U.S. Economy Added Only 74,000 Jobs in December

[snapper]

That was no recession, and to expect the recovery to follow any of the post-WWII patterns is simply denying reality. We have exactly one (US) example that might apply, and it isn’t a very good one: the 1930s.

Crikey! With 'unemployment' now at 6.7% there might be no 'unemployment' by then! Though maybe that would require just a few more $trillion of fiscal and monetary stimulus...

[Stitch]

Aint it. This debate is arguing the correct amount of unemployed, taking into consideration of the baby boomers leaving the work force, people giving up and going back to college.

I would like to get above all of that and find out WHY there are so many millions of people out of work, and not only the unemployed, but the UNDER employed.

The figure is still extremely high no matter how many times you beat it with a bat. The economy is supposed to be doing much better, and the unemployed and underemployed is not reflecting that. So what's up?

My personal opinion is that most of the "profit" we're making is going to the corporate bottom line (to make the company look more inviting to investors), investors (mostly overseas), and executive payroll; as bonehead said, too few jobs are "trickling down" to the broader economy. The company I work for is making record profits, and our numbers have been climbing like a rocket for the last year, but do I see any of that? I am getting paid exactly the same amount now as I was five years ago, yet my company is making money hand-over-fist; what's wrong with this picture? From my perspective, all of that "excess" money is being re-invested by the company (not a bad thing by itself, but it should be invested in it's employees, not more initiatives), and being paid to upper management (both in the foem of salaries and bonuses), yet none of those "benefits" are making it down to those of us who are "on the ground", or "in the trenches".

I do believe that the American middle class will soon become a minority (if they haven't already), and our economic demographics will eventually look a lot more like a third-world's demographics, rather than that of the richest country on earth (for now).

[antimony]

My personal opinion is that most of the "profit" we're making is going to the corporate bottom line (to make the company look more inviting to investors), investors (mostly overseas), and executive payroll; as bonehead said, too few jobs are "trickling down" to the broader economy. The company I work for is making record profits, and our numbers have been climbing like a rocket for the last year, but do I see any of that? I am getting paid exactly the same amount now as I was five years ago, yet my company is making money hand-over-fist; what's wrong with this picture? From my perspective, all of that "excess" money is being re-invested by the company (not a bad thing by itself, but it should be invested in it's employees, not more initiatives), and being paid to upper management (both in the foem of salaries and bonuses), yet none of those "benefits" are making it down to those of us who are "on the ground", or "in the trenches".

I do believe that the American middle class will soon become a minority (if they haven't already), and our economic demographics will eventually look a lot more like a third-world's demographics, rather than that of the richest country on earth (for now).

I can get down with re-investment; after all, if the company does not do so, then it will no longer be in the running and wioll soon be overtaken by young upstarts.

What I do not tolerate is the fattening of Executive checks at the expense the middle tier. That is actually harmful to the company and the investors. I wish there was some formula to limit Executive pay and tie it formulaicly to overall company revenues.

[Doktor]

I can get down with re-investment; after all, if the company does not do so, then it will no longer be in the running and wioll soon be overtaken by young upstarts.

What I do not tolerate is the fattening of Executive checks at the expense the middle tier. That is actually harmful to the company and the investors. I wish there was some formula to limit Executive pay and tie it formulaicly to overall company revenues.

There is a reason for the huge disproportion before medium and upper management. It's the incentive to work hard to one day become a top dog.

[astralis]

z,

Where once again a Democrat president used massive federal stimulus, currency manipulation and wrong headed thinking about how to stimulate an economy to prolong the pain and delay the recovery.....

do tell, then, how the US economy recovered from the Great Depression.

[zraver]

z,



do tell, then, how the US economy recovered from the Great Depression.

It recovered on the back of a massive upsurge in exports, not road and damn building. It was British, French and American factory orders not the CCC that ended the great Depression. Unemploymet was at 19% in 1938 and had dropped to 14% its lowest level since 1929 by 1940- after the war began in Europe but before the draft and the biggest of the US orders.

[DOR]

It recovered on the back of a massive upsurge in exports, not road and damn building. It was British, French and American factory orders not the CCC that ended the great Depression. Unemploymet was at 19% in 1938 and had dropped to 14% its lowest level since 1929 by 1940- after the war began in Europe but before the draft and the biggest of the US orders.

Exports, huh?

[zraver]

Exports, huh?

