February Employment Report: “Real” or “Fake?”

March 15, 2017

The employment report for the month of February (the first full month of the Trump administration) was released on Friday and the numbers looked pretty good.  The economy added 235,000 jobs and the unemployment rate fell one tenth to 4.7%.  President Trump hailed the news and declared that, though the employment reports during the Obama administration were fake, that the February numbers were very real.

Let’s examine that claim.  First of all, take a look at this chart:  Labor Backlog.  Some explanation is in order.  “Actual labor force growth” is the growth in the labor force if it had grown at the same rate as the overall population as it does in reality.  The “BLS reported labor force growth” is the growth in the labor force that the Bureau of Labor Statistics uses to calculate the unemployment rate.  The “change in employment level” is a figure taken directly from the BLS monthly data.  It’s the growth in the number of people who report being employed in the household survey.  The “labor force backlog” is the difference between the growth in employment level and the “actual labor force growth.”  If the employment level grows faster, then unemployment should decline along with the “labor force backlog.”

Note that during the Obama years, the BLS consistently reported less growth in the labor force than what the growth in the population would suggest.  Only in 2012 and 2015 did the BLS report labor force growth that was slightly above actual growth.  The result is that the “labor force backlog” grew steadily during the Obama administration until it peaked at the end of 2014 at 6,359,000 workers who were unemployed.  By the end of 2016, that backlog had fallen only slightly to 5,994,000 workers.  In spite of that, according to the BLS, the unemployment rate plummeted from 9.9% in 2008 to 4.7% in 2016.  That’s impossible and the only way that the BLS was able to make it appear that the unemployment rate was dropping was by claiming that workers were dropping out of the labor force or by not growing the labor force as the population grew, or through some combination of those factors.  Thus, when Trump claimed that the employment data was “fake” during the Obama administration, he was exactly right.  If you’ve been a follower of this blog, you know that it’s something that I maintained all along throughout the Obama administration.

OK, so how about Trump’s claim that the numbers now are “real?”  So far, in January and February, the BLS has reported growth in the labor force of 416,000 workers.  The actual growth in the labor force – if it grows in proportion to the population – is only 89,000 workers.  In other words, so far in 2017, the BLS now claims that 327,000 “missing” workers have reappeared in the work force.  That supports Trump’s claim that his numbers are real.  But time will tell.  Two months’ of data isn’t nearly enough to judge how honest the Trump administration is being when it comes to the employment reports.  It’s something I’ll watch just as closely as the Obama numbers.

Advertisements

Week 1 Done

January 28, 2017

The world is slowly awakening to a new reality.  It has profoundly changed.  And that may be an understatement.

Throughout the campaign, Trump’s “populist” rhetoric was dismissed by many – especially by those who stood to lose the most if globalization were dismantled – as exactly that, a play for votes or posturing designed to win concessions in the highly unlikely event that he would actually be elected president.  After all, this is the author of The Art of the Deal, a book about his tactics for winning in the business world.  He’s just  staking out his opening position.  Right?

During the transition, however, he doubled down on his rhetoric and stacked the cabinet mostly with people aligned with his positions.  The world grew a little more nervous.

Then came inauguration day and, I have to admit, that even I was taken aback by his speech.  It was as though he picked up a rhetorical two-by-four and began swinging at everyone who’d had a role in America’s trade mess and economic decline, and any who doubted his intentions or who stood in his way.

Now his first week in office is history, and what a week it was.  TPP (the Trans Pacific Partnership trade deal) is dead.  NAFTA (the North American Free Trade Deal) is as good as dead.  The wall on the southern border will be built.  Tariffs on Mexican imports will pay for it.  Immigration from many Middle Eastern countries has been brought to a halt.  And, in stark contrast to Obama’s visit to Mexico in the early days of presidency to discuss renegotiating NAFTA, a humiliating experience that yielded only more Mexican tariffs on American goods, Trump has put Mexico on notice.  If you can’t accept the new reality of American tariffs on Mexican imports and an all-out effort to halt illegal immigration from your country, then too bad – we have nothing to talk about.

