The Wow Moment

Picture 2The recent unemployment report showed that the loss of jobs for November was only 11,000, and average hours worked increased from 33 per week to 33.2. The Dow surged 130 points, and some analysts described it as a “wow” moment — explaining that the loss was so much less than expected.

Wow!

We really do live in a world of lowered expectations when news like this is considered cause for celebration. I guess it’s all relative. The news must be good because it isn’t so bad.

Wow!

So while some see bad news as good news, we still have 10% unemployment and an anemic recovery. But have no fear: the government has a solution. After all, it doesn’t take much to create jobs. According to the government’s own data on the effects of the stimulus, an order worth $890 to Moore’s Shoe Service in Kentucky resulted in the creation of nine jobs. And a Minnesota company that makes lawn-care equipment created (or saved) 50 jobs for $1,047. So, between ordering some more boots and lawn mowers we’ll have the unemployment problem solved. And for good measure we’ll have the “Cash for Caulkers” program: a tax credit for weatherizing your home.

The Definition of Madness

Apparently, ovens weren’t the only places turkeys were being cooked up over Thanksgiving. One proposal being seriously considered is another stimulus package. Since the first two were so successful in lowering unemployment all the way from 7% to 10%, another one is obviously the way to go. I’m reminded of someone I worked with who was failing at some task and told me that her solution was to re-double her efforts. The definition of madness is to do the same thing and expect a different result.

The last stimulus package did help bring the economy back on track, but it has not done anything of consequence to address the most critical requirement for long-term growth — job creation in private industry. Long-term, permanent jobs are simply not being created. Already, with construction projects funded by stimulus dollars coming to an end, construction firms are again laying off workers. The U.S. now produces fewer private sector jobs than it did a decade ago. In October, private sector companies employed just over 108 million U.S. workers, a million fewer than in October 1999. The one place where jobs are growing consistently is the government. The Feds have hired 25,000 people in the last six months.

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With more than 65% of the economy dependent on consumer spending, the only real basis for a return to a robust economy is job growth in private industry. The only program being considered that can help with this is the tax credit for employers. Further spending on more bridges, roads, and boots is a stopgap arrangement that does nothing to create private sector jobs. What’s worse is that jobs created by government spending use money that would have otherwise been available to private industry. And private industry is far better at spending it in ways that create jobs than the government is.

No Good Deed Shall Go Unpunished

The incentive to create jobs in private industry is low. Employers create jobs because they expect to see a positive return on the money they spend. Right now all the spending by the government is going to lead to higher taxes, which are already being promised. Throw-in the costs of the healthcare legislation, cap-and-trade, and who knows what else, and higher taxes are guaranteed. Why bother with investing in any activity that creates jobs if the returns are going to be taxed away?

What’s needed is letting business’s creativity flow and eliminate uncertainty caused by burdensome legislation. That doesn’t seem to be what Congress and the White House is supportive of. Their desire is trending toward creating some kind of an industrial policy — favoring some businesses more than others. The push for “green jobs” being the most obvious example, despite the fact that green technology has no potential to create widespread employment for decades. When the government starts picking winners and losers, all sorts of good ideas will be lost, because the choices are made based on political considerations (imagine that).

With all these great ideas floating around I’m surprised Congress didn’t accept Larry Flynt’s proposal for creating jobs by bailing out the adult movie business. Now that would be stimulating.

Raghav Singh, director of analytics at Korn Ferry Futurestep, has developed and launched multiple software products and held leadership positions at several major recruiting technology vendors. His career has included work as a consultant on enterprise HR systems and as a recruiting and HRIT leader at several Fortune 500 companies. Opinions expressed here are his own.

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10 Comments on “The Wow Moment

  1. Raghav – Well said.

    That anyone, at any time, could possibly think paying someone with tax dollars has anything to do with ‘creating or saving’ anything at all is a perfect example of government “at work”. If I need a bigger blanket, should I cut 3 inches off the top and sew it on to the bottom?

