The Effect of Immigration on Productivity

Immigration during the 1990s and the 2000s significantly increased the presence of foreign-born workers in the United States, but the increase was very unequal across states. In The Effect of Immigration on Productivity: Evidence from US States (NBER Working Paper No. 15507), NBER Research Associate Giovanni Peri analyzes state-by-state data to determine the impact of immigration on a variety of labor market outcomes, including employment, average hours worked, and average skill intensity, and on productivity and income per worker.

Peri reports a number of distinct findings. First, immigrants do not crowd-out employment of (or hours worked by) natives; they add to total employment and reduce the share of highly educated workers, because of their larger share of islow-skilled relative to native workers. Second, immigrants increase total factor productivity. These productivity gains may arise because of the more efficient allocation of skills to tasks, as immigrants are allocated to manual-intensive jobs, promoting competition and pushing natives to perform communication-intensive tasks more efficiently. Indeed, a measure of task-specialization of native workers induced by immigrants explains half to two thirds of the positive effect on productivity.

Third, Peri finds that inflows of immigrants decrease capital intensity and the skill-bias of production technologies. The decrease in capital intensity comes from an increase in total factor productivity; the capital-to-labor ratio remains unchanged because investment rises coincident with the inflow of immigrants. The reduction in the skill-intensity of production occurs as immigrants influence the choice of production techniques toward those that more efficiently use less educated workers and are less capital intensive.

Finally, Peri finds that for less educated natives, higher immigration has very little effect on wages, while for highly educated natives, the wage effect of higher immigration is positive. In summary, he finds that a one percent increase in employment in a US state, attributable only to immigration, is associated with a 0.4 to 0.5 percent increase in income per worker in that state.

A central challenge in establishing a causal link between immigration and economic outcomes is the fact that immigrants may be disproportionately attracted to states with strong economic performance. Peri recognizes this problem, and uses information on state characteristics, such as the location of a state relative to the Mexican border, the number of ports of entry, as well as the existence of communities of immigrants there before 1960 to predict immigrant inflows. He then studies how these predicted inflows, rather than actual inflows, are related to labor market outcomes. He argues that the state characteristics that underlie his predictions are not likely to be associated with either labor market outcomes or productivity. He also controls for several other determinants of productivity that may vary with geography such as R and D spending, computer adoption, international competition in the form of exports, and sector composition.

What the Stock Market Decline Means for Financial Security and Retirement Choices

The recent decline in stock market values will have only a muted impact on the retirement of the average early baby boomer, according to NBER Research Associate Alan Gustman and his co-authors Thomas Steinmeier and Nahid Tabatabai. In What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population (NBER Working Paper No. 15435), they explain that with only around 15 percent of the wealth of workers aged 53 to 58 in stocks, they aren't likely to see a huge hit to their retirement portfolios, despite the market losing roughly a third of its value from its 2007 peak through the fall of 2009. More than a quarter of the household wealth of this group is instead concentrated in anticipated Social Security payments.

The pension wealth of this group is far more dependent on traditional pensions, called defined benefit plans, than on 401(k)s or defined contribution plans, which often are heavily reliant on stock market performance. The simulations in this study suggest that the declines in the stock market will only cause early boomers to postpone retirement by an average of 1.5 months. The drop in housing prices is also unlikely to greatly affect their retirement plans.

"For most of those approaching retirement age, while losing several percentage points of this total is certainly a significant average loss -- and is of greater significance for those who are more exposed to the stock market and will experience even larger losses -- these losses will not be life-changing," the authors conclude.

Early boomers might seem to be especially vulnerable to the twin declines in stock and housing markets, since they have little time to recover before reaching retirement age. A 2006 survey of nearly 2,500 households in which at least one member was 53 to 58, conducted as part of the Health and Retirement Study, found that these households had an average of $766,945 in total wealth. But Social Security was their single largest asset, representing 26 percent of total wealth on average. Pensions were the second largest source of wealth: 23 percent on average. Home equity averaged 22 percent. Stocks in defined contribution plans and held directly accounted for only $116,535, or about 15 percent of the total.

