Did the Government “Rig” 3rd Quarter GDP?

October 27, 2011


Prior to the release of this morning’s report of 3rd quarter GDP, economists had been forecasting an annual rate of increase of 2.5%.  I thought they were crazy.  Did it feel like the economy grew in the 3rd quarter?  Not to me or to anyone else.  Most economic reports were negative during the quarter, prompting speculation that the U.S. was sliding back into recession.

But, sure enough, 3rd quarter GDP came in exactly as forecast – an annual rate of growth of 2.5%  (See the above link.)  So I began to update my spreadsheet in preparation for this post.  If you’ve been a follower of this blog, you know that I’ve been following not only GDP and expressing it in per capita terms, but I’ve also been tracking what GDP would have been without the spending attributable to the “American Recovery and Reinvestment Act of 2009,” since that spending would end in a couple of years.  It’s important to know what shape the economy is in when that spending goes away. 

Spending on the Recovery Act peaked in the 2nd quarter of 2010 – over a year ago – and has been winding down ever since.  The Act authorized a total of $807 billion in spending, which was expected to last a couple of years.  Through the 2nd quarter of 2011, $660 billion had already been spent.  Spending had slowed to $26.8 billion in the 2nd quarter of this year. 

So it seemed unlikely that the nice bump in GDP coud be attributed to spending on the Recovery Act.  But, boy, was I wrong!  Recovery Act spending in the 3rd quarter of 2011 jumped to $62.1 billion, it’s highest level since such spending had peaked in the 2nd quarter of 2010!  (Here’s a link to the Recovery Act web site:  http://www.recovery.gov/Pages/default.aspx.  And here’s a link to the cells in my spreadsheet that track the stimulus spending:  stimulus spending by quarter.)  Take away that spending and 3rd quarter GDP would have actually contracted at an annual rate of 1.8%!  Worse, if you factor in population growth and express GDP in per capita terms, it contracted at an annual rate of 2.6% in the 3rd quarter, falling to $41,958 per person – lower than it was in the 4th quarter of 2004.

Here’s my chart of GDP per capita, with and without stimulus spending:  Real Per Capita GDP

Did the government intentionally boost Recovery Act spending – through actual spending or accruals – in order to rig the 3rd quarter GDP numbers?  Or was the sudden spike in spending explainable and a mere coincidence?  The third quarter is actually the last quarter of the federal government’s fiscal year.  Was there a push to pull forward spending in order to make spending next year (an election year) appear to be reduced?  Or were there valid reasons to accrue spending at the end of the fiscal year?  I don’t know, but it looks extremely suspicious that this was a tactic used to rig the GDP number and make the economy appear to still be growing when, in fact, we are sinking deeper into recession.

What I do know is this:  the Recovery Act spending is nearly over.  In August, Congress agreed to hundreds of billions in cuts.  And, soon, the “super committee” will identify another $1.5 trillion in cuts to federal spending.  Take away all that spending (or even some of it, since it’s sure to be back-loaded over 10 years), and the result will be big downward pressure on GDP.  Anyone who looks at today’s report and draws encouragement that the worst of the downturn is behind us is making a very big mistake.


7 Billion People

October 26, 2011


Within a matter of days, we will mark a very sad milestone.  It is estimated by the UN that October 31st will be the day that the world population will breach 7 billion people.  

The world’s population continues to grow by approximately 1.1% per year, currently adding 77 million people per year, more than the entire population of the Northeastern United States.

It took the vast majority of human history to reach 1 billion people sometime in the early 1800s.  It took only a hundred years for the population to then double to 2 billion.  In 1960 we reached 3 billion people.  Fifteen years later, in 1975, we hit 4 billion.  Twelve years later, in 1987, we hit 5 billion.  Only 11 years later, we hit 6 billion.  Eleven years later again, sometime in the next few days, we will have added yet another billion to reach 7 billion people. 

And the pace of growth isn’t slowing much, at least not yet.  The UN projects that the world population will grow to 8 billion by 2025.  But then it does begin to slow, taking until 2042 to reach 9 billion.  It will then take over 40 years to add the next billion, reaching 10 billion by 2085.  Its projections are based on assumptions about development and declining birth rates.  (Although, as of the time of this writing, the UN has not yet published the assumptions that formed the basis for its projections.)  I can assure you, though, that the role of excessive population density in driving unemployment and poverty isn’t factored into their thinking.

