View Full Version : Job recovery - a decade or more?
From the Brookings Institute comes an analysis of how long it will take to recover from the job losses experienced in the current recession. At the current rate, it will take about 136 months. If a much more optimistic scenario is assumed, it will still take 57 months.
In my opinion, this suggests that housing, the overall economy, and the stock market are unlikely to recover quickly.
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Complete article at LINK (http://www.brookings.edu/opinions/2010/0702_jobs_greenstone.aspx)
Excerpt:
The "job gap" underlying these numbers is daunting. In recent months, on this blog, we described the job gap -- the number of jobs it would take to return to employment levels from before the Great Recession, while also accounting for the 125,000 people who enter the labor force in a typical month. After today's employment numbers, the job gap stands at almost 11.3 million jobs.
How long will it take to erase this gap? If future job growth continues at a rate of roughly 208,000 jobs per month, the average monthly job creation for the best year for job creation in the 2000s, it would take 136 months (more than 11 years). In a more optimistic scenario, with 321,000 jobs created per month, the average monthly job creation for the best year in the 1990s, it would take over 57 months (almost 5 years).
Thanks. After a year and a half of looking for a long term job, you sure know how to kick a guy in the sack.
Better to know, jw74, at least IMO. Best of luck in your search.
Surf n Turf
07-19-2010, 22:22
From the Brookings Institute comes an analysis of how long it will take to recover from the job losses experienced in the current recession.
In my opinion, this suggests that housing, the overall economy, and the stock market are unlikely to recover quickly.
Nmap,
What is the old saw about liars, damn liars, and statistics ---
Thus far this year, (June) the economy has added 882,000 jobs, with 593,000 coming from the private sector.
If we count ONLY Private Sector Jobs*, we are currently creating 98,833 jobs per month. (593K/6)
Thus if
“125,000 people who enter the labor force in a typical month.”, and we are only creating 98,833 we are growing the job base at a negative 21,167 per month (-254,004 per annum)
and if
The unemployment rate is 9.5%, (representing 11,3 million jobs), The TOTAL number of the workforce should then be 118,947,368.
It follows then that Øbama’s negative job growth rate would have the Private Sector at ZERO (0) employment in 468.2 years. :munchin
SnT
*Private Sector job taxes fund the Public Sector
6.8SPC_DUMP
07-19-2010, 22:37
Monster, Indeed, Careerbuilder, Dice, Craigslist, LinkedIn, Jigsaw, Hound and Jobcentral dotcoms' have decent reputations. Best of luck jw.
craigepo
07-20-2010, 06:03
Nmap,
What is the old saw about liars, damn liars, and statistics ---
SnT
*Private Sector job taxes fund the Public Sector
I wonder how many of those jobs were census workers, whose jobs are now almost complete. Not to make it worse or anything.
GratefulCitizen
07-20-2010, 12:19
There are jobs, just not the jobs people want.
It may take two or three unpleasant/temporary/seasonal jobs to support the lifestyle which used to be attainable from one "nice" job.
Was on vacation in western Colorado last week.
The peach farmers there hire plenty of people over the summer.
One particular farmer had 18 applicants and hired them all.
He would've hired more if more people had applied.
The new hands were quite happy with the work and wages, until the weather turned hot.
When gut check time came, all 18 quit.
In over a half century of running his farm, he has never had anything like this happen.
Never.
There is a big gap between expectations and reality in this economy.
Many of those old jobs are never coming back.
The current unemployment is primarily structural, not cyclical.
The skill sets/acceptance wages of potential employees have to meet the needs of potential employers.
Keep pushing, jw74.
Persistence is the one thing over which you have absolute control.:lifter
There are jobs, just not the jobs people want.
It may take two or three unpleasant/temporary/seasonal jobs to support the lifestyle which used to be attainable from one "nice" job.
Was on vacation in western Colorado last week.
The peach farmers there hire plenty of people over the summer.
One particular farmer had 18 applicants and hired them all.
He would've hired more if more people had applied.
The new hands were quite happy with the work and wages, until the weather turned hot.
When gut check time came, all 18 quit.
In over a half century of running his farm, he has never had anything like this happen.
Never.
There is a big gap between expectations and reality in this economy.
Many of those old jobs are never coming back.
The current unemployment is primarily structural, not cyclical.
The skill sets/acceptance wages of potential employees have to meet the needs of potential employers.
Keep pushing, jw74.
Persistence is the one thing over which you have absolute control.:lifter
I appreciate it and what you said about expectations is very true. In the past year I've been a substitute teacher, a house painter, a waiter, a bouncer, and now a bartender. Whenever something steadier than what you have comes up you have to be ready to say "of course I can do that."
I hesitate to say this in the company of this board, but persistence is my strong suit. Thanks again to all.
GratefulCitizen
07-20-2010, 14:18
I appreciate it and what you said about expectations is very true. In the past year I've been a substitute teacher, a house painter, a waiter, a bouncer, and now a bartender. Whenever something steadier than what you have comes up you have to be ready to say "of course I can do that."
I hesitate to say this in the company of this board, but persistence is my strong suit. Thanks again to all.
Also worked as a school teacher and as a bouncer (among many other jobs...) prior to getting my foot in the door at UPS.
Had to pick up a second job to make it work here.
Put in back-to-back 3100 hour work-years in 2003-2004 between the jobs.
Success is a choice.
You don't always get to choose the particular path or the timing, but you can choose to drive on until you find it.
You have chosen.
You will succeed.
:lifter
The jobs are never coming back. A present (like once a week) client, Canadian by birth, related the following to me: “Verbatim”.
“I was a partner in many brand names of discount entertainment models, Radio Shack, Best buy, etc. I got out.
“Now that I have formed my own company based in China, not only have we lowered our cost per unit of production, but our QC, quality control, has gone through the roof. The American politician is the one to hold accountable, and not us for your demise”.
GratefulCitizen
07-20-2010, 18:00
The jobs are never coming back. A present (like once a week) client, Canadian by birth, related the following to me: “Verbatim”.
“I was a partner in many brand names of discount entertainment models, Radio Shack, Best buy, etc. I got out.
“Now that I have formed my own company based in China, not only have we lowered our cost per unit of production, but our QC, quality control, has gone through the roof. The American politician is the one to hold accountable, and not us for your demise”.
Respectfully disagree that the American politician is responsible for the core issue.
They do exacerbate the problem through corporate tax rates.
Manufacturing moving overseas was inevitable.
Had an econ professor who detailed and predicted this back in the early 90's.
He knows is stuff.
http://econbus.mines.edu/Roderick-Eggert
Our economy does benefit some from the exchange.
Califia Beach Pundit points this out:
http://scottgrannis.blogspot.com/2010/05/deflation-and-inflation-are-alive-and.html
No doubt your source is correct, but that’s not what I was relating with regard to this post, to be blunt.
(% are fictional)
Mr. Egan, can manufacture his components at a 30% COS per/unit in China vs a 65% COS per/unit in the US. Not to mention that the QC is through the roof.
Forget where your national allegiance are; why should he manufacture his product in North America, if his responsibilities are to his partners and shareholders?
The politician is guilty, because they did not offset the imbalance in trade with regard to wages and corporate earnings, they did this, by not demanding an equitable and adjustable monetary exchange rate base on their Yuan.
But, for the sake of argument let’s say they had, and further that all things were equal.
China would still overcome the economic challenge by producing product with superior customer satisfaction.
The American unionized work force is no longer competitive, and if I might add, culpable, for its own demise.
The Reaper
07-20-2010, 19:21
How do the Germans anfd Japanese remain manufacturing nations?
TR
GratefulCitizen
07-20-2010, 20:47
In a sense, the USA is a victim of its own success.
For 40 years, the amount of stuff made in the USA has increased dramatically.
