Data sources at end of page.
Irrational belief in the infallibility of the "free market" and "free trade" has led to devastating offshoring of good-paying manufacturing and IT jobs. This has undermined the US economy, leading to its collapse. Nationally, policies continue to be a disaster for Mfg Jobs, IT Jobs, and Advanced Technology Products "trade". I explain why both stimulus and trade policy reform are necessary.
The accompanying undermining of US wages is largely responsible for The 9/22/08 Economic Crisis ... collapsing demand has inevitably led to a collapsing economy. Yes, financial fraud and speculation precipitated the debacle, but the economy has become more and more unstable as U.S. wages have been systematically undermined.
- Mfg and IT job loss continues. Nationally, as of Mar 09, the U.S. lost 30.2% of manufacturing jobs and 21.8% of IT jobs since their peaks.
- Nationally, job growth is negative. Jobs haven't kept up with population growth ... Gap: 11.3 million jobs in Mar 09 (compared to a 10.3 million gap in Feb 09 and a 4.2 million gap in Nov 07.
The U.S. has lost
- 4.1M jobs over the last six months
- 5.1M jobs over the last 12 months
- 5.8M jobs since Nov 07 ... 15 months
- Colorado jobs also haven't kept up with population growth ... Gap: 313K jobs in Feb 09 compared to 295K jobs in Feb 09 and 162K jobs in Nov 07 (K= 1000s).
- Colorado Springs has been a major disaster for manufacturing and information technology, worse than the state or nation. The Springs has lost 45.7% of manufacturing jobs and 49.0% of IT jobs since their peaks. See the summary below.
All this is of course, according to "conservatives," all Obama's fault though he's only been in office a little over two months.
On the "banking crisis," conservative historian and proponent of a McCain presidency, Niall Ferguson, had this view, 4/26/09:
Ferguson also agreed with advice offered by Paul Krugman (an "unprecedented" event, by Ferguson's own admission) that the "only way to deal with these big insolvent institutions is to take them into temporary conservatorship, let's use that lovely euphemism not nationalization, as happened with Fannie Mae and Freddie Mac, institutions that they quite closely resemble anyway. It's going to happen; we're going to end up doing this. And you restructure them."
Unfortunately, Obama is not doing this even though he's being charged with taking over the banks and being a "socialist." As with Bush's Treasury Secretary Henry Paulson before him, Obama's Tim Geithner is bailing out the banks with few, if any, strings attached. That's the banks controlling government, not the government controlling the banks; that's fascism, not socialism.
Looking at the graphs below, is there any wonder that the U.S. economy is in shambles thanks to "free trade" offshoring? Examples of what "trade" policy has produced: Tent Cities in LA 3/16/09, Cities Deal With a Surge in Shantytowns 3/25/09.
On "stimulus" and "trade"
Obama's stimulus is necessary, but not sufficient, and will fail unless the "trade deficit" is addressed ... and so far it doesn't appear that it will be. As Uchitelle wrote: "... imports, entering the country in ever greater quantities, will slow any expansion by siphoning sales from domestic producers."
The Rock and the Hard Place: Obama needs the Chinese to keep buying U.S. treasury bills to fund necessary stimulus to address the short-term cyclical recession; therefore he can't upset them by confronting them on "trade" issues. But because Obama won't address "trade" issues that have caused a long-term secular economic decline, the stimulus will fail. Bummer.
Damn. We are so screwed.
See the section below that uses the equation for GDP to explain why both Stimulus & Trade Policy Reform are necessary.
On "trade agreement" history
The Graph below showing Manufacturing Jobs & Trade Agreement History illustrates that the rapid loss of manufacturing jobs has been since China got PNTR. But the growth of manufacturing jobs stopped back in 1980 (that's 28 years).
The Graph below showing Trade Deficit & Trade Agreement History illustrates that the trade deficit began its major climb in 1996 following NAFTA in late 1994 (that's 14 years). It would have been sooner, also in 1980 (that's 28 years), had Reagan's Plaza Accord not devalued the dollar.
