On the Contrary:  I am a big fan of contrary analysis, looking for where the masses and the media are exactly wrong about a major issue. This is not easy to do, as it requires a level of objectivity, and the ability to pull yourself out of the society you are a part of, looking at things with a fresh eye. To do this well, you need what I call a "Martian’s point of view."

However, there are often attempts to be contrary where that detached objectivity is lacking. Even worse, the pseudo contrarian may get certain facts or analytical approaches wrong. We can see this happening when an accepted meme starts to fall into disrepute. Rather than a true contrary approach, it can operate as an attempt to rescue a false and dying belief.

Such is the case in a botched Sunday New York Times article, A Boom in Jobs, and Fear. I do not know the writer, so I cannot attest to his motivations and biases. But the piece is such a smarmy, purposefully misleading column, that I find myself wondering about whatever happened to the editors and fact checkers at the New York Times. Perhaps they were lost in a recent round of budget cuts.

Let’s have a look at the column, and see where it went wrong:

"Here at home, meanwhile, it’s raining jobs — an estimated 5.8 million new ones in just five years, according to a recent Labor Department report. The government’s household employment survey showed a gain of 437,000 jobs in October alone. Unemployment that month fell to just 4.4 percent, a 5½-year low. Jobs are so abundant that investors are worried that the Federal Reserve may delay making interest rate cuts, lest inflation revive. The concern is that all these new jobs may lead employers to bid up wages, heaven forbid."

Its rare to find a paragraph with that combination of intellectual dishonesty, misleading data, and what can only be described as knowingly false statements. Because its BSD (bull shit density) is so high, we need to take it apart sentence by sentence.

"Here at home, meanwhile, it’s raining jobs — an estimated 5.8 million
new ones in just five years, according to a recent Labor Department
report."

The number in that is factually accurate — but the description — raining jobs — is hardly so. Private sector job creation in the present recession-recovery cycle is amongst the weakest recovery since World War II. In a nation of 300 million people, with a work force of 145 million, creating less than 1.2 million jobs per year for 5 years barely amounts to a drizzle. In simple math terms, job growth has been about 0.8% gains per year over that 5 year period.

Let’s continue:

"The government’s household employment survey showed a gain of 437,000
jobs in October alone."

The Household Survey has become the last refuge of economic scoundrels. Whenever anyone trots out Household Employment Survey as proof of job creation, it is an admission that they are clueless hack, or a charlatan. This has been so clearly resolved that it tortures the imagination to understand WTF this is doing in the NYTimes. For posterity, I will repeat this for the umpteenth time:
the Household survey IS NOT A SUPERIOR MEASURE OF JOB CREATION to the establishment survey. However, it is a reliable source of confusing data to the layperson that it can be cherry-picked by the disingenous. 

What it measures is
UNemployment. No less an authority than the BLS, Alan Greenspan  and the Federal Reserve have said that the Household Survey is not a good measure of job creation. It was never designed to measure new job
creation. For more information on this, see  BLS on Payroll vs. Household Survey, Redux: Household versus Establishment Surveys and this  Household versus Establishment Surveys, part 42.

Let’s address another slice-o-nonsense in the column — the issue rising wages. The grim reality is that Median incomes for households with people of working age fell for the fifth year in a row in 2005, and that’s likely to be the case in 2006 also. Adjusted for inflation, the typical American household is bringing in about $3,000 less this year — even with the late year drop in energy prices. Real (as opposed to nominal) income is actually negative for this group.

Compare this with how well the top income percentiles are doing, and you can see why taking average income data provides a very different picture than median income data: Newsweek reported that "In 2004, the wealthiest 1 percent of households (with incomes higher than $315,000) copped 53 percent of all the year’s income gains."

While it may be technically accurate to say that total income increased, it is inaccurate to imply that it was a benefit to most families.

Since the column brings up October’s jobs, lets take a closer look at them. As we noted on Saturday (Barron’s: Bushwhacked), the actual mix of jobs — private and public sector, high paying and low — was rather poor. Here are some specifics from the 92,000 new hires in October’s NFP data:

• 39,000, or 42% of the total gain,was local governments, mostly back-to-school hires.

• 27,000 of the additions were in bars and restaurants

• 23,000 were in entry level health care.

• Manufacturing shed 39,000 jobs in October and construction employment declined 26,000, weighed down by a hefty 31,000 shrinkage in payrolls connected to residential construction. The drop in homebuilding employment was conspicuous among the workers who finish houses, likely a preview of things to come.

