November Employment Report a Cold Slap in The Face

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

The November employment report, just released this morning by the Bureau of Labor Statistics (link provided above), was so bad that the most difficult task I faced in writing this post was choosing which piece of data to highlight in the headline.  The fact that per capita employment has fallen to match the lowest level of the recession?  Or the fact that unemployment by any honest measure (one that doesn’t use the “mysteriously vanishing labor force” trick to hold the numbers down) has risen to nearly match the highest levels of the recession?  The fact that the number of unemployed workers rose to 18.9 million?  Or the fact that the employment level (the number of people working) fell for the third month in a row and for the sixth time in the last seven months? 

In the end, I decided to simply sum it all up as a “cold slap in the face” for economists and the administration.  So much for the slowly rebounding economy. 

The “expert” economists were forecasting that the economy added 168,000 jobs in November.  Instead, if you believe the rosy figures of the “establishment survey” upon which this data is based, the economy added only 39,000 jobs.  The more thorough and accurate household survey reveals that the economy actually shed another 173,000 jobs in November (the sixth decline in seven months), boosting unemployment to the official rate of 9.8% or, using my more accurate calculation, 12.0%.   The “expert” economists may be shocked at this data, but anyone who understands my theory of population density and has been following this blog should have been expecting it. 

Here’s the data:

Unemployment Calculation

And here are charts of the data:

Unemployment Chart          Labor Force & Employment Level          Unemployed Americans          Per Capita Employment

Notice how my calculations of unemployment – “U3a” and “U6a” – correlated perfectly with the BLS’s calculation until the recession escalated, at which point the BLS began holding down the numbers by resorting to the “mysteriously vanishing labor force” trick, or simply assuming that so many people dropped out of the labor force, apparently no longer needing a source of income.  (Hoping that you believe such things.)

The additional 39,000 jobs reported by the establishment survey break down as follows:

  • professional and business services temporary help:  + 40,000
  • health care:  + 19,000
  • mining:  + 6,000
  • manufacturing:  – 13,000
  • retail:  – 28,000

It’s worth noting that the decline in manufacturing employment is the fourth consecutive month of declines, correlating perfectly with the steadily rising trade deficit and hi-liting the futility of Obama’s plan to boost manufacturing employment by doubling exports in five years. 

Think this is bad?  It’s going to get worse.  The stimulus program is winding down, Congress is under pressure to cut spending, taxes are likely to rise and, worst of all, the administration has proven absolutely gutless in doing anything to improve our balance of trade.  Raising taxes and cutting spending, while necessary to head off a bigger economic disaster down the road, in the short term add up to taking money out of the economy, a recipe for a double dip recession.  Or worse.

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14 Responses to November Employment Report a Cold Slap in The Face

  1. Mark Hall says:

    Pete:

    How do you say “Happy Days are STILL Here Again!!” in:

    Chinese

    Korean

    Japanese

    German

    Indonesian

    Vietnamese

    Tai

    &

    ALL Other languages except “American”

    • Pete Murphy says:

      I’ve been updating my trade data for the study I’m doing on wages vs. trade balance, and was amazed at how the deficit with Vietnam has exploded in the last three years. I recall that you picked up on that earlier. Good eye, Mark!

  2. MikeF says:

    We can sum this entire situation up with one word; LIMITS.

    We often speak about putting limits on children for their own good, but no such limits are applicable after the age of 18. In other words, those who make the rules don’t follow the rules.

    Labor is a commodity like any other commodity. When the supply of labor outstrips the demand for labor, the unbending LAW of Supply and Demand goes about its ugly work.

    In March of 1995, Robert Hickerson wrote:
    “All attempts to reduce the deficit, balance the budget or pay off the national debt are futile. The deficit and the national debt represent the subsidy the government has paid in its attempt to keep growth and unemployment at the level of social tolerance.”

    With several states simultaneously hitting the deficit wall and with our Federal Government having to run $TRILLION + annual shortfalls, we have reached the mathematical limits of our current economic system.

    • Pete Murphy says:

      Economists have been happy to see retail sales running about 1% higher than last year. They’re also happy to see productivity rising at a rate of about 3%. It doesn’t take a genius to figure out that that spells higher unemployment. The supply of and demand for labor grows ever more out of balance as crowding is driving down per captita consumption.

      By far, the biggest problem with our economy is the trade deficit. It’s no mere coincidence that the growth in the national debt in the last few decades almost exactly matches the cumulative trade deficit during that same period. Eliminate the trade deficit and most of our economic problems are solved. The rest would be solved by shrinking our population back to (approximately) a pre-1960 level.

  3. MikeF says:

    Pete,

    Your last statement can be boiled down to, “There is no longer an easy way out.”

