Why Are Employment Numbers So Bad? 27 comments
July 03, 2009
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Employment is still falling pretty sharply.
While GDP has hardly surprised me, I did not anticipate last fall that employment would get so low. Even with the benefit of hindsight, I am not sure I see a complete explanation.
Part of the story is the plethora of means-tested public policies: They discourage work and raise employer costs:
Mortgage modification
Student loan forgiveness
IRS enforcement of prior tax debts
extended unemployment benefits
But likely there is more to the story. Too bad I don't know more than that.
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This article has 27 comments:
The Fed and governments choice to make this decent into recession a slow motion wrech through mass spending and QE has become a decision to make it last year after year and inflict more economic pain on all of us than it should have in order to damage banks and financial institutions less. Don't look to the Fed. After they engaged in Greenspan heavy Zirp rates they have 0 ammunition. If Paulson was Rambo he would have blown himself up in 5 seconds and then wonder where the weapons were.
Any consumer credit card debt over three years of age should have all additional interest charges waived if the consumer is paying the debt down, that would be a real stimulus plan.
www.bloggersagainstcha...
www.daily-protest.com
Here are my top theories based on reality on the ground and not the propaganda from the financial sector and government:
1. Off shoring and importation of cheaper labor. All major companies have closed US concerns over the past decade and re-opened them in China or the third world. Those unnecessary, overpaid American workers WERE the world's best customers. Now they are broke and the ripples of their income loss is growing by the day. This didn't start in 2007, my customers & suppliers have been silently being run out of business since Clinton opened trade with China. Amazingly enough, companies that can't compete go out of business and take a few million jobs with them.
2. Congress changing the credit rules in 2005, which did not take effect until late 2007. What did the "experts" think would happen when they doubled minimum monthly payments and the banks tripled, or quadrupled (or more) interest rates? Did the experts really think that people had the extra cash to send to the bank AND keep purchasing Asian made crap? All while being charged 30% for debt they have carried for a decade? Apparently, they did.
3. Cap & Trade. MANY manufacturing companies are looking ahead and seeing massive pain. Preemptive layoffs are coming.
4. Increases in freight, utilities, insurance, finance charges, taxes and regulations. What, experts haven't figured out there is no magic money tree and that the only way to recoup the costs being shoved down our throats is to fire more employees? These costs have been increasing every 6 months over the past 5 years. Every time I turn around something goes up in price while my customers expect me to meet, or beat, China's prices.
5. For half a decade we THRIVED on liar loans and cheap credit. Now gone. Record profits, record tax revenues and hidden trouble.
The cost of necessities is through the roof. And there are NO sales.
Now, throw in the GM/Chrysler bankruptcies and the closure of 1000s of dealerships. What, did you think the employees would keep their jobs?
Then couple the closed dealers with sending out bankruptcy paperwork to thousands of American suppliers. We aren't getting paid and for some reason our suppliers still expect their money.
Shit rolls downhill and firing the world's best customers isn't working out so well.
We aren't truly ever going to "recover." Just wait until Cap & Trade and forced health care hits our employers.
No jobs (or fewer, less well paid jobs) equates to fewer customers. Pretty simple when you look at reality.
Fewer customers means less sales, less profit, less tax revenue and longer pain.
The good news is that due to the fact that once an unemployed worker declares himself "discouraged" he is no longer unemployed.
Magically, he is removed from the data and magically, he ends up with pockets full of money and spending galore. [/sarcasm]
Daily.
Yanking loans from paying customers based on financials.
Increased regulation and reporting from the government.
Every time we ask Congress to protect us, it costs us American jobs.
Every multi-million dollar lawsuit won costs American jobs.
Every increase in tax or regulation, costs American jobs.
Shocking the way the real world works, isn't it?
On Jul 03 09:57 AM Alessandro wrote:
> As local businesses dry up, credit card defaults rise as well, thereby
> making the concept of for every percentage point the credit card
> companies raise their interest rates, the default rate increases
> by at least one percent, a reality.