Consider this:  as the world grows ever more overpopulated, per capita consumption is in a state of decline.  If per capita consumption held steady, then each person added to the population would find work at about the same rate as everyone up to that point.  A one percent rise in population would result in a one percent increase in jobs and unemployment would remain a constant. 

While that’s what economists believe, that’s not what’s happening.  Each one percent gain in population is actually driving down per capita consumption and driving up unemployment.  To make matters worse, productivity continues to rise at an even faster pace than our population growth rate.  What all of this means is that every person added to our population is headed straight to the unemployment line.  If we add another billion people by 2025 (about half of whom would be considered part of the labor force), as the UN projects, then the ranks of the unemployed, globally, will grow by 500 million.  And the U.S. isn’t immune.  As we add 3 million people to our population every year, or about 1.5 million new laborers, every one of them is doomed to the unemployment line. 

None of this is factored into the UN projections.  For that reason, I’d be willing to bet the farm that the world population will never exceed 10 billion.  In fact, it’s highly unlikely that we’ll hit 9 billion.  And I’d give you even odds that we’ll never even reach 8 billion.  Does that sound like wild-eyed optimism from a staunch advocate of stabilizing our population?  Hardly.  Grim pessimism is a better description because the conditions that will drive such a sudden halt to population growth is exactly what I’ve hoped we could avoid if only economists would pull their heads from the sand and begin advocating an orderly process of stabilization and contraction.  Just imagine the conditions that we are about to witness as the U.S. adds 1.5 million people and as the world adds nearly 40 million people to the unemployment line every year.  Societies are going to unravel quickly.  Nature is very unforgiving of species that don’t adapt to a changing environment.  And when that species’ ability to adapt depends on its intellect, as in the case of humanity, nature will be brutally unforgiving of self-inflicted ignorance perpetrated by its leaders. 

Look at this slideshow:  http://www.reuters.com/news/pictures/slideshow?articleId=USRTR2T6A3#a=1.  As you do, I want you to ask yourself, “what is the per capita consumption of the people I see in this picture?”  How much do they consume compared to how much they could produce if put to work in a modern factory?  If all consume so little but are capable of producing so much, how can all of them – or even a significant fraction of them – find gainful employment? 

Our economists and leaders need to wake up very quickly and stop pretending that mankind can overcome any obstacle to growth and grow ourselves into further prosperity.  Economies built on economists’ lies can’t endure and nature couldn’t care less what we believe.  This world is going to become a very ugly place very quickly, far more quickly than even I imagined when I published Five Short Blasts four years ago.

Immelt: “We’re Not Trying that Hard … to Compete”

October 24, 2011


The above-linked op-ed piece has been running on Reuters for a couple of days now, in which Chrystia Freeland recounts a breakfast with featured speaker Jeffrey Immelt, CEO of General Electric and the head of the president’s “Council on Jobs and Competitiveness.”  The name of this council alone says it all about what Obama thinks about our huge trade deficit.  It seems we should all blame ourselves for not trying hard.

“We are not trying that hard,” Immelt said. “We haven’t really tried as hard as we can to compete, educate and sell our products around the world and I think we can do better.

“The world just plays harder than we play,” he said. “Whether it is on exports or whether it is on foreign direct investment, the rest of the world plays for keeps. And we just don’t have a similar philosophy.”

He goes on but, before we get to that, I thought it might be interesting to explore just how well Mr. Immelt has done with competing and creating jobs at G.E., where he took over as CEO in September, 2001.  Since that time:

  • GE’s stock price has plunged by 60%.
  • Global employment at GE has fallen from 310,000 to about 287,000 today.
  • U.S. employment at GE has fallen from 158,000 to about 133,000 today.  In other words, all of the reduction in employment at GE has occurred in the U.S.   Employment has actually risen by about 2,000 in the rest of the world.
  • GE’s revenue has risen from about $126 billion per year to about $150 billion per year.  However, adjusted for inflation, this actually represents a decline of about 3.3% in revenue. 

