Fundamental Factors Impeding Employment Growth

Published by WallStreetWeather.net

Shocking” was the word most frequently used to describe Friday’s employment report showing companies hired 18,000 workers in June. The unemployment rate rose from 9.1% to 9.2%, its highest level this year. The BLS also revised downward nonfarm payrolls for April and May.(1)This was in stark reversal to Thursday’s optimism after ADP reported 157,000 new hires were added to private payrolls last month. The chart on ADP’s website (scroll further down on their webpage), shows employment slowly but steadily increasing since the beginning of 2011.

The ADP report only reflects private sector employment at ADP’s client companies whereas the government’s report reflects all private and public sector employment. Excluding government payrolls which continue to decline, 57,000 workers were added to private payrolls. (2) But if the data contained in the government’s report is accurate and June’s report does not turn out to be an anomaly, then it is likely that June’s payrolls and the downward revisions since April reflects the growing reluctance among employers to hire. The uncertainty surrounding the federal debt ceiling issue is one factor impeding employment growth.

Concerns about Congress reaching agreement to raise the debt ceiling in time began to surface in April after Washington failed to reach agreement on funding the current fiscal year budget until the very last minute. Less than two weeks later, S&P downgraded the U.S. long-term credit rating to negative over concerns that the U.S. will delay addressing medium to long-term budgetary challenges until after the 2012 presidential election. Anytime a business faces either an uncertain future or a period of reduced revenue, they will be reluctant to purchase new equipment or expand employment.

In my previous post I described how virtually every business either directly or indirectly does business with the federal government. To elaborate further, a company supplying products or services to General Electric (GE) is only one step away from doing business with the federal government. As another example, the workers in a restaurant serving primarily Honeywell (HON) employees are also one step away from doing business with the federal government.

Whether we like it or not, we are all connected to the federal government in one way or another. A government shutdown for any length of time will put everyone’s paycheck at risk, and thus reduce consumer spending. As more people feel at risk they will spend less, which in turn puts that much more people at risk. This has the potential of creating a downward spiral that puts the economy back into recession. So although no one knows exactly what would happen in a government shutdown, what we do know is that these interconnections will impact the economy. Rather than state that a government shutdown would be "calamitous" which is too vague for the public to relate to (especially for those who believe he is engaging in pure political rhetoric), it would behoove President Obama to specifically explain to the public how these interconnections impact the economy.

Even though Democrats have now agreed to $4 trillion in spending cuts over the next 10-12 years, Republicans refuse to compromise on anything. They stubbornly insist that closing corporate tax loopholes is a tax increase because Grover Norquist told them so.(3) Republicans complain about “uncertainty,” yet their refusal to raise the debt ceiling could jeopardize the fragile economic recovery. President Obama and the Democrats should stand firm against agreeing to a short term solution that postpones the issue or only raises the debt ceiling enough until after the 2012 presidential election as it will only perpetuate companies’ reluctance to hire permanent full-time workers.

Shocks, surprises, unexpected events, and reversals are all part of the planetary energy of Uranus. This is especially true now as Uranus’ energy is particularly potent July 7-13 as Uranus from Earth’s vantage point appears to be motionless in the sky as it turned retrograde July 9 (until December 10). Uranus in Aries turns retrograde as it squares the USA’s natal Venus (revenues) which conjoins Jupiter, the planetary energy of abundance. Venus rules the sectors of the USA chart representing the labor force, the Administration (as well as corporations), and Congress. What happens in Washington has a direct impact on employment conditions. The influence of Uranus in Aries squaring the USA Venus and Jupiter over the next eighteen months reflects that incoming revenues tend to be erratic. As Uranus stations retrograde, it squares the USA Venus which increases the potential for disruptions in government and corporate revenues (such as in a government shutdown).

Uranus in Aries indicates the time for reform is now before a crisis erupts into chaos. Uranus stationing at the time of Friday’s First Quarter Moon in Aries opposite sign Libra indicates that Washington must act now. Pluto in Capricorn exactly opposes the USA Jupiter now at the same time the energies of Uranus and Pluto are in a frictional relationship with each other. The huge deficit gap cannot shrink without a radical transformation of the tax code in order to raise the revenue needed to make a dent in the deficit. Venus in Cancer opposite Pluto Friday indicated that a workable solution to reducing the deficit cannot be achieved unless the two parties agree to balance spending cuts with revenue enhancements, as so aptly named by President Reagan (i.e. closing tax loopholes). These energies reinforce the fact that the public’s income is dependent on government in one form or another.

