Global Unemployment Drops Slightly in 2014, Still Higher than 2012

July 29, 2015

The main implication of the inverse relationship between population density and per capita consumption is that, as the world’s population continues to rise, so too will unemployment.  I’ve now begun tracking a rough measure of global unemployment, using the data posted on the CIA’s World Factbook web site for each nation, beginning with 2012.  Knowing the unemployment rate and the population, I can calculate how many people are unemployed in each nation, and then tally the sum for the entire world.  The CIA provides the data for most nations, but not all.  Also, the data has to be somewhat suspect, given that there is much disagreement over the official unemployment rate even in the United States.  You can imagine that the data for third world countries is probably not all that reliable.

Nevertheless, it’s all we have to go by.  Also, I’m making an assumption that the labor force in each country is made up of exactly 50% of the population (relatively close to the figure for the U.S.), since the CIA provides no data on the size of the labor force.  Using the CIA’s data and this assumption, in 2012 the global unemployment rate was 7.9%, and 26 million people were unemployed.  In 2013, the unemployment rate rose to 8.6% and 28.8 million people were unemployed.

In 2014, the situation improved slightly, with unemployment falling to 8.3% and 28.1 million unemployed.  It should be remembered that the period of 2012 through 2014 supposedly represents a time of global “economic recovery.”  While three years isn’t really enough data to begin drawing conclusions, so far the data seems to bear out the theory that unemployment will worsen as the world grows more crowded – even during a period of “recovery.”

This is data that I’ll continue to track and will report on again when 2015 data is available – probably early next year.


America’s Worst Trade Partners in 2013

May 26, 2015

Top 20 Deficits, 2013

In a recent previous post, I reported that the U.S. suffered a record trade deficit in manufactured goods with those half of nations above the median population density, and a healthy surplus with the other half of nations. The relationship between population density and trade imbalance is clear.

To make it even more clear, let’s take a look at the opposite ends of the spectrum of trade imbalances – those nations with whom we have the worst trade deficits in manufactured goods and those nations with whom we enjoy the biggest surpluses. This post will look at the top twenty deficits. In order to factor out the geographic size of nations as a factor, these trade imbalances are expressed in per capita terms – dollars per person.

Above is a link to a spreadsheet showing the top twenty per capita trade deficits in manufactured goods in 2013. The following are some observations about this list:

  • Of these top twenty nations, eighteen are more densely populated than the U.S. Most are much more densely populated. The average population density of the nations on this list is 504 people per square mile. This is almost six times the population density of the U.S.
  • The thing that may surprise people the most is that China, the nation everyone thinks of first when the subject of our trade deficit comes up, barely makes the list of the top 20 deficits, coming in at number 17. In per capita terms, our deficit with other nations including Israel, Taiwan, Japan, South Korea and a number of European nations, is much worse.
  • Low wages are often blamed for our trade deficit in manufactured goods. Manufacturing jobs, it is said, are shipped overseas to take advantage of cheap labor. So I’ve included the “purchasing power parity” (or “PPP”) – essentially the gross domestic product of each nation per person – to see whether this claim holds water. PPP is a measure of the purchasing power of the citizens of each nations, and is a good indication of the average wages paid. As you can see, our worst deficit are with rather wealthy nations. (By comparison, the PPP of the United States in 2013 was $49,000.) The average of PPP of these twenty nations is $35,330. Only two nations are below $10,000: China and Nicaragua. It should be noted that China’s PPP has more than doubled in the last eight years. If “low wages” were the cause of trade deficits, then we should begin to see our deficit with China decline as PPP rises. Instead, our trade deficit with China set a record in 2013. Our trade deficit with Switzerland, the wealthiest nation on this list, also worsened in 2013 to $1,859 per person from $1,680 in 2012, moving Switzerland from 3rd to 2nd place on this list.
  • South Korea moved from 12th place in 2012 to 11th place in 2013 as our trade deficit with them worsened from $426 to $496 per person. Our deficit with South Korea continues to worsen dramatically in the wake of the 2012 trade deal which the Obama administration hailed as a “big win for American workers.”
  • In the most dramatic move on the list, Malaysia went from 13th place in 2012 to 21st place – vanishing from the list – as our trade deficit with them was cut in half in 2013. This allowed Mexico to move up to 13th place in spite of a 20% decline in our deficit.

