December 8, 2013
I saw this Citibank commercial today and it just about made me ill. It begins with Jonathon Rose, a developer, noting that America’s population is projected to grow by 90 million people over the next 40 years, and he speaks of what a great challenge it will be to grow and develop cities to handle all these people, and he speaks glowingly of how wonderful it will be.
Wonderful for developers like him and, of course, it won’t do their financiers – like Citibank – any harm either. Both will make a killing. But consider this: America’s population grew by 90 million over the last 40 years. Do you think we’re better off for it? The fact is that the top one or two percent of Americans are better off. But the middle class has fallen behind. And poverty rates are at a record level. Unemployment (the real kind, not the number that the Bureau of Labor Statistics publishes) hovers just above 10% and 17 million Americans are out of work. It wasn’t like this 40 years ago. And 40 years from now, today’s economy will look like the good old days.
I bring up this commercial because it illustrates one of the key points that I tried to make in Five Short Blasts – that beyond some critical population density, the interests of business and the interests of individual citizens – once in alignment – begin to diverge. It’s in the best interest of business that the population continue to grow forever. As the population grows, so too does total consumption of all products. As total consumption grows, so too do corporate profits. If 310 million people in the U.S. consume 310 million widgets, and 400 million people will consume 350 million widgets, then you’ve sold an additional 40 million. What do you care if the per capita consumption of widgets has declined and, along with it, the number of people with jobs? As long as your company is making the widgets, you’re doing great.
But unless you’re someone high up in the Widget Co. hierarchy, you’re not doing so well. Because per capita consumption has declined, unemployment is higher and it’s putting downward pressure on your wages. You’re fearful of losing your job – with so many people eager to do your job for less. And your world is a dirtier, more crowded place, one in which rising poverty is taking its toll on government’s ability to provide an adequate safety net.
So whose interests do you think will hold sway, yours or Citibank’s? Where do you think your congressman will turn for campaign donations – to you or to Citibank? And then who do you think he/she will listen to?
December 6, 2013
In what can best be described as a catch-up month, the Bureau of Labor Statistics announced that unemployment fell to 7.0% in November from 7.3% a month earlier. The government shutdown in October was widely cited throughout the report to explain the big swings in the numbers. (See the above link for the report.)
Both the 203,000 jobs added and the drop in the unemployment rate exceeded analysts’ expectations. But what people should take away from this report is that, in the wake of the past two months, little has changed. The household employment level is virtually unchanged in the past four months – 144.4 million vs. 144.3 million in July, an anemic growth rate of about 25,000 per month, far below the rate needed to employ the growing population.
The number of unemployed Americans is unchanged in the past year. Here’s the chart: Unemployed Americans.
The real unemployment rate – one that doesn’t rely on workers mysteriously vanishing from the work force to skew the number downward – is also unchanged in the past year at 10.4%.
Per capita employment, though it rose incrementally in November, remains at exactly the same level as it was in July, 2009 – 45.5%. Absolutely no progress has been made in the past 3-1/2 years in boosting the employment rate. Here’s the chart: Per Capita Employment.
And, what I call the “detachment from reality index” – the degree to which the government relies on smoke and mirrors (like the “mysteriously vanishing labor force” in the midst of a rapidly-growing population) – remained just under the record level set in October. Here’s the chart: Detachment from Reality Index.
No doubt, the administration will hail this report as proof that its economic policies are working. Nothing could be further from the truth.
December 4, 2013
As announced by the Bureau of Economic Analysis (BEA) this morning (see above link), the U.S. October trade deficit moderated slightly to $40.6 billion from $43 billion in September. The overall trade deficit continued its moderating trend that began in February of last year, thanks primarily to an improving balance of trade in oil. During that time frame, oil imports have fallen by $7.0 billion while oil exports have risen by $3.2 billion – a swing of $10.2 billion in the balance of trade in oil. That’s great news. Here’s the chart for the overall balance of trade: Balance of Trade.
The bad news lies in the details. Our balance of trade in manufactured goods, though it improved by $1.6 billion in October, continues on an overall downward trend. Here’s the chart: Manf’d Goods Balance of Trade.
Exports of manufactured goods lagged the president’s goal of doubling them in five years for the 27th consecutive month and by a record margin – $33.9 billion. They haven’t risen at all in the past year. Overall exports lagged the president’s goal for the 25th consecutive month, and by nearly $49 billion. In other words, the U.S. would now be enjoying a surplus of trade if the the president had met his goal. But that was never possible since the U.S. has absolutely no control over exports. Here’s the chart: Manf’d exports vs. goal.
But the most disturbing news in the report is what’s happening to our balance of trade with Europe. In October, the trade deficit with the EU hit a new monthly record of $14.3 billion. And it’s on pace to shatter the annual record, set only last year, by 15%. This is led by a record deficit with Germany of $6.9 billion in October. Our trade deficit with Germany is on pace to shatter last year’s annual record by 22%. And we also had a record deficit with Ireland in October of $3.2 billion – also on pace to beat last year’s annual record.
President Obama’s approval rating has been sinking. Nowhere is his failure greater than his failure to follow through with his campaign promise to fix America’s broken trade policy.