Gallup’s Payroll-to-Population Rates Pinpoint the Go-Go Metro Areas

Commuters in New York City.
Commuters in New York City.

The Gallup polling organization’s P2P measurements (payroll-to-population employment rates) are an interesting metric and add an extra dimension of understanding as to what’s happening with employment across the United States.

Gallup’s evaluation is limited to the top 50 most populous SMSAs (metropolitan statistical areas).  But because of the large number of phone interviews conducted within each metro area (ranging from ~1,300 to 18000+ depending on the population), the findings are statistically significant whether looking nationally or within a particular urban area.

The latest surveys, conducted by Gallup in 2014 among nearly 355,000 households, find that two metro areas with the highest P2P measures are Washington, DC and Salt Lake City, UT — urban centers that couldn’t be more dissimilar in other ways.

For DC, the P2P rate is 54.1.  The calculation is derived from the percentage of the adult population (age 18+) who are employed full-time for an employer for at least 30 hours per week.

For Salt Lake City, the P2P rate is just slightly lower, at 52.9.

Other top scoring metro areas include three markets in Texas (Austin, Dallas-Ft. Worth and Houston).

What about metro areas at the other end of the scale?  Those would be Miami (38.2 score) and Tampa (39.3).

Three other low-scoring MSAs are located in California:  Los Angeles, Riverside and Sacramento.

What do these stats mean in a broader sense?

For one thing, there’s a direct relationship between employment stats and P2P performance:  Metro areas with the highest unemployment rates correlate to those with low P2P scores.

For instance, Miami’s unemployment rate in 2014 was 10.3%.  It was 10.2% in Riverside, CA.

That’s a big contrast with Salt Lake City, which had an unemployment rate of just 3.5%.

I find one interesting deviation from the norm:  Buffalo, NY.  There, while the unemployment rate is one of the ten lowest in the country, its labor force participation rate is also very low — bottoms among all 50 metro areas, in fact.

Shown below are the figures for all of the 50 largest U.S. metro areas based on the interviews conducted by Gallup in 2014:

Gallup full results

More details on the research findings are available here.

Gallup’s CEO Calls the Official U.S. Unemployment Rate a “Big Lie”

American consumersI’ve blogged before about how the American public doesn’t seem to be responding to the news that the country has been out of its economic recession for a number of years now.

It’s not for lack of trying.  From the White House and other politicians to government agencies, financial industry practitioners and news media articles, there’s been a steady stream of speeches, announcements, news items and commentary lamenting the disconnect between the perception and the reality.

Plus … I’m reminded often by my business counterparts who work in Europe and Asia that the situation is much better in America than in many other countries.  I consider it advice to “count our blessings,” as it were.

With this as backdrop, it’s easy to fall into the paradigm of thinking that the American public is simply being unrealistic in its expectations for economic recovery — and the recovery’s ability to reach into all strata of society.

But then … along comes a commentary by Jim Clifton, chairman and CEO of the Gallup polling organization.

Jim Clifton Gallup CEO
Jim Clifton

In addition to heading what is arguably America’s most famous polling company, Mr. Clifton is a keen observer of economics and public policy.  He is also the author of the book The Coming Jobs War (published in 2011).

The gist of Clifton’s commentary is that the official unemployment rate, as reported by the U.S. Department of Labor, is very misleading.

Moreover, it’s Clifton’s contention that the very way the Department of Labor calculates the unemployment rate goes straight to the heart of the disconnect between the experts and the “person on the street.”

Here’s what Clifton wrote in a column released earlier this month:

“If a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking [for work] over the past four weeks — the Department of Labor doesn’t count you as unemployed. 

That’s right:  While you are as unemployed as one could possibly be, and tragically may never find work again, you are not counted in the [unemployment] figure we see relentlessly in the news — currently 5.6%.”  

official U.S. unemployment rate
The official U.S. unemployment rate as reported by the United States Department of Labor’s Bureau of Labor Statistics.

In Clifton’s estimation, right now as many as 30 million Americas are either out of work or severely unemployed.  That would equate to an unemployment rate far higher than the reputed 5.6% figure.

But it goes even beyond that.  Clifton points out another clue as to why the perception gulf between the “statisticians” and the “street” seems so wide — and he puts it in the form of two examples:

“Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager.  If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6% [figure]  

Few Americans know this. 

