“So…. Where Are the Jobs?”

The economy has turned, and though recovery is slow, things are improving!

The recession is over!

And Nero fiddled while Rome burned.

For four straight months the economy had added jobs and expectations were high among analysts for the May report. They expected over half-a-million new jobs on Friday, and the whisper number was even higher. The number was good; 431,000 new jobs in May.

But it wasn’t exactly what the market wanted and there was a caveat. This month’s number included 411,000 Census workers hired temporarily by the government to complete the 2010 Census. These, of course, are only temporary and will be gone by the end of summer.

But, the U.S. isn’t Rome and the Obama Administration is doing all it can to put people back to work.

So…. Where are the jobs?

The May report seemed like good news and should have raised the spirits of the markets and all Americans.

Unemployment dropped back to 9.7% reversing the .2 percent jump last month when it climbed, unexpectedly to 9.9%. Though there was a slight drop in the rate for unemployed black workers, it still remains high at 15.5%. The hardest hit, teenagers, remained extremely high at 26.4%, and Hispanics showed little change at 12.4 percent. The number of unemployed stood at 15 million in May.

The explanation from the Department of Labor for the increase in April to 9.9% in the household survey was: when the job market improves…drum roll please…more people who had become discouraged by the weak job market were suddenly encouraged to look for work.

An interesting concept, but it is difficult to figure how many actually made the decision to reenter the job hunt, therefore, the numbers may not be entirely accurate.

Considering that the May report indicated the number of reentrants fell by 286,000 and offset the increase in April, we’re back to where we were in March. That is probably more of a negative than a positive for the jobs market.

Then what is the true employment picture?

Employment is an extremely important indicator in not only an improving economy, but in the perception that things are improving.

It’s increasingly difficult to determine who’s working and who’s not, who’s hiring and who’s firing, who’ll be in business tomorrow and who will not.

Unemployment benefits have been extended many times, and though necessary to prevent a complete economic collapse, have skewed the comparisons to previous jobless cycles.

The hiring of 524,000 Census workers can be viewed as another brief stimulus boost despite its mandate to be taken every 10 years. It came at a good time in this economic cycle. Hundreds of thousands of people in need of work are able to collect a wage for a few months. But it does add to an already stifling deficit.

It’s important again to stress that over 15 million Americans are currently out of work.

Consider also that millions of people have taken jobs that pay less than what they were making in their previous jobs. These individuals are considered underemployed.  The number of underemployed is, consequently, at record levels and as a result may also distort the actual employment picture.

Then there’s the Emergency Unemployment Compensation (EUC) program. It was meant to be a supplemental program to help get small businesses through the recession. It not only exceeded predictions in the numbers expected to utilize the benefit, but has also exceeded the length of time anticipated. A program expected to last just 33 weeks has been extended to recipients several times and is now far longer than originally designed. It still compensates over 5 million people every week.

Programs like the EUC are not reported in headline unemployment numbers and are unprecedented in making comparisons.

It is believed that small businesses account for nearly all new job creation. Small businesses are those under 500 employees, and are captured in the household survey.

Small businesses, at least in California, and more specifically in Orange County, are declining. Every week there are new vacant buildings in Anaheim, Irvine, and Santa Ana. This is happening in Los Angeles County and other counties all over the country. With each business failure comes more job losses and fewer businesses to hire.

There is talk about giving small businesses tax credits to hire additional people, but it’s not the fear of pending taxes nor a lack of tax credits that is preventing small businessmen from increasing their work forces.

It’s a lack of need that prevents them from adding new employees. With little demand for their products there is no need to hire extra help.

Manufacturing is one of the bright spots in the May report. Manufacturing jobs increased for the 5th straight month—this month by 29,000. More than 125,000 jobs have been added over the five months.

The biggest question in manufacturing is how much of the improvement is due to the need to restock inventory. That question could be answered in the next few months. If there is little demand after restocking is completed then manufacturing will slow and the hiring trend will reverse.

Despite the perceived improvement in employment, jobs are hard to come by. This is evidenced by those unemployed for at least 6 months hitting historic highs month after month. The figure for May edged up slightly but remained just over 6.8 million. The number of discouraged workers was up 291,000 from a year earlier at 1.1 million.

There are several factors that will determine the direction of the jobs market over the next 6 months.

One of the most important is how long the government can continue to fund its extended unemployment programs. Extended unemployment benefits, the EUC program, and the potential tax credits for small business have helped us avoid an economic catastrophe. The discontinuation of either of the two programs or the failure to initiate tax credits will change the dynamics of the job market and the overall health of the economy.

Also, a withdrawal of stimulus for states and municipalities, many already in extreme distress, would cause large layoffs and discontinuation of services throughout the U.S., and would be an unfortunate turn of events for the employment picture.

The system can’t afford to absorb 400,000 new unemployment claims every week and continuing claims that remain over four-and-a-quarter million or more week after week.

A declining stock market will also have an adverse affect on a weakening jobs situation. And a rapidly deteriorating housing market will have an affect on construction, real estate, mortgage lending, and home improvement.

So…. Where are the jobs?

Manufacturing may have hit its peak. Construction is in the doldrums and there doesn’t appear to be any major turnaround on the horizon. Retail may hit a snag if the consumer wanes. And a decline in consumer spending will be adverse for other areas such as financial activities, leisure and hospitality and information which all remained flat in May.

Only one area has the potential of ‘real’ and ‘sustainable’ job growth in the United States. That is in the renewable energy arena. A serious move toward renewable energy, including development, research, production, manufacturing and distribution could become the new tech/dot.com explosion for the American economy.

In order to tap renewable energy as a positive for American growth it must be done domestically—NO outsourcing! All aspects of this dynamic job creator must be done by Americans—American companies, American workers, utilizing American ingenuity.

Without advancments in renewable energy, or something as powerfully dynamic, we’ll still be asking a year from now…

So…. Where are the jobs?

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