While I am no fan of Dr Marc Faber, he has an alternate explanation. June 08, Dr. Marc Faber ended his monthly bulletin with the following :
"The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer/Software it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part."
On Jul 03 10:21 AM TeresaE wrote:
> Why?
>
> Here are my top theories based on reality on the ground and not the
> propaganda from the financial sector and government:
>
> 1. Off shoring and importation of cheaper labor. All major companies
"Any consumer credit card debt over three years of age should have all additional interest charges waived if the consumer is paying the debt down, that would be a real stimulus plan."
If you have credit card debt this old, you need to better manage your money and quit spending money you don't have!!!
On Jul 03 10:32 AM Living4Dividends wrote:
> TeresaE - I like your post a lot. I agree with most points you made.
> You really hit the nail on the head.
>
> While I am no fan of Dr Marc Faber, he has an alternate explanation.
> June 08, Dr. Marc Faber ended his monthly bulletin with the following
> :
>
> "The federal government is sending each of us a $600 rebate. If we
> spend that money at Wal-Mart, the money goes to China. If we spend
> it on gasoline it goes to the Arabs. If we buy a computer/Software
> it will go to India. If we purchase fruit and vegetables it will
> go to Mexico, Honduras and Guatemala. If we purchase a good car it
> will go to Germany. If we purchase useless crap it will go to Taiwan
> and none of it will help the American economy. The only way to keep
> that money here at home is to spend it on prostitutes and beer, since
> these are the only products still produced in US. I've been doing
> my part."
>
> On Jul 03 10:21 AM TeresaE wrote:
Just a suggestion.
I'm really surprised that you were Ever in a Business of any sort, And if you were, It wouldn't surprise me that You are out of Business now.
Your Comment: "Yanking Loans to paying customers based on financials."
No Business is going to remain in Business if the Customer's 'Financials' indicate that the ability to continue paying Off outstanding Loans has diminished.
You do not give "credit" to a potential customer unless you have checked out the "financials" of same, nor do you continue to give the same amount of Credit if those Financials are getting worse.
But Maybe You did, and Now you are Here, ranting.
By all means, yes, this is how free market financial economics is supposed to work. So let's apply this to the money center banks whose asset values have crashed and who have all been technically insolvent for over a year now. But wait, trillions of dollars of US taxpayer bailouts to the rescue! Now these banks are less insolvent and the US administration is doing everything in American taxpayers' power to restore their profitability so they don't have to suffer the free market fate of bankruptcy that they so richly earned.
So American employers and employees are faced with the double jeopardy of bailing out insolvent bankers with their future taxes and paying extortionate interest rates on existing debt, all to save a few profligate banksters from facing the consequences of their uneconomic actions. Teresa is right. The costs of doing business are rising, and those increased costs to real businesses are being funnelled directly into the vaults of financial businesses and the salary and benefits packages of government bureaucrats. The real economy is being sacrificed to the numbers economy of Wall St bankers and the nonproductive government sector. By concentrating all of the economy's money in these few hands the real economy is hollowed out and employment keeps declining.
harammph, the US taxpayer should "yank the loans to the banksters due to deteriorating financials", according to your logic. And all the assets currently concentrated in the balance sheets of those failed money center banks can then be sold at bankruptcy prices to solvent investors and the thousands of prudent American regional bankers who didn't drink the KoolAid. Maybe then the real economy coould start finding its feet again.
On Jul 04 09:12 AM derryl wrote:
> harammph wrote, "No Business is going to remain in Business if the
> Customer's 'Financials' indicate that the ability to continue paying
> Off outstanding Loans has diminished. You do not give "credit" to
> a potential customer unless you have checked out the "financials"
> of same, nor do you continue to give the same amount of Credit if
> those Financials are getting worse."
>
> By all means, yes, this is how free market financial economics is
> supposed to work. So let's apply this to the money center banks
> whose asset values have crashed and who have all been technically
> insolvent for over a year now. But wait, trillions of dollars of
> US taxpayer bailouts to the rescue! Now these banks are less insolvent
> and the US administration is doing everything in American taxpayers'
> power to restore their profitability so they don't have to suffer
> the free market fate of bankruptcy that they so richly earned.
