Unemployment drops in regions with growing manufacturing

High unemployment still plagues much of the country, but regions such as Ohio and Michigan are actually seeing impressive job gains as manufacturing activity picks up, especially in the auto industry. Those gains may be reversed in upcoming months, though, as high inventories and decreasing demand for transportation equipment slow factory activity.

The region with the largest decrease in the unemployment rate in the country was Muskegon-Norton Shores, Mich., which saw unemployment drop 2.6 percentage points to 9% from October 2010 to October 2011, according to data from the Bureau of Labor Statistics. Flint and Jackson, Mich., also saw significant drops of 2.5% each.

In Ohio, unemployment in Steubenville fell to 10.3% in October from 12.6% the previous year, and to 8.9% from 10.2% in the perennially knocked-about town of Youngstown. By comparison, 76 metro areas saw unemployment rates increase over the year. 

"Youngstown in particular, and Ohio in general, are doing substantially better than we were," said George Zeller, an economist research analyst in Ohio.  "Auto sales had been picking up, which is where the recovery is coming from."

Youngstown’s manufacturing employment has grown 12.4% from 2010 to 2011, and the region leads the state in manufacturing growth, Zeller said. Two steel plants are under construction in Youngstown, and auto parts suppliers across the state are picking up production. GM’s Lordstown plant, which makes the Chevrolet Cruze, had been booming until the company shut the plant down for two weeks after slowing sales.

That slowdown worries Zeller, who says the recovery isn't happening quickly enough.

“We have been getting a slow recovery, but it is extremely slow,” Zeller said. “And it has been taking a relapse lately.”

Part of the reason for that relapse, Zeller said, is that activity picked up significantly after production delays related to the Japanese earthquake and tsunami were solved. Now it could be slowing again. Reports out Monday indicate that new orders for manufactured goods slipped for the second straight month in October, falling 0.4% to $450 billion. Inventories were the highest since the data started being measured in 1992, indicating the goods have been manufactured but not purchased. Auto inventories grew the most in the month.

Still, cars sold at a brisk pace in November, with national auto sales up 10% from November 2010.

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Photo: Auto plant in Youngstown. Credit: Bob Jagendorf via Flickr

Does Boeing settlement mean NLRB's actions were for naught?

Out of all of the Obama administration's appointees, those on the National Labor Relations Board have been among the most productive -- and controversial. Two Obama appointees last year introduced a rule to speed up union elections, which awakened the ire of Republicans. The NLRB also launched an investigation into Boeing Co. for transferring airline assembly jobs from Seattle to a non-union shop in South Carolina, whch had become a hot-button issue on the campaign trail as business and labor interests butted heads.

The Boeing investigation could have had profound consequences for companies that are trying to avoid hiring union workers, economists say. But Boeing and the machinists union have reached a deal that creates new union jobs in the Seattle area in exchange for the machinists dropping any opposition to the South Carolina plant.

The reversal may be a disappointment for some labor activists who had hoped that the NLRB's actions would help labor stand up to business interests -- but it was probably the only way the issue could be resolved, said Harley Shaiken, a labor relations professor at Berkeley.

Though the NLRB issued the investigation because it thought Boeing's actions were potentially illegal, the political repercussions made the board's job more difficult than it had hoped, Shaiken said.

"The firestorm that was created was greater than anyone there would have imagined," he said.

A congressional subcommitee led by Rep. Darrell Issa (R-Vista) served the NLRB with its first subpeona since 1940; the U.S. Chamber of Commerce expressed "grave concern" over the investigation; the Obama administration, which is trying to court business leaders such as Boeing's chief executive, was put in a bind and avoided commenting.

"In the larger context, this is the best that could be done," said Shaiken, about the deal. "It does leave some questions unanswered -- but those are for the larger political process, not for the bargaining table."

A statement from the International Assn. of Machinists and Aerospace Workers lauded the jobs the agreement created, but did not mention the compromise about the South Carolina plant.

Expect these issues to come to the fore during the 2012 campaign. In the meantime, there may be one more immediate result: Companies have learned to be more circumspect when relocating jobs to non-union shops. Businesses will bring their legal teams in earlier when relocating employees, and be more cautious about the reasons they give when asked about relocating (a Boeing executive vice president had told the Seattle Times that the company couldn't put up with so many union-related work stoppages).

