The Jobs Problem

Newsmax ^ | Wednesday, Jan. 14, 2004 | Paul Craig Roberts

[looscnnn]

The current economic recovery has not been good for employment. Despite 25 months of "recovery," the economy has 2,944,000 fewer private sector jobs than in January 2001. American manufacturing has experienced the largest job loss, with 2,559,000 fewer jobs today than 35 months ago when President Bush took office.

These figures include the losses of the 2001 recession. The really scary part of the story is that, far from recovering these job losses during the past 25 months of economic recovery, the economy has continued to lose jobs. During 25 months of recovery, the economy lost another 1,321,000 jobs in the manufacturing sector. A small gain in poorly paid areas of non-tradable services leaves a net loss of 907,000 private sector jobs during 25 months of economic recovery.

This is unprecedented poor performance, especially in the face of unprecedented expansionary monetary and fiscal policy. With interest rates near zero and 6-year interest-free auto loans, with fiscal policy expansionary, whether measured by tax cuts or the record size of the budget deficit, 25 months of economic recovery loses almost a million jobs?!

Much hope was attached to October's "turnaround" job growth of 116,000 private sector jobs, even though about half were in lowly paid temporary help and retail, and none were in high-value-added tradable goods and services. This "turnaround" job growth number has now been revised down by 37,000 jobs. Revisions have reduced November's paltry 50,000 gain (also in lowly paid service jobs) by 51 percent.

December's job gain is 1,000 jobs, or practically speaking, zero. Obviously, U.S. job growth is far from enough to absorb the monthly inflow of immigrants or the inflow of young people into the job market looking for their first jobs, much less to reduce the unemployment from the 2001 recession.

Some economic recovery it is.

Trying to put a good face on disaster, some claim that overtime has cut into employment growth, with businesses working existing workers longer in place of new hires. This argument is contradicted by the empirical evidence. During the past 25 months of recovery, total hours worked have declined by 1.7 percent, with manufacturing hours declining by 7.7 percent.

When pressed on the point, apologists for the recovery say that fewer people and hours are needed because of increased productivity.

There is another explanation, one much less reassuring: As a result of outsourcing, offshore production and Internet hires, the U.S. recovery is creating jobs for foreigners, not for Americans.

Every day, we read about another corporate giant replacing thousands of American jobs by moving operations to India, China or another foreign country where skills equal to those of Americans can be purchased at a fraction of U.S. wages and salaries. Economists, determined to keep their heads buried in the sand, dismiss report after report as "anecdotal evidence," as if facts don't count unless they are in an economist's study.

Economists and policymakers continue to ignore -- indeed, they are in outright denial of -- two fundamental changes that are disconnecting the U.S. economy from U.S. employment: the collapse of world socialism and the rise of the Internet.

Until the collapse of world socialism about 15 years ago, the international mobility of First World capital and technology was confined to the First World. This limit on capital mobility ensured that First World labor would have productivity advantages over much lower paid Third World labor.

The new global mobility of capital and labor has stripped away the protection that high productivity gave First World wages. Indian and Chinese labor employed by First World capital and technology is just as productive as First World labor. Moreover, due to large excess supplies of labor in those labor markets, Asian labor can be hired for less than the value of labor's contribution to output.

Capitalism works by finding the lowest cost. Thus, First World labor is being substituted out of First World production functions by outsourcing, offshore production and Internet hires.

The business press has been full of stories, example after example. When will policymakers notice?

When will economists notice? They will never notice as long as they believe they are witnessing the beneficial effects of free trade.

But are they? American economists seem to have forgotten that free trade rests on a case. They have forgot the necessary conditions under which free trade produces mutual gains to the participant countries. They have not noticed that these conditions have been destroyed by the international mobility of factors of production.

The economic case for free trade rests on shared gains. Shared gains depend upon countries allocating within their borders factors of production to where they have comparative advantage. For there to be comparative advantage, factors of production cannot be as mobile as traded goods.

Today, factors of production are as mobile as traded goods, indeed more mobile. Capital, technology and ideas can move with the speed of light, as can Internet labor, whereas goods must be shipped.

What we are witnessing is not trade patterns based on the flow of First World factors of production to comparative advantage within their own countries, but the flow abroad of First World factors of production to where absolute advantage is greatest. The productivity of capital is highest where labor is most abundant.

The flow of factors of production to absolute, in place of comparative, advantage vitiates the economic case for free trade. What we are witnessing is the redistribution of First World income and wealth to developing countries blessed with excess supplies of labor.

If the United States is to remain committed to free trade, we must give thought to figuring out how to recreate the conditions under which free trade produces mutual gains to the participating countries.

[B4Ranch]

Caution: I am not a financial expert in any field, just your everyday investor. These are only my personal opinions.

When I look at our smoothly doctored unemployment numbers I see, especially pertaining foreigners working in the US who have no intention of becoming American citizens and are working in the US as adding insult to injury and ignorance.

They will generally send home between 10 and 25% of their paycheck. This amounts to billions of dollars every year.

This is foreign aid by any other name.