To estimate the effect of stock market declines on retirement, this study looks at the last stock-market plunge: the bursting of the dot com bubble in the early 2000s. It concludes that stock-market plunges have a modest effect on older workers and change the average age of retirement by only a few months. In addition, these modest delays in retirement by some workers trying to make up for stock losses may be swamped by the number of early retirements caused by a lack of good jobs. Even if the stock market decline, taken alone, modestly decreases the number of retirements, the recession that started in 2007 may substantially increase retirement due to poor job prospects, the authors write. Thus, the net effect of a deep recession and a falling stock market may be an overall increase in retirements.

On the housing front, the fallout from the big decline in home prices may also be muted for early boomers. Nearly half of early boomer households had no mortgage. Almost all of the rest had positive equity. Mortgages represented 39 percent of their home values on average, leaving only a tiny sliver of early boomers 1.7 percent with negative home equity in 2006. If housing prices were to fall 20 percent, only 6.4 percent of the households in this age group would be "under water," according to the study. Typically, it will be many years before these boomers sell their homes to capture the equity in them.

The study points out that some early boomers may be affected by the combination of stock and housing declines. Those who lose a job may have to retire early or take another job that will likely pay much less. This diversity of winners and losers poses a major policy challenge for those wanting to extend government help to hard-hit early boomers.

How reducing payroll taxes increases employment

Today CBO released a letter to Senator Robert Casey, Jr., in response to questions he asked about policies that could be adopted to increase employment. Specifically, Senator Casey was interested in a policy option to reduce employers’ payroll taxes for firms that increase their payroll, and how different design elements of this type of policy might affect its impact on employment.

In CBO’s January 2010 publication, Policies for Increasing Economic Growth and Employment in 2010 and 2011, the agency analyzed the effects on employment of several policy options, including giving employers a one-year, nonrefundable credit against their payroll tax liability for increasing their payrolls in 2010 from their 2009 levels. (To finance Social Security, employers and employees each pay 6.2 percent of an employee’s annual earnings up to a maximum.) Such a tax cut would lead to increased employment through a number of channels. For example, some firms would hire more people because hiring would be less expensive; others would lower prices to increase sales, thus spurring production and increasing the demand for labor; still others would increase compensation for employees, which would encourage more spending.

CBO measured the effect of that policy (and others) on employment as the cumulative effect on years of full-time-equivalent employment for each dollar of a policy’s total budgetary cost. (A year of full-time-equivalent employment is 40 hours of employment per week for one year.) CBO estimated that, through its effects on wages, prices, and profits, the policy would add 8 to 18 cumulative years of full-time-equivalent employment in 2010 and 2011 per million dollars of total budgetary cost, measured in terms of lost revenues. Thus, the budgetary cost of increasing employment by one full-time person for one year would probably be between $56,000 and $125,000. Although such a policy would have economic benefits in the short run, it would also add to already large projected budget deficits. Unless offsetting actions were taken to reverse the accumulation of additional government debt, future incomes would tend to be lower than they otherwise would have been.

Policymakers could structure legislation that reduced payroll taxes for firms that increase employment using various combinations of caps on the total amount of the tax benefit a firm could receive, limits on the size of firms that would receive the tax cut, methods of measuring payroll growth, and other elements. In today’s letter, CBO separately analyzed several key policy design elements and concluded that, per dollar of budgetary cost:

• Capping the size of the tax cut for individual firms would decrease the employment effect;
• Restricting eligibility to small firms would decrease the employment effect;
• Limiting the eligible wage base would not change the employment effect, but would alter the types of employment fostered by the policy;
• Basing the tax cuts on the total payroll in 2010 for new hires rather than on the net change in a firm’s payroll from 2009 to 2010 would have a similar effect on employment;
• Offering larger tax cuts in economically depressed areas would probably not significantly alter the effect on employment;
• Raising awareness of the tax change would increase the employment effect; and
• Increasing the complexity of the tax change would reduce the employment effect.
  

