(c) Copyright, View from Silicon Valley, 2006.
All rights reserved.
There are many "cheerleader" articles out there
but only a fixed number of hours in a day. We read such a continuous stream of "spin" posing
as economic analysis that de-bunking them all would be a full-time job for a small army. Occasionally, however,
one snippet hits us as so blatant that comment is deserved.
Based on the headline, this has the
potential to tell us something we don't already know. What we "know," or at least think we "know," is the real estate
business has accounted for something on the order of 50% to even 80% of new jobs over the last several month. "Everybody"
is either building, inspecting, repairing, improving, furnishing, appraising, funding or brokering some portion of the record
volume of real estate changing hands over the last two-plus years. (And local governments are rushing to hire and
spend more based on the tax revenue these transactions spin off, but that's a topic for another missive.)
In short, this article admits what
labor market strength there has been over the last 2.5 years is heavily dependent on the real estate market.
It further states the obvious in observing, "health care, accounting, engineering and other services," will hire more people in
2006.
But then their "logic" starts to get
a little fuzzy. To wit:
1) "Employers, faced with spiraling
health costs, have been conservative about hiring. But as corporate worries about the price of energy ease, service businesses
may be more willing to add workers. "
--Do you walk to school or carry your
lunch? If health care costs hold back hiring, how does an energy price "ease" compensate? Won't health
care costs still be high in 2006? (Or higher?) Aren't gasoline and natural gas costs still up 50%+ from
2003?
(By the way, have you noticed gasoline
tick up $0.25 -$0.30 per gallon over the last few weeks? We expect more of the same as various loudly-proclaimed SPR
releases are quietly withdrawn from the market.)
2) "We would look at (the job market)
and say, you know what, 2006 has the likelihood of creating as many jobs as 2005 did."
--If this is a "feature," then why are so many people complaining about the weak 2005 (and 2004 and 2003) job markets?
2A) The article claims new jobs add up to, "a
total of nearly 4.5 million since the labor market reversed its decline in mid-2003."
--Fourth grade arithmetic finds 150,000
jobs per month over 30 months, which is less than the rate at which the US economy work force expands. Said another
way, 4.5Million represents 3.2% job growth since mid-2003 (142.5M total US jobs). Or 1.28% job growth per year vs. a typical 2% annual increase in the workforce.
3) "Even as companies like the major
airlines and General Motors have been cutting jobs, a few industries have been the source of much of the nation's net job
growth."
--You mean the newly-unemployed autoworkers
are going to become accountants and engineers? Wow, you ARE good!
4) "Restaurants have added close to
600,000 new workers since mid-2003. But the mix of new leisure and hospitality jobs could change in the coming year, with
more hiring by hotels and resorts, experts say."
--On top of 600Ku new cooks,
wait staff and dishwashers added in two-plus years, now we're going to start getting more --cooks, wait staff and dishwashers
coupled with maids, gardeners, bell hops and laundry jobs. Clearly, this is a sign of a strong employment
market.
5) The article crows about accounting
jobs. "(D)emand is evident at accounting firms like BDO Seidman, which plans to add 300 employees in the coming year
after adding 400 in the past 12 months."
--Some hiring is better than none
but, sorry, in 2006 BDO is actually SLOWING their rate of hire. Was this the best example of job growth they could
find?
6) "Temporary agencies have signed
on 400,000 more workers, with caution by companies prolonging demand. "
--Yes, historically, temp agency hiring is
a precursor to general employment gains. Except this precursor failed when temp jobs jumped in 2003 with little
follow-through in ensuing months and quarters.
We could go on and on (and, once again,
we already have) and discuss the (in)significance of the official unemployment rate. Or why the continued threat of
increased H-1B's (and, lately, J-1's) and/or incremental off-shoring will restrain wage growth even in "high end" jobs,
but you get the idea.
The bottom line claimed in this
article was,
"Housing and related industries have produced nearly one in four new jobs since 2003... "There are some signs the hiring is moderating. But the pace of homebuilding and
buying is still so strong, that some employers say they'll need new workers well into the new year."
The final conclusion was, "businesses are going to have to
start bidding a little more for workers."
Our own opinion is 25% vastly understates
the impact of real estate on the job market. However, if we accept the article's 25% and also it's premise real
estate-related hiring will decrease, then their final conclusion is clearly wishful thinking.
Also notice the source of quotes
and factoids for this article:
A) Economy.com (according
to their web site: "500 clients worldwide, including the largest commercial and investment banks; insurance companies;
financial services firms; mutual funds; governments at all levels; manufacturers; utilities; and industrial and technology
clients."
-- Isn't their job to perpetuate the belief
"everything is wonderful all the time"?
B) Manpower, Inc.
-- A temp agency whose job is to sell
you on the idea temp hiring is strong, so apply now!
C) Toll Brothers
-- If you believe they are a
font of objective knowledge, do you mind if hold your wallet?
D) BDO Seidman
-- Hiring fewer accountants this year
than last.
E) "National Association of Colleges
and Employers"
-- In the business of getting college
grads hired.
F) "Naroff Economic Advisors"
-- Financial industry consultant-
probably not in the habit of giving away their leading-edge information.
Conclusion:
We readily admit 2006 employment might
ratchet up. It's even possible the nationwide increase in total wages might increase faster than inflation plus population
growth for the first time since the 1999 -2000 boom years. Perhaps this will happen even in the face of flat
(or declining?) employment in real estate-related fields. However, there is little actual evidence for such
a scenario in this article.
As always, read the whole article,
and understand the motives of the participants, before jumping to any conclusions based on the headline.