There are downturns with economic cycles, but the overall trend is significant increase.
http://www.bea.gov/national/nipaweb/nipa_underlying/TableView.asp?SelectedTable=45&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Qtr&FirstYear=1995&LastYear=1996&3Place=N&AllYearsChk=YES&Update=Update&JavaBox=no
http://www.bea.gov/national/nipaweb/nipa_underlying/TableView.asp?SelectedTable=59&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Qtr&FirstYear=2009&LastYear=2010&3Place=N&AllYearsChk=YES&Update=Update&JavaBox=no
The number of manufacturing jobs was stable for a little over 30 years, despite a massive increase in the labor force.
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet **
The number manufacturing jobs has been stable or decreasing (on average).
The amount of stuff produced has been steadily increasing (on average).
More stuff made from the same or fewer people.
That is just productivity and innovation in action.
That productivity and innovation is why 4.5% of the world's population produce 25% of the world's goods and services and hold 40% of the world's wealth.
The price of that prosperity is inequity of outcomes among our citizens.
We don't have manufacturing jobs here because they aren't needed.
Robots do much of the work now.
The economic dominoes will fall in China, and more manufacturing will eventually be needed from this nation.
This will not, however, lead to significant increases in manufacturing employment.
We'll just have robots making the robots which make stuff.
The structural change to the domestic economy (and soon the world) is permanent.
People need to acquire the skills desired by employers if they want jobs.
Not saying how it should be.
Just saying how it will be.
**
The bls website isn't being nice.
Go here: http://www.bls.gov/iag/tgs/iag06.htm
Scroll down to the "Employment, all employees" row and hit the "back data" dinosaur icon.
The "from - to" range can be selected with the tool at the top of the applet.
Another point to consider is that a side effect of a weak dollar makes it more cost efficient to manufacture in the US.
We no longer have any steel mills in this country. .
Really?
http://www.arcelormittal.com/index.php?lang=en&page=429
http://www.uss.com/corp/index.asp
The Reaper
07-21-2010, 11:32
I think if a WWII-style type of war ever flares up again, we would scale up manufacturing a lot more.
How?
Have you seen the approval process to get any building done in this country?
The environmentalists will resist any manufacturing facility like the plague.
"Those jobs are going, son, and they ain't coming back."
TR
The Reaper
07-21-2010, 11:53
Well I would think the environmentalists would be over-ruled if it was a WWII-scale war, with such an enemy. I mean I doubt the government will let the environmentalists get in the way if the country was facing the equivalent of Imperial Japan or Nazi Germany or the Soviet Union at its height.
I suspect that the courts would rule differently.
TR
Patriot007
07-21-2010, 12:03
I would like to think that as well Broadsword... We're facing an enemy that is more proliferative and has been around much longer than Imperial Japan, Nazi Germany or the Soviet Union combined which that has declared war and attacked non-believers for all of its existence. There are enough people in this country that have priorities higher than liberty. It has been repeated multiple times here but only America can destroy America.
I think if a WWII-style type of war ever flares up again, we would scale up manufacturing a lot more.
We have become a nation of assemblers, paper pushers and service providers who rely heavily foreign countries to do the dirty work i.e. manufacturing. The knowledge base is nearly gone.
We shut off water to farming in California to save some f-ing minnows. The EPA is hammering farmers left and right which means we buy more and more food outside the US.
The oil leak in the Gulf is a good example how things would come together in a crisis. The EPA spends endless weeks examining the ecological effects of sand berms. The EPA had is testing a skimmer for weeks to see if it works. The Coast Guard shuts down skimmers for 24-48 hours to make sure they have fire extinguishers and life vest........while they are looking up a dead horses ass to see what it died from we got millions of gallons of oil spewing into Gulf......or let me check the hose for leaks while the house burns around me.
I think it is highly doubtful another World War will do anything other than decrease the population through bullets, starvation and increase the need for a second language in Chinese.
Really?
http://www.arcelormittal.com/index.php?lang=en&page=429
http://www.uss.com/corp/index.asp
To a large degree they import castings, forgings, billets or roll........they 'finish' it and it is deemed Made in USA.......it's the 51% factor. There are also manufacturing vessels off the coast that are manned by low wage foreigners that produce 'domestic' materials.
It is smoke and mirrors BS, partially the result of the EPA and Greed.
I have been to a few 'manufacturing' plants of pipe fittings. There was no start to finish manufacturing, just finishing a raw 'unmarked' product and there were not enough people or machinery to produce the 10's of thousands of product they sold. Some will even tell you they get the 'raw' product from Mexico, China, etc.
Or you can do like Nibco and many manufacturers do, open a manufacturing facility in Jaurez, Mexico and then drive it across the street into Texas....Made in USA.
Well I would think the environmentalists would be over-ruled if it was a WWII-scale war, with such an enemy. I mean I doubt the government will let the environmentalists get in the way if the country was facing the equivalent of Imperial Japan or Nazi Germany or the Soviet Union at its height.BS2004--
With respect, even when America faced the dire threat of Nazism, the government received a lot of 'push back' from the private sector. In an earlier post, I pointed to an example of this 'push back' <<insufferable self referential link (http://professionalsoldiers.com/forums/showpost.php?p=303581&postcount=26)>>.
More generally, I would point out two constant themes in American military history for your consideration. First, every war America has fought has been unpopular among one group of Americans or another. Second, domestic politics (broadly conceived) has always been a driving force behind military/naval/aerospace policy and the formulation of grand strategy.
My $0.02.
GratefulCitizen
07-21-2010, 14:40
How?
Have you seen the approval process to get any building done in this country?
The environmentalists will resist any manufacturing facility like the plague.
"Those jobs are going, son, and they ain't coming back."
TR
If more production is needed, existing factories would run production lines for more hours per day or they would be re-engineered to change product or output rate.
Most probably don't run 24/7.
The marginal cost of production in our manufacturing sector is pretty small.
Scaling up is easy.
It is true that the manufacturing jobs are never coming back.
They have been replaced by engineering, construction, and maintenance workers who design, build, and maintain automated production facilities.
The Reaper
07-21-2010, 15:10
If more production is needed, existing factories would run production lines for more hours per day or they would be re-engineered to change product or output rate.
Most probably don't run 24/7.
The marginal cost of production in our manufacturing sector is pretty small.
Scaling up is easy.
It is true that the manufacturing jobs are never coming back.
They have been replaced by engineering, construction, and maintenance workers who design, build, and maintain automated production facilities.
Just out of curiosity, have you studied how many steel plants we had rolling in WW II, what their gross output was, and how much we can make today at max capacity?
How about smokeless powder? Or loaded ammunition? Or airplanes? Or bulk explosives?
How many facilities are left in the US which can cast tank hulls and turrets?
What is the production time to build a tank?
How long does it take to design and manufacture an aircraft these days?
What minerals vital to war production are no longer mined in the US and must be imported from foreign sources?
How many flagged ships are in the US Merchant Marine and Navy sealift fleet today? How will you deliver heavy equipment once these are unavailable?
If you are the enemy and you see these bottlenecks, how could you exploit them in a protracted conflict?
TR
I have to question the premise of scaling up production.
Can it be done? Yes - over time. That's the key word - time.
To scale up production, we would need an entire network of production - the raw materials, the suppliers of everything, the people who did various things, and all the rest. We must ask ourselves how long our enemy (or enemies) will give us. We must also ask whether our suppliers will (or even can) provide critical materials.
If a war occurs, will we still have all the oil (and chromium, and rare earths, and so on) that we need? If not, how do we modify the transport system to take care of war supplies? Are we going to be able to shift enough, fast enough? And are there side effects - transport of food, for example? It's all connected, and such a shift will not be easy.
