Manufactured Exports Lag Obama’s Goal by Record Margin in June

August 11, 2014

www.bea.gov/newsreleases/international/trade/2014/pdf/trad0614.pdf

Last week the Bureau of Economic Analysis announced that the U.S. trade deficit fell by $3.1 billion to $44.1 billion.  It was the second monthly decline in a row, but there’s little evidence of a long-term improving trend.  Check out the chart:  Balance of Trade.  The general improving trend that was evident for a couple of years, beginning in early 2012, ended early this year when the rapidly worsening deficit in manufactured goods swamped a decline in oil imports.  Though the deficit in manufactured goods improved by $3.0 billion in June, you can see from the following chart that a quickly worsening trend remains in place:  Manf’d Goods Balance of Trade.

Most of the improvement in the manufactured goods deficit was driven by a decline in imports.  (Such declines are usually followed by a big jump the following month.)  But the improvement was also helped by a small $0.8 billion rise in exports.  In January of 2010, President Obama set a goal of doubling exports within five years.  Though he wasn’t specific about the type of exports, it’s reasonable to believe that the plan was for manufactured exports to contribute their fair share toward that goal.  It didn’t happen in June.  The $0.8 billion rise was less than half of the $1.8 billion it needed to rise in order to keep pace with the president’s goal.

Nothing new there.  That’s been true nearly every month for the past three years.  Exports have risen by only $0.7 billion since March of 2012, while they needed to rise by $42.4 billion to keep pace with the president’s goal.  The result is that manufactured exports now lag the president’s goal by $45.9 billion – a record shortfall that exceeds the entire trade deficit.    Here’s a chart that shows both manufactured exports and imports:  Manf’d exports vs. goal.

Contrary to all the hype about a “manufacturing renaissance,” the decline of the manufacturing sector of our economy has continued unabated during the Obama administration.  It’s not a surprise.  The president has ignored the import side of the trade equation – the side he has the power to affect if only he had the will and courage to do so, and instead took the chicken’s way out, setting a goal for exports, over which neither he nor anyone else in the U.S. has any control, since it’s determined solely by foreign demand.  In effect, he washed his hands of U.S. trade policy, but did it in a way that he hoped would give the appearance of being a champion for American workers.  Shame on him.

 

 


Why Incomes are Stagnant or Declining

August 5, 2014

OK, it’s time for something completely new and original.  This began with the release of 2nd quarter GDP (gross domestic product) a couple of weeks ago.  The Bureau of Economic Analysis (BEA) announced that the economy grew at a 4% annual rate in the 2nd quarter – the most impressive economic performance of the supposed recovery from the deep recession of a few years ago.  Of course, that slightly bigger pie is now shared by slightly more people – 1% more each year – so in per capita terms the economy grew by 3%.  But even that is decent growth.  Here’s a chart of real (adjusted for inflation) per capita GDP:   Real Per Capita GDP.  Looking at the chart, you can see that per capita GDP has recovered, but is barely above the level of 6-1/2 years ago.

Last week, the BEA also announced that the economy added more than 200,00o jobs in July, adding to a string of such results.  But the report also noted that wages barely budged in July, rising by only a penny per hour.  When you consider that the top 1% of wage earners are rolled into that data, you realize that wages for 99% of us are in decline.

What gives?  How is it that wages aren’t rising in an economic environment of 4% growth and consistent monthly job gains of 200,000 plus?  It’s a question that has vexed economists and the Federal Reserve.

It boils down to a question of what drives the demand for labor.  Growth in per capita GDP should translate into growth in the demand for labor.  But there’s another factor at work that I touched on in Five Short Blasts but I’ve barely mentioned since – productivity growth.  So I thought it would be interesting to go back and calculate the annual rate of growth in per capita GDP, minus the rate of growth in productivity.  Although GDP and population data go back further, productivity data is only available as far back as 1947.  So that’s the base year for my data, and is assigned a value of “1.”  Each succeeding year, that figure is reduced or increased, depending on whether the combination of per capita GDP growth and productivity growth yielded a slightly positive or negative percentage change in this “demand for labor.”  Here’s the chart of the results:  % Change in GDP per capita minus productivity.

