Where has the vanishing labor force gone? Now we have a clue.

November 11, 2015

http://www.pnas.org/content/early/2015/10/29/1518393112.full.pdf

Each month I criticize the Bureau of Labor Statistics (BLS) report on employment for using the “mysterious vanishing labor force” trick to keep the government’s official unemployment rate artificially low.  Since Obama took office in January, 2008, the U.S. population has grown by 19 million.  Yet, according to the BLS, the labor force has grown by only 3 million, an employment-to-population ratio of only 16% while the same ratio for the overall population is 46%.  It seems that some six million workers have gone missing.  These are the long-term unemployed that the BLS explains away as having “given up looking for work.”

So where have they gone?  How are they supporting themselves?  Well, the above linked study published by Princeton last week gives us an inkling about what’s become of them.  They’re living in despair.  And they’re dying.  As the study found, the mortality and morbidity among middle-aged whites in America has taken a very dramatic turn for the worse since 1998.

This may be the first concrete evidence that the theory I proposed in Five Short Blasts – that the worsening unemployment driven by a rising population density and by trade with overpopulated nations will increase poverty and, ultimately, will begin to drive up death rates.

Your first reaction may be similar to mine – that when you hear of increased mortality among Americans, obesity and all of its related problems are probably the leading cause.  Americans are paying the price for living the good life.  However, this study found that that’s not the case at all.  Worsening obesity contributed only a small fraction to the death rates among this group.  The increase in the death rate is heavily driven by suicides, drug overdoses and alcoholism.  These are the afflictions of people whose dreams have been destroyed and who have lost hope.  So dramatic is the increase in mortality, that the study compares it the AIDs epidemic:

“If it (the death rate) had continued to decline at its previous (1979-1998) rate, half a million deaths would have been avoided in the period 1999-2013, comparable to lives lost in the US AIDS epidemic through mid-2015.”

Why hasn’t this trend shown up in any of the mortality data published by the Center for Disease Control (CDC)?  As the study points out, this data is lost in the “disaggregation” done by age and race in the CDC reports.

The study discusses possible causes for this trend:

“Although the epidemic of pain, suicide, and drug overdoses preceded the financial crisis, ties to economic insecurity are possible.  After the productivity slowdown in the early 1970s, and with widening income inequality, many of the baby-boom generation are the first to find, in midlife, that they will not be better off than were their parents. Growth in real median earnings has been slow for this group, especially those with only a high school education. However, the productivity slowdown is common to many rich countries, some of which have seen even slower growth in median earnings than the United States, yet none have had the same mortality experience.  The United States has moved primarily to defined-contribution pension plans with associated stock market risk, whereas, in Europe, defined-benefit pensions are still the norm. Future financial insecurity may weigh more heavily on US workers, if they perceive stock market risk harder to manage than earnings risk, or if they have contributed inadequately to defined-contribution plans (31).

So why did this begin in 1998 or soon after?  In 2000 the U.S. granted “Most Favored Nation” trading status to China, opening the door to a flood of imports that has decimated what remained of American manufacturing.

President Obama took office in 2008 on a promise of “hope and change,” and on a promise to fix the trade policies that were wreaking havoc on the middle class.  He broke that promise and even exacerbated the trade problem.  Well, it seems that for many Americans, that “hope” that he promised was their last hope.  Americans are literally paying with their lives for America’s idiotic trade policies.


Americans Growing Poorer

September 19, 2015

http://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf

The above-linked report – “Income and Poverty in the United States:  2014” – was published by the Census Bureau a couple of days ago.  The news isn’t good.  In spite of the supposed decline in unemployment and all the talk of economic recovery, the median household income fell once again and the poverty rate remained at or near the highest level in fifty years.

There’s tons of data to sift through in the report, so I’ll simply quote a few of the key findings of the report:

“Median household income was $53,657 in 2014, not statistically different in real terms from the 2013 median of $54,462 (Figure 1 and Table 1). This is the third consecutive year that the annual change was not statistically significant, following two consecutive years of annual declines in median household income.”

