Productivity & Unemployment UP/Down?

We at Berman Larson Kane ( continue to experience a steady stream of new job orders from our clients contrary to everything we read in the media.  I mean just today General Motors announce a major layoff of all their hourly workers with the number being around 40,000 if my memory from this morning paper is correct.


So why are we seeing steady demand here at BLK?  Yesterdays, Wall Street Journel published an article about how the current productivity numbers are effecting the unemployment numbers.  And how the independent contractors are the first to feel this current slow down and that companies have positioned themselves with an efficient mix of employees, contractors and temps to adjust ready to the first signs of a turndown. Please read below:



But there might be a different explanation. And clues are buried in, of all places, the surprisingly strong productivity data for the fourth quarter.Despite a sharp slowing in output in the last three months of the year, productivity still grew by a fairly healthy 1.8% during the period, more than three times as fast as economists generally had forecast. Usually, when the economy decelerates, productivity — which is defined as output per hours worked — declines because the numerator falls faster than the denominator of that fraction. Businesses don’t immediately furlough workers as soon as production slows; it’s not that they’re soft-hearted, but it takes time to see if the falloff is temporary or not.In the second half of 2007, there was an unusually sharp decline in the hours worked by self-employed workers, so the denominator fell, resulting in the fraction rising.According to the productivity numbers, total hours worked fell by 1.5% in the fourth quarter. Looking at the Labor Department’s payroll data, however, hours worked rose 1% during that period.Why the discrepancy? The payrolls data count workers on companies’ payrolls. The productivity data, by contrast, count all workers, including the self-employed. If the latter rose while the former fell, it’s reasonable to infer that the self-employed were working less.That’s important because the self-employed have become an increasingly large portion of the U.S. economy, and not just because of the E-bay entrepreneurs that Vice President Dick Cheney is fond of citing.During the housing bubble, the army of mortgage brokers and realtors swelled. The barriers to entry into those fields are minimal. As the former head of mortgage operations of a major New York bank once told me, a mortgage broker is a used-car salesman with a better suit. (Apologies to used-car salesmen.)In any case, thousands of people began to earn a living by getting a slice of the housing boom. But even when they went to work for a mortgage or real-estate firm, they remained independent contractors, not employees. That meant that they weren’t on firms’ payrolls (and not counted in the establishment survey of the monthly employment report)”                                                                                                                                                                                        So the bottom line is that the unemployment numbers have not been affected, however, as these announced RIF’s begin to hit the unemployment offices over the next several months I do believe we will see a steady increase in unemployment and a decrease in orders here at BLK. As for the moment I thank our terrific clients for having the confidence in our organization to allow us to continue to service their staffing requirements.