>
>
> So American employers and employees are faced with the double jeopardy
> of bailing out insolvent bankers with their future taxes and paying
> extortionate interest rates on existing debt, all to save a few profligate
> banksters from facing the consequences of their uneconomic actions.
> Teresa is right. The costs of doing business are rising, and those
> increased costs to real businesses are being funnelled directly into
> the vaults of financial businesses and the salary and benefits packages
> of government bureaucrats. The real economy is being sacrificed
> to the numbers economy of Wall St bankers and the nonproductive government
> sector. By concentrating all of the economy's money in these few
> hands the real economy is hollowed out and employment keeps declining.
>
>
> harammph, the US taxpayer should "yank the loans to the banksters
> due to deteriorating financials", according to your logic. And all
> the assets currently concentrated in the balance sheets of those
> failed money center banks can then be sold at bankruptcy prices to
> solvent investors and the thousands of prudent American regional
> bankers who didn't drink the KoolAid. Maybe then the real economy
> coould start finding its feet again.
i would like to add the following:
the auto bankruptcies will have an effect similar to that of the bankruptcies of the steel companies of the 80's.
millions of people were in essence thrown out of the highly paid sectors of the workforce, as most of them surely could not be retrained to be software programmer or hardware engineers.
having family and friends in WV western PA and northern OH I witnessed first hand the incredible economic and emotional decline not only of families but of entire communities .
to top it all Cap and Trade will inflict even more pain.
the tragic part of this scenario is that the people that need the most will be hurt the worst.
the level of incompetence of our political class ( both parties) is equated only by the lack of integrity and the lack of transparency that they exhibit almost on a daily basis
On Jul 03 10:21 AM TeresaE wrote:
> Why?
>
> Here are my top theories based on reality on the ground and not the
> propaganda from the financial sector and government:
>
> 1. Off shoring and importation of cheaper labor. All major companies
> have closed US concerns over the past decade and re-opened them in
> China or the third world. Those unnecessary, overpaid American workers
> WERE the world's best customers. Now they are broke and the ripples
> of their income loss is growing by the day. This didn't start in
> 2007, my customers & suppliers have been silently being run out
> of business since Clinton opened trade with China. Amazingly enough,
> companies that can't compete go out of business and take a few million
> jobs with them.
>
> 2. Congress changing the credit rules in 2005, which did not take
> effect until late 2007. What did the "experts" think would happen
> when they doubled minimum monthly payments and the banks tripled,
> or quadrupled (or more) interest rates? Did the experts really think
> that people had the extra cash to send to the bank AND keep purchasing
> Asian made crap? All while being charged 30% for debt they have
> carried for a decade? Apparently, they did.
>
> 3. Cap & Trade. MANY manufacturing companies are looking ahead
> and seeing massive pain. Preemptive layoffs are coming.
>
> 4. Increases in freight, utilities, insurance, finance charges,
> taxes and regulations. What, experts haven't figured out there
> is no magic money tree and that the only way to recoup the costs
> being shoved down our throats is to fire more employees? These costs
> have been increasing every 6 months over the past 5 years. Every
> time I turn around something goes up in price while my customers
> expect me to meet, or beat, China's prices.
>
> 5. For half a decade we THRIVED on liar loans and cheap credit.
> Now gone. Record profits, record tax revenues and hidden trouble.
>
>
> The cost of necessities is through the roof. And there are NO sales.
>
>
> Now, throw in the GM/Chrysler bankruptcies and the closure of 1000s
> of dealerships. What, did you think the employees would keep their
> jobs?
>
> Then couple the closed dealers with sending out bankruptcy paperwork
> to thousands of American suppliers. We aren't getting paid and for
> some reason our suppliers still expect their money.
>
> Shit rolls downhill and firing the world's best customers isn't working
> out so well.
>
> We aren't truly ever going to "recover." Just wait until Cap &
> Trade and forced health care hits our employers.
>
> No jobs (or fewer, less well paid jobs) equates to fewer customers.