Apparently, investors don’t have much confidence in GE  under Immelt’s leadership.  So why should Obama or any American have any confidence in his ability to lead the creation of jobs?  There’s nothing in his record that suggests he’s qualified for either role. 

With that said, let’s take a closer look at some of the other things he had to say at that breakfast.

“Chancellor Merkel flies from Berlin to Beijing, there’s 25 German C.E.O.’s that get off the plane right behind her. And they connect the dots. They play hard, they play to win, they play for exports,” Immelt said. “We’re not all-in the same way that the Germans are all-in.”

And how many American executives have gotten off the plane in Beijing, Mr. Immelt?  Hundreds.  All of them play hard and play to win for their companies.  The end result has been an historic shift of wealth and jobs to China.  Are you saying that the result will be different if they accompany American officials?  Are you saying they will then eagerly work against their own interests in an effort to bring those jobs back home?  Of course Germany has a trade surplus with China.  Germany is twice as densely populated, consumes far less, and is even more dependent on exports for survival than China is. 

But then Immelt goes on to refute his own argument:

“Our competitiveness in this country today is the greatest it’s been in 25 years,” he said. “I have never seen our competitiveness as solid versus India and China as I do today.”

Wait a minute!  In one sentence he says that we need to try harder, and then he says we’ve never been more competitive!  It begs the question:  if we’ve never been more competitive and we’re losing badly, is it possible that it’s not about competing?  Don’t we need to start looking elsewhere for answers? 

The U.S. is the most productive, most competitive nation on earth – far more competitive than China.  Consider this:  with a work force of approximately 150 million, the U.S. generates a gross domestic product of approximately $15 trillion – or about $100,000 worth of goods and services per worker.  China’s GDP is about $6 trillion, generated by a work force of about 600 million.   So Chinese workers generate only about $10,000 worth of goods and services each. 

That means that American workers are ten times as productive as Chinese workers.  Ten times!  And yet we have to “try harder?”  We have to be “more competitive?”  This kind of illogical gibberish isn’t unique to Immelt.  It’s spouted by virtually every economist on earth. 

The problem isn’t competitiveness, but a lack of understanding of what may be the most fundamental and profound relationship in economics – the inverse relationship between population density and per capita consumption.  The next quote by Immelt illustrates that lack of understanding:

“There are going to be one billion consumers joining the middle class in Asia. I think for us to reduce unemployment, exports are going to be a key way to do it,” Immelt said. “It’s this country’s only destiny just because most of the consumers are some place other than here.”

See?  He, like all business leaders, political leaders and economists, thinks that every person can be an American-style consumer, regardless of their circumstances.  They’re all absolutely ignorant of the role that high population density has in eroding per capita consumption and, with it, employment, making high unemployment and poverty an inherent characteristic of their economies.  Only if some nations like America are foolish enough to come to their rescue by ceding the manufacturing sector of their economies to them do they have any hope of rising from their poverty.  Nations like China, Germany and Japan are not export powerhouses because they are “more competitive” and “try harder.”  Rather, it’s because they consume so little that they’re utterly dependent on exports, and utterly dependent on America to consume their exports to have any kind of viable economy at all.   They can never consume enough to consume their own productive capacity, much less to begin consuming American exports. 

Before I end, there’s one more “Immelt-ism” that can’t be allowed to pass without comment:

“Look, when I was a young guy, when I first started with G.E., Jack Welch sent us all to Japan because in those days Japan was gonna crush us,” he said. “And we learned a lot about Japan when we were there. But over the subsequent 30 years, the Japanese companies all fell behind. And the reason why they fell behind is because they didn’t globalize. They didn’t have to go out and sing for their dinner in every corner of the world. That’s not the case with G.E. It’s not the case with other American multinationals.”

Hey, Immelt, here’s a news flash for you:  Japan is still kicking our ass in trade!  Have you not noticed that they still have a trade surplus with us that, on a per capita basis, dwarfs China’s?  You think that Japan doesn’t “sing for their supper in every corner of the world?”  Where have you gone in the world where you don’t see Japanese cars all over the roads? 

