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Why unemployment is ignored by Washington…

November 9, 2009 Leave a comment

An interesting exchange with Larry Summers, the shithead who advises the Messiah on issues of unemployment:

summerssmallWhite House officials express confidence in the steps taken, saying the stimulus is spending money and creating jobs ahead of schedule, and forestalling far higher unemployment. They say they opted against direct jobs programs not for political reasons but because they thought such efforts would not produce long-term value. And they have not pushed the private-sector job-sharing idea — being promoted by Sen. Jack Reed (D-R.I.) — because they want to build real demand for workers, not just spread work among more people.

“I think we got the Recovery Act right,” Larry Summers, the president’s chief economic adviser, said in an interview. “The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”

Why would it be a concern of Larry Summers whether the problem of unemployment is solved by sharing the available work – and the available time off – or creating “real demand” for more work? As long as people were able to pay their bills and were satisfied with their real standard of living, why would Washington have a preference?

We’re glad you asked that question.

If, from Washington’s perspective, the problem of unemployment was a problem of people being evicted from their homes and going hungry, one would imagine any solution which dampened this pain would be considered by a democratically elected government responsive to those who placed it in power.

After all, the point is the well being of those who elected you, and by whose sufferance you remained in power.

But, suppose that government had its own agenda, the pursuit of which compelled it to feign concern with the condition of its constituents, but which, as a practical matter, stood in contradiction to the interests of its constituents. Suppose, in other words, that government saw it in its own interest that unemployment must be solved by creating more work, rather than sharing the available work – and the available time off from work.

As we have noted, a good deal of the artificial stimulus at work in the economy, which has produced the most recent uptick in economic activity, was nothing more than rapidly rising expenditures on military expansion.

That military expansion costs money which is being borrowed at an astounding rate. To service that newly acquired debt requires increasing tax revenues, which, if it not to be raised by increasing taxes, must be realized through increased economic activity.

Sharing work does not increase economic activity, it reduces it. If economic activity is falling, then tax revenues are falling, and debt becomes more difficult to service. If it falls fast enough and far enough, the accelerated military buildup cannot be maintained.

So to preserve his quiet military buildup, the Messiah and his henchmen have to get the economy growing and employment rising. And, any proposal to reduce work time must be avoided at all costs.

h/t Tom Walker

Someone else who gets it…

November 9, 2009 Leave a comment

Over on Naked Capitalism the blogger, George Washington, continues on the theme we have written been covering here: American corporations are clearly pursuing the Cramer Gambit by focusing on foreign markets not simply as suppliers of goods, but also as the customer for those goods.

Guest Post: One Reason that the Stock Market is Rising While Unemployment is Soaring

Daniel Gross points out that part of the reason that the American stock markets are going up even though unemployment is rising and the real economy suffering is because multinational corporations headquartered in the U.S. are experiencing strong sales abroad:

Here’s a puzzle: The stock markets are doing very well, yet the performance of the underlying economy doesn’t seem to justify optimism. The buoyant S&P 500 has risen 53 percent since the March bottom. And while the economy expanded at a 3.5 percent rate in the third quarter, unemployment is high, incomes are stagnant, and consumers are shaky…

It could be that the notion the stock market is an accurate gauge of the domestic economy’s temperature is outdated.

The Dow, the S&P 500, and the NASDAQ are primarily indices of large U.S.-based companies, not main street businesses: more Davos than Chamber of Commerce. These increasingly cosmopolitan firms have been busy globalizing and expanding their operations overseas. In 2006, according to Standard & Poor’s, 238 members of the S&P 500 broke out revenues between U.S. and non-U.S. sales. These companies notched about 43.6 percent of sales outside the United States. For large companies that had already saturated the U.S. market, the home market was something of an afterthought. In the second quarter of 2007, 66 percent of Coca-Cola’s beverage business came from outside North America.

And thanks to the long recession, demand for products and services of all types in the United States has shrunk even since 2006. Yes, the global economy in 2008 experienced its first year of shrinkage since World War II. But growth has resumed, and in some places—Peru, China, India—it never stopped. As a result, the globe’s economic geography has continued to change, with the United States accounting for a smaller chunk of global output and demand each year. For much of the past two years, virtually all growth in economic activity has taken place outside America’s borders. As a result, U.S.-based companies are becoming even more reliant on non-U.S. customers and operations for sales… in two years, big companies’ proportion of sales coming from outside the United States rose 9.8 percent. It’s likely the 2009 figure will be something very close to 50 percent.

This is trickle down economics minus the trickle part folks. There is no defense against this for workers, except a reduction of hours of work.

More chart porn: Service employment falls two years running

November 9, 2009 Leave a comment

In 70 years of record keeping, the American economy has never recorded a back-to-back, year-over-year, decline in employment in the services sector of the economy.

Since this is so unprecedented in the economy, we thought we might take a snapshot of this elusive bird so everyone could stare at it with the awe we felt when we first gazed upon it.

Service sector employment in the United States, 1979-2009

Allow us to explain the chart: The green field shows total employment in service sector, which includes government employment, since 1979. The red line shows the change in the rate of employment growth during that period – from a high of 4.5 percent in 1984 to the present low of -2.4 percent in 2009. The black line shows the overall trend in this growth rate from 1979 to the present.

As you can see, during the period from 1979 to 2009, the rate of growth is trending down and finally has gone negative two years in a row during this recession.

What makes it so interesting is that exactly 30 years ago (June, 1979) the United States recorded its largest industrial labor force (19.5 million) only to see it promptly kneecapped by the double recessions of 1979 and 1981. From there, the labor force in manufacturing fell to its present low of 11.6 million workers – and a shitload of Walmarts stocked with inexpensive Chinese made goods.

As industrial employment fell due to increases in productivity and the off-shoring of manufacturing, service sector employment became the one sector where overall employment was growing. Agriculture employment was dead, industrial employment was a dead end, work that produced real economic value was becoming increasingly scarce.

And that is a real problem, since you having a job is the essential precondition for buying all those 42 inch wide-screen high-definition plasma televisions now being made with fewer workers. If you don’t have a job, production comes to a standstill – it is as simple as that.

The great thing about service sector employment is that it provides the wages necessary for you to buy all those otherwise unsellable 42 inch wide-screen high-definition plasma televisions, with out adding to the pile of unsold appliances – it supports mindless consumption without producing anything of real value. And, this becomes ever more important as the increase in productivity forces industry to turn out ever larger quantities of unsellable goods with fewer workers.

For service sector employment to be falling at this time, as the nation experiences the worst economic catastrophe since the Great Depression is, therefore, not only a significant event, it is a dire warning of a serious adjustment in the economy: US service sector employment, which has served as the primary customer for global production, is faltering and an economic train wreck is unfolding in slow motion as those unsold goods begin piling into each other like so many freight cars.

With this data it becomes clearer why many US industrial corporations have begun to shift the emphasis of their operations to foreign market, not just as suppliers of goods, but as customers for these products.

They can no longer count on probability that you will have a job.