> Pretty simple when you look at reality.
>
> Fewer customers means less sales, less profit, less tax revenue and
> longer pain.
>
> The good news is that due to the fact that once an unemployed worker
> declares himself "discouraged" he is no longer unemployed.
>
> Magically, he is removed from the data and magically, he ends up
> with pockets full of money and spending galore. [/sarcasm]
Well said, you pretty well summarized it all in a nutshell.
What is a job? Here is my layman's simple definition.
It is a set of directed task(s) that an employer invests in an employee with the prospect to making a profit out of its outputs, be it manual labor or intellectual effort.
In today's obviously deteriorating economic climate, the employment number answers itself.
TK
On Jul 03 10:21 AM TeresaE wrote:
> Why?
>
> Here are my top theories based on reality on the ground and not the
> propaganda from the financial sector and government:
>
> 1. Off shoring and importation of cheaper labor. All major companies
> have closed US concerns over the past decade and re-opened them in
> China or the third world. Those unnecessary, overpaid American workers
> WERE the world's best customers. Now they are broke and the ripples
> of their income loss is growing by the day. This didn't start in
> 2007, my customers & suppliers have been silently being run out
> of business since Clinton opened trade with China. Amazingly enough,
> companies that can't compete go out of business and take a few million
> jobs with them.
>
> 2. Congress changing the credit rules in 2005, which did not take
> effect until late 2007. What did the "experts" think would happen
> when they doubled minimum monthly payments and the banks tripled,
> or quadrupled (or more) interest rates? Did the experts really think
> that people had the extra cash to send to the bank AND keep purchasing
> Asian made crap? All while being charged 30% for debt they have
> carried for a decade? Apparently, they did.
>
> 3. Cap & Trade. MANY manufacturing companies are looking ahead
> and seeing massive pain. Preemptive layoffs are coming.
>
> 4. Increases in freight, utilities, insurance, finance charges,
> taxes and regulations. What, experts haven't figured out there
> is no magic money tree and that the only way to recoup the costs
> being shoved down our throats is to fire more employees? These costs
> have been increasing every 6 months over the past 5 years. Every
> time I turn around something goes up in price while my customers
> expect me to meet, or beat, China's prices.
>
> 5. For half a decade we THRIVED on liar loans and cheap credit.
> Now gone. Record profits, record tax revenues and hidden trouble.
>
>
> The cost of necessities is through the roof. And there are NO sales.
>
>
> Now, throw in the GM/Chrysler bankruptcies and the closure of 1000s
> of dealerships. What, did you think the employees would keep their
> jobs?
>
> Then couple the closed dealers with sending out bankruptcy paperwork
> to thousands of American suppliers. We aren't getting paid and for
> some reason our suppliers still expect their money.
>
> Shit rolls downhill and firing the world's best customers isn't working
> out so well.
>
> We aren't truly ever going to "recover." Just wait until Cap &
> Trade and forced health care hits our employers.
>
> No jobs (or fewer, less well paid jobs) equates to fewer customers.
> Pretty simple when you look at reality.
>
> Fewer customers means less sales, less profit, less tax revenue and
> longer pain.
>
> The good news is that due to the fact that once an unemployed worker
> declares himself "discouraged" he is no longer unemployed.
>
> Magically, he is removed from the data and magically, he ends up
> with pockets full of money and spending galore. [/sarcasm]
This time we had a 467K job loss number despite a +185K add from the birth/death, without this it would have been a lot worse. Other indicators like the work week, which hit all time low of 33.0 hrs, and diffusion indicator fell to 28.6 – all point to very little possibility of hiring in the near future.
On Jul 03 08:21 AM Michigan Mama wrote:
> Yes, there is likely more to the story. Why did you even bother publishing
> this?
Everything else is just further putting off the inevitable. Just like the collapse in public services in California. The U.S. will be poorer because economists are too arrogant to consider that their theories might not have accounted for the current scenario -- an unlimited number of jobs can flow overseas for almost free labor and there are no jobs to replace the old ones.
"...The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part."
I could kick it up a notch or two, myself. For my country.