Yet another figure of importance that doesn’t get much press:  those working part time but wanting full-time work.  If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find — in other words, you are severely unemployed — the government doesn’t count you in the 5.6%.   

Few Americans know this.”

Clifton doesn’t mince words in his characterization of the official unemployment rate; he calls it a “Big Lie” — one which has consequences that go well-beyond simply the stats being arguably wrong.

Here’s how he puts it:

“… It’s a lie that has consequences because the Great American Dream is to have a good job — and in recent years, America has failed to deliver that dream more than it has in any other time in recent memory.   

A good job is an individual’s primary identity — their very self-worth, their dignity.  It establishes the relationship they have with their friends, community and country.  When we fail to deliver a good job that fits a citizen’s talents, training and experience, we are failing the American Dream.”

Statisticians and economic policy experts can and do disagree about what constitutes a “good job” in America.  The Gallup organization defines it as working 30 or more hours per week for an organization that provides a regular paycheck, with or without other benefits.

That’s actually a pretty low-bar for what defines a “good job.”  But however jobs are defined, the U.S. economy is currently delivering at a rate of just 44%, which equates to the number of full-time jobs as a percent of the adult population (age 18 and over).

It would seem that the 44% figure would need to be significantly higher to really solve the challenge of available jobs.

Clifton concludes his commentary by issuing this challenge:

“I hear all the time that ‘unemployment is greatly reduced, but the people aren’t feeling it.’  When the media, talking heads, the White House and Wall Street start reporting the truth — the percent of Americans in good jobs; jobs that are full time and real — then we will quit wondering why Americans aren’t ‘feeling’ something that doesn’t remotely reflect the reality in their lives. 

And we will quit wondering what hollowed out the middle class.”

I’ve devoted significant space in this blog post to quoting Jim Clifton’s words verbatim, so as not to change their tenor or dilute them in any way.

What do you think?  Is Clifton speaking truth to power?  Or is he painting an overly negative view of things?  I welcome your thoughts and comments.

Coming Up: A Labor Shortage?

The coming labor shortageIt may seem fanciful, but a new report published last week by The Conference Board concludes that the United States and other advanced economies will actually face significant labor shortages over the coming decade and a half.

This forecast has been made primarily based on the Baby Boomer workforce departing the labor market over this period.

The Baby Boomer phenomenon is what makes things different in now compared to the decades previously:  For the first time since World War II, working age populations will actually be declining in mature markets.

Conference Board logoAs Dr. Gad Levanon, director of macroeconomics at The Conference Board reported, “The global financial crisis and its aftermath – stubbornly high unemployment in many countries – have postponed the onset of this demographic transformation, but will not prevent it from taking hold.”

According to The Conference Board’s analysis, several countries have already begun to see this happen, as their natural rates of employment have now fallen below their pre-recession levels:  Japan, Germany, South Korea and Canada.

The same thing is expected to happen in the United States and the United Kingdom by 2015 … and in the Scandinavian countries, the Benelux countries plus Australia by 2016 or 2017.

Other mature economies like those of Spain, France, Portugal, Italy and Greece won’t experience this until the years further out – but The Conference Board predicts that it will happen there as well.

U.S. market sectors that are expected to experience the most severe labor shortages include healthcare occupations, STEM occupations (science, technology, engineering and mathematics), as well as skilled trades that don’t require a college degree but that do require specialist training.

Among the challenges The Conference Board envisions in these three major categories are the following:

  1. Skilled labor occupations like construction, transportation and utility plant operations are going to be adversely affected by many more retirements happening than new job seekers coming in to fill the void.
  2. STEM occupations won’t be as stressed as some might imagine, because higher productivity will alleviate the pressure on hiring more workers in IT and high-tech manufacturing segment. That being said, certain sub-segments such as information security, environmental and agricultural engineering, and applied mathematics are expected to face severe labor shortages.
  3. The numbers of new entrants in various healthcare occupations are constrained by high barriers to entry such as extensive education and experience requirements, along with accreditation requirements.

The Conference Board report has constructed a Labor Shortage Index covering 32 countries.  The index combines current labor-market tightness with future demographic trends to predict the likelihood of the different countries experiencing labor shortages.

The bottom line on the index:  with the exception of the Mediterranean countries, all of the labor markets in developed economies are expected to be squeezed pretty tightly starting within the next few years.

It’s been quite a while since we’ve been hearing about pending labor shortages … but that’s exactly what The Conference Board is predicting.  Here’s a link to more details about the report, which is appropriately titled From Not Enough Jobs to Not Enough Workers.

