Reflections on a Bittersweet Labor Day (Unemployment and Let's Fire the Fed)

Barron's ^ | 1 September 2003 | Gene Epstein

[shrinkermd]

The last Labor Day that looked worse in terms of joblessness than 2003's was in '93. We won't know the unemployment rate for August until this Friday, but in July it ran 6.2%, and based on respondents' answers in August on whether jobs were hard to get or plentiful (see chart below), the likely range is 6.2% to 6.4%.

[shrinkermd]

One nice thing about being old is that you can reflect on what used to be the reasons for "inflation." When I was young if you were a Pubbie it was the damn unions and their constant demands for increasing wages. If you were a RAT then it was the greedy corporations (especially oil companies, railroads and agri-businesses) that were inflating prices and profits. And, if you just weren't sure, you could get a Gerry Ford WIN Button (Whip Inflation Now) and refuse to either strike or charge more for goods and services.

I still can't get over Epstein finding an audience in Barron's to advocate firing the FED. Things must be much worse than I thought.

[Norse]

Well I find it sad that there are people (most people) who still blame the fed for the great depression, when in reality it WAS fiscal policy by way of international and domestic taxes.

[agitator]

I still have my WIN button and it hasn't worked yet.

[KriegerGeist]

"Labor Day '03 marks a time of superstition, most recently the bogus belief that "knowledge work" is moving overseas at a faster rate than ever before, a scare traceable to a few made-up numbers issued by a prestigious consulting firm late last year."

Projected Number of U.S. Jobs to Move Overseas:

Management: Number of jobs moving overseas by 2015: 288,281
Business: Number of jobs moving overseas by 2015: 348,028
Computer: Number of jobs moving overseas by 2015: 472,632
Architecture: Number of jobs moving overseas by 2015: 184,347
Life sciences: Number of jobs moving overseas by 2015: 36,770
Legal: Number of jobs moving overseas by 2015: 76,642
Art, design: Number of jobs moving overseas by 2015: 29,564
Sales: Number of jobs moving overseas by 2015: 226,564
Office: Number of jobs moving overseas by 2015: 1,659,310
Source: Forrester Research, Inc. November, 2002

Salary Comparisons:

Software Programmer: United States: $66,100
Software Programmer: India: $10,000

Mechanical Engineer: United States: $55,600
Mechanical Engineer: India: $5,900

IT Manager: United States: $55,000
IT Manager: India: $8,500

Accountant: United States: $41,000
Accountant: India: $5,000

Financial Operations: United States: $37,625
Financial Operations: India: $5,500

Source: Paàras Group, 2002; International Labour Organization

Don't you just love "outsourcing"?

[Pelham]

Well I find it sad that there are people (most people) who still blame the fed for the great depression, when in reality it WAS fiscal policy by way of international and domestic taxes.

I fail to see how anyone can claim to know a singular cause of the Depression. It seems to me that there was more of a "Perfect Storm" of causes, especially for the US.

The US economy was the most insulated of all the advanced economies, with trade accounting for less than 5% of GNP. The US could have closed off all trade and a very large proportion of the economy would never have noticed. The perennial idea that the infamous Smoot-Hawley Tariff, which passed after the stock market had already crashed, was the cause of the Depression seems to play fast and loose with cause and effect.

Austrians blame credit expansion during the 20s, leading to credit collapse in the 30s. Monetarists blame the 30% collapse of the money supply as banks failed in the first 3 years of the Depression, and the Fed failed to reflate. Schumpeter and many European analysts blame the peculiar American banking laws that prohibited branch banking, which led to widespread bank failure and credit contraction in America. Probably all contributed.

[Chi-townChief]

My personal worst Labor Day was 1998 - downsized after 18 years.

[Cicero]

I'm surprised to see someone saying about firing the Fed in Barron's too. A lot of Doom and Gloomers have been saying it, but Barron's normally steers clear of that sort of thing. Sounds more like PrudentBear than Barron's.

[old-ager]

This Labor Day means more to me than any before. I have only worked as a union guy for a few months in my whole life. I have worked in one of these "outsourceable" white collar segments for a long time. I have lived long enough to see that our country is not better than it used to be. We need to preserve and PROTECT our country and our jobs.

[WilliamofCarmichael]

Thanks for posting facts with sources. I started wondering was this an onion.com piece when I read the "marks a time of superstition" comment. Even in the near term jobs are flowing quickly overseas. Can this article be real? Has Barron's writing become this bad?

Beyond writing skills I will defer to the Barron's employee's opinions, he's the professional, but there are other takes on what he feeeeeeeeeeels, IMO. To wit,

If you exclude manufacturing, then over the past year, there have been small gains.

If you exclude government, then over the past year, there have been small losses.

The unemployment rate rose because there was an even bigger increase in the number of candidates looking for work. And what that suggests is that most of the pain is concentrated among those with newly minted degrees.

Not necessarily so. Consider the number of unemployed drawing unemployment, plus long-term unemployed, under-employed and other categories of "marginally attached workers." Many of those "marginally attached workers" are being drawn back into career job searches given the "good news" articles. "Real" unemployment is about ten percent

http://www.bls.gov/news.release/empsit.t12.htm

[FITZ]

You must make yourself an invaluable resource, employment will take care of itself.

In this kind of thing individuals aren't the issue --- when unemployment reaches 30% -- it would mean 70% are still managing to keep jobs --- but will that be good? I think even in the Depression the majority were still employed.