There are a couple of key take-aways from this list. First is that population density plays the major role in determining trade imbalances. If it did not, one would expect the ratio of more densely populated nations to less densely populated nations to be somewhere around 1:1. Instead, the ratio here is 9:1. Secondly, low wages clearly have absolutely nothing to do with these trade deficits. This list is heavily skewed toward wealthy, high-wage nations like Ireland, Switzerland, Germany, Japan, Israel, Taiwan, Denmark and others.

The problem with attempting to trade freely with these badly overpopulated nations is not that their wages are too low. The problem is that they buy too little from the U.S., thanks to a level of per capita consumption that has been decimated by their extreme population densities. People who live in such crowded conditions simply can’t consume products at the same level as people who live in more reasonably populated conditions like we enjoy in the U.S.


“The shadow of crisis has passed.” Or has it?

January 21, 2015

Last night, at the beginning of what can best be described as a victory lap, President Obama began his State of the Union message by declaring that “…the shadow of crisis has passed …”  The crisis he spoke of included lots of things, but foremost was the economy which, at the time he inherited it, was indeed in a full-blown crisis.  Perhaps two decent quarters of GDP (gross domestic product) growth are enough for him to declare “mission accomplished,” but has the crisis passed or has it merely been swept under the rug?

Three sentences later, he asked, “Will we accept an economy where only a few of us do spectacularly well?”  Yeah, that pretty accurately sums up the state of the economy.  But that’s not stuff worthy of a victory lap, so he then went on to make some claims that merit closer scrutiny.

