Updated: Friday
April 2, 2004
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Jobs Report: Still 5.7% Unemployed!
Although the number of jobs went up, the unemployment rate didn't budge in the March report out from the Bureau of Labor Statistics this morning: The entire report is at http://www.bls.gov/news.release/empsit.toc.htm for your review, but I'll just highlight a couple of items in the official release:
THE EMPLOYMENT SITUATION: MARCH 2004
Nonfarm payroll employment increased by 308,000 in March, and the
unemployment rate was about unchanged at 5.7 percent, (for the quarter!
It was actually up in March from 5.6 to 5.7%!)the Bureau of Labor
Statistics of the U.S. Department of Labor reported today. Payroll job growth
was fairly widespread, as construction employment rose sharply and several
major service-providing industries also added jobs.
Unemployment (Household Survey Data)
The unemployment rate, 5.7 percent, and the number of unemployed persons,
8.4 million, were essentially unchanged in March. Both measures remained
below their recent highs of June 2003. Unemployment rates for the major
worker groups--adult men (5.2 percent), adult women (5.1 percent), teenagers
(16.5 percent), whites (5.1 percent), blacks (10.2 percent), and Hispanics or
Latinos (7.4 percent)--showed little or no change over the month. The unem-
ployment rate for Asians was 4.2 percent in March, not seasonally adjusted.
(See tables A-1, A-2, and A-3.)
Total Employment and the Labor Force (Household Survey Data)
Total employment in March held at 138.3 million, and the employment-popula-
tion ratio--the proportion of the population age 16 and over with jobs--was
essentially unchanged at 62.1 percent. The civilian labor force was about
unchanged over the month at 146.7 million, and the labor force participation
rate remained at 65.9 percent. (See table A-1.)
In March, the number of persons who worked part time for economic reasons
increased to 4.7 million, about the same level as in January. These indivi-
duals indicated that they would like to work full time but were working part
time because their hours had been cut back or because they were unable to
find full-time jobs. (See table A-5.)
Persons Not in the Labor Force (Household Survey Data)
The number of persons who were marginally attached to the labor force
totaled 1.6 million in March, about the same as a year earlier. (Data are not
seasonally adjusted.) These individuals wanted and were available to work and
had looked for a job sometime in the prior 12 months. They were not counted
as unemployed, however, because they did not actively search for work in the
4 weeks preceding the survey. There were 514,000 discouraged workers in March,
also about the same as a year earlier. Discouraged workers, a subset of the
marginally attached, were not currently looking for work specifically because
they believed no jobs were available for them. The other 1.1 million margin-
ally attached had not searched for work for reasons such as school or family
responsibilities. (See table A-13.)
Industry Payroll Employment (Establishment Survey Data)
Total nonfarm payroll employment rose by 308,000 in March to 130.5 million,
seasonally adjusted. The over-the-month increase in employment included gains
in construction, retail trade, and health care and social assistance. The
number of factory jobs was unchanged in March. Since August 2003, payroll
employment has risen by 759,000. (See table B-1.)
Table A. Major indicators of labor market activity, seasonally adjusted
(Numbers in thousands)
______________________________________________________________________________
| Quarterly | |
| averages | Monthly data |
|_________________|__________________________| Feb.-
Category | 2003 | 2004 1/| 2004 | Mar.
|_________________|_________________ ________|change
| IV | I | Jan. 1/| Feb. | Mar. |
_________________________|________|________|________|________|________|_______
HOUSEHOLD DATA | Labor force status
|____________________________________________________
Civilian labor force.....| 146,986| 146,661| 146,863| 146,471| 146,650| 179 (the labor force dropped Q3:Q4???)
Employment.............| 138,369| 138,388| 138,566| 138,301| 138,298| -3 (employment actually dropped)
Unemployment...........| 8,616| 8,273| 8,297| 8,170| 8,352| 182 (unemployment grew)
Not in labor force.......| 75,290| 75,695| 75,298| 75,886| 75,900| 14 (and more people were not in the labor force)
|________|________|________|________|________|_______
| Unemployment rates
|____________________________________________________
All workers..............| 5.9| 5.6| 5.6| 5.6| 5.7| 0.1 (If the headline is unchanged, why up .1%?)