If you have thoughts or personal observations to share on the job markets on the domestic scene or internationally, please share them with other readers here.

Over-Hyping the “Made in China” Situation?

Made in China ... as threatening as we think?“Made in China” aren’t the most welcome-sounding words to American workers these days. Many of us believe that the plethora of goods it manufactures means the People’s Republic of China is grabbing scads of U.S. jobs as well.

Recent reports about Apple’s scads of assembly facilities in China only add fuel to fiery debate … and at least one presidential candidate is making the loss of manufacturing jobs a key component of his campaign rhetoric.

So I was surprised to read the findings of an analysis performed by economists Galina Borisova Hale and Bart Hobijn which contends that goods and services from China accounted for only ~2.7% of personal consumption expenditures in the United States in 2010.

What’s more, less than half of that amount reflected the actual cost of Chinese imports. The remainder went to American businesses and employees transporting and selling the products carrying the “Made in China” mark.

The report, which draws on data published by the Bureau of Economic Analysis, U.S. Census Bureau, the Bureau of Labor Statistics and other sources, states that total U.S. imports in 2010 amounted to about 16% of total Gross Domestic Product.

More specifically, imports from China amounted to ~2.5% of GDP. Moreover, nearly 90% of consumer spending in the United States during 2010 was on American-generated products and services.

Of course, services – which comprise about two-thirds of total spending – are mainly produced locally. And when we consider items like automobiles and electronics, the picture is different: One-third of U.S. consumption on durables goes for goods that are made outside the country.

It’s not hard to guess which products are the ones most likely to be imported from China; they’re primarily electronics, furniture, clothing and shoes. Offshore sourcing is most pronounced in apparel and shoes, where more than 35% of U.S. purchases in these categories were of items labeled “Made in China.”

No wonder so many clothing mills in America have gone the way of the dodo bird.

Without dismissing the impact of overseas manufacturing on manufacturing jobs in the United States, the broader statistics suggest that any long-term drop in American manufacturing employment is due to more factors than merely Chinese labor competition. Undoubtedly, advanced manufacturing technology and productivity gains per worker have a lot to do with it as well.

It looks like the “Made in China” debate may be another example of how the issues and challenges we face in the world are rarely ones of “black and white” … but rather “shades of gray.”

The employment cunundrum: “Workers, workers everywhere … and ‘nary one to hire.”

Labor shortage in the midst of high unemploymentThese days, conservative estimates are that ~13 million Americans are seeking employment. And yet, more U.S. companies are reporting that they can’t find qualified workers to fill their open positions.

In fact, more than half of American employers surveyed by Manpower Group, a leading staffing group, report that they’re having trouble hiring qualified workers. That’s nearly 40% higher than what was reported in the company’s 2010 survey.

The most obvious reason for the incongruity is the disconnect between the background and capabilities of available workers and the skill sets companies are seeking.

But there may be a few other factors at work as well. Spokespersons for Manpower Group suspect the following:

 The 2009 recession made it very easy for companies to find qualified candidates … but those days are now over.

 Employers are less willing to invest the time or dollar resources to train new employees for specialized or unique work.

 Employers may be less willing to hire candidates from outside their area so as to avoid incurring relocation expenses … even as job candidates may also be less willing to consider moving because of the soft housing market.

Melanie Holmes, a Manpower vice president, puts it this way: “Employers are getting pickier and pickier. We want the perfect person to walk through the door.” She and other specialists contend that companies need to get more realistic about the situation and react accordingly.

The Manpower survey results were part of a large global research study of ~40,000 employers worldwide. The trends it sees of greater difficulties in hiring were clearly evident in several other countries, besides just the U.S. (India, U.K. and Germany), whereas in China the trend was just the opposite.

More results from the 2011 Manpower Group survey can be found here.

Jobless Americans and Gallows Humor …

Jobless AmericansThere’s a funny-yet-sobering ditty bounding about cyberspace that chronicles a day in the life of an unemployed American looking for work.

Whether it’s the alarm clock, the coffee pot, clothing, appliances, the car and the gasoline it takes to run it, everything with which this person interfaces during the course of the day comes from overseas – especially China or some other East Asian country.

For those of you who haven’t encountered this satirical little piece yet, you can read it here.