How to Create Jobs

In the New York Times, Paul Krugman says the administration needs to do more to promote job growth. “It’s time for an emergency jobs program. How is a jobs program different from a second stimulus? It’s a matter of priorities. The 2009 Obama stimulus bill was focused on restoring economic growth. It was, in effect, based on the belief that if you build G.D.P., the jobs will come. That strategy might have worked if the stimulus had been big enough — but it wasn’t. And as a matter of political reality, it’s hard to see how the administration could pass a second stimulus big enough to make up for the original shortfall.”

Separately, Gary Becker and Richard Posner debate what to do about unemployment. Becker: “It is wiser to cut labor costs in other ways. I fully endorse Posner’s suggestions to cut the minimum wage, but I do not see that happening with the present Congress. My favorite approach it to try to stimulate the economy by cutting income taxes, especially corporate income taxes and other taxes on capital, both physical and human capital. Such tax cuts will stimulate investments in the economy, and in this way increase the demand for workers.”

Personally, I prefer Becker's approach. That policy option has worked best in the green industry historically.

Jobless claims continue to fall

WALL STREET JOURNAL -- In a positive sign for the labor market, the number of U.S. workers filing new claims for jobless benefits decreased more than economists expected last week. Initial claims for jobless benefits fell by 33,000 to 521,000 in the week ended Oct. 3, the U.S. Labor Department said in its weekly report. The last time initial claims were this low was on January 3.

The four-week moving average of new claims, which aims to smooth volatility in the data, also fell by 9,000 to 539,750 from the previous week's revised figure of 548,750. The last time the four-week moving average was this low was on January 17.

Economists at JP Morgan Chase & Co. wrote in an economic analysis last week that claims generally appear to be on a downward trend, but the pace at which they are falling is a bit sluggish. "The drop has been somewhat slow relative to other large recessions," the economists wrote last week. "Initial jobless claims have fallen 18% in the 26 weeks since they peaked. In the same time span, jobless claims fell by 23% after the 1975 recession, 33% after the 1980 recession, and 29% after the 1982 recession. Claims are usually a good predictor of employment, and the slowness of their decline could indicate a sluggish recovery in the labor market."

Mark Perry provides commentary regarding his chart below: From the early April peak of 658,750, jobless claims (four-week average) have fallen by 119,000 (-18%), and that measure of jobless claims has fallen in 20 out of the last 26 weeks. It's also interesting that in the WSJ article above, the Chase economists didn't mention the two most recent recessions of 1990-1991 and 2001. During those two recessions, jobless claims fell by a comparable amount, by -15% from the March 1991 peak and by -19% from the October 2001 peak.It’s the pace and strength of the recovery that matter now, particularly whether improvements in gross domestic product translate into increased employment. Until businesses start adding to their payrolls -- probably not until next year -- indicators tracking the consumer (retail sales) and manufacturers (durable goods orders) will likely remain unsteady. Housing sales (another consumer indicator) have been doing well this year, having gotten a boost from Uncle Sam in the form of the $8,000 federal income tax credit for new home buyers.

Unemployment update

The latest numbers, fresh from the Bureau of Labor Statistics:


The unemployment rate went up to 9.7%, reversing the improvement we saw in July. To be fair, “unemployment” is somewhat difficult to measure. For one thing, the way the unemployment rate is calculated doesn’t take into account the people who are no longer looking for work. (You know, the “discouraged workers” we heard about endlessly during the Bush years.) So you could see the economy improve but the unemployment rate actually go up, because more people start looking for work.

Source of graph. Click here for Mankiw's interpretation of it.

Minimum wage = minimum benefit

Here's some economic logic to ponder. The unemployment rate in June for American teenagers was 24% and even White House economists are predicting more teenage job losses. When the minimum wage increases to $7.25 an hour from $6.55 on July 24, it will effectively raise the cost of employing teenagers (and other entry-level workers) once again, thereby exacerbating the situation.

The national wage floor will have increased 41% since the three-step hike was approved by Congress in May 2007. Then the economy was humming, with an overall jobless rate of 4.5% and many entry-level jobs paying more than the minimum. That's a hard case to make now, with a 9.5% national jobless rate and thousands of employers facing razor-thin profit margins.

