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Tuesday, Mar 5, 2024

Employment Growth Slow in “Odd Economic Recovery”

Employment Growth Slow in ‘Odd Economic Recovery’ By BRAD SMITH Staff Reporter Between 1997 and 2002, American manufacturers reported a 15.5 percent increase in sales, shipments, receipts, and revenue, according to federal figures released this month. Yet manufacturing employment in the United States dropped by 13.5 percent. What is going on? “Business is trying to improve their productivity and trying to keep their costs under control and this all speaks to slower than normal employment growth, even in an economic upturn,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corporation. “Employment growth has been de-coupled from GDP (Gross Domestic Product) growth.” In the last three years, the national economy has reported 11 straight quarters of growth, but there are a million fewer jobs in the nation than there were in 2001, when the latest recession began. The reasons why are complex, analysts say, ranging from business uncertainty over the impact of the ongoing wars the United States is fighting to the costs of health care, unemployment insurance, and workers’ compensation. “You have three wars, Iraq, Afghanistan, and the war on terror, and there’s no end in sight,” Kyser said. “There’s real uncertainty, and you hear that from people in certain industries, especially for anybody who is importing something the increased security regulations are a real business cost.” Depending on the industry sector, some employers would rather work their existing workers harder rather than hire additional personnel because of the costs of insuring a brand-new employee, experts agreed. The combined costs of health care, unemployment, and workers’ compensation insurance costs can add $3,000 or more annually to the cost of hiring a worker in California over hiring the same worker for the same job in Arizona, Texas, or even New York state, according to employer surveys. “They don’t single out just health care costs but what they are getting at is the combination of workers’ comp, unemployment insurance and health care costs,” said Bruce Ackerman, president and CEO of the Economic Alliance of the San Fernando Valley. Stretched thin “They’re stretching to the max, which is one of the reasons why we’re having this odd economic recovery,” Ackerman said. “Sales volume is up but they are simply not hiring new people they are trying to make do with what they have rather than face the employment costs.” Trying to differentiate between the various pressures hitting different industries and different parts of the state is difficult, experts said. In California, for example, the unemployment rate did decrease from 6.3 percent in June to 6.1 percent in July, even as payroll employment decreased by 17,300 jobs. Yet in Los Angeles, unemployment edged up, from 7.7 percent in June to 7.9 percent in July; unemployment in a half-dozen San Fernando Valley cities also increased, by from 0.1 to 0.2 percentage points. According to the California Employment Development Department, natural resources, manufacturing, professional and business services, and government are all hiring and gained some 8,000 jobs in July. The state’s construction, trade, transportation and utilities, information, financial, educational and health, and leisure and hospitality sectors, however, were all shedding jobs, losing some 25,300 positions the same month. Locally, the increase in the unemployment rate may stem from losses in sectors that are traditionally strong employers in the Valley and surrounding areas, including public education (down 22,500 jobs), and the motion picture and recording industry (down 9,700 jobs), according to the state. In some areas where there is hiring international trade, where there were 300,000 applications for 3,000 unionized dockworker jobs at the Ports of Los Angeles and Long Beach, or aerospace, where southern California-based companies are seeing increased orders from the military there may be shortages of qualified applicants. “People are looking hard for good jobs (and) those are good plum jobs,” Kyser said. “But the big thing is training and skills; for a lot of people who don’t have much in the way of job skills this is going to be a very difficult market.” Using overtime Even when they see applicants with significant experience, some manufacturers would rather pay overtime than fund a new position. “Rather than an additional eight hour chunk, it still may be cheaper to pay overtime even at time and a half,” Ackerman said. Ackerman’s group, for example, has heard from members in the financial services industry and manufacturers that California’s workers’ compensation and unemployment insurance costs remain high in comparison to neighboring states, even after state government’s efforts to reduce premiums in 2003 and again this year. “One company was looking at the costs of moving to Las Vegas and you can get property there cheaper, but what really shocked them was their equivalent of (workers’ compensation),” Ackerman said. “In California they were looking at paying $400,000 annually; in Nevada that would drop to $90,000 the first year.” That sort of bottom-line impact probably has as much to do with hiring decisions as anything else, Kyser said. “The (state reforms) haven’t had an impact yet and most of the results have been somewhat disappointing to business,” he said. “And this just adds to their watch and wait syndrome.”

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