Some seem to get it.  Some American companies have begun hedging their bets with announcements of plans to invest in American manufacturing.  Still, the world is largely in a state of denial.  Markets around the world continue to rally on optimism over the aspects of the Trump agenda that it likes – corporate tax breaks and infrastructure spending – while shrugging off the possibility that Trump means business about imposing tariffs on imports.

The world is made up of only two economies, really.  One is the economy of the more sparsely populated countries, able to gainfully employ their workers, which is dominated by the United States.  The other is the rest of the world, badly overpopulated and heavily dependent on manufacturing for export to the aforementioned countries – again, most notably, the United States.  Tariffs on imports into the U.S. will  totally alter the host-parasite relationship that exists between the two.  Those who continue to blindly invest in the economies of the latter may be making a serious mistake.

Americans have finally gotten fed up with playing the role of enabler to ever-worsening overpopulation, using immigration as a relief valve and trade to prop it up.  Trump has hastened the day when the rest of the world must face the consequences on their own.


Employment & Trade Data Sum Up Obama’s Presidency

January 11, 2017

https://www.bls.gov/news.release/empsit.nr0.htm

On Friday, the Bureau of Labor Statistics released the employment/unemployment report for December, while the Bureau of Economic Analysis released the trade data for the month of November.  I usually comment on these two reports separately but, frankly, in these waning days of the Obama administration, these looks backward seem rather irrelevant.  In each case, we knew what we were going to get with the economy locked into a “new normal” status quo by Obama’s trade policy.  Nevertheless, it’s worth taking a look at them since, together, they kind of “sum up” the economic results of Obama’s presidency.

It was yet another so-so month for the employment report.  The job growth number was respectable, but wasn’t corroborated by the “employment level” portion of the household survey, which rose only 26,000.  In fact, the employment level rose by only 43,000 in the last three months.  Not only that, but the civilian labor force actually contracted by 72,000.  As a result, unemployment rose slightly.

Meanwhile, the trade report was bleak.  The deficit in manufactured products rose to $60.5 billion, just $0.5 billion off the record high deficit set five months earlier.  Manufactured exports remained stuck at the same level as in March of 2011.  That’s five and a half years of zero growth.  Remember Obama’s pledge to double exports in five years?

These two reports aren’t the kinds of numbers you’d expect from a healthy economy.  President Obama likes to highlight the number of jobs created and the drop in unemployment as evidence of a healthy labor market.  But it’s more a case of him drinking his own Kool Aid.  Those numbers are gimmicked by workers who mysteriously dropped out of the labor force and by a proliferation of low-paying, part-time jobs.  He may fool himself and try to fool you with these numbers, but other statistics tell a different tale.  Death rates don’t rise and life expectancies don’t fall in a good economy.  Nor are wages stagnant.  And “the country is headed in the wrong direction” isn’t the number one issue on the minds of voters in an election in a healthy economy.

Taken together, these two reports do a good job of summing up the economic results of the Obama presidency – economic stagnation at best or, more realistically, a decline fueled by an ever-worsening trade picture – the very thing he promised to fix during the 2008 campaign.


Manufactured Exports Fall to 5-1/2 Year Low

December 7, 2016

Almost seven years ago, in the wake of his disastrous visit to Mexico to address our trade deficit – which resulted in a sharp rebuke from the Mexican president and even higher tariffs on American goods – President Obama decided to turn his focus on exports.  “Why can’t we have an export-driven economy like Germany,” he challenged his economic team.  Evidently, none of them responded that there is no other United States out there to serve as our trade patsy as we’ve done for Germany.  So, in January of 2010, the president proclaimed that, within five years, the United States would double its exports.  This would be the centerpiece of his economic agenda.

Yesterday the Bureau of Economic Analysis released its monthly report of International Trade in Goods and Services.  The overall trade deficit came in at $42.4 billion in October, right in the range where it has been throughout the Obama administration.  There isn’t another economic report that chronicles America’s economic demise as clearly as this one does, yet the reaction was the same as it’s always been:  ho-hum.  Unbelievable.