If Congress were wise and compassionate, it would at least suspend the wage hike for one or two years until the job market recovers. We know this Congress won't do that, but someone has to speak up for the poorest, least skilled Americans.

Wall Street Journal (click here)

The truth behind the latest labor stats

WASHINGTON (AP) -- The Labor Department reported Thursday that the number newly laid off workers applying for benefits dropped to 601,000 last week. That was far better than the rise to 635,000 claims that economists expected. But the total number of people receiving jobless benefits climbed to 6.35 million, a 14th straight record.

There's one small problem with the bold statement above. The population of the U.S. has roughly doubled since the 1950s, so comparisons of today's unemployed (unadjusted) to past periods is meaningless without adjusting for the population. The current number of unemployed (6.2 million average for April) is about 2% of the current U.S. population (estimated 306.56 million for April), which is still below the 2.12% level in 1975. So the claim of a 14th straight record for Americans receiving jobless benefits is not accurate, after adjusting for the size of the U.S. population.

Latest unemployment report not a good one

According to the BLS report yesterday, the latest job market numbers show a recession that's deepening. A total of 1.9 million jobs have been lost so far this year, with two-thirds of that in the past three months.

The Labor Department’s jobs data showed that the economy shed 533,000 jobs in November, the worst one month decline since December 1974 (though the number in 1974 represented a greater percentage of total workers, so the impact isn’t directly comparable). However, the composition of the declines was very different in the two periods. In December 1974, the drop in employment was almost two-thirds concentrated in the manufacturing sector, and less than a quarter in the services industry. The economy has changed drastically since then. Last month’s decline was less than a sixth in manufacturing, and more than two-thirds in services.

A loss this year of about 2.3 million looks likely, and losses in 2009 could total 3 million. The unemployment rate, which rose in November to 6.7% from 6.5% the previous month, is headed close to 9% in 2009. The losses are widespread, with gains only in education, health care and government.

As layoffs increase, incomes shrink and so does consumer spending, inducing firms to continue cutting payrolls. Making conditions worse are tighter lending standards by banks that hurt companies and their customers. While the rising unemployment rate is disturbing, it's still nearly four percentage points below the 10.8% peak hit at the end of the 1981-82 recession.

Expect the economy to possibly show some signs of improvement by summer of 2009, but remember that job losses typically continue for a while after a recession ends.

Unemployment rates vary by state

Facts from the October BLS report on state unemployment rates, ranked from lowest to highest:

1. Five states have unemployment rates at 3.6% or less (SD, WY, ND, UT, and NE).

2. 33 states have unemployment rates below the national average of 6.5%, 15 states are above 6.5%, and two states are at 6.5%.

3. The median unemployment rate by state is 5.7%, with 25 states at or below 5.7% and 25 states at or above 5.7%, and mean by state is 5.86%.

Based on #2 and #3 above, Mark Perry suggests that the reason the national average of 6.5% is above the median of 5.7% is either because: a) the states with higher-than-average unemployment rates are also states with higher-than-average population, and/or b) there are more extreme "outliers" above the median than extreme outliers below the mean, bringing the mean of 6.5% above the median of 5.7%.

Both of these are probably correct. Some of the states with the highest jobless rates are also states that have large populations (MI at 9.3%, CA at 8.2%, OH at 7.3% and, IL at 7.3%). Moreover, the two states with the highest rates are Michigan and R.I. with 9.3% rates, 3.6% above the median, while the two states with the lowest rates are SD and WY with 3.3%, or only 2.4% below the median.

The bottom line is that economic problems and labor market weakness are not necessarily distributed equally around the country, but the biggest problems are perhaps somewhat concentrated in some of the states with the largest populations. Fourteen states have unemployment rates below 5% for example, which would normally considered to be pretty far from recessionary levels.

Latest labor stats good or bad?

Is there anything good to say about yesterday's report from the Bureau of Labor Statistics that the U.S. unemployment rate jumped up to 6.1% while seasonally adjusted nonfarm payrolls declined by another 84,000 jobs?

