Musings on Sports, Politics and Life in general

Posts tagged “Jobs

It’s Time for the 21st Century

One of the things that’s driving me absolutely bonkers this election season is the focus all the candidates have on returning the USA to the economy of the 1950’s and 60’s. All of them, but especially Messers Trump and Sanders, seem to think that if we wall ourselves off from the rest of the world, we can return to those halcyon days.

It’s a pipe dream, and if you’re buying into it, you might be stuffing something other than tobacco in your pipe. I’m going to drop some knowledge on you that you might have heard whispers of, but never been forced to grasp. The “good ol’ days” are gone forever – and they’re never coming back. Labor-intensive work, requiring little to no skills that pays well, is a thing of your memories. Soon, many of the jobs that we kid ourselves about being in demand will have gone the way of the blacksmith, the cobbler and the typesetter.

It’s understandable that most of us do not want to hear this. We grew up being to ld that if we worked hard, kept out of trouble and were good citizens we could live the American dream. Then, one day we woke up to find that our jobs disappeared and they aren’t coming back. Nobody told us why, or what jobs would replace them. Then, we found out the jobs that did replace them required all kinds of skills that most of us lacked. It didn’t matter that we’d proven ourselves as good employees by every other measure: we simply didn’t qualify for these new jobs.

It would be wonderful if we could bring back those labor-intensive jobs that didn’t require much in the way of training or skills. But here’s the thing: anything that’s labor-intensive is now being done elsewhere, for much less than you would accept as a pay rate. No company in their right mind would bring those jobs back here. As an example, let’s take Apple Corporation’s outsourcing the manufacturing of iPhones to FoxConn, a Chinese company. What nobody told you (or apparently, Mr. Trump) is that FoxConn turns out those millions of units using fewer than 100 employees, and they’re mostly engaged in packaging and shipping. 85% of an iPhone’s manufacturing is automated: it’s built by robots. So, yes, I suppose you could force Apple to build a factory in the USA. But do you suppose they wouldn’t also build the doggone thing with robots? Of course they would.

This is the reality that the snake oil salesmen have avoided telling you this election season. What’s worse, they aren’t telling you that the move away from those jobs is accelerating. They aren’t telling you that by 2025, many of the jobs we currently take for granted will be gone, replaced by automation or cheaper competition from overseas. Think of it this way: the only place you find elevator operators today is in old movies. Fairly soon, anyone who drives for a living, works in the fast-food industry, works in a warehouse or does general office work will be looking for a new career. How can I say that with certainty? Because those jobs are already being slowly replaced. Amazon now has robots doing order picking. McDonald’s is rolling out ordering kiosks in their restaurants. Self-driving vehicles are already on the roads, and companies like Uber and UPS are already in partnerships with vehicle makers to implement driverless delivery systems.

In other words, you needn’t be prescient to realize that the jobs of today are disappearing and that the jobs of yesterday are not coming back. But rather than gird Americans for this reality, we get platitudes about “forcing” manufacturing jobs back to US shores. When future jobs are discussed at all, it’s usually with vague rejoinders about “getting the skills for the jobs of tomorrow.” The politicians are afraid to tell you the truth. It’s a truth I suspect most of you have already grasped, even if you haven’t acknowledged it.

This isn’t the first time we’ve undergone a dramatic shift in the workforce. Over a century ago, our great-grandparents were faced with the shift from an agrarian society to a manufacturing one. They didn’t handle it particularly well. Now it’s out turn, as we lurch from a manufacturing economy to a knowledge economy. But we can do one of two things: we can embrace it and lead the world once again. Or we can fight it and  get left behind, becoming a second-rate power.




The Progressive Economy

This morning, the Bureau of Labor Statistics released the latest job numbers. They aren’t good. But they’re also pretty much what anyone who doesn’t subscribe to Keynesian economics expected.

To put it succinctly, the economy sucks.

To explain why, you don’t have to look further than Adam Smith and basic supply-and-demand laws.

First, making sense of the data: according to BLS, the last two months have seen a net total of 278,000 jobs added to the economy with average wages actually declining by 0.1% over that time. The number of people who gave up looking for work outpaced those landing a job by a 4:1 margin. There are now over 94 million Americans not working, almost equaling the number of Americans who are working.