“Median household income … in 2014 … 6.5 percent lower than the 2007 (the year before the most recent recession) median ($57,357), and 7.2 percent lower than the median household income peak ($57,843) that occurred in 1999.”

“In 2014, the official poverty rate was 14.8 percent. There were 46.7 million people in poverty.”

“The 2014 poverty rate was 2.3 percentage points higher than in 2007, the year before the most recent recession (Figure 4).”

Median household income has declined every year since 2007, and even the median income in 2007 was less than the median income in 1999.  This is the longest period of decline since the Census Bureau began tracking the data in 1967.  From 1967 to 1999, the median household income (for all races) rose from approximately $42,000 to $57,843 – a increase of 38%.  Since 1999, however, it has declined by 7.2%.

This is exactly what the inverse relationship between population density and per capita consumption would predict – that as our population density (including our “effective” population density) rises beyond a critical level, worsening unemployment and poverty is inescapable.

So what was it that happened after 1999 that threw median incomes into what increasingly appears to be a permanent state of decline?  Our population density has been rising by about 1% a year for decades but our “effective” population density – the population density that we take upon ourselves when we combine with another nation through “free” trade – skyrocketed in 2000.  That was the year that the Clinton administration granted China “permanent normal trade relations” satus, opening the door to “free” trade with China.

Look back at Chapter 7 of Five Short Blasts (especially Figure 7-5 on page 130), where we examined what happened to our effective population density as we combined our economy with other nations through “free” trade.  The effect of trading with Ireland – the nation with whom we have the largest per capita trade deficit in the world – is negligible.  They’re so small that it makes no change to our effective (combined) population density.  Add Mexico to the list, and our density rises from 85 people per square mile to 118.  Add Germany and it rises to 132.  But, when China, with one fifth of the world’s population, is added to the mix, our effective population density rockets to 242!  The downward pressure on our labor market and incomes suddenly becomes overwhelming.

As long as we continue to blindly apply “free” trade policy to all nations with no consideration of the effect of population density, the resulting downward spiral in our economy is inescapable.  With each passing year, the data on incomes and poverty in America bears this out.

 

 

 

 

 


Employment Level Falls 56,000 in June; Unemployment Edges Up to 8.8%; 432,000 Discouraged Job-Seekers Give Up

July 2, 2015

The headline for today’s employment report for the month of June reads “Employment Increased by 223,000 in June, and the unemployment rate declined to 5.3%.”  It’s hard to believe that that headline, and the headline of this blog post were both taken from the same report, isn’t it?  Well they were.  And I could have added to my headline a couple more facts:  that the employment figures for April and May were revised downward by 60,000 and that there were no wage gains in June.

In fact, that headline figure of 223,000 jobs added in June, taken from the establishment survey, is probably the only positive in the whole report.  (If it can even be believed.)  The positive from the household survey – a drop in unemployment to 5.3% – falls apart when you see why it dropped.  It seems that 432,000 long-term unemployed have simply given up looking for work.  Put them back in the equation, along with the other workers who previously and mysteriously vanished from the work force, and unemployment actually rose to 8.8%.

In November of 2007, 48.4% of the U.S. population participated in the labor force.  Since then, the U.S. population has grown by 19 million, but only 16% of them have been added to the labor force.  This is how the Obama administration has been able to claim a sharp drop in the unemployment rate – by understating the size of the labor force.  Here’s a chart of per capita employment since November, 2007:  Per Capita Employment.  While per capita unemployment has improved from the depths of the recession, it’s still at a deeply recessionary level.

One of the less-noticed statistics in the report, but perhaps the most telling about the state of the economy, is that employment in manufacturing was flat yet again in June.  In a separate report this morning, factory orders fell for the ninth time in ten months, and new factory orders and shipments are running 6% and 4% behind year-ago levels.

The Obama administration has continued the practices of previous administrations that exacerbate the demise of the middle class through immigration policy that floods the labor force with unneeded workers and trade policy that is detached from the realities that drive trade imbalances and turns a blind eye to a $600 billion/year trade deficit in manufactured goods.


