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July 30, 1993
A weakish report has blown away Chairman Greenspan's smoke screen, and taken mortgage rates back near their lows. The economy is not growing at a 3% pace, inflation is lower than feared, and the Fed has no reason (yet) to tighten.
The April-June Gross Domestic Product grew only 1.6%, though it may be revised up a little. Durable Goods Orders picked up 3.8% in June (though the core gain was only a tenth of the gross report), Consumer Confidence fell near its recession lows, and Jobless Claims popped up to 394,000.
Robert Reich, Labor Secretary and escaped Harvard academic, this week launched a major job-creation effort by the Clinton administration.
Secretary Reich invited 500 executives to a conference in Chicago to push the notion that enlightened management practices would create a torrent of new jobs.
The ideas advanced were "empowerment" of workers in decisions about work, quality and wages; the need to treat employees as investments, and to train them well and often.
The President raved, "The most interesting thing is that what turned out to be good for the company turned out to be good for the workers."
These are terrific ideas.
These ideas are so good that they were thought up 40 years ago, and have been in place in most corporations for twenty years.
"X" versus "Y" management theory goes back to the 1950's. The old idea says people won't work unless you bully and threaten them; the modern one holds that people like to do a good job. There isn't an MBA under 45 who didn't learn in school that all decisions should be made at the lowest possible level, and that rewards, incentives, training, and respect produce the best results.
In fact, the results are so good that there are fewer jobs. The biggest category of permanently lost jobs in the 1980's is the white collar, supervisory job. It turns out that empowered workers don't need to be told what to do.
In the same week that Secretary Reich held his prayer meeting, IBM announced the pending layoff of another 60,000 people, mostly managers and knowledge workers (about a quarter-million total ex-Big Blues, so far). Most major corporations have wiped out whole layers of management in the last ten years, raising productivity accordingly.
While Mr. Reich is enjoying his fantasy, the real world will move on. July Non-Farm Payrolls will be announced next Friday, and the President's budget deal is going to pass.
July may look okay, but sometime in August the IRS will send out new income tax withholding tables for retroactive collection. That's bound to be a boost for new jobs, right?
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