Economists Admit to Being Clueless about Jobs

July 11, 2011

The above-linked article just appeared on CNBC this afternoon.  It seems that economists are admitting to being flummoxed by the incredibly bad June employment report when all of them were expecting some halfway decent job growth. 

I posted a comment in reply to the article at about 1:21 PM, if you want to find it.  But to make it easier, here was my reply:

Economists are clueless about jobs because economists steadfastly refuse to consider the most dominant parameter affecting our economy today – population growth. Since the seeming failure of Malthus’s economic theory about population in the 1800s, anyone who dares to suggest that overpopulation could present a problem for the economy is instantly dismissed as a “Malthsian.”
That’s a pity because if economists would once again open their eyes to the full ramifications of population growth and not just the strain on resources and stress on the environment, they may discover very serious consequences for the economy itself in the form of falling per capita consumption and rising unemployment, and the role that population density disparities play in driving global trade imbalances.

Ever-worsening unemployment, destructive trade imbalances and the global debt problem – these are no mystery. They’re completely predictable when you understand the relationship between excessive population densities and low per capita consumption.

Pete Murphy
Author, “Five Short Blasts”

So, “economists,” what are you going to do about it?  Cling to your incomplete economic models or open your minds to the one parameter you refuse to consider in your economic equations?  Sadly, I think I know what their reply will be.  “Malthusian.”

Obama’s “Grand Bargain”

January 12, 2009
While being interviewed by George Stephanopolous yesterday on ABC’s “This Week,” Obama admitted that, at some point in his administration, in order to restore some fiscal sanity while pursuing his agenda, he will have to reach a “Grand Bargain” with Congress and the American people – sweeping legislation to put the brakes on spending and raise taxes to eliminate the deficits and begin paying down the debt. “Everyone will have to share the pain,” he said. “Everybody has to have some skin in the game.”
I don’t know if he’s thought this through yet but, contrary to what some “economists” may be telling him, cutting spending and raising taxes by themselves will seriously erode the purchasing power of consumers. As consumption declines, so too will employment. It’s a recipe for making the recession (or depression?) even worse, unless one more step is taken – eliminating the trade deficit. When he speaks of everyone “sharing the pain” and having “skin in the game,” is he including the exporting nations who have gotten a free ride in the American economy? Cutting the purchasing power of Americans doesn’t mean that they’ll simply stop buying imports. Go to WalMart and take a look around. See any luxury items? Of course not. Everything you see is necessities. And, aside from most of the grocery items, do you see anything that’s manufactured in the U.S.? Again, no. Sure, there’ll be fewer imported cars purchased, but sales of domestic models will decline just as fast. It’s services where the pain will really be felt – services provided by American workers.

In recent decades, as free trade policies eroded our manufacturing base, the big lie that we could somehow still have a vibrant economy was swept under a rug of debt. Americans could be made to feel just as prosperous by swapping savings for debt. We sold everything we could think of to foreign investors to raise the cash for easy credit. When we finally resorted to selling them subprime mortgages, the whole scheme came crashing down and the rising tide of unemployment that we had held at bay for so long is now topping the levee and inundating us.

Mr. Obama is a very smart man. In his efforts to restore some sanity to our fiscal mess, how long can a line item written in huge, bold red caps escape his attention? Unless Mr. Obama wants his “Grand Bargain” to accelerate our economy’s downward spiral, he’ll have no choice but to finally turn his attention to our massive trade deficit, now totaling $9.2 trillion since our last trade surplus in 1975. And, being a smart man, will he look at our decades-long strategy of complaining about currency valuations and cajoling our trade partners to abide by the spirit of agreements, and say to himself, “gee, this is working really well?” “Let’s keep doing it!” Or will he finally conclude that, just perhaps, it may be time to take some positive action – like tariffs, for example – to restore some balance? The last “skin in the game” may be the global trade welfare state.


Obama Raises Jobs Target

December 22, 2008

Earlier this month, when Obama announced his jobs creation program, I asked, “Is that all there is?”  (See “Obama Jobs Plan: Please Tell Us There’s More.)  Well, it seems that the Obama team has already recognized that it’s inadequate, raising the target from 2-1/2 to 3 million jobs.  In addition, he’s created a task force focused on helping the middle class. 

WASHINGTON (Reuters) – U.S. President-elect Barack Obama unveiled a new task force on Sunday charged with helping struggling working families, as an aide said Obama’s economic recovery plan would be expanded to try to save 3 million jobs.

