OT - NY Times economy article

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

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Reply to
jim rozen
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Someone at the presidential debate quoted Henry Ford as saying, " I pay my workers more so they can afford to buy my product."

I've read some about Ford and I recall that when he raised wages, the money went into a trust to be paid out after 6 months if the employee was still there, in good standing.

Fred

Reply to
ff

You're assuming that *only* the laid off workers bought their products. That would be a very unusual business indeed. In almost all cases, a company's workers form a *very* small subset of its customers.

Look at it this way, out of a potential domestic market of nearly 300 million consumers, the manufacturers lost

93,000 potential customers. That's 0.031% of the market. That *very* small drop in the potential market size is more than compensated by the much lower production costs of having the product made off shore.

As long as the cost reductions exceed the loss of market size, the company comes out a winner. Look at the auto industry. They're having a *record* sales year (in units sold) despite continuing shrinkage of the number of US auto workers.

They've had to discount their prices (via rebates and zero percent financing) to achieve that, but as long as those discounts are less than their cost savings due to outsourcing, they're ahead of the game, and consumers have benefited from lower prices.

Gary

Reply to
Gary Coffman

Ah, but that's in *one* month. And the suspected cause of the job loss is only just beginning. What happens when it keeps up, month after month?

Somehow this seems like a ponzi scheme to me, still. If this is true, that the job flight overseas isn't a problem, then how come all those economists are starting to wring their hands?

There's nobody who wants this to turn around more than the president. Everyone there is praying for some daylight in the economic forcasts, but it seems to be not forthcoming. Could it be they're missing the obvious?

Jim

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Reply to
jim rozen

The question is, can the gdp grow that much, when the domestic market is shrinking from loss of wages?

Jim

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Reply to
jim rozen

It could. We tend to wish and buy our way out of recessions. We could do it again.

However, there will be fewer people doing it, although they'll have a lot of money in their pockets.

-- Ed Huntress (remove "3" from email address for email reply)

Reply to
Ed Huntress

A complex problem but here are a couple of thoughts to consider. In the 1800's most of the jobs were farm jobs, but now there are very few farm jobs. The same thing is happening to manufacturing jobs. It takes fewer people where ever they are to manufacture things. With Cad, Cam, etc it takes fewer engineers as well as factory workers. And I don't think we want to ensure more manufacturing jobs by decreasing producivity. Anyone for outlawing carbide and insisting on using HSS?

And as far as relocating jobs. Some years back jobs were leaving the North and going to the South. With time the advantage has decreased. Wages in the South are higher now. And Southerners buy more with their increased wages. The same thing will happen with other countries. Not quickly, not smoothly. But more jobs in China means more farm goods exported to China. Farm goods produced by fewer workers than in the 1800's.

Management can not let their companies become uncompetitive. If they do all the workers lose their jobs, the stockholders their investments ( and management their high salaries ). Some companies as Nucor are manufacturing in the States. They have two plants that make fasteners. But they are extremely automated. Run 24 hours a day and have something like two guys on the swing and night shifts. Not many jobs there. Ditto with steel making. They make lots of steel, but don't employ many people.

Dan

Reply to
Dan Caster

It sounds good, Dan, but the realities are somewhat different. For example:

Not likely. It doesn't work that way with China. Their agricultural productivity is increasing, too -- much faster than ours. They may buy more but you can be sure that the jobs equation will go the other way, as will most of the money.

This is a good description of the dilemma. So, do you think that following these traditional economic imperatives will produce a good overall result, or is it possible that, given the unique, unprecedented factors in the equation (1.4 billion people in China; 80-cent wage rates for skilled workers; 800 million peasants standing in line to get those good,

80-cent-per-hour jobs), it's really a self-delusional, one-way suicide trip?

Maybe we can pay the robots, and teach them to drink beer and buy cars.

-- Ed Huntress (remove "3" from email address for email reply)

Reply to
Ed Huntress

Guys, the plain fact is that, all else being equal, things should be produced where they can be done so most efficiently. The ultimate beneficiary is the end consumer. For example, the reason that US cars were crap in the late '70's and early '80's was an entrenched workforce and lack of competition. To the extent they're better quality now, it was directly competition with Japan that made the difference.