"The fight that took place won't make [companies] change their behavior," Shaiken said. "It will make them far more cautious about the reasons they give about moving, but it won't make them change behavior in one way or another."

There are signs that the NLRB's burst of activity won't last long. As David G. Savage reports in Thursday's Los Angeles Times, one of the board's three members is serving under a recess apppointment due to run out at the end of the year. If Republicans block the next appointees nominated by Obama, the board will lack a quorum and will be unable to adopt any rules.

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 Photo: Scott Olson / Getty Images

Economic insecurity rising, new indicator shows

More than one in five Americans experienced economic insecurity during the recession, meaning they had an economic loss without an adequate safety net to replace that loss, according to a new report from the Rockefeller Foundation. The report also found that economic insecurity has been rising since even before the recession.

"While the Great Recession led to a sharp increase in income instability, the share of Americans experiencing economic insecurity had already been growing for a quarter of a century," said Jacob Hacker, director of the Institution for Social and Policy Studies at Yale.

A separate report from Wider Opportunities for Women found that 45% of Americans are unable to cover their basic expenses, and that some households face economic insecurity even when its members are working. 

The Rockefeller Foundation report updates the Economic Security Index, an indicator developed by Hacker. The index measures the share of Americans who see their incomes drop 25% or more after they pay for household and medical debts, and who lack a way to replace that income.

During the most recent downturn, 20.5% of Americans were economically insecure, the index shows, compared to 14.3% in 1986.

While economic insecurity will likely decline as the recovery progresses, the report finds that Americans are more subject to sharp swings in their financial fortunes than they were two decades ago. And if federal unemployment benefits are allowed to expire on Dec. 31, as they will unless Congress renews them, economic insecurity could get worse before it gets better.

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Photo: Men in a bread line. Credit: Kheel Center, Cornell University

Unions survive anti-labor push in New Hampshire

Legislators in New Hampshire voted to sustain Gov. John Lynch's veto of a right-to-work bill in New Hampshire that would have prevented unions from collecting dues from non-members. It was a victory for unions in a Republican-dominated state that plays host to the first primary of the presidential election season.

Republican presidential candidates Rick Perry and Mitt Romney had spoken in support of the measure, which was passed in the New Hampshire legislature and then vetoed by the governor. The House sustained the veto by a margin of 240-139 this morning.

"Their vote is a clear signal to all of our elected leaders, in New Hampshire and elsewhere, that attacking the rights of everyday Americans isn’t the key to economic prosperity," said Mark MacKenzie, the president of the New Hampshire AFL-CIO, in a statement. 

The New Hampshire vote was the second victory in as many months for the AFL-CIO, which also rallied to get Ohioans to vote down Senate Bill 5, which would have dramatically curtailed collective bargaining for public sector employees in the state. In November, voters approved the ballot initiative striking down the bill by a margin of 61% to 39%.

Still, conservatives worry these small union victories could have a detrimental effect on the economy. According to the National Right to Legal Work Defense Foundation, right-to-work states -- those that prohibit agreements between employers and labor unions that make due-paying or union membership a condition of employment -- fare better economically.

Jobs in the private sector grew 0.3% in right-to-work states from 2000 to 2010, compared to shrinking 5.5% in non-right-to-work states, the foundation says. Right-to-work states are primarily concentrated in the Southeast and the Great Plains.

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Photo: Republican presidential candidate and Texas Gov. Rick Perry, who is from a right-to-work state, addresses the New Hampshire legislature. Credit: Jim Cole / Associated Press

 

GDP revised downward; corporate profits up

The U.S. economy grew more slowly than previously thought in the three months ending Sept. 30, the Bureau of Economic Analysis said, revising the nation's third-quarter gross domestic product downward to annualized growth of 2% from its previous estimate of 2.5%.

Although the downward revision indicates that the economy isn't doing quite as well as economists had hoped, the numbers are still better than the second quarter's meager growth of 1.3%. But the sluggish growth still leaves the economy on uncertain footing as debt woes in Europe and in Washington continue.

"We expect the rate of economic growth to weaken in the current quarter, and the situation may deteriorate further if uncertainty arising from the super committee budget discussions and the debt crisis in Europe continue to adversely affect both business and consumer confidence in the US and its major export markets," Chris Williamson, chief economist at Markit, a British research firm, wrote in a note to reporters.

