The US Job Market is Very Strong, for those who admit it

After years of weakness, resulting in almost no net gain in jobs from 2001-2004, the US labor market is finally booming.  This is the strongest labor market in 5 years, and stronger than it has been for 80% of the last 50 years.

Let's look at today's employment report.  The unemployment rate of 4.7% is lower today than all but a 3.5-year period from 1997-2000, in the last 35 years.  One has to go all the way back to the 1960s to find the next most recent period of high job growth.

   

The first thing that irrational pessimists will say is that people who are unemployed for too long stop collecting unemployment benefits and are no longer recorded in the unemployment rate.  This is untrue, as consumer confidence is also high, and hourly wages are rising and productivity is dropping.  The second thing they will say is that these jobs are all lower-skilled jobs that pay poorly.  This directly contradicts their claims that all the gains of US economic growth gravitate to the top of the income latter while the rest received no benefit. 

In fact, the angry left has so much cognitive dissonance about the fact that the economy is currently strong, that they are probably inhibiting their own chances of success in this economy.  Their pessimism leads to risk aversion, negativity, and other behaviors that preclude success. 

It is true that jobs continue to be lost at the bottom of the skill ladder (like in manufacturing), while a greater number of jobs are added at the top of the skill ladder.  This is a boon for highly-educated workers, but a problem for workers with lower-level skills.  Those who can upgrade their skills will prosper, and those that cannot will see declines in their standards of living.

This pattern of workforce evolution has been the norm for centuries, ever since Ned Ludd and his 'Luddite' followers destroyed cotton looms that put handweavers out of business.  The accelerating rate of economic growth, however, now means that while a person could once spend their whole life at one skill level, they now have to continuously upgrade their skills every decade or so. 

Comments

[jeffolie]

The US economy has low unemployment. A lot of the growth in jobs have been real estate (RE) related in construction, finance and sales. The Fed has been building asset bubbles and they go bust followed by the next asset bubble. This asset bubble is going to bust and the DARK SIDE will laugh with joy. Many RE bubbles have bust such as Japan's 15 years and counting of deflation and the Asian Tiger RE bust took only 12 months from joy to dispare.

I believe this housing bust will overwhelm the Fed and it will not sucessfully mop it up. The result will be a deflationary depression. To fight the depression the Fed will create as much credit as is necessary in its view to mop up. But, as in Japan, there will be 15 years or more of deflation.

Here is the short version of what I know will happen. When the subprime owners default the following happens:

The first to feel the declines in price are the new sellers. The second ripple is the MEW's (mortgage equity withdrawal, home equity loans, HELOC's, etc) which depresses renovations and major purchases. The foreclosures and REO's come third because the laws give months and months of grace period. Oh, did I mention the defaulting mortgage backed bonds, especially derivatives.

The fear is that the sheer pace of the growth in credit derivatives has outstripped both the scope of the existing regulation and the development of infrastructure to manage exposures in the sector. According to the International Swaps and Derivatives Association, the total notional volume of credit default swaps outstanding had reached $12,430bn by the end of June - a growth rate of 48 per cent in six months. The market had scarcely existed in 2000.

Collapsing mortgage backed bonds and derivatives, plus stock derivatives and a declining economy will overwhelm the Fed. The central bank of Japan in 1990 failed. This is my reason to conclude that all prices will fall in a severely.

Oh, did I mention that the hedge funds use derivatives. Hedge funds account for more than half of the daily volume in the US stock market. Hedge funds can buy or sell the risk of default by a single company or a portfolio of them. Derivatives have been used to create securities that track the credit of hundreds of companies at once, allowing hedge funds to bet either way on the corporate credit market.

Unless of course, the desparation forces the Fed to actually print and distribute cash via HELICOPTER BEN. Then, the deflation will be reversed by hyperinflation.

This flip flop scenario probably will happen with inflation as the last part.

[GK]

The RE bust (which I do think will happen in certain markets) will cause the loss of many jobs in CA, FL, etc.

However, I still think the net gains of jobs in technology, services, healthcare, etc. will offset the losses.