This is what the progressive version of economics has rendered: national debt now exceeds 100% of GDP, for the first time in our history. Yet despite all of that largess (which the Keynesian’s insist would boost the economy), wages continue to sag and new employment opportunities can’t keep pace with population growth. By the BLS’ own estimate, the economy needs to add 250,000 jobs per month just to match population growth; the most  recent data indicates that we’ve added 222,000 too few jobs.

So how does this affect you? Well, the pressure is still on the employed, not the employer. As a result, wages either sink or stay put. If you ask for a raise, keep in mind there is somebody out there desperate enough to do your job for less than you’re earning now. Even if you’re unaware of that, your boss isn’t.

Add in the regulatory spree that progressivism claims is needed to protect you from yourself, and businesses that are already feeling the pinch of reduced demand are further squeezed. Profit margins are not some whimsical thing that can be created by government edict, as much as statists like to think so. They are very much the result of income after costs – and in a bad economy, adding more costs certainly isn’t going to improve employment, demand or prices.

So, to summarize, Mr. Obama has the economy he asked for. Oh, I know he didn’t ask for these results. But this is the real world, not some theoretical research paper written by left-winged professors, and these are the real-world results of putting those policies in action. Despite record debt (the cornerstone of the Keynesian model) the economy has seen negative aggregate demand. There are as many people without a job as have one. A large number of those people with a job aren’t getting paid enough to increase demand and thus increase employment opportunities, or wages.

In other words: the labor SUPPLY still outstrips the DEMAND for labor. Until that changes, the economy cannot be said to be in “recovery.” That is Mr. Obama’s economy.

Local Economics, Local Politics

When I moved my family to the NYC metro area 8 years ago, this seemed like the perfect neighborhood. Housing was relatively inexpensive, the neighborhood mix in terms of blue-collar and white-collar types, and a true representation of the American melting pot. Crime was low, the schools were better than average. In short, my town (and my neighborhood, especially) are about as representative of as you can find, with one glaring exception: this place is as solidly Democratic as anywhere in the country. The Republican party is virtually non-existent in the county and there is no local Republican organization.

I got to thinking about this yesterday after seeing one of my neighbors put a Mitt Romney sign in his yard and reflecting on recent conversations with others. There is palpable anger and despair with the current administration – anger and despair that emanates from the economic morass that Kearny, like so many other towns, finds itself stuck in. There’s a well-worn adage, coined by former House speaker Tip O’Neill, that “all politics is local.”  There’s another equally well-known political saying, created by political consultant James Carville, that says “it’s the economy, stupid.” And after listening to my friends and neighbors, I found myself wondering just how exactly President Obama can win re-election. In a town where he holds an irrefutable edge in organization, he’s losing the local citizenry. And he’s losing that edge for one simple reason: the economy.

President Clueless

There’s the guy who owns the local bodega. He scrimped and saved to send his son to Columbia Law School. Despite graduating with honors and clerking at the Bronx DA’s office, his son cannot find permanent work. And thanks to the fact that nearly half of my neighbors are unemployed, his business is foundering. Where once he used to hire one or two local kids to help stock shelves, he hasn’t hired anyone. Instead, he has his cousin – an out-of-work software engineer – doing those tasks.

There’s a guy on my block who lost his job a month ago, because the company he worked for hasn’t had any new business in over a year. Despite more than 20 years working as a master stonemason, he is collecting unemployment for the first time in his life. He can’t find work. He’s falling behind on his mortgage. And he’s worried.

Around the corner, there’s a Brazilian restaurant that has cut back on their hours of operation and laid off half the staff. The woman who owns the place is in shock – three years ago she had a booming business ( you couldn’t even get a table without an hour wait) and even opened a second restaurant. Last week, she had to borrow money from her son just to turn the lights back on. She fully expects to have to shutter her business by September if conditions don’t improve.

Two doors up is a guy who owns a bakery. Every night, he leaves for work around 9pm. Last summer, he laid off his delivery driver and took to doing the deliveries himself. This summer, he’s been handing out free bread throughout the neighborhood – because orders are getting canceled at the last minute. While I’m grateful for the free bread, I wonder how much longer he can keep his ovens fired up at this pace. So does he.

After being vacant for two years, the house next door to me finally sold in May. The previous owner paid $378,000 for the property. The bank initially offered it at $290,000. The final selling price: $118,000. The new owners are excited. The rest of us looked at that selling price and weren’t quite so happy.