Moreover the First Quarter Moon in Venus-ruled Libra (July 8 at 2:30 AM EDT) conjoining Saturn in Libra in the sector representing employment in the chart set for Washington DC indicates that job growth is slow but steady with Venus ruling this sector and Venus in Cancer favorably aspecting Jupiter in Venus-ruled Taurus. But the Moon conjoining Saturn as the Moon conjoins the USA’s natal Saturn in Libra reflects that employment growth is being stunted by the ever fluctuating conditions as Washington infighting has inhibited resolution.(4)

The Moon conjoining Saturn here also reflects the contraction that has been underway in government payrolls. Venus in the sector of revenue opposite Pluto in Saturn-ruled Capricorn in its home sector of income and entitlements dependent upon others reflects the growing impact on businesses revenue resulting from government layoffs.(4) The relatively recent phenomena of segregating government payrolls from private payrolls doesn’t change the fact that until the government workers get absorbed into the private sector with comparable compensation, it doesn’t matter to small businesses in particular if the customer is a government or private sector worker so long as they continue to patronize their business. A person out of work or earning a fraction of what they used to is likely to be a less frequent customer or an ex-customer altogether.

As Saturn returns to its natal position in the USA chart (see my previous post for more info) as Uranus and Pluto engage in a challenging alignment to each other and the USA Venus/Jupiter in Cancer, it is time for the USA to make the difficult choices and structural reforms now so the transformation of the U.S. from a consumer to manufacturing and technology driven economy can occur much faster.

While Jupiter expands, Saturn contracts but can bring rich rewards but only if the focus is on the long term. Saturn rules history and looking at this Wall Street Journal graphic tracking the unemployment rate since it was first recorded in 1948 shows that prior to now, the three highest rates of unemployment occurred when Saturn was making challenging alignments to the USA chart. Just like now, two of the three periods occurred when Saturn was transiting Libra.

The unemployment rate was 9% in May 1975 as Saturn conjoined the USA’s natal Sun in Cancer, squaring the USA’s Saturn in Libra. This alignment had been preceded by the transit of Saturn squaring Pluto in 1974 over the USA’s natal Venus/Jupiter conjunction. The recession created a contraction in employment. (While the square between Saturn and Pluto occurred in the same phase of their 38 year cycle during 2009-10, the influence of their energies is only now beginning to recede.)

Prior to the current economic downturn, the last time the unemployment rate was 9.2% was in September 1983 during the previous transit of Saturn in Libra. As Saturn returned to its natal position in the USA chart in October 1981, the unemployment rate was 7.9%. The unemployment rate peaked at 10.1% in June 1983 as Saturn conjoined Pluto in Libra which began their current cycle. At the same time Saturn conjoined Pluto, the two planets squared the USA natal Pluto in Capricorn located in the sector of the USA chart representing the nation’s net worth. Contracting revenues, tight lending conditions, and historically high interest rates (all Saturn/Pluto stuff) was certainly not a conducive environment for companies to hire additional workers.

The expression ”this time is different” accurately describes why current economic conditions contrast with the recoveries that followed previous downturns and recessions. The political polarization in Washington has never been so extreme thanks to the Supreme Court’s 2010 decision enabling plutocrats and corporations to spend unlimited amounts of money on political causes. This secret funding (Pluto in Capricorn) has enabled the most extreme leaders of these causes to build their personal “brand” (Uranus in Aries) at the nation’s expense as Uranus and Pluto make challenging alignments to the USA Venus and Jupiter in Cancer (the sign ruled by the Moon which represents the general public). In addition to the unprecedented political factor, job growth in the U.S. will be slow and the unemployment rate is likely to remain elevated due to the following economic differences:

1. In contrast to recovering from prior economic downturns, recessions, and the Great Depression (which was the last time Uranus in Aries squared Pluto), is the lack of construction spending. We are currently experiencing the fallout from a construction boom in residential and commercial real estate and the accompanying infrastructure building to support new development in previously undeveloped or underdeveloped areas.

