Anti-border tax coalition

April 20, 2017

http://www.reuters.com/article/us-usa-tax-lobbying-idUSKBN17C2HQ

I’ve been predisposed for a week or so and it’s now time to get caught up on some things.  There’s been a lot in the news lately regarding Trump administration policies on immigration and trade.  I’m extremely pleased with what’s happening on immigration, less so with what I hear about Trump waffling on the idea of a “border tax” (another name for tariffs).

But I’ll start with the above-linked story that came out last week because this is a perfect example of the divergence of interests that takes place when a nation becomes “economically over-populated” or takes on the characteristics of such an economy through free trade with a badly overpopulated nation.  For the benefit of those unfamiliar with this concept, this divergence of interests is one of the consequences of the inverse relationship between population density and per capita consumption.  As a society becomes more densely populated, the need to crowd together and economize space begins to erode per capita consumption.  As per capita consumption declines, so too does per capita employment.  The result is rising unemployment and poverty.   It’s in individuals’ best interest – in the best interest of the common good – that this situation be avoided.  (To better understand this concept, I encourage you to read Five ShortBlasts.)

However, while per capita consumption may begin to decline as a population density reaches a certain level, total consumption continues to rise with a growing population.  Who benefits from that?  Anyone in the business of selling products.  Not only do they benefit from the increase in sales volume, but they benefit further as the labor force grows faster than demand, putting downward pressure on wages.  Thus, it’s in corporations’ best interest to see population growth continue forever, and to pursue more markets through free trade.

So it’s in the best interest of the common good that we avoid meshing our economy through free trade with nations whose markets are emaciated by overcrowding and who come to the trading table with nothing but bloated labor forces hungry for work.  But it’s in corporations’ best interests to grow the overall customer base through free trade with those same nations.  So it comes as no surprise that a big-business coalition is eager to steer lawmakers away from any tax plan that would include a “border tax” (a tariff) that might shut them out of their foreign markets.

They call themselves “Americans for Affordable Products,” making it sound as though it is individual Americans who make up this coalition and not global corporations.  They want us to believe that products will become less affordable.  While prices for imports may rise, they want you to forget that those increases would be more than offset by rising incomes and falling tax rates.  They don’t care if the border tax benefits you.  All they care about is that it may not necessarily benefit them.

So which of these competing interests will lawmakers heed – their wealthy corporate benefactors or the angry Americans who swept the Trump administration into power on his promise to enact a border tax and bring our manufacturing jobs back home?  Money talks and I fear that groups like this coalition are having an effect.  Trump and Republicans would be wise to ignore them.  Democrats paid the price for ignoring the plight of middle-class Americans when Obama betrayed his promise of “hope and change.”  Those same middle-class Americans will pull the trigger on Trump too if he doesn’t come through.

 


Weak Headline Number Masks Strong March Employment Report

April 8, 2017

The Bureau of Labor Statistics yesterday released its employment report for the month of March.  The headline jobs number was weak.  “Only” 98,000 jobs were added in March – about half of what was expected.  But unemployment dropped by two tenths (a fairly big drop) to 4.5%.  The data underlying the unemployment figure was quite strong.  The “employment level” (the number of people reporting being employed in the household survey portion of the report) rose by 472,000 in March.  (It rose by 447,000 in February.)  And the labor force grew by 145,000 – outpacing the growth in the general population for the fourth month in a row.

Last month, Trump hailed the strong February employment report as “real,” as opposed to the “fake” reports produced by the Obama administration.  (The Obama administration did lean heavily on claims of a shrinking labor force to prop up its unemployment figures.)  Was that claim just bluster or has the reporting methodology actually changed for the better?  It’s two early to tell but, at least for the second month in a row, the BLS claims that the labor force grew (as it actually does, of course) and the numbers seem plausible.  Time will tell.

Per capita employment (the employment level divided by the population) climbed above 47% for the first time since November, 2008.  (Here’s the chart:  Per Capita Employment.)  The “detachment from reality index” – my measure of how much the unemployment figures were distorted by the “mysteriously vanishing labor force” tactic used by the Obama administration – fell to its lowest level since January, 2013.  (Here’s the chart:  Detachment from Reality Index.)

This is great news, but it has more to do with a burst of confidence among consumers (likely driven by a burst of confidence among investors which has driven the stock market higher) in the wake of Trump’s election.  The fundamentals of the economy haven’t changed.  The trade deficit is as bad as ever.  And interest rates are on the rise which will pull the economy down if Trump isn’t able to make headway with tax and trade reforms.  And the jump in stocks that have propelled the economy has already stalled, now waiting to see if expectations of Trump policies actually materialize.