I can’t help but wonder if Immelt has ever pondered the fact that GE’s revenue would be higher if high tariffs on foreign-made engines meant that every plane in the U.S. was powered by a GE engine and every kitchen in the U.S. was equipped with GE appliances.  Nah.  Better to let that bone drop in favor of that big, juicy one he sees reflected in the waters of his imagined, bottomless pool of Chinese consumers.

Obama Pays Fisker to Build Electric Cars in Finland

October 21, 2011


Did you see this story on “Good Morning America” this morning?  Unbelievable!  It seems the Obama administration gave a half billion dollars to a company named Fisker to develop and produce an electric car in the U.S.  (As though Chevy, Ford and Chrysler weren’t capable.)  So what happens?  Fisker is producing it in Finland!  They complain that they can’t find a “contract manufacturer” in the U.S. capable of building the car.  And that’s true.  No one “contract manufactures” cars in the U.S.  Every auto company builds their own cars.  Fisker and the Obama administration both knew this very well before they agreed to this deal. 

So, now, in essence, the Obama adminstration is plundering the U.S. Treasury to pay a foreign entity to worsen our trade deficit.  Is this not an impeachable offense?  If not, it should be.  There needs to be an investigation. 

The world is awash in auto manufacturing capacity, and the capacity to develop electric vehicles.  There was absolutely no reason to pay someone to do this, unless there was some kind of payola or political favors going on. 

One of Fisker’s biggest financial supporters, records show, is the California venture capital firm Kleiner Perkins Caufield & Byers. The firm financially supports numerous green-tech firms, records show.

Kleiner Perkins partner John Doerr, a California billionaire who made a fortune investing in Google, hosted President Obama at a February dinner for high-tech executives at his secluded estate south of San Francisco. Doerr and Kleiner Perkins executives have contributed more than $1 million to federal political causes and campaigns over the last two decades, primarily supporting Democrats. Doerr serves on Obama’s Council on Jobs and Competitiveness. Doerr has not replied to interview requests since March.

Former Vice President Al Gore is another Kleiner Perkins senior partner. Gore could not be reached for comment.

The Obama administration has consistently aided foreign firms in getting a foothold in the American market, their support for Fiat’s take-over of Chrysler being a prime example.  Instead of helping American workers, President Obama has done just the opposite.  He’s opened our border to Mexican trucks, gave tacit approval to new Mexican tariffs on American goods, stands silent as Japanese companies continue to dump products on the American market and sides with Republicans in their efforts to thwart any moves against China. 

Is U.S. trade policy any smarter since Obama took office?  You be the judge.

Paychecks Fall Again in ’10 to Lowest Level Since ’99

October 21, 2011


As reported in the above-linked Reuters article, Americans’ paychecks fell for the third year in a row to their lowest level since 1999.  After median pay peaked at just over $27,000 per year in 2007, paychecks took their biggest plunge in 2010 (the year that stimulus spending and the Fed’s “QE2” program were at their peaks) since the beginning of the recession.  That really doesn’t bode well for the future, now that both stimulus programs have ended and Congress is under pressure to cut spending even more. 

Until economists pull their heads from the sand and once again consider the consequences of a world with ever-worsening population density, nothing is going to change.  This is the new normal – rising unemployment, falling incomes, increasing poverty and misery.  No politician can fix this as long as their advisor economists continue to believe that “economic growth” (driven by population growth) and more free trade are the remedies.

S. Korea Trade Deal Another Trade Policy Gaffe

October 17, 2011


Last week, Congress passed the long-pending trade deals with South Korea, Columbia and Panama.  The trade deals with Columbia and Panama are no threat to the American economy at all.  They’re small nations with population densities nearly identical to that of the U.S. and are capable of developing into high per capita consumption economies whose labor forces will be fully occupied providing for their own needs.  They are no threat of becoming exporting powerhouses. 

South Korea is an entirely different matter.  With a population density 15 times that of the U.S. (and four times the population density of China), they’re a nation incapable of consuming anything other than tiny apartments, food and clothing, leaving them with a vast labor force utterly dependent on manufacturing for export.  President Obama has said that he’d like to see Koreans driving Fords, Chevys and Chryslers, which would indeed be quite a feat since their roads are so over-crowded that, on a per capita basis, they don’t drive anything to speak of, being forced to rely instead on mass transit, bicycles and shoe leather.  And if the president wanted to see Koreans driving American cars, why did he agree to an annual limit of 75,000 vehicles exported to Korea while leaving Koreans free to export as many cars as they want?  Only an idiot would agree to such a deal.  This is a deal sure to kill many more American jobs.