Let's consider something simple - night vision equipment. Can we make the lenses, the electronics, and all the parts? Can we assemble them in large numbers? Are we sure that there aren't any obscure little parts made elsewhere, which would require entire new facilities to produce? It doesn't matter if we manufacture more food processors than the rest of the world combined if we need night vision. Replicate that problem across the vast span represented by military logistics.
What of trained people? We've gotten rid of them, over the years. They have retired, moved on, died. How long to make a new machinist or tool and die maker? How long to get people to the factory floor, train them, and manage them?
Let's suppose we can get people trained and up-to-speed in 30 days. (Good luck with that, BTW.). So, at best, it's going to be 31 days before any of that production gets to the soldiers. Will we have enough, soon enough? Or are soldiers going to be passing around bullets so everyone has one?
If there's a war, I strongly suspect it will be a "come as you are" affair. Correcting supply deficiencies after the beginning of hostilities may be remarkably difficult.
And that's the problem with David Ricardo's free trade theory. Yes, we can get lots of cheap flat panel televisions from China. But we have sent both the production capability and the production knowledge to them. So long as we're all friends, that can work. But if a war occurred, and we needed to produce lots of those displays for military purposes, we might face a substantial shortfall. How long to fix that problem? I'd be surprised if we could produce any substantial volume in less than 90 days, best case, with no court arguments.
Will we have the luxury of time? I really doubt it.
I think it would be the Chinese who would have a higher chance of starving in such a war. They do not have the farmland to grow food like we do.
Yes. But China doesn't have the EPA, USDA, DOI and BLM creating regulations that hinders farming.....unless of course your Monsanto, ADM or Don F-ing Tyson. In addition the US Government is buying up land and putting much of it off limits. In addition to that more and more of our produce is coming from places like Mexico. All of which means there are less people who farm or know how to farm.
So lets say it all goes to hell. Do you have any idea how long it will take to have a bountiful harvest? I would guess 6-12 months if everything works in your favor. Will the Feds allow you to raise hogs and sell the pork chops without a EPA evaluation of the run off, a clean room and wearing HAZMAT suits in the hog pen?
What I am getting at is it would likely take many years, possible several generations to reverse enviro brainwashing, our dependence on convenience and the damage created by outsourcing so much of our infrastructure.
Farming was a tradition passed down through generations, and like the steel industry that knowledge is evaporating.
Thus we will starve.
So lets say it all goes to hell. Do you have any idea how long it will take to have a bountiful harvest? I would guess 6-12 months if everything works in your favor. Will the Feds allow you to raise hogs and sell the pork chops without a EPA evaluation of the run off, a clean room and wearing HAZMAT suits in the hog pen?
Great point.
Let's suppose someone, somewhere gave me a hog farm. I wouldn't have a clue what to do. Even if there were no constraints of any kind, I would not know how to keep that farm going. I suspect many are in the same boat.
I wonder if I could feed the hogs fast food? Donuts, maybe?
After my ignorance killed the farm....what next?
GratefulCitizen
07-21-2010, 15:59
Just out of curiosity, have you studied how many steel plants we had rolling in WW II, what their gross output was, and how much we can make today at max capacity?
How about smokeless powder? Or loaded ammunition? Or airplanes? Or bulk explosives?
How many facilities are left in the US which can cast tank hulls and turrets?
What is the production time to build a tank?
How long does it take to design and manufacture an aircraft these days?
What minerals vital to war production are no longer mined in the US and must be imported from foreign sources?
How many flagged ships are in the US Merchant Marine and Navy sealift fleet today? How will you deliver heavy equipment once these are unavailable?
If you are the enemy and you see these bottlenecks, how could you exploit them in a protracted conflict?
TR
Fair enough, sir.
In response to this question;
If I was the enemy and I saw those bottlenecks;
-I would try to stir up strife within the US over how to manage those resources and production lines.
-I would try to get interested parties fighting with each other for lobbying influence to encourage corruption and meddling within the government to interfere with the marketplace response to increased demand.
-I would try to stir up strife among the citizens negatively affected by whatever decisions were made, or not made, by the government regarding strategic economic concerns.
The primary goal would not be to diminish the war fighting capability of the military.
The primary goal would be to slowly sap the political will of the American voter, leaving them neither hot nor cold with regard to foreign threats, but lukewarm.
<edit>
IIRC, the central planning element of the wartime economy during WWII involved maximizing production based on the most limited resource.
Believe it was determined to be copper or steel.
(Got this info during an econ or linear algebra class a long time ago, sorry for the lack of direct references.)
Lacking the computer power of today, theoretical maximization of production could be done by solving a system of linear equations.
At this point in history, the most limited resource (in terms of $) would probably be labor.
Labor supply was an issue of sorts then, too.
Government mandates on wages denied the true cost.
This led to the tying of health care to employment.
The unintended consequences of government meddling can be far reaching.
<edit>
In response to this question: At a net level, petroleum.
Believe we have some strategic reserves of other stuff in addition to the SPR.
Heard a rumor that at one time, we had a strategic paper reserve.
Pretty hard to run a government and military bureaucracy without paper.
The critical one now would appear to be rare earth metals.
We do have a de facto reserve in the form of consumer electronics and other consumer items.
An enterprising company could extract those rare earth metals if it were needed.
Similar activities were being done with plastics while the price of oil was high.
<edit>
In response to these questions:
We do have category 1000 mothballed aircraft, and there is also the National Defense Reserve Fleet.
These would buy time to allow a ramping up of production facilities.
My responses are not meant to be snarky or arbitrarily contrarian.
There are definitely vulnerabilities.
I have faith in the military's ability to hold the line long enough for the economy to make necessary adjustments, should they be warranted.
The sleeping giant is still a giant.
After the 9/11 attacks, skilled and unskilled workers flooded to ground zero from all over the nation, unbidden.
The decentralized nature of our economy has weaknesses, but it also has strengths.
Great point.
Let's suppose someone, somewhere gave me a hog farm. I wouldn't have a clue what to do. Even if there were no constraints of any kind, I would not know how to keep that farm going. I suspect many are in the same boat.
I wonder if I could feed the hogs fast food? Donuts, maybe?
After my ignorance killed the farm....what next?
Feeding is easy. A slop bucket of table scraps and corn get's them fed ;) Then the question becomes how do I keep the hog healthy, what do I do with a litter, when do I castrate the males, how do I process them and how do I store the meat.
There is a learning curve.
As to your comments on manufacturing in war time.
Look no further than Nuclear Energy as a tell tale sign.
As a Nuclear Engineer told me a few years back, we can design them, but we don't have the manufacturing resources domestically to build a plant. Worse yet, domestic companies are not willing to invest in the necessary infrastructure and certification because of regulations and political agendas. The few companies that can and do produce nuclear grade products do not have the capacity for large production.
At the time he was looking for nuclear grade pressure vessels. One company in Texas has the facility, the capability but lacked the ISO Certification.
They would not invest, because if Obama won it was all going GREEN.
6.8SPC_DUMP
07-21-2010, 21:53
How do the Germans and Japanese remain manufacturing nations?
TR
Perfect question in a debate that is absolutely crucial to the eventual resurgence of the American economy. They both engage in cross-shareholdings to protect their companies from hostile takeovers. I used to think that wasn't the key aspect but I don't know now.
Germany isn’t just respected for their manufacturing: they are a leader in processing materials. Unlike us they reinvested for world class metals and plastics processing/production technology that has secured their global position in manufacturing. There is also no substitute for a quality product.
During the current crisis their firms streamlined and continued introducing innovative new products that met the demands of expansion into new markets (which is where the growth is).
The 20 billion we gave them didn’t hurt – but the real gem of their economy is the importance given to and contributions of small and midsize companies (employing >500 workers) – called the German “Mittelstand”. They hire about 70% of all employees and account for over 95% percent of all companies. It’s the backbone of the German middle class.