That's the subject of Jim Hamilton's post over on Econbrowser in which he says the economy is now in recession. I'm hesitant to do the same just yet, given my recent concerns with the way we tend to interpret the BLS data and the rising unemployment of unskilled workers due to the recent minimum wage increase. But nonetheless, it is another indicator that conditions are not rosy.

Another unsettling report came just last week, when the Census Bureau released its annual study of household incomes, poverty and health insurance -- often called the nation's "economic report card." Its hard numbers seemed to confirm how many Americans feel. Sure, we're prosperous, but prosperity is fraying. Except for the rich, living standards are stagnant. Poverty is up; health insurance coverage is down. Naturally, both Barack Obama and John McCain seized upon the report to claim that their policies would restore progress.

Superficially, the conventional wisdom seems convincing. The Census Bureau found that median household income in 2007 was $50,233. Though up 1.3 percent from 2006, that was still less than the peak of $50,641 in 1999 (all figures are in inflation-adjusted 2007 dollars). Meanwhile, the share of people below the government's poverty line -- about $21,000 for a family of four -- was 12.5 percent, up from 11.3 percent in 2000. Finally, the ranks of the uninsured have increased in six of the past eight years. They're now about 15 percent of the population. Case closed right? Not exactly.

A previous Mark Perry post pointed out one of the problems with historical median household income from the Census Bureau income data is that it doesn't adjust the declining household size over time. After adjusting for household size, real median income is at an all-time high.

Robert Samuelson points out three more problems with poverty and income data from the Census Bureau: (1) comparing real household income or poverty rates in 2007 to the year 2000 is unfair because 2000 was an artificially high benchmark because of the "tech bubble," (2) immigration distorts commonly cited statistics for both poverty and income, and (3) Census figures understate income gains by not counting fringe benefits.

Greg Mankiw cites yet another problem with Census income data, citing the NY Times, which reported that "The current poverty measure only counts cash as income, and doesn't include government assistance like food stamps, housing subsidies and tax credits. Such aid has been devised to help support the poor, but its impact is not calculated by the current measure."

There you have it -- a mixed bag of apples and oranges. "Lies, darn lies, and statistics" as the old saying goes. What's the bottom line? Whether you call it a recession or not, times are tough; not all over and not to the same extent, but we have more work ahead of us to weather this storm. We have serious problems and its going to take some serious people to lead us through them.

But regardless of who is in national leadership positions, Green Industry businesses must be proactive about conserving cash and emphasizing perceived value in the minds of customers. We must make our products and services more inelastic among our consumers or we will fall the way of other luxury goods in tight times.

Higher minimum wage effects

Teenage unemployment (16-19 years old, seasonally adjusted) for July (20.3%) was at the highest level in more than 15 years. It seems like that would be pretty newsworthy, but it received almost no media attention. Plus, the attention it did receive was mostly off-base, blaming on the country's "economic malaise" and "economic downturn," without a single mention of the increase in minimum wage.

The only newspaper report that linked the 20.3% teen unemployment rate to the increase in minimum wage was a story in the LA Times, which quoted David Resler, economist at Nomura Securities:

"The July jump in the federal minimum wage rate appears to have had the predicted impact on teen employment: The higher required rate enticed more teens into the job market to search for a smaller number of jobs on offer."

Demand curves slope downward, whether it's the demand for gasoline, the demand for cigarettes, or the demand for unskilled workers. We can argue about price sensitivity, elastic demand vs. inelastic demand, availability of substitutes, etc., but higher prices or wages result in a reduction in the quantity demanded. That is, we can argue about the slope, but the slope of the demand curve is always negative.

The bottom line: higher wages for unskilled workers equates to fewer jobs for unskilled workers which equates to higher unemployment rates for unskilled workers.

Canada welcomes U.S. H-1B skilled workers

According to Tennessee immigration lawyer Greg Siskind, "While our Congress buries its head in the sand and refuses to update our antiquated skilled immigration system, our neighbors to the north are seeking to take advantage of the paralysis. This is just embarrassing."

Alberta, Canada is now actively recruiting dissatisfied high-skilled H-1B workers in the U.S. (discouraged by sometimes waiting 7 or 8 years for a green card), by promising expedited "Permanent Residency in Canada.