Plus, loss of RE jobs and gain of high-end white-collar jobs is still the principle of loss at the bottom of the skill ladder, with greater gain at the top of the skill ladder.

[jeffolie]

The Asian Tigers RE bust wipeout many countries. I know that the world wide use of derivatives will leave the first world in choas. Here is the12 month Asian Tiger RE collapese:

December 1996: The IMF praises the Thai Government’s ‘consistent record for sound macro-economic management policies’.

July-1997: Thai property companies get into difficulties after a real-estate bubble bursts, wiping a third of the value off the stock market and leading to the collapse of the banks which backed them. Foreign investors lose confidence and start pulling out. The Thai currency’s peg to the dollar wobbles. Currency speculators move in for a killing. The Thai baht is floated and the currencies of the Philippines, Malaysia, Indonesia and South Korea also suffer. A wave of devaluations follow, triggering a massive haemorrhage of funds as panicky foreign investors sell up their stocks and bonds. The economies of Thailand, Indonesia, South Korea and the Philippines go into free fall.

December 1997: By now millions are without work and decades of social and economic progress have been thrown into reverse. Of 282 firms on the Indonesian stock market only 22 are technically solvent.

[GK]

But the Human Development Index of Indonesia, Thailand, VietNam, etc. has continued to rise.

Go to the link in this post, which has a table of progress from 1975 to now.

http://futurist.typepad.com/my_weblog/2006/01/un_human_develo.html

The Asian Tiger ust caused deep damage to a small number of people, but not wide damage. Living standards in those countries are higher now than a few years ago.

[jeffolie]

I noticed this was NOT an economic index. I do not trust this index. It shows continuous growth for Japan. Japan is and has been in a deflation since 1990. These fiquires LIE.

Source :
calculated on the basis of data on life expectancy from UN (United Nations). 2005. Correspondence on life expectancy at birth. Department of Economic and Social Affairs, Population Division. New York.; data on adult literacy rates from UNESCO Institute for Statistics (United National Educational, Scientific and Cultural Organization). 2005. Correspondence on adult and youth literacy rates. March. Montreal, and UNESCO (United Nations Educational, Scientific and Cultural Organization) Institute for Statistics. 2003. Correspondence on adult and youth literacy rates. March. Montreal.; data on combined gross enrolment ratios from UNESCO (United Nations Educational, Scientific and Cultural Organization) Institute for Statistics. 2005. Correspondence on gross, net enrolment ratios and survival rate to grade 5. March. Montreal and UNESCO (United Nations Educational, Scientific and Cultural Organization). 1999. Statistical Yearbook 1999; and data on GDP per capita (2000 PPP US$) and GDP per capita (PPP US$) from World Bank. 2005. World Development Indicators 2005. CD-ROM. Washington, DC.

[GK]

I agree it is not *entirely* an economic index. That is why the US is #10, rather than #2 or #3. Nations with lower per-capita income than the US, like Canada, place a bit higher.

But it does measure increases in life expectancy, drops in crime, internet penetration, percentage who go to college, etc.

It also does measure economic things like per capital income, as a component of the index. There is also a 'GDP rank' within the larger HDI rank.

Other measures of quality can improve lives, even if income does not corelate exactly.

But coming back to SE Asia, Thailand, VietNam, Malaysia, Indonesia all have has GDP growth rates of 5% or more for the past 5 years, no?

Poke around there a little more...

[jeffolie]

That index tells nothing about property values, employement, value of the currency or inflation and/or deflation.

[jeffolie]

Where do you get you fiquires, what source on the 5% growth? Does the growth even retrace one-third of the decline from the RE crash? Give citations.

[jeffolie]

The US economy never stays still. It has ups and downs. It is up now. It will not stay at a permanent high level. The last time an economist said that was in 1929.

[jeffolie]

As far as recovery goes, one of biggest economic powers, Japan still has its stock market down 80% after 15 years.

[GK]

"That index tells nothing about property values, employement, value of the currency or inflation and/or deflation."