The mittelstand companies are export-oriented, exporting almost 80% of their production. Typically, the companies work on "back stage"; they produce components and systems which are then used by other companies to create end products - “Inside the miracle: How Germany weathered the recession” The Economist, 2010.
Their dilemma on bailing out other euro-zone members isn’t good will IMHO - it’s that the 16 member countries account for about 43% of its exports.
Their banking system is one of protectionism, co-decision and co-responsibility. Banks serve as creditors, shareholders and consultants. However, the trend has shifted towards a slightly more market-oriented system. Deutsche Bank, Dresdner Bank and Commerzbank is where the power is concentrated – particularly for large companies. Here’s a short article on it: Link (http://www.virtusinterpress.org/additional_files/journ_coc/Paper18.pdf )
Germany did everything we didn’t do in the last 25 years to protect their middle class. So much of it is over my head – like the impact of our need to be the world reserve currency status and Military expenditures.
President Reagan is a hero to so many conservatives (which isn’t the same as neo-conservatives IMO) and dispite his track record of being vehemently and unapologetically “wrong” on the most important economic issues we face (derivatives problem, credit crisis, housing collapse, ect.) Art Laffer still gets his bullshit articles circulated in the MSM because he was part of Reagan’s economic team.
The true “Father of Reaganomics” is Paul Craig Roberts who was Assistant Secretary of the Treasury in the Reagan administration. His unmerciful criticisms of Bush 42 has him black listed but here’s what he has to say about the topic.
Thanks. After a year and a half of looking for a long term job, you sure know how to kick a guy in the sack.Move!:lifter Migrate to a better location ASAP!:cool:
Stay safe.
6.8SPC_DUMP
07-21-2010, 23:11
How the Economy was Lost (http://www.counterpunch.org/roberts02242009.html)
Here it is. Sorry about the delay I wasn't to post it for a bit and won't copy and paste the entire article.
Dr. Roberts is an extremely polarizing person. I had the same impression of him initially as you did when I first read his work years ago about the trade deficit/borrowing with China. I disregarded it and came to find some years later that he was addressing his POV on questions that I hadn't even considered. I have come to appreciate and greatly respect his POV on economic matters. That is the context of his writing which I was focusing on.
For several years but particularly in the past 2 years, I have been trying to work around wild price gyrations (110% price swings) on previously price-stable commodity chemicals.
I have also had to deal with allocations of materials and unavailability of materials.
In a lot of cases, the chemical pricing and unavailability is due to lowered output by manufacturers. With petroleum-based products, there is a fair bit of shuttered capacity. In some cases, the plants are shuttered to keep prices higher. Some of it is due to the economy as well.
A lot of the petroleum-based products are in high demand in China, and the Chinese are willing to pay more for the materials than US manufacturers are.
Dow, Dupont, Lyondell, Union Carbide, Monsanto, ADM et al are selling to China because they make more money that way. Capitalism at work.
I'd be able and thus willing to pay more for my raw materials if I could pay my employees $.64/hr like they do in China. Not an option.
I frequently encounter delays in supply deliveries that never used to occur. Most businesses have lowered inventory levels to manage cash flow in a slower economy. Nobody wants all their cash sitting in inventory that won't sell.
I'm doing the same thing. I am striving to have the absolute minimum tied up in inventory so if the music suddenly stops playing, I'm not left with tons of inventory I can't sell. People just have to wait longer for their product.
Interestingly, materials costs are lower than they have been in 10 years on most items.
Surge demand for products isn't resulting in increased hiring most of the places I deal with. I'm keeping my headcount low too. I'd rather pay overtime than bring more people on, because I don't know what new idiotic move the Feds or the State is going to do next. How much are my taxes going to go up in the next 5 years? What new requirements am I going to have to comply with as a business owner? Is my unemployment tax going to get jacked up? I have no clue. Overtime seems cheap under the circumstances.
Most people I speak to are waiting to make investments or planning exit strategies for their businesses because it is clear that the political and economic leadership is in disarray, vacillating, and unable to come up with any plan to solve problems. A lot of business owners I know seem to think that the Democratic Leadership is truly anti-business.
I don't see the Republican Party as being much better lately. The two political parties are like the driver and passenger of a car engaging in a fistfight while driving down a curvy road at 70 miles an hour. Each seems to be more concerned with getting their licks in on each other than showing any real leadership and trying to promote a better business and economic climate.
Surge demand for products isn't resulting in increased hiring most of the places I deal with. I'm keeping my headcount low too. I'd rather pay overtime than bring more people on, because I don't know what new idiotic move the Feds or the State is going to do next. How much are my taxes going to go up in the next 5 years? What new requirements am I going to have to comply with as a business owner? Is my unemployment tax going to get jacked up? I have no clue. Overtime seems cheap under the circumstances.Axe--
If you don't mind two prying questions:
What is your sense of the morale of your team? Friends/associates working at firms with manpower policies similar to yours seem increasingly on edge when they talk about their work loads. (Many have made the decision to leave as soon as circumstances allow.)
Do you have for expanding your team if the economy starts to grow? (Before, during, or 'just in time'?)
And here are some more regulations, designed to facilitate more enforcement actions.
Rhetorical question: Why on Earth would any business want to hire anyone? I wouldn't. Every single job would be outsourced, offshored, and kept outside the regulatory circle.
LINK (http://cnsnews.com/news/article/69746)
White House Backs Bill to Collect Employee Pay Information from Businesses
Thursday, July 22, 2010
By Penny Starr, Senior Staff Writer
(CNSNews.com) – The Obama administration is backing legislation that includes regulations requiring U.S. businesses to provide to the government data about employee pay as it relates to the sex, race and national origin of employees.
In an orchestrated effort that included a statement by President Barack Obama and an event at the White House featuring Vice President Joe Biden, Attorney General Eric Holder and Labor Secretary Hilda Solis, the president and his cabinet endorsed the Paycheck Fairness Act.
The House approved the act in 2009, but the Senate did not approve it. In the 111th Congress, both the House and the Senate have offered legislation that covers a wide range of workplace requirements and regulations, including training girls and women to become better at negotiating pay and benefits, and the establishment of a data base of U.S. workers’ pay in both the public and private sector.
At the White House on Tuesday, Biden was the keynote speaker at a Middle Class Task Force event where he told invited guests that the Obama administration is “on the right side of history” by passing legislation to ensure women are paid the same as their male counterparts.
“Women make up nearly half of all workers on U.S. payrolls, and two-thirds of families with children are headed either by two working parents or by a single parent who works,” Biden said.
“Yet, the workplace has, for the most part, not changed to reflect these realities – and it must. Closing the gender pay gap, helping parents keep their jobs while balancing family responsibilities, and increasing workplace flexibility – these are not only women’s issues, they are issues of middle class economic security,” he said.
Biden said Congress should pass the bill, which includes language requiring employers to provide information about employee pay. In Section 8 of the bill, entitled Collection of Pay Information by the Equal Employment Opportunity Commission, it calls for an amendment to Section 709 of the Civil Rights Act of 1964:
"(f)(1) Not later than 18 months after the date of enactment of this subsection, the Commission shall--
"(A) complete a survey of the data that is currently available to the Federal Government relating to employee pay information for use in the enforcement of Federal laws prohibiting pay discrimination and, in consultation with other relevant Federal agencies, identify additional data collections that will enhance the enforcement of such laws; and
"(B) based on the results of the survey and consultations under subparagraph (A), issue regulations to provide for the collection of pay information data from employers as described by the sex, race, and national origin of employees."
In a White House-issued press release, the “enhancement of enforcement” is described as “a pledge by the Department of Justice and other enforcement agencies will coordinate and collaborate through investigations, litigation, policy guidance, data analysis, and public education efforts to make meaningful progress in closing the wage gap,” the press release stated.
