Tuesday, July 10, 2012

BLS Employment Situation 07/06/2012 [BLS Jobs Report]: the Average Work Week and the Fiscal Cliff

Perusing the Bureau of Labor Statistics Employment Situation 07/06/2012 report/press release one might find insight by looking at the top of page three. The report states that the average work week for production and non supervisory employees stands at 33.8 hours. That means the average firm X, assuming average firm X needed more production, average firm X has many more hours to employ current employees before they reach the tipping point of adding more employees. That is, average firm X has another 6.2 hours per week to employ per worker assuming a 40 hour work week and that workers desire a 40 hour work week and the income associated with 40 hours. (1)

Further, if average firm X reached 40 hours per employee, many firms will run production based overtime initially, in that, they want to be certain (expectations/uncertainty) that demand is such that extra employees are warranted (run overtime production as a wait-and-see strategy). Keep this in mind for a moment.

On the other hand, note at the bottom of page two, continuing to page three, that manufacturing is at 40.1 hour work week with overtime at 3.3 hours for the fifth consecutive month. Hence manufacturing is exhibiting the phenomena mentioned in the above paragraph i.e. run overtime production as a wait-and-see strategy. (2)

Hence “being ahead of the curve” for the firm regarding human capital is heavily weighted to the expectation of “certainty”. It’s not that the average firm doesn’t see trends approaching, but the average firm wants certainty in the trend.

Now consider the fiscal cliff which is the simultaneous series of tax increases and spending cuts scheduled for year end 2012. Some pundits and talking heads are holding forth the notional proposition ridiculous that as the fiscal cliff to approaches and nothing of significance will occur e.g. Chad Stone at the Center for Budget and Ppolicy Priorities, a union funded think tank. Merely one example of a zillion appears above, in that, the expectation of a trend of uncertainty, caused by the approaching fiscal cliff, would affect the employment phenomena mentioned above, in a negative way.  (3) (4)

Expectations do count. Uncertainty does count.




(2) ibid, pages 2 and 3

(3) What is the Fiscal Cliff? About.com
(4) Misguided “Fiscal Cliff” Fears Pose Challenges to Productive Budget Negotiations, Chad Stone, 06/18/2012, Center for Budget and Policy Priorities


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