    I’m convinced that we will enter what Gerald Celente calls “The Greatest Depression.” It has been my studied opinion for some time that it is now impossible to avoid a protracted depression. We carelessly danced the night away and now it’s time to pay the band.

    • Pete Murphy says:

      I agree that, for the world as a whole, it is quite impossible to avoid a depression – likely one that won’t end until the world population has contracted to a sustainable level. For the U.S. it couldbe avoided, but only through a dramatic change in trade policy that quickly restores a balance of trade, bringing home millions of manufacturing jobs. (Which would quickly hasten the depression for the overpopulated, export-dependent nations.) But there is no political consensus or backbone for such an approach. So my argument for the U.S. avoiding the depression scenario is probably academic and it won’t be avoided. I’m just trying to make the point that there is a way out.

      To put it another way: if we are doomed, it’s not by a lack of solutions but by the intelligence and will to implement them.

  4. ClydeB says:

    Pete,
    Your statement”To put it another way: if we are doomed, it’s not by a lack of solutions but by the intelligence and will to implement them.”,
    may be one of the most profound to appear in print in a very long time.
    The position currently taken by the likes of Krugman and others that, if only we were willing to borrow more money, we could spend our way to prosperity, should be criminally prosecutable.

  5. MikeF says:

    Clyde, When we understand something in an inherent fashion, we often make the false assumption that the majority shares our view.

    In reality, MOST people believe that if they had enough money…that if everyone had enough money…we would immediately pull out of this recession and all hang out together on Got-It-Made Boulevard.

    Both the government and the citizens fail to realize that fiat money DOES NOT represent physical capital. Fiat money is nothing more than paper. It is based on absolutely nothing other than the supply of paper and ink.

    With the shallow thinking of the average American citizen it is considered that if everyone had enough money, they could buy a new home and new car, and sit on their butts and watch a flat screen TV. Of course, that would be physically impossible as we would hit the wall on natural resources long before those homes and cars were built. As I continue to say, “Los Angeles can’t be built again.”

    As far as bringing all the manufacturing back to America and the U.S. then requiring 40% of all world energy and 40% of all world materials to accomplish the same, and at the same time, expecting that the other countries would accept a protracted depression without declaring all out war. Well…it ain’t gonna happen.

    • Pete Murphy says:

      Mike, regarding your last paragraph, that is the crucial challenge – restoring a balance of trade without starting a war. That’s why it’s critical to change the thinking of economists to recognize the role of population density disparities in driving trade imbalances, and to employ a poulation density-based tariff system to get the job done. A rebalancing of the global economy based upon sound economic principles would be much less likely to start a war. On the other hand, if America implements a shotgun approach to tariffs and is perceived as hoarding its market out of pure selfishness, it could very well start a war – one with good trade partners aligned against us along with the parasitic ones.

      On the other hand, if tariffs are applied only to the manufactured products of those densely populated nations who insist on running trade surpluses, and if such action is perceived to make perfect economic sense, a war is much less likely. And if it did happen, it would be a war between less densely populated nations, including the wealthiest nations, the ones with the most resources and the ones representing the vast majority of the earth’s land mass, against badly overpopulated nations with no resources and now finding themselves collapsing into abject poverty. My money would be on the former group.

      And because you’re right about energy and other resources, those same economic principles on which a rebalancing of the global economy should be based also dictate that the world needs to immediately begin a serious effort to reduce its population from its current level of 7 billion people to about 1.5-2 billion (my guesstimate), if there is to be any chance for all people of the world to enjoy a high standard of living sustainably. The U.S. needs to take the lead and show that it’s serious, dramatically curtailing immigration and implementing economic incentives to encourage a lower birth rate (instead of its current practice of using economic incentives – like tax policy – to stoke a higher birth rate).

      If a war happens, the blame can be layed squarely on the shoulders of the field of economics and all its practitioners who steadfastly refuse to open their eyes to the ramifications of unending population growth.

  6. ClydeB says:

    Mike,
    I regularly return to your blog on the chance that you have resumed posting, plus I get a recharge of my battery just reading some of your common sense postings.
    Individuals who follow your recommendations can hope for some reasonable level of stability in their life. Those vast hordes of people, that are at the core of the major problems, will ignore the best of recommendations and be swallowed up in the disaster that Pete describes.
    I suspect a world wide famine is the likely scenario that will ultimately effect a reduction in population. There is no question that viable water supplies are dwindling at an alarming rate and those natural resources that it takes to make goods are becoming more scarce and difficult to bring to market all the time. Not a pretty picture any way you look at it.

  7. Ken Hoop says:

    I assume any attempts to reduce US population to 1960 levels would have to be government-directed and not only isn’t there a current will to do this, the apropos ethnic proportionality of such reduction would be met with cries of racism anyway.

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