“Already, the Justice Department, in conjunction with the EEOC and four of its district offices, has launched a robust and intensive pilot program to coordinate the investigation and litigation of charges against state and local government employers,” it added.
But critics charge that the Paycheck Fairness Act will be harmful to small businesses and the economy. The National Association of Manufacturers issued a statement about the bill in April.
“The Paycheck Fairness Act, which purports to prevent instances of illegal gender-based discrimination, could outlaw many legitimate practices employers use to set employee pay rates, even where there is no evidence of intentional discrimination and employers act with reasonable belief that their pay policies are lawful,” the statement said.
“Manufacturers strongly oppose unlawful discrimination in any form, but the Paycheck Fairness Act would impose unparalleled government control over how employees are paid, among even the nation’s smallest businesses,” it added.
“It would drastically alter the Equal Pay Act to allow unprecedented penalties of unlimited punitive and compensatory damages in cases of alleged discrimination,” the statement said.
James Sherk, Bradley Fellow in Labor Policy in the Center for Data Analysis at conservative The Heritage Foundation, said that the law would be a boon to trial lawyers seeking damages from employers for their clients and would allow the courts to “micro-manage” American businesses.
In a statement issued on Tuesday, Obama said it was discrimination in the workplace that is harming the economy and American families.
“In America today, women make up half of the workforce, and two-thirds of American families with children rely on a woman's wages as a significant portion of their families' income,” the statement said.
“Yet, even in 2010, women make only 77 cents for every dollar that men earn. The gap is even more significant for working women of color, and it affects women across all education levels,” the statement said.
“As Vice President Biden and the Middle Class Task Force will discuss today, this is not just a question of fairness for hard-working women. Paycheck discrimination hurts families who lose out on badly needed income. And with so many families depending on women's wages, it hurts the American economy as a whole. In difficult economic times like these, we simply cannot afford this discriminatory burden.”
Move!:lifter Migrate to a better location ASAP!:cool:
Stay safe.
Yes Sir, that was what the Mrs & I were planning until really recently. We decided to stay and accept some family hospitality while I work nights and self sponsor through a police academy. Thanks for the advice, we've got ourselves ready for whatever and wherever opportunity presents itself.
JW
Axe--
If you don't mind two prying questions:
What is your sense of the morale of your team? Friends/associates working at firms with manpower policies similar to yours seem increasingly on edge when they talk about their work loads. (Many have made the decision to leave as soon as circumstances allow.)
Do you have for expanding your team if the economy starts to grow? (Before, during, or 'just in time'?)
Morale is poor. Stress is high. There was an all hands pay cut last year, which hit morale hard. I can see the signs of critically high stress from overwork in my people.
I have had a lot of overworked folks showing out-of-character behavior. I have had a number of people blow up for no apparent reason, and threaten to quit. Nobody likes the stress of there being more work needing to be done than there is time to accomplish it.
I let the people who get upset vent, tell them I'd hate to lose them, but tell them to do what they need to do. They calm down and realize there isn't anywhere else for them to go, and the next day come in, apologize, and get back to work. There aren't any other jobs out there in our area.
I have a $15/hour clerical job opening and had over 150 applications. I have interviewed over 12 people with MBA's who all really want the job. I have never seen anything like it before.
A lot of the people I have been interviewing are employed in other businesses. Everyone seems to be concerned about their employer's viability.
Our business is down, but I had to cut a disproportionately higher number of staff. We are burdened with the same regulatory and accounting burdens we had before, however. Everyone is juggling more balls than is good, and everyone feels the stress that comes with worrying about dropping an important ball.
I am personally doing 2 other peoples jobs now in addition to the other stuff. 12-14 hour days are the norm. I don't have to pay myself overtime, after all.
Any staff additions would be done just in time, in fact probably a little on the late side. I would give serious consideration to using a temp service or shifting work to my Canadian facility.
That is very interesting Axe, I have been wondering just how many business owners, the ones who own and run the small and midsize businesses that employ the majority of America, who may not keep a keen eye on politics all the time, and may not be particularly Republican or Democrat, are being influenced by the policies of our government right now.
There are some who say it's "nonsense" that uncertainty is stalling the economy, but I don't believe this.
Whoever thinks that uncertainty isn't a very large factor does not understand human nature very well. Everyone, especially business people, want to have the sense that:
1. The people in charge know what the hell they are doing, and;
2. The rules are going to stay somewhat consistent.
We have neither going for us right now.
The White House can't even be decisive enough to make up their minds about firing a scapegoat or not, for crying out loud.
So much change has occurred so quickly, and in so many unprecedented areas, that nobody knows what the new normal is. Business owners take risks, but they are calculated risks. You can't calculate risk if you don't know what the rules are going to be a year from now.
The sudden nature and magnitude of this recession as well as the Federal government's inability to stop spending like crazy has really made the business owners I know start thinking with a far less optimistic viewpoint and with a much more jaundiced eye.
When the credibility of our system is being questioned by the main players and heavy lifters, there is a problem.
Surf n Turf
07-23-2010, 20:21
Whoever thinks that uncertainty isn't a very large factor does not understand human nature very well. Everyone, especially business people, want to have the sense that:
1. The people in charge know what the hell they are doing, and;
2. The rules are going to stay somewhat consistent.
We have neither going for us right now.
When the credibility of our system is being questioned by the main players and heavy lifters, there is a problem.
To follow-up on Axe’s comments, an article from Der Spiegel
Ambiguous and confusing Rules and Regulations might be the death knoll for our financial sector.
Will the World’s financial Centers become Frankfurt, London or Tokyo
SnT
German Giants Flee Wall Street
With expensive accounting rules, an increased threat of litigation and hundreds of millions of dollars in fines for some firms, the once prestigious New York Stock Exchange and other American markets have become unattractive to Germany's biggest companies.
Of the 11 firms on Germany's DAX index of blue chip companies that were at one time listed on the NYSE, only four still remain: Deutsche Bank, Fresenius, SAP and Siemens.
The double-digit costs of SEC complaince, however, are paltry compared the hundreds of millions of dollars in liability -- either through lawsuits or investigations and prosecutions -- to which a US listing can expose foreign firms.
"What the SEC fully doesn't grasp today is that dealing with the US regulation system is a nightmare
http://www.spiegel.de/international/business/0,1518,706321,00.html
To follow-up on Axe’s comments, an article from Der Spiegel
Ambiguous and confusing Rules and Regulations might be the death knoll for our financial sector.
Will the World’s financial Centers become Frankfurt, London or Tokyo
SnT
German Giants Flee Wall Street
With expensive accounting rules, an increased threat of litigation and hundreds of millions of dollars in fines for some firms, the once prestigious New York Stock Exchange and other American markets have become unattractive to Germany's biggest companies.
Of the 11 firms on Germany's DAX index of blue chip companies that were at one time listed on the NYSE, only four still remain: Deutsche Bank, Fresenius, SAP and Siemens.
The double-digit costs of SEC complaince, however, are paltry compared the hundreds of millions of dollars in liability -- either through lawsuits or investigations and prosecutions -- to which a US listing can expose foreign firms.
"What the SEC fully doesn't grasp today is that dealing with the US regulation system is a nightmare
http://www.spiegel.de/international/business/0,1518,706321,00.html
In addition to not hiring, I am avoiding any unnecessary capital expenditures right now because I have no idea if things are going to stay the way they are right now or get worse. I don't want to be stuck paying for machinery that might end up sitting idle.
Any expenditures I would make on machinery would be done to eliminate a worker. Automation is the only way to be able to compete in the market. In addition, I have never had to discipline machinery, and machinery has never done a shakedown and sued me when I stopped using it.:D
Now I see in nmap's article I will soon get to submit payroll data to the feds too. I have to pay someone to gather and send that info.