Even as the economy continued to limp along, corporate profits increased in the quarter. Domestic profits of financial corporations increased $16 billion in the third quarter, in contrast to a decrease of $54.2 billion in the second. Domestic profits of non-financial corporations increased $17.4 billion in the third quarter, compared with an increase of $80.8 billion in the second. 

There were some bright spots in the GDP report. Consumer spending rose 2.3% in the quarter, after second-quarter growth of just 0.7%. Exports, a key piece of President Obama's growth strategy, grew by 4.3% in the quarter, and imports increased just 0.5%.

But inventories provided the biggest hit to GDP growth. Private businesses decreased their inventories by $8.5 billion in the third quarter, after growing them $39.1 billion the second quarter and $49.1 billion in the first. Though the numbers were bad news, those inventory reductions could lead up to a large leap in inventories in the fourth quarter, setting up a rebound.

The overall GDP numbers trend with a forecast from major economists who predict that the economy will grow slowly this year and next, with little chance for a recession but also little chance for fast growth. The NABE Outlook Survey predicts a 2.5% growth rate throughout 2011, slowing slightly to 2.4% in 2012.

The economists said that corporate profits would continue to grow, but that consumer spending would grow more slowly than usual.

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Photo: Leaders from the financial and government sectors meet to discuss the congressional "super-committee." That panel's failure to reach an agreement on deficit reduction could be another factor contributing to economic uncertainty, economists say. Credit: Mark Warner's Photostream, via Flickr

 

Economic inequality is growing, a Fed blog says

Everyone from Occupy Wall Streeters to politicians seems to be talking about economic inequality these days, but actual data can be hard to find, especially regarding the effects of the 2007-09 recession. But a new set of numbers from Liberty Street Economics, the blog attached to the Federal Reserve Bank of New York, shows definitively that there is a growing gap between the upper and lower classes.

Economists Jaison R. Abel and Richard Deitz isolate 25 occupations and look at how median wages have changed over the last three decades. They find that rising wages in the highest-paying occupations, coupled with shrinking employment in middle-wage jobs, is leading to a startling income gap.

"With a rising share of jobs at the upper and lower ends of the wage distribution and a wider gap in wages among occupations, jobs have become more polarized in the United States over the last three decades," they write.

For instance,the median wage for occupations in computer and math was $49,000 in 1980 and grew to $67,000 in 2009. Construction, on the other hand, shrunk to median pay of $35,000 in 2009, from $38,000 in 1980 -- no doubt hurt by the housing crisis.

It's not just wages that are changing. Employment in sectors across the economy is changing too. Using wage levels as a stand-in for skill levels, the economists divided occupations into three groups: "high-skill" were the top five categories, "low-skill" were the bottom five, and "mid-skill" were the rest. The high- and low-skill categories grew the fastest from 1980 to 2009 -- low-skill grew 110% while high-skill grew 100%. Mid-skill grew just 46%. 

High-skill jobs also saw their wages rise significantly over that time period, while they've remained stagnant in middle-skill jobs.

"Job growth occurred disproportionately at the upper and lower ends of the wage distribution," the economists write.

Economists such as David Autor have raised this issue before, hypothesizing that automation and outsourcing are in part to blame for the "hollowing out" of the workforce. But few have any idea what to do about it. Some suggest asking those who are paid more to pay higher taxes, but business leaders say that would stifle growth.

Robert Reich, the former Labor Secretary under President Clinton, has said that the economy won't recover until this trend is reversed. If the middle class doesn't have enough money to buy goods, demand will remain weak.

As for how this trend might affect the American people -- those who work at the Fed in New York City might just be able to look out their windows the last few days and see for themselves.

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Photo: Protesters at Occupy Cincinatti make a statement about class inequality. Credit: Big 3 News via Flickr

Bank of America says it's lending more to small business

That Bank of America TV commercial featuring the Pink’s hot dog stand as a sign of its long history of lending to small business was cited in a Times article this week, and BofA wasn't exactly happy about it.

The article used the ads as an example of the chasm between big banks that tout their lending to small business, and the small-business owners who say they cannot get the loans they need to expand.

Loans to small business dropped 0.3% in the three months ended June 30, according to the SBA’s Office of Advocacy. But Bank of America’s small-business lending increased during that same period, according to bank spokesman Jefferson George.

George said Bank of America loaned $7.8 billion to U.S. small businesses in the first half of 2011, a 35% increase from the same period last year.