Job Loss Data Summary: National, Colorado, Colorado Springs since their peaks.
|Job Loss Summary|
Comparison of Percentage of Manufacturing Jobs Lost
|Mfg Job Loss Comparison by Region|
Comparison of Percentage of IT Jobs Lost
|IT Job Loss Comparison by Region|
Woe is Colorado Springs ... it just gets worse. In Jan Mfg job loss was 44.9% and IT loss was 48.3%.
The Jobs and "Trade" Details:
US Job Growth has nowhere near kept up with Population Growth ... especially as jobs have been lost. The gap is over 11.3 million jobs. There are now 5.8 million fewer jobs than in Nov 07 (it was 4.9M last month). Persons who have another job hold about 7.6 million existing jobs; that's 5.5% of employment (see the "multiple jobholders" graph at the bottom of Employment & Unemployment and BLS site for the latest).
Population increasing ... jobs dropping like a rock:
|US Job Growth Negative - Job losses accelerating|
You read that Jobless Rate Hits 8.5% After 663,000 Jobs Lost in March, but that's non-farm, payroll jobs. The actual number of jobs lost is 861,000. See the "Seasonally Adjusted Employed" Feb to Mar delta at Labor Force Statistics from the Current Population Survey. These are the numbers used for the chart above.
In Economy Falling Years Behind Full Speed By LOUIS UCHITELLE 4/7/09 there's this:
... even if the recession miraculously ended tomorrow, economists estimate that at least three years would pass before full employment returned and output rose enough for the economy to operate at full throttle.
But looking at the graph above, one can see that, even in Nov 07 when the latest job plunge began, there was a gap of 4+ million to have kept up with population growth ... so the economy never did recover to even close to what might be considered "full throttle."
The economy has not returned to the employment to population ratio that existed in 2000; at this point, 11.3M more jobs are needed to get back to that. It will take a lot more than 3 years ... if ever ... considering the U.S. (and world) economy is now in the over-capacity downward spiral of demand and production that Uchitelle describes in his article.
As the graph shows, there are 5.8M fewer jobs in Mar 09 than there were in Nov 07 (Obama's fault, of course).
From 663,000 Jobs Lost in March; Total Tops 5 Million By PETER S. GOODMAN and JACK HEALY, April 3, 2009
Its really just about as bad as can be imagined, said Dean Baker, a director of the Center for Economic and Policy Research in Washington. Theres just no way were anywhere near a bottom. Well be really lucky if we stop losing jobs by the end of the year.
Amen. Employment trajectories like this don't reverse on a dime, so the downward trend will almost certainly continue for another year, if not longer.
Looking at employment, it's clear that Mark Zandi (in the "Jobs Lost in March" article above) is delusional:
The downturn is still very intense, but its no longer intensifying, said Mark Zandi, chief economist at Moodys Economy.com.
"No longer intensifying?" Are you nuts? Look at the downward jobs trajectory.
This is more realistic:
This prevalent view that the recession is about to bottom out has somehow bypassed the most important part of the economy, which is jobs and income, Mr. Rosenberg wrote in a note to clients.
No kidding. Is there any wonder that the U.S. economy is in shambles thanks to "free trade" offshoring? Obama's stimulus is necessary, but not sufficient, and it will fail unless this is addressed ... and so far it doesn't appear that it will be. As Uchitelle wrote: "... imports, entering the country in ever greater quantities, will slow any expansion by siphoning sales from domestic producers."
On Stimulus & Trade Policy Reform
Here's an important equation that explains why both stimulus and trade policy reform are necessary:
Gross Domestic Product = GDP = C+I+E+G
Consumer spending (C) + Investment (I) + Net Exports (E) + Government Spending (G)
C: Consumer spending has collapsed because of undermined wages.
I: Investment has collapsed due to lack of demand because of those undermined wages.
E: Net Exports = Exports - Imports ... we have an annual ~$700B deficit ... see the Trade Deficit & Trade Agreement History graph below.
G: Government Spending is all that's left ... and that's why stimulus is needed.
Unfortunately, compared to the annual ~$700B "trade" deficit alone, a $787 billion stimulus package doesn't look all that big. Considering also collapsed C (Consumer spending) & I (Investment), it's apparent it's not enough.
