Companies Cutting Hours Aggressively

I have over the years discussed what a poor economic recovery this cycle has been in terms of job creation. Given the lack of robust job creation, its not a huge surprise that layoffs typical of most recessions have yet to appear.

Merrill Lynch’s David Rosenberg notes it has become "economic myth" that the April employment report was benign. In particular, he notes that hours worked, one of the employment metrics reported by the BLS, is rapidly declining. In the April NFP release, hours worked plunged:

"Companies did not cut as many positions as expected, they cut the hours instead.  The average work week plunged 0.3% (and, aggregate hours worked were down at an annual rate of 1% in the past three months), which, by the way, would be the equivalent of 400,000 job cuts.

This is a sign that labor market conditions and domestic demand are far softer than the headline suggests. What drives consumer spending inevitably is income growth. Average weekly earnings fell 0.2% sequentially in April in what was the largest decline in two years. This dragged the year-on-year rate down to 3.1% from 3.3% in March, 3.7% in February and the nearby peak of 3.8% posted last November in what is clear disinflationary trend in wages. 

The rebound in the Household survey was all in part-time employment. While there was a nice rebound in the Household Survey, it was all in part-time employment – that is not the driver of confidence and spending. Growth in full-time jobs is what drives those things.  And, full-time employment actually fell 375,000 in April and is down 572,000 year-to-date; of the folks who were working part-time in April, the number doing so because of “economic reasons” (mostly slack business conditions) surged 306,000 or 6.3% – again the steepest runup in two years.  The diffusion indices fell through the floor to 45.4 in April from 48 in March – this measures the share of industries adding to payrolls and shows that even though the headline job loss was lower than expected, the decline was very broadly based across sectors.   (emphasis added)

In case you missed the underlined text, employers cut back so many hours that it was the functional "equivalent of 400,000 job cuts."

This is not the sort of data you associate with economic recoveries.

>

Source:
Macro viewpoint: Debunking five myths
David A. Rosenberg, North American Economist
Merrill Lynch,  09 May 2008
http://tinyurl.com/6kjlhl

Previously:
Job Creation: Post-Recession Recovery Cycles   April 05, 2008 
http://bigpicture.typepad.com/comments/2008/04/job-creation-po.html

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What's been said:

Discussions found on the web:
  1. VennData commented on May 16

    At this rate, pretty soon we’ll be working as many hours as the French.

  2. hidebound commented on May 16

    most likely for less money

  3. Owner Earnings commented on May 16

    Rosenberg is probably the best economist on the street, at least top 3. BR, be glad to see more of his stuff if the future.

    btw, the average American is already earning less money than the French.

  4. mat commented on May 16

    and yep we have our 8 weeks of holidays ;-)
    (in french subsdiaries of american big companies ) and we are paid in euros …

  5. VennData commented on May 16

    Yeah, but how much is your Health Insurance? Ha. Got you there, Frenchie.

    Maybe Dick Armey and Steve Forbes can start a fake website AngryPartTimers.org and decry the
    lack of respect part timer work gets and offer petitions for site visitors to sign to demand that they be included in the job numbers.

  6. Ken H commented on May 16

    Seroiusly, I find this to be mental masterbation on whether we are going to have a recession. I’m a business man in the trenches and deal with many other large to small regional managers and business owners. The margins are getting crushed as fewer customers and higher costs are killing profits. Pretty simple and pretty obvious. I admit I watch CNBC because of their layout. Just easier to follow the numbers unlike Bloomberg (Hear that bloomberg?? Us color blind old farts can’t read that cluster you got going on!!) I just turn the volumn down so I don’t have to listen to the shills on CNBC(Except for Santelli, “At the end of the day, Rick’s the only one who isn’t full of shit!” Nobody owns him I guess?).

    My point is, you can continue to ignore the obvious like many did in housing and the tech bubble if you want. It’s painfully obivous to anyone looking in the right places that this is ugly and going to get worse.

  7. Greg0658 commented on May 16

    I was buying a couple tacos last week and overheard and spy’d on an employee with pay check issues

    $416 on check, 55 hours, 2 weeks in check

    I’m wondering when home builders and zoning laws will get it

    6 bedroom homes with a rec room and parking for almost 12 cars ie: 6 guys with their girlfriends OR 2 married couples with a room for the each set of brothers and sisters.

    ps – the check didn’t have an issue

  8. Bruce commented on May 16

    When the rich Chinese tourists start coming over, can we be as snotty as the French were to us when we could afford to vacation in France? Just wondering……How do you say,” No, I don’t speak Chinese” in Mandarin…..??