Be prepared!

On Wednesday, at the educational sessions of the Southwest Growers Conference, Dr. Marco Palma gave an excellent presentation on "hiring a legal workforce" for nursery and greenhouse operators. Conference attendees were also presented with their very own copy of the newly revised Immigration and Labor Handbook that is hot off the press (click here).

As part of the discussion, it was was pointed out that increased I-9 and immigration compliance audits of businesses are expected. To prepare, ANLA has revised their employer audit guide (click here). ANLA also reports an increase in DOL wage and hour investigations targeting nursery employers using the H-2A agricultural guest worker program. Auditors are closely scrutinizing job descriptions and performance of non-agricultural work that can result in the loss of the agricultural overtime exemption.

Largest minimum wage increase in 50 years

Fellow blogger Mark Perry makes a good point. In nominal dollars, the upcoming change in the minimum wage from $5.15 per hour in 2007 to $7.25 per hour in 2009 will be a 41% increase. In real, inflation-adjusted dollars (assuming a 3.8% increase in 2008-09), it will be a 25.5% increase, and will be the largest 2-year increase in the real minimum wage in at least 50 years (see chart below -- click on it for larger view).

Latest labor data doesn't support recession scenario

From today's BLS employment report, here's what probably won't get reported. According to the more comprehensive Household Survey Data (which unlike the establishment data, includes the self-employed, unpaid family workers, agricultural workers, and private household workers), there were 146.331 million Americans employed in April (see chart below), which is 618,000 higher than April of last year (145.733 million jobs) and 362,000 higher than March of 2008 (145.969 million). Note also what happened to employment levels for both measures during the 2001 recession. Much different than 2008. Hmmmm.

Also, in case you're wondering. Neither the establishment nor household survey is designed to identify the legal status of workers. Thus, while it is likely that both surveys include at least some undocumented immigrants, it is not possible to determine how many are counted in either survey.

Starting Salaries for College Graduates

I always have discussions this time of year with participants in the green industry who are looking for bright, energetic college graduates to work in their business. Of course, they always ask how much should they expect to pay. Relative to other disciplines, starting salaries for horticulture students probably fall somewhere slightly below the middle of the spectrum below, averaging around $35,000. Then again, if we're really talking about the best and brightest, those students usually come at $5-8K premium, particularly those with an internship or two under their belt. After a year of so on the job, of course, this usually goes up dramatically for those who make the cut.

Regional Outlook is Mixed

If there are strengths in any regional economies, they are largely in two areas emanating from Texas. The first extends to the north all the way to North Dakota. The mid-section of the country is supported by high prices for a broad array of commodities—oil, wheat, corn, and industrial metals, to name a few. There is barely any weakness in any of the large or small metropolitan areas of this region. The second is to the east, extending from Texas to Georgia and the Carolinas. The stability of this area arises from the lack of a housing bubble during past years, which left house prices rather stable and the market less exposed to subprime lending. But in this region, the strength is less uniform. Where considerable investment is taking place, such as in Mobile or Huntsville, AL, or Raleigh, NC, the economies are doing well. Where there is considerable exposure to the manufacture of housing and construction-related materials or to import competition, then it is hard to avoid some weakness. And where there was some overbuilding of housing, as in Atlanta, the economy is more susceptible to a slowdown.

Cracks are widening in some regional labor markets of the West and South. Through February, new claims for unemployment insurance—a proxy measure for layoffs—were rising fastest in those two regions. The rise in new claims in each was about as fast as it was as when the economy entered the 2001 recession. Much of this has to do with both areas' high exposure to housing-related industries and their weak housing markets. However, with a 20% rise in each region, it seems to be approaching a scale that reaches beyond housing and closely related industries.

Downside risks are prevalent in most regions as consumer spending weakens. This is particularly evident on the West Coast and in Florida, Washington, D.C., and the Northeast, where strong borrowing against home equity in 2005 and 2006 had bolstered spending. The Northeast’s risk is compounded by impending layoffs and weaker income generated by investment banking. Risks will rise more broadly across the country as consumer credit quality falters and other sources of cash for spending disappear. Additionally, if business confidence remains as weak as it is, a falloff in investment spending will hurt the industrial Midwest and centers of tech-producing industries on the coasts and in Texas.

