For the second month in a row, the news from the BLS on employment was basically good news. Employment increased by 290,000. Economist has expected job growth of 180,000 (according to the Dow Jones Newswire survey) or 190,000 (according to the New York Times). As important, March’s figure was revised substantially upward to 230,000 (from the 162,000 reported last month). The piece of not-so-good news was that the unemployment rate increased to 9.9%. However, that was due to an increase in the number of people looking for jobs — a sign of economic optimism.
That does not, however, explain the rise in involuntary underemployment. The number of people who could only find part time work was essentially the same as last month. The people working part time because of slack work, however, increased. Apparently companies are still cutting back in some areas. Slack work as historically been a coincident indicator — so the increase in recent months is troubling.
Interestingly the number of voluntary part time workers continues to decline. As I discussed in an earlier posting, the number of people working part time for non-economic reasons had been essentially stable for almost 30 years. In March of 2007 it started to decline — a decline that continued last month. I speculated before that this might be a labor market crowd out effect — with those seeking part-time jobs for non-economic reasons (such as collage students) being pushed out of the labor force by those who can only get part-time jobs. But that is pure speculation and does not necessarily fit with the fact that the number of people who could only find part-time work was the same as last month. If there was crowding out, that number should have increased. Someone needs to look at this more closely.
The Commerce Department’s Economic and Statistics Administration has issued a new report on Measuring the Green Economy. The report is a careful attempt to define activities — in construction, services and goods production. The analysis finds that in 2007 most of the economic activity and jobs in the “green” economy was in services: 1.8 million jobs under the broad definition of the sector. Construction (green buildings) accounts for about 300,000 jobs using a broad definition. For green manufacturing, the number is smaller: 240,000 under the broad definition. As the report states:
To put the number of green jobs in perspective, the 2.4 million jobs involved in producing green products (using our broad definition) is equivalent to 15 months of job growth at the average monthly rate that occurred during the expansion from 2003 to 2007. The green economy is in a position to grow quickly, but the relatively small size of the green economy also suggests that a majority of the jobs that will be created during this recovery may come from the production of products and services outside of the green economy.
So, according to this analysis, green is not enough.
Let me take a slightly different view of this. The real economy boost might not be the production of green goods and services, but how they are used in the rest of the economy. Think of green as an input rather than an output. Utilization of green technologies and techniques can spur productivity in other “non-green” sectors. The point is not to expand the “green” sector (noun) but to “green” all parts of the economy (verb).
By the way, the same is true intangibles. Readers of this blog will note that I have often tried to dismiss the idea that we can simply be an “intangible-producing” economy. Intangibles are inputs. The key to future economic prosperity is how we utilize the intangibles as fuel for the economic machinery (to use industrial age imagery).
So it is not just green — or intangibles — but how they drive the rest of the economy.
It often seems that the second biggest lie in business is the statement “employees are our most important asset.” Executive say that repeatedly and then slash payrolls to cut costs. But according to a story in today’s Wall Street Journal (Recalculating the Cost of Big Layoffs), more companies are walking the walk, not just talking the talk. The story points to a case in point:
Early in the past decade, when its sales fell 11% in two years, Honeywell International Inc. laid off 31,000 employees, one-fourth of its work force, canceled plans for new products and scaled back its global-expansion goals. Those actions “decimated our industrial base,” Honeywell Chief Executive David Cote recently told the company’s shareholders.
During the recent recession, Honeywell took a different tack. The company’s sales fell 15% last year, and its profits shrank 23%, but the diversified manufacturer used furloughs and benefit cuts to limit layoffs to 6,000 employees, about 5% of its work force.
At the same time, Honeywell introduced 600 new products, including advanced industrial controls and fuel-efficient auto turbochargers.
Now, with the economy seemingly on the mend, Honeywell is reaping the benefits of its choice.
Last month, the company, which is based in Morristown, N.J., reported a 3% increase in first-quarter revenue and boosted its forecasts of sales and profit for the rest of the year.
The story goes on to describe research showing that “companies that take a limited and more-targeted approach to layoffs tend to do better in economic recoveries than those that slash employment sharply and across the board.”
As the story notes, this doesn’t mean companies don’t reduce payroll. The key is strategic moves to improve performance, not across the board reductions designed to cut costs. So maybe some companies actually get it.
Yesterday was election day in a number of states — mostly primaries. But in Ohio, there was a ballot issue to continue funding of the Third Frontier program. According to their website:
The Ohio Third Frontier represents an unprecedented and bipartisan commitment to expand Ohio’s technological strengths and promote commercialization that leads to economic prosperity throughout Ohio. Designed to build world-class research programs, nurture early-stage companies, and foster technology development that makes existing industries more productive, Ohio Third Frontier creates opportunity through innovation.
