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By Jason Stipp | 04-06-2011 04:28 PM

The Slow-Cooking Job Market

A depressed housing market has capped job growth thus far, but ultimate improvement there could help extend the recovery longer than usual, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar.

Following a pretty good employment report from March, Morningstar's Bob Johnson has had some time to pull out some longer-term themes that he is seeing in the employment market. He is here to talk about those today.

Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: So you said that you looked through the report, you spent some time with it, and you formulated a list of some pluses and some minuses that you see in the job market. I always like to get the bad news out of the way first.

When I was speaking with Vishnu about the report, he mentioned we might see some very short-term headwinds with supply chain disruptions because of the disaster in Japan, for example, could be a short-term headwind we should keep on our radar.

You have a couple of other ideas. What are you seeing that might put a little bit of a cap on employment right now?

Johnson: Well, I think one of the bigger things out there might be some of the merger and acquisition activity, and certainly as corporations have built up cash on their balance sheets, they have spent some of it on manufactured goods, but they have also spent a great deal of that cash on mergers and acquisitions.

Unfortunately, one of the things they do in merger and acquisition, the first thing they talk about is, "well, what are the synergies of that." Unfortunately, that's code for "how many people can we lay off?" And ... you've got the AT&T and T-Mobile deal going on, a lot of very, very big deals, where it's just obvious that there are going to have to be some cuts in labor. You can't put the two companies together without cuts and labor and distribution cost, the deals don't make any sense.

Stipp: So when you do look at the weekly claims data, though, do you see any indication that we're seeing more layoffs right now?

Johnson: Right now we're in a great shape, and the Challenger Gray report would say the same. Right now in terms of the unemployment claims, we're back down to almost a number that I would call normal.

Stipp: So, so far we're not seeing a huge effect from the M&A but certainly something to keep on the radar?

Johnson: Right. I think it has kept the number down, and by the way, I think M&A last year kept some of the unemployment numbers from getting better, so it's a little bit of a continuation of a trend.

Stipp: So it could be a little bit hidden. We might have seen better improvement perhaps than we've seen so far.

So I wanted to talk a little bit about the numbers and the improvement that we have seen. So I don't think it's been gangbuster employment growth, but we have seen a trend month-to-month of employment growth. We also got some news this week about McDonald's, and they might be doing some hiring. And as a percentage of the number of jobs we've been adding per month, the number of people McDonald's is looking to hire is a pretty big chunk of that.

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