Gordon Report, July 2016
Future Shock Becomes Job Shock
Part I: The U.S. Employment and Talent Situation
As the current state of the U.S. job market is a central
focus of the Gordon Report, attached we present our extrapolation of figures
from the U3 Unemployment Report from the Bureau of Labor Statistics (BLS) and
the A38 "Not in the Labor Force" data from the Current Population
Survey of the Census Bureau.
Our estimate of "Low Skilled, Weak Work Ethic, and
Poorly Educated" people is derived from reports issues by the Organization
for Economic Co-operation and Development, and data from the National Assessment
of Adult Literacy and the National Assessment of Educational Progress, both
conducted by the U.S. Department of Education, and other sources.
In short, the official June U.S. unemployment rate (U3) is
4.9 percent and shows 7.8 million Americans looking for a job. The broadest BLS
measure of unemployment (U6) that includes persons marginally attached to the
labor force raises the rate to 9.6 percent. However, combining the U3 and A38
which gives us a broader view of the U.S. labor market, we conclude that about
27.8 million Americans could potentially joint the labor force, which would
then yield a 17.5 percent unemployment rate. (See attachment.)
In June 2016 the U3 Official Unemployment Rate rose from 4.7
percent to 4.9 percent largely because 400,000 more people were unemployed. The
average number of weeks people remained unemployed rose from 26.7 to 27.7. The
proportion of those unemployed for over 6 months rose to 25.8%; 94.5 million
people have given up looking for work and are classified as "Not in the
Workforce". In a correction from the previously reported figure, the
BLS indicated that businesses added only 11,000 jobs in May, the weakest level
of hiring since September 2010.
Yet many of the district reports in the Federal Reserve
Beige Book issued on July 13 stated that businesses are reporting having
difficulty filling job openings and that wages are increasing modestly in areas
where the labor market is tight. The May "Small Business Trends
Report" issued by the National Federation of Independent Businesses found
that 48 percent of the companies surveyed reported finding few or no qualified
applicants.
Part II: "Job Shock" Adds to "Future
Shock"
Alvin Toffler, the celebrated author of Future Shock
(1970) died recently. His best-selling books also included The Third
Wave (1980), and Powershift (1990). They all contended that
people and institutions would suffer from "information overload" as
the growth of science, the internet, and communication technologies would lead
to an overwhelming pace of change. Toffler's basic message was knowledge, not
just "clicking for brains", would become the most important economic
resource of advanced societies.
Today "Job Shock" is taking its place alongside
"Future Shock". A June press release from the outplacement company,
Challenger, Gray, and Christmas, has the headline, "Is the Labor Force
Running Out of Labor?" A Bloomberg Businessweek article asks "Has
America Run Out of Workers to Fill Its Open Jobs?" (June 8, 2016).
Our estimated unemployment rate of 17.5 percent (see
attachment) indicates that over 27 million people are available for the U.S.
workforce. Today's 'Job Shock" is the gap between the demand for skilled
labor and the available supply of skilled workers. It is a prime mover of the
the populist revolt in the current Presidential campaign.
"Job Shock" is among the factors moving some of
the heads of America's largest public corporations and investment firms to
openly advocate for change in corporate governance principles stating that this
"is critical to economic growth and a better financial future for American
workers, retirees, and investors." In a full-page advertisement in the Wall
Street Journal, New York Times, and Financial Times (July 21,
2016), Warren Buffet, Jeff Immelt, Jamie Dimon, and other prominent senior
executives subscribed to the contention that financial markets "have
become too obsessed with quarterly earnings forecasts." The website that
further explicates their stance states, "Making short-term decisions to
beat guidance (or any performance benchmark) is likely to be value destructive
in the long run."
Investment for the long-term would help curtail the on-going
negative behaviors of continuing stock buybacks, huge executive bonuses,
perpetual cost-cutting, and merger and acquisition activity that only benefits
a few. It has the potential of encouraging business to refocus on investing in
plants, equipment, research, and the training/development and education of
employees as knowledge workers.
The Gordon Report has long argued that global/U,S, business
strategic workforce planning requires a balance between short-term and
long-term investment. We continue to propose that the business community join
us in urging the Financial Standards Accounting Board to revise its accounting
standard to give publicly-held U.S. companies the option of capitalizing rather
than expensing their investments in training and development, education,
internships, and apprenticeships.
Business participation in partnerships encompassing
educational institutions, economic development agencies, and community
non-profits is vital for successful initiatives that build an American
knowledge-based economy. Toffler believed that such knowledge creation was
mandatory for expanding the pool of appropriately skilled people across the
United States. He warned that people and institutions that failed to keep pace
with knowledge growth faced ruin.
Edward
E. Gordon is president of Imperial Consulting Corporation - www.imperialcorp.com. His latest book is
Future
Jobs: Solving the Employment and Skills Crisis (Praeger, 2013), which is a 2015
Independent Publisher Book Award winner.