Something our President said he would not do is give foreign aid to Mexico. I won't call him a liar here but I would to his face because then I could explain my reasoning to him.

When a person sends American dollars to a foreign country this takes it out of our economic rotation.

When you and I spend $10.00 in a local store that ten dollars gets rotated through at least seven different businesses or peoples hands before it stops the rotation at the US Treasury.

The local store owner might use it as wages, or to buy replenishment stock, to pay any number of fees or local taxes, buy gasoline or food at a local store, pay a bank loan. You name it. The $10.00 then will be loaned out again for someone to locally buy a car or home, or to a local road or home contractor, and on the cycle goes.

When the $10.00 goes to Mexico or India, it does not rotate in our economy, it does in Mexico's or India's though. That builds Mexico's or India's economy NOT ours.

The amount of money that is rotating in the daily cycle is what controls our interest rates. With Mexico alone, the illegals are sending home 12 billion dollars annually.

Take the 12 billion dollars and assume it only passes through corporate hands being taxed at 15% not the 35% personal rate that you and I pay.

The loss to our economy in taxes alone from a single 12B gain is 18 million dollars. When that 12B passes thru seven different corporations the loss to America would be multiplied by the average gain of each corp.

There is no proper way that I know of to calculate the loss of business profits due to that cash NOT flowing through their accounts. (I'm sure someone does) I would estimate overall average business profits should be somewhere between 4% and 10% so there's another 48 to 120 million lost by the wayside in unearned income.

Our economy is not in a recovery contrary to what the announcers on TV are saying. We are still in a freefall.

The non-mortgage debt growth rate is extraordinarily high. Consumer debt is rising faster than incomes are growing. This is an unsustainable trend that the Presidents advisors seem not to want to watch.

We borrow as a nation about $500 billion each year to finance our foreign purchases over what we export. The trade deficit contiues to climb with no visible plans to arrest it.

The dollar is down 15-20% from its high. Foreign goods are that much more costly. If foreign countries start to dump the dollar and demand payment in Canadian dollars we will be sunk into depression quickly.

This jobless recovery or lower paying job recovery is a dangerous trend. It will lead to a deep recession and a continuation of deflation of the dollar.

Lowering long term interest rates will allow the world to see just how shaky our financial situation is. I do not see this administration willing to consider protectionism. Europe will have to step in to help us or their economy will sink also.

The day of reckoning is not too far down the road.

Investments:

I see the rise in gold as being severely diminished because of the lowered value of the dollar. I much prefer to invest in the Canadian dollar. This is a handy site to watch the value of the dollar as it changes.

[null and void]

Excellent.

[Starwind]

Your discussion is interesting but not complete. BLS reports that total employment is up from Jan 1, 2001 to Dec 31, 2003 by 2.5 million. Unemployment is also up by about 2.4 million during the same time frame. So about 5 million joined the job market and during the recession and 2.5 million got jobs, and unemployment rate is now going down.

BLS reports no such thing.

BLS in fact reports total non-farm employment is down 2.3 Million from 132.436M Jan 2001 to 130.124M(p) Dec 2003.

Series Id:     CES0000000001 Seasonally Adjusted Super Sector:  Total nonfarm Industry:      Total nonfarm Data Type:     ALL EMPLOYEES, THOUSANDS
Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Annual
2001	132436	132560	132527	132247	132230	132064	131867	131719	131550	131198	130900	130661
2002	130578	130510	130481	130415	130411	130383	130204	130224	130289	130408	130409	130198
2003	130356	130235	130084	130062	129986	129903	129846	129881	129980	130080	130123(p)	130124(p)
p : preliminary

Total unemployment has gone up 2.4M from 5.956M in Jan 2001 to 8.398M in Dec 2003

And the unemployment rate went down because the labor force got smaller as discouraged job seekers quit looking.

When those unemployed discouraged workers are included, the unemployment rate is 9.9% for Dec 2003.

[B4Ranch]

I think dismal is more appropriate. :(

[null and void]

OoooooKAY.

How about an excellent analysis of a dismal situation...

[lainde]

Watch the Lou Dobbs series on CNN...He's naming the companies.

[B4Ranch]

Thank you for the kind words.

Trend= http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=d12

Manipulation= http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=w

[A. Pole]

If all the jobs are going overseas, how come the Mexicans aren't following them? Are they even too mundane for the Mexicans?

Because they would not be allowed to enter India or China. There are some Americans who tried to follow their jobs to India and were refused.

[Happy2BMe]

Merits it's own thread.

"Caution: I am not a financial expert in any field, just your everyday investor. These are only my personal opinions."

You may not be an "expert" financial advisor, but your advice is the truth, and that is exactly what we are not hearing anything of. Wonder why?

But you are a patriot, a concerned citizen, and have sense enough to kow when you're being "slow-rolled." You are not alone, and every day now many are coming to understand the same things you do.

And you are a man doing his best to help others understand how our national sovergnty is being abandoned like some disfigured baby who survived an abortion attempt.

The political machines working day and night to import tens of millions of illegal immigrants (to weaken our economy) while at the same time painting Americans as lazy bombastic ba$tard$ not wanting to work and exporting more millions of jobs (further weakening our economy) is a recipe for national destruction - mainly that of the United States of America.