But it does broader, and totalls everything up as Human Development. Japan's growth in HD has been less than Australia or the US due to Japan's long recession.

[jeffolie]

Here is another year in the CRASH of the Asian Tiger:

January 1998: A $120 billion rescue plan, crafted by the IMF and the US Treasury, is set in motion in order to enable South Korea, Thailand, Indonesia and the Philippines to pay back the billions of dollars owed to US, European and Japanese banks and lure back January 1998: A $120 billion rescue plan, crafted by the IMF and the US Treasury, is set in motion in order to enable South Korea, Thailand, Indonesia and the Philippines to pay back the billions of dollars owed to US, European and Japanese banks and lure back foreign investors. In exchange the four countries have to restructure their economies, opening up their markets even further to foreign capital. Transnational corporations from the US, Europe and Japan buy Asian companies at rock-bottom prices.
April 1998: Japan slips into recession. A couple of months later the yen tumbles.

May 1998: Escalating pro-democracy protests and riots in Indonesia, fuelled by the economic crisis, oust the dictatorial President Suharto.

Mid 1998: 20,000 South Korean firms have gone bust since the crisis began. Jobless rates of 11% and 10% are predicted for Indonesia and South Korea. The Thai Government decides to expel up to one million migrant workers by the end of 1999, South Korea 146,000 and Malaysia 900,000.

July 1998: Other countries begin to feel the fallout. The devaluation of several Asian currencies, especially the yen, hits Brazil’s exports to Asia. Foreign investors are reluctant to put their money into any emerging economy. South Africa’s currency, the rand, plunges to an all-time low.

August 1998: Western manufacturers complain that undercutting by desperate Asian countries, notably South Korea, is causing job losses in the West.

[jeffolie]

You recognize and acknowlege the diaster in Japan for 15 years, it is not something that can be disputed. But, you index does dispute it because your index is dysfunctional.

[GK]

The disaster in Japan did not block off improvements in medical technology, Internet diffusion, etc.

Overall human development did not drop. It just slowed. The housing and equity collapse in Japan can only harm some dimensions of life, not all.

Countries were human development actually did declien ate Botswana, Russia, Zimbabwe, etc.

[jeffolie]

"The US Job Market is Very Strong, for those who admit it" I only accept that it is a snapshot of a current picture. A futurist would try to look ahead.

"...they are probably inhibiting their own chances of success in this economy. Their pessimism leads to risk aversion, negativity, and other behaviors that preclude success." Now is the time to be risk averse. If you were proactive, you would invest and structure your assets to make money in the coming deflationary depression. That would be success. Those that have interest only loans or ARMs and pay high portions of their income to their mortgages betting that future will have higher prices are NOT going to have success; they will be ruined.

[jeffolie]

"The housing and equity collapse in Japan can only harm some dimensions of life, not all."

In 1990 families were taking out 100 year mortgages ruining any hope of recovery. The unemployment rate skyrocketed. How are you going to pay medical bills without money; especially, since Japan's population is rapidly aging. The women are so emotionally depressed they do not want children and Japan's population is shirking dramatically.

[GK]

But the RE bubble deflating will probably not drag down the whole economy.

Technology is just starting to accelerate again.

[Lord]

The second thing they will say is that these jobs are all lower-skilled jobs that pay poorly. This directly contradicts their claims that all the gains of US economic growth gravitate to the top of the income latter while the rest received no benefit.

Danger! Will Robinson. Danger! Check those logic circuits. There is no such contradiction.

It is true that jobs continue to be lost at the bottom of the skill ladder (like in manufacturing), while a greater number of jobs are added at the top of the skill ladder.

Fact check alert. Faulty data. But manufacturing is the top of the unskilled/semiskilled food chain. Where jobs are being added is in food service, cleaning, construction. It is not at the top end at all.

[GK]

Lord,

Then why are average wages rising? Why is the unemployment rate lowest for people with advanced degrees?