  • “We believed we could reverse the tide of outsourcing, and draw new jobs to our shores. And over the past five years, our businesses have created more than 11 million new jobs.”  The implication here is that we did, in fact reverse the tide of outsourcing and bring eleven million jobs home.  If only it were so.  The fact is that, while the economy has grown by 15% in real (inflation-adjusted) terms in the last five years, the trade deficit in manufactured goods has widened by 72%.  The only explanation for that is that the “tide of outsourcing” has actually gotten worse.  That’s no surprise when you look at Obama’s record on trade, especially the terrible deal he signed with South Korea.  And “eleven million new jobs?”  According to the household survey, the employment level has grown by only 9 million.  And, during those five years, the population has grown by 11.4 million.  In other words, almost all of the growth in the employment level is due purely to population growth, and not a matter of putting people back to work.  In fact, during those five years, of the 18.3 million Americans who were out of work in January, 2010, only 3.2 million have been put back to work.
  • “More Americans finish college than ever before.”  That’s because we have more Americans than ever before.
  • “… we’ve seen the fastest economic growth in over a decade … a stock market that has doubled and health care inflation at its lowest rate in 50 years.”  We have had two good quarter of GDP growth, preceded by a really bad quarter at the beginning of 2014, but the president didn’t mention that.  The best in the past decade?  That’s not saying much when you look at the past decade.  The stock market has doubled thanks to the Federal Reserve pumping $4 trillion into the bond market, crowding investors out of that market, leaving the stock market as the only place to invest.  And health care inflation is at its lowest rate in 50 years because overall inflation is also down that much.  Relative to everthing else, especially stagnant wages, the inflation in health care is still pretty bad.
  • “Wages are finally starting to rise again. We know that more small-business owners plan to raise their employees’ pay than at any time since 2007.”  Wages are rising – barely – until expressed in real (inflation-adjusted) terms. In those terms, they’re stagnant.  And planning to raise wages isn’t the same thing as actually raising them.
  • “We set up worker protections, Social Security, Medicare, Medicaid to protect ourselves from the harshest adversity. We gave our citizens schools and colleges, infrastructure and the Internet, tools they needed to go as far as their efforts and their dreams will take them.  That’s what middle-class economics is: the idea that this country does best when everyone gets their fair shot, everyone does their fair share, everyone plays by the same set of rules.”  True, we did all that.  Then we signed the Global Agreement on Tariffs and Trade, initiating a trade regime that completely undermined all of the aforementioned programs, deprived American workers of their “fair shot” and gave away millions and millions of our best jobs.  Is that “middle-class economics?”
  • “Of course, nothing helps families make ends meet like higher wages. That’s why this Congress still needs to pass a law that makes sure a woman is paid the same as a man for doing the same work.”  While I agree that women should be paid the same as men, this would do nothing to raise wages.  No company is going to raise its overall cost of labor.  If forced to equalize the pay between men and women, companies will simply lower the wages for men.  The only thing that can drive wages higher is a higher demand for labor, like we’d have if we really did turn the tide on outsourcing.
  • “… to make sure folks keep earning higher wages down the road, we have to do more to help Americans upgrade their skills.”  Here we go again.  Job training as a solution to unemployment.  No one ever takes note of the fact that we lost our manufacturing jobs to people who were uneducated and practically devoid of job skills.
  • “…  we still live in a country where too many bright, striving Americans are priced out of the education they need.”  That’s because far too many of the seats in our college classrooms are filled with foreign students.
  • “… 21st century businesses, including small businesses, need to sell more American products overseas. Today, our businesses export more than ever, and exporters tend to pay their workers higher wages.”  We don’t sell more American products overseas because so many countries are so badly overpopulated that they can’t even consume their own productive capacity.  Yes, we export more than ever, but not much more.  In the meantime, imports have exploded, draining our economy of those manufacturing jobs that the president admits pay more.  In the past five years, manufactured exports have grown by $27 billion per month.  But imports have grown by $47 billion – all thanks the president taking the chicken’s way out on trade and deluding himself into thinking that exports can be grown by just wishing it so.
  • “I’m asking both parties to give me trade promotion authority to protect American workers with strong new trade deals from Asia to Europe that aren’t just free but are also fair.”  Following this assertion, the president admitted that trade deals have gone badly for American workers.  And now he wants to double down on that trade policy.  (Mr. President, if it doesn’t make any sense to continue the same policy with Cuba that has been a proven failure for 50 years, why does it make sense to continue pursuing trade deals that have been proven a failure for just as long?)  There is no “free” trade.  There is no “fair” trade.  There is only trade, and trade with overpopulated nations is a sure-fire loser.  But bend over America.  Here comes more of it!
  • “… 95 percent of the world’s customers live outside our borders. We can’t close ourselves off from those opportunities.”  This is the very heart of our trade problem – the pursuit of more customers – customers capable of producing more than they consume.  That’s good for companies who couldn’t care less where their products are manufactured, as long as they sell more products.  But it’s an absolute disaster for American workers and the American economy.
  • “More than half of manufacturing executives have said they’re actively looking to bring jobs back from China.”  We’ve heard this for years, but how many of them actually do it?  Very, very few.
  • “I want Americans to win the race for the kinds of discoveries that unleash new jobs: converting sunlight into liquid fuel; creating revolutionary prosthetics, so that a veteran who gave his arms for his country can play catch with his kids again.”  We do win those races, but every time we do, the manufacturing of those new products very quickly ends up in some badly overpopulated country.

No, the crisis hasn’t passed.  Nothing has been done to fix the problems that caused it in the first place – our trade deficit and our use of population growth as a crutch for economic growth.  In fact, these issues have gotten worse.  The crisis has been swept under the rug and will slither back out sooner than most people – especially the president – think.


A Happy Day for Illegals, a Sad Day for Americans

November 22, 2014

Obama finally did it, granting amnesty to roughly 5 million illegals.  In the recent mid-term elections, Democrats were trounced by voters who, more than anything else, were incensed by the president’s amnesty plan.  He did it anyway.

So, for five million people who made a mockery of our immigration laws and made fools of those back home waiting in line to enter the U.S. legally, life has gotten much better.  But for 320 million Americans, life just got incrementally worse.  More competition for their jobs.  More downward pressure on wages.  More crowding, more traffic, more burden on the public school systems that are already short on funding.  The economy is incrementally worse.  In general, the quality of life for Americans has just declined.  Like polls have been telling us, America is on the wrong track – toward a dead end.  And immigration is the engine that’s driving us there.

