Rice for Vehicles

http://www.reuters.com/article/2014/02/21/us-usa-asia-tpp-idUSBREA1K0A320140221

This epitomizes what’s wrong with American trade policy and the American economy as a whole.  As reported in the above-linked Reuters article, President Obama is running around the world selling meat and produce and is willing to surrender manufacturing jobs as payment.  In the case of Japan, he wants them to lower their tariffs on American farm products and, in return, is considering giving up our small tariffs on their cars and our big tariffs on imported trucks.  (By the way, in case you wonder whether tariffs work, take a look around at how few imported trucks are on the road compared to cars.)

At the same time that he’s marketing the U.S. as some rural, agrarian society – something we haven’t been for a century, he’s desperate to liberalize immigration policy to turn us into even more of an urban jungle than we’ve already become. 

Is the condition of our economy any wonder, when our president considers rice for vehicles an even exchange?  Does he not understand the difference in the labor involved in producing these products?  Can’t he acknowledge what a disaster the same trade deal with South Korea has been for American jobs? 

God help us.  Obama won’t.

“It’s not a matter of race, but of space.”

http://blogs.reuters.com/john-lloyd/2014/02/10/switzerland-says-were-full/#comment-2467

If you haven’t heard, Swiss  voters recently voted in favor of putting strict curbs on immigration.  The above-linked opinion piece from Reuters begins with a good summary of what has taken place in Switzerland – a true democracy where the voters actually have a direct say over how their country is run.  It seems that the people of Switzerland – a land more densley populated than China where a quarter of the population are immigrants (much like the U.S.) – are increasingly concerned about rising unemployment and the downward pressure on wages.

But I was especially intrigued by the response from the leader of the UK’s Independence Party who said that the Swiss opposition to immigration is “not a matter of race but of space.”  It’s heartening to see that there are others out there who “get it” when it comes to immigration – that the real problem is overpopulation and the erosion of the economy that accompanies it. 

It’s also interesting to read readers’ comments on stories about immigration.  They seem to run opposed to immigration by about a 3-1 margin.  Yet, if our own politicians and media are to be believed, virtually everyone in the U.S. is clamoring for more immigration.  It’s simply not true.  The American people are just as fed up with the effects of immigration-driven population growth as are the Swiss.  Sadly, we don’t have the same ability to do anything about it.

Despite Weak Jobs Growth, Unemployment Falls Again. Why?

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

The headline job growth announced by the Bureau of Labor Statistics on Friday (link to the report provided above) came in well below analysts expectations at only 113,000 – less than needed to keep pace with growth in the labor force.  Yet, unemployment fell again, from 6.7% in December to 6.6% in January. 

The household survey portion of the report – the portion used to calculate unemployment – was completely out-of-synch with the establishment survey.  That’s not so unusual, but the reason for it was.  Usually it’s because the government relies upon the explanation that more people have mysteriously dropped out of the labor force.  But this time, 523,000 people were actually added back into the labor force, which should have sent unemployment soaring.  Instead, it fell by 0.1% because the “employment level” – the number of people that the household survey says has jobs, inexplicably soared even more by 638,000.  So how do you reconcile those two numbers – a measley 113,000 jobs added by the establishment survey and 638,000 according to the household survey?

Here’s what I believe happened.  At the end of December, unemployment benefits expired for over a million long-term unemployed workers.  When you’re eligible for and collecting unemployment, you must answer “no” on the unemployment form when asked if you’ve found work, in order to remain eligible for your benefits.  If you happen to also be included in the household survey, you’d better answer “no” to that one as well, right?  If you’re collecting unemployment, you’re probably picking up a few bucks here and there babysitting and doing odd jobs, but you’re not going to report that. 

But, once the unemployment benefits are taken off the table, you no longer have that constraint to answering the household survey honestly – a survey which considers you employed even if you earn only one dollar that month as pay for some service performed.  (And it’s a survey for which there was no penalty for dishonestly responding “no.”)  Suddenly, thousands are free to answer honestly that, yes, they made a few bucks babysitting, or helping some contractor friend for a few bucks paid in cash.  Extrapolated to the general population, those now-honest responses add hundreds of thousands to the employment level. 

Regardless of this artificial drop in unemployment, the economy isn’t improving.  Following two quarters of real pre-holiday binge spending-driven growth in the economy, data since the beginning of the year shows an economy that’s faltering once again.  Mortgage applications continue to decline.  Manufacturing is slowing.  New factory orders fell by the most in 33 years in January.  Exports fell as well.  Retail sales growth slowed to zero in the last week of January. 

So January’s employment report is another aberration, on the heels of two other monthly aberrations caused by the government shut-down in November.  Let’s see what happens next month.

Trade Deficit in Manufactured Goods Hits Record in December

http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf

As announced by the Bureau of Economic Analysis this morning (link to the report provided above), the U.S. trade deficit rose slighly in December to $38.7 billion – a fairly benign figure that continues a declining trend.  But slight improvements in the balance of trade for services, food and petroleum products mask a big $4.9 billion drop in manufactured exports that resulted in a record deficit in manufactured goods of $46.5billion.

Manufactured exports fell to $106.5 billion, the lowest level in 27 months.  To keep pace with with Obama’s goal to double exports within five years (a goal he set in January, 2010), exports needed to rise by $39.5 billion per month.  Manufactured exports now lag the president’s goal by a record $41.3 billion. 

Imports of manufactured goods in December were $153 billion, only $0.4 billion shy of the record set only 3 months earlier.  Clearly, if the president’s goal is to generate manufacturing jobs by reducing the trade deficit, his focus is misplaced.  He has no ability to influence exports which are determined solely by foreign demand.  But he has total control over imports, control that a change in trade policy toward a greater use of tariffs would give him.  But he lacks the fortitude for that approach. 

Here’s a chart of manufactured exports and imports:  Manf’d exports vs. goal

And here’s a chart of the manufactured goods trade deficit:  Manf’d Goods Balance of Trade

This kind of debunks the whole notion of the mythical “manuacturing renaissance,” doesn’t it?