To show regulatory issues from my small business's perspective, my regulatory costs are about 120K or more per year, spent largely on information-gathering and reporting. I have to comply with and submit reports to a number of agencies. Most agencies require multiple reports, and those reports are often redundant and overlapping.
The sad thing is that I know for a fact that many agencies don't read them, they file them without review. Heaven help you if you don't submit your report on time though! LOL
Below is a list of Agencies requiring reporting or other interface. II am not listing them as a complaint, merely to illustrate to someone who might not be aware of it the burden a small privately held chemical manufacturing business has to deal with to keep the doors open.
There are more agencies that we have to track to see if they have come out with new rules that might affect us. I did not list them here:
EPA- SPCC Division
EPA-Air
EPA -Water
EPA-Land
EPA-Hazardous Waste
EPA-Pesticide Division
3 States worth of EPA- SPCC Division
3 States worth of EPA-Air
3 States worth of EPA -Water
3 States worth of EPA-Land
3 States worth of EPA-Hazardous Waste
6-7 other state EPAs requiring emission reports.
Federal OSHA
2 Other States OSHA (with different and additional rules)
Local Fire Departments
State TOC's
DOT
Homeland Security
DEA (Chemical Diversion and Trafficking Act)
Boards of Pharmacy (those same chemicals)
State Police-multiple jurisdictions
State Fire Marshal-3 states
FAA
Department of Fish and Wildlife
Department of Labor
Multiple State Departments of Labor
Multiple State Unemployment Insurance Agencies
Oh, and of course:
IRS
State Revenue agencies (a lot of states try to shake us down even though we don't owe them anything)
BTW, I think the California Tax Agencies are run by the mob! They routinely bill us even though we owe them nothing, practically threaten us with castration or similar punishment, and it is darn near impossible to get them to admit their error!
My business is a small, privately owned business and doesn't have to deal with Sarbanes-Oxley or most of the other financial stuff the German firms leaving have to deal with. I really can't blame them. The mindset of the regulatory agencies is fine maximization, not assisting with compliance.
The hurdles one faces to open a business in any core product area in the US are quite high. I wonder how many Chinese companies have to deal with such an alphabet soup of regulatory agencies.
Morale is poor. Stress is high. There was an all hands pay cut last year, which hit morale hard. I can see the signs of critically high stress from overwork in my people.
I have had a lot of overworked folks showing out-of-character behavior. I have had a number of people blow up for no apparent reason, and threaten to quit. Nobody likes the stress of there being more work needing to be done than there is time to accomplish it.
Hospitals are not immune - ~ 30 folks were let go within the past year at one of the facilities where I work and Monday we’ll learn if they’ll be more cuts. Several years ago we frequently ran 4-5 employees/night to manage 4 Intensive Care Units, the ER, and the floors and now we routinely run 3 with a larger workload (355 beds). :(
…So much change has occurred so quickly, and in so many unprecedented areas, that nobody knows what the new normal is. Business owners take risks, but they are calculated risks. You can't calculate risk if you don't know what the rules are going to be a year from now…
…In addition to not hiring, I am avoiding any unnecessary capital expenditures right now because I have no idea if things are going to stay the way they are right now or get worse.
Hospitals in our area aren’t hiring either… most folks are hanging on for the ride…
Hospitals are not immune - ~ 30 folks were let go within the past year at one of the facilities where I work and Monday we’ll learn if they’ll be more cuts. Several years ago we frequently ran 4-5 employees/night to manage 4 Intensive Care Units, the ER, and the floors and now we routinely run 3 with a larger workload (355 beds). :(
Hospitals in our area aren’t hiring either… most folks are hanging on for the ride…
That is simply Change you can believe in.:rolleyes:
Everyone with a job should be happy they have one. From what I see in my area, I know the official unemployment figures are grossly understated.
I know a fair number of Docs. I have yet to speak to an older MD who indicates he is planning on continuing to practice if he can financially afford to retire when the new healthcare changes really kick in. I think we had all better learn to be satisfied with FNP's for our primary care soon.
My wife spent two nights in the hospital, and I can say that the staffing cuts have taken their toll. The insidious part is the substitution of LPNs and nursing aids for RN's at our facility. Our hospital is doing what they can to cut costs, and I can't really blame them. Our local hospital is County-owned and is bleeding from the eyeballs.
As a side note, I used to feel comfortable extending credit to cities, counties, and states, and didn't worry if they were a little late paying bills. Government agencies have always generally been good bets as they may pay a little slow, but always did pay reasonably promptly. That is not the case any more.
My local county Road Commission is currently paying their bills from January. They are now cash up front. State of California? Cash up front.
My bank and my vendors aren't willing to let me pay them in 7 months, so I can't let my government customers do that either.I am watching every government agency's payments like a hawk now.
…Change you can believe in.
Everyone with a job should be happy they have one…
Amen brother…our mandatory meeting today was dark and gloomy, morale is poor, and numerous outbursts of out-of-character behavior were displayed - tension was so thick it could be sliced with a knife. Although my pay was reduced ~ $1,300/mo, so was everyone else’s who had what was formerly known as Baylor.
Hey, I still have two jobs, I’m not pushing daisies, and the family is well :D
Life is good, sort of :D
It's time for financial hibernation mode...
Defender968
07-26-2010, 19:13
That is simply Change you can believe in.:rolleyes:
Everyone with a job should be happy they have one. .
Totally agree, I quit my job as a local LEO to train up for SFAS/SFQC, with the thought that they always need cops I can come back when I'm ready and if I need too....yea that was a bad call on my part...now I'm wondering what I'm going to do when I get done with the Q, not many prospects out there for new jobs, and no job to go back to as my old dept is hiring only 1 officer at a time as 1 officer leaves...and I'm betting that fewer and fewer will leaving as better jobs get harder and harder to find.
From what I see in my area, I know the official unemployment figures are grossly understated.
Spot on from what I'm seeing as well, I personally know lots of folks who have all but stopped looking and many others who decided to go back to school because they couldn't find work, and then I know a couple who are working part time jobs and thus not counted against the unemployed but really need to find fulltime employment.... and that's just in my AO, recovery is not what I could call what we are in, hope it gets better in the next 18 months….but I’m not holding my breath.
alright4u
07-27-2010, 04:25
The jobs are never coming back. A present (like once a week) client, Canadian by birth, related the following to me: “Verbatim”.
“I was a partner in many brand names of discount entertainment models, Radio Shack, Best buy, etc. I got out.
“Now that I have formed my own company based in China, not only have we lowered our cost per unit of production, but our QC, quality control, has gone through the roof. The American politician is the one to hold accountable, and not us for your demise”.
A man who wants to do something finds a way.
GratefulCitizen
07-31-2010, 14:42
For several years but particularly in the past 2 years, I have been trying to work around wild price gyrations (110% price swings) on previously price-stable commodity chemicals.
<snip>
I frequently encounter delays in supply deliveries that never used to occur. Most businesses have lowered inventory levels to manage cash flow in a slower economy. Nobody wants all their cash sitting in inventory that won't sell.
I'm doing the same thing. I am striving to have the absolute minimum tied up in inventory so if the music suddenly stops playing, I'm not left with tons of inventory I can't sell. People just have to wait longer for their product.
Interestingly, materials costs are lower than they have been in 10 years on most items.
Surge demand for products isn't resulting in increased hiring most of the places I deal with. I'm keeping my headcount low too. I'd rather pay overtime than bring more people on, because I don't know what new idiotic move the Feds or the State is going to do next.
Seen much of this over the years with various customers to whom we make deliveries.
Most are set up to run with razor-thin inventories and can adjust output dramatically if needed.
Chatted with a customer yesterday who manufactures pistol barrels, from bar stock to finished product; any barrel, any modification.
They have 6 people and make about 250 barrels/month.
Asked him what level they could scale up to if the demand were there.
