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Thread: Asian analyst looking beyond 'official' US unemployment statistics

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    Default Asian analyst looking beyond 'official' US unemployment statistics

    (snip)"POWER WITHOUT CREDIBILITY, Part 2
    A lost decade ahead
    By Henry CK Liu

    (Part 1: Bogged down at the Fed)

    The US Federal Reserve faces an intractable problem of unemployment. Non-farm payroll employment in the United States continued to decline in July 2009, with the loss of 247,000 jobs, and the unemployment rate was little changed at 9.4% for the second consecutive month, the US Bureau of Labor Statistics reported in August.

    The average monthly job loss for May through July was 331,000 jobs, about half the average decline for November 2008 through April 2009, which lost 645,000 per month. Employment decreased by 117,000 a month on average during that period.

    In July, 2009 job losses continued in many of the major industry sectors, pushing the number of unemployed persons to 14.5 million.

    Employment in construction declined by 76,000 in July 2009, about in line with the average of 73,000 for the past three months. Employment had decreased at a higher rate, by 117,000 a month on average from November 2008 to April 2009.

    Manufacturing employment fell by 52,000 in July 2009 and has declined by 2 million since the recession began. In motor vehicles and auto parts, fewer workers than usual were laid off in July for seasonal retooling. As a result, the estimate of employment for the industry rose by 28,000 after seasonal adjustment. In large part, July's seasonally adjusted increase reflects the fact that previous job cuts had been so extensive that there were fewer workers to lay off during the seasonal shutdown. Elsewhere in manufacturing, several industries continued to lose jobs in July, including machinery (-15,000) and fabricated metal products (-14,000).

    In July 2009, retail trade employment declined by 44,000. Job losses in the industry had averaged 27,000 per month over the prior three months. Employment in wholesale trade fell by 19,000 in July, with the majority of the decline occurring among durable goods wholesalers.

    Employment in professional and business services continued to trend down in July, losing 38,000 jobs. The industry has shed 1.5 million jobs since the start of the recession. Within professional and business services, employment in the temporary help industry edged down in July. While temporary help has lost 844,000 jobs since the recession began, the declines have lessened substantially over the past three months.

    Transportation and warehousing lost 22,000 jobs in July. Since May, the average monthly job loss was half the average monthly decline for November through April (-17,000 versus -34,000).

    Financial activities employment continued on a downward trend in July (-13,000). The average monthly decline for this industry was 23,000 over the past three months compared with 46,000 per month from November through April. Since the start of the recession, the financial activities industry has lost 501,000 jobs. Employment in the information sector declined by 16,000 jobs in July, which included job losses in publishing and telecommunications."(snip)

    from


    While the larger point of Mr. Liu's articles is difficult or impossible to glean from this short snippet, you will notice that essentially all of the businesses and jobs listed above as major 'losers' are in the private sector ... thus creating 'real' added value and 'real' tax revenue. This stands in stark contrast to other sectors which gained jobs i.e. health care, gov't contractors and gov't employees ... whose paychecks are funded by private sector taxpayers and thus do not create any 'real' tax revenue.

    ~
    Last edited by Melonie; 09-15-2009 at 03:51 AM.

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    Default Re: Asian analyst looking beyond 'official' US unemployment statistics

    Most analysts agree that the REAL unemployment rate is at least 12% and more likely 15% and some have it as high as 20 %.

    A huge percentage of the newly unemployed earned $75,000 a year or more. A LOT of buying power has been removed from the economy.
    Those buyers have been made sellers as they desperately sell assets to try and stay afloat.

    Just to get back to G.W. Bush employment numbers, we must create about 10 million new jobs. Even if Obama catches every break and his stimulus plan works perfectly, the consensus is that at most 3 million jobs will be created by the end of 2012. With just standard annual additions to the work force and assuming standard attrition that means Obama will effectively be running in place. Standard attrition perhaps ought not be presumed because older workers are being incentivized to work longer and retire later. An effort to recover 401K losses and earn additional retirement funds are just two reasons. Add in better health coverage than Medicare and it is likely that many workers will want to defer retirement as long as possible.

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    Default Re: Asian analyst looking beyond 'official' US unemployment statistics

    ^^^ several points of response ...

    Regarding the creation of new jobs, there is a world of difference between the private sector economy creating a new job which creates additional 'real wealth' and contributes additional 'real tax revenue', and the creation of a public sector job ( or gov't funded job within the private sector) which does NOT create additional 'real wealth' and which consumes 'real tax revenue' rather than providing it. This was part of Mr Liu's article series i.e. that foreign lenders fully realize the new 'equation' re the major and permanent loss of US private sector jobs and their partial replacement with gov't funded jobs, and the resulting future impact on America's ability to repay its Treasury Bond debts to those foreign lenders.