Adult men..............| 5.5| 5.1| 5.1| 5.1| 5.2| .1
Adult women............| 5.1| 5.0| 5.0| 4.9| 5.1| .2
Teenagers..............| 16.3| 16.6| 16.7| 16.6| 16.5| -.1
White..................| 5.1| 5.0| 4.9| 4.9| 5.1| .2
Black or African | | | | | |
American.............| 10.7| 10.1| 10.5| 9.8| 10.2| .4
Hispanic or Latino | | | | | |
ethnicity............| 7.1| 7.4| 7.3| 7.4| 7.4| .0
|________|________|________|________|________|_______
ESTABLISHMENT DATA | Employment
|____________________________________________________
Nonfarm employment.......| 130,002|p130,327| 130,194|p130,240|p130,548| p308
Goods-producing 2/.....| 21,676| p21,706| 21,696| p21,672| p21,750| p78
Construction.........| 6,766| p6,822| 6,812| p6,791| p6,862| p71
Manufacturing........| 14,340| p14,311| 14,314| p14,310| p14,310| p0
Service-providing 2/...| 108,326|p108,621| 108,498|p108,568|p108,798| p230
Retail trade.........| 14,915| p14,971| 14,945| p14,961| p15,008| p47
Professional and | | | | | |
business services..| 16,114| p16,195| 16,172| p16,185| p16,227| p42
Education and health | | | | | |
services...........| 16,705| p16,773| 16,746| p16,767| p16,806| p39
Leisure and | | | | | |
hospitality........| 12,172| p12,229| 12,218| p12,221| p12,249| p28
Government...........| 21,549| p21,547| 21,527| p21,542| p21,573| p31
|________|________|________|________|________|_______
| Hours of work 3/
|____________________________________________________
Total private............| 33.7| p33.8| 33.8| p33.8| p33.7| p-0.1
Manufacturing..........| 40.6| p41.0| 41.0| p41.0| p40.9| p-.1
Overtime.............| 4.4| p4.6| 4.5| p4.6| p4.6| p.0
|________|________|________|________|________|_______
| Indexes of aggregate weekly hours (2002=100) 3/
|____________________________________________________
Total private............| 98.7| p99.1| 99.1| p99.1| p99.0| p-0.1
|________|________|________|________|________|_______
| Earnings 3/
|____________________________________________________
Avg. hourly earnings, | | | | | |
total private..........| $15.45| p$15.52| $15.49| p$15.52| p$15.54| p$0.02
Avg. weekly earnings, | | | | | |
total private..........| 520.55| p523.95| 523.56| p524.58| p523.70| p-.88
_________________________|________|________|________|________|________|_______
1 Beginning in January 2004, household data reflect revised population
controls used in the Current Population Survey.
2 Includes other industries, not shown separately.
3 Data relate to private production or nonsupervisory workers.
p=preliminary.
Construction employment increased by 71,000 in March, following a decline
in February. This industry has added 201,000 jobs over the past year. Most
of the March employment gain occurred among specialty trade contractors.
Retail trade added 47,000 jobs in March. This sector has added 132,000
jobs since December, after posting a net job loss in 2003. Within retail
trade, employment in food stores increased by 13,000 over the month, reflect-
ing the net impact of workers returning from a strike. Wholesale trade em-
ployment edged up over the month. Since October, the industry has added
39,000 jobs.
Employment in health care and social assistance rose by 36,000 in March.
Over the year, this industry has gained 255,000 jobs. In March, employment
increased in hospitals (12,000), offices of physicians (9,000), and nursing
and residential care facilities (7,000).
In the financial sector, employment in credit intermediation and related
activities grew by 11,000 in March. Following declines in the last quarter
of 2003, employment in credit intermediation expanded in the first quarter,
reflecting a rise in mortgage refinancing activity. Prior to the fourth
quarter of 2003, the industry had been adding jobs for about 3 years.
Professional and business services added 42,000 jobs in March. Small em-
ployment increases occurred in several of the component industries, including
architectural and engineering services, computer systems design, and manage-
ment consulting. Elsewhere in professional and business services, employment
in temporary help services was about unchanged over the month. Since April
2003, however, the industry has added 212,000 jobs.
Within the leisure and hospitality sector, employment in food services and
drinking places increased by 27,000 over the month and by 186,000 over the
year.
Manufacturing employment was unchanged in March at 14.3 million. Declines
in manufacturing employment began moderating late last summer. Employment in
both durable and nondurable goods manufacturing was little changed in March.
Employment in a number of other industries edged up in March, including
transportation and warehousing (13,000), utilities (2,000), and government
(31,000). Within government, the March job gain was concentrated in state
and local education.
Weekly Hours (Establishment Survey Data)
The average workweek for production or nonsupervisory workers on private
nonfarm payrolls decreased by 0.1 hour in March to 33.7 hours, seasonally
adjusted. The manufacturing workweek also declined by 0.1 hour to 40.9 hours.
