September Employment Report Shows No Improvement in Economy

October 22, 2013

The Bureau of Labor Statistics (BLS) finally released the employment report for September this morning.  The economy added 148,000 new jobs and unemployment fell by one tenth of a percent to 7.2%.  The Obama administration noted that it was the 43rd consecutive month of job growth and hailed it as further evidence of a steadily improving economy. 

But the report is actually further evidence of a stalled recovery (and it was never much of a recovery) and an economy that could begin backsliding into recession.  The following is a chart of unemployment since the onset of the recession six years ago:  Unemployment Chart.  Note that “U3a” unemployment, a measure that holds the labor force as a constant fraction of the total population, is at exactly the same level as October, 2012, and never managed to drop below 10%.  And the difference between this measure and the BLS’s (“U3,” which claims that millions of Americans have dropped out of the labor force) – what I call the “detachment from reality index” – hit a record level in September.  Here’s the chart:  Detachment from Reality Index.  In other words, the lie designed to perpetuate the myth of an improving jobs market just keeps getting bigger and the Obama administration’s nose keeps getting longer.

Per capita employment was essentially unchanged in September and remains little changed in the last year-and-a-half.  Here’s the chart:   Per Capita Employment.

Finally, the number of unemployed Americans is actually higher than it was eleven months ago:  Unemployed Americans

The link at the beginning of this post will take you to the BLS’s summary of the data.  Several things are worth noting:

  • Employment in health care has led the charge in job growth during much of the “recovery.”  But that sector is now faltering.  In 2012, health care added an average of 27,000 jobs per month.  So far in 2013, that number has fallen to 19,000 per month.  In September, it fell to only 7,000. 
  • Job growth in “leisure and hospitality” grew by 28,000 per month over the last twelve months, but actually lost 7,000 jobs in September.
  • There was no job growth in manufacturing in September. 
  • While the employment level grew by 133,000 in September (the household survey number, which pretty much coroborates the establishment survey figure of 148,000 jobs added), dig more deeply into the numbers and you find that part-time employment grew by 682,000, while full-time employment fell by 560,000.  In other words, there was a significant  shift toward lower-paying, part-time work in September. 

This isn’t good news for the economy.  Good-paying, full-time employment is getting more scarce and improvement in the jobs market has stalled.  No surprise, since the Obama administration has done nothing to improve the jobs picture – has done nothing to bring manufacturing jobs back home while exacerbating the over-supply of labor with out-of-control immigration.


Congress Doesn’t Represent the American People

October 13, 2013

The link I provided above will take you to a segment of today’s “Meet the Press” program on NBC in which Chuck Todd, chief white house correspondent for NBC, presents the results of a new NBC-Esquire Magazine poll which identified the characteristics of the American “political center.”  This poll found that this group, which represents the majority of Americans, can be characterized by the following traits:

  • Party loyalists (though not strongly so)
  • Pro-safety net
  • Secular
  • Socially libertarian
  • Isolationist
  • Beer-drinkers
  • Football-watchers

I found it interesting that, as Chuck Todd ran down the list, briefly describing each trait, he completely skipped over one of them – “isolationist.”  That’s the term now applied to those who are concerned about the negative impacts of globalization and free trade.  Such people used to be described as “protectionist.”  But I suppose that that term now seems quite reasonable.  People see nothing wrong with wanting to protect American jobs and the American economy.  So, it’s now better to describe them as “isolationist” – a term that conjures up images of people with some sort of personality disorder – withdrawn and anti-social, like monkeys from a psychology experiment who have been deprived of social interaction with other monkeys. 

The term is a mischaracterization of where people are today.  One can oppose the blind application of free trade policy without being “isolationist” at all.  Most have no problem with trade in general – just that trade policy should be applied intelligently.  Most continue to favor a strong foreign policy with the U.S. playing a leading role in international issues. 

The conclusion, as described by Chuck Todd, is that these are values that aren’t being represented in Congress today.  Indeed.  When it comes to trade policy, the voice of the American people has been ignored for decades as both parties have bowed to the will of their corporate benefactors, advancing free trade policy to the detriment of the American people.  Today’s impasse on the debt ceiling is a direct consequence.  We’re divided into two camps:  one that can’t stomach any more deficit spending (which is absolutely essential as long as we continue to run a trade deficit), and the other which says the government should continue to go ever deeper in debt to take care of us if you’re going to do nothing to bring our jobs back. 

As long as the world’s economists refuse to consider the role of overpopulation in driving global trade imbalances, I see no way out.  This is going to continue to get worse.