The Problem with TPP

June 14, 2015

On Friday, the House of Representatives dealt a major blow to what would have been a crown jewel in President Obama’s economic plan – the “Trans Pacific Partnership” (TPP) trade deal that he has worked for his entire presidency.  It’s a good thing.  Had he gotten the fast track trade authority he was seeking in order to steamroll this trade deal through Congress, it may well have sounded the death knell for the American auto industry, and perhaps even American manufacturing in general.

The problem with TPP can be summed up in two words – population density – and its failure to take this factor into account.  The TPP is a deal that has been negotiated between the U.S. and eleven other countries:  Australia, Brunei , Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.  Of these eleven nations, five are less densely populated than the U.S. – Australia, Canada, Chile, New Zealand and Peru.  The United States enjoys a surplus of trade in manufactured goods with every one of them – a surplus totaling almost $103 billion.

Of the remaining six nations, one – Brunei – is a net oil exporter.  The U.S. enjoys a surplus of trade in manufactured goods with all net oil exporters since oil is priced in dollars, and dollars can only be spent in the U.S.  Another – Singapore – is a tiny city-state and the U.S. enjoys a surplus of trade with nearly all such city-states.  Why?  Because manufacturing requires some serious real estate, something that city-states lack.  Their dense populations necessitate an economy built around services, like banking, for example.  That leaves four nations more densely populated than the U.S. – Japan, Malaysia, Mexico and Vietnam.  The U.S. suffers a trade deficit in manufactured goods with all four nations – a deficit totaling almost $155 billion.

A surplus with all five less densely populated nations of $103 billion vs. a deficit with all four more densely populated nations of $155 billion.  This is no coincidence.  It’s yet another demonstration of the power of population density in driving global trade imbalances.  It dwarfs all other factors in international trade.  Low wages, currency manipulation, lax labor and environmental standards – none of these things amount to a hill of beans in comparison to the effect of population density.  Compared to the citizens of less densely populated nations, those living in intensely crowded conditions such as you find in these four nations consume comparatively nothing, but are every bit as productive.  The result is that these nations come to the trade table with massive labor forces desperate for work, but offer nothing in return except puny markets emaciated by low per capita consumption.  Huge trade deficits with such nations are inescapable without the use of tariffs.

Many believe that globalization and free trade has already wiped out tariffs.  It has eliminated and reduced many, but consider this:  the American truck market, unlike the automobile market, is still protected by a 25% tariff.  Because of this, virtually every pickup truck and every larger truck, up to and including semis, are built in the U.S.  Take away that tariff, as TPP has vowed to do, and you can kiss the U.S. truck industry goodbye.  One might argue that that isn’t so – that the U.S. auto industry still thrives without the tariffs.  However, it thrives not because of tariffs but because of quotas, something else that will vanish under TPP.  If the American truck-building industry and what’s left of the auto industry vanishes, there’s a good possibility that a domino effect may very well lead to the collapse of virtually all of American manufacturing.

Trade policy that fails to account for the effect of population density has proven to be an unmitigated disaster for the U.S. economy for decades.  President Obama seems hell-bent to make matters worse, just as he did with the deal with South Korea that, in only a couple of years, has cost thousands of Americans their jobs.  Let’s pray that our congressmen will continue to stand fast against any further such hare-brained deals.


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.


Effect of Population Density on Trade Sets Record in 2013

May 4, 2015

Each year I vow to publish this analysis in a more timely manner and, it seems, that each year it gets tougher to do.  But this is a massive undertaking, so I hope you’ll cut me some slack.

First, a little about my methodology is in order.  For each nation, I tallied the imports from and exports to that nation for hundreds of end-use-code product categories.  For example, here’s a link to the web site that tallies the imports from China:  http://www.census.gov/foreign-trade/statistics/product/enduse/imports/c5700.html.  That’s just the imports.  There’s another page for exports to China.  Those are then combined, and the end use codes that represent manufactured products are identified and tallied.  Population data is taken from the CIA World Fact Book web site, and is up-to-date through 2013.  So, with all of that said, I think you can understand the difficulty involved in compiling this data for 166 countries.*

This chart, updated through 2013, shows the U.S. balance of trade in manufactured products with the half of nations above the median population density, and the other half of nations below the median population density: Deficits Above & Below Median Pop Density.  In 2013, with the half of nations below the median population density (182 people per square mile), the U.S. enjoyed a surplus of trade in manufactured products of $147 billion.  (It should be noted that the U.S. population density is approximately 87 people per square mile.)  In stark contrast, the U.S. suffered a trade deficit in manufactured goods with the half of nations above the median population density of $634 billion – a record.  And the disparity between the two figures – $781 billion – is also a record.  The same number of nations.  A huge contrast in results.  And, the longer the U.S. continues to pursue free trade policy that ignores the role of population density, the worse the disparity becomes.