This pack of trade deals does offer a unique opportunity to track their effects from the beginning, and that’s exactly what I plan to do in order to prove my point.  The following are charts of our balance of trade with each nation, dating back to 2001:

Korea, South     Colombia     Panama

As you can see, while we have a nice surplus in manufactured goods with Columbia and Panama, we have a very large trade deficit in manufactured goods with South Korea, just as the disparities in population density would predict.  These new trade deals will probably have little effect on the balance of trade with Columbia and Panama, but it’s easy to predict that the deficit with Korea will only worsen.  It’s going to take a while for this to take effect.  Maybe a couple of years or so.  But it’ll happen.  And, as it does, I’ll continue to chide Obama, even after he’s out of office in 2013, for viloating his campaign promise not to do any more job-killing free trade deals, because this is one that surely will kill American manufacturing jobs.  Shame on you, Mr. President!

So watch for updates on our balance of trade with these three nations.

Every Aspect of Trade Deficit Worsens Since Obama’s Pledge to Double Exports

October 13, 2011


The U.S. Bureau of Economic Analysis (BEA) released trade figures for the month of August this morning.  It was little changed from July’s awful reading of $45.6 billion. 

If you’ve been following my blog, you know that I’ve been tracking how the U.S. has been doing in exports since President Obama’s pledge in January, 2010 to double exports within five years.  I’ll get to that in a moment.  Of greater importance is how the U.S. is doing in terms of its balance of trade, both overall and, more importantly, in manufactured products.  Only by eliminating our trade deficit in manufactured products is there any hope of bringing millions of manufacturing jobs back home.

I was particularly struck by the following data this morning.  Since making his pledge in January, 2010:

  • our overall trade deficit has worsened by 21.7%  Here’s the chart:  Balance of Trade
  • our trade deficit in manufactured products has worsened by the exact same figure – 21.7%
  • our trade deficit in petroleum products has worsened by 19%.
  • our trade surplus in food products has shrunk by 17%.

Our trade picture has darkened dramatically since Obama made that pledge.  With that said, let’s now take a look at how we’re doing with exports.  Here’s a chart of overall exports and imports since January, 2010:

Obamas Goal to Double Exports

Is it just me, or does anyone else find it suspicious, even downright implausible,  that exports have tracked so closely to Obama’s goal to double exports?  Is it possible that some category of exports is being manipulated?  Here’s a stunning piece of data that I didn’t realize until I examined the data more closely this month:  while our trade deficit in pretroleum products has worsened by 19% since January 2010, driven largely by a 37% increase in oil imports (most of which is due to the rising price and not an increase in demand), oil exports have risen by 226%!  Oil exports!  From a nation desperate to reduce its dependency on foreign oil! 

In the meantime, exports of manufactured goods have fallen short of Obama’s goal by $5.1 billion per month.  Here’s the chart:

Manf’d Goods Balance

Hmmm.  Exports of manufactured goods are lagging Obama’s goal by about $5.1 billion at this point, only 1-2/3 years into his 5-year goal.  At the same time, oil exports have risen by $5.7 billion (an increase of 126%).  The end result is that overall exports fall exactly on Obama’s target line.  Pure coincidence?  Maybe.  But it sure looks suspicious.

OWS: Right Movement, Wrong Street

October 12, 2011


It was bound to happen.  It’s been coming for decades.  It began with a trickle – a few jobs here and a few jobs there – sacrificed in the name of free trade.  Employers steadily nibbled away at benefits.  Raises got smaller.  And, though the unemployment data said otherwise, there was a growing suspicion that decent-paying jobs were getting harder to find. 

However, between debt-fueled safety net programs, tax cuts to make us feel richer, irrational exuberance and, finally, the financial deceipt that fueled the housing boom, the government was able to keep a lid on the discontent and forestall the day of reckoning.  Until the whole house of cards collapsed in 2008. 