From 1947 until 1963, there was a general downward trend.  Then, over the next 36 years, an upward trend reversed the losses of the previous 16 years, reaching a peak in 1999 at a level clearly above that of 1947.  But what really blew me away was what happened next.  Beginning in 2000, this figure fell like a rock and, in ten short years, wiped out all of the gains of the previous 36 years, and continued falling to a record low reached in 2010.  Since then, it’s begun to recover, but ever so slowly.  Last year it was still below the previous low reached in 1963.

Now this is a piece of data that rings true.  Doesn’t it feel like what’s been going on?  Remember the “jobless recovery” for which President Bush took so much criticism?  This shows you that it was real.  And it shows you just how much damage the recession that began in 2008 did to the economy.

What’s driving this decline?  The growth in per capita GDP has fallen dramatically since 2000.  It’s no longer keeping pace with the growth in productivity.  To illustrate the point, here’s the average change in per capita GDP by decade:

  • 1950’s = 2.43
  • 1960’s = 3.17%
  • 1970’s = 2.17%
  • 1980’s = 2.20%
  • 1990’s = 2.21%
  • 2000’s = 0.62%
  • 2010-2013 = 1.50%

Meanwhile, productivity growth has remained fairly constant at around 2.2%.

This slow-down in per capita GDP is even more remarkable when you consider the extraordinary measures that have been taken in the last few years to prop up the economy.  Since 2000, the national debt has more than tripled from $5.7 trillion to over $17 trillion today.  And, in the past few years, the Federal Reserve has poured in an additional $4 trillion.  That’s over $15 trillion of “stimulus” since 2000.

One has to consider the possibility that the inverse relationship between population density and per capita consumption is at work here, and we’ve reached the tipping point where leaning on population growth to fuel the economy is backfiring and eroding per capita GDP.

 


August 1, 2014

http://www.bls.gov/news.release/empsit.nr0.htm

The Bureau of Labor Statistics (BLS) announced this morning that the economy added 209,000 non-farm jobs in July (according to the establishment survey) while the unemployment rate ticked up to 6.2% (according to the household survey).  Regarding the latter figure, the employment level rose by 131,000 while the civilian work force grew by 329,000.  In reality, population growth figures indicate that the labor force actually grew by 122,000.  The result is that per capita employment (or employment to population ratio) held steady at the depressed level of 45.9%.  Here’s the chart:  Per Capita Employment.

The jobs picture has definitely brightened in the past few years, but not as much as we’re led to believe.  While official BLS figures would have us believe that unemployment has fallen to 6.2% from a recession-high of 9.9% in April of 2010, those figures are skewed lower by claims that people have simply dropped out of the work force.  A more accurate reading, one that grows the labor force in proportion to the growth in the population (after all, people do need a source of income), shows that unemployment has fallen to 9.6% from a recession high of 11.9% in June, 2011.  The difference is what I call the “detachment from reality index.”  Here’s a chart of how the government’s figures have become more detached from reality since the onset of the recession, obscuring just how bad the employment picture has become:  Detachment from Reality Index.

There’s been a lot of excitement about the brisk pace of economic growth in the 2nd quarter, and much of that growth is real.  But it’s also a snap-back from the steep decline in GDP caused by the harsh winter in the first quarter.  Already, economic data is beginning to indicate that the 2nd quarter was a flash-in-the-pan, catch-up quarter and that growth is beginning to flag.

The other day, Reuters ran an article about the Federal Reserve being puzzled by stagnant wages, given the (supposed) growth in jobs and decline in unemployment.  (I tried to resurrect that article, but now can’t find it.)  The answer lies in examining the growth in GDP vs. the growth in population and  rising productivity.  More on that in an upcoming post.


“Scarcity” at Root of Political Polarization?

July 23, 2014

http://www.pbs.org/newshour/bb/politically-divided-wisconsin-little-incentive-seek-middle-ground/

The above link will take you to a story that aired on the PBS Newshour on July 18th.  It’s a story about the political divide in Wisconsin and is followed by analysis by David Brooks (conservative and Wall Street Journal columnist) and Mark Shields (liberal commentator).

Brooks’ analysis was particularly poignant.  He explained that he once believed our polarization was a top-down, Washington-based phenomenon, but now sees it as a bottom-up movement, driven by “scarcity.”

The significance of this is that “scarcity” is a term used by economists, primarily to deride those concerned with overpopulation as having a “scarcity mentality.”  It’s an alternative to “Malthusian,” lest the latter term become trite.  You see, economists don’t believe in the concept of “scarcity.”  Man is clever enough to stretch resources and always assure that there is enough for all as our population continues to grow, say economists.