The White House Task Force on Working Families, to be headed by Vice President-elect Joe Biden, would aim to boost education and training and protect incomes and retirement security of middle-class and working families whose plight Obama had made a central issue of his campaign.

I’ll point out again, all of this is woefully inadequate.  The U.S. is short 20 million jobs, not 3 million.  Since America’s labor force grows by 150,000 per month (due to population growth), creating 3 million jobs over two years means that unemployment will grow worse by 600,000 jobs instead of improving. 

Obama’s infrastructure spending will help in the short term, but that can’t be sustained for long.  In the end, the only way to put this economy back on sound footing is to restore its manufacturing base, bringing 6 million high-paying manufacturing jobs back home.  In addition, the administration has got to stop flooding our labor supply with immigrant labor.  Immigration intensifies the over-supply of labor faster than it contributes to consumer demand.

Biden said the economy was in worse shape than he and Obama had thought it was.

“President-elect Obama and I know the economic health of working families has eroded, and we intend to turn that around,” Biden told ABC’s “This Week.”

I have news for the Vice President-Elect.  The economy is in much worse shape than they realize even now.  The “economic health of working families” can only be restored by shifting the balance in the supply vs. demand equation of labor in favor of demand, driving incomes higher.  It cannot be done with more lending and debt.  The only way to stimulate a lasting demand for labor is by bringing home the jobs we’ve exported through misguided trade policy.

Obama Confirms Climate Change a National Security Issue

December 10, 2008

Eight days ago, following Obama’s roll-out of his national security team, I wrote a post about the seemingly strange mention of climate change on a couple of occasions, and speculated that this meant the issue of climate change was being elevated to a national security issue.  (See “Hints of Hopeful Signs in Obama’s Press Conference.”)  As much as I scan the web for commentary on these kinds of things, I don’t think anyone else picked up on this nuance in that press conference. 

Does this mean that climate change, energy and food have been elevated to national security issues in this upcoming administration? And doesn’t talk of energy and food in terms of “shortage” and “scarcity” imply an understanding of the supply / demand relationship for these resources – an understanding that demand is at least part of the problem?

Now, in this linked Reuters article, we get confirmation from Obama himself that, in fact, this is exactly the case – he considers climate change a matter of national security.

“This is a matter of urgency and of national security and it has to be dealt with in a serious way. That’s what I intend my administration to do,” Obama said.

This is very good news!  No intelligent person (and Obama is very intelligent) who accepts that climate change exists and is caused by human activity – that is, by the burning of fossil fuels and the resultant CO2 emissions – can believe that the problem can be solved while allowing our population to grow unchecked.  I’m not saying that Obama has yet reached this realization but, once his staff gets down to the nuts and bolts of how to accomplish their objective, they will quickly run into the population growth wall.  It’ll be very interesting to see how Obama then reacts to this new reality.  Will he rein in immigration?  Will he begin to ponder the need for incentives for people to choose smaller families? 

The article goes on to mention that Obama sees tackling climate change as another opportunity for creating jobs.  No doubt, there will be a tremendous amount of work involved in converting our electrical generation to new technologies and in transitioning our home heating from oil and gas to more climate change-friendly technologies.  This is an example of the kind of thing I hope Obama has “up his sleeve” when he spoke recently of his economic stimulus plan, but seemed to come up short on jobs.  (See “Obama Jobs Plan: Please Tell Us There’s More.”)

It’s going to be exciting to see how all of this unfolds, as it appears that enormous changes for the better are finally in store for America!

Unemployment Soars in August

September 7, 2008

The economy shed another 84,000 jobs in August, and the July and June figures were revised upward dramatically.  We’ve now lost 605,000 jobs since the beginning of the year.  Never mentioned in this report is the fact that our labor force grows by about 150,000 workers per month, due simply to population growth.  Therefore, we’re now 1.8 million jobs short of what’s needed to keep unemployment from rising.  A shortfall of 1.8 million jobs represents about 1.2% of the work force. 

An unexpectedly steep 84,000 U.S. jobs were lost in August and the unemployment rate hit a five-year high of 6.1 percent, fanning worry ahead of November’s presidential vote that the economy was near recession.

“Unexpectedly?”  This isn’t unexpected.  It’s totally predictable when you understand how trade with overpopulated nations practically guarantees such results. 

Here’s the typical response by our lawmakers:

The speaker of the U.S. House of Representatives, California Democrat Nancy Pelosi, renewed a pledge to seek a second economic stimulus program to pick up from one earlier in the year that has now largely been paid out to consumers.