  9. Philippe commented on May 16

    It is assumed to be quiet normal that the French do not have to work more since they do not enjoy
    « yet « as the USA do a total debt / GDP at 330 % or a total credit debt / GDP of 331% (source US Federal reserve 2006 )
    One component of GDP to be yet quantitatively expressed « the quality of life » even US hedonistic attempts such as fictive rents on housing are not coming close to it.

    With data

  10. trail commented on May 16

    Absolutely. Our warehousemen have been working killer hours, 6-7 days a week for the last couple of years – but the last six weeks the OT has subsided like the tide going out of the Bay of Fundy. Now some of them are being sent home early and they are all complaining about the tiny paychecks.

    I think that after getting burned in the last recession, a lot of businesses were hesitant to add staff. They just made the existing staff work more and more overtime. That’s one of the reasons why employment didn’t advance as much in the recovery. Now we’re seeing the flip side and companies are reducing OT rather than laying off.

  11. Steve Barry commented on May 16

    We can’t let the ordinary Joe know the truth or they may get scared and not blow their stimulus checks on flat screen TVs and gangster video games. That’s why we have CNBC to report when JC Penney same store sales plunge that “JC Penney beats Expectations!”…and when Philly Fed is -15, “Philly Fed Beats Expectations”

  12. Ivo commented on May 16

    Read also the last report by Paul Kasriel:

    For last 12 months total non-farm payroll growth was only + 381K, but B/D added +787K or +207%. So without the B/D “adjustment”, -406K jobs were lost.

  13. Steve Barry commented on May 16

    Ivo…it’s funny when the “adjustment” is twice the actual measurement.

  14. Steve Barry commented on May 16

    Just finished reading Rosenberg say housing starts had to slide to 500,000 and stay there for 4 years to eat up inventory when CNBC announces housing starts up 8% to over 1 Million and the market rallies…they see an inflection point in housing.

  15. bluestatedon commented on May 16

    This data from Rosenberg is a devastating rebuttal to the talking heads/enablers in the MSM who’ve been trumpeting the “good news” from April. Even the favorite media bogeyman of dittoheads everywhere, the horribly liberal America-hating NPR, duly repeated the “good news.” I doubt that anyone on TV or radio, whether Rush or the twits on National Useless Radio, will cover Rosenberg’s article. Because, you know, April’s gas prices declined 2% seasonally adjusted, so everything’s looking good.

  16. Mike in NOLA commented on May 16

    Am moving to Houston and looking to apply to Total. Do they pay in Euros?

  17. kio commented on May 16

    It is well established fact that in the mid-and long-run the growth rate of labor force (participation rate) has a NEGATIVE correlation with the rate of real economic growth. So, faster growth in the 1990s resulted in a deceleration of labor force growth. The weak performance in the 2000s really stopped (but not revert) this tendency and from 2004 the growth rate of LFP of an upward trend. So, decreasing LFP is a consequence of intensive real economic growth.

    http://ideas.repec.org/p/pra/mprapa/8677.html

  18. Bill commented on May 16

    Is this a cyclical or structural change? It could be that the economy is restructuring around greater reliance on contract employees. It would be interesting to see employee hours overlayed with contract employee hours.

  19. Loren Steffy commented on May 16

    BizLinks and Open Comments | 5.16.08

    No ships coming to new Port of Houston cruise terminal — a bruising from no cruising. FAA Probes American’s Inspections ($) Team Icahn: Who’s Running for Yahoo’s Board Companies Cutting Hours Aggressively Bernanke: Banks Must Foresee Risk Candidate f…

  20. starsky commented on May 16

    It’s no wonder the jobs numbers don’t reflect reality. If the “Household Survey” polls citizens who live in Households, then it makes sense that all the jobless, foreclosed-on citizens with no Houses wouldn’t get counted! :)

  21. Francois commented on May 16

    Bruce,

    “How do you say,” No, I don’t speak Chinese” in Mandarin…..??”

    not to worry: this is yet another place where the Chinese are eating our lunch. I happen to know because my daughter is heading for college in International Relations.

    How many Chinese students study English in China?

    North of 20 millions

    How many American students study Mandarin in the USA?

    Around 24,000 (yes, as in thousands)

    The only head of state in the industrialized countries fluent in mandarin is Kevin Rudd of Australia.

    Needless to say that when he goes to Beijing to negotiate trade deals, he is received with a fair bit of respect.

    That can’t hurt, can’t it?

    If a candidate for President had the same ability here, some asshats would start a false controversy about “being too foreign and not American enough”. (Theresa Heinz anyone?) And the asshats would gain traction!

    We have an economic recession, and also a socio-cultural depression.

