Tuesday, April 11, 2006

Declining Loss

It is some measure of the jobs situation in the United States that less than stellar news on the employment front is greeted with resounding applause by the mainstream media. CNN, today, proudly displayed this headline, trumpeting the jobs situation lately seen in the high-tech sector:
Higher demand for high tech workers.
That certainly sounds great, doesn't it? The lede continues the happy news:
Tech workers are back in hot demand, according to a report released Monday.
Hot demand? Did I miss something? Maybe all those dismal tales of high tech job loss will finally be coming to end. At least, that is what one might think until a reader sees the first line of the story. What do we actually see?
Tech-sector job cuts in the first quarter of 2006 were 40 percent lower than the same quarter last year....
This is what CNN thinks is hot demand, a reduction in the rate of job loss? Then the numbers start coming out:
The tech sector, which includes computer, telecommunications, electronics and e-commerce, announced 39,379 job cuts in the first three months of 2006, down from 59,537 in the first quarter of 2005.

But the
first-quarter figure was 16 percent higher than the 21-month low of 34,048 tech cuts announced during the final three months of 2005.
These numbers don't sound all that reassuring. Not at all. And notice the legerdemain: the job cuts this quarter are less than the first quarter of 2005, but they are also higher than the fourth quarter of last year. Which means the job loss rate increased since then. But CNN blares a headline so misleading, it is barely meaningful in the context of the actual jobs report.

While I found it mostly curious that CNN Money was triumphantly celebrating the fact that the US wasn't hemorrhaging as many high tech jobs as it had been, this hardly struck as the boastable news CNN clearly thought it was. And when one sees that there was an increase in job loss rate since last quarter, well, the whole headline is just completely off kilter. It is hardly true that a reduction in the job loss rate represents increased demand. What this really represents is a slowing of decreasing demand. By no stretch would anyone call this "hot demand." Except CNN, that is.

This latest report hardly appears to be the glowing good news CNN would have headline scanners believe. All it really indicates in the current climate is that the rate companies are shipping jobs overseas is lower than it was last year at this time. But it is higher than just three months ago. This is news that CNN Money wonks are high-fiving over. I wonder if Lou Dobbs is palpitating over this.

The kernel of the information is that the US economy continues to dump high tech jobs at an unpleasantly high rate. Whether it is 40,000 jobs or 60,000 jobs per quarter, that is a lot of high tech jobs evaporating from the US economy. How many more years can the economy bleed 100,000+ jobs a year before there is nothing left? Well, here are some sample numbers: a Ford Foundation study found that between March, 2001 and April, 2004, the information tech sector lost 403,300 jobs, which shrank the market by 18.8%. At that time, 1.74 million people were employed as high tech workers and that number has dropped by another 200,000+ since then. Which means the US economy has roughly 1.5 million jobs left in the high tech sector. At the slowest loss rate seen in the last five years, these jobs would last fifteen years.

Of course, such an linear extrapolation is entirely meaningless; economies just don't behave that way and job loss rates are simply not linear functions, despite the near linear loss rate over the last five years. It is more likely that jobs market would cross some industry threshold and either resurrect itself or collapse completely.

Nonetheless, to those at CNN Money, apparently smoothered in that soothing White House balm that things are grand, a (sort of) reduced job loss rate appears out of the mist as some signal that all is well.


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