Republicans are indignant about the president breaking our laws and failing to uphold the constitution, or so they say.  What they’re really indignant about is that the president beat them to the punch on pandering to the Hispanic vote.  Neither party is any better than the other when it comes to immigration.  Both parties have two constituencies to deal with.  Both parties have the voters to contend with, voters who are pretty much split on the issue.  But the Democrats have big labor on their side, and big labor loves the influx of unskilled labor that illegal immigration brings, which translates into potential growth in their membership.

Republicans, on the other hand, are in the pockets of big business, who loves the huge influx of skilled workers that H1B visa immigrants bring, keeping downward pressure on wages.  So, with Republicans you get posturing (and maybe a little more border enforcement) on the illegal immigration issue, but a huge influx of legal immigrants.  With Democrats you a huge influx of illegals, each wave attracted by the amnesty granted to the previous.  They all know that U.S. immigration laws are practically meaningless.

But, if you’re out of work and find yourself competing with immigrants for a job, does it really matter to you whether they have green cards or not?  You’re out of a job just the same.

It’s pointless to be angry with one party or the other.  Our anger needs to be directed toward economists and their idiotic reliance on population growth to stoke macroeconomic growth, a strategy that is ultimately doomed to failure.  If population growth is such an economic cure-all, then Japan, a nation ten times as densely populated as the U.S., should have an economy that’s not mired in decades of stagnation.

Nothing will change until the field of economics pulls its head from the sand and considers the full range of economic  implications of population growth.  Until then, we’ll get more of the same – presidents who hand their economic policy over to academic economists – the blind leading the blind.


Japan Plunges Back into Recession

November 20, 2014

http://www.usatoday.com/story/money/markets/2014/11/16/japan-says-economy-contracted-16-pct-in-july-sept/19147417/

It was reported on Monday (see above-linked article) that Japan officially slid back into recession in the 3rd quarter.  The economy contracted 1.6% (annual rate) in the 3rd quarter, following an even larger contraction of 6.7% in the 2nd quarter.  This came as a shock to the business community, which had expected a resumption of growth.

Japan is a poster-child for what happens to an economy that is badly overpopulated.  Japan is approximately ten times as densely populated as the U.S.  Because its people live in such dense, overcrowded conditions, per capita consumption there is a fraction of what it would be otherwise.  Low consumption would mean low employment, were it not for the fact that Japan runs a massive trade surplus in manufactured goods.  (It actually runs a deficit for overall trade because it’s also heavily dependent on imported raw materials in order to manufacture those goods.)  Without that surplus of trade in manufacturing, Japan’s economy would collapse into something resembling a third world country.

Once South Korea, followed by China, began muscling in on its export business, growth in Japan’s economy ground to a halt.  It’s been in a state of recession more often than not for the past two decades.  During that time, it has racked up an enormous national debt, the largest in the world, in order to prop up its economy.

In 2012, Shinzo Abe was elected prime minister of Japan, thanks to his promise to revitalize the economy through a combination of tax cuts, a huge boost in spending on infrastructure, and massive money-printing by Japan’s central bank – a program that came to be known as “Abenomics.”  Once the economy was kick-started, then the plan was to raise sales taxes in order to once again begin addressing the debt issue.

At least that was the plan.  It worked great at first.  The Japanese people were given lots of free money and they spent it.  The Japanese stock market soared.  But then came the tax hikes and the party was over.  The economy quickly collapsed back into a deep recession.

What economists don’t understand is that macroeconomic growth in a society plagued by severe over-crowding is impossible, and nowhere is this more evident than in Japan, one of the most densely populated nations on earth.  A point is reached where falling per capita consumption erases any gains that further population growth may provide.  This effect can be masked by deficit spending, but that tactic can only be sustained for so long.  Ultimately, the Japanese people are doomed to a failing economy and worsening poverty.