Yup... Exports jumped a billion dollars a year (once again you cut off data... odd that) In addition to that billion were billions more in orders that spurred domestic consumption as factories were built and re-tooled and they hired... One source- In 1938 the US GDP was about 95 billion. By 1941 it was pushing 120 billion a 25% expansion in 2.25 years ( late 39, 40 and 41). In another GDP (2009 dollars) 1938 1.08 trillion. By the end of 1941 1.49 trillion a 40% expansion of the economy. More economic expansion in 2 years of feeding and equipping the allies than in all previous FDR years of public works.

[astralis]

z,

It recovered on the back of a massive upsurge in exports, not road and damn building. It was British, French and American factory orders not the CCC that ended the great Depression. Unemploymet was at 19% in 1938 and had dropped to 14% its lowest level since 1929 by 1940- after the war began in Europe but before the draft and the biggest of the US orders.

interesting take. that leaves several questions:

- how did the US economy grow from 1932-1937? in fact, by 1937-- before the big war orders came in after the munich debacle-- the US GDP was already larger than pre-Depression level.
- what happened in mid-1937 that caused a collapse?
- how can -every- nation export their way out of a depression?

here's a more complete graph of what DOR wrote; no big surprises. US exports actually dipped after 1941, yet the economy continued to grow at a blistering pace. why? yet another question; if exports are so central to having gotten the US out of the Great Depression, how is it despite the historically unprecedented export boom of 1945-1946, there was a recession in 1945?

exports are important to a recovery, no doubt about it. even in the special example of the Great Depression, though, where almost by definition all international trade was cut off in a bunch of tariff wars only to be revised by the frantic war-gearing of the late 30s, it's important to put things in context. in the equation C + I + G + (X-M), you're trying to make (X-M) the main driver. that wasn't the case even in the 30s (look at the size of exports vs the overall size of the economy); that simply isn't the case today, when the national economy is so much bigger. moreover by definition not everyone can be an exporter.

[snapper]

There should be another driver in your aggregate demand calculation; credit expansion - also known as debt. Aren't we a little off topic though?

[astralis]

snapper,

There should be another driver in your aggregate demand calculation; credit expansion - also known as debt.

heh, in economic theory terms your focus on that makes you a post-keynesian. :) funny thing is that the austrian school which your beliefs are closest to doesn't even recognize there's a thing called aggregate demand.

but to not complicate things too much, debt is accounted for in the equation in either C, G, or I.

i'm glad you pointed that out. knowing that the US expanded her federal debt from 15% in 1929 to 106% by 1946, it's not too hard to tell what drove US GDP, G or (X-M).

and if it were true that public spending ALWAYS crowds out private spending, why was the US standard of living/GDP per capita far higher in 1946 than it was in 1929? and if the government spending can only act as an "artificial stimulant", why did US GDP/GDP per capita keep on growing without fail afterwards?

[Julie]

There should be another driver in your aggregate demand calculation; credit expansion - also known as debt. Aren't we a little off topic though?

I don't think this is off topic because it is interesting how this long and dismal recovery is similar to the Great Depression. I do believe the markets have recovered, but the trickle down has not occurred due to many things each of you have touched upon.

I projected the housing market would take 8-10 years to get its footing, and that effects many trade jobs, builders, roofers, plumbers, electricians, etc., which were very hard-hit by the housing market crash, and even though new home building is beginning, it's not anywhere near where it should be to put these tradesmen back to work, not to mention the small businesses that completely went out of business. There were many of them here.

So, with that said, I don't feel this is off topic at all.

[DOR]

Yup... Exports jumped a billion dollars a year (once again you cut off data... odd that) In addition to that billion were billions more in orders that spurred domestic consumption as factories were built and re-tooled and they hired... One source- In 1938 the US GDP was about 95 billion. By 1941 it was pushing 120 billion a 25% expansion in 2.25 years ( late 39, 40 and 41). In another GDP (2009 dollars) 1938 1.08 trillion. By the end of 1941 1.49 trillion a 40% expansion of the economy. More economic expansion in 2 years of feeding and equipping the allies than in all previous FDR years of public works.

Zraver,

Sorry, I didn’t realize the Great Depression you were referring to started before 1929 . . . or, are you thinking of one that ended after 1940? Must be some other Great Depression, since the only one I can think of occurred within that time span.

I had to make this chart in PowerPoint, since the data are not in the Fed’s modern website. In fact, I had to punch in every number by going through pdf copies of Survey of Current Business (lovely collection back to 1922 can be found here: ArchivaL Federal Reserve Economic Data - ALFRED - St. Louis Fed ). There’s an off-chance I’ve mistyped a number, but since there isn’t any obvious break in the pattern, I’ll call it good enough for the purposes of this discussion.

