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a "study" commissioned by the group whose agenda would benefit from certain results that just happen to fit the conclusions is hardly without major methodological problems.

It is not just this group. A little common sense and basic economics is all you need to know this is reality. Unfortunately the unfair traders would rather give up this country for a $3 CD player.

U.S. Facing Challenge Amid Big Shift Of Jobs To Low-Wage Nations
Author: JED GRAHAM
Section: Business & The Economy
Date: 7/1/2003

With interest rates at their lowest level since the 1950s and another big tax cut going into effect, the U.S. economy should be surging.

Most economists do think the U.S. will take off in the second half. But right now it remains sluggish. Factories are still closing, businesses are curbing investment and the economy keeps losing jobs.

Trade accounts for more and more of total economic activity. That makes the U.S. more dependent on the rest of the world, which is stuck in low gear. And global competition means more jobs shift to lower-wage nations like China and India.

Pimco's Bill Gross, who oversees the world's largest bond fund, compares the economy to a wet log that won't stay lit despite Washington's stimulus efforts.

China and India make "the logs in the U.S. . even wetter by hollowing out our manufacturing and services industries," he wrote in his latest investment outlook. Globalization spurs firms to innovate and become more efficient. It helps developing nations develop. Consumers enjoy higher quality and lower prices on everything from stereos to cars to PCs Swelling Trade Deficit. But with Japan and Europe in a rut, the world is relying heavily on the American consumer.

The U.S. goods trade deficit surged from $96 billion in 1992 to $482 billion last year. And it's on pace to hit $548 billion in 2003. That's a big reason the economy has failed to take off despite decent demand, notes James Paulsen, chief investment strategist at Wells Capital Management.
"Nearly 20% of the total growth in U.S. nominal demand has leaked abroad" in the past six quarters, more than twice as much as in any recovery in the past half century, Paulsen wrote.

The deficit with China has overtaken all others, swelling to $103 billion last year. "Imports now account for almost one quarter of goods transactions in the U.S.," up from 14% in the late 1980s, wrote Edward Yardeni, chief investment strategist at Prudential Financial. At a time when global demand is weak and industry is swamped with global excess capacity, low-wage producers in China and elsewhere increasingly set U.S. prices.

That is likely to continue even after the economy picks up steam. Many U.S. companies have trouble competing with factories in China, where workers average about $1 an hour.

Increasingly, complex technology jobs are leaving the U.S. Solectron, which makes equipment for Hewlett-Packard and Cisco Systems, said in March it would cut 12,000 jobs in North America and Europe. That's on top of 40,000 layoffs since the start of 2001. It's part of an ongoing strategy to shift work to low-cost regions, particularly Asia.

U.S. factories have shed 2.4 million jobs since the start of 2001, paring their payrolls to 14.7 million, the lowest since 1958. Globalization is just one factor. Factory productivity gains have long outstripped output growth. With output sluggish amid weak demand and excess capacity, productivity gains lead to job losses.

The dollar, strong until recently, also has hurt U.S. exporters. Many economists think the greenback's recent decline could revive factories. Others are skeptical. The dollar "can't conceivably move far enough" to make U.S. factories competitive with low-wage producers, said Bob Gay, global head of fixed income research at Commerzbank Securities.

It's not just manufacturing. Due to communications advances, services jobs, largely insulated from trade up until now, also are exiting the U.S. Convergys, a provider of billing and customer-support services, cut 950 U.S. jobs in December. This year it said it would add 3,000 jobs in India and planned to hire 1,000 in the Philippines.

Forrester Research predicts 3.3 million U.S. services jobs and $136 billion in annual wages will move offshore by 2015.

The Federal Reserve, having won its long fight against inflation, is now focused on deflation. It cut its key interest rate to a 45-year low of 1% on June 25. Some see strong deflationary headwinds from China and elsewhere.

While Gay expects current stimulus to rekindle the economy, the rebound could be brief. Eventually growth may disappoint "because of the competition from low-wage countries," he said.
If good jobs continue to leave the U.S., the result could be inadequate income growth and further deflationary pressures, Gay says. The global economy means more Americans will compete with workers overseas. U.S. entrepreneurs, workers and educators face a challenge to adapt and create new opportunities.

It also means a much bigger pie for U.S. companies to go after. After years of waiting, China is finally developing a real consumer market. And it's opening key sectors to foreign competition.
U.S. factories may be finding their footing. Several reports have shown a modest pickup in manufacturing activity in June, including Monday's Chicago purchasers index.

But one or two months of growth isn't a sustained upturn. And factories keep shedding jobs at a fast clip.

I just noticed this. The article said we "shed" 2.4 million jobs in 2.5 years. In the previous 18 years, we had ADDED 25 MILLION jobs. Seems to me a little retrenchment was due anyway. Moreover, do you have stats on how many self-employed there are in the U.S.? I wonder how many of those 2.4 million are truly "out of work" and how many started their own businesses?

Critics who think "all our jobs are going over seas" (which has always been baloney) always ignore those who start their own companies. Yet "microbusinesses" (under five employees) are the fastest-growing sector of the U.S. economy. While I don't have a study on WHO starts these "microbusinesses," I'd be you a Dunkin Donut that more than half are started by people "laid off" who find it easier to be their own employers rather than to work for someone else and, more important, be regulated and (often) pay taxes.

Every day in my neighborhood, I see streams of landscaping, cleaning, repair and construction, drapes, and other vans coming in---every one of them locally owned, most of them run by the owner. Virtually no 'foreigners," no "illegals." Just Americans. I drive past dozens of small firms in south Dayton turning out "widgets."

I think manufacturing is important. But it's interesting that our whole discussion has been conducted via a system whose manufacturing component is a tiny fraction of its value: the actual manufacturing cost of your computer is infinitessimal. A $60 CD costs about $1 to manufacture. Everything else is what we call "service"---but it is precisely all that other stuff that adds the value: software design, marketing, invention, innovation, risk taking, and so on.