    Please, please, please show me a government run program that is efficient and profitable. There are NONE.

    And we’re giving serious consideration to putting 1/6 of our entire economy into the hands of these incompetent, egocentric fools.

    God help us.

  2. Raghav is right on the money–wish more people had his jobs creation insights. If our politicians don’t begin lowering our cost of doing business reducing taxes, government mandates, and regulations private corporate sector jobs won’t be created causing a domino effect of other jobs not being created.

    Bill

  3. The Nov09 US Unemployment rate is said to be now 10%, down from 10.2%. Or is it?

    The latest Time magazine (21 December 2009 – yes, right date!) had an interesting article concerning the real jobless rate and the flaws in how this “unemployment rate” is actually formulated.

    You might remember two weeks ago when the Bureau and Labor Statistics (BLS) announced the November 2009 US unemployment rate was now 10%, dropping from 10.2% from October 2009. The White House was giddy saying ‘the economy and jobless rate was rebounding’. But not everyone was buoyed by the drop in “unemployment rate” because many consider the method of calculating the “unemployment rate” as flawed and treats this statistic with suspicion and distain because it fails to accurately reflect just how bad things are out there.

    Each month, the BLS determines the “unemployment rate” by contacting 60,000 households by phone and asks the employment status of household members age 16 and over. Those that don’t have jobs but have looked in the past four weeks are classified as unemployed. This total number of “unemployed who have looked in the past four weeks” adjusted to the total US population and then divided by the size of the total workforce (employed plus unemployed) and there is your “unemployment rate”. Measured that way, unemployment isn’t all that bad.

    The problem with how this “unemployment rate” is calculated is that it counts only those who really want jobs but misses millions of people who may not be actively looking for a job but would happily take one if offered. The BLS understands these limitations and has come up with a “U-6 Unemployment Rate” statistic that asks the same question but changes searched for work in the last “4 weeks” to “last year”. The Nov 2009 U-6 Unemployment rate is a whopping 17.2%. Many employment experts believe even this U-6 measurement is very misleading because it measures just those that really want jobs. Current measurements miss a large number of really unemployed in new categories such as: stay at home dads, independent consultants, new entrepreneurs forced to start their own venture, job seekers subsisting on others who are waiting for conditions to change, and formerly employed workers who are now reenrolled in full time college.

    There are many more factors at play in this current job market than just a tough job market. But is also may be a sign that these are in fact the worst times for American workers since the 1930’s and why there is so little excitement about the 1 December 2009 drop in the “unemployment rate” to 10%.

    Link: http://www.time.com/time/magazine/article/0,9171,1946924,00.html

  4. Raghav –
    You forgot the 30k jobs created in a far-away exotic, yet challenging place. To reclaim a healthy 5% basic unemployment, we would need to create 250k+ jobs a month for 5 years – a yearly level only achieved in 1999. Sad that the Admin, that promised unemployment would stay under 8% if we passed the last Stimulus, is claiming a Million jobs ‘saved or created’. Add part time & long term unemployed and those who gave up, sadly there are 35 million hurting.
    Many experts expect us to stay above 10% for years, which continues to be a challenge to us who are survivors and are learning to do things better, but with less competition, from both independent and company recruiters.

  5. Raghav we went through this in the early 80’s. Somehow, all the trials and tribulations and hard earned knowledge about how the fed gov cannot (and never will) turn around a failing economy have been forgotten again. What’s worse as you noted they actually make things worse. Somehow, “we” always get weak and panicky and turn to the ones that for a lack of better words want to own us when bad times hit. I guess its time to again re-learn old lessons.

  6. Mitch, good point. Key to remember is when the private sector isn’t hiring/spending money people reflexively look to the government for “security” to support their families.