[jeffolie]

Re women in Japan:

"The question is why people are becoming slow in getting married or choosing, or being forced, not to get married at all. The most plausible answers are economic factors for working women in particular. ''Women need an environment where they can start a family and keep working without facing a heavy financial burden. They also do not want to shoulder the social responsibility of taking care of the children. But the government has not told us yet how exactly women can ease these burdens,'' she explained.
The decline in Japan's birth rate is so severe they have invented a word for it - 'shoshika', meaning a society without children. ...
Japan's current population of 128 million is expected to drop to 100 million in 2050 if nothing in a business as usual scenario."

Re "But the RE bubble deflating will probably not drag down the whole economy.

Technology is just starting to accelerate again."

Half the mortgages made in the US in 2005 were interest only or ARMs. These will fail causing houses to go back to the lenders who will go back to the GSEs (Fannie and Freddie) who have created bonds (MBSs) which have become CDOs which have become Trillions in derivatives sold world wide. Half the stock market volume is derivatives.

Over 60% of the growth in the economy came from RE in 2005. Alan Greenspand said that $700 billion was spent by consummers which came from MEWs (Mortgage Equity Withdrawals). All of that disappears when housing declines and there is no equity to borrow on.

This is why the whole economy will sink like a stone. It happened in Japan and the Asian Tigers, and it will happen here pretty soon.

Advancing technology can not undo the financial bubble that will bust. The Fed is trying to bust this bubble and air is already leaking out of it now.

[jeffolie]

If you want to get an American engineering or software job, go to India.

LOL

[jeffolie]

"Somebody somewhere once told me I'd make a good Trivial Pursuit partner, but any flattery I report about myself is obviously worth what you paid for it. On the other hand, I'm VERY ignorant about the beast known as the option adjustable-rate mortgage, or "Option ARMs." These let homeowners decide how much to pay each month, beyond a small minimum amount; all unpaid interest rolls into the balance, which of course gets larger with each minimum payment. Yeah, just like a credit card.

So here's what I don't know:

Whose idea was this, and who said it was actually okay?

The government finally seemed to say "It's not okay," in public remarks by the Comptroller of the Currency, as reported by the Washington Post on Dec. 10. The story's lead was, "Federal financial regulators appear to be on the verge of reining in one of the most popular mortgages in hot housing markets nationwide."

But yesterday's Wall Street Journal said that fears of a "regulatory crackdown on option-ARM lending practices… turned out to be more bark than bite." Why, then, did regulators suggest a "crackdown" and then fail to crack down?

After five years or so, Option ARMs can push monthly payments higher by 50% to 100%. Exactly how small was the print in the contract that explained this clause to the borrowers?

Borrowers who do know about balloon payments apparently believe that "double-digit appreciation" in home values will continue, and in turn bail them out of the heavy debt load. Why do they assume that past performance is indicative of future results?

Lenders who get the minimum payment on Option ARM mortgages are actually able to book the full monthly payment into their earnings. Why is this legal?

"The banks' loan-loss reserves are low, by historical measures," even as Option ARMs comprise dramatically higher percentages of their mortgage portfolios. Why is this legal?

As much as 80% of recent mortgage loans have been "low documentation," which means banks know very little about the creditworthiness of borrowers. As many as 13% of these borrowers are NINAs -- "no income, no assets," which means "customers get mortgages without disclosing their income and assets." Why is this legal?

There's more I don't know, but you get the idea. Here's what I DO know: even the very few people who see the real estate bubble for what it is don't grasp what will really happen to the economy, when that bubble bursts.

[GK]

Yes, there will be a housing bust. The effect of that will hurt some people a lot, but most people not a lot.

It will be about as bad as the dot-com bust. Not worse. This is because I think tech is shifting into higher gear at the same time..

[jeffolie]

DEFLATIONARY DEPRESSION for me by the end of 2007. The era of ultra fast communications via first the internet, then radio programs and last the main street media will create an avalanche world wide. I look for real estate be down 80 percent from the peak, stocks down 85 percent, and mortgage backed bonds down 95 percent by the end of 2007. LOL

[GK]

I say CA RE down 25%, but the midwest won't drop, so nationwide down 10% in total.