He said they could triple production without hiring anyone or buying more equipment (though they would all work more hours).
Running at 1/3 capacity is cost effective for them, given the economic climate.
Axe, if you don't mind sharing:
Given sufficient demand, how much could you scale up without any more hiring or equipment/capital purchases?
GratefulCitizen
07-31-2010, 15:12
Economic laws asserting themselves...
http://online.wsj.com/article/SB10001424052748703720504575377690791466492.html
Recent Chinese labor strikes—particularly in the heartland of manufactured exports in Guangdong and the Pearl River Delta—have taken most observers by surprise. Labor shortages in and around Shanghai and Beijing are also widespread. Many local governments, especially on the developed eastern seaboard, have increased minimum wages by 15% to 20% this year.
A wage explosion fed by labor militancy is obviously disconcerting to Beijing. But in the long term China's wage increases should reflect its remarkably high productivity growth in manufacturing. Higher wage growth would have two great advantages for China and the rest of the world.
First, Chinese wages would become closer to those in the more mature industrial countries, thus reducing protectionist pressures. Second, higher wage settlements would reverse labor's declining share in China's national income. With a shift away from business profits—which have become exorbitantly high in recent years—to greater household disposable income, consumption would naturally rise and reduce China's trade surplus.
For wages to grow less erratically, what should China's long-term exchange-rate policy be? Much of the world, particularly Asia, is on a dollar standard. Most Chinese exports and imports are invoiced in dollars, as are international financial flows. China's net saving surplus is manifested mainly in a huge buildup of liquid dollar claims. In this dollar-based world, a fully credible fix of the yuan/dollar rate is the key to encouraging sustained high growth in Chinese wages that matches productivity growth.
In contrast, bashing China to appreciate its currency is counterproductive. If Chinese employers fear that the yuan will be higher in the future, then they become loath to grant large wage increases in the present. Producers of export products could be bankrupted if they granted high wage claims in yuan only to find out afterward that the yuan had also ratcheted upward, making the effective wage increases much larger in dollar terms.
In a world where competing goods from other countries (including the U.S.) are all invoiced in dollars, a safely fixed yuan/dollar rate allows a Chinese employer to estimate more precisely what wage increases are commensurate with expected future growth in labor productivity. If any one employer offers less, others could well bid away his most prized workers.
The earlier experience of Japan shows the importance of the yen/dollar rate in determining wage growth. After the inflationary chaos and disorganization following World War II, in 1949 the Japanese government with American financial assistance unified the battered currency (got rid of multiple exchange rate and payments restrictions) and fixed the central rate at 360 yen per dollar.
With this dollar anchor, the postwar Japanese miracle unfolded: From the early 1950s to 1971, GDP and labor productivity in manufacturing began to grow by about 9% per year while growth in money wages was in excess of 10%, more than twice as high as in the U.S. With stable wholesale prices, trade was roughly balanced and so was international competitiveness.
But in August 1971, President Richard Nixon shocked the world by forcing the other industrial countries—Japan, Canada and those in Western Europe—to appreciate against the dollar. Nixon imposed a tariff on all industrial imports until the other industrial countries agreed to appreciate, which they all did by the following December. Japan appreciated by 17%. As early as 1970, the expectation of dollar depreciation caused huge hot money flows out of the U.S. Foreign central banks intervened heavily to buy dollars to prevent their currencies from appreciating more than what was agreed to with Nixon. The result was a world-wide loss of monetary control, great inflation, large business cycle fluctuations, and slow economic growth in the 1970s into the '80s.
Because Japan had by then emerged as America's foremost industrial competitor, the U.S. mistakenly began "bashing" Japan to force further yen appreciation. The yen rose to a high of 80 per dollar in April 1995 from 360 per dollar in August 1971. Hot money inflows first contributed to land- and stock-market bubbles in Japan in the late 1980s. But after these burst in 1990 and the overvalued yen rose even further, the economy was thrown into a deflationary slump from which it has yet to recover. By the end of the 1970s, money wage growth had slumped to less than in the U.S.—and Japanese wages are actually falling in 2010.
What is the lesson for China? Exchange rate appreciation and money wage growth are substitutes in the long term. But an erratically appreciating exchange rate with the associated hot money flows does long-term damage to the economy. Best to keep the exchange rate safely fixed near 6.83 yuan/dollar—as it had been for two years through mid June. Then gently explain to would-be China bashers that Beijing fully respects—and even encourages—workers to bargain in good faith for higher wages to match high productivity growth in manufacturing, which Chinese employers can more readily accept if they expect the yuan/dollar rate to remain stable.
Nevertheless, the U.S. Congress is again threatening to impose punitive tariffs on imports from China unless the yuan is appreciated. To contain the political risks from trade protectionism, the People's Bank of China bowed to this pressure on June 19 and depegged the yuan in favor of managed floating against an (unspecified) basket of foreign currencies. Whether this ambiguous "float" will succeed in defusing U.S. protectionist pressure remains to be seen.
But any systematic yuan appreciation—or threat thereof—will immediately restart the hot money inflows and, in the longer term, slow money wage growth. Moreover, a discrete sharp appreciation won't defuse the situation because it would be unlikely to reduce China's trade (i.e., net saving) surplus on which the Americans are so focused.
Behind this unnecessary political crisis is a widely held but false economic belief: that the exchange rate can be used to control any country's trade balance—the difference between its saving and investment. The imbalance actually arises from a large saving deficiency in the U.S.—with very large fiscal deficits and low personal saving—coupled with "surplus" saving in China from high business profits and buoyant government revenue.
The yuan/dollar debate that continues in Washington is more than a distraction. The threat of appreciation may well impede the natural process by which Chinese wages rise as fast as labor productivity in manufacturing, leading to greater unrest and perhaps even a Japan-like Chinese bubble.
Last hard class
07-31-2010, 20:26
In my business, we call it:
The just late inventory system.:D
LHC
Seen much of this over the years with various customers to whom we make deliveries.
Most are set up to run with razor-thin inventories and can adjust output dramatically if needed.
Chatted with a customer yesterday who manufactures pistol barrels, from bar stock to finished product; any barrel, any modification.
They have 6 people and make about 250 barrels/month.
Asked him what level they could scale up to if the demand were there.
He said they could triple production without hiring anyone or buying more equipment (though they would all work more hours).
Running at 1/3 capacity is cost effective for them, given the economic climate.
Axe, if you don't mind sharing:
Given sufficient demand, how much could you scale up without any more hiring or equipment/capital purchases?
Right now, in my main business I am at 90% capacity with current staff. If I added overtime, I could go up another 30-35%.
I have a more seasonal business as well which is at about 1% capacity right now. We can't make enough product fast enough Mar-May, then it drops off. Same thing in September.
That business has equipment sitting idle. There is market demand, but I can't meet pricing expectations of many customers who want low price rather than quality..
What I do make and sell is razor thin profitability, so i can't afford to stock up during the slow times for the busy times to come.
We start and stop production based on inventory and orders in both businesses..
GratefulCitizen
08-01-2010, 18:21
Some of the unemployment is structural.
http://www.ajc.com/business/fed-official-labor-force-582635.html
The nation’s central bank can try to stoke economic growth or chill it, effectively toss trillions of dollars into the economy or remove them, make borrowing cheap or make it unaffordable.
Enlarge photo Bloomberg Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, shown here July 15, said, “We have recently seen an increase in workers’ hours, which is probably preliminary to actual hiring.”
Granted power to make monetary policy for the $14.6 trillion-a-year U.S. economy, the Federal Reserve has a sometimes contradictory set of missions: to keep prices relatively stable, to support the financial system and to maximize employment.
In its 97 years, the Fed has faced many decisions — some in severe circumstances, some that remain controversial.
