Ellison Chair in International Floriculture
Ellison Chair in International FloricultureTeaching, Research, Extension and Service

Be prepared!

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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

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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

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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

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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

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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?

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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

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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.