No Job Creation this time around

Important front page article in the NY Times today: “Slowing Stream of New Jobs Helps to Explain Slump.” While job losses (blue line) have mostly stopped — recent layoff announcements notwithstanding — there has been very little in the way of Job Creation (red line). The chart below shows that new job creation appears to have peaked in ’99:

Job creation.gif

Here’s an excerpt:

“A lack of hiring, rather than a wave of layoffs, appears to be the main problem afflicting the American economy. Even as unemployment continued to mount last year, the number of jobs being eliminated fell below the level in the late 1990’s, according to a new government report. But the number of jobs that businesses created in 2002 dropped to its lowest level since 1995. Compared with the size of the economy, the rate of hiring was even slower than during the weak recovery of the early 1990’s.

The results come from a survey that the Bureau of Labor Statistics published for the first time yesterday, offering a fuller picture of the nation’s long jobs slump. The government previously reported only the net change in employment, which does not explain whether a weak job market like the current one stems mainly from layoffs or from companies’ unwillingness to hire.

The new numbers portray an economy stuck in neutral, with workers no longer losing their jobs at the rapid pace of 2001 but with relatively few new job opportunities popping up. In the last three months of 2002, 7.8 million jobs were eliminated, while 7.7 million were created, according to company records studied by the bureau.”
-David Leonhardt, Slowing Stream of New Jobs Helps to Explain Slump, New York Times

I believe this is part of a larger (and complex) structural change where the GDP and Jobs have Disconnected.

I plan to address it as the subject of a focused piece shortly (less than a week). Other issues will include why “Shell Shocked CEOs” are so reluctant to hire new employees; How strong Productivity is making the situation much more difficult; Where one must draw the line on the misleading issue of Employment data as a lagging indicator; Lastly, the non-issue of the “Self-Employed Work-at-Home Contractor” is analyzed and dismissed as a canard.

Slowing Stream of New Jobs Helps to Explain Slump
by DAVID LEONHARDT, New York Times, Published: October 1, 2003

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  1. Stewart Noyce commented on Oct 2

    In preparing your piece, I recommend that you look closely at the importance of small and medium-size businesses in job creation. According to the SBA Office of Advocacy, this group is responsible for about 75% of new job creation in the US. There is a report on their web site that provides the detail. This group is not taking up the slack that it normally does when big business lets people go.

    A survey done today would likely find more small, self-funded companies (that create only a very few relatively low-paying jobs with the potential for wealth creation) than high-growth venture-funded firms (that create significantly more higher-paying jobs with plenty of upside). The weakness in venture capital today is where you will find the lost jobs. The VC community looks somewhat like the Japanese banks ten years ago. It’s pushing more money into its zombies rather than taking its losses and investing in the future. If structural change in our economy is to take place, venture money will need to flow into new concepts.

    Overall, the issue appears to be a matter of risk. CEOs are risk averse today (terror, Sarbanes-Oxley, supply-side bubble). Venture investors can’t seem to pull the trigger on new investments (stock option expensing, weak IT demand, expected returns of 20-30%). The consumer wants a tidy life (job security, higher pay, benefits). In this climate, the innovation that leads to job creation is at risk. (For a good quote on innovation, go to

    One last thing, at-home contract work is how many Silicon Valley veterans get their next job. They shop around until they find their next ride. With the explosion of venture-funded business in the 90s it’s no wonder there are more at-home contract workers now.

    Stewart Noyce

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