18 Apr In our changing economy, ‘just-in-time employment’ masks job creation numbers
MADISON – Maybe it’s not a “jobless recovery,” after all. Perhaps it’s just a matter of how we count 21st century jobs.
U.S. Labor Department figures for March showed the addition of 308,000 jobs to the economy, which is double what it takes (150,000 jobs) in an average month to keep pace with growth in the labor force. It was the seventh straight month the economy has added jobs, but the first time in many months that it expanded well beyond the “break even” point.
Still, many analysts are asking why more jobs aren’t being added. Corporate profits have returned, output is strong and the number of people applying for unemployment compensation is falling. So, what’s holding back job creation? Why the so-called “jobless recovery”?
It may simply be a matter of how we count today’s jobs.
The U.S. Labor Department survey hasn’t changed much since 1939, when it was established as a way of counting payroll jobs. The survey counts all employees at traditional firms, plus some workers at start-up companies that have payroll records. But the payroll survey doesn’t count a number of workers who fall into other categories crucial to today’s economy.
The ranks of the self-employed have grown by 650,000 in just two years, according to another Labor Department survey that counts total household employment rather than payroll figures. In addition, there are limited liability companies (LLCs), a new form of business that is surging. There’s also the rise in the number of consultants, such as people who formerly worked on a company’s payroll but who switched to a free-lance or “outsourced” consulting role.
Those kinds of discrepancies help to explain why the economy appears to be gathering steam but the creation of traditional payroll jobs is lagging. The Labor Department’s household survey reported a record employment level of 138.3 million as of March – about 600,000 more working Americans than the same month in 2001. The payroll survey shows 323,000 fewer jobs today than in November 2001.
The trend is similar in Wisconsin. The number of state manufacturing jobs has declined by 77,400 since President Bush took office in January 2001, yet the unemployment rate (5.1 percent) continues to run behind the U.S. average of 5.7 percent. Somehow, somewhere, most people are finding work.
“Common sense tells us that payroll jobs aren’t the end-all, be-all of jobs in the new economy,” wrote Tim Kane, a research fellow in macroeconomics in the Center for Data Analysis at the Heritage Foundation. “Economists reflexively like payroll data because it has a bigger sample, but quantity doesn’t always ensure quality … This is the brave new economy, and the work force of 2004 can no longer be measured by an outdated definition of a job.”
Precisely because the economy has changed, payroll numbers may never roar back the way they did after past recessions. In part, that’s because businesses have figured out how to produce more goods, services and profits with fewer full-time workers.
Outsourcing is one such trend. About 90 percent of outsourcing actually takes place inside the United States and creates jobs at home. Only 10 percent of “outsourced jobs” are created overseas.
Businesses are also relying more on free-lancers, temporary workers and contract employees. Many work off payroll (and without benefits) and simply aren’t tracked by the government’s payroll survey. Employers also leverage technology to streamline and automate operations, which can also reduce the need to payroll workers.
“What employers have really discovered is … you can have just-in-time employment,” said David Wyss, chief economist at Standard & Poors in New York. What is “just-in-time” employment? As Wyss explained to the Associated Press: “I use the workers when I need them. I don’t use the workers when I don’t need them.”
While that’s hardly a comfort to working Americans who might prefer a bit more stability – not to mention corporate loyalty – it is a fact of working life. It’s why more Americans are retraining for jobs that are harder to “downsize” or automate, or returning to school to start a new career. It’s also why so many more Americans are self-employed or forming their own companies. While being your own boss is demanding, you can usually trust the person at the top.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.
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