Having said that, my concern is that our business with China is the classic case of a free market selling communists the rope with which we will be hanged. These people not only use slave labor to beat their economic competitors, they are physically dangerous to us. When a major Chinese general says that interference with their desire to absorb Taiwan will be for them to nuke LA, this should not be dismissed, and we certainly shouldn't be doing business with them.

Reply to
.....

"jim rozen" wrote

Jim.... your post was right on the money. Very well said.

Mark

Reply to
Mark Winlund

Or, the relocation of jobs from the southern US to Mexico, to the border regions. Those areas of Mexico are now rapidly becoming wastelands as the factories are rapidly departing to China. The wages in Mexico were starting to inch up also, so off we go in search of the next cheap place.

I guess this is my point Dan - that the companies view 'being competitive' as being equal to 'firing all the US employees.' I can just imagine the discussions that go on in the board rooms - "say look, if we don't do this and cut our labor costs, then XYZ company (competitor)

*will* shift _its_ production overseas, undercut us by ten percent in price, get all the business and eat our lunch. So we HAVE to do it or go under."

There's a certain logic there and honestly I don't know what I would say if I were in those shoes. I think the forces driving the job migration are real and relentless. They're not going away.

But as Ed has said before, there's *nothing* we can do or make in this country, that the folks in China can't do or produce - for about 1/20 the labor cost. Everything is susceptible here. We're not just talking about manufacture of goods, were talking software, services, support, all that. Like the song says,

"These jobs are going son, and they won't be back."

Ah, but my question is, who is buying the fasteners and steel? If those folks are out of work, they won't be spending any money at all. If those companies are supplying US manufacture or industry, then I would claim they're on a finite lifeline. Only a matter of time before their market slowly dwindles out of existence.

Jim

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Reply to
jim rozen

Expanding these days? Probably police and military...

Al Moore

(Who's son is in the rapidly expanding Coast Gaurd. Now part of the new and improved Dept. of Homeland Security...)

Reply to
Alan Moore

Yeah, car salesman or mechanic too. (US auto sales are on track for a record 19 million units sold this year. Someone is making a commission on each sale, and somebody is going to eventually have to fix all of them too.)

It isn't just health care for people which is growing either. Veterinary jobs are growing rapidly too. (People who have foregone having children are lavishing care on pets instead.)

Walmart is also looking for a record year.

Careers to avoid include farmer, railroad worker, telephone operator, typists/data entry operators, meter readers, machine operators, and insurance claims processing clerk.

Gary

Reply to
Gary Coffman

It is worth noting that the US workforce is shrinking. More people are retiring than entering the workforce. This caused a net shrinkage of the workforce of half a million workers during the first half of this year. It would have been even greater except for the unprecedented number of illegals entering the US. As the Baby Boomers reach retirement age, this trend will accelerate.

So we can expect fewer workers to be chasing jobs in the future. And that means we'll need fewer jobs created to satisfy them.

Gary

Reply to
Gary Coffman

On Sun, 07 Sep 2003 22:55:46 GMT, ..... wrote in Msg.

Learning from the U.S. way of doing business I guess.

--Daniel

Reply to
Daniel Haude

Agree - all but *two* of those occupations have that vaguely similar aroma about them - that they can trivially be shipped overseas, especially given that the work product can be imported without the use of a container ship!

Jim

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Reply to
jim rozen

My personal take on this effect (and I have personally noted it myself in all my relatives) is that this is the ultimate outfall of the 1930s depresssion. That basically anyone who lived through that event simply does not want to ever stop working. Once they have a job, they will never give it up, because they lived through a time when jobs were unavailable.

So nothing short of death or extreme illness will cause them to retire. Both my parents are 70s plus, and they commute in to work every day. My mom has scaled back to three days a week but my father still goes in every day, *and* he travels abroad many times per year on field trips.

Even though those folks were fairly young during the 30s, they still remember hard times. And act on them accordingly.