Dana Bales, an industry colleague of mine who is a managing partner at Dayton, OH-based NEO Marketing Communications, reacted to this joke by noting a few key points about China. He writes:

I’m a free trade advocate. I absolutely support NAFTA. But for the life of me, I don’t get our trade relationship with China. Let me get this straight:

 China imposes trade barriers to many of our goods and services.

 China allows its industries to pollute with impunity, keeping its costs for manufactured goods lower while adding to atmospheric and oceanic pollution.

 China allows its citizens and companies to rip off non-Chinese patents.

 Although experts may disagree on the degree of impact, China manipulates its currency to benefit its own export goods.

 China actively supports efforts to hack into U.S. corporate and defense systems, stealing untold billions of dollars’ worth of technology.

 China uses American dollars to subsidize its own industries.

Food for thought, indeed – even if you don’t agree with every single one of Bales’ statements.

It would be nice, too, if our government and trade officials could focus on coming up with some workable solutions to these issues. I think we’d all be happier if we could relegate this sort of gallows humor to the literary trash can!

The Consequences of Alabama’s New Immigration Law: Welcome to Economics 101

Alabama's tough new immigration law (2011)Since the passing of Alabama’s tough new immigration law several months ago, two major things have happened:

1. Many immigrant workers have left the workforce.

2. Employers – especially agricultural operations – have found it nearly impossible to replace the lost workers.

In retrospect, neither development seems particularly surprising. Many immigrant workers, whether they’re here in the United States legally or not, fear the heavy hand of government and will opt to find a more inviting environment than the one in Alabama today. For now at least, that environment is better in nearly all of the other 49 states.

And while the jobs no longer being done by immigrants may now be sought by American citizens – after all, the ~9.9% unemployment rate in Alabama is higher than the overall U.S. rate – the appetite for doing many of these jobs dissipates quickly when people are confronted by the reality of what is required to perform them.

Alicia Caldwell, an Associated Press reporter, spoke last week with some Alabama farmers to find out what has happened since Americans were hired to replace immigrant workers.

“Most show up late, work slower than seasoned farm hands and are ready to call it a day after lunch or by mid-afternoon. Some quit after a single day,” Caldwell reported in her AP article published last week.

As a result, farmers are opting to leave crops in the field rather than harvesting them.

What we have here is a classic Economics 101 lesson. If workers aren’t willing to do the jobs at a labor cost that will enable the products to be sold at a competitive price, the crops won’t be brought to market.

If agricultural operations in the whole world faced the same situation as Alabama farmers, it’s possible that a new labor/price equilibrium could be established. But not only is Alabama competing against other states where immigrant labor continues to be used, it’s also competing against other countries that produce the same crops.

The result? No one is winning. Not the farmers … not the immigrant workers … nor the unemployed Americans who have decided that ramaining unemployed is preferable to working a difficult or unpleasant job.

The Alabama state government is attempting to support the transition away from immigrant workers. A program started recently seeks to pair Alabamians interested in jobs with the state’s farming operations that need replacement labor.

So far, the results of this effort haven’t been encouraging, with only ~260 people registering interest in temporary agricultural jobs.

Out in the field, reporter Caldwell has found ample anecdotal evidence that underscores the disconnect between the “theory” versus “practical reality” of unemployed Americans taking advantage of these new job opportunities:

Tomato farmer Wayne Smith said he has never been able to keep a staff of American workers in his 25 years of farming.

“People in Alabama are not going to do this,” said Smith, who grows about 75 acres of tomatoes in the northeast part of the state. “They’d work one day and then just wouldn’t show up again.”

At this farm, field workers get $2 for every 25-pound box of tomatoes they fill. Skilled pickers can make anywhere from $200 to $300 a day, he said. Unskilled workers make much less.

A crew of four Hispanics can earn about $150 each by picking 250-300 boxes of tomatoes in a day, said Jerry Spencer of Grow Alabama, which purchases and sells locally owned produce. A crew of 25 Americans recently picked 200 boxes – giving them each $24 for the day.

Years ago, an old Russian emigré professor of Slavic history and literature at Vanderbilt University advised us students, “As you grow older and wiser, you’ll come to realize that the great issues of the day can’t be debated in black and white. Because the two sides aren’t black and white; they’re really shades of gray.”

Those words could well be applied to the immigration debate and its socioeconomic consequences. Certainly, one “black and white” issue that should be banished from the discussion is the notion that if all of the jobs done by illegal immigrants were to become available to Americans, our unemployment problem would be magically solved.