Down the street is an accountant I know. He got laid off in the bloodbath that was the Fall of 2009 and hasn’t found permanent employment since then. He’s surviving by taking much lower paying, no-benefit contract positions – a far cry form his former $100K salary. Where once he dreamed of sending his daughter to Princeton, the recent graduate is now headed to Hudson County Community College. And without a car – they had to sell her 17th birthday present back to the dealer, since they couldn’t make the payments.

These are just a few of the stories from my neighborhood. And as the anger seethes and despair grows, I can’t help but wonder if the President realizes he’s on a path to be remembered in the same vein as Jimmy Carter and Herbert Hoover. All because he forgot that all politics is local, and it’s the economy, stupid.

Leader or Crybaby?

Yesterday, Presdent Obama held a news conference. The sole purpose of said conference was apparently to whine about not getting his way on the deficit reduction talks.

Look, I realize the President has certain liberal economic ideas he holds dearly. I don’t expect him to abandon them simply because the political reality is they will never make it through either house of Congress. But I also don’t expect him to take over the airwaves for an hour in order to throw a temper tantrum. I bet Sasha and Malia don’t get away with that type of behavior in the White House; I see no reason their father should, either.

He’s supposed to be not only the leader of the United States, but the free world. Leaders don’t complain that nobody is following their lead. They don’t beg, plead and berate. (Well, really poor leaders do, but then they usually find a pink slip one day). No, principle number one in leadership is to recognize the problem, identify a solution and then get buy-in from everyone. Those three traits were all visibly missing yesterday.

  1. Recognize the problem: The problem, to quote another President, is the economy, stupid. All the talk about debt ceilings and corporate tax loopholes doesn’t amount to a hill of beans as long as the economy is still in recession. (It is, as you can read here). While nobody really wants to risk not raising the debt ceiling, the idea of rasing taxes during a recession is an economic no-no, whether you come from the Keynesian or Austrian school. Not even the ultimate Keynesian, FDR, raised taxes. Second half of problem: the Congress will not raise taxes right now, even if it means not raising the debt ceiling. Political reality – that’s how most of them got voted into office, in the first place.
  2. Identify a solution: So, how do you get the debt ceiling raised, reduce spending and get additional revenue, without raising taxes? Go back to a standard TEA party plank: restructure the tax code completely, simplifying the whole thing. Can it be done by August 2? Probably not. But put it out there – ok, we’ll agree to all of these cuts IF you agree to have the tax code completely rewritten in time for the 2013 budget, leaving nothing off the table.
  3. Get buy-in: It’s pretty hard to see who wouldn’t buy-in to that solution. Immediate problem of debt ceiling solved. Short-term problem of deficit reduction solved. Long-term problem of restructuring our finances solved.

Of course, the tactic the President chose is purely political. He’ll be certain to get a bump from his core supporters. But even the most liberal economists are already deriding the lack of any real plan behind yesterday’s posturing. And the right is eviscerating him for playing politics with the national economy.

Where are the jobs?

Something to chew on over the next few days:

According to Keynesian economics, all of this government spending over the past few years should have led to an explosion of job growth. After all, since 2008 the US Government has ballooned the debt by an annualized rate of 17.47% or about twice the rate of growth over the previous decade. But the jobs aren’t coming. This first graph shows the rate of employment vs. total working age population:

Table 1: May Total Employment Ratio

Notice that the percentage of working age people now working has dropped and kept dropping like a stone, despite all of that spending. In fact, the last time this few people had jobs was in 1982 – and prior to that, 1956, when farm payrolls were significantly higher than they are now. Now for the second half of the equation, part time employment vs. full time:

Table 2: May Employment Type Ratio

Fulltime employment has also continued to decline. Of course when you realize most of this recovery job “gains have been in retail or service industries, that shouldn’t come as a surprise. Still, the ratio now has dropped below4 FT employees per PT employee, territory we’ve never seen before. You can’t sustain a recovery on the back of McJobs. Right now, if you run the numbers, only 47% of working age Americans have a full-time job. If you’re shocked, you should be. The last time the number fell below 50% was in 1933.

If Barack Obama thinks this is the way towards recovery, he needs a new navigator.