This opinion piece by James Saft does a good job of illustrating how boxed-in the Japanese economy has become, and how he and economists still don’t get it – that population growth is the root of the problem, not the cure – by implying that all would be well if Japan’s central bank could simply “print people.”

What Japan’s people need, more than anything else, is simply room to breathe.  Less densely populated, they could live in real homes instead of rabbit hutches.  They could drive real cars and park them in their own garages.  They could have lawns and gardens.  They could play golf on golf courses that currently don’t exist.  The quality of their lives would improve by leaps and bounds.  But, with fewer of them, the Japanese macroeconomy, as its traditionally measured, would be smaller and economists would be sounding the alarm.

It never ceases to amaze me how economists are incapable of recognizing or acknowledging how dumb their reliance on never-ending population growth in a finite world is.  Japan is a perfect example.


The End of Growth

October 22, 2014

http://www.reuters.com/article/2014/10/16/us-cenbanks-markets-policy-idUSKCN0I501120141016

Last week, markets were in a steep sell-off, driven largely by increasing worries about global economic growth.  (See the above-linked Reuters article from last week.)  In the wake of the Great Recession, years of interest rates at zero and money printing by the central banks of the U.S., Europe and Japan have yielded pretty disappointing results.  Europe is once again on the brink of recession.  And Japan has either been in recession or been on the brink for decades.  And slowing economic data in the U.S. is making it look as though we won’t avoid backsliding into recession either.

We’ve all seen cartoons depicting pessimists standing on street corners wearing sandwich-board signs declaring that “the end is near.”  Well, folks, it’s time to face facts.  When it comes to economic growth, the end is, in fact, here.

Let’s begin with a step back – way back – to World War II.  The imperialist ambitions of both Germany and Japan had similar roots.  Both nations were badly overpopulated, short on resources and long on unemployment.  Both embarked on huge land grabs.  In the wake of the war, in 1947, the Global Agreement on Tariffs and Trade – the precursor of today’s World Trade Organization – was implemented, with the primary goal of preventing such wars by giving Germany and Japan easier access to resources and more access to U.S. markets, thus alleviating the high unemployment that fostered Hitler’s rise to power.

No problem, at first.  Americans had done without for years, with the nation’s manufacturing capacity devoted 100% to the war effort.  There was a lot of catching up to do and Americans’ appetite for goods seemed insatiable.  The economy boomed and the federal government was able to cut spending and whittle away the debt it had racked up during the war.

The infrastructure and economies of Germany and Japan were rebuilt.  Slowly, the new trade regime enabled imports from those nations to erode America’s trade surplus.  First came Volkswagens and a sprinkling of Mercedes and BMW’s from Germany.  Those were followed first by motorcycles from Japan, and then Hondas – pathetic little cars that were painted in paisley and sold as jokes, but they got their foot in the door.  By the early 70’s our trade surplus was gone.  We oscillated between surplus and deficit for a few years.  We ran our last trade surplus in 1975.  Since then, we’ve experienced 38 (soon to be 39) consecutive years of trade deficits.

At about the same time, America’s budget deficit began to grow again too.  It had to, to offset the trade deficit’s drain of money from the economy.  Soon, new terms began to creep into the American economic lexicon:  “redundancy,” “down-sizing,” “right-sizing” and “outsourcing.”  American manufacturers began closing their doors en masse, unable to sustain a profit margin in the face of the onslaught of foreign companies snatching up American market share.

Even with their new-found trade surpluses and manufacturing jobs cannibalized from American manufacturers, the Europeans and Japanese both found it necessary to lean heavily on deficit spending, just as America was doing, to keep a lid on unemployment.  Rising productivity enabled manufacturers to meet growing demand without growing employment at the same pace.

At the end of World War II, the world’s population stood at just under 2.5 billion.  Today it has nearly tripled.  All of this growth has been concentrated in urban areas.  Cities have expanded and grown vastly more crowded, and it’s a fact that people living in crowded conditions consume less out of necessity.  Growth in the global labor pool outpaced the rate at which workers were absorbed into the economy, putting downward pressure on wages.  And that situation grew exponentially worse when China was factored into the global trade equation, growing the global labor pool virtually overnight by 25%.

