This Year, the Economy Produced Negative New Jobs (vs. New Workers), and 74% were Part-Time! Causes: Federal Counterfeiting-Based (Printing Worthless Money) Inflation, Negative Interest Rates, and Obamacare (John Mauldin)
Re-posted by Nicholas Stix
Thanks to reader-researcher RC for sendalong, who asked,
Is it due to a dearth of jobs?
Or a surfeit of workers?
http://www.vdare.com/letters/a-texas-reader-says-sub-prime-lending-boom-got-bush-elected
BTW, John Mauldin has a large number of children; I believe three of them are adopted. One of the three is a black male. Mauldin mentioned in a recent column that this son is having a hard time obtaining full time employment. Instead the son works part time for UPS, the shipping concern.
There's a lot of good stuff below, which I alluded to in my title. However…
The biggest factor, which Mauldin somehow failed to mention, was mass, third-word immigration. At one point he hinted that he supports open borders, when he suggested that we might "grow our way out" of the current, extended Great Depression II (my term, not his).
"Growing" has been the problem, all along: Growing the population of low-IQ, high-crime people who are net tax eaters rather than taxpayers, and growing massive deficits. And all "growth" proposals by both parties involve more of the hare that bit us. We have to shrink our way out—by cutting welfare spending for the poor and the rich alike, and by deporting enough illegal alien invaders, to persuade the rest to self-deport, and if that doesn't work, deport the whole kit and caboodle of them.
I know. That's not about to happen, as long as the trespasser-in-chief holds the Oval Office under occupation.
Another thing: Mauldin speaks of a growing contingent of over 55-year-old workers. This is the least sensible passage in his letter. First of all, that age group is dying off. Second, as Norm Matloff has been reporting for years, in the tech sector (but not only there), age discrimination against workers over 35 is rampant, in order to save billions on pay and benefits. Thus, the abuse of the H-1B and other "non-immigrant" visas.
The only explanation I can think of, offhand, for the 55+ numbers would be non-tech sector retirees forced to re-enter the job market (at lower pay, and probably limited hours), and/or those of retirement age who now cannot afford to retire.
Date: Sat, 27 Jul 2013 16:59:59 -0400
From: wave@frontlinethoughts.com
Subject: Thoughts from the Frontline - A Lost Generation
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| A Lost Generation By John Mauldin | Jul 27, 2013
An Ugly Secular Trend in Part-Time Work Not an Audio subscriber?
It is pretty well established that a tax increase, especially an income tax increase, will have an immediate negative effect on the economy, with a multiplier of between 1 and 3 depending upon whose research you accept. As far as I am aware, no peer-reviewed study exists that concludes there will be no negative effects. The US economy is soft; employment growth is weak – and yet we are about to see a significant middle-class tax increase, albeit a stealth one, passed by the current administration. I will acknowledge that dealing a blow to the economy was not the actual plan, but that is what is happening in the real world where you and I live. This week we will briefly look at why weak consumer spending is going to become an even greater problem in the coming years, and we will continue to look at some disturbing trends in employment.
Last week, I noted at the beginning of the letter that an unintended consequence of Obamacare is a rather dramatic rise in the number of temporary versus full-time jobs. This trend results from employers having to pay for the health insurance of employees who work more than 29 hours a week. I quoted Mort Zuckerman, who [N.S.: whose ghostwriter] wrote in the Wall Street Journal: The jobless nature of the recovery is particularly unsettling. In June, the government's Household Survey reported that since the start of the year, the number of people with jobs increased by 753,000 – but there are jobs and then there are "jobs." No fewer than 557,000 of these positions were only part-time. The June survey reported that in June full-time jobs declined by 240,000, while part-time jobs soared 360,000 and have now reached an all-time high of 28,059,000 – three million more part-time positions than when the recession began at the end of 2007. That's just for starters. The survey includes part-time workers who want full-time work but can't get it, as well as those who want to work but have stopped looking. That puts the real unemployment rate for June at 14.3%, up from 13.8% in May.
As it turns out, the unintended consequences of Obamacare are not the only problem. Charles Gave wrote a withering indictment of quantitative easing this week (which we will look at in a few pages) and included the following chart, which caught my eye. Note that the relative increase in part-time jobs began prior to Obama's even assuming office. The redefinition of part-time as less than 29 hours a week and the new costs associated with full-time employment due to Obamacare simply accelerated a trend already set into motion. An Ugly Secular Trend in Part-Time Work Look closely at this graph. It turns out the trend toward part-time employment started in the recession of the early 2000s, paused only briefly, and then really took off in the recent Great Recession. This is clearly a secular trend that was in place well before 2008.
This development is very troubling, especially because it primarily affects young people and those with fewer skills. As I documented in letters last year, workers 55 and older are actually taking "market share" from younger workers. I went back tonight to see if that trend is still in place. The first graph below (the next few graphs are from the St. Louis Fed's FRED database) is one we are familiar with: the actual employment level over the last ten years. We are still two million jobs down since the onset of the last recession, some six years later. The only reason the unemployment rate has fallen at all is that several million people have simply left the labor force for one reason or another.
The next graph is the number of employed 25-54-year-olds. What you will notice is that the above graph shows about 7 million new jobs since the very bottom of the employment cycle, yet employment in the 25-54 age cohort has barely risen. Who got all the jobs?