To get to the real heart of the problem – the siphoning of jobs out of our economy – you have to strip away the “noise” – the trade in services, oil and food.  What’s left is trade in manufactured products, and the picture there grows worse with each passing month.  The deficit in manufactured products was $57.9 billion in October, not far from the record of $62.5 billion set in March of last year.  Check out this chart:  manfd-goods-balance-of-trade.

Especially pathetic is the contribution of declining exports to the increase in the deficit.  In October, manufactured exports fell to $104.3 billion, the lowest level in over 5-1/2 years.  (Exports of manufactured goods were $104.9 billion in March, 2011.)  Manufactured exports have fallen by $10.3 billion since peaking at $114.6 billion exactly two years ago.  To reach Obama’s goal, exports would have had to rise to $171.7 billion.  They never even came close.  Here’s a chart showing both manufactured exports and imports since Obama made his vow to double exports:  manfd-exports-vs-goal.  A complete failure, and no surprise.  The U.S. has no control over exports.  But at least deflecting attention away from the steady growth in imports – and the corresponding steady decline in manufacturing jobs – made things more pleasant for Obama around the punch bowl at G20 meetings.

Frankly, I’m sick of tracking this statistic under the Obama administration, watching it get predictably worse.  Only two full months of data remain – November and December.  Then things get interesting again.  This deep hole that’s been dug under the (lack of) leadership by Obama becomes Trump’s baseline.  How far and how fast can he whittle down this deficit?  Could he even turn it into a surplus, like we used to enjoy forty years ago?  Time will tell.  A deficit of $60 billion in manufactured goods represents a loss of ten million manufacturing jobs, and probably an equal number of jobs in ancillary industries.  Such a demand for labor would mop up every last unemployed person in the country and send wages soaring.  If Trump accomplishes even half of this, people will be stunned at the effect on the economy.

 


Some Observations about Trump’s Transition

November 25, 2016

The following are some random thoughts and observations about the unfolding transition of Donald Trump’s presidency.  (I still can’t believe I’m writing those words.)

  • Wow, for a guy pushing 70, this guy has a motor!  I stayed up the night of the election until it was clear he had won, which happened about 3 AM on the morning of the 9th.  I was exhausted for the next several days.  Not Trump.  Two days after the election he was at the White House to meet with President Obama and then on to Capitol Hill for a series of meetings.  The next day he launched into an endless stream of meetings with potential staff members – up to twenty meetings a day – and still had the energy to be “tweeting” at 3 o’clock in the morning.  Yesterday – Thanksgiving Day – he was even on the phone with the CEO of the Carrier Corporation trying to convince them that moving their manufacturing operations to Mexico was a bad idea.  The guy is clearly a workaholic.
  • In order to push forward his agenda, he needs a cabinet staffed with like-minded individuals, not a “team of rivals” as some have suggested.  I’ve been pretty pleased with his picks thus far, but I really hope he doesn’t pick Romney for Secretary of State.  Romney might soothe ruffled feathers among traditional Republicans and calm nerves among foreign leaders with his polished style and globalist outlook, but that’s not what Trump needs.  He needs someone who can look China in the eye and tell them “tough s___” when they complain about Trump’s trade policy.  That’s definitely not Romney.  Giuliani would be a much better choice.
  • Trump has softened his stand on illegal immigrants somewhat, vowing to deport or incarcerate 2-3 million of the worst among them, but expressing a willingness to “consider” the rest.  I’m OK with that as long as he “builds a wall” or takes whatever other actions are necessary to put a halt to illegal border crossings and to immediately deport those who still do make it across.  A pleasant surprise has been his vow to also crack down on some legal immigration, like the H1B visa program which is designed purely to hold down wages.  The program, and others like it, should be completely eliminated.
  • Early on, Obama began assembling a team of economic advisors, mostly academics, largely from Harvard.  No wonder his vow to tackle the trade deficit was quickly abandoned.  So far I’ve heard none of this about Trump’s transition team.  Unless I’ve missed something, there hasn’t been a single mention of an “economic advisor.”  Good.  He doesn’t need any.  His economic plans are right on target and he would be hard pressed to find any economists who wouldn’t steer him in the wrong direction.
  • So far, his plans to impose tariffs on Mexico and China, though a huge step in the right direction, are too timid.  Tariffs on auto parts from Mexico will only make U.S. auto manufacturers less competitive with imports from Japan, South Korea and Germany.  Tariffs on Chinese imports will only move manufacturers to India, Vietnam, Indonesia and other countries with huge labor forces.  To be successful, he needs to extend his tariff plans to include all products from all such countries.
  • I’ve heard some pundits proclaim that some manufacturing jobs won’t come back to the U.S. no matter what he does with trade policy.  That’s absolute nonsense.  If tariffs raise prices to the point where products can be made profitably in the U.S., then someone will seize the opportunity and do exactly that.  For example, if Apple doesn’t move its i-phone manufacturing back to the U.S., then someone else will soon undercut them with cheaper and better phones made right here in the states.
  • Manufacturers who have moved to China might be wise to not even wait for tariffs to be implemented.  They’d be smart to move their equipment back to the U.S. before China prevents such moves.
  • Despite all the fear-mongering by free trade and globalization cheerleaders about the dangers of “protectionism,” investors seem to be betting on the opposite.  In fact, we see the same thing happening in Britain in the wake of “Brexit.”  I’m reminded of an old saying:  “Money talks and BS walks.”
  • The media has been wringing their hands over potential conflicts of interest with Trump’s vast and far-flung business empire.  It’s a potential concern, but everyone knew it when they voted for him and it’s not something he can divest overnight.  Let’s give it time to play out.
  • Trump’s not an inspirational orator like Obama has been.  That’s OK.  I’ll happily trade that trait for someone who can get things done to fix our immigration mess and our idiotic trade policy.

