Friday, February 06, 2004

Weaker Than Hoped: Monthly Employment Report

INTRODUCTION
Well the results are in, and after poking through the guts of the thing the oldman is satisfied that he called it just about right: not too warm and not too cool. According the the Bureau of Labor Statistics monthly employment report: "Nonfarm payroll employment increased by 112,000, with job gains in construction and several service-providing industries. Manufacturing employment continued to trend down, but the rate of job loss has moderated in recent
months.
"

Of course there is still the discrepency in the report between the payroll survey and the household survey. The oldman commented upon which one should be relied upon more in his post 'Oh where did all the jobs go?''. According to the BLS report, the household survey reported that "Total employment rose by 496,000" as opposed to the 112,000 number reported by the payroll survey.

According to my post 'It's not here, it's not there' the oldman had predicted that:

For the record, the oldman thinks that the employment report will be on the weak side. How weak, the oldman isn't sure but from what he's seen it may have improved but it doesn't feel all that strong.

Here is the commentary from MSNBC's coverage where they write that:

" WASHINGTON - Companies added 112,000 new jobs in January, fewer than expected, but enough to keep alive hope for a turnaround in the struggling job market... Employers added new jobs last month at a pace not seen in three years. The last time payrolls expanded more than 112,000 was in December 2000, when companies added 124,000 positions. But economists were disappointed, saying they had expected a larger increase of 150,000 new jobs or more."

This is fairly in line with the oldman's expectations. The good news is that the economy is trending positively but there is tremendous drag from foreign competition that has been created by unfair (in the oldman's view) trade treaties. As MSNBC notes:

" Businesses are being squeezed by intense competition from other countries, and are holding down costs by not hiring new, full-time workers in the United States. Instead, they are outsourcing, working their existing employees harder or shipping jobs overseas."

This has been the fifth month that the jobs creation has been positive, though it hasn't reached levels that would be normal for a healthy economy that has "recovered" from a recession. The oldman is glad to see the numbers climbing steadily toward normal but there is still a discrepency between the jobs being created and what one would normally expect for an economy at this point. As MSNBC quotes an economist saying:

" Added Ken Mayland, president of ClearView Economics: “This economy under normal circumstances should be generating 200,000 to 300,000 a month” in new jobs."

The oldman believes that the discrepency between the expected number of jobs created can be attributed mainly to two sources. The first is changing employment practices of companies reacting to intense foreign competition for marketshare, and the second is that the Federal Reserve and the BLS are underestimating inflation because they are relying upon measures like the CPI that do not accurately reflect the cost of living increases experienced by most Americans. Over the weekend, the oldman plans on posting two articles with one on the Real Estate valuations being overpriced by Federal Reserve intervention and the other on the impact of that and other changes on cost of living increases for Americans. A third article on the ins and outs of the real impacts of the present (unfair) trade paradigm on the American economy will also be forthcoming. If the true inflation number were based on the cost of living instead of the CPI inflation would be likely considered a few percentage points higher. This alone would explain most of the lack of economic growth since "Real" GDP is calculated from subtracting inflation from nominal GDP.

INTO THE BELLY OF THE BEAST

For a balanced presentation of both sides of this debate listen to this audiostream from NPR on the merits of job creation vs foreign competition. The oldman feels that this is similar to rearranging the deckchairs on the Titanic. Clearly with the increasing numbers of the working homeless are a sign of something dreadfully wrong with the system. Imagine that: people who work fulltime but live "on the streets"! There are even homeless shleters specifically catering to these people. Surely we've gone too far.

This criticism shouldn't merely be taken as liberal wanking. First the oldman is a conservative. Second hardly a bastion of anti-trade thought, the Financial Times criticizes the employment numbers as less than rosy:
" Economists have been forecasting a strong rise in payrolls for several months and have been disappointed on each occasion. The economy must add 150,000 jobs a month just to absorb new labour market entrants, such as first-time workers and immigrants. The administration took comfort from the fact that the 125,000 rise in private payrolls was the strongest since December 2000. The unemployment rate also declined to 5.6 per cent, its lowest level in 2 years.

" Goldman Sachs said the fall in unemployment appeared to be partly the result of would-be workers abandoning their search.

" Population growth should be driving the labour force up but instead fewer people are looking for work," said Jan Hatzius, an economist at Goldman.

" The rise in employment was also narrowly based with retail and food services accounting for most of the increase.
"

Read here NathanNewman's excellent weblog entry on the topic comparing the present economic recovery to the one in the nineties. Note that Nathan's peice was written in Feb'03!!! The situation has only gotten worse since then. Read here Nathan's more recent Nov'03 piece on whether or not the economic growth is even real.

Clearly the economic drag of our trade treaties has been reducing the worker compensation and job creation in the United States for quite some time. Also it should be remembered that the best job creation period in the nineties was the Internet boom which was not driven by foreign trade at all. Wired Magazine has a spirited editorial defense of outsourcing that compares jobs lost to computer automation to jobs lost to foreign competition. However this argument is fatally flawed. The profits and investments in computing were directly invested into the domestic economy. Every act of "offshoring" represents money lost to a foreign economy and not recycled back into the American economy. Wired Magazine also admits that it will not only be "call centers" or low-level service jobs that are lost overseas.

This shouldn't be blamed (solely) on President Bush. Clearly it's been around since the nineties under President Clinton with the phenomena of the "jobless" economy around since then and before. It's just that it's gotten so bad that it's becoming impossible to hide now!The process of the pillaging of the American economy has been apparently happening since the 1970's as reported by Znet:

" ...Since the 1970s, labor force withdrawal, and longer jobless spells, have been gaining ground, steadily and ominously, so that even the BLS "alternative unemployment measures," let alone the official one, increasingly understate true unemployment in the United States."

The oldman is committed here to investigating why this happens to be so, why the numbers have been so skewed, and what the true causes and state of the American economic situation to be. We shouldn't have to both see our children and grandchildren have to settle for a lower standard of living AND be lied to about it. The truth will out, hopefully with a little help from your friendly neighborhood oldman.

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