That mystery is solved courtesy of the next chart, which shows the number of employed in the 55+ age group. Even acknowledging that there is a growing Boomer population does not account for the rather spectacular increase in employment in the 55+ age group. Can you find the recession in this chart? If the St. Louis Fed hadn't shaded the recession in gray, you certainly couldn't find it in the data. Not only did Boomers see a rise in employment, they took jobs from younger groups. If you dig down deeper, you find that the younger you are, the higher the unemployment level of your age-mates. I will spare you that exercise, as this is already depressing enough, unless you are 55+.
Note that I am not arguing that those of us over 55 should be put out to pasture. Many can't afford to quit working (especially when their kids are living with them!). I am just reporting on the facts. The only way to solve this is to grow our way out of it, yet whatever we are doing is not working. The Emergence of a US Underclass Let's turn back to my good friend Charles Gave's analysis, picking up in the middle of his work. He has divined a rather interesting reason for our current employment malaise. I am going to quote at length because this is just so good and deserves a wide audience in the current debate over monetary policy. This chart [below] shows a steady increase in part time employment since the early 2000s back toward levels that persisted through the 1976-2001 period. The big change is the precipitous decline in full time jobs which started in 2002 and accelerated after 2008. It can be seen that the number of part time jobs has risen by 3mn, while full time jobs have decreased by a similar amount. This compositional shift is unprecedented.
The next step is to measure the difference in job growth for part time and full time workers. This is done by comparing the rolling seven year series for each classification of jobs and noting the differential. As this gap widens in favor of part time employment, we would expect a greater share of the US labor force to be earning lower wages. To test this proposition we compare this seven year differential measure with the median income level for US households. The results are quite striking. The correlation between our differential measure for the kinds of jobs being created and the real median income was 0.82 between 1974 and 2013; from 1997 to 2013 it moved up to 0.95. This matters because periods when individuals have stable full time jobs are associated with rising median income, while incomes tend to decline in an unstable job market.
Put simply, median income has slumped because a very large share of Americans can no longer find proper jobs. Behind this economic, political and social disaster, stand many factors such as technological change which has undermined traditional low-skilled employment and the rise of China as a fierce industrial competitor. What is less well understood is the pernicious impact that US monetary policy has had on the US labor market. A collapse in the US median income level has historically coincided with the Fed running a policy of negative real interest rates. The reason why unemployment tends to be lower during periods when capital has a real cost attached was explained in some detail in a piece written in early 2011. This dour relationship has been maintained over the last two years and median income has, as I suspected, continued to fall. Make no mistake, if monetary policy is not substantially changed, then median incomes will continue to fall.
When poor people cannot earn a return on their savings or on their labor they remain trapped in poverty. The effect is to subsidize what are effectively overpaid financial jobs and undermine employment prospects within traditional sectors. As a result, periods of negative real rates tend to be accompanied by the Gini coefficient rocketing higher. Today, this policy is effectively leading to the emergence of a poorly paid and chronically insecure "lumpen proletariat". At least half of the US population may be moving deeper into a poverty trap, which, over the long-run, must negatively impact consumption. Moreover, I never saw a structural bull market in equities take place against a backdrop of falling median income. So why is Bernanke doing it? It would seem for the same reasons that the Japanese did 20 years ago. He is protecting not so much the banks as the bankers. To cut a long story short and to paraphrase a famous quote: What is good for the US Investment Banks is bad for America. Bernanke's policies are aimed at guaranteeing the prosperity of this elite, and as such he has been wildly successful. Paul Volcker, arguably the best ever central banker, cared for the interests of ordinary people over those of investment bankers. By contrast, Bernanke has helped create his own "lumpen proletariat" and a parallel class of the "super-rich." This will have many consequences, not all of them pretty.
For this reason, I saw the potential for so called tapering as the first step towards a return to economic sanity (see Volcker's Return). Alas, I seem to have been wrong. Bernanke has the fortitude of a cheese cake, and once again, I misjudged him. The implications for job creation, fair income distribution and indeed the future prosperity of the US may be far reaching. I am worried. We are watching the Fed employ a trickle-down monetary policy. They hope that if they pump up the banks and stock market, increased wealth will lead to more investment and higher consumption, which will in turn translate into more jobs and higher incomes as the stimulus trickles down the economic ladder. The kindred policy of trickle-down economics was thoroughly trashed by the same people who now support a trickle-down monetary policy and quantitative easing. It is not working.
Maine, Montana, and San Antonio I have been in Newport, Rhode Island, at the Naval War College, where I attended a small Summer Study Group for the Office of Net Assessment for the Department of Defense. My mind is on overload trying to absorb all I heard and learned and to fit all that into my limited understanding of how the world works. It is a very complex world that the US military finds itself in. Shrinking budgets and an expanded menu of options and demands mean difficult choices. Factor in rapidly changing geopolitical and technology environments, and the challenges become even more complex. When I think of the limits our budget process is going to force on our set of choices, the situation does not make me comfortable.
http://www.mauldineconomics.com/go/bwXwl/MEC It is time to hit the send button. Have a good week and enjoy your summer. I intend to.
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1 comment:
Maudlin is not one to look to for realistic financial advice. Dim as a 15 watt bulb!
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