There should be no misconceptions that this will be anything but a wild ride.  It’s going to be absolutely fascinating to watch it play out and, if he follows through on his campaign promises on immigration and trade, we’re going to witness a transformation in the U.S. economy that no one even thought possible.


January Trade Deficit in Manufactured Goods Rises

March 14, 2009

http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf

Buried in all the happy talk about the fact that our trade deficit in goods and services fell in January from $39.9 billion in December to $36.0 billion in January, a bigger drop than economists had expected, is the fact that all of the drop was due to the falling price of oil, from almost $50 per barrel in December to $39.81 per barrel in January.  Don’t get me wrong, that’s certainly good news.  But the bad news is that the non-petroleum deficit in goods (in other words, manufactured products – the part of the trade deficit that costs us jobs) actually rose by $0.1 billion. 

The two biggest culprits in this rise were China and Korea.  Our trade balance with China worsened by $0.7 billion while the deficit with Korea worsened by $0.5 billion.  (It actually improved with most other countries.)

The biggest piece of the deficit in manufactured goods is in the category of vehicles – autos, trucks, buses and parts.  In this category, we have five major trading partners:  Canada, Germany, Japan, Korea and Mexico.  Of these, Canada is our best partner.  From December to January, our balance of trade with Canada in autos and parts swung from a $0.19 billion deficit to a $0.14 billion surplus.  (We basically have a balance of trade with Canada.)  Of the remaining four, with whom we have a deficit in this category, the biggest percentage decline in the deficit from December to January was with Germany, with the deficit falling from $1.46 billion to $0.69 billion.  By far, the most parasitic of these partners is Japan who, in January, exported $2.76 billion worth of autos to the U.S. while importing only $0.07 billion worth of autos from us.  And Korea isn’t much better, exporting $0.86 billion worth of autos while importing only $0.04 billion.  With Mexico, the deficit in this category declined from $1.84 billion to $1.14 billion.  (In January, we imported $1.93 billion in this category from Mexico while they bought $0.79 billion from us.)