Now anger is boiling over and its abundantly clear that throwing more debt at the problem is an unsustainable dead end.  We’ve reached the end of the line.  There’s no more hiding the fact that America is in decline; the American dream is over. 

The anger has coalesced into a critical mass.  You can’t expect tens of millions of unemployed and underemployed to sit silent any longer.  Civil unrest was bound to start.  All it needed was some catalyst – some little protest to get it started, and a little media attention to get it rolling.  Under normal circumstances, it might not last.  But these aren’t normal times.  The “Arab spring” protests have demonstrated what’s possible if downtrodden people get angry, get organized and persist.  Thus, the “Occupy Wall Street” (OWS) movement was born. 

The following quote from the OWS web site (link provided above) does a good job of summarizing what they’re about:

Occupy Wall Street is leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%. We are using the revolutionary Arab Spring tactic to achieve our ends and encourage the use of nonviolence to maximize the safety of all participants.

This is a movement in its infancy.  It’s naive and confused.  The 99% of the population that they claim to represent has every reason to be angry at the disparity between their plight and that of the top 1% of wage earners.  But their anger is misdirected.  Most of those 99% rely upon their investments in Wall Street as a source of retirement income and a refuge from the other economic forces that are eroding their quality of life.  Our economy is based upon capitalism.  We want it and our corporations to succeed.

But what we don’t want is a system that’s rigged in favor of the handful of people at the top of those corporations.  We don’t want a system that’s rigged in favor of other nations at the expense of our own.  The leaders of our corporations aren’t doing anything illegal.  Everything they’ve done has, if you will, been authorized by our political leaders.  Wall Street will never change its ways until our political leaders redraw the boundaries within which our capitalistic system operates.  They have every right to be angry and demand change, but they’re on the wrong street.  They need to be camped out not on Wall Street but on Pennsylvania and Constitution Avenues in Washington, DC.

But maybe there are other streets that need to be targeted as well.  Our political leaders don’t dream up economic policy.  They’re too busy with campaigning and schmoozing.  They take their economic policy advice from economists.  Some lean slightly left; some lean slightly right.  But there’s little difference among them, which is why nothing ever seems to really change regardless of which party is in power.  All favor free trade and all favor growing the population, because they refuse to open their eyes to the consequences. 

So maybe the movement should be renamed “Occupy Garden Street” for the street in Cambridge, Massachusetts where Harvard University is located.  Maybe they should be demanding that Harvard and all of our universities abolish their economics departments, since the economists they’ve produced have proven to be abject failures.  The only way to tilt the economy back in favor of the 99% is to restore some balance to the supply and demand equation for labor.  That’s going to require people who understand how it got out of balance in the first place. 

And when it comes to demands, OWS has better include a demand for a new constitutional convention because, without it, money will continue to corrupt our political system and the influence of the 1% will continue to drown out the voice of the other 99%. 

And while OWS might like to think of themselves as a leaderless, amorphous movement, that’s not going to get them anywhere.  Think that the Libyans and Syrians are having a hard time changing their leadership?  That’s nothing compared to what the OWS is taking on.  They’re going to need leadership and strategy to make any real headway and, ultimately, they need to consider becoming the foundation of a new political party.  Otherwise, they can demonstrate all they want but, in the end, each of us, including each one of them, will have the choice of voting for either a Democrat or a Republican, funded by the same special interests and advised by the same economists, and nothing will ever change.

September Employment Stuck in “New Normal”

October 7, 2011


The September employment report (link provided above), released this morning by the Bureau of Labor Statistics (BLS), contains some good news but otherwise is consistent with an economy stuck in the “new normal” of 9% unemployment. 

The headline numbers are so-so:  103,000 jobs were added, better than what was expected but not quite enough to even keep pace with the growth in the labor force.  So unemployment remains stuck at 9.1%.  The best news is that the employment level rose by nearly 400,000 to just over 140 million people – the biggest jump since April, 2010 and the highest level since June, 2009.  Of course, the bad news is that, since June, 2009, the population has grown by nearly six million and the labor force has grown by 2.7 million.  As a result, we now have over 18.5 million unemployed vs. 15.8 million in June, 2009. 

