Tuesday, September 9, 2014

The job market reflects a hollow economy


I'm more and more convinced that the current economic smoke-and-mirrors 'posterity' is a sham, a fake and a public lie, and that it's going to come crashing down around our ears in the not very distant future.  I've pointed out all sorts of indicators in recent years, focusing most recently on the jobs market and the threat to ongoing employment for many Americans (not to mention workers in other countries).

Two articles in the past couple of days have reinforced my sense that we're on the brink of something really nasty.  First, David Stockman highlights 'The Epic Failure of the US Labor Market'.  I'm going to quote from his article at some length, because he lays bare the foundations of our fraudulent prosperity as far as jobs are concerned.

... outside of health and education there has not been one net new job created in the American economy since July 2000! Yes, not a single new job—as in none, nein, nichts, nada, zip!

Yes, we do have about 7.3 million more teachers, nurses, home health aides and bed-pan changers—-meaning that the total job count in what I have termed the HES Complex (health, education and social services) now stands at 31.7 million compared to 24.4 million in early 2000 (see below).

. . .

In fact, the 107 million non-HES Complex jobs shown above can be divided into two categories—–part time jobs and breadwinner jobs.  Compared to breadwinner jobs which pay about $50,000 per year, the former pay at a rate of about $20,000 annualized, reflecting around 26 hours of work per week and hourly pay of about $14.

Stated differently, the bartender, waiter, bellhop, maid, shoe repair, retail clerk and temp positions ... represent 40% jobs from an economic value perspective. And from a societal angle, they provide no foundation whatsoever on which to support middle-class families and a thriving citizenry.

By contrast, breadwinner jobs in manufacturing, mining, construction, FIRE, transportation and distribution, information technology, the white collar professions and business management do generate the means for at least a minimum standard of living. Unfortunately ... the US economy has been losing breadwinner jobs at a rate of 18,000 per month for 14 years running.

. . .

During a decade and one-half, the US economy has managed to generate only 21,000 part-time jobs per month outside the HES Complex ... even if you believe that prosperity can be sustained by the vaunted “shop until they drop” American consumer, the pattern shown above doesn’t get the job done by a long shot. The periodic rebirth of a modest quotient of part-time positions paying $20k per year will support robust consumption spending in the current GDP reports only at the expense of ballooning credit losses and over-time work for the repo man down the road.

. . .

First, nearly all of these jobs are “fiscally dependent” owing to direct government spending, loans and tax expenditures ... all of this fabulous fiscal support for the HES Complex consists of borrowed money—-since if there actually were a balanced budget law that required today’s taxpayers to foot the cost of government rather than the unborn taxpayers of tomorrow, the first thing to be cut would be the giant subsidies being collected by the health and education cartels. In any event, governments are now bumping up against “peak debt”, meaning that the stupendous flow of fiscal resources to the HES Complex is beginning to abate sharply, resulting in a unmistakable slowing in the rate of so-called job creation.

During the Greenspan Boom between 2000 and 2007, for example, the monthly rate of job  creation in the HES Complex was 51,000. During the Great Recession that slowed to 43,000 per month; and during the 61 months of recovery since then it has dropped further to just 28,000 per month. In short, the American jobs machine—-tentative as it has been for the past 14 years—-has essentially rested on a fiscal mirage that is now reaching it waning days.

. . .

Sooner or later, the American economy will be forced to import only what its earns in foreign sales and services because the export of excess dollars and debt by the Federal Reserve will be brought to a halt as the race to the bottom among global central banks enters its final phases. Stated differently, the Asian mercantilist exporters to not “save” too much; they furiously peg and print their own currencies in order to absorb the tsunami of dollars the Fed sends their way.

In this context, there has self-evidently been no recovery in goods production. As of last Friday’s report, the number of jobs in construction, manufacturing and mining (including energy) had hardly budged from the recession bottom and was down nearly 25% from the level of January 2000.

So at the end of the day, the HES Complex does not help the US economy pay its way. Essentially, America has been creating jobs only by borrowing from the rest of the world—–more than $10 trillion on a balance of trade basis during the last 30 years.

There's more at the link, including graphs illustrating the trends Mr. Stockman describes.  It's essential reading for anyone employed in the USA today, to understand whether your job is one of those at risk, and to understand what's going to happen to our economy when those at-risk jobs are destroyed by fiscal reality.

Barron's confirms a great deal of Mr. Stockman's thesis in an article titled 'Work's for Squares:  The unemployment rate may be falling, but with more people than ever out of the workforce, the news is bad and getting worse'.  Again, government programs and subsidies appear to be largely to blame.

The job market has made a comeback over the past year, but the American labor force hasn't, and the prospects don't look good. Work seems to be on the wane in the U.S., with worrisome consequences for economic growth.

While the unemployment rate slipped to 6.1% in June -- its lowest level in six years -- the percentage of adult American workers who are actually in the workforce is at its lowest level in 36 years, with no rebound in sight.

. . .

The problem increasingly appears to be structural. Following the devastating recession of 2008-09, the "jobless recovery" drove many workers out of the labor force, as often happens when the economy is in a downward cycle and then struggles to recover. But now that the expansion is starting its sixth year, the rebound in the job market is beginning to make the decline in participation look anomalous and therefore likely to persist.

The share of the adult population, 16 and over, participating in the labor force is at its lowest level since 1978, at 62.8% and 62.9% in June and July, respectively. In a comprehensive study of trends in the workforce released in December, the Bureau of Labor Statistics said it expects a further decline in labor-force participation, to 61.6%, by 2022.

