Job woes punish the young
When the Labor Department released its latest monthly employment data a week ago, it cheered both stock and bond investors. But employment numbers that are good for stocks usually are bad for bonds.
What a dilemma. If the unemployment picture is good for companies' stock prices, then the Federal Reserve undoubtedly would have reason to taper its bond purchases in support of the economy sooner. That would threaten to send interest rates higher and erode bond prices.
But a deeper examination of the unemployment situation tends to favor the bond market's view that these were not healthy numbers.
The headline number showed the unemployment rate fell to 7.4 percent in July, positive news for stocks, but underlying this figure was a picture of increasing gloom, particularly regarding young people seeking full-time employment.
On the surface, a fall in the unemployment rate of 0.2 percentage points to a 4 1⁄2-year low last month and a 2.8 percentage drop from its peak during the Great Recession of 10.2 percent in October 2009 is welcome news. But that is far from the whole story.
The data showed that the number of workers considered long-term unemployed — out of work for more than 27 weeks — shrank miraculously to 4.2 million from 5.2 million. The number represented 40.7 percent of the labor force.
Evidently, some 1 million people accepted part-time employment or gave up seeking any job and were no longer counted as unemployed. If this total, accumulated over years, was included, the “real” unemployment rate would be closer to 14.3 percent. Among 16- to 24-year-olds, 16.2 percent are jobless, despite trillions of dollars spent by the Federal Reserve on bond purchases to stimulate the economy and help promote job growth.
The government reported that 557,000, or 74 percent, of the 753,000 jobs created in the first half of this year were temporary and form part of the 3 million part-time jobs created since 2007. Understandably, they replace many of the 2 million full-time jobs lost.
But part-time employment tends to be in low-paid sectors, such as leisure, entertainment and similar service industries. It implies low wages and job insecurity. Furthermore, part-time work offers reduced opportunities for employees to enhance their skills and for promotions. It is a rotten prospect to hold out to college graduates, many of whom are saddled with huge loans to obtain qualifications for higher-paying careers.
ObamaCare is exacerbating the situation. It requires employers with 50 or more workers to provide health care for all employees working more than 30 hours a week, which is considered full-time. This is encouraging employers to cut their workers hours or hire more part-timers.
Crushing consumers with increased taxes, overregulation and added costs, the government has discouraged businesses from investing in full-time employment opportunities.
The growing number of temporary jobs and absence of full-time employment is damaging to the morale, training and wealth generation of the young.
John Browne, a former member of Britain's Parliament, is a financial and economics columnist for Trib Total Media. Email him at email@example.com.