“I Have a Dream”

August 28, 2013

Today marks the 50th anniversary of the march on Washington on August 28th, 1963, when Dr. Martin Luther King delivered his famous “I Have a Dream” speech. 

I’ve learned some interesting things about that speech that many of you may already know, but thought I’d share them anyway.  The “I Have a Dream” speech was first delivered by King in June of 1963 during a march down Woodward Avenue in Detroit.  During the March on Washington two months later, King spoke from some prepared remarks.  Nine minutes into the speech, gospel singer Mahalia Jackson, who stood behind King, said to him, “Tell them about The Dream, Martin.”  King paused, put aside his prepared notes, and began “winging it,” drawing upon the speech delivered in Detroit.  The speech is widely considered the best speech of the 20th century and one of the greatest speeches of all time. 

If you’ve watched news reports this past week and have seen films of the march on Washington, you know that the march was as much about jobs as it was about freedom.  Today, the “freedom” King sought has been largely realized.  But, while blacks and minorities now have access to jobs they could only dream of in 1963, the jobs picture for blacks is as bleak as ever.  In July, the unemployment rate for blacks stood at 15.0%, double the 7.6% unemployment rate for whites.  In June, the unemployment rate for black teenagers was over 48%. 

Racism is less a factor now than the impact on blue-collar jobs that our “free” trade policy has had since 1963.  Manufacturing jobs were the next rung on the economic ladder that blacks aspired to in ’63.  But at the same time that barriers to climbing that ladder were broken down, that section of the ladder was cut off and cast aside, and the hopes of both blacks and whites alike, dependent on manufacturing jobs to live the American Dream, were dashed. 

I wonder what King would have to say about this situation?  What would he dream today?   Perhaps he’d dream of a new “civil rights” – the right of all people to participate as vital cogs in their economy instead of functioning as mere consumers to feed corporate bottom lines.  Perhaps he’d dream of a new economics, one dedicated to full employment and a sustainable, high standard of living for all people, instead of never-ending profit and population growth – a world in which economists had the courage to explore the truth instead of turning a blind eye to subjects that brought them derision in the past.  Where would we be if people like King showed the same cowardice in the face of criticism that economists have displayed in the wake of Malthus? 

Sadly, I’m afraid that all we can do for now is dream.

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Gallup: Unemployment Worse Than Reported

August 24, 2013

http://www.cnbc.com/id/100981153

As reported in the above-linked article, polling company Gallup is reporting that unemployment is significantly worse than being reported by the Bureau of Labor Statistics (BLS):  8.6% vs. the BLS’s figure of 7.4%.  And, according to Gallup, the employment picture is taking a significant turn for the worse in August. 

Gallup also estimates that U6 unemployment (the broader measure of unemployment that includes the underemployed) is actually 17.7 percent, vs. the BLS’s figure of 14.0%.

These figures corroborate my own estimates of 10.2% (U3 unemployment) and 18.2% (U6 unemployment) – estimates based on the assumption that the labor force grows at the same rate as the population.  Even though, prior to the Great Recession, the labor force consisted of 51% of the populaton, the Obama administration would have us believe that, since November of 2007, only 15% of the 14 million people that have been added to our population need to work to support themselves. 

It’s refreshing to see that there are some organizations like Gallup that haven’t bought into the economic hype designed to prop up consumer confidence and are willing to tell the truth about the economy.


June Trade Deficit Drops Sharply

August 7, 2013

http://www.bea.gov/newsreleases/international/trade/2013/pdf/trad0613.pdf

As announced by the Bureau of Economic Analysis on Tuesday, America’s trade deficit dropped sharply in June, surprising everyone.  It fell by $9.9 billion, or 22%, from $44.1 billion in May to $34.2 billion, the lowest level in years.  The decline was due to a $5.8 billion decline in imports and a $4.1 billion rise in exports.  Here’s a chart of our total balance of trade:  Balance of Trade.

