Today the business section of the NY Times had two interesting articles. One was entitled: "Wall Street Shaken by US Job Losses in August" and the other was front page, "Drop in Jobs is Continuing: 93,000 Lost Last Month."
Excerpt from the first:
.... yesterday the labor department reported that while the unemployment rate slipped to 6.1% in August, companies cut payrolls by 93,000. The report was weaker than expected and delivered mixed signals about the nation's overall economic health. Wall Street was expecting jobs to increase 20,000 to 25,000, Mr. Hogan [chief market analyst at Jeffries and Company] said.
"We are concerned about the jobs-creation part of the economy," Mr. Hogan said.
The second article is highly remiscent of the discussions that went on here on rcm in the past few months, here I quote from that article:
... What suprises many economists is that the job-shedding has continued despite what they describe as an extraordinary level of economic stimulus. Low interest rates, tax cuts and rebates, a rise in military spending, mortgage refinancings, growing corporate profits, even a long-awaited improvement in business spending on new equipment and software have all all contributed to the rise in the economic growth rate.
But jobs are disappearing, and employers continue to resist adding hours for their existing workers. Economists warn that without payroll expansion and rising income from wages, sustaining the economic growth will be difficult once the stimulus weakens.
"If we go into next year without job growth, then the consumer's willingness to keep spending comes into question, and recovery is in danger of unwinding," said James W Paulsen, chief investment strategist for Wells Capital Management.
Seeking an explaination for the job drought, some economists call attention to the shifting of production overseas, particulary to China, and to the american economy's rapid gains in productivity. The productivity gains allow companies to maintain the same level of production with fewer workers.
Both trends have proceeded at a stepped-up pace in recent months so the economy, in response, may now have to expand at an annual rate of 5 percent or more, simply to keep employment levels stable, said Albert M. Wojnilower, economic consultant and wall street forecaster. ....
The article also mentioned that about half of the 93 thousand jobs lost were in the manufacturing areas.
Frankly it sounds to me like the company's dreams of increased profit by shifting production overseas where labor rates are very low is already showing signs of failure. My bet is that the management in firms like that is driven by the pure and simple desire to temporarily boost profits, so that they can line their own pockets before the rent comes due. Yep, plain old greed.
The problem that nobody anticipated is, the feedback time constant is way, way too far short for this to work. To boost their profits, they need to lay off american workers. Sure the workers have some savings, but once you lay off the worker, they stop buying - instantly, and almost completely.
Which leaves no market for the goods that the companies are trying to peddle. A lot of this stuff is about perception, all a person needs to hear is that their friend has just been laid off, and he thinks, "that could be me. I better start tightening the belt now before it's too late."
Somebody has to knock these idiots' heads together and holler in their ears, that NOBODY BUYS ANYTHING WHEN THEY HAVE NO JOB. This seems simple but they just ain't 'getting it.'
How much do folks want to be that the next big export overseas to china is going to be those executives themselves, when they discover that their efforts have destroyed their companies - and the US economy as well. I suspect they will also be making 1/20 of their present salary or thereabout - IF china is interested in hiring them. Otherwise it's off to the rice farm for them.
Jim
================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================