09/05/2004
August was the thirty-fourth month of disappointing job growth. A mere 120,000 private sector payroll jobs were created in August according to the Bureau of Labor Statistics.
Continuing the third world transformation of the US labor force established by the Bush recovery, the new payroll jobs are concentrated in domestic nontradable services. Health care and social assistance account for 42,000 of the new jobs. Employment services and temporary help provided work for 18,000, as did financial services. Construction added 15,000 workers to payrolls. These four payroll classifications account for 78% of last month’s net new jobs.
Manufacturing jobs increased by 22,000, leaving the economy with a net loss of 2.7 million manufacturing jobs since Bush was sworn in as president.
Today’s economy has 4,000 fewer jobs in architectural and engineering services and 200,000 fewer jobs in computer systems design and related than in January 2001.
America’s continuing decline as a manufacturing power is further evidenced by a decrease in total manufacturing hours worked during almost three years of economic recovery — a first according to Charles McMillion of MBG Information Services.
McMillion notes that total hours worked for all non-supervisory jobs has not increased over the economic recovery. In contrast, past recoveries experienced growth in hours worked by 5-12%.
Let’s get real: neither employment growth nor growth in consumer income is driving the current recovery. July’s increase in personal spending was financed by a drop in the savings rate to 0.6% of disposable income.
Face it: the current recovery has been driven by the Federal Reserve’s low interest rates, which have driven up housing prices, allowing people to refinance their homes and to spend their home equity. Both households and government alike are loaded with debt.
At least the Census Bureau is not in denial: according to a recent report, the number of Americans living in poverty increased by 1.3 million during 2003. The number of Americans without health insurance rose by 1.4 million to 45 million.
It’s a fact: Americans are not prospering. When US companies locate manufacturing abroad, where costs are lower, and outsource high value-added jobs to foreigners, who can be hired for less, foreigners, executives and shareholders gain income at the expense of the US labor force.
Stagnant real income growth in the US results from the loss of career occupations to outsourcing, forcing many Americans into less remunerative employment, while executive pay explodes.
Standard & Poor’s reports that in 2003 the median earnings growth for the Fortune 500 largest companies was 9.6%, but median pay for Fortune 500 CEOs rose 22%.
Prosperity only for the few undermines Americans' political tolerance for the rich. This is especially the case when the traditional ladders of upward mobility are lost to outsourcing and offshore production.
According to William McDonough, chairman of the Accounting Oversight Board, in the bad old days of President Reagan's "trickle-down economics," the average Fortune 500 CEO made 40 times more than the average person who worked for him … "By 2000, it was between 400 and 500 times, and last year I believe it was about 530 times. What will bring executive pay under control?, Financial Times, By Adrian Michaels, August 23 2004
Pity the policymaker who attempts to make a case for across-the-board tax cuts in the face of such politically explosive economic inequality.
Nothing can better revive the American political left than the loss of good American jobs to foreigners while executive pay skyrockets — particularly if the two are closely related. One might expect that conservative "free market" economists would be alarmed. Instead, they either turn a deaf ear or shoot the messenger.
Recently, Steve Roach, chief economist at Morgan Stanley, wrote: "Economists, market strategists, and even analysts are all too often becoming identified with a political cause; that is a disturbing development — it has the potential to compromise credibility and leave investors without the security of independent advice."
Mr. Roach could just as well have said that the politicization of economic analysis leaves presidents and legislatures with no awareness of the true consequences of their actions. "You are with us or against us" means no market for independent thought and no hearing for independent advice.
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Paul Craig Roberts is the author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice
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