It’s also interesting to note that the half of nations above the median population density occupy only 25% of the earth’s land mass.  This means that the U.S. has a surplus of trade in manufactured goods of $147 billion with 75% of the earth’s land mass (outside the U.S.).  With the remaining 25% – the densely populated 25% – the U.S. has a trade deficit of $634 billion.

This data is undeniable proof of a powerful relationship between population density and trade in manufactured products, a relationship first revealed in Five Short Blasts.  Without some mechanism (like tariffs) to counter the effect of population density, it’s a near certainty that trade with very densely populated nations will yield a large trade deficit and result in the loss of many manufacturing jobs.

In upcoming posts I’ll dig deeper into the 2013 data for more evidence of the role of population density in trade, and to examine whether the other popular scapegoats – low wages and currency exchange rates – play any role at all.

In the meantime, I’ll also begin compiling the 2014 data!

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* Small island nations are excluded from the study, since they enjoy unique economies, usually based on tourism.  Also excluded are tiny city-states.


Per Capita GDP Falls in 1st Quarter

April 29, 2015

The Bureau of Economic Analysis announced this morning that GDP (gross domestic product) grew at an annual rate of only 0.2% in the first quarter of this year, at the bottom end of the range of analysts’ expectations.

However, while the “pie” grew by 0.2%, the number of people crowded around the table, grew at an annual rate of 0.8%, thanks entirely to immigration.  As a result, per capita GDP – everyone’s share of the pie – fell at an annual rate of 0.6% – a recessionary figure.  Here’s a chart of real per capita GDP since 2000:  Real Per Capita GDP.  Since the onset of the “Great Recession” in the 4th quarter of 2007, GDP has risen by only 2.7%.  That’s an annual growth rate of only 0.4% – virtually no growth at all.

And here’s something else I find interesting.  Check this chart of the percent change in GDP since 2005:  Change in Real Per Capita GDP.  Notice that, since the recovery from the recession began in 2009, the frequency of negative quarters is increasing.  From the 3rd quarter of 2009 until the first quarter of 2011, six quarters passed before we had a negative quarter.  Then another six quarters passed before a 2nd negative quarter.  But, after that, there were only four quarters between negative quarters.  Most recently, there were only three quarters of positive growth before another negative quarter.

This recovery, fed by stimulus spending and $4.5 trillion in “quantitative easing” by the Federal Reserve – both of which have dried up – has run out of gas.  The economy is teetering on the brink of another recession.  It’s no surprise.  Nothing has been done to remedy the conditions that precipitated the last recession – our huge trade deficit and out-of-control immigration-fueled population growth.  In fact, it was falling exports that led the decline in per capita GDP in the first quarter.  Remember Obama’s pledge to double exports by 2015?  Never happened.  Not even close.

Contrary to the talk that you hear about a recovery that’s gathering momentum, or a slowdown that is only transitory, this economy is sick and is in serious trouble.  Its capacity for serving as a “host” to prop up the economies of badly overpopulated nations is practically depleted.  It’s now totally dependent on deficit spending and money-printing.  And equity markets have transitioned from vehicles for investing in the economy into a scheme for sopping up money from central banks.  Investors are playing a dangerous game of chicken with central banks when bad economic news is welcomed in the hopes of raising the odds of more money-printing.  Never have we entered a recession with interest rates already at zero and with a balance sheet that already has the Federal Reserve feeling queasy.  The ability of these economic gimmicks to mask the effects of overpopulation and a host-parasite trade regime has nearly run its course.  Watch out!


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