The BLS study provides an indispensable framework, essentially asking whether the retiring baby boomers will be replaced in sufficient numbers by younger cohorts. The agency's conclusion is not reassuring.

Indeed, a closer look suggests that the problem is far worse than the BLS supposes. There are two key reasons. For starters, the study makes no mention of the surge in disability filings that has already claimed millions of dropouts from the labor force and will likely claim more. It also makes no mention of the Affordable Care Act's likely negative effects on incentives to work. The Congressional Budget Office projects that the ACA could reduce the labor force by the equivalent of more than two million full-time workers.

. . .

The [Social Security Disability Insurance] program "creates a very strong incentive against meaningfully participating in the formal labor market," says Massachusetts Institute of Technology economics professor David Autor ... In 2013, the average payout per recipient was $1,146 per month. But recipients also get full Medicare coverage. According to Autor's calculations, the average value of that health-care benefit is the equivalent of purchasing a lifetime annuity for $275,000. When you bear in mind that SSDI income is steady and indexed to inflation, and that it's possible to supplement it with under-the-table money, it might not be surprising that the number of recipients has soared over the past few decades. The current cost of the system, according to Autor's calculation, exceeds $1,500 a year per U.S. household.

. . .

... one new factor that is just around the corner is the depressing effect on labor-force participation of the Affordable Care Act ... The disincentives work like this: By working more, people could lose subsidies bestowed by the ACA, amounting to an implicit tax on earnings, which could induce them to work less. For example, when a family's income rises above 400% of the federal poverty level, it will suffer a cut in subsidies equal to a marginal tax of 100% on the first few thousand dollars of extra income.

Again, more at the link.

Mathematics is a science, not an art.  When you run the numbers, they add up to a very serious situation indeed - one that our political leaders are absolutely unwilling to address, because to do so by means of fiscal discipline, a balanced budget, and living within our means as a nation, would mean that an outraged electorate, much of which is by now accustomed to 'sucking on the government teat', would vote them out of office at the earliest opportunity, and give their votes to politicians who promised to restore the 'bread and circuses' to which they've become accustomed.

Nevertheless, mathematics, like all 'hard' sciences, will not be denied.  Facts are facts.  Reality bites.  Sooner or later - and I'm thinking it's not far away now - the veil of deception that masks our economic reality is going to be ripped apart by mathematical reality.  When that happens, things are going to get very, very tough for all of us.

(Some readers have asked - or rather complained about - why I keep putting up articles pointing out these negatives.  "Don't you have any good news?" they want to know.  Actually, no, I don't.  Politicians can trumpet the 'good news' of the unemployment rate coming down, but we all know that the labor participation rate is artificially kept low, making the employment figures look a whole lot better than they actually are.  I'm not going to repeat the lies of those who want to mislead the American people.  IMHO, it's better to reveal the facts and let people draw their own conclusions, so we can prepare for what's coming.)

Peter

3 comments:

Jester said...

It's coming. That's the short line explanation of it. In the common modern words "S**t's about to get real." If you don't have access to a solid job as you state it may be time to learn something or become a jack of all trades so that you can survive till this politically inspired hell can pass. If it ever does.

Able said...

I know I've pointed it out before (without understanding quite why its happening) but …

You are aware that the bulk (even the overwhelming majority) of those 'newly created' jobs in HES (as well as administration, usually as part of the bureaucracy) are women only posts.

The situation is mirrored here in the UK. Manufacturing, Industry and even service (and the military of course) jobs traditionally used as 'bread-winning' posts by men have been decimated over the last few decades (and continue to be so). The 'only' jobs created have been by the 'social care' type posts caused by 'care in the community' (closing hospitals and moving it to 'peoples homes', so one hospital nurse is now replaced by twenty community health care assistants, with a massive bureaucracy to support them, … all of them women only). The expansion of government (be that local, regional or national) with its concomitant increase in (predominantly female) administration posts. (We here have areas, cities, where >60% of the working age adults are employed directly by government, the overwhelming majority being women. Then include those on unemployment, supplementary or sickness benefits and it's not inconceivable that they are all being supported by taxing two small business owners in a district – a slight bit of hyperbole but not much).

The trend to part-time posts is also interesting as, yet again, it favours women (here at least). A woman with children (unmarried) can work up to 16 hours a week and still receive her full benefits. Then there is preferential hiring for women to 'balance the inequalities' (well except for any industry/profession where the majority are women). There are also regulations which force employers to provide 'family friendly', 'job sharing' hours when requested. So we have a position where an employer 'must' employ women, who then 'force' the employer to divide up previously full-time positions into multiple part-time ones. Result? Only women can survive on the part-time salary (with added benefits) so men (and to an extent young, single, childless women too) are driven from them. (This has happened in my current area, hospital nursing, where a ward previously had a number of full time nursing positions sufficient to suport an individula and even a family, now they have a plethora of 0.5 fte and even 0.25 fte posts which can only be taken by someone with 'supplementary' income. Result? The wards struggle to schedule cover as all the 'parents' want the same time off to 'look after' their children. They regularly, obviously, fail and so must employ additional part-time 'agency' staff – the very people who would have been working for them full time otherwise).

I still cannot fathom why? What aim, if one exists and it's not just reaction/pandering (women do appear to vote en block after all), could explain it. Is it yet another unintended consequence of the deliberate destruction of the family, with husbands/fathers replaced by 'sugar daddy' State? I just don't know, and yet it is patently societal suicide.

0007 said...

I don't think that the "job-market comeback" means the same to those bureaucrats as it does to the folks who aren't sitting in .gov jobs.