Note that exports didn’t reach the mid-1927 level even in mid-1941. Remember, we weren’t the only economy in depression so to expect others to buy what we couldn’t consume ourselves is a bit of a stretch. Remember, too, that exports don’t drive economies; NET exports do, and we ran some deficits in the period under question. That slows growth.

Still, it’s true that GDP reached $126.7 billion (nominal) in 1941. That’s up from $103.6 billion in 1929, and the first year in 13 that GDP topped the pre-Depression level. The bottom was $56.4 billion, in 1933.

It’s also true that the real growth rate from 1933 to 1941 was 88.2%, but that masks the important information: the economy was in a massive depression.

How did the economy grow in the 1932-37 period? It wasn’t private consumption, which shrank in real terms from 84.7% of GDP to 75.9%. Export expansion, from 2.8% to 3.1% isn’t enough to make a difference, and imports (from 4.3% to 4.7%) neutralized much of the benefit.

Nope, it was gross fixed capital formation, which increased from 1.8% to 9.9%. Now, we don’t have a break-down for public vs. private, but it isn’t hard to connect the dots.

What happened in 1937, and caused a 33% drop in capital investment in 1938, was an overly early effort to reduce the fiscal deficit (5.5% of GDP in 1936); and the Fed’s doubling of the bank reserve requirements.

[DOR]

This is the difference between a recession and a . . . something else.
Note the data are monthly, from 1919 to the end of 2013.

Total Borrowings by Depository Institutions from the FED (monthly averages)

Something broke.

[snapper]

I don't think this is off topic...

Indeed I was clearly deluded in believing that US (un)employment statistical interpretation was not the same as discussion of Keynesian aggregate demand else the wise administrator and legendary butter cookie maker astralis would clearly have temp banned himself and locked the thread as previously. I am grateful for your wise observation in this regard. It is a joy that I no longer need fear such delusion when replying and welcome the opportunity to discuss related issues without such strict definition. :hug:

heh, in economic theory terms your focus on that makes you a post-keynesian. :) funny thing is that the austrian school which your beliefs are closest to doesn't even recognize there's a thing called aggregate demand.

astralis,

I did not say that I believed aggregate demand to be important; please do not impute this from my previous reply. I was rather trying to show that Keynesian economists, to which both your and Davids views most closely conform, are reliant on credit/debt expansion to bolster their 'aggregate demand' to feed their mythical 'animal spirits'. In brief; Keynesian relies on debt to bolster demand. This you seems to be reflected in the data you offer;

i'm glad you pointed that out. knowing that the US expanded her federal debt from 15% in 1929 to 106% by 1946

Of course from 1939 onwards much of this debt may actually have been 'necessary' and offset by such programs as 'lend lease'. During WW2 the US was exporting more and as millions were enrolled in the services and in the arms export trade this may account for the growth in GDP/standard of living you note.

and if it were true that public spending ALWAYS crowds out private spending, why was the US standard of living/GDP per capita far higher in 1946 than it was in 1929?

When millions of soldiers are returned to the labour and domestic consumption market further demand is created. Same happened after WW1. The reason the US 'won' WW2 was because it's manufacturing base, being safe from destruction, was able to supply the allies with weapons. The manufacturing base was still in place when the soldiers came home. The US Balance of Payments only started to go wrong after Bretton Woods died in 1971; http://www.census.gov/foreign-trade/...ical/gands.txt

The circumstances this time around I would suggest are very different. The main export of the US today is pieces of green fiat paper. The fiscal stimulus, as the graphs show, did not work as planned to put it mildly



So the Fed stepped in with monetary stimulus and to suppress the bond yield without which interest on the growing debt may be exorbitant. More credit/debt was created in another attempt to boost the fabled 'aggregate demand' and more little pieces of green fiat currency were created and exported. Perhaps you would argue that this was the only answer (I largely reject this idea) but one 'unforeseen consequence' of this debt expansion is that the richest have become richer and the poorest become poorer. You have through the use of monetary stimulus permitted “the biggest transfer of wealth to the rich of any government policy in recent documented history” (QE). Perhaps this does not matter or is a necessary evil?

My point is that in order to reverse this unforeseen 'transfer of wealth' future Administrations will be encouraged to take further arbitrary and misguided actions the unforeseen consequences of which will further harm the economy and may harm the trade in $ exporting which relies on it's 'reserve status'. When the Chairman of the PBOC speaks publicly about the $ status as world reserve currency you feel threatened; DOR even suggested it could be regarded as 'act of war'. Are you going to force those living outside the US to hold $s against their will so you can continue create credit to boost demand? I suggest this may be counter productive. It may be time to make the $ actually desirable to hold by paying down or even restructuring the debt and reforming the supply side to create greater competitiveness.