A thought on why employment might not be crushing the markets
Improvement in employment has certainly been a substantial dissapointment in this recovery. I can't imagine even the most polyanna of permabulls feeling good about the economy being essentially unable to create new jobs more than a year and a half after the recession ended.
Recently, and for the most part throughout this rally, the market has brushed off bad employment figures with hardly a shrug. The only two real selloffs I can recall on employment numbers were July 2009 and summer 2010. The market eventually recovered from those, and those selloffs happened at a time when sentiment was highly negative already. It is fairly common to hear people blame this on the artificial market created by QE and QE2, the funny money market, fed manipulation, fed buying stocks itself, and assume that the market - without this presumed manipulation and the influence of QE - would sell itself into oblivion quickly as unemployment remains such a dramatic problem.
I would like to try to offer a different thought. We live in strange times, and numerous force push and pull at the labor market in different ways. Among these are
-overwhelming anti-business liberal sentiment everywhere in culture. please name a movie made in the last 20 years in which some hard working business guy was the good guy? How many times are we hit with the idea that the businesses we work for are evil? This works to make the attitude of employees towards their job and those who employ them more negative than it would be otherwise.
-unions and their vast influence. unions literally cultivate a culture of despising your employer and wanting more for doing less. And to those ends they have been incredibly successful. I am rarely shocked when I sit down to eat or talk with union people at how deeply resentful they are of the people that are paying them far more than market wages. I have heard dozens of stories from people who worked in unionized plants about them being yelled at or threatened if they didn't work slower, lest it make everybody else look bad, of people napping on the job, of people playing cards on the job, etc. Throughout all of this, they maintain (by and large) their aura of gloriously working for the common man, their "Robin Hood" image. This despite the fact that they are bigger and more powerful than the companies that employ them frequently (witness the auto industry) and massively destructive to the world around them and their own members, eventually, as their greed chokes their employers to death (withness michigan and detroit)
-the vast, amazing economic success of the US over the last century or so. Our society has become so rich, so wealthy, so prosperous, that most of the time over the last 60 years getting a job was more of a choice than a challenge. Even today, could I, with no college degree and quite literally no marketable job skills, get a job? I guarantee you I could snag a job at a McDs or an Olive Garden or Joes Tavern or sweeping floors or something. Somebody is hiring. But our culture of easy-living and feeling like we are entitled to an easy life leads people to refuse to take these "lower" jobs, and how many people right now are sitting around refusing to take less than a $80k job because thats what they want. We have a culture of people who just won't "lower" themselves to take what work is available and instead would rather sit around and pout. Which leads us to the big one
-can you (i'm asking) quite literally do nothing in this country and get enough free money from the government to get by fairly well? get an apartment and a TV and some food? The response of our government to the crisis on a welfare/social aid level is, in my mind, no doubt exacerbating the situation. Unemployment benefits icnreased, extended, extended again, to perpetuity? When do we stop extending them and force people to fend for themselves? Why is it reasonable for someone to just refuse to work at McDs or some restaurant or digging ditches and live on taxpayer money because they don't want to get their fingers dirty? Those were my first jobs. Why are they so much better and more important than me? Its the long slow self-destruction of a democracy. They start so gloriously, by giving everyone a chance to live and unleashing all that legion human potential that was entrapped by a caste system. And then one day someone (like FDR) realizes that if he gives away free stuff to people, they will vote for him, and he can retain power. And then the political system slowly gravitates towards a condition where politicians quite literally just try to buy votes by giving people more and more free stuff. FDR created jobs with the TVA and such, it has evolved into todays democrats almost literally running on a platform of "vote for me and I will give you free stuff". More or less, that is what Obama ran on. Hard working rich people are evil (and few, so who cares if they vote for me), Imma take their money away and give it to you! You deserve free health care and free life, and a new Corvette! The problem of course is when living off the public purse hits critical mass and the people willing to put in the hundred hour weeks for as long as it takes to create new jobs just say "screw it" and go to the bar. Then whoh pays all those taxes for all those nice free-money welfare checks? The USA is probably not to the point of no return down that path, but its sure trying to get there. None of this is that complicated. Its all been done before. In fact, its probably brought down more empires than anything else throughout history.
Etc and so on, I could go on with points for probably hours. Here are some real stories from my own life to highlight:
-the second employee we ever hired was a guy we'd worked with in restaurants back int he day. At the restaurants he was fairly annoying and lippy but undeniably had a fantastic work ethic. He'd do anything, if they were short a cook he'd go cook french fries, if they were short a bartender he'd do that. We ran into him one day and he asked how biz was we said we needed to hire as it had gotten far out of our ability to do it ourselves and we were probalby about to drop dead. He begged for the job, we gave it to him. He was the best. He proved to be much more talented than we'd anticipated, fixing equipment, staying late, working all night hammering some metal to try to form a new part or whatever. If you gave him a list of experiments to run, even though he didn't know anything about anything, he'd carry it out so dilligently it was almost better than doing it yourself. So we took him off hourly and gave him 1500 bucks a week. In this part of the country thats alot of money for blue collar work and its probably huge anywhere for a guy with a GED. All was well. And then somehow, at a lake somewhere, he made friends with some union people. Teamsters Union to be specific. Every weekend he'd hang at their lake cabin, cruise around on their pontoon, drink at their houses, whatever. After a year or so his attitude at work started to degenerate. On Mondays he'd complain about how we didn't care about him or anybody, we were just suits, he'd gripe all day, take an hour to cook a long slow lunch and half an hour to eat it. Leave at 5. By thursdays he'd be better, but the next monday it started again. When we sold the businesses he quit and he's been on unemployment for more than 2 years now, despite job offers including one from us. He states he has no intention of working again until unemployment is off. Just the weekend influence of that union attitude changed the guy from "screw it, lets work until this is done, this is cool stuff we are doing" to "screw you, why should I work for you when you're buying a new car". There are some stories about this guy and his union friends that would probably shock you, they sure shocked me. But for now they can wait.