The Budget / Debt Ceiling Standoff: What 38 Years of Trade Deficits Hath Wrought

October 8, 2013

Forgive my use of archaic English in the title of this post.  But here we are again, with the federal government bumping its head against the debt ceiling, and each time it happens the debate about federal spending becomes nastier.  And once again, as in the past, the real root cause of the deficit spending and soaring national debt is completely absent from the debate.  It’s the trade deficit. 

It’s no mere coincidence that federal deficit spending tends to match the trade deficit – generally somewhere in the range of $500 billion to $1 trillion per year.  The following chart compares the growth in the national debt to the growth in the cumulative trade deficit since 1975, the year of our last trade surplus:  Cumulative Trade Deficit vs Growth in National Debt.  Notice that the lines generally parallel each other, occasionally criss-crossing.  If you study the chart carefully, you’ll find a strong correlation between recessions and periods when the deficit spending slacks off a bit and converges with the trade deficit.  And note that in 2013, as always happens when the growth in the national debt runs too far ahead, pressure to reduce the deficit spending has begun to once again bring the two lines into convergence – something that always triggers a recession. 

The reason for this is pretty straightforward.  Ultimately, since the United States is the only place where U.S. dollars are legal tender, net outflows of dollars from the U.S. economy (like the trade deficit – which is the biggest outflow), must balance with net influxes of dollars.  Foreign exporters need some vehicle for plowing those dollars back into the U.S. economy.  Since, by now, after decades of U.S. trade deficits, foreign investors already own virtually every physical asset in the U.S. (either directly or indirectly by buying mortgage-backed securities) there is little left for foreigners to buy except U.S. government bonds.  The federal government sells bonds to China, Germany, Japan and others and then returns that money into the economy through deficit spending. 

It’s very similar to your own bank account.  If you continue to drain funds from your account, then either you’re going to have to begin running up a debt to maintain your lifestyle or you’re going to soon be living like the pauper that you are. 

The reason the debate grows more heated each time the debt ceiling is reached is that it’s growing faster than our ability to repay it.  The following chart tracks the debt as a percentage of gross domestic product.   National Debt as Percentage of Chained GDP.  As you can see, it’s been worst in the past, like at the end of World War II.  By that measure, it doesn’t seem to be such cause for alarm.  Some other nations actually have much higher debts relative to their GDP. 

However, it’s not the “GDP” that would have to repay the debt.  It’s the taxpayers – you and me.  No, it’s not corporations.  Sure, they pay taxes, but you and I ultimately pay their taxes for them through higher prices for their products.  It’s individual taxpayers who will bear the brunt.  Here’s a chart of how the debt burden has grown for American taxpayers:  National Debt Per Capita, 1929-2013.  As you can see, the debt per capita has hit another record this year and the situation is much worse than it was at the end of World War II.  The debt is growing exponentially. 

But the situation is even worse than that.  As the debt grows, our ability to repay it is shrinking.    Here’s the chart:  National Debt as Percentage of Total Household Net Worth.

So why is the connection between the trade deficit and our national debt completely absent from the debate?  Because the corporate interests who fund the campaigns of our congressmen don’t want that dirty little secret exposed.  They want you to believe that excessive federal spending is the reason that you’re struggling when, in fact, you’d actually be struggling a lot worse if the government stopped the spending and pulled that money out of the economy.  They don’t want you to think about the fact that misguided trade policy that drained millions of manufacturing jobs out of our economy is the real reason that you’re struggling, because that same trade policy does wonders for their bottom lines. 

It’s all just a bit heartless for congressmen to promote trade policy that ruins people’s lives and then demand that the government not spend money on programs to help mitigate the suffering. 

On the PBS Newshour last night, when asked about the effect that not raising the debt ceiling would have on the economy, an economist correctly replied that it’d immediately lop about 4% from our GDP.  That’s a lot.  That’s as much as we experienced in 2009 when we were on the verge of another depression.  But what he didn’t point out was that it wouldn’t be a one-time thing.  There’d be another 4% reduction every year – a downward spiral into another depression. 

I’ve got mixed emotions.  On the one hand, if we don’t raise the debt ceiling, we’re all going to experience an economic calamity and many of us will be wiped out by soaring interest rates and collapsing stock and bond prices.  On the other hand, maybe that’s what it will take for someone to finally come clean about the connection between the deficit spending and the trade deficit.  How I’d love to hear an admission that we can’t cut the deficit spending as long as we continue our free trade policy.