That number includes more than $1.2 billion in loans to small businesses in California, George said.
He conceded that bank lending is down overall from the days before the financial crisis, but said that is largely because there isn’t the same consumer demand.

"We're trying to make every good loan we can, but the interest isn't as strong as it had been pre-recession," he said. "The economy is challenging everyone, and we're seeing that in loan demand."

But, he said, the bank is hiring small-business bankers across the country to advise small businesses and help them grow their companies -- it aims to hire 1,000 by the middle of next year.

Already, George says, Bank of America’s loans have helped some businesses hire. One was Sliding Door Co. in Chatsworth. The company, which makes doors for closets, room dividers and offices, bought a 25,000-square-foot building, essentially doubling its space, and plans to add 20 employees in the next few years. The loan was a SBA 504 commercial real estate loan with Bank of America.

Loans made through the SBA are typically for borrowers who might otherwise have trouble getting a loan through traditional banks. The SBA guarantees a portion of the loan, making it more appealing to banks.

Mark Herter, chief executive of Farmers Insurance Group Federal Credit Union in Los Angeles, says it might make more sense for small businesses frustrated with the loan process to go to small banks and credit unions such as his.

"Many credit unions do small-business loans and are happy to consider 'smaller' loan amounts," he said. "That is our market."

Big companies go to big banks for loans -- small businesses having trouble finding financing should turn to credit unions, he said.

"When given a chance, a large bank commercial loan department will gravitate to larger loan application amounts than small ones. If GM wanted a loan, they would not consider a credit union," he said. "So the corollary should hold: When a small business wants a loan, it should knock on the door of a smaller lender such as a credit union."

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Photo: A Bank of America sign in Virginia. Credit: Alex E. Proimos via Flickr

U.S. economy added 80,000 jobs in October, fewer than expected

The nation’s economy continued to grow sluggishly in October, adding just 80,000 jobs as concerns about the future weighed on employers and consumers, curtailing both hiring and spending.

The unemployment rate dipped slightly, to 9.0% from 9.1% the month before, and the government revised upwards employment figures from both August and September. But the economy still isn’t creating the 125,000 jobs a month economists say are needed to bring down the unemployment rate.

“Employers are riding a turtle when we were hoping they’d get on a Thoroughbred,” said Patrick O’Keefe, a former assistant secretary at the Department of Labor who is now director of economic research at accounting firm J.H. Cohn.

The service sector led growth in the month, continuing the nation's shift to a service-heavy economy. Retail trade grew by 17,800 jobs and transportation and warehousing added 9,400. Professional and business services gained 32,000 positions and educational and health services added 28,000.

After a burst of activity earlier this year, manufacturing seems to be losing steam. That sector gained just 5,000 jobs in October, and a separate report released earlier this week by Automatic Data Processing Inc. said that the manufacturing industry shed 8,000 jobs last month.

Government and construction are also struggling. Cuts in state positions dragged down the government sector, which lost 24,000 jobs. Construction shed 20,000 positions.

Economy added 80,000 jobs in October; unemployment rate at 9%

Employers added just 80,000 jobs to payrolls in October, fewer than analysts had expected, as cuts in the government and construction sectors continued to weigh down the national economy. The unemployment rate dipped only slightly, to 9.0% from 9.1% the month before, according to new data from the Bureau of Labor Statistics.

Still, the government revised employment figures from previous months, saying the economy had added 158,000 jobs in September, more than the 103,000 than previously reported, and that it had gained 104,000 in August, nearly double the number it had previously reported for that month. Those revisions indicate that the economy is on firmer footing than it seemed to be just a few months ago, analysts say.

"I don't think there's any sign of a recession in this report," said Ryan Sweet, senior economist at Moody's Analytics. "Going forward, the labor market isn't booming, but I don't think there are any signs we're going to take a significant step back."

Private-sector employment led the growth in October, adding 104,000 jobs. The professional and business services, healthcare and leisure and hospitality sectors all performed well. The government sector shed 24,000 jobs and construction lost 20,000.

A separate report released earlier this week by Automatic Data Processing Inc. said that private sector employers added 110,000 jobs in October, buoyed by strength in service-providing sectors. Manufacturing growth slowed last month, the company said, as the industry shed 8,000 jobs.