For a time, government deficit spending, used primarily to fund social safety net programs and other programs designed to supplement incomes and prop up a perception of wealth, sustained consumption and kept the economy growing.  But that tactic has run its course.  National debts have risen to worrisome levels.

Developed economies looked to China to pick up the slack by developing its economy, turning 1.3 billion people who had nothing into western-style consumers.  By that measure, China has been a huge disappointment.  Collectively, they consume a mountain of goods, but nowhere near enough to even consume their own productive capacity, much less to develop into a market for other nations.  Their growth is faltering and it looks like their domestic consumption will settle at the same diminished level as Europe and Japan.

Growth is now virtually dead and all the deficit spending in the world can’t prop it up.  Economists won’t admit that fact and adamantly refuse to give any consideration to the fact that population growth lies at the heart of the problem.  But markets don’t care, and what we’re witnessing is an adjustment to a no-growth world.  Interest rates have fallen to zero.  Bond yields, projected to rise as the economy “recovered” never did, and are now sliding backward to near-zero levels.  Central banks’ hands are tied, left only with thinly-disguised money printing programs to fall back on to provide stimulus to the economy, a tactic that’s already begun to make them nervous about unintended consequences.

The world’s economy is reaching a critical and dangerous point, where the inverse relationship between population density and per capita consumption begins to take hold in a big way that can trigger an irreversible downward spiral.  People consume less than they’d like for two reasons – because they lack space to make use of products, and because they are simply too poor to afford them.  When the proportion of people in the first condition reaches a critical level, the downward pressure on wages begins to make everyone poorer, accelerating the downward pressure on consumption.  Governments’ and central banks’ resources and abilities to hold this economic force at bay will soon be exhausted.

Economists had better extract their heads from that place where the sun doesn’t shine, and soon, if this economic fate that they don’t understand and are unable to see is to be avoided.  I fear that they won’t.  Growth isn’t always desirable.  Sometimes it’s cancerous.  Left unchecked, population growth will soon present the one challenge that none of them are clever enough to overcome – worsening poverty that gets so bad that it throws the world population into decline.  In essence, if economists and world leaders aren’t smart enough to manage our population to a level where all can enjoy a high quality of life, their stupidity will surely drive it to a level that no one wants.

 


Americans Continue to Grow Poorer During “Recovery”

September 19, 2014

http://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf

One of the consequences of the inverse relationship between population density and per capita consumption is declining incomes as the demand for labor fails to keep pace with the growth in supply.  As per capita consumption goes, so goes employment.

I published Five Short Blasts in 2007, just before the onset of the “Great Recession.”  That unemployment rose and incomes declined during the recession was no surprise and provided no proof of my theory.  But a report released last week by the Federal Reserve does.  The Fed released it’s 2013 update to its tri-annual “Survey of Consumer Finances.”  (Link provided above.)  The latest survey shows the changes in consumer finances during the 2010-2013 period, a period of recovery, following the previous release which covered the 2007-2010 period of recession.

The survey found that while Americans grew substantially poorer during the 2007-2010 period of recession, they have continued to grow poorer during the so-called “economic recovery.”  Median incomes fell yet another 5% after falling 8% during the recession.

Median net worth fell another 2% during the “recovery” after falling 38% during the recession.

Wealthy Americans, the top few percent of wage earners, have fared much better.  Their incomes have risen 4% during the recovery and they have completely recovered their much-smaller loss in net worth that occurred during the recession.

Economists are baffled.  I’m not, and you shouldn’t be either.  As long as the U.S. continues to mis-apply free trade to nations grossly overpopulated and as long as we continue to exacerbate our own worsening population problem, declining incomes and worsening unemployment is inescapable.  People living in crowded conditions consume less.  It’s impossible to avoid.  When people consume less, less is produced and employment declines.  It’s all really quite simple – simple to anyone willing to open their eyes and ponder the economic consequences of a growing population – something that economists are still unwilling to do.


Follow

Get every new post delivered to your Inbox.

Join 55 other followers