I hope that what appears to be honesty with the factors that make up the employment report (based on a scant two months’ of data) continues.  But without the “border tax” that Trump promised, the good numbers won’t.

By the way, for some time now, the Federal Reserve and others have been proclaiming the economy to be at full employment.  If that were true, then how does the economy continue to add jobs at a faster rate than the growth in the labor force, and how does the unemployment rate continue to fall?  It’s because they were all sucked in by the “detached from reality” employment reports produced by the Obama administration.  The fact is that an honest reading of unemployment (one that grew the labor force in proportion to population growth) has unemployment at 7.3% – nowhere even remotely close to “full employment.”


No U.S. Population Growth for Six Months?!?!

March 21, 2017

As part of my monthly calculation of the size of the actual labor force (for the purpose of analyzing the monthly employment report), I use the U.S. population as determined by the “Population Clock” on the home page of the U.S. Census Bureau.  As I write this, it stands at 324.73 million.  This figure typically grows at the rate of about 180,000 per month.  That’s a scary rate of population growth.  The U.N. estimates that half of all world population growth by 2050 will be caused by the growth of the population in only eight nations – seven third world nations and – you guessed it – the United States, the only developed nation that continues to experience third-world-like population growth.

But I’ve noticed something strange in the last six months, and especially since the beginning of the year.  In December, the population clock actually fell back by almost 600,000.  Since then, the population has been growing at a rate of only about 80,000 per month.  Today, it stands at almost exactly the same level as it did at the end of September.

This is great news, but I suspect that some of the reason for the slowdown is not good news.  You may recall that sometime back around December, the CDC announced that death rates in the U.S. were rising while life expectancy had actually declined slightly.  But there’s some really great news too.  Illegal immigrants are being deported and the entry of new illegal immigrants has slowed dramatically.  Even legal immigration has slowed since Trump took office.

Although it’s still early in this new trend, a couple of observations are in order:

  • Most economists predict economic gloom and doom to accompany a lack of population growth.  Contrary to that, the U.S. economy has experienced its best growth in many years in the past six months.  A brightening economic outlook is one of the outcomes I predicted in Five Short Blasts that would accompany a stabilizing or even declining U.S. population.
  • A rising death rate is another outcome that I predicted in my book for nations whose population densities continue to grow beyond a critical level, driven by rising unemployment and poverty.

This is all something I’ll be watching closely as immigration continues to slow dramatically during the Trump administration.


American Millenials Far Worse Off Than Their Parents at the Same Stage in Life

January 16, 2017

http://www.usatoday.com/story/money/2017/01/13/millennials-falling-behind-boomer-parents/96530338/

An analysis of Federal Reserve data by the advocacy group “Young Invincibles,” released on Friday, finds that the millenial generation – especially white millenials – are far worse off economically than their baby-boomer parents were at the same stage in life – in 1989.  (See the above linked article.)

  • The median net worth of millenials is 56% lower.
  • Median income has fallen 21% in spite of the fact that a larger percentage of millenials (approximately 50% more) have a college education compared to baby boomers.
  • Home ownership is down by 3%.
  • Millenials are saddled with “drastically higher” student debt.

The article observes that “the analysis fits into a broader pattern of diminished opportunity.”

Looking beyond the Federal Reserve data, millenials are clearly much worse off than their parents in many other ways:

  • While most employers offered pensions in 1989, few do today.
  • The cost of health care is orders-of-magnitude higher than it was in 1989.
  • Good jobs were still fairly plentiful in 1989.  Not today.  The example cited in the article of a college-educated lady earning minimum wage making pizza isn’t a one-off.  It’s pretty typical.
  • The millenial generation is famous for depending on their parents for housing and additional support beyond that.  It’s not a matter of immaturity among millenials.  They do it out of necessity.  In 1989, no self-respecting baby boomer would be caught dead living with his/her parents.  There was no need.

None of this should come as any surprise to those who understand the consequences of the inverse relationship between population density and per capita consumption.  It’s precisely what I predicted in Five Short Blasts, which I began writing in 1993.  Since 1989, the U.S. population has grown by approximately 25%.  But, worse than that, our effective population density has exploded by 200% since 1989 by economically erasing our borders and attempting to trade freely with badly overpopulated nations who prey on our market and bring nothing in return to the trading table but bloated labor forces, hungry to take jobs from Americans.  Diminished opportunity and worsening poverty is inescapable in those circumstances.

