Monday, September 18, 2006

Where's the jobs?

At this point, most people don't believe that the economy is doing well. That's because wherever you look, you see job cuts. Take Ford, for example.

In another indication that US auto manufacturers are continuing to struggle, Ford announced more layoffs and plant closings.

Ford Motor Co. said Friday that it plans to cut 10,000 more salaried jobs, offer buyouts to all hourly workers and shut down two more plants as part of a dramatic restructuring plan designed to rein in expenses and restore the struggling automaker to profitability.

Unless Ford somehow manages to break free from their reliance on the sales of SUVs and pickups, they're going to be stuck in a pretty hard place.

Ford lost $4 billion in the United States in the first half of the year as soaring gas prices sent sales of gas-guzzling trucks and SUVs into a nosedive. They account for a third of Ford's business — but are down 17 percent in 2006, reports CBS News correspondent Anthony Mason.

One thing that struck me as funny was this paragraph in the article:

Ford's union contracts also are a big part of the problem. A Ford worker earns on average nearly $65 an hour. In contrast, Toyota pays its American workers just $45 an hour, Mason adds.

Ah, the problem is the unions! Damn that liberal media! Oh, wait...Anyway, it's just as easy to say that the problem is that the Japanese are allowed to undercut American wages like that because their workers aren't protected by a union. In the final analysis: "The bottom line is that nearly 45,000 salaried and manufacturing jobs will be gone, with two more plants added to Ford's closing list."

Back to the point. America keeps losing jobs like these by the thousands, yet we hear that unemployment is lower and that so many new jobs have been created. There are two reasons for this. For one, there actually are new jobs being created. For two, the Bureau of Labor Statistics only counts unemployed people who have looked for a job in the past 4 weeks. They count the entire employable population as those who have jobs and those who are looking. They don't take the simplest method and compare the numbers of employed to the overall population. Nor do they note people who lose good jobs only to end up in minimum-wage or part-time jobs. That being said, the explanation for the continued growth of new jobs comes from a surprising source:

But the very real problems with the health-care system mask a simple fact: Without it the nation's labor market would be in a deep coma. Since 2001, 1.7 million new jobs have been added in the health-care sector, which includes related industries such as pharmaceuticals and health insurance. Meanwhile, the number of private-sector jobs outside of health care is no higher than it was five years ago.

Whoa! 1.7 million jobs in 5 years! Isn't that incredible? President Bush's administration has sought to take credit for all job growth, claiming that it's due to tax cuts. Is that the case? Let's see what the Economic Policy Institute has to say about it. From their site

If tax cuts have created jobs at all since 2001, it will have happened in the private sector. Assuming that job growth in 2006 matches the Bush Administration's projections, the economy will have added about 2.0 million jobs to the private sector from FY2001 through FY2006.

Now, to be sure, far more than 2 million jobs have been created in the past five years. But at the same time, jobs have been disappearing. That's why Bush can say something like this: "The economy has created more than 1.7 million jobs over the past 12 months – and more than 5.7 million jobs since August 2003." Naturally, that doesn't mean that almost 6 million workers have been added to the workforce in 3 years. But where do those jobs come from? Tax cuts? Not according to the EPI.

Based on Defense Department estimates of the number of private-sector jobs created by its own spending, we project that additional defense spending will account for a 1.495 million gain in private sector jobs between FY2001 and FY2006. Furthermore, increases in non-defense discretionary spending since 2001 will have added yet another 1.325 million jobs in the private sector, for a total of 2.82 million jobs created by increased government spending. Increased mandatory government spending—which is not even included in these estimates or the accompanying chart—would account for even more job creation.

Almost 3 million jobs just from government spending! Talk about big government! And of course those jobs are coming from taxes. Oh, the irony! If you want to read some more about how tax cuts don't create new jobs, read this article from Common Dreams.

The point is, the government isn't creating new jobs and hasn't been for quite some time now. Healthcare is a naturally expanding market as more of the population grows older. Although I don't want to get too deeply into it, the article from Business Week talks about how the health care industry is partly responsible for the huge budget deficit of the US government, and that of course prompts more borrowing, plunging the US further into debt.

This is not a good thing. The economy needs to get back into gear, and this will only come with the creation of real jobs. There's no simple answer as to how to do this, but one thing is certain: tax cuts only lead to debt. Instead of servicing debt, our tax moneys should go toward funding the things Americans need, like education and public works. Surely jobs will come naturally to a nation that can boast a low crime rate, citizens in good health, and one of the most educated populations on the planet. But heck, even if they don't, we should have those things anyway!


Fan Boy said...

The US economy is growing but beginning to slow as evidenced by the shake down in the new home sales and decreasing values of used home values.

The problem is corporate America is driven by the bottom line. With increasing cost and shrinking margins with eoperaating cost and income on hand down businesses are doing more with less. Less means lower paying jobs, less money into the economy, and less at retailers.

Americans are spending more, saving less and the goverment is backing cc to get more americans to spend in debt to keep the economy moving - problem is that America is tapped out of credit.

Xanthippas said...

I suppose an economist could make an analysis that is more complicated, but certainly not one that is more trenchant.

Nat-Wu said...

Quite true. You can't forget that although the economy overall is growing, there are two different groups that are experiencing different trends. One group is those who rely on personal income. The other is those who rely on corporate income. In short, individual workers vs. business. Workers have seen real wages decline decade after decade, and they've reached their lowest point now. Corporations have seen revenues climb and climb, to the point that CEO's make hundreds of times what the average worker does. The only explanation for a growing economy in this circumstance is a growing disparity between the wealthy and the not-wealthy. If the economy is slowing overall, it more than likely means that wages are stagnating to the point that it counterbalances corporate profits. We're in bad, bad shape.