It’s very good news that our trade deficit has fallen by over 40% in the last year.  This decline could help limit the depth of the recession.  The bad news is that all of the decline is a function of the recession, including the decline in oil prices, and is not due to any corrective action by the U.S.   This, coupled with the fact that the jobs-destroying component of the deficit has declined very little, will also tend to limit the potential for a real economic recovery.  In fact, as long as the deficit continues, the financial health of the U.S. will continue to deteriorate.  Eventually, interest rates will have to rise to keep attracting money for lending from our foreign creditors.  This is when the economic savvy of Obama’s administration will really be tested – when he’s faced with the choice of accepting a permanent, higher level of unemployment and a lower standard of living for Americans, or taking tough action to restore a balance of trade with nations unwilling to bear the cost of their own overpopulation.


Obama vs. McCain: Why Their Families Are An Issue

September 5, 2008

The size of the families of the candidates is a relevant issue that should be factored into voters’ decisions. I know that this may sound preposterous. Pundits seem unanimous in declaring candidates’ families off-limits. But please hear me out.

If, like me, you arrive at the conclusion that worsening overpopulation is a serious issue or even the dominant issue of our time, then you have to ask yourself several questions about the candidates:

  1. What are their positions on the issues that may relate to population growth.
  2. Although they may not yet recognize overpopulation as a problem, what is the likelihood that they will be willing to consider it?
  3. Once overpopulation becomes an issue, will they be credible in a leadership role in addressing the issue?

Now let’s consider Obama and McCain. Neither candidate recognizes overpopulation as an issue. (If they have, they haven’t admitted it publicly.) But I believe that it is the dominant issue of our time. The whole point of my book is that it is the root cause behind the steady deterioration of our economy. Beyond that, it’s also a major contributing factor to global warming and to our dependence on foreign oil, just to name a couple of issues. Addressing overpopulation should be a national priority right now, but it isn’t.  I believe that within the next forty years, by the year 2050, there is a nearly 100% chance that it will be. At some point, hopefully sooner rather that later, something will precipitate this issue’s rise to national attention.

When that happens, it is critically important that we have the people in office who are most likely to be receptive to the idea and most likely to be a credible force in dealing with it. On these two points, will McCain be more likely to fill this role or Obama? I think that the size of their families is a good indicator. With seven children, is McCain likely to be receptive to the idea of overpopulation and the need to implement policies aimed at stabilizing our population? With two of those children being foreign adoptions, will he be receptive to the idea that our rate of immigration needs to be scaled back by 95%? If you were a McCain advisor, would you even raise the issue with him or would you remain silent out of fear of losing your job? In the unlikely event that an advisor broached the subject with McCain and he bought into it, what kind of credibility would he have in trying to explain to the nation new policies and programs designed to influence family planning decisions more toward choosing smaller families? Won’t peoples’ responses be predictable? “Oh, I see! It’s OK for you to have a big family, but not us! It’s OK for you to adopt two kids from foreign countries, but now you want to take that away from us!”

Or, with only two children, will Obama be more receptive to the concept of overpopulation and the need to address it? Will he have more credibility than McCain in trying to lead the nation toward an understanding of the issue? If there was only a small difference between the two candidates, then it wouldn’t be a factor. But seven children vs. two children is a significant difference. Throw in their running mates and the difference is even more dramatic: twelve children vs. five.

I have steadfastly maintained that we should not be judgmental of people regarding the decisions they’ve made about the size of their families, especially when those decisions were made without any understanding of the overpopulation problem. Who cares how many children any one family has? It’s only the overall fertility rate / birth rate that matters. Some may choose ten children; some none. As long as the overall rate is reduced slightly to the level needed to attain population stability (or even a slow decline), then the size of any one family is irrelevant.

However, when a person submits him or herself for judgment of their fitness to lead our nation and make the difficult decisions that will shape our future, then the size of their family is a relevant factor in judging whether or not they will be receptive to the concept of overpopulation and whether they would have any credibility in a leadership role on that issue. And there is no issue more critical to determining our future quality of life. Obama is the clear choice on this issue, not that he even recognizes it, but because the decision that he and his wife have made about the size of their family may be an indication that they are receptive to the concept of overpopulation, and it surely puts him in a better position to address it with the American people.