Sadly, most millenials are oblivious to what’s been done to them through globalization, which has been slickly packaged and sold to them as some sort of utopian state where we all live in perfect harmony together, masking the underlying truth – that their economic civil rights have been trampled by the greed of global corporations who feed on population growth to stoke their bottom lines.

 

 

 


Employment Level Falls by 43,000

November 4, 2016

The media is ballyhooing the October employment report as evidence of strong job growth and a strong labor market.  Don’t be fooled.

Sure, the headline numbers look good.  According to the establishment survey, the private sector added 142,000 jobs and unemployment fell to 4.9% (from 5.0% in September).  That’s good.  However, in the new normal where 100,000 is the new zero, it’s not great.

But look deeper.  The employment level – the number of people employed according to the household survey – actually fell by 43,000 in October.  The drop in unemployment?  That’s only due to a supposed decline of 195,000  workers in the labor force – the old “vanishing labor force” trick that the Obama administration has used often to mask the reality of a weak labor market.  In fact, with the population growing by 224,000 in October, the labor force grew by over 100,000.  Without that trick, unemployment actually rose by a tenth of a percent in October, and an honest measure of unemployment – one that grows the labor force along with the growth in population – has unemployment at 7.9%.

Regarding the employment level, it’s also worth noting that since February it has risen by 851,000.  That’s an average increase of 106,000 per month – barely keeping pace with growth in the population.  Consequently, there’s been no improvement in the historically high rate of 7.9% unemployment (the rate it would be if the labor force grew in proportion to the population).

It’s also worth noting that per capita employment – the employment level divided by the population – is exactly where it was in February.  No improvement.

October’s employment report is one more piece of evidence that the economy continues to stagger along in a zombie-like state.

Next up:  the September report on the trade deficit, also released this morning.

 


Globalization Proponents Starting to Sweat

October 11, 2016

http://www.reuters.com/article/us-imf-g-idUSKCN12629J

As illustrated in the above-linked article, advocates of globalization, an experiment embarked upon in the wake of World War II to spread prosperity and avert future wars, are growing desperate to stave off its collapse.  It has indeed spread prosperity to some but a fatal flaw has been exposed.  Instead of turning overpopulated and desperately poor nations into Western-style consumers that would eventually lift the growth rates of economies that they scavenged in the first place, globalization has evolved into more of a host-parasite relationship that has left the “host” economies of Europe (most notably Great Britain, but there are others) and especially the United States, weakened, angry and ready to revolt.  Great Britain already has.  America and others soon will.

Globalization was doomed from the outset thanks the failure of economists to look beyond the resource challenges of overpopulation to consider the economic ramifications of declining per capita consumption and rising unemployment.  Now, a half-century into the experiment, instead of developing into the economic “growth engine” that its architects envisioned, it more resembles a sort of poverty-sharing program where the fortunes of some people have improved somewhat, but only on the backs of the more prosperous who now find themselves unwilling and even unable to sustain it.

Now the world’s ruling elite are calling for a coordinated effort among the host nations and their central banks to boost deficit spending and to keep interest rates near zero, ignoring the risk of eventual economic collapse posed by such reckless policies.

“On Thursday, Bank of England Governor Mark Carney said policymakers now have a better recognition of the need for their actions to ‘more immediately, tangibly and clearly, transparently benefit larger segments of the population.'”

All along, we have been assured by the advocates of globalization that all of us benefit, but those benefits may just be too complicated and ethereal for the rest of us to grasp.  No one, at least not in the host countries, is buying it any longer.  Why didn’t globalization provide more benefits that were “tangible, clear and transparent” from the outset?  Because it can’t.  It’s simply impossible for the host in a host-parasite relationship to experience any benefit.  So now they want to administer a little food and medicine to the hosts by jiggering the system, keeping them alive a little longer.

Reducing poverty in the undeveloped world is a noble goal.  I might even be able to get on board with globalization if, at the same time that the host economies were being scavenged, there were provisions to address the root cause of the poverty – gross overpopulation – that necessitated globalization in the first place.  (Before many of you who haven’t read Five Short Blasts freak out, I’m talking about doing this through economic incentives to encourage people to have smaller families.)  But that’s not what globalization’s advocates want.  They not only want to scavenge host economies, but they want the host nations to take in the overflow population from the rest of the world in order to fuel the revenue growth that the global corporations – who fund the campaigns of the ruling elite – demand.

Regardless of how the U.S. presidential election turns out, the pressure to scrap the globalization scheme will only intensify.