And damn, even if it were enough, it's a path to long-term debt and hyperinflation. The "trade" deficit must be addressed! But then there's that Rock and a Hard Place sqeeze noted above. Oh, my. Did I mention we are so screwed?
References on this equation:
Why the Stimulus is Needed by Hale "Bonddad" Stewart, 1/31/09
Senator McConnell -- Idiot of the Highest Order by Hale "Bonddad" Stewart, 12/29/08
The cost of those cheap products from China has been much greater than what we paid in dollars.
National Manufacturing Job Trend ... major resumption of downward trend since mid-06 ... now accelerating downward.
|National Mfg Jobs Trend ... note the downward acceleration|
Manufacturing Jobs & Trade Agreement History
Here's a graph, suggested by Paul Carson and first included last month, showing average U.S. manufacturing jobs for each year along with 'trade-related' agreements. Note the downhill slide began in the 80s with the U.S. giving China Most Favored Nation status. But it really went over the cliff when the U.S. granted China Permanent Normal Trade Relations (PNTR). That coincides with the real cliff in the loss of manufacturing jobs. A coincidence? I don't think so.
Note: Originally Normal Trade Relations (NTR) was called Most Favored Nation (MFN) status, but that sounded just too cosy to have with China, so the free traders changed the name.
The graph shows that the rapid loss of manufacturing jobs has been since China got PNTR. But the growth of manufacturing jobs stopped back in 1980 (that's 28 years).
|National manufacturing jobs with dates of 'trade'-related agreements|
National IT Job Trend. Bummer, people who lost their manufacturing jobs retrained for these jobs. But somehow the US needs 65,000 H-1B visas to import workers because there's a shortage?
|National IT Jobs Trend|
Colorado Manufacturing Job Trend ... also accelerating downward.
|Colorado Mfg Jobs Trend|
Colorado IT Job Trend ...
|Colorado IT Jobs Trend|
Colorado Springs Manufacturing Job Trend ... also accelerating downward ...
|Colorado Springs Mfg Jobs Trend|
Colorado Springs IT Job Trend.
Think about this: 46% of Mfg and 49% of IT jobs lost from Colorado Springs. Read about this in the corporate media?
|Colorado Springs IT Jobs Trend|
Colorado Non-Farm Jobs Trend. Colorado would need another 312,532 jobs to have kept up with population growth (this was 295,000 jobs last month). Colorado has lost 61,100 jobs since Aug 08. That's 14,700 CO jobs lost in Feb ... see the chart below for jobs lost by month.
|Colorado Non-Farm Jobs Trend .. Gap increasing|
Trade Deficit & Trade Agreement History
Note on the Census Bureau and "trade" deficit history graph below:
Census Bureau: Trade Deficit Decreases in January 2009 The Nation's international deficit in goods and services decreased to $36.0 billion in January from $39.9 billion (revised) in December, as imports decreased more than exports. (13 March 2009)
The "trade" deficit has declined somewhat in 2007 & 2008. This is indeed because the decrease in imports was more than the decrease in exports. That's because the U.S. economy is failing.
Note that NAFTA, China PNTR, and China into the WTO have been on the forefront of massive borrowing to support the "trade" deficit. The "trade" deficit was growing exponentially through 2006. It's no surprise that that's over; no exponential increase can be sustained.
The graph shows that the trade deficit began its major climb in 1996 following NAFTA in late 1994 (that's 14 years). It would have been sooner, also in 1980 (that's 28 years), had Reagan's Plaza Accord not devalued the dollar.
|U.S. Trade deficit with dates of 'trade'-related agreements|
Advanced Technology Products "Trade" Trend. This should be one of the most frightening trends of all. The U.S. is so proud of its technological prowess. However, most people are unaware of the rate at which we're losing it.
The U.S. had a $38.4B surplus in 1991. The ATP "trade" balance in 2008 was -$55.6B, a deficit much larger than the surplus in 1991.
This is the "progress" the U.S. has made thanks to the "free traders" that have undermined the U.S. economy?