The point of these numerical details is that the bulk of jobs being added are not big payers, while the bulk of those outsourced jobs being lost are. So even after we get past the fact that total number of new jobs has been relatively poor on a historical basis, the QUALITY OF THE JOBS added is even worse.

~~~

One last thing: I’m in favor of free trade and outsourcing. And so is most of America, judging by their spending habits. I’ve outsourced lots of software programming and tech support work overseas. A project I am presently in the midst of is being done exclusively in India, for about 8 cents on the dollar as to what it would have cost here.

I just do not feel compelled to misrepresent the facts about it . . .

>

Sources:
On the Contrary: A Boom in Jobs, and Fear
DANIEL AKST
November 12, 2006
http://www.nytimes.com/2006/11/12/business/yourmoney/12cont.html

The Economic Perception Gap
Jane Bryant Quinn
Newsweek, Nov. 20, 2006
http://www.msnbc.msn.com/id/15672865/site/newsweek/

Category: Employment

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “It’s Raining Jobs!”

  1. mentalmodel says:

    It’s great to hear that you’re outsourcing software development. Imagine how much better off we’d all be if Bloomberg did the same.

  2. We want to make available an institutional caliber quantitative product to retail investors. The original version cost over half a million dollars to develop int he US, and took years to tweak.

    If we created it in the US, it would have to sell for over $2,000 per month to be breakeven. This covers the new programming (amortized over 3 years) plus the fees for charting, data feeds etc, and assumes a large user base. At present, it will run for between $595-695 per month — maybe less.

    The choice was simple: either dont do it — or outsource it, and make it available to non-institutional investors.

    It was an easy decision

  3. VennData says:

    Bill Gates recently gave a talk stating “the West” is not supplying enough IT talent.

    Microsoft is a me-too competitor – think Zune, Internet Explorer, MSN, word processing, spreadsheet, GUI OS etc etc – that uses its market power foist average-at-best products onto us.

    Microsoft frightens capital away from programming ideas.

    Complicit are public officials like former Assistant Attorney General Charles James who, after they were found guilty, fined Microsoft nothing, then quickly moved on to his corporate job.

    Imagine the effect on programming talent if the OS world was Linux-based and people with creative ideas would not have to work for some monolithic grinder of R&D dollars into copycat product after copycat product? Programming would be entrepreneurial. Out-souring would fit hand in glove as the building blocks of an integrated, non-proprietary super structure would be prevalent for developers to use anyway they saw fit. …and the re-inventing-the-wheel overhead of Microsoft’s lame development / user-control / rent-extracting environment would not exist.

    I’m all for free markets, but computer software development isn’t one. Microsoft’s platform guarantees that.

  4. Neal says:

    Review of earlier work (ca. 2001)-”Akst’s column claims it “tilts at conventional business wisdom”. Not in his column today. He simply repeats the long-established talking points of those who own and control the worlds wealth.”
    A lower level tool who has made a living of of filling off-day editorial column inches.

  5. lurker says:

    NYT business section sux. Nuff said.
    Bloggers have started to kill off the paper based old media. See Time magazine probs. Subscribers falling like flies? Raise the cover price! LOL. If it wasn’t so sad. Weekly? newsmagazine is almost oxymoronic.

  6. Jobs Q –
    Both Roubini and BR have mentioned that the future employment indicuators are dropping. Roubini’s quote is:

    “Also true forward looking indicators of the labor market are signaling weakness: temporary employment is down; the Help Wanted Index is sharply decelerating; and the online equivalent of the Help Wanted Index – the Monster.com Index – is also sharply decelerating.”

    My question is: With the exception of retail, doesn’t most hiring slow to a crawl during the holidays? Do these indexes mean that much going into Thanksgiving?

  7. Tom Harlen says:

    So, you outsource your software development. Don’t you realize that you are helping to create the “Bifurcated Economy” that you love to complain about. You are a unbelievable hypocrite.

    ~~~

    BR: Why do you believe that the observation of reality and my adaptation to that reality to be hypocritical?

    If we did the project here, it would be impossible to produce at a reasonably competitive price (as is a few $100 per month is expensive for retail investors)

  8. dblwyo says:

    Barry – thanks for taking the time and trouble to post and analyze. Gives new depth to the notion of ‘disingenous’, doesn’t it ? Just for the record in Aug00 employment was 131.8M and in Oct06 it was 136.7, for a gain of 4.9M, or approx. 71k jobs/month. Taking 150K/month as the min. acceptable social policy goal that’s less than 1/2. During the period Jan97-Aug00 we were creating 284K jobs per month while, on reaching our apparant “recovery’ peak, from Oct04 to Oct06 it was a breakeven 154k. All we’ve done is get back to the steady-state but w/o recovering lost jobs or engendering fundamental growth. We needed a period of a couple of years of 350k/month before settling out to 200-250k for a healthy economy.