2. The Federal Reserve has run out of assets to prop up. The Dow and S&P500 are near their record 2007 highs and the Nasdaq is at its highest level since the recovery from the internet bubble, yet the economy has still not responded.

3. Interest rates prior to the financial crisis were low to begin with vs. the prior Saturn cycle when the Fed raised interest rates to record high levels to combat runaway inflation. The Fed succeeded, and the economy expanded then as the Fed began to reduce rates back to normal levels. All forms of construction were depressed because of high interest rates. As soon as interest rates were lowered, a construction gusher was released.

Dropping rates to almost zero with two rounds of quantitative easing has done little for employment. Cheap money has generated more M&A activity resulting in higher unemployment. Speculation in commodities is putting additional pressure on consumer and business balance sheets which hurts hiring.

4. Consumers’ balance sheets were way too overleveraged going into the recession, so it will take time for them to lower the debt mountain (Pluto in Capricorn for the first time since the nation was founded).

5. Uranus rules technology and the internet. Today’s internet bubble is different from the first time around as the telecom bubble was a key component of the 1990s internet bubble. The installation of fiber optics cable throughout the world at that time reflects my premise based on historical precedence that construction is an essential ingredient to reduce unemployment because it creates a variety of jobs for low, semi, and skilled workers. Laying fiber optic cables begins with low skilled workers digging trenches and begins moving up the skill set through splicers to engineers programming the optical transmission equipment.

While the internet boom of the 1990s was all about selling real goods over the internet and was more in balance with the overall diversity of the labor pool, the current internet boom is primarily focused on selling virtual goods. With the exception of Amazon.com’s (AMZN) distribution centers, the virtual internet has created very few jobs for low and semi-skilled workers as this boom is concentrated among highly skilled techies (Uranus in Aries). Uranus in Aries reflects the fierce competition amongst tech companies for those few individuals who hold the unique skills that can bring their company’s projects to the finish line first.

Saturn is the backbone and Saturn in Libra is the bridge that connects the internet’s physical infrastructure (the server farms) that powers the internet. Although building a server farm requires construction, wiring, and assembly of the servers themselves, the amount of lower skilled workers required to lay fiber optic cable in the telecom boom was far greater.

As I have written several times, the U.S. is experiencing the arduous process of going “back to the future” by transforming the nation’s economic structure from a service economy back to being the leader in manufacturing and technological development. The transition is likely to keep the unemployment rate elevated despite the fact that more jobs are being created since the financial investment required in a manufacturing economy is so much greater than a service economy.

Let’s create a couple of hypothetical examples to illustrate what I mean. A person opens a restaurant which costs the owner of the business $100,000 to make the improvements needed to the space to operate the restaurant. The owner hires 100 people, so each job requires $1,000 investment. In keeping with the energy of Uranus in Aries, a business person who wants to manufacture a new precision electric motor in the U.S. spends $2 million to build a manufacturing plant to hire 100 workers. In this case each job requires $20,000 worth of investment. (These simplistic examples do not consider the investment required to cover any losses while the business is getting off the ground.)

Obviously it takes a lot more investment to create a manufacturing job than a service job. In the age of the internet and its short attention span, it’s become more difficult than ever for people to have the patience for a long term transition.

The USA’s Saturn in Libra is located in the sector of the USA chart representing the federal government and the President. The fundamental factors I’ve outlined would affect whichever political party occupied the White House, and whatever ideology they brought to the table. But these factors are difficult to encapsulate in a talking point – let alone a Tweet.

(1)April was revised lower to +217,000 from +232,000 and May to +25,000 from +54,000.

(2)57,000 private sector jobs less 39,000 government sector jobs equals 18,000 additional hires.

(3)Interestingly, the Democrats have agreed to a level of cuts that closely aligns with Rep. Paul Ryan’s “roadmap” that calls for reducing the deficit by $4.4 trillion over 10 years.

(4)The Moon in Pisces in the sector of employment in Summer Solstice chart reflects fluctuating employment conditions during the summer.

USA: July 4, 1776 5:10 PM LMT Philadelphia, PA

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