Despite the job growth, many workers say that the positions being created are of lower quality than the ones they held before the recession. Wages and salaries grew just 0.3% in the three months ending Monday and benefits grew only 0.1%, according to the Bureau of Labor Statistics.

Kevin Friedlander knows it. The 22-year-old Las Vegas resident got laid off from a warehousing job last month and is scrambling to find new work to support his wife and daughter. Each job he’s had since  he got out of the military three years ago pays less and seems more temporary than the one before, he said.

“With almost every job I’ve  had, every day I’ve gone into work it felt like it could be my last day,” he said. “Nothing feels secure, nothing feels stable.”

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Photo: Job seekers at a career fair in Minneapolis. Credit: Jim Moore/Associated Press

ADP: Private employers added 110,000 jobs in October

Private sector employers added 110,000 jobs to payrolls last month, led by hiring among small- and medium-sized businesses, according to a report by Automatic Data Processing Inc., or ADP. The firm provides a monthly jobs report in advance of the government's official tally, to be released Friday.

ADP also said that private sector employers added 116,000 jobs in September, more than the 91,000 the firm had previously reported.

The ADP report does not include government employment, which has been falling consistently, and shed 34,000 jobs in September. State and local governments have jettisoned 641,000 jobs over the last three years, according to the Economic Policy Institute. A shrinking government sector is helping keep the unemployment rate elevated even as the country adds jobs.

"The recent trend in private employment is probably below a pace consistent with a stable unemployment rate and reflects the sluggish pace of GDP growth exhibited earlier this year," said Joel Prakken, chairman of Macroeconomic Advisers LLC, which puts out the jobs report with ADP.

Medium-sized businesses added 53,000 jobs in October, while small businesses -- those with 50 to 499 employees -- added 53,000, ADP said. Large companies lost 1,000 jobs.

Gains were concentrated in service-providing sectors, which added 114,000 positions. Goods-producing sectors shed 4,000 jobs. Manufacturing shed 8,000 jobs, ADP said.

Other signs indicate that manufacturing slowed in October. The ISM Manufacturing Index was 50.8 in October, showing very slight expansion, down from 51.6 in September. A number above 50 indicates growth. Although new orders improved, a good sign, companies cut back on inventories because of fears about the future, according to Nigel Gault of IHS Global Insight.

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Photo: A Whirlpool operations plant in Ohio. Whirlpool said it would cut 5,000 jobs after demand fell. Credit: Daniel Acker / Bloomberg

Crowded labor market drives lackluster wage growth

A labor market flooded with unemployed workers continued to put downward pressure on wages and compensation in the last three months, according to employment cost data released Friday by the Bureau of Labor Statistics. Wages and salaries increased just 0.3% in the third quarter of 2011, while benefits increased just 0.1%, the slowest growth rate since 1999.

Wages and salaries grew 1.6% in the 12 months ending Sept. 30, while benefits rose 3.2%. Benefits have grown faster than wages and salaries over the past two years. In the quarter, the overall employment cost index rose at the slowest pace in two years.

Compensation was dragged down by flat salaries for state and local government workers. Their pay increased just 1.5% over the year, the slowest growth since the data started being recorded in 1982. (In June 1982, state and local government compensation grew 8.5% over the year). That's just one more sign that state and local government positions, once seen as work that came with job security, pensions and stable pay, are no longer the sinecures they once were.

In the three months ending Sept. 30, wages and salaries in the private sector grew in financial activities and insurance, 0.8% and 0.9%, respectively, and in installation and repair. They shrank in the public sector in education, especially among elementary and secondary school employees.

Total compensation, which includes benefits, grew the fastest in the Detroit area over the year -- 4.9%. It rose just 1.9% in the Los Angeles area, and 2.9% in the Phoenix area. If benefits are taken out, wages and salaries grew the fastest in the Minneapolis region over the year, 2.5%, followed closely by Boston and Houston. They grew the slowest in Los Angeles, just 1.3%.

These growth rates aren't likely to speed up until the unemployment rate shrinks, wrote Gregory Daco, an economist with IHS Global Insight.

"With the unemployment rate at 9.1%, ongoing labor market slack should continue to put downward pressure on employment costs," he wrote. "While this is good news for business, it does not bode well for U.S. households whose real disposable incomes fell 1.7% in the third quarter -- the biggest drop since the third quarter of 2009."

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Photo: Job seekers in Oakland. Credit: Justin Sullivan/Getty Images