The program was up for renewed funding and this morning’s Cleveland Plain Dealer reports the $700 million renewal was winning by 61% with 85 percent of precincts reporting. As the story notes, the proposal had no organized opposition. However, the supporters were taking no chances and formed a group United for Jobs and Ohio’s Future to push for a Yes vote. The list of supporters is impressive — not only does it include business, labor and academic organizations, it can boast of support from both the Ohio Republican and Democratic Parties.
That support is especially impressive given the breath of the Third Frontier’s programs – which go beyond funding basic research. One of my favorites is the Innovation Ohio Loan Fund:
The Innovation Ohio Loan Fund (IOLF) was created to assist existing Ohio companies develop next-generation products and services within certain Targeted Industry Sectors by financing the acquisition, construction, and related costs of technology, facilities, and equipment. Ohio’s manufacturing sector is a key target of this program. The IOLF addresses an identified need in the capital-funding continuum, the IOLF is intended to supply capital to Ohio companies having difficulty securing funds from conventional sources due to technical and commercial risk factors associated with the development of a new product or service. The IOLF can finance up to 75 percent of a project’s allowable costs to a maximum of $2 million and a minimum of $500,000.
This is not a research program, this is commercialization — as the chart below from their website shows:
Bottom line: the states get this — it is all about economic development. But, for some reason ideas that everyone accepts on the state level to help create jobs and spur innovation often get bogged down in ideological debates when they get to Washington. Maybe the voters and politicians of Ohio have helped breakthrough that barrier.
In an earlier posting, I described the National Economic Council’s announcement Request for Information on Commercialization of University Research. Now comes word that the comment period has been extended until May 26, 2010 at 11:59 P.M. Eastern Time.
The Commonwealth of Virginia has one of the more active technology-based economic development (TBED) programs. The Center for Innovative Technologies was an early leader in TBED. Universities, such as the University of Virginia, Virginia Tech and George Mason University, have been at the forefront of this activity.
But now, Virginia is caught up in a scientific and political controversy over climate change research. The new Virginia Attorney General Ken Cuccinelli has started a broad fraud investigation of Dr. Michael Mann — now at Penn State but formerly an employee at the University of Virginia. As such, Dr. Mann is subject to the Virginia Fraud Against Taxpayers Act of 2002. The fraud that the AG Cuccinelli is investigating is Dr. Mann’s climate change findings. (See stories on FoxNews, USA Today and the Washington Post).
Regardless of what you think about climate change and the merits of the investigation, the mixed signal it sends is interesting. How many scientists might now do a double take on coming a Virginia school? Do you really want take the chance that your research might be subject to what some see as a politically-based investigation? And if the theories are right about top-notch research universities being a driver of technological innovation, what does that do to Virginia’s TBED strategy?
As this controversy plays itself out, it will be interesting to see what collateral damage is cause to the Commonwealth’s ability to attract scientific talent. Just as reputation matters for companies, it also matters for state and localities in this globally mobile scientific marketplace.
Over at the blog IP Finance, Neil Wilkof asks the question What Should We Do With Brand Rankings?. In this case, he looks at the process of brand valuation and rankings for the BrandZ rankings recently published in the Financial Times and see a black box.
I also fully appreciate that it [BrandZ] might want to keep some of its methodology and data confidential. Still, there is this lingering concern that, without the ability to reasonably evaluate the process of fact-gathering and the empirical robustness of the valuation models, there is a threat that the ultimate branding metrics may have a bit of misplaced quantitative certitude about them.
The same seems true with all other valuations of intangibles. As I have noted a before, intangible valuation needs to go beyond the black box and at least create some standards. The IRS Intangible Property Valuation Guidelines requires that its valuators prepare a written report that “should effectively communicate the methodology and reasoning, as well as identify the supporting documentation.” As the guidelines note:
1. The primary objective of a valuation report is to provide convincing and compelling support for the conclusions reached.
2. Valuation reports should contain all the information necessary to allow a clear understanding of the valuation analyses and demonstrate how the conclusions were reached.
These guidelines seem to go beyond the I mentioned in a earlier posting. in that they describe very specific issue to be considered when using a valuation method and require the justification of the method used. Use of a similar set of questions would go far to resolving the valuation black box problem — at least in many cases. Because of the their nature, valuation of intangibles will always be somewhat of an art as well as a science. But increased transparency in the valuation process will increase understanding, and ultimately acceptability, of these important assets.