    IMO, unless we gain national commonality realizing to be globally competitive we must reduce the cost of doing business we’ll find fewer and fewer private sector corporate positions being created with more people financially addicted/dependent on government

    Bill

  7. Ah yes, we’re all headed down “The road to Serfdom” where the vile socialists will corrupt our precious bodily fluids. The evidence is here:

    http://en.wikipedia.org/wiki/List_of_countries_by_economic_freedom

    Oh, it seems that the U.S. actually is one of the freest nations on earth and not collapsing under the Neo-Stalinist boots of the Democrats after all.

    ============================================================

    Index of Economic Freedom 2009
    The Index of Economic Freedom is a series of 10 economic measurements created by the Heritage Foundation and Wall Street Journal. Its stated objective is to measure the degree of economic freedom in the world’s nations.

    Economic Freedom of the World 2008
    The annual survey Economic Freedom of the World is an indicator produced by the Fraser Institute, a conservative and libertarian think tank which attempts to measure the degree of economic freedom in the world’s nations. The index uses a definition of economic freedom similar to laissez-faire capitalism
    Rank ? Country ? Summary
    index ?
    1 Hong Kong 90
    2 Singapore 87.1
    3 Australia 82.6
    4 Ireland 82.2
    5 New Zealand 82
    6 United States 80.7
    7 Canada 80.5
    8 Denmark 79.6
    9 Switzerland 79.4
    10 United Kingdom 79
    11 Chile 78.3
    12 Netherlands 77
    13 Estonia 76.4
    14 Iceland 75.9
    15 Luxembourg 75.2
    16 Bahrain 74.8
    17 Finland 74.5
    18 Mauritius 74.3
    19 Japan 72.8
    20 Belgium 72.1
    21 Macau 72
    22 Barbados 71.5
    23 Austria 71.2
    24 Cyprus 70.8
    25 Germany 70.5
    26 Sweden 70.5
    27 The Bahamas 70.3
    28 Norway 70.2
    29 Spain 70.1
    30 Lithuania 70
    31 Armenia 69.9
    32 Georgia 69.8
    33 El Salvador 69.8
    34 Botswana 69.7
    35 Taiwan 69.5
    36 Slovakia 69.4
    37 Czech Republic 69.4
    38 Uruguay 69.1
    39 Saint Lucia 68.8
    40 Korea, South 68.1
    41 Trinidad and Tobago 68
    42 Israel 67.6
    43 Oman 67
    44 Hungary 66.8
    45 Latvia 66.6
    46 Costa Rica 66.4
    47 Malta 66.1
    48 Qatar 65.8
    49 Mexico 65.8
    50 Kuwait 65.6
    51 Jordan 65.4
    52 Jamaica 65.2
    53 Portugal 64.9
    54 United Arab Emirates 64.7
    55 Panama 64.7
    56 Bulgaria 64.6
    57 Peru 64.6
    58 Malaysia 64.6
    59 Saudi Arabia 64.3
    60 Saint Vincent and the Grenadines 64.3
