What to Make of the Jobs Report

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The good news is that the economy added 112,000 new jobs in June.  The bad news is that that figure is less than half of what economists expected.  More bad: manufacturing lost jobs.

Personally, I was stunned by the news.  The month when kids get out of school for the summer, resorts increase staff for vacation season, etc., should have seen a big number.  I was siding with the more optimistic economists expecting 300,000+ new jobs.  Unless there’s a major revision later, that didn’t happen.

I wish we could take solace in finding a big increase in hours worked and productivity, but both were down.  So the sum of these data is that companies hired a few more people than were let go, that overworked employees were relieved of some of their overtime, and that the economy continues to grow.

These are not bad things.  Between January and May, I worked an average of about 62 hours per week.  Others on my team worked more.  Contracts signed when the economy was very weak, particularly in the technology field, meant we could not profitably hire the number of skilled people we needed, so everyone had to work longer hours.   Needless to say, morale and quality were the victims.  When people, particularly people in mental jobs, are working over 50 hours a week, their net productivity declines rapidly.  I have personally observed software programmers whose total lines of bug-free code begin to drop after 45 hours.  I don’t mean the marginal return from additional hours worked, but the actual amount of bug-free lines of code. 

With productivity and work weeks approaching records during the first half of 2004, it is time for a break.  Businesses like the numbers associated with very high productivity, but their glee is shortsighted and short-lived.  Maintaining very high operational tempos eventually sends the best workers looking for greener pastures, and bottom lines are reduced when low quality results in rework or refunds to customers down the road.

What the economy needs now is for businesses to take a balanced approach to payrolls.  We can’t afford another free-for-all like we had in 1998-2000, when companies overpaid for questionable talent and then tried to find something for their employees to do.  Instead, companies need to hire enough people to relieve the loyal, experienced folks who kept doors open during the recession. 

So the news wasn’t all bad.  American workers have more job choices, hire incomes, and fewer hours of work.  That means they will spend money on leisure, fix up their homes, cars, and lawns, and buy gifts for loved ones.  These are good news–these are the reasons we work.