Manufacturing overtime was unchanged at 4.6 hours over the month.
(See table B-2.)
The index of aggregate weekly hours of production or nonsupervisory workers
on private nonfarm payrolls fell by 0.1 percent in March to 99.0 (2002=100).
The manufacturing index was down by 0.3 percent over the month to 94.1. (See
table B-5.)
Hourly and Weekly Earnings (Establishment Survey Data)
Average hourly earnings of production or nonsupervisory workers on private
nonfarm payrolls increased by 2 cents in March to $15.54, seasonally adjusted.
Average weekly earnings fell by 0.2 percent over the month to $523.70. Over
the year, average hourly earnings grew by 1.8 percent, and average weekly earn-
ings increased by 1.5 percent. (See table B-3.)
So unemployment edged up from 5.6 to 5.7% Meantime, the U-6 table at http://www.bls.gov/news.release/empsit.t12.htm reveals that the number of unemployed plus marginally attached - climbed from 10.3 to 10.4% for the month - and that's with literally millions falling off the rolls.
Still, the nonfarm payroll hype is a gain of 308,000 jobs - which means that the markets will soar like crazy for a few days - and with that, a pullback of gold prices to the $408 range is possible.
Reader's Who "Get it!"
Here's one just in today:
"George,
I find it interesting to see in the headlines this morning...
March Job Growth Strongest in 4 Years
Reading further I see Non-farm payrolls climbed 308,000 in March, the Labor Department said.
This number sure looks an awful lot like a number I have seen somewhere very recently. Take a look... (see earlier this week, below)
"If you want some amusing reading, check out John Crudele's column in the NY Post this morning where he explains how the government simply lost 321,000 jobs in January. <http://www.nypost.com/business/17897.htm>. Now the way the numbers game might be played - and this is all theoretical mind you - is this: You would reduce the number of jobs by 321,000 in say January. Then, even if you were to add 321,000 jobs, between say February and Election Day, you'd end at something approaching the truth - and something that might be defensible before Congress should anyone (Ron Paul? The Labor Committee? Anyone?) ask."I am sure you and all your readers picked up on all of this...
Keep up the good work!
What can I say?
Knew in Advance
There's another report today that the U.S. knew that al Qaida would attack using planes - and this time the allegation is from a woman who once worked as a translator for the government: http://news.independent.co.uk/world/americas/story.jsp?story=507514. Meantime, Clinton papers predating 9/11 are being withheld by the Bush administration: http://www.nytimes.com/2004/04/02/politics/02PANE.html?ei=5062&en=9f262a847f8b14e2&ex=1081486800&adxnnl=1&partner=GOOGLE&adxnnlx=1080878736-XjZ19lyPR51kzmToIAd1aA&pagewanted=print&position=
Quake Forecast
A major Southern California earthquake is being predicted by a group which looks at how quakes "swarm" prior to events. The group says sometime in the next five months, SoCal will rock: http://www.ktvu.com/news/2968506/detail.html
Mutual Fund Suits
Maryland is becoming the busiest place for lawyers who are managing more than 100 lawsuits against mutual funds for all kinds of trading scheme - and today the courts get rolling into the mess in force: http://ap.tbo.com/ap/breaking/MGAVQ6C4KSD.html.
Thursday
BLS: BS?
You get to make your own mind up on this, and how you view today's long-delayed report on the February Producer Price Index numbers will no doubt depend on whether you fancy yourself as a Democrat (in which case the report's numbers will look bad, and the methodology even worse), or if you are a counterfeit Republican (the real ones are more Libertarian these days) the numbers will look great - and you'll be able to make the case that George 43 is doing a way fine job. Ready? Here's the official word:
The Bureau of Labor Statistics of the U.S. Department of Labor
reported today that the Producer Price Index for Finished Goods edged up
0.1 percent in February, seasonally adjusted. This increase followed a 0.6-
percent jump in January and a 0.2-percent increase in December. At the
earlier stages of processing, prices received by manufacturers of
intermediate goods rose 0.9 percent in February, after advancing 0.8
percent in January. The crude goods index increased 2.5 percent, compared
with a 2.8-percent rise in the prior month. (See table A.)