As I have stated in earlier posts, some regions of the country are faring well considering the circumstances. Regardless of what situation you find yourself in, maintain your marketing strategy (or even expand it). Stay the course.

Graphs sources: Moody's.com

Employment down: Does this spell recession?

he unemployment rate rose from 4.8 to 5.1 percent in March, and nonfarm payroll employment continued to trend down (-80,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported Friday. Over the past 3 months, payroll employment has declined by 232,000.

In March, employment continued to fall in construction, manufacturing, and employment services, while health care, food services, and mining added jobs. Average hourly earnings rose by 5 cents, or 0.3 percent, over the month.

The number of unemployed persons increased by 434,000 to 7.8 million in March, and the unemployment rate rose by 0.3 percentage point to 5.1 percent. Since March 2007, the number of unemployed persons has increased by 1.1 million, and the unemployment rate has risen by 0.7 percentage point.

So that's the bad news. Now for some perspective. The magnitude of the employment decline is pretty small: less than 2/10s of one percent from the peak in December through March. So don't think of massive layoffs; think of minor adjustment. (I know that to people who have lost their jobs, it feels pretty massive.)

The Wall Street Journal was more inane than usual. They noted the 80,000 decline in jobs and said, "Had it not been for a rise in government jobs last month, payrolls would have fallen by around 100,000." Let me add that had it not been for the drop in construction employment, payrolls would only have fallen by 29,000. Did you learn anything from this? I didn't think so.

How should business plans be adjusted now?

Now that you've looked at the forest, spend more time with your trees. Look at your own sales by segment and geography. Watch your customers' sales closely. There's plenty of variety of there; you need to know whether you are in the happy side of the economy (and there certainly is one) or the sad side.

So does this spell recession? I can only say at this point...maybe. Next month we could (not likely, but possible) see an expansion of employment, followed by nothing but expansion for the rest of the year. If that happens, then we'll look at these three months of decline and say "blip" rather than "recession." So anyone who says that we are definitely in a recession now is making a forecast about the next few months. They are probably right, but bear in mind they're making a forecast, not reading hard data.

H-2A "patch" proposed

The H-2A program is the temporary agricultural worker program for growers and producers in most agricultural industries. In a joint media briefing by Secretary of Homeland Security Michael Chertoff, Secretary of Labor Elaine Chao, and Deputy Secretary of Agriculture Chuck Conner, two separate sets of regulations have been proposed for public comment: the Department of Labor's proposals to "modernize" the program and Homeland Security proposals on the hiring process itself.

The current H-2A program is unpopular with employers — only about two percent of agricultural workers come in under the H-2A program. Growers typically do not fully utilize the program because it is expensive, litigious and [quite frankly] bureaucratic. In the face of increased enforcement and a decreasing labor force, the inability to secure sufficient workers means that crops are rotting in the field in many industries and there is a less stable supply of workers available for growers in the Green Industry. One of the many problems with the current system is that the Department of Labor consistently fails to meet its own deadlines required by law, therefore farmers cannot depend on the program's promise to provide the correct number of workers at the correct time.

The new regulations being proposed would provide some relief, but in other areas raise serious concerns. On one hand the new rules include changing the process employers must go through to apply for workers, making it less burdensome. However, the proposal also would allow the Labor Department to start random audits of H-2A employers, and increase the fines from $1,000 to $15,000 for employers who have displaced American workers by hiring foreign ones. Other fines would increase for violating regulations from $1,000 to $5,000. In addition, under the proposed changes, wages would be based on "skill levels" and the wage formulas are changed.

Obviously, the proposal is long, complex and needs careful review, but it probably represents a good first step. However, since H-2A reform alone cannot address the breadth and depth of the agricultural labor crisis, there is still a desperate need for overarching immigration reform that will will provide the industry with a workable guestworker program. If Congress fails to act, employers will undoubtedly face a plethora of state and local laws, increased enforcement, and a new "No-Match" rule, which is expected shortly.