Ed Huntress wrote:
Women became a larger part of the workforce
That's true, although it had flattened out around 20 years ago, until the
latest recession:
http://research.stlouisfed.org/fred2...0039?cid=32305
Looks like men got laid off much more than women
in both recessions in the last 10 years
But my question is what percentage of the adult population our economy can
sustain as employed, money-earning workers. During the Clinton years, we had
a tech bubble. During the Reagan and G.W. Bush years, we had a
deficit-spending bubble.
Not really - the public debt equals the trade deficit
Are the employment rates we saw in those years
sustainable without some kind of bubble?
What would be the negative impact of maintaining
full employment through deficit spending?
Keep in mind deficit spending
does not mean excess spending
It can as easily mean more money
available for consumers to spend (lower taxes)
I don't profess to know. It's just a nagging question that bugs me every
time I think about trends in employment. Manufacturing is an example that
really prompts the question. As much as productivity has improved, how many
people can we realistically sustain in manufacturing jobs?
Do you mean how many millions of jobs can the US support in China?
If you look at the high employment rate (64.6%)
of the year 2000 as the norm
Then current employment (58.4)
is down about 10% from the norm
But that 2000 rate is the extreme *peak*. Why should that be the norm? That
occurred at the tail end of the dot.com bubble.
There is no reason to believe a smaller portion
of the people want to work today
At any rate 10% seems to be the maximum
The U6 unemployment rate also includes people
who are working part time or temporary positions
who want full time permanent work
That number is about 16% of the work force
9% unemployed and 7% partially unemployed
During the best boom years of the 1960s, the rate was slightly less than it
is right now, at a time of economic distress. This is a very curious
situation.
Things are not functioning well
But the bottom lone is consumers are not buying
which means businesses are not selling and
therefore won't be
hiring until they have some better prospects
of selling more of their goods and services
All of that is true. The question is, why?
Consumers are not buying because debt to finance
consumption is no longer fashionable
There is no accounting for taste...
The main fear is that if deflation sets in
any amount of debt becomes onerous
A few years ago people believed deflation
was never possible
now they know better.
So what do these recently high "unemployment" numbers mean? It's an
interesting question, but it's curious that the historically
unprecedented
It means the jobs exist they are just not being filled
Firms have the capacity to hire every one
But they don't have the sales to support that level of hiring
percentage of adults who have been employed in recent years parallels
that
giant sucking sound of wealth and incomes to a minute slice of population
at
the top of the economic heap.
So current low employment would mean the opposite?
I.E. not so much money being made by that top tier
Not necessarily, but the correlation is curious, if possibly coincidental.
The middle class may not be accumulating wealth
in the form of consumer goods
But they are also not accumulating debt
And the federal deficit is where the money is going
It's not going to the top earners.
Oh, yes it is. Money is coming OUT of the federal government, as deficit
spending, and going into the general economy. And the top earners are
winding up with the bulk of it.
Where is the evidence for that?
It looks to me that the federal excess spending is being
sucked up by the middle class and small businesses
to fix up their balance sheets
The federal deficit is not sufficiently large
to offset the current level of
reduction in private debt plus
the increase in savings
There nothing left over for the very rich
Of course you take away the federal deficit
and you have a full blown depression
Possibly.
What? Do you expect that
suddenly the consumer is going to suddenly
start buying goods and services
if the government stops spending
and start taking more out of the consumer's paycheck?
How is that even a remote possibility?
what was unsustainable is the level of consumption
that produced that high level of employment
And that was unsustainable because it was financed
by private debt which can't go up forever
Certainly that is a big factor, maybe the biggest. But that's just another
type of bubble. In other words, given higher levels of saving, is out
present level of employment sustainable? Or is this the new norm? Has
productivity improvement resulted in a new, much higher level of structural
unemployment?
What you are ignoring is the trade deficit
In fairness, I've been asking this question for over 30 years, and my fears
have yet to be realized. g But only in retrospect do I realize that our
economy has been pumped up with one unsustainable bubble after another. How
many more rabbits can we pull out of the hat? Is it limitless?
There is no evidence that any bubble
has produced any growth
in the long run.
the over-valued dollar is what creates the necessity that
somebody has to go into debt if your net national exports
are -$0.5 trillion a year
The private sector went deep into debt in the last 30 years
to finance the consumption and growth and the trade deficit
But that is done now
they aint gonna do it anymore
So now what?
Good question. If you come up with an answer, let us know.
There seem to be 3 possible courses
1) Balance the budget and create a depression
this would be to follow the theory that
"what doesn't kill you makes you stronger"
2) Carry the economy on the backs of the Fed
create full employment and large Federal deficits
Eventually that will lower the value of the dollar
and slowly goods will drift back to being Made in USA
at the same pace they drifted away in the last 30 years
3) Maintain your structural high unemployment
and limp a long with little growth
and slowly declining wages and living standards
--
Ed Huntress