December 12, 2003

Hiring Patterns

Morgan Stanley's Stephen Roach takes a closer look at hiring patterns:

Morgan Stanley: ...There seems to be a real disconnect between the actual numbers on the hiring front and the impressions that have been formed in financial markets. Total nonfarm payrolls have expanded by only 328,000 workers over the August to November 2003 period -- an average of 82,000 per month. That's far short of the pace of job creation that normally occurs at this stage in a business cycle recovery -- somewhere in the range of 250,000 to 300,000 per month. Yet many have been quick to interpret the recent modest pickup in hiring as a sign that Corporate America is finally breaking the shackles of risk aversion and emerging from the funk of recent years. The mix of recent hiring trends tells a very different picture. It turns out that fully 84% of the total increase in nonfarm payrolls over the August to November period is traceable to hiring in four segments of the labor market -- the temporary staffing industry, health, education, and government -- where combined jobs have increased by 68,000 per month. In other words, the bulk of the so-called hiring turnaround since August has been concentrated in either the contingent workforce (temps) or in those industry groupings that are least exposed to global competition. This hardly speaks of a US business sector that has consciously made an important transition from downsizing to expansion. It merely reflects the fact that scale is increasing in the most sheltered and least productive segments of the economy.

Those trends stand in sharp contrast to employment conditions in those segments of the economy that are most exposed to tough competitive pressures. Over the past four months, jobs have continued to decline in manufacturing, the information sector (i.e., telecom, publishing, data processing, and broadcasting), wholesale distribution, and finance and insurance. Moreover, at the same time, employment growth has been anemic in transportation and warehousing and in a broad array of professional and business services other than temps (i.e., legal, computer systems design, management consulting). Collectively, these "exposed" segments of the economy employ about 47 million workers, or 36% of the total nonfarm workforce. Over the August to November time period, jobs in this large collection of industries have contracted, on average, by 20,000 per month...

Posted by DeLong at December 12, 2003 02:56 PM | TrackBack


On the one hand, this explains why so many people are so worried about their own jobs, when the news media are telling us that hiring is increasing. On the other hand, from where is the consumer increasing spending? Still from re-fi's, taking equity from their homes? That certainly can't be good for the long-term.

Posted by: Dave Johnson on December 12, 2003 03:47 PM


Do you want fries with that, sir?

Posted by: non economist on December 12, 2003 04:39 PM


thank god for stephen roach, telling it like it is!! My hat off to you, sir.

Posted by: camille roy on December 12, 2003 05:47 PM


"...fully 84% of the total increase in nonfarm payrolls over the August to November period is traceable to hiring in four segments of the labor market -- the temporary staffing industry, health, education, and government...those industry groupings that are least exposed to global competition."

In other words, those pols and acadamicians most invested in pushing free trade theories are, as I've said before, those who believe their jobs are safe.

Is this report a surprise to anyone not protected by tenure or incumbency?

Posted by: SG on December 12, 2003 06:22 PM


"-- the temporary staffing industry, health, education, and government...those industry groupings that are least exposed to global competition."

Those four industry groupings could also very well be the shape of things to come, as productivity increase continues in manuf and retail, as chores are transferred more and more from humans to machines.

The American economy is not only growing, but changing as well, and changing radically.

Dubya team is out to keep that grown and changed body in the old shirt for another decade or two. But it looks like the body is going to tear through that old shirt, break the seams apart.

If capitalists think so too, the Howard Dean will win. I hope Dean cathes that development as well.

Or else the body would remain naked for a while, which is not good. Not good for any body.

Posted by: Bulent Sayin on December 13, 2003 12:07 AM


Dismayed is not too strong a word for how I felt when I read Roach's commentary this week. I normally find him insightful and sensible, but this time he blew it.

Are wholesale distribution, finance, and insurance really more "exposed" to international competition than other industries? No, of course not -- in fact, I would argue that they face almost NO international competition. What about transportation and warehousing? Again -- they face zero international competition.

For Roach to mention the poor labor market performance in those industries and then to blame it on international competition is bordering on malpractice, in my opinion. At the least, it's extremely bad economics.

Posted by: Kash on December 13, 2003 03:55 AM


Aren't the capitalists supporting Bush?
Note that I said 'capitalists', not 'entrepreneurs'.

Posted by: Barry on December 13, 2003 05:37 AM


I appreciate the difference between capitalist and entrepreneur, as I advocate a transition / evolution to collective ownership of capital on top of free markets and free enterprise.

Still, Bill Gates a capitalist or entrepreneur?

I did use on occasion on this forum the term "smarter capitalist" and I think they are considering to drop Bush, if they weren't opposed to him in the first place.

And the capitalist community may very well concur or develop consensus to drop Bush. If they do, then he is gone.

Posted by: Bulent Sayin on December 13, 2003 07:16 AM


"Do you want fries with that, maam?"

Stephen Roach has also been shrill about the amazingly low household saving rate and the public deficit projections. We are evidently content to live on the kindness of strangers. Well, I am not content to live on such kindness.

Posted by: anne on December 13, 2003 09:19 AM


Another reason why the Bush tax cuts have failed to produce domestic jobs. Do government job increases reflect the federalization of airport security?? State govt. is contracting not expanding.

Posted by: bakho on December 13, 2003 11:59 AM


Two words: structural adjustment.

It's as much Bush's fault as the tech boom was Clinton's - not very.

Wherever we end up, the transition will be bumpy. Very bumpy. Especially if the US somehow ceases to be the world's investment home. Capital inflows stop, interest rates soar, the dollar falls (and don't look to exports to save us, at 7% of the GDP). I see five to ten years stagnation (1% growth or less), unless the next technological innovation happens sooner, and is a big one. But goods will be cheap as hell, so standards of living will be about the same. Financial and real estate markets might have trouble though.

Posted by: andrew on December 13, 2003 04:31 PM


Kash, Insurance and finance are exposed from a labor market standpoint because their back offices and their phone support services can be shipped abroad.

Medical has back office stuff that can be shipped abroad too. But most nursing, doctoring, lab work, and operation of clinical testing equipment can't be shipped to Banglaore. Some of the billing and other back office parts of the medical industry can be shipped abroad. But medical is less impacted by foreign competition.

The disconnect between the owners and the employees is widening as their interests diverge.

Posted by: Randall Parker on December 13, 2003 10:44 PM


In the latest trade data real nonpetroleum imports jumped 4.5%. I am still sticking with my
forecast that imports will explode in the 4th Q
and be a major negative for real GDP growth that
the consensus expectations of 3% - 5% growth
is missing. It will more than offset inventory boost.

Real improrts are 180% of real exports. This means that to just keep the real trade balance flat that exports have to grow 180% faster than imports. Ie, if imports grow 10%, exports have to grow 18%. right now it looks like trend real imports are growing at a 7% to 9% rate and real
exports are growing at about half that rate.

Posted by: spencer on December 14, 2003 06:11 AM



What drives the drop in net exports? If it is consumption, then a bit of "marginal propensity to import" thinking will show that the impact of imports cannot overcome the impact of consumption.

Posted by: K Harris on December 15, 2003 09:59 AM


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