We've been told that the US is going to let others (e.g., China) do the low-tech manufacturing and the US is going to retain high-tech manufacturing. So much for that; it's not true. It should be no surprise that students aren't attracted to high-tech education. It's difficult subject matter ... and high-tech jobs are disappearing.
|Advanced Technology Products "Trade" Balance Trend - Annual ... a downhill slide|
Here's the monthly ATP trade balance trend since 2006 with a linear least-square fit showing the overall downward trend.
Note that from Nov to Jan the ATP balance has been less negative by $5.9B. Why is that? It was because exports fell by $3.3B and imports fell by $9.2B; So the ATP balance wasn't improving because exports rose. It was because imports fell more than exports. That's because the U.S. economy is failing.
Feb data has been added to the graph below since this page was published ... exports rose by $198M and imports fell by $317M. ATP balance remains negative, but less so for the last three months.
|Advanced Technology Products "Trade" Balance Trend - Monthly|
US Unemployment Rate - Official vs. Actual
While there's concern that the Official Unemployment Rate (U3) rose to 8.5% in Mar (it was 7.6% in Jan & 8.1% in Feb), there should be even more concern. What I call the "Real Unemployment Rate" is 21.8%.
Do not dismiss this as absurd. John Williams (Shadow Government Statistics) has his SGS-Alternate Unemployment Rate last month at 19.1% ... my estimate isn't all that much different. From his March 6, 2009 Flash Update:
Keep in mind, though, that the Great Depression unemployment rates were estimated after the fact, without adequate data or surveying. Regular unemployment surveying did not start until the early 1940s and then was subjected to methodological revisions over the decades. As discussed below, the SGS-Alternate unemployment rate now tops 19%, and such would be my best estimate of a rate that would be comparable to the Great Depression readings.
His Employment and Unemployment Reporting primer is educational.
My "Real Unemployment Rate" number includes those extra who are classified as "Not in labor force, but Persons who currently want a job" to the government's U6 statistic. It also adds those needed to keep up with population growth ... see the gap at the 4th figure from the top ... that's now 11.3 million persons.
For explanations of these numbers see Unemployment: Official, Effective, Real. For the real-life impact see There's no 'free market' for Labor. Ever wonder why the official poverty rate in America is between 12% and 13%? It's no coincidence.
|Different Measures of the Unemployment Rate|
US Unemployment Level - Official vs. Actual
There are now more like 39.4 million persons unemployed in Feb09 compared to the official U-3 number of 13.1 million and U-6 number of 24M. None of this counts the underemployed. In 2006 there were 36.5 million people in poverty; no wonder.
|Different Measures of the Unemployment Level|
Uchitelle's numbers in the article referenced above, Economy Falling Years Behind Full Speed, are dire, but they're an underestimate:
Labor is contributing hugely to the shortfall. More than 24 million men and women, or 15.6 percent of the labor force, are either hunting for work or working fewer hours than they would like to work, or are too discouraged to seek work, although they would take jobs if offered them, the Bureau of Labor Statistics reports.
His 15.6% is U-6, which also doesn't count everyone and doesn't include jobs needed to keep up with population growth. The 24M is the number of people the U-6 15.6% represents. It's more like 39M!!!
U.S. Employment & Unmemployment found at historical data for labor force based on the household survey
- Table A-1. Employment status of the civilian population by sex and age. Includes those considered "Not in labor force, Persons who currently want a job"
- Table A-12. Alternative measures of labor underutilization, U-1 through U-6
U.S. Population data at U.S. Census, Estimates
State and Area Employment, Hours, and Earnings Find Colorado and Colorado Springs data here for Total Nonfarm, Manufacturing and Information Technology, and other states, regions, & categories
Colorado Population by Region 2000 - 2006
U.S. International Trade In Goods and Services, Historical Series
U.S. Trade in Goods (Imports, Exports and Balance) by Country find China, Mexico here.
Advanced Technology Products at FT900: U.S. International Trade in Goods and Services, Exhibit 16
Unemployment: Official, Effective, Real, 9/12/06. Calculations of different measures of the unemployed, levels and percentages. Includes those who want a job now but are classified as "not in the labor market" and additional jobs needed to keep up with population growth since April 2000 when employment began to decline.