Stock market will not have than much of a dip. Tech will actually rise. IMO.

Let's see what happens...

[jeffolie]

The DARK SIDE glows with anticipation.

[whiteboy]

Would you classify someone that has trouble finding work an "irrational pessimist" about unemployment? Your remark smacks of elite smugness, as if to say that you're alright, you've got yours. As for the rest, "let them eat cake".

I am not an "angry leftist", rather a college educated person who has been eating cake ever since President Bush arrived. I am not alone, there are many, many others like me across all levels of the economic "ladder".

1) Please define what is meant by a "factory job".

2) Please define the jobs on the upper level of the ladder.

3) Please list who gets the jobs on the upper end of the ladder, and if they are Americans, or outsourced.

4) You assert that it is fallacy to compute that the long term unemployed are not recorded because of consumer spending and worker productivity, because "as consumer confidence is also high, and hourly wages are rising and productivity is dropping." Your logic eludes me. What does "consumer spending" have to due with the longterm unemployed? What is "consumer spending" and who are these consumers? Could they be ultra rich corporations? Could you be referring to spending on the military industrial complex? Please be more specific. Would you have us believe that the emperor wears (no) clothes as well?

There are lies, damned lies, then there are statistics. - Will Rogers

Secondly you say: "The second thing they will say is that these jobs are all lower-skilled jobs that pay poorly. This directly contradicts their claims that all the gains of US economic growth gravitate to the top of the income latter while the rest received no benefit."

The above statement says that workers pay drops while big business rakes in record profits, and does not indicate that the loss of jobs and pay is replaced by well and equal or greater number of well paid Americans.

Your above circumloction is so flawed, you sound like a paid political BS artist.

It is not angry leftists who have had their lives ruined by the loss of American jobs, there are plenty of unfortunate Republicans, suffering "cognitative dissonance" who would dare you to say that to their face.

Please provide facts to support your assertion that there has been a boon to highly educated workers. Please note that we are concerned with AMERICAN WORKERS, not their third world doppleganger slaves.

You sound like a priveliged elitist who has time discuss, Ned Ludd, and the cotton picking industry. Your snide and infuriating attitude is duly noted as a callous lack of concern for the Americans who are truly suffering is duly noted as you push your partisan Republican elitist globalist agenda.

Are you perhaps the sixth column, a column of globalists with no alliegance to your fellow countrymen, who have executed an American coup d'etat. You are free to make snide remarks about the poor unfortunate lower class Americans, while ignoring the highly educated AMERICANS who are in dire straights. Whose side are you on anyway?

5) Are you being paid by the Republican party in any way, because your remarks smack of partisan politics. How do you make your money? I bet that you eat very well, compared to all those highly educated Americans working at mcjobs.

I really like some of your articles, but some of your articles are way off base. Either you are truly a naive inhabitant of an ivory tower, or it is in your interests to make such outlandish assertions, perhaps an agent provocateur.

[whiteboy]

One more thing I to add to my above comment:

You blithley stated: " The accelerating rate of economic growth, however, now means that while a person could once spend their whole life at one skill level, they now have to continuously upgrade their skills every decade or so."

When you speak of "economic growth" please be more specific, and specify whose economic growth, the skills that need continuous upgrading, and how that correlates to which portion of the unemployment rate. Furthermore, please correlate the types of skills that require constant upgrading to the outsourcing of American jobs, both High Tech and "factory", etc.

Please explain how someone who spends gets a higher education by spending four to eight years or so studying, and goes into debt for thousands for tuition can afford to upgrade every 10 years?

For example, I was laid off from a high tech middle class job along with many others. The department of labor convinced me with graphs that high tech is the wave of the future. So after spending my savings going back to school and getting another degree, I could not find work because the massive outsourcing has created an American labor crunch.

What do you do for a living? Do snotty elite academic Republican partisans require upgrading their hot air blowing skills every 10 years?

You do a fancy dance with your elitist academic lingo, graphs, and statistics. Well, Marie Antoinette did a fancy dance too, if you recall your history studies.