The unemployment rate remained stuck at 9.1% in spite of the employment level growing by 398,000 jobs because the administration took the opportunity to release 423,000 unemployed workers from its “mysteriously vanishing labor force” bank of people who supposedly gave up looking for work.  Isn’t it interesting how each rise in the employment level is matched by people who suddenly decide to start looking for work again?  If you look at my calculation of unemployment, you’ll see that my calculation exactly matched the BLS’s until Obama took office in January, 2009.  Immediately, workers began “vanishing” from the labor force, artificially holding down the BLS’s U3 calculation of unemployment and effectively “capping” it at about 9%.  Truth be told, the real rate (my U3a calculation) is 11.7%.

Here are my charts of the unemployment rate, employment level, number of unemployed and per capita employment:

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

One bit of bad news is that manufacturing employment fell by 13,000 in September, the second decline in a row.  The president was banking on the manufacturing sector leading the economy out of recession, vowing to double exports in five years.  What we’re seeing is that, although he’s more or less on track to meet that goal, imports (which he’s completely ignored) are wiping out other manufacturing jobs just as fast as exports create them.  The result is that the economy is mired in recession and Obama is watching his chances of re-election sink along with his approval ratings. 

* * * * *

Here’s a breakdown of those 103,000 jobs added, according to the establishment survey of the report:

  • Professional & business services:  + 48,000
  • Health care:  + 44,000
  • Construction:  + 26,000
  • Mining:  unchanged
  • Retail:  – 9,000
  • Manufacturing:  – 13,000
  • Government:  – 34,000

The jump in construction employment, the first in a long time, is a good sign.  What’s not a good sign is the continuing growth in health care employment, since health care costs are a drag on the rest of the economy and that’s one place where it would be nice to see employment declining as other more productive sectors take over (which isn’t happening either).  An economy built on caring for the sick is a sick economy. 

The Sun Won’t Rise Tomorrow

October 5, 2011

No, this isn’t a prediction of the apocalypse.  Rather, I’m using the title of this post to make a point.  The terms “sunrise” and “sunset” are vestiges of the geocentric model of the universe, in which the earth lay at the center while the sun, the moon and stars revolved around us.  Thus, the sun “rose” in the sky in the morning and “set” in the evening.  This model was developed in ancient Greece and held sway until approximately the 17th century.  So fiercely was it defended by the Catholic Church that, when Galileo developed his more accurate concept of “heliocentrism” in which the earth revolved around the sun, he was tried and found guilty by the Inquisition, forced to recant, and spent the rest of his life under house arrest.  Ignorance doesn’t die easily.  To this day, approximately 20% of adult Americans still believe that the sun rotates around the earth.

And so it is with the field of economics today.  Like Pope Urban VIII who had Galileo tried by the Inquisition, modern economists are just as unwilling to consider any challenge to their irrational model of never-ending growth, and they are just as eager to label anyone who dares to delve into concerns about overpopulation a “Malthusian” as Urban was in condemning Galileo as a heretic.  Tomorrow (whether it’s literally tomorrow or sometime in the near future), they say, economic growth will rise again, just as surely as the sun will rise tomorrow.

But the sun won’t rise tomorrow.  While the earth continues its never-ending rotation, which will indeed bring the sun into view on the eastern horizon, the sun is setting forever on economists’ equivalent of “geocentrism,” their flawed theory of never-ending economic growth.  The field of economics will continue its plunge into the darkness of ignorance – perhaps forever or, hopefully, until some economist, as did Galileo, has the courage to brave the scorn of his/her peers and consider economics from a different perspective, willing to examine the full gamut of challenges that overpopulation may present.

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This post also marks a turning point in my forecasting of future events, which will take a decidedly more gloomy tone.  From the beginning, when I first began to develop my theory about the effects of the inverse relationship between population density and per capita consumption, I envisioned it as a process that would unfold slowly, taking perhaps decades to manifest itself in noticeable changes in our economy.  I fear that I’ve underestimated the gravity of this theory, blinded by the effectiveness with which debt was used to mask its effects.  That debt ploy has nearly reached its limit and, without it, the effects of unemployment and worsening poverty will escalate rapidly.