Daniel Gross

Poor June Jobs Report: Why Companies May Share the Blame

Contrary Indicator

Another month, another blah jobs number. The private sector added 80,000 positions in June and the unemployment rate remained constant at 8.2 percent. If three underwhelming employment reports constitute a trend, then we have a definite trend of slower employment growth. In the first quarter, the economy added an average of 226,000 jobs per month. But the pace of job creation has been a lot like the weather in San Francisco — ranging from the 60s to the 80s. In April, the economy added 68,000 jobs (revised down in this report from 77,000); in May, 77,000 (revised up from 69,000).

A few takeaways:

Austerity bites. What I've dubbed "the conservative recovery" is still in effect. Virtually every month for the past two years, the private sector has added jobs while the public sector — federal, state and local government — has cut jobs. That trend continued in June, when the private sector added 84,000 and government cut 4,000 jobs. With government revenues stabilizing, there are signs that the great bloodletting in public employment may be coming to an end. Still, since May 2010, the government sector has cut 1.04 million jobs. By contrast, since February 2010, the private sector has added 4.35 million jobs.

Silver linings? You have to look deep into the numbers to find upbeat data inside a report like June's. But there is some. In recent years, there have been plenty of months in which the labor force shrank, as people grew so discouraged that they simply went to the sidelines. In June, the labor force grew by 156,000, and in the past year it has risen by nearly 1.66 million. As hours worked and average hourly earnings both rose, average weekly earnings rose by .5 percent in the month, which isn't bad.

Enduring problems. Where to start? Unemployment remains stubbornly high, and there's too much slack in the labor markets. But there's something else at work. There are plenty of job openings. According to the Bureau of Labor Statistics, there were 3.4 million job openings at the end of April. And the Conference Board says the number of online job ads rose in June by 232,000 to more than 4.9 million. But for a host of reasons, companies aren't filling them.

Peter Cappelli, professor of management at the Wharton School of Business at the University of Pennsylvania and author of Why Good People Can't Get Jobs, is our guest on the Daily Ticker today. (Video to post shortly). While a lack of aggregate demand is the chief culprit for a weak jobs situation, Cappelli argues that companies share some of the blame. In the wake of the recession, companies have cut recruiting budgets. They wait for prospective employees to come to them instead of seeking people out. Too often, they look for a "purple squirrel" — an employee with a set of skills and attitudes so rare as to not be found in nature. And rather than focus on hiring people who are unemployed, they look to hire people away from existing positions at other companies. So they take their sweet time in filling positions.

Companies in sectors such as trucking have cited a lack of skilled or trained workers available in the field as a reason why they're not filling open positions. But Cappelli says companies have largely abdicated their historic role in training.

"It used to be companies would hire for attitude and train for skills," he said. "But that doesn't happen as much anymore." So an unwillingness to spend on training — and an expectation that unemployed workers will finance their own training — may leave some positions open. In addition, companies have come to believe they're entitled to hire the people they want at low wages. But even in a tough job market, firms may have difficulty attracting qualified workers unless they pay decent salaries. Cappelli notes that it's a two-way street. It's a cliché that beggars can't be choosy. But even in this economy, job seekers may often conclude that they are overqualified for positions they're offered.

In the end, the June jobs report offers ample fodder for the pessimists (another month of subpar jobs growth) and for those who think we're just going to have to muddle through a grinding recovery (hey, we didn't lose jobs and the trend is still marginally positive). But it's thin gruel for optimists.

Daniel Gross is economics editor at Yahoo! Finance.

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com.

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