Stay safe - and please keep on giving us your expert advice. We don't seem to be getting it from Washington.

[Happy2BMe]

Please, don't try and confuse us with the facts . .

I can assure you between now and November, the Dems will be preaching a much more damnable sermon than what these numbers are reflecting. If Republicans continue to embrace the "Ostrich effect" by ignoring this and the immigration invasion issue, both of these issues will cut like a double sword into Bush's reelection effort.

All is not as rosey as we would be led to believe.

MESSAGE TO THE PRESIDENT: It's the jobs - THE AMERICAN JOBS!

"When those unemployed discouraged workers are included, the unemployment rate is 9.9% for Dec 2003."

Jobs Americans Won't Do: Voodoo Economics from the White House.

Jobs Americans Won't Do: Voodoo Economics from the White House.

[A. Pole]

"The economy" doesn't create any jobs -- it never has, and it never will. Companies and individuals create jobs.

Yes, there are no such thing as the forest, only individual trees exist. There is no such thing as species - only individual organisms which for some strange reason can interact and procreate. You do not have a body - there are only billions of cells who happened to be clustered together. Even the Earth does not exist - big association of atoms is what we have, what do I say - not atoms but elementary particles or quarks.

Free market does not need any outside interference or claim, it will do fine withour public roads, without public army and police, without public currency etc ... Free market is self-sufficient god.

[The_Eaglet]

Campaign Finance "Reform" Offends the First Amendment-Campaign Finance Reform thread-day 35

[Alberta's Child]

I honestly don't understand the point of your post. If I run a sawmill and I send a crew out tomorrow morning to cut some raw logs, they're going to come back empty-handed if they ignore individual trees and think instead in terms of the whole forest.

[null and void]

I didn't think you'd get it.

[A. Pole]

If I run a sawmill and I send a crew out tomorrow morning to cut some raw logs, they're going to come back empty-handed if they ignore individual trees and think instead in terms of the whole forest.

And when one day the forest is gone (because nobody took care to replenish it) you will be wondering where all those trees has gone.

[easytree]

Employment Situation Summary
Technical information:
Household data: (202) 691-6378 USDL 04-07
http://www.bls.gov/cps/

Establishment data: 691-6555 Transmission of material in this release is
http://www.bls.gov/ces/ embargoed until 8:30 A.M. (EST),
Media contact: 691-5902 Friday, January 9, 2004.

THE EMPLOYMENT SITUATION: DECEMBER 2003

Table A. Major indicators of labor market activity, seasonally adjusted
(Numbers in thousands)

HOUSEHOLD DATA | Labor force status
|____________________________________________________
Civilian labor force.....| 146,628| 146,986| 146,892| 147,187| 146,878| -309
Employment.............| 137,647| 138,369| 138,095| 138,533| 138,479| -54
Unemployment...........| 8,981| 8,616| 8,797| 8,653| 8,398| -255
Not in labor force.......| 74,885| 75,290| 75,147| 75,093| 75,631| 538

Internet address: http://stats.bls.gov/newsrels.htm
Technical information: USDL 01-35
Household data: (202) 691-6378
Transmission of material in this release is
Establishment data: 691-6555 embargoed until 8:30 A.M. (EST),
Media contact: 691-5902 Friday, February 2, 2001.


THE EMPLOYMENT SITUATION: JANUARY 2001
Table A. Major indicators of labor market activity, seasonally adjusted
(Numbers in thousands)
___________________________________________________________________________
| Quarterly | Monthly data |
| averages | |
|_________________|__________________________| Dec.-
Category | 2000 | 2000 | 2001 | Jan.
|_________________|_________________|________|change
| III | IV | Nov. | Dec. | Jan. |
______________________|________|________|________|________|________|_______
HOUSEHOLD DATA | Labor force status
|____________________________________________________
Civilian labor force..| 140,706| 141,208| 141,136| 141,489| 141,955| 466
Employment..........| 135,049| 135,593| 135,478| 135,836| 135,999| 163
Unemployment........| 5,657| 5,616| 5,658| 5,653| 5,956| 303
Not in labor force....| 69,235| 69,358| 69,441| 69,254| 68,934| -320

I am not sure what you are looking at but my numbers above are directly from BLS and support my prious email.

[Starwind]

Without guessing at your math, it seems you're citing the household survey data, which uses a different definition of 'job'.

When the household survey is made, they are attempting to distinguish between people with any work at all (partime and even unbillable time self-employed) versus people with no work of any kind. The purpose of the household survey is actually to measure unemployment.

The purpose of the establishment survey is to measure jobs and treats a job as generally full-time paid, though I believe, OTOH, commissioned sales positions get included.

The difference between the two surveys has been discussed for years, and the BLS is trying to reconcile them with yet a 3rd report called the "Quarterly Data on Business Employment Dynamics".

But generally, the establishmnet data is used to measure employment, the household survey is used to measure the total labor force and unemployment.

[JustPiper]

BumPing!!! Great Cartoon!