Another economic stimulus won’t help anything, as the first one demonstrated.  How can pumping more money into the economy help when it does nothing to address the underlying root cause, our trade deficit?  The money will simply be spent on foreign-made products, helping the economies of our trade parasites, but doing almost nothing for our own. 

Analysts said the bleak hiring data likely means that Federal Reserve policy-makers will feel obliged to keep interest rates low for an extended period.

Oh, yeah, that’ll help too.  That sky-high 2% interest rate is really holding back the economy!  Cutting it to 1.75% will really make a huge difference. 

But, hey, not to worry!  Economists have been predicting that the lower dollar will cure all our ills.  It’ll make our products cheaper for foreign buyers and make their products more expensive here, improving the competitive position of domestic manufacturers.  We’ll experience a renaissance in manufacturing!  Right.  So what’s really happening?  Take a look:

Some 61,000 manufacturing jobs were lost, the most for any month since mid 2003, and 8,000 more construction jobs were cut. There were 53,000 jobs eliminated in professional and business services and 4,000 in leisure and hospitality industries.

The falling dollar has had zero impact on domestic manufacturers because the trade deficit has nothing to do with currency valuations.  It has everything to do with attempting to trade freely with overpopulated nations, trading away our healthy market for access to markets that are badly stunted by overcrowding and low per capita consumption. 

Is it any wonder that wages are declining along with household net worth?  Is it any wonder that bankruptcies and home foreclosures are soaring? 

Any bets on what the September jobs report will look like next month?

7th Straight Month of Job Losses in July

August 4, 2008

The Labor Department released its employment report on Friday for the month of July and the numbers were grim once again. Another 51,000 jobs were lost from the economy, inluding losses in manufacturing, construction and services. This is the seventh straight month of job losses, bringing the total for the year to 463,000.

Not mentioned in the report is the fact that, thanks primarily to our extreme rate of legal immigration – a policy used by the government to keep labor in a state of over-supply and keep wages depressed – the labor force grew by about 150,000 per month. So, year to date, our economy is now 1,513,000 jobs behind where it needs to be to keep unemployment from rising. This has added about 1.0% to our unemployment rate, which jumped to 5.7%. (It’s actually much worse, but the government uses gimmicks to make the number more palatable.) Separately, the government reported that weekly jobless claims soared to 448,000. Multiply that by 52 weeks and you have an annual rate of 15.5% of the labor force filing for unemployment every year – almost one out of every six workers. That’s a much more accurate picture of how bad job prospects are.  Take a look around at the five people working around you at work.  Odds are, one of you will be visiting the unemployment office during the next twelve months!

As our population continues to grow beyond the optimum level – the level at which per capita consumption begins to decline out of the need to conserve space as people are forced to crowd together (as explained in Five Short Blasts) – matters will only get worse. Unemployment will continue to rise and wages will fall further behind the cost of living. Hope for a better life for your children and grandchildren becomes more of a fading memory.

If you’re worried about the direction of our economy – as everyone should be – you really need to read my book, Five Short Blasts, if you haven’t already.

With the auto manufacturing sector now in a state of total collapse and construction declining further, look for more jobs losses in August and another rise in unemployment to at least 5.8%.

Obama & McCain on Jobs: Same Old Approaches

August 2, 2008

McCain and Obama are falling back on the same old, tired, worn-out approaches to improving wages and increasing jobs.  McCain adheres to the ineffective “trickle-down” approach.  What was once an effective strategy under Reagan, when lower taxes on the wealthy actually boosted spending in the American economy, has evolved into “trickle-out,” where lower taxes on the wealthy and on corporations now boost spending for foreign goods and investment in “emerging economies.”  It simply doesn’t work any more.

Obama’s no better.  His primary campaign promises to attack the trade deficit have already been abandoned in favor of worn out Democratic approaches – boosting the minimum wage and boosting government spending.  Obama does propose boosting spending on alternative energy, but that will do little for jobs or wages.  It’ll create a few research jobs but, when it comes to implementing solutions, the manufacturing will all be done overseas.

These guys just don’t get it.  We’re not in just another business down-turn cycle.  America has been stripped of its wealth by the trade deficit and there’s little left to give.  Our foreign benefactors now see us as a poor place to invest and are cutting off the easy credit.  Yet, we continue to pump away $2 billion per day to fund the global trade welfare state.  These problems are immune to the solutions of these advocates of failed 18th century economic theories. 

Lacking a president with the vision, wisdom and guts to turn us away from blind trade, the U.S. is doomed to continue its headlong plunge toward becoming the world’s first “undeveloping country.”