    As someone has pointed out this was a different business cycle – investment-driven rather than consumer-led and we haven’t gotten back to self-sustaining organic growth. Hmmm…who pointed that out ?

    And just to put a further point on it we know the economy is slowing to <2% growth, recession risks are rising [ > 50%] and that doesn’t allow for implosive risks to housing. And all that w/o facing up to the nature of the cycle.

    Ah well, fundamentals. Who needs ‘em ?

  9. Rational Actor says:

    I think you are being unfair to the Times in calling them intellectually dishonest — they don’t know any better than to publish that kind of tripe (at least that is my judgement based on my friends who work there). I stopped relying on the Times as a source for anything other than crossword puzzles a long time ago. The traditional liberal media has been replaced by the new, inept media.

  10. vfsv says:

    It’s funny but we wrote about this same mis-representation of jobs here in Silicon Valley. There are mutlitple sources of this dis-information:

    1) headlines written about the CA-wide & county-wide jobs which omit “CHARGE” jobs:
    http://www.viewfromsiliconvalley.com/id274.html
    -and-

    2) the VC spending headlines which people assume correlates with local tech jobs. The actual numbers suggest otherwise at:
    http://www.viewfromsiliconvalley.com/id279.html

    To keep up with “What’s Really Happening,” please visit:
    http://www.viewfromsiliconvalley.com

    Thanks!

  11. M1EK says:

    Barry, I enjoy reading your blog so much that I hope to heck you’re going to survive your offshoring experiment. You’re not going to find many people in my industry who will admit to having high-quality results from the experience these days… but there are stories after stories of projects done just well enough to fool the largely unqualified people on our own shore in charge of acceptance testing; only to result in disaster later on. (In that event, the project either fails or calls in on-shore contracting cowboys who cost a heck of a lot more than good normal on-shore developers would have all along).

    India has produced programmers who are smart enough to be able to fool people who don’t understand programming as well as programmers do. This was fairly predictable, wasn’t it?

  12. me says:

    To go along with what MIEK says, I am reading in Fast Boat To China about how China has diploma mills. I would not be surprised if that is where a majority of Indian engineers are form also.

    Free trade to me embodies WalMarts dotting India and Citibank on corners in China.

    Notice the Indians on strike against outsourcing and those jobs would outsourced to their own country.

    All free trade is, is a Chamber slogan to justify offshoring our good jobs to cheap labor period. Catherine Mann said how many jobs would be created by this cheap IT and guess what? It hasn’t happened.

  13. donna says:

    Software in the U.S. is in an abysmal state. I’m a software QA and process guru, and Americans simply don’t want to be told how to do it right, they’ll just keep hiring their cowboy programmers who end up screwing things up. The Indian companies follow good development procedures and do it right. Can’t blame you, Barry, though I wish it were different. I’ve been trying to get software companies here back to good software discipline for 20 years now. i get paid well when I do it, but it’s very frustrating.

  14. Patrick (G) says:

    5.8 million jobs in 5 years.
    is 5.8 million jobs in 60 months. or roughly 100 thousand jobs a month.

    Economists like Paul Krugman and Brad Delong have mentioned that in order for the employment to keep pace with our expanding population, we need to add something like 150 thousand jobs a month.

    So in 5 years, our workforce has shrunk to approximately 3 million jobs less than the size it would have been if employment growth had kept pace with our population growth. ((60 * 0.15M) – 5.8M)

    A 3 Million jobs gap isn’t a rain of jobs, it’s a drought of jobs.

  15. Rich says:

    Thank goodness we have more people retiring from the workforce than entering it right now. That at least masks the jobs issue with a low unemployment rate so we can keep up the raining jobs charade.

  16. Bob White says:

    People seem to think that globalization is a kind of one-way flow where strong currencies can buy cheap labor. But the flow goes both ways. Once an engineer learns his true value, he’s not going to work for less just because bananas are cheaper at his market than at a US supermarket.

    Good engineers learn to charge what they’re worth. So to a certain extent, to get a software project done at 8 cents on the dollar, one has to hire less experienced or less talented workers.

    I have seen several US companies dive into the market for outsourced SW development only to be rewarded with truly poor results. It’s not because Indians can’t program (I work almost exclusively with Indians here in the US). It’s that the best engineers go where the best salaries are.

    This may be less true for a website, but for anything more complicated and customized, US engineers do okay. Also, most of software development costs come from specification: making it clear and unambiguous, understanding the spec, correcting the implementation to match the spec and amending the spec to more closely match what was needed but not foreseen. All of these things are better accomplished by onsite discussion with the client.

    The latency of communicating with people who sleep when we work and work when we sleep is more costly than people would guess.