Trouble Signs in the Employment / Labor Market Picture

October 8, 2016

The September employment report, released Friday by the Bureau of Labor Statistics, continues a trend that has characterized much of 2016.  Job growth is slowing.  The economy added 156,000 jobs, but that’s the third straight monthly decline and is below the year-to-date average for 2016 (178,000 jobs per month), which is already down from 2015 (229,000 jobs per month).

Economists were at odds over how to interpret this latest report.  Some called it a “goldilocks” report – not too hot and not too cold.  In fact, on the surface, that might seem an apt analysis.  156,000 new jobs should be enough to absorb the growth in the labor force that results from population growth.  Yet, unemployment rose to 5.0% after hitting a low of 4.7% in May.

What’s happening is that what I have referred to in the past as the “mysteriously vanishing labor force” is reappearing.  It’s not a one-month phenomenon, but a trend that’s been building for well over a year now.  To better illustrate what’s happening, I ran some numbers dating back to the onset of the financial crisis that began at the end of 2007.  I tracked the change in the labor force and compared it to what the real growth in the labor force has been, assuming that people still need to find work to support themselves in about the same proportion that we’ve seen historically.  That is, about half of the population.  In other words, if the U.S. population grows by three million per year, it’s safe to assume that about 1.5 million of those people need work to support themselves and their dependents.  That’s been the historical norm.

If the growth in the labor force recorded by the BLS didn’t keep pace with the actual population, or if it actually contracted, then that’s a labor force “backlog” that the economy will eventually have to absorb and put to work at some point.

I then compared this backlog to the “employment level” reported by the BLS from its “household survey” portion of the monthly employment report.  Here’s what I found:

labor-backlog

From 2008 until present, the actual labor force grew pretty consistently each year, along with the growth in the population.  (2011 was lower because of an adjustment to the U.S. population based on the 2010 census.)  However, note the 2nd line – the growth (or contraction) of the labor force reported by the BLS.  Until last year, only one time did the BLS-reported growth exceed the actual growth in the labor force – in 2012.  Each year that it was less, people actually dropped out of the labor force – thus, the “mysteriously vanishing labor force.”  My more cynical side suspects the Obama administration of manipulating this figure to make the unemployment rate lower.  But let’s assume that people actually did drop out, employing an array of tactics to survive financially, at least for some period of time.

The third line is a calculation of the “labor force backlog,” a cumulative tally of how many people have left the labor force.  For example, in 2009 when the BLS reported that the labor force actually contracted by 1.544 million workers, this figure added to the actual growth in the labor force of 1.324 million workers, produced a backlog of 2.868 million workers.  Added to the 2008 figure, the backlog by the end of 2009 was 3.505 million workers.

Line 4 is the change in the employment level reported by the BLS based on the household survey.  Again using 2009 as an example, the BLS reported that the employment level actually fell in 2009 by 5.356 million people.  It was a horrible year.  As a result, the unemployment rate actually soared to 9.9% in 2009 from 7.3% in 2008.  (It was 5.0% in 2007.)

With all that said, here’s the problem I see developing.  In 2015, the growth in the labor force reported by the BLS exceeded the actual labor force growth.  In other words, people in the “labor backlog” rejoined the work force.  And through last month, that has accelerated dramatically.  In only nine months, the labor force has grown by an amount that would usually take almost two years.

Economists say that this trend is the result of an improved labor market.  People see the jobs picture brightening, making the time right to find a good job.  But I believe another factor is at play here.  The tactics used by displaced workers to survive the downturn have run their course.  Those who went back to school for more training and more advanced degrees (including those who scammed the system and used student loans to meet living expenses) are now saddled with all the student debt they can endure.  Those who went back home to live with Mom and Dad may have overstayed their welcome or have put their families in a financial bind.  Others may have exhausted the severance packages they received when they lost their jobs.  People need a source of income to survive.  The idea that people could simply drop out of the labor force without consequences was preposterous.

The labor force backlog reached a record 6.359 million people by the end of 2014.  As of last month, it’s dropped some to 4.9 million workers, but that’s still a huge backlog.  As of last month, workers are pouring back into the labor force at a rate that has exceeded the growth in the employment level, a trend that’s actually accelerating at the very same time that job creation seems to be slowing.  As a result, unemployment has begun to rise again. This trend is likely to begin to put downward pressure on wages and could actually reduce consumer confidence and slow the economy.  And, it should be noted, that much of the job creation we’ve seen in recent months has been in the restaurant and bar industry and in retail – sectors of the economy that are especially sensitive to consumer confidence.  They’re the first places people rein in spending when finances get tight.

All of this spells trouble for the economy in the coming months.