Comments for 0 at http://www.tradereform.org , comment 1 to 1 out of 1 comments http://www.tradereform.org Sun, 14 Mar 2010 12:51:45 +0100 FeedCreator 1.7.2 http://www.tradereform.org/content/view/974/42/#comment-111 Morici writes: [quote]Factoring in the decline in the number of adults participating in the labor force, the unemployment rate is closer to 7.2 percent.[/quote] This 7.2% vastly understates [i]real[/i] unemployment. The next-to-last chart at "Jobs & 'Trade' Data Update Jun08" at http://www.exponentialimprovement.com/cms/jobsjun08.shtml shows it's closer to 14%. See the same estimate at Shadow Government Statistics at http://www.shadowstats.com/alternate_data. [i]Real[/i] unemployment, even in "good times," is on the order of 10% ... or more taking into account underemployment, that is, people with jobs that don't fully use their skills based on education, training, and experience. This high real unemployment is created by Fed policies focused on "restraining inflation" rather than on creating anywhere close to full employment. Google "There's no 'free market' for Labor" for more on this. The impact is enormous. Those who believe even marginally in the power of market supply and demand can see that a 14% excess supply of labor depresses demand for labor and therefore wages. The effect is even more than one might suspect. When there are 10 people and 9 jobs, the added value of that added worker is ... get ready for it ... zero! That person isn't needed. According to game theory (read the book, "Co-opetition"), this means that [i]the added value of any one worker is zero[/i]! This effect depresses wages to between zero and subsistence level, which about where wages at the bottom are. This is why there's a need for a minimum wage. The impact on wages is even greater considering the loss of relatively-high-paying manufacturing and IT jobs (as shown at the first link above) due to offshoring. This high real unemployment contributes greatly, of course, to create the "inadequate demand" noted in the next quote below ... as did Bush's tax cuts that did little for those with lower incomes who would spend the money. [quote]The Federal Reserve is in crisis, because its mix of policies addresses an old style recession, one premised on inadequate demand but solid financial institutions. The current recession has its origins in questionable banking practices and a breakdown of investor trust in the integrity of Wall Street’s most venerable banks and investment houses.[/quote] The Fed's cutting of interest rates encourages more debt to keep spending going, but it's the Fed's "command and control" manipulation that created the inadequate demand for labor that led to low wages, which are also depressed due to offshoring. Low wages encouraged excess borrowing (e.g., against home equity ... that's worse than over with many mortgages underwater) and debt to keep the game going. All types of debt are so high now that the game is nearly over and the Fed encouraging more borrowing with lower rates no longer works ... especially thanks to the corruption that led to the "breakdown of investor trust in the integrity of Wall Street’s most venerable banks and investment houses" to which Morici refers. [quote]Going forward, the economy will add some jobs for college graduates with technical specialties in finance, health care, education, and engineering. However, for high school graduates without specialized technical skills or training and college graduates with only liberal arts diplomas, jobs offering good pay and benefits remain tough to find.[/quote] Finding jobs is not just a problem for those with "liberal arts diplomas." It's also a problem for those with technical degrees. Since their peaks, as of May 08 the nation lost 4 million manufacturing jobs (23% since Mar 98) and 713,000 IT jobs (19.2% since Mar 01). The U.S. Advanced Technology Products trade balance went from a $38.4B surplus in 1991 to a $53.5B deficit in 2007; that means the U.S. is losing high tech capability and the jobs that go with it. [quote]Overall, the pace of employment growth indicates the economy is settling into a troubling malaise.[/quote] No, it's going to be much, much worse than "malaise." Sorry, the game is over. - Bob Powell Fri, 04 Jul 2008 10:40:53 +0100