May 12, 2013

Charles Lawton: More churn in jobs would be good sign

"One must imagine Sisyphus happy."

– Albert Camus, "The Myth of Sisyphus"

Too often, we look at the economy as fixed blocks -- households, consumers, businesses, schools, hospitals, government agencies, etc.

In the labor market we talk about creating jobs, as if they were a product to be manufactured. If you've got a job, that's a good thing. If you don't, that's a bad thing, and we have to figure out how to somehow "create" one for you.

In actual fact, the economy is far more fluid. People are born, grow up, strike out on their own, create households, move, on and on.

In the labor market, jobs don't pop off an assembly line that sometimes moves faster and sometimes slower. They churn around in a messy mix of part-time work, internships, freelance contracts, under-the-table deals and employment agencies placing temporary workers.

This job churn (or lack of it) is evident in looking at the history of the Great Recession.

In 2006, the year before the Great Recession "officially" started, Maine had 582,000 jobs. Over the same year, there were 88,000 new hires and 109,000 separations, meaning someone leaving his/her former employer, whether voluntarily or involuntarily.

In 2007, total employment actually rose by 3,300 jobs, but the "churn" in the labor market showed a marked change. The number of new hires fell by 3 percent, and the number of separations by 2 percent.

In short, employers slowed down new hiring and employees slowed down their voluntary departures.

Over the next two years, new hires dropped by 12 percent and then 14 percent, and separations fell by 5 percent and then 12 percent. In other words, the recession wasn't just a change from "now you've got a job to now you don't."

It was a gradual slide from slowing new hires to drastically cutting new hires, followed by a similar but somewhat delayed pattern of slowing and then drastically falling separations.

Add new hires and separations and call that labor market churn -- a measure of activity, employers hiring to fill new jobs plus workers leaving jobs.

In 2006, that sum totaled nearly 200,000 actions and represented 34 percent of the average number of people employed during the year. In 2009, labor market churn fell by 22 percent to just over 150,000.

Over the recession, churn fell from 34 percent of employment to 27 percent.

The labor market didn't fall off a cliff; it gradually froze up.

Since then, activity has picked up, but not by much.

In 2010, new hires rose by just over 7 percent to 69,390, but then grew only by 0.6 percent in 2011 to 69,772. Separations increased less than 1 percent in both 2010 and 2011, and churn remained basically static at about 28 percent of total employment.

In short, the drastic deceleration of the "jobs engine" that drives the labor market has ended and a turnaround has begun.

But the dynamism of a vital economy -- lots of new hiring and lots of voluntary job leaving has not. Until that sort of confidence can be restored, our economic "recovery" looks bleak. And that's why we need to unload all the "fear and loathing" surrounding the idea of "a job."

It shouldn't be such a traumatic activity -- tied to rules, long-term commitments, major investments in health insurance, retirement programs and regulatory risk.

If we want to get the economy moving again, to ease the Sisyphean task of getting this rock up the hill, we must make giving someone a chance to work less difficult.

Charles Lawton is chief economist for Planning Decisions Inc. He can be reached at:

clawton@planningdecisions.com

 

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors




Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)