Jim

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Reply to
jim rozen

Although I respect your opinion about "the red menace", there are a few points to be made.

Most of China is MORE capitalistic than the USA. Although there are large government subsidies (mostly for larger stuff and largely indirect) etc, the majority of their economy runs in a similar "business" mode to the USA. The subsidy issue also comes up in the USA: A good example is increasing orders for Patriot Missle systems that are an abject failure. Another example are the huge sums of money given to the wine making industry to "market" products.

Much of the USA effectively has "slave labor" also. This varies from the prison workforce (paid pennies on the dollar with large government subsidies to market products) to the current changes in the overtime laws (which the Dept of labor admits will cause loss of overtime for a huge number and those who are no longer "exempt" from overtime are expected to have wages lowered so there is no net gain...IE working extra hours for free).

Finally, Are you saying that our threats against russia and china to keep their hands out of the Iraq issue (not to supply aid to Iraq) and the threats of "severe retribution" against those couontries if such were to happen as being any different than the Taiwan Issue?

The pot calls the kettle black

Koz

..... wrote:

Reply to
Koz

I just had to add a quick ramble here....

When 5% of the people hold 90% of the wealth in this country, most business essentially operates to serve the interests of that 5%, not the other 90%. The result is that the overall goal is to result in "short term" profitability rather than overall business strength. A good example of this is the HUGE focus of the governmental policies to try and and keep stock prices going up. This also puts o focus on CEOs to artificially inflate those prices through layoffs, cost cutting measures, etc which cause huge short-term profits at the expense of any long term company strength. A good example of this is US steel dumping all their fabricated product divisions in the early 80s. Those divisions were making profits for the company (small and consistent) but when the overall stock price was falling, they dumped all fabricated products and re-worked the accounting system to make it look like cost savings and bolster the stock price.

One should also take note that "increase in worker productivity" is seen as a GOOD thing in all the government reports. Yes, slight increases in productivity are good but for most workers, this figure means they are working harder and longer for the same money. How many of you can say that you are paid more and work less than 20 years ago? Can you even say that you are paid more and work about has hard as 20 years ago?

As long as the government operates in a mode where decisions are made with such a high focus on "short term profitability", as they currently do for that 5% who hold the 90% wealth, we will always be weak and nationally insecure.

Koz (and yes it is a ramble, no it isn't suggesti>Today the business section of the NY Times had two interesting

Reply to
Koz

I disagree, business operates to satisfy the stockholder, and today, in the U.S., that is every working stiff with a 401K or mutual fund investment, plus a lot of small busnessmen who have their pension plan invested at least partially in stocks and bonds. The 1960's idea that only the idle rich care about stock prices is long gone, the man on the street is just as likely to check his investments as the tycoon.

The result is that the overall goal is to result in "short

I disagree again, you assume that a small cadre of ultra rich are running the country to suite their fancy. The facts are that those running business today answer to almost the entire spectrum of American society, look at the Enron executives either doing time or about to do time, in prison. This should reafirm your flagging belief in the free market system as practiced in America.

A good

Your example of what is wrong with corperate America come from the 1980"s! Are you kidding! A lot of things are done wrong in every decade, that is the human element, but to try to buttress your arguement with examples from 20 years ago is simply irrelevant.

Those

That was their perogative, if it was the wrong decision, they would be punished by the market, again 20 year old examples are obsolete when talking about the big business climate of 2003, soon to be 2004.

I most definitly can, 20 years ago I was making a fraction of what I make today.

Can you even

Of course I can.

I am, and I believe WE are, neither. Keep your weakness and insecurity to your self, I am, and those I befriend and associate with, are NOT weak, and NOT insecure. I feel sorry for anyone that, living in the most freedom loving country in the world, the country with the greatest amount of opportunity ever available on the face of the earth, that finds their predicament so depressing, you my man would have been eaten alive in the middle ages, you would have never survived on the plains in the 1880's, and you probably only survive (to whine) due to government assistance in the year 2003.

JTMcC.

Reply to
John T. McCracken

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