So it’s significant that someone of Brooks’ gravitas sees actual scarcity in our economy that is the driving force behind our polarization.  It’s not a scarcity of natural resources but a scarcity of jobs, a scarcity of income, a dwindling of resources needed to provide adequate health care and of government resources necessary to provide a social safety net.  Such scarcity now pits Americans one against another as they compete for these ever-more-scarce financial resources.  Each side now sees the other as a threat instead of as fellow Americans working toward a common goal.  The haves see the have nots as a threat to strip them of some of their wealth through redistribution schemes.  The have nots see the wealth of the haves as ill-gotten gains that have been taken from them unfairly with the collusion of their conservative politicians.  With each side  perceiving themselves as having their backs against the wall, neither is willing to compromise.  We’ve become like an overcrowded cage full of  animals where all was peaceful until the zookeeper began cutting back on the food thrown into the cage.

This scarcity is the direct consequence of the rising unemployment and worsening poverty that’s inescapable as overcrowding drives down per capita consumption and, with it, employment.  And it’s not merely a national phenomenon, but a global one, as labor forces continue to swell and compete for ever-more-scarce manufacturing jobs just to keep themselves out of poverty.

If Brooks is right (as I believe he is) that scarcity lies at the root of our political polarization, then the polarization and gridlock in Washington is only going to get worse.


Trade Deficit in Manf’d Goods Worsens Again in May

July 9, 2014

http://www.bea.gov/newsreleases/international/trade/2014/pdf/trad0514.pdf

I’m still catching up from last week.  On Thursday the Bureau of Economic Analysis announced that the trade deficit in May moderated slightly to $44.4 billion.  (A link to the report is provided above.)  But the real news is that the deficit in manufactured goods set yet another record – $49.5 billion.  Here’s the chart:  Manf’d Goods Balance of Trade.

Manufactured exports rose slightly in May, but not enough to keep pace with the President’s goal of doubling exports by 2015.  Manufactured exports lagged that goal in May by a record margin of $45.0 billion.  In fact, manufactured exports haven’t risen in the past 26 months.  Here’s the chart:  Manf’d exports vs. goal.

Even if we give the president the benefit of the doubt and assume he meant exports of all goods and services, that figure also lagged the president’s goal by $66.3 billion.

Remember the trade deal that President Obama signed with South Korea two years ago, which he hailed as a “big win for American workers?”  Our trade deficit with South Korea set another record in May:  $2.7 billion.  In 2011, our trade deficit with South Korea was $13.2 billion.  Last year it was $20.7 billion.  So far, 2014 is on track to handily beat that record.  Thanks, Mr. President!  Please, if you’re not going to do something to restore a balance of trade, stay out of any further trade negotiations unless you hire someone competent in the subject.

We keep hearing talk of a “manufacturing renaissance” in the U.S., but the facts speak otherwise.  Our trade policy continues to drain ever more from the life of the manufacturing sector of the economy.  Trade policy is just one element of a clear pattern that has emerged over the course of the Obama presidency.  It’s a pattern of zero follow-through.  He very publicly proclaims lofty goals and draws red lines, but then sits back and does nothing toward accomplishing those goals.  He’s become the quintessential “bench-warmer,” filling the seat in the White House until he can be replaced, hopefully by someone with some drive and some competence.


“The Best and the Brightest”

July 8, 2014

http://www.reuters.com/article/2014/07/04/us-usa-obama-immigration-idUSKBN0F91LX20140704

This story (link provided above) is a couple of days old but still relevant, given the continuing and escalating anger over the illegal immigration situation that has a hundred thousand children per year pouring across our border.  As busy as things have been for me this past week, I couldn’t let it pass.

Commenting on the issue, President Obama remarked that:

It’s in our DNA. … We shouldn’t be making it harder for the best and brightest to come here.

The statement is so illogical and insulting to the American people that journalists should be ashamed for letting it pass without challenge.  First of all, what we’re talking about here is the entry of illegal immigrants.  No one is giving them IQ or aptitude tests upon crossing the border to determine whether they represent the “best and brightest.”