    In simplest terms, the percentage of gov't funded unemployment plus gov't funded employment cannot exceed a certain percentage versus total private sector employment or the parasitic effect of gov't tax revenue needs overwhelms the private sector thus the US economy as a whole. Arguably, America crossed that maximum percentage late last year, and the trend is getting worse. And non-arguably, those sectors of the US economy in which the Obama plan is adding jobs are virtually ALL government funded i.e. government employees, government contractors, predominantly gov't funded health care workers, gov't grant based green energy startups etc. While such jobs obviously are of 'value' to the people being hired, in point of fact every such job added increases the 'real tax revenue' burden on private sector businesses and workers ... either now or in the near future.

    As to buyers being made into sellers, this is true for both individuals and governments ! But gov't faces the Margaret Thatcher barrier ... 'sooner or later you run out of other people's money'. And both face a limit imposed by lenders ... i.e. at some point the lenders stop lending because their fear ( of non-repayment in terms of real purchasing power dollars ) exceeds their greed. This in turn forces the 'rejected' borrower ( individual or gov't ) to either reduce their spending levels to match their actual revenues, or to resort to 'crime' to increase their revenues. Of course, governments have a number of options available to increase their revenues without 'working for' the extra money ... but when done by a government it's called a tax increase or currency inflation rather than a 'crime'.

    As to your comment about the former $75,000 per year middle class being rapidly devastated, this is obviously already happening. But it is also about to get worse ... MUCH worse ... because those $75,000 middle class Americans who are still employed will soon be facing significantly higher tax rates ( both federal by expiry of the Bush tax cuts and AMT patch, and at the state and local level) as well as significantly higher prices ( for oil / food / durable goods due to a declining US dollar, due to new tariffs imposed on low cost Chinese imported products, etc.).

    ~
    Last edited by Melonie; 09-15-2009 at 02:26 PM.

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    Default Re: Asian analyst looking beyond 'official' US unemployment statistics

    Quote Originally Posted by Melonie View Post
    ^^^ several points of response ...

    Regarding the creation of new jobs, there is a world of difference between the private sector economy creating a new job which creates additional 'real wealth' and contributes additional 'real tax revenue', and the creation of a public sector job ( or gov't funded job within the private sector) which does NOT create additional 'real wealth' and which consumes 'real tax revenue' rather than providing it. This was part of Mr Liu's article series i.e. that foreign lenders fully realize the new 'equation' re the major and permanent loss of US private sector jobs and their partial replacement with gov't funded jobs, and the resulting future impact on America's ability to repay its Treasury Bond debts to those foreign lenders.

    In simplest terms, the percentage of gov't funded unemployment plus gov't funded employment cannot exceed a certain percentage versus total private sector employment or the parasitic effect of gov't tax revenue needs overwhelms the private sector thus the US economy as a whole. Arguably, America crossed that maximum percentage late last year, and the trend is getting worse. And non-arguably, those sectors of the US economy in which the Obama plan is adding jobs are virtually ALL government funded i.e. government employees, government contractors, predominantly gov't funded health care workers, gov't grant based green energy startups etc. While such jobs obviously are of 'value' to the people being hired, in point of fact every such job added increases the 'real tax revenue' burden on private sector businesses and workers ... either now or in the near future.

    As to buyers being made into sellers, this is true for both individuals and governments ! But gov't faces the Margaret Thatcher barrier ... 'sooner or later you run out of other people's money'. And both face a limit imposed by lenders ... i.e. at some point the lenders stop lending because their fear ( of non-repayment in terms of real purchasing power dollars ) exceeds their greed. This in turn forces the 'rejected' borrower ( individual or gov't ) to either reduce their spending levels to match their actual revenues, or to resort to 'crime' to increase their revenues. Of course, governments have a number of options available to increase their revenues without 'working for' the extra money ... but when done by a government it's called a tax increase or currency inflation rather than a 'crime'.

    As to your comment about the former $75,000 per year middle class being rapidly devastated, this is obviously already happening. But it is also about to get worse ... MUCH worse ... because those $75,000 middle class Americans who are still employed will soon be facing significantly higher tax rates ( both federal by expiry of the Bush tax cuts and AMT patch, and at the state and local level) as well as significantly higher prices ( for oil / food / durable goods due to a declining US dollar, due to new tariffs imposed on low cost Chinese imported products, etc.).

    ~
    ^^^ Thank God the recession is "over".

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