The Fed under Paul Volcker is credited with smothering inflation — and causing recession — in the early 1980s. A half-century before that, Fed constraints on the money supply plunged the nation into the Great Depression, according to many economists — including current Fed Chairman Ben Bernanke.
This time, the Fed chose the road not taken before.
As the economy slipped into a mild recession in late 2007, the Fed trimmed interest rates. And when the financial sector threatened to collapse the next fall, Bernanke’s Fed chose a massive, unprecedented effort to save the banking system.
In the months that followed, the Fed virtually printed hundreds of trillions of dollars, making emergency loans, buying bonds and purchasing debt and pouring financial lubricants into an economy in danger of freezing up.
And that was only one half of the government’s economic management. The other was fiscal policy, the spending negotiated between presidents and Congress.
Starting during the last year of the Bush administration, more than $1 trillion in a bank bailout was followed by a two-year stimulus package.
By this spring, the crisis had abated, but it is not over.
Across the country, unemployment remains at recession levels, as do layoffs. Much of the nation’s productive capacity is idle, as are many cash registers, with so many consumers reluctant — or unable — to spend.
In many cities, including Atlanta, the housing market continues to struggle. Foreclosures remain high. And with few companies hiring, a record number of the jobless have been out of work more than six months.
Yet the economy overall is now expanding.
After it cut short-term interest rates virtually to zero, some Fed officials started talking about the need to stop stacking up cheap money that could become a bonfire of inflation. Yet in the data, inflation is barely a whisper. The data are not exactly screaming job growth and prosperity either.
On Thursday, the president of the St. Louis Fed, James Bullard, made news by warning of deflation and argued for more stimulus efforts. But the president of the Philadelphia Fed responded by calling fear of deflation “overblown.” Several other Fed presidents also declined to join Bullard on the deflation barricades.
So, with the rate-setting meeting set for Aug. 10, the Fed remains stopped at the crossroads, waiting.
As chief executive of the Atlanta Fed, one of a dozen branches across the country, Dennis Lockhart has a say in deciding which way to go. He is not a voting member of the rate-setting group this year, but he is among the elite.
Fed presidents hold enormous power. When they speak, markets move and analysts peer between the lines looking for clues to policy. So they tend to speak carefully.
Lockhart, a former U.S. Marine, banker, academic and financial services executive, was named to head the Atlanta Fed in 2007. He has been active in the community, recently co-chairing a United Way commission on early childhood education.
He sat down last week with The Atlanta Journal-Constitution in a free-ranging discussion about the economy’s condition, the factors hampering faster growth, the nation’s likely economic direction and the choices the Fed faces. Here’s a sampling of the topics covered and Lockhart’s views:
The current economic situation: “We have not made great progress yet in bringing down unemployment. We are in net job creation, but the net job creation is not at a pace that is going to make a substantial dent in the unemployment level for some time ... which is frustrating to everyone concerned.”
The character of the recession: “I think the underpinnings of this recession are simply more profound and more fundamental. A long period of leveraging that is going to be followed by an extended period of de-leveraging. A long rise of house prices which made people feel financially secure and therefore supported consumption. Now we’ve had a downturn in house prices that may last for quite some time.
“There is a cyclical component, but there’s a combination of something cyclical and something more fundamental going on.”
Worry about deflation: “Deflation is not in my base case. I am not overly concerned that we are heading in a deflationary direction. But we should keep watching this carefully.”
Why companies aren’t hiring more: “In my opinion, hirers, parties that are in a position to hire, are reluctant to hire until they are convinced of better times ahead, that their revenues or their business activities are going to continue to accelerate.
“Businesses are going to use what they’ve got until they’ve run out of capacity, whether that’s human productive capacity or equipment capacity. We have recently seen an increase in workers’ hours, which is probably a good sign because it is probably preliminary to actual hiring.”
Restructuring of the labor market: “Yes I think, whether you call it restructuring or adjustments, I think there are some medium- and maybe long-term adjustments that are under way. Certain sectors that lost jobs during the recession are unlikely to see the total number of jobs come back. I’d cite two areas: construction and manufacturing. People have to train. People may have to relocate."
Imbalances in labor: “One of our advisers from Chattanooga estimates that in the trucking business — which has been doing extremely well — they have a gap of 400,000 drivers nationally. These are jobs that cannot be filled. But driving a big rig is a highly trained job, a highly trained profession. It’s not something that somebody applies for and then just starts doing.”
Focus on indicators: “We track all the available data as carefully as we can. The real art becomes putting that together into a narrative, the story of what is happening in the economy.”
Atlanta, post-recession: “The place has some tremendous strengths. Being a transportation nexus is one. Higher education is another. Being in the Sunbelt and having net inward migration continuing — even if it may have slowed down a little — is another strength. Now, Atlanta is a corporate headquarters. It ranks third or fourth in that respect. That makes for a very dynamic business community.
“One does have to be concerned about the education picture in the state. Just to put in a plug for something I worked on for the United Way, I think there’s a lot of scope for investing in early childhood education — pre-k education, as a way of insuring that we ultimately have fewer dropouts and better-prepared people for the modern workplace.”
“I think this state and city must remain competitive from a human resource point of view. That also can include, fortunately, being an attractive place that human resources from elsewhere want to go. To bring in talented, well-educated people.”
Fed policy: “In terms of monetary policy, our role is to create the most favorable conditions for recovery. I feel we should be patient with this — call it accommodative stance of policy — with the Federal Funds Rate target essentially being as low as it can go. So I am not in the least trigger-happy ... about raising rates.
More Fed stimulus?: “My view is that some of the data has softened, but neither bad enough nor long enough for me to be recommending more accommodative policy.”
If things don’t improve, would you recommend a change?: “Yes. [Long pause.] And at the moment I think it’s simply appropriate to be studying what our options are.”
Good article, but that man can talk a lot without being very specific. He is well-served by being in higher political office. IMHO LOL
My simplified understanding of the article:
1. A lot of consumers who had been paying debts with new debt and living from paycheck to paycheck ended up broke and homeless when the music stopped. A lot of responsible consumers got taken down with them as collateral damage.
2. Those consumers who didn't end up that way have largely gotten on their knees, given thanks, and become zealous Dave Ramsey/Clark Howard converts.
3. A lot of businesses that in some manner depended on heavy consumer spending for survival or whose greed consumed them, as well as some others (under-capitalized, bad luck, etc) were obliterated.
4. Leaders of businesses that survived the purge largely all got on their hands and knees, gave thanks, and became disciples of Chainsaw Al Dunlap's personnel management practices and have begun daily devotionals focused on rightsizing.
5. There are more houses in the US than people that can afford to buy them.
ZonieDiver
08-01-2010, 22:26
However you slice if, GDP has improved 2.4% this quarter while unemployment hasn't changed - obviously, businessess are learning how to do more with less.
GratefulCitizen
08-02-2010, 16:04
Good article, but that man can talk a lot without being very specific. He is well-served by being in higher political office. IMHO LOL
My simplified understanding of the article:
1. A lot of consumers who had been paying debts with new debt and living from paycheck to paycheck ended up broke and homeless when the music stopped. A lot of responsible consumers got taken down with them as collateral damage.
2. Those consumers who didn't end up that way have largely gotten on their knees, given thanks, and become zealous Dave Ramsey/Clark Howard converts.
3. A lot of businesses that in some manner depended on heavy consumer spending for survival or whose greed consumed them, as well as some others (under-capitalized, bad luck, etc) were obliterated.
4. Leaders of businesses that survived the purge largely all got on their hands and knees, gave thanks, and became disciples of Chainsaw Al Dunlap's personnel management practices and have begun daily devotionals focused on rightsizing.
5. There are more houses in the US than people that can afford to buy them.
Concur.
There were many superfluous jobs in this country which had been propped up by cheap money.
The party is over, the keg is empty.
Skills, productivity, or wages have to change to fit reality.