June’s decline continues a trend that began a year-and-a-half ago, after the trade deficit hit its worst level of the Obama administration in January, 2012 – $51.4 billion.  A falling trade deficit is always great news, but it’d be better news if it was due to a decline in imports of manufactured goods, which is where job creation is to be found.  But that’s not the case.  Nearly all of the decline is due to falling oil imports and, to a lesser extent, an increase in the services surplus.  Although the trade deficit in manufactured goods also fell in June by $5.6 billion, the long term trend for that category of goods has been worsening.  Here’s the chart:  Manf’d Goods Balance of Trade.

Exports of manufactured goods rose slightly in June, following a drop in May.  In the last two months, manufactured exports have risen by $1.3 billion, less than half the increase of $3.1 billion needed to keep pace with the president’s promise to double exports by January, 2015.  In fact, for the first time since the president made that promise in January, 2010, if manufactured exports had kept pace with that promise, America would actually have recorded an overall trade surplus in June.  Here’s the chart:  Manf’d exports vs. goal.

Falling imports would be better news if it were due to a rise in domestic manufacturing.  But that doesn’t seem to be the case.  Other economic data shows a manufacturing sector that continues to muddle along.  Employment in manufacturing has been flat for a year now.  Instead, falling imports may be for another reason – the kind of cut in consumer spending that portends a coming recession.


July Jobs Report Further Evidence of “Deep Structural Problems” within America’s Economy

August 5, 2013

The Bureau of Labor Statistics released another humdrum, “new normal” employment report for the month of July on Friday morning.  Non-farm payrolls added 162,000 jobs – below expectations and the lowest level in four months.  The unemployment rate dipped by 0.2 percent to 7.4% – the best level in 4-1/2 years.  However, though the labor force participation rate improved very slightly, it has barely budged since the depths of the recession.   What this means is that the economy has barely added enough jobs to keep pace with the growth in the labor force caused by immigration-fueled population growth. 

Commenting on the report, New York Times columnist David Brooks, a conservative, commented during the PBS Newshour’s “Brooks and Marcus” segment on Friday night that, in the wake of this report, “… the structural problems are becoming super-obvious … we’ve got some deep structural problems …”  Obama bashing by a conservative columnist?  No.  His liberal couterpart, Washing Post columnist Ruth Marcus, agreed with him.  Brooks went on to comment that “something really fundamental has shifted in the economy,” that no one seems to have answers and that our political system is ill-equipped to deal with it.

Brooks cited some factors, but can be forgiven for missing the real issue (since even economists don’t recognize it) – that continued population growth is whittling down per capita consumption, adding workers to our labor force at a pace incommensurate with the economy’s ability to absorb them. 

This weak employment report is corroborated by the equally weak preliminary report of 2nd quarter GDP growth, released two days earlier, which showed the economy grew by a measley  1.7%, on top of an even weaker 1st quarter growth of 1.1%.  What’s amazing is that this economic weakness is in spite of the Federal Reserve pumping a trillion dollars into the economy over the past year.  Something is indeed “structurally wrong” when the economy fails to respond to such unprecedented stimulus.

The following are additional high-lights from Friday’s employment report that underscore the weakness of the report:

  • Both the May and June reports were also revised downward by a total of 26,000 jobs.
  • The number of long-term unemployed was unchanged in July.
  • The employment to population ratio was unchanged.
  • The number of people employed part-time for economic reasons was unchanged.
  • The number of discouraged workers, 988,000, is up 136,000 from a year earlier.
  • The job growth was concentrated in low-wage sectors:  retail (47,000 jobs), and restaurants and bars ( 38,000). 
  • Manufacturing employment was flat, in spite of a growth of 9,000 jobs in the auto industry.  This means that the rest of manufacturing actually contracted by the same number.
  • Employment in the health care industry has stalled, as I’ve long predicted it would.  In 2012, health care added an average of 27,000 jobs per month.  In 2013, that’s fallen to an average of 16,000 jobs.  In July, it fell to zero. 
  • The average work week fell by 0.1 hours in July.  In manufacturing, it fell by 0.2 hours and overtime declined by 0.2 hours to 3.2 hours per week.
  • Average hourly earnings fell by 2 cents.

Something is structurally wrong with the economy.  It’s structured around trade policy based on flawed trade theory that’s guaranteed to result in a huge trade deficit in manufacturing goods.  And it’s structured around a reliance on population growth to stoke economic growth, a flawed strategy that’s now destructive and self-defeating.