    61 South Africa 63.8
    62 Albania 63.7
    63 Uganda 63.5
    64 France 63.3
    65 Romania 63.2
    66 Belize 63
    67 Thailand 63
    68 Slovenia 62.9
    69 Mongolia 62.8
    70 Dominica 62.6
    71 Namibia 62.4
    72 Colombia 62.3
    73 Madagascar 62.2
    74 Kyrgyzstan Kyrgyz Republic 61.8
    75 Turkey 61.6
    76 Italy 61.4
    77 Cape Verde 61.3
    78 Macedonia 61.2
    79 Paraguay 61
    80 Fiji 61
    81 Greece 60.8
    82 Poland 60.3
    83 Kazakhstan 60.1
    84 Nicaragua 59.8
    85 Burkina Faso 59.5
    86 Samoa 59.5
    87 Guatemala 59.4
    88 Dominican Republic 59.2
    89 Swaziland 59.1
    90 Kenya 58.7
    91 Honduras 58.7
    92 Vanuatu 58.4
    93 Tanzania 58.3
    94 Montenegro 58.2
    95 Lebanon 58.1
    96 Ghana 58.1
    97 Egypt 58
    98 Tunisia 58
    99 Azerbaijan 58
    100 Bhutan 57.7
    101 Morocco 57.7
    102 Pakistan 57
    103 Yemen 56.9
    104 Philippines 56.8
    105 Brazil 56.7
    106 Cambodia 56.6
    107 Algeria 56.6
    108 Zambia 56.6
    109 Serbia 56.6
    110 Senegal 56.3
    111 Sri Lanka 56
    112 Gambia, The 55.8
    113 Mozambique 55.7
    114 Mali 55.6
    115 Benin 55.4
    116 Croatia 55.1
    117 Nigeria 55.1
    118 Gabon 55
    119 Côte d’Ivoire 55
    120 Moldova 54.9
    121 Papua New Guinea 54.8
    122 Tajikistan 54.6
    123 India 54.4
    124 Rwanda 54.2
    125 Suriname 54.1
    126 Tonga 54.1
    127 Mauritania 53.9
    128 Niger 53.8
    129 Malawi 53.7
    130 Bolivia 53.6
    131 Indonesia 53.4
    132 China 53.2
    133 Nepal 53.2
    134 Bosnia and Herzegovina 53.1
    135 Ethiopia 53
    136 Cameroon 53
    137 Ecuador 52.5
    138 Argentina 52.3
    139 Micronesia 51.7
    140 Djibouti 51.3
    141 Syrian Arab Republic 51.3
    142 Equatorial Guinea 51.3
    143 Maldives 51.3
    144 Guinea 51
    145 Vietnam 51
    146 Russia 50.8
    147 Haiti 50.5
    148 Uzbekistan 50.5
    149 Timor-Leste 50.5
    150 Laos 50.4
    151 Lesotho 49.7
    152 Ukraine 48.8
    153 Burundi 48.8
    154 Togo 48.7
    155 Guyana 48.4
    156 Central African Republic 48.3
    157 Liberia 48.1
    158 Sierra Leone 47.8
    159 Seychelles 47.8
    160 Bangladesh 47.5
    161 Chad 47.5
    162 Angola 47
    163 Solomon Islands 46
    164 Kiribati 45.7
    165 Guinea-Bissau 45.4
    166 Congo, Republic of 45.4
    167 Belarus 45
    168 Iran 44.6
    169 Turkmenistan 44.2
    170 São Tomé and Príncipe 43.8
    171 Libya 43.5
    172 Comoros 43.3
    173 Congo, Democratic Republic of 42.8
    174 Venezuela 39.9
    175 Eritrea 38.5
    176 Burma 37.7
    177 Cuba 27.9
    178 Zimbabwe 22.7
    179 Korea, North 2

