Saturday, February 05, 2011
How does American employment look compared to other postwar recessions? Pretty farookin' hideous.
At some point you have to wonder whether post-crisis policy decisions have had a greater depressive effect than the overhang from the credit bubble.
It doesn't help that the Obama Administration is hanging its hat on all the green energy jobs that will be created. Green energy jobs (and energy)have been found wanting wherever green energy plans have been implimented.
Look at 1991, 2001 and then 2007.
These curves start to look similar, and each is deeper than the last.
The lower productivity level, entry level manufacturing jobs are gone to Mexico and China (and elsewhere). This trend really started in the '70's and has been accelerating ever since. These jobs also feed the service sector, so the connection is deeper unemployment, and a slower recovery, with every cycle getting deeper and slower to recover.
We will not recover the jobs from the 2007 job-loss interval onward for a long time, if ever, unless real structural changes are made to the tax code, regulation and the pattern of lending and investment. We will be in this hole for a long time.
The policies of the Obama Administration have surely fed into this, but that alone is not a sufficient answer.
We are well and truly.....boned.
Companies cut back to the bone after September 2008 meltdown getting rid of the "fat" that we thought we needed--or didn't bother to get rid of-- during the lead up to the recessaion.
As business improves--and it is in many sectors--companies are not hiring 1) because they have learned to get along with less and 2) technology has replaced need for same numbers of employees.
I work at an AmLaw 25 law firm. We have reduced HC by almost 20% since Septe '08. We have a pipeline of defered first years through 2012, summer associates classes are half of what they were in summer 2008, contract lawyers are doing the work of first years, JPMorgan Chase is outsourcing majority of its document review work to India, and the standard ratio is one secretary for every four lawyers. Oh, and 2010 was our most profitable year yet. Unless there's a new dot com bubble on the horizon, we're not going back to pre-2008 staffing levels anytime soon. If ever.
That same scenario is playing out across the legal industry and most every other service industry. We have all learned to do more with less. Busy is the new black.
"At some point" you have to start wondering? I started wondering that in October 2008, when, in the first full flush of victory lapping, the anti-business rhetoric was really coming hot and heavy.
Now, once the administration and the evil Democrats have started to get a little bit of a clue, you think perhaps it's time to wonder?
You are late to the game, very late.
The graph shows what we know, that this is a particularly bad recession which still has two or three years to run.
It follows a particularly savage boom, probably the worst boom since WWII. The real question is, are the oscillations in the economy increasing in amplitude, or will the next boom-and-bust cycle be a small one?
If the oscillation is getting worse, we need to think how to damp it. This was the point of Keynes's method. If that no longer works, a new method is needed. But perhaps it does work, and governments have stopped using it.
Were there big cutbacks in government spending during the boom? There should have been.
It follows a particularly savage boom, probably the worst boom since WWII.
Interesting choice of words there. Economic booms are bad? For those who try to make their money selling short, I suppose they are.
This kind of result was 'baked into the cake' in November of 2006. Any human with an ounce of life experience understands Keynes theories are fig leaves for the power hungry, not actual theories.
As of that point, we knew who was going to be in charge of Congress, we suspected who would be coming in 2008, and we knew what the prevailing economic thoughts were among both. OK, one concession - most thought Hillary at the time, but then again there isn't a dime's worth of difference.
Every productive sector of the economy read the situation as what it was: a Hurricane Warning.
We remain where we are for simple reasons: what those in power believe, and what a sad percentage of the population believes (it rhymes with Ron Box) is stupidity on stilts. It isn't suitable for running a lemonade stand. Its track record is 100% failure, and it got about 75 million people killed between 1930 and 1945.
The willing cluelessness of the obstinant Keynes Disciple is one of the enduring mysteries of life.
"Economic booms are bad?"
Certainly. Boom and bust are just the two phases of a bipolar disorder in the economy.
In a boom, people are spending money that they will not earn until several years into the future. The apparent growth is greater than any real growth.
The worse the boom, the more likely it is that the recession will be sudden and severe.
"Any human with an ounce of life experience understands Keynes theories are fig leaves for the power hungry, not actual theories."
What method do you propose for damping excessive oscillations of the economy?
I haven't actually seen Keynes' method being applied in this cycle. Did you see any attempt to damp the boom? I didn't here in the UK, and I doubt you did in the US either.
As always, Don, it's like watching a dog chase its own tail.
1. In a 'boom' people are not necessarily spending to-be-earned money. Sometimes 'booms' are actually real growth. You know, the kind where things improve, where everyone benefits. It brings things like indoor plumbing, personal mobility, and a host of other Good Things too numerous to mention, and certainly too numerous to be planned for by Really Smart People. The Keynesian sees all this as chaos, and says something must be done! the rational person recognizes that the world usually does not move in an orderly fashion, and anything done in the name of deciding what is growth and what is bubble is playing God.
2. I have no clue how to 'dampen' excessive oscillations.' The premise on which the challenge rests is a castle in the air, starting with the oh-so-well-defined 'excessive'. To believe such a thing most certainly also requires one to believe it would be a good thing for Really Smart People to proclaim "Yeah Verily, I decree it hath become excessive!", and begin to pull their various levers behind the curtain. Oh, I should also add, yes we had Keynes - in the form of Govt telling banks how they should assess risk when making mortgage loans.
Your original comment included the whopper "if Keynes no longer works" or some such flapdoodle. The fact that I don't have a Unified Theory of Every Human Decision doesn't change this - Keynes is worse than nonsense, it is the bloody shirt waved by those who would tell me I should yield my freedom to them, for my own good of course. And the children. Can't forget The Children.
It is the same as the rot on offer from the AGW alarmists - "Give me your money! Give me your freedom! For your own good! And the Children!"
Just saw this. This thread is a few days old, but hopefully folks are still following.
The lede graph shows the most significant thing going on in the USA, I submit. Official reports on "unemployment" mask what this simple graph makes abundantly clear. This isn't your father's recession. It may be your grandfather's, or worse.
We can argue about causes and answers, but it's been REALLY FUCKING CLEAR to this humble narrator that Obama isn't helping. I'll skip the details. (Long time readers may recall my rants as LINK, etc).
I will say once again that it's all about growth. Sustained 3.5% - 4.0% GDP growth does wonders. At even 2.5% growth we're collectively fucked ... we have too many baked in assumptions.
Folks like Don Cox don't understand what drives growth. Half the Ivy League economics faculty don't either.
Growth requires CHANGE. Real change. Not Hopenchange. Read Schumpeter. We need to let redundant jobs die to seed the growth of the new and better. Bad goverenment only obstructs this ... in many, many ways. In the true Old School sense of these words, Obama is neither a liberal nor a progressive.