Secondly, the remark implies that America is short on “best and brightest” qualities – that too many Americans are among the “worst and dumbest,” making it necessary to import superior people.  It also implies that the degree of goodness and intelligence is something inherent in one’s make-up – something that can’t be developed through education and training.  It says we’d rather  import people with skills and training that may be in short supply (though the data proves that we have no such situations), rather than invest in training and education.  It says that if you’re in a disadvantaged situation in America – tough.  We’ll import someone else and give them all the advantages.

And a question that’s never asked is why the “best and brightest” want to come here in the first place.  The stated reasons are because they are fleeing this or that or, more often, because they’re seeking a better life.  What’s unsaid is that those are euphemisms for what they’re really fleeing – the effects of overpopulation in their home countries.  So how much sense does it make to pursue immigration policies that guarantee that our own country will eventually come to the same fate?

The arguments in favor of high rates of immigration are pure BS.  The president is merely caving to business interests who want to maintain downward pressure on wages through an over-supply of labor and who, secondarily, see a growing population as a growing customer base that will swell the bottom line.  Who cares that it steadily erodes the quality of life of everyone but the top 1%?

Immigrants are no magic elixir for our economy.  They are merely people, no different that the rest of us.  In the final analysis, the only effect of immigration, legal or otherwise, is to grow our population.  Any discussion of immigration policy that isn’t in that context makes no sense whatsoever.  We have to begin by asking ourselves whether it makes sense to add workers to the labor force while fifteen million Americans are still out of work.  Does it make sense to add oil consumers when we’re already heavily dependent on imported oil?  Does it make sense to add carbon emitters when the challenge of meeting commitments to reduce carbon emissions already threatens to erode our quality of life?  Does it make sense to increase the demand for social safety net services when we already can’t afford them?  Does it make sense to increase the stress and strain on our resources and environment when they’re already near the breaking point?

I voted for Obama in the first election because I thought he favored the interests of the American people over the interests of global corporations.  What a disappointment.  Contrary to outward appearances, he clearly either lacks the intelligence to connect the dots between population growth and a host of critical issues (perhaps he doesn’t represent the “best and brightest?”), or is just another politician beholden to the deep pockets who put him in office.

 


Per Capita GDP in Decline

July 3, 2014

The country is in an uproar over the immigration crisis that Obama’s refusal to enforce the laws has left us in and, at the same time, I find myself with limited time for writing posts.  You can read opinion pieces on the immigration mess anywhere and everywhere right now.  So I though a better use of my time would be to focus on the recent downward revision in GDP (gross domestic product) and use it as an example as to why America’s ridiculously high rate of legal immigration – not to mention Obama’s refusal to enforce the border and deport illegal immigrants – is so bad for the American economy.

The BEA (bureau of economic analysis) last week dramatically lowered its final reading of GDP for the 1st quarter to an annual rate of decline of 2.9%.  The harsh winter took much of the blame.  Adjusted for inflation, GDP still remains higher than it was in the 3rd quarter of 2013.  And it’s risen by nearly a trillion dollars since the 4th quarter of 2007, when the recession first began.

But you shouldn’t care about overall GDP.  What matters is each American’s slice of the pie, or per capita GDP.  When population growth is taken into account, per capita GDP fell to its lowest level since the 2nd quarter of 2013.  And it’s barely budged in the past seven years (going back to the 4th quarter of 2007 again).  Here’s the chart:  Real Per Capita GDP.

Since the end of 2007, per capita GDP has risen by only $317 per person, an annual rate of increase of only 0.09%.  That includes all Americans, and it’s been widely reported that all of the gains are concentrated in the top 1% of Americans.  Take away that top 1%, and per capita GDP has actually declined during the supposed “recovery” that has taken place since the end of the recession.  And that’s in spite of a trillion dollars in stimulus spending by the federal government and four trillion dollars of stimulus provided by the Federal Reserve.  Imagine how bad it’d be if we took away that $5 trillion that has been poured into the economy in the past seven years.

Declining per capita GDP is one of the outcomes predicted by the inverse relationship between population density and per capita consumption (which is inextricably linked to per capita employment).  As our population continues to grow beyond its optimal level (thanks entirely to both legal and illegal immigration), it’s inescapable that per capita GDP will decline, even as overall GDP continues to grow slowly.

In other words, immigration is the driving force behind a decline in Americans’ quality of life.  Yet, the deep pockets that fund our politicians continue to advocate for increased immigration and population growth.  They want more consumers to grow their bottom lines.


Follow

Get every new post delivered to your Inbox.

Join 48 other followers