  22. grumpyoldvet commented on May 16

    Barry…what is this meme “create jobs”…jobs are not created, they only appear when business needs workers to fill a position, whether it in manufacturing, sales or administration. Then those slots are filled, but they are, if you will, created by some sort of demand from customers. If anyone creates jobs it is the buyer of your wares. Management only fills a need.

  23. DonKei commented on May 16

    grumpoldvet,

    agree…jobs are never “created” by businesses. They are necessitated by demand for the business’s products or services.

    Francios,

    You don’t have to know how to say “I can’t speak Chinese” in Mandarin. Just look indignant and walk away. It works for the French, n’cest pas?

  24. martin commented on May 16

    This is from 2 years ago, but since Michigan is leading the nation in unemployment you might find it relevant as to what is happening elsewhere now.

    Outside the local Meijer store there was a large now hiring sign. When you entered the store there was a booth where you could fill out applications. When I got up to the checkout the cashier and the bagger were complaining about how the store seemed to be cutting everyone’s hours. They each were talking about how its a pain to work 2 jobs that each only want you for 25 hours. They were also complaining about how that they only get short shifts.

    I speculate that these two had their hours cut so that they would only be part-time, so that they wouldn’t get full time benefits. That the store was hiring part-time people to make up for the the hours of existing workers that were getting cut. Perhaps this is spreading to other areas of the country now.

  25. Greg0658 commented on May 16

    martin; I sure hope those employees get an 8 hour day for the expense of driving to work that day

  26. Ha! commented on May 16

    “At this rate, pretty soon we’ll be working as many hours as the French.”

    …but we can keep working as inefficiently as usual.

  27. Greg0658 commented on May 16

    oh, I wanted to start a roar to request the Presidential candidates address the issue of the upcoming Census

    and; I wonder if the handheld issue is working itself out … altho paper ballot is ok by me

  28. mhm commented on May 16

    One company I was working for in 2002(?) did force a 10% hour cut on us to save money, plus some layoffs. My group was fully scheduled and could not comply, so we kept working and got an effective 10% pay cut (paid hour cap). Of course you were free to go if you didn’t agree…

  29. Big E commented on May 16

    I have to laugh at the total disconnect between what’s being disseminated from the gubmit, and what people actually think on the street. Gubmit, Wall Street, press coverage is, “All is well!” but main street is just dropping like a stone. I wonder how that’s going to end.. at what point does the government/Wall Street capitulate and go, “Y’know, I guess things really ARE that bad..”

    Probably when President Obama is sworn in, huh?

  30. cm commented on May 16

    “It could be that the economy is restructuring around greater reliance on contract employees.”

    I see this in a number of (formerly?) “white collar” professional occupations. With clerical staff (to the extent it still exists) it has been going on for long, but increasingly it is a phenomenon with IT, engineers, and what I would broadly characterize as “business analysts” — the people dealing with workflows, business processes, data models, data exchange, etc. and their execution and computerization.

    The general idea is that once the “general theory” or current “paradigm” of something is figured out (and how to put the “knowledge content” in a database), you need mostly raw commodity labor, which fits the bill for contracting.

  31. anonymous commented on May 16

    When the rich Chinese tourists start coming over, can we be as snotty as the French were to us when we could afford to vacation in France? Just wondering……How do you say, “No, I don’t speak Chinese” in Mandarin…..??

    Funny you should mention this. In the past month I’ve noticed a number of Chinese tourists milling around in NYC (or coming into or out of it). It struck me, because I just don’t recall ever seeing them before. I’m not talking handfuls of students–for instance, there was a huge tour package of middle aged folks taking the train from DC to NYC (acela, no less).

    What I’m wondering is how this will affect the predictions about health insurance coverage. I’m sure people tried to factor it in, but I suspect with the high fixed cost of healthcare, this trick of cutting hours to avoid benefits will be more used than in prior recessions, and the rate of uninsured is going to leap.

  32. winslow commented on May 16

    We are not cutting positions but we have just enacted the following measure to maintain profitability:
    All employees are responsible for 100% of their health care premium.

  33. donna commented on May 16

    duìbuqǐ, nǐ huì shuō yīngwén ma

    (Sorry, do you speak English?)

    standardmandarin.com

    After studying Japanese, the phrase I most use is “Nihon go no wakarimasen”…

  34. Winston Munn commented on May 16

    Seems no one sees the obvious conclusion drawn by these figures, and that is more and more happy, satisfied, wealth-effect rich workers are voluntarily cutting hours to spend more quality time with friends and family.

    There is no recession, it’s an economic slowdown – George W. Bush

  35. Paul in NYC commented on May 16

    trail @ 8:14 It looks like all these employers are moving to the “WALMART” model of part time employees with part time hours and zero benefits.

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