For once I would lke to tear you out of your ivory tower and cast you out among the masses of "angry leftists" and people going without health insurance and skipping meals who have "cognitative dissonance", so that you might feel the harshness of your arrogant words as applies to you...not somebody else.

I'd like to see you suffer the lash that you so coyly enjoy upon others less fortunate than yourself.

[GK]

whiteboy,

Your immature screed is laced with personal attacks, probably because you hate people of color who have left the Democrat plantation and have chosen to have a non-approved (i.e. realist) set of views.

You provide no data, just subjective slogans.

The unemployment rate is better than it has been for 35 of the last 38 years. Inflation is low. GDP is growing smartly. Even real wages have finally begun to rise.

Which OFFICIAL DATA on the economy is doing badly relative to the average of the last 20, 30, or 40 years? A simple question that I doubt you will have the courage to answer.

[whiteboy]

One final thing to add to above.

I agree that recently jobs have been easier to find. I postulate that there is a correlation recent grass roots efforts to curb globalist outsourcing and punish companies that hire illegals. Indeed there has been a recent wave of cities that are outlawing hiring or renting to illegals, closer scrutiny of driver license awards, etc. Antiglobalist protests were ineffecitve, however, just as it took the Rico Racketeering law to get the mafia, Rico law saves the day again against the treasonous globalist criminal conspiracy.

Suddenly companies are contacting Americans for jobs, not because they give a hoot about America, but because they are being served law suits. This has precipitated the present housing bust, because there are less illegals to sell illegal mortgage contracts to, and to hire.

The welfare of American citizens is threatened by illegal actions taken by a corrupt collusion between government and industry. Rico violatons are merely the tip of the iceberg.

American independence is threatened by an alleged North American Union, and the President is loathe to heed the call of the majority of Americans concerned by borders open to terrorists.

The definition of treason includes: "a violation of allegiance to one's sovereign or to one's state."

If not guilty, then the globalists have some 'splaining to do

Thank you, there are many good and interesting articles here, but I part ways with the owner when it comes to certain Republican party lines. I am independent and vote on issues, not parties.

[whiteboy]

"Your immature screed is laced with personal attacks, probably because you hate people of color who have left the Democrat plantation and have chosen to have a non-approved (i.e. realist) set of views."

GK, I never mentioned race. Apparently you make wild speculations formulated by your imagination out of thin air. What do you know about? Nothing! Who is making immature and personal attacks here? You are! You are trying to evade answering your charges by changing the subject and personally attacking me. This will not work (you have said so previously) and I hope that you can prove me wrong because your well learned opponents are reading this and licking their chops.

You are the one posting articles and inviting a reply. You have answered my valid question with another question, you are evading. Please disregard my unnecesary hyperboyle, and simply respond to at least once of my questions, if you can.

You are the one with all the fancy graphs and statistics, so please just answer my questions. If I am wrong, I will admit it. You have the chance to prove me wrong, or loose your credibility.

[GK]

whiteboy,

1) Where have I mentioned 'factory jobs'? If you mean Manufacturing jobs, that is defined by the ISM group and the ISM index.

2) 'Upper Level' jobs are those that are more specialized, higher paying, and usually (but not always) needing of higher education. For example, many BMW-certified specialized mechanics make over $100,000 a year, but their skills are more about workign with the highly computerized systems of modern BMWs, rather than traditional grease-intensive mechanic work.

3) Mostly Americans. The unemployment rate of college-educated people is just 2$, vs. 4.6% for the whole economy.

4) Please summarize this page-long question down for me. Unemployment is low, wages are rising, the stock market is rising, and consumer confidence is healthy. Relative to the last 35+ years, this economy gets a grade of A- or A. This is not an A+ grade, but most people will recognize that an A- or A is still quite good.

5) What is partisan? I am merely quoting non-partisan data, which you are yet to dispute or even address. The topic at hand is the current data vs. the average of the last 20, 30, or 40 years, which spanned Presidents and Congresses of both parties.