-a guy I know from the nearest big city cesspool of liberalism got laid off by a major money center bank, then went on unemployment. In late 2008. Saw him a few weeks ago, still on unemployment. He's a super-liberal hippy kind of guy with a garage band. I asked him if he hadn't been able to find a job, he said he got offered his old job back but as long as he could collect unemployment, the big severance package he got and taht were enough and he just wanted to take some time "for him" to work on this music. He's 40, he ain't gonna be the next big rock star, that ship sailed a long time ago. But he's taking special time to smoke weed and play his guitar, on the taxpayer's dime.
-we hired one guy to be the sales manager and for a month he refused to call on a certain type of potential client. when we asked him why he didn't explain or answer, he just started crying and said that we put too much pressure on him and he was going to wind up with a divorce if we didn't ease up. he sued us when we laid him off. we hired him to do THAT JOB. I know what you're thinking, you're wondering WTF was wrong with me for hiring him. He was 50 and had had numerous high level jobs, college grad, the works. He'd been laid off a couple of times when businesses contracted or downsized...
-we hired one guy to replace him who, no lie, smoked weed in the lobby of our biggest customers office. try explaining that one to said biggest customers CEO, who was coming out of the elevator with you when you witnessed said smoking of weed. another college grad, good work history except, again, had been laid off af ew times always when businesses were downsizing.
-we hired one guy for the same job who was late for work probably 20 straight days. He got probably 10 last warnings. And then we fired him. We kept a spare car or 2 to loan to employees in case their cars broke down, as we remembered how traumatic it was to have your car break down and face a $700 repair bill back in the day. He had been driving one of those. We always played rock paper scissors for who had to deal with the firings, and this time I lost. I drove him home in the car, my car, and he bawled and cried and begged for more chanced. Then when we got to his house he says "hey, you think it'd be ok if I kept the car for a month or two?". Folks, youc an't make this stuff up.
Did we also get some loyal and hard working employees? People I'd drive across the state to hang out with? Of course. But I'd honestly say 25% of the people we hired were really not employable, I mean what are you going to do witht hese guys? I could go on all day, share stories about other business owners I've met who hired a female and a week later she complained she was sexually harassed (not by them) and then basically refused to do anything but threatened to sue if she was fired (heard that story twice). They kept her around because nobody wants to be sued and their are lawyers just waiting for that case, because they know you'll settle rather than spend all that time ont he lawsuit. You are busy, after all. Of employees who stole (happened to us more than once), of employees who yelled at hteir bosses when asked to perform a task (happened), who were manaagers of retail stores and consistently late so that the other employees would be standing in the mall waiting to go to work with the doors locked. Of online stores whose webmaster crashed the site and refused to stay past 6 o'clock when he went home to get it back up, leaving it down overnight.
Why did the two sales guys we tried to hire above get laid off every time a company made changes? They were the chaff. They weren't actually necessary and they were just kept around because in general people are fairly nice and don't like firing.
They were the chaff that a combine throws out as it harvests grain. They were paid for a time because business was good and people are generally nice. But when the shyte hits the fan, they are the first to go, and businesses are thrilled to be rid of them.
Folks, its REALLY HARD as a business owner to find good employees that will even try to earn the money that they make. All of the factors above work to make a large percentage of people have REALLY bad attitudes towards their jobs, strive to do the minimum.
When true panic set in in late 2008, several things happened:
1. biz's got a "lay people off for free card". nobody was going to win a lawsuit over being laid off in late 2008, it was scary times, and layoffs were massive and widespread.
2. it became for a time not-socially-unacceptable to lay people off, and businesses took the chance to raise productivity and unload unnecesary payroll
3. the remaining people who still had jobs, maybe, just maybe, sat down and thought "boy, I have a white collar job and in all honesty work about 15 hard hours a week, and spend the rest of the time texting and drinking coffee and surfing the web, maybe, just maybe, I should maybe be grateful for having a job and try a little harder"
I am not saying that if youw ere laid off you were a bad employee and/or unemployable and/or deserved to be laid off. But a WHOLE LOT of those people did. I do realize that many quality people lost their jobs and haven't been able to find another one, and it is not my intention to be grossly insensitive here...
Just offering the other side of the coin - the employesr side, the bosses side - you know that guy that everybody talks about how stupid he is when they are having beer at night and gripes about how nice it must be to be him/her? lol
Alot of these people and jobs weren't needed and arent' coming back. And until the gov't stops paying the chaff to live for free, these people won't really be forced to have a come-to-jesus talk with themselves and adjust their attitudes.
And so perhaps... the market, this thing that is deified by many as the most prescient entity extant, just realizes that. Would the economy get a boost if it booms enough again for employment to drop significantly? Yes. But does employment growing slowly necessarily mean that conditions are horrendous? Not necessarily, if what I suspect is correct and alot of chaff got thrown out, and the remaining grain decided to maybe take its employment a bit less for granted.