    Rank ? Country ? Summary
    index ?
    1 Hong Kong 8.94
    2 Singapore 8.57
    3 New Zealand 8.28
    4 Switzerland 8.2
    5 United Kingdom 8.07
    6 Chile 8.06
    7 Canada 8.05
    8 Australia 8.04
    9 United States 8.04
    10 Ireland 7.92
    11 Estonia 7.89
    12 Iceland 7.8
    13 Denmark 7.78
    14 Finland 7.69
    15 Austria 7.66
    16 Netherlands 7.65
    17 Germany 7.64
    18 Taiwan 7.63
    19 Kuwait 7.62
    20 Slovakia 7.61
    21 Costa Rica 7.58
    22 Luxembourg 7.58
    23 Norway 7.54
    24 Malta 7.53
    25 El Salvador 7.51
    26 United Arab Emirates 7.49
    27 Japan 7.48
    28 Hungary 7.46
    29 South Korea 7.42
    30 Panama 7.41
    31 Lithuania 7.4
    32 Spain 7.38
    33 Cyprus 7.35
    34 Honduras 7.35
    35 Sweden 7.35
    36 Jamaica 7.33
    37 Bahrain 7.32
    38 Oman 7.32
    39 Georgia 7.29
    40 Latvia 7.27
    41 Mauritius 7.26
    42 Kazakhstan 7.23
    43 Mongolia 7.22
    44 Belgium 7.2
    45 France 7.19
    46 Jordan 7.19
    47 Peru 7.16
    48 Portugal 7.16
    49 Bahamas 7.15
    50 Italy 7.15
    51 Zambia 7.09
    52 Trinidad and Tobago 7.07
    53 Guatemala 7.06
    54 Greece 7.03
    55 South Africa 7.03
    56 Thailand 7
    57 Nicaragua 6.99
    58 Mexico 6.98
    59 Montenegro 6.98
    60 Botswana 6.96
    61 Kenya 6.96
    62 Kyrgyzstan 6.96
    63 Czech Republic 6.95
    64 Uruguay 6.93
    65 Albania 6.86
    66 Ghana 6.84
    67 Armenia 6.83
    68 Bulgaria 6.82
    69 Poland 6.78
    70 Uganda 6.78
    71 Namibia 6.77
    72 Malaysia 6.72
    73 Philippines 6.72
    74 Romania 6.66
    75 Egypt 6.65
    76 Israel 6.63
    77 India 6.59
    78 Moldova 6.51
    79 Tanzania 6.47
    80 Iran 6.46
    81 Lesotho 6.46
    82 Tunisia 6.44
    83 Belize 6.42
    84 Fiji 6.42
    85 Macedonia 6.41
    86 Paraguay 6.4
    87 Papua New Guinea 6.39
    88 Bolivia 6.38
    89 Slovenia 6.38
    90 Croatia 6.35
    91 Turkey 6.35
    92 Mauritania 6.31
    93 China 6.29
    94 Dominica 6.27
    95 Morocco 6.24
    96 Brazil 6.16
    97 Haiti 6.16
    98 Barbados 6.15
    99 Serbia 6.15
    100 Mali 6.13
    101 Indonesia 6.12
    102 Russia 6.12
    103 Sri Lanka 6.11
    104 Pakistan 6.05
    105 Bosnia and Herzegovina 5.99
    106 Madagascar 5.96
    107 Cote d’Ivoire 5.95
    108 Bangladesh 5.94
    109 Vietnam 5.94
    110 Guyana 5.89
    111 Benin 5.88
    112 Nigeria 5.88
    113 Ecuador 5.87
    114 Argentina 5.85
    115 Colombia 5.78
    116 Mozambique 5.77
    117 Cameroon 5.76
    118 Azerbaijan 5.73
    119 Senegal 5.65
    120 Sierra Leone 5.65
    121 Ethiopia 5.64
    122 Ukraine 5.64
    123 Burkina Faso 5.63
    124 Algeria 5.57
    125 Syria 5.54
    126 Malawi 5.42
    127 Gabon 5.37
    128 Nepal 5.35
    129 Togo 5.33
    130 Congo, Democratic Republic of 5.25
    131 Burundi 5.23
    132 Rwanda 5.23
    133 Chad 5.12
    134 Central African Republic 5.01
    135 Guinea-Bissau 5.01
    136 Venezuela 4.76
    137 Niger 4.67
    138 Congo, Republic of 4.64
    139 Myanmar 4.19
    140 Angola 4.1
    141 Zimbabwe 2.67

  8. Keith – It’s nice to know we’re free enough to spend our way out of debt… and that we’re ranked five behind (2008) and nine behind (2009) the country that holds most of that debt. If you consider this a scoreboard, keep in mind that it’s not static and we’re not climbing. Not only is it an embarassment, it’s an inexcusable tragedy.

    I’d say we need another important speech followed by the audacity of unprecedented creating or saving of hope and change. Then we should vote on it… urgently, before the world melts.

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