Table A. Monthly and annual percent changes in selected stage-of-processing price
indexes, seasonally adjusted
______________________________________________________________________________________
| | | | |
| | Finished goods | | |
| | | | |
| |---------------------------------------------------------| | |
| | | | | | Change in | | |
| | | | | Except |finished goods| Inter- | |
| | | | |foods and|from 12 months| mediate | Crude |
| Month | Total | Foods | Energy | energy | ago(unadj.) | goods | goods |
|--------------------------------------------------------------------------------------|
2003
Feb. 1.2 0.4 7.4 -0.1 3.3 1.9 5.2
Mar. 1.3 .3 4.8 .6 4.0 2.1 13.2
Apr. -1.5 .8 -7.2 -.5 2.4 -2.3 -15.8
May -.4 .1 -3.1 .1 2.5 -.7 1.5
June .6 .4 2.9 0 2.9 .6 4.3
July .1 -.3 .5 .1 3.0 .2 -2.8
Aug. .5 .8 1.4 .1 3.5 .6 -1.0
Sept. .2 1.2 -.1 0 3.5 -.1 2.7
Oct. r .6 r 2.0 r -.4 .5 3.4 .3 r 2.8
Nov. r -.1 r -.2 r -.8 0 3.4 -.1 r .4
Dec. .2 .1 1.6 -.1 4.0 .4 2.2
2004
Jan. .6 -1.4 4.7 .3 3.3 .8 2.8
Feb. .1 .2 .2 .1 2.1 .9 2.5
r=revised. Some of the figures shown above and elsewhere in this release may differ
from those previously reported because data for October 2003 have been revised to
reflect the availability of late reports and corrections by respondents.
But wait a minute. the sharp slow down in energy prices is credited with much of the improvement (e.g. slowing of the rate of increase). But does this square with the February that we lived through? Let's see if we can find a three-month look at a typical energy measure - like this May 04 delivery of light sweet crude, for example, available at www.ino.com :
Maybe I'm just a little suspicious, of the BLS methodology - so let's look at the Feb pricing of the May 04 Henry Hub gas contract. May it was down, 'k?
So how BLS folks determined that energy price increases in February leveled off must relate to some arcane use of spot at some particular location. What the charts show is that futures prices in February were going up, and just eyeballing it, it looks like natural gas went from about $5.15 in early Feb to around $5.40 - meaning the gas contract was up about 5% and and LSC oil was up from about $32.75 to call it 35.25 - a gain of 7.6%. Maybe BLS uses a 50 day moving average - in which case maybe it would look believable...but even then barely.
OK, that's the trader's reality of the May '04 contracts. Let me put in a free plug for www.ino.com because they have a wonderful site and if you ever want to trade commodities, check it out and see what they have to offer... Now, if you flip over to http://www.bls.gov/news.release/ppi.t03.htm you will see that BLS in unadjusted numbers saw: a) a decrease in gas fuels, b) a meaninglessly small increase in electric power, and c) dead stable petroleum produce prices.
Here's the challenge for you: Did you you pay less for gas fuels in January (e.g. nat gas)? Did you have a stable electric bill? And, was the price paid by users of petroleum products really unchanged? Sure doesn't square with what the futures markets were doing. But hey, I'm not a statistician - just a skeptical MBA.
By the way, the crude goods index, which they did admit was up 2.5% for the month - when coupled with the previous month of 2.8% gives us a two-month gain of round it off to 5.37% for two months gives us underlying inflation of...Holy Smokes! 29.9% Yikes! No wonder gold touched $433 already today!
Tomorrow morning, the BLS will be releasing the labor situation report. We'll be watching that because we've been watching certain states to see if there really is any sign of an economic recovery on the job scene. We might go so far as to agree that there has been a bit of a recovery to the cash flow statements of major companies, but by and large any improvements seem to be coming from reduced head counts - largely because of offshoring.
If you want some amusing reading, check out John Crudele's column in the NY Post this morning where he explains how the government simply lost 321,000 jobs in January. http://www.nypost.com/business/17897.htm. Now the way the numbers game might be played - and this is all theoretical mind you - is this: You would reduce the number of jobs by 321,000 in say January. Then, even if you were to add 321,000 jobs, between say February and Election Day, you'd end at something approaching the truth - and something that might be defensible before Congress should anyone (Ron Paul? The Labor Committee? Anyone?) ask.
Iraq Stats
The Washington Times carries a story this morning about the large number of medical evacuations from Iraq: More than 18,000 since the undeclared-by-Congress war was started by the guy in the Oval Office: http://www.washtimes.com/upi-breaking/20040330-051545-6818r.htm We wonder about the ratio of evacs because it seems sort of higher than we would have expected from a country which the hype polls say the populace s really feeling better about their future...
Arab Summit Off
The Arab League was going to be holding a summit at the behest of Tunisia, but it seems that plan is out: http://news.bbc.co.uk/1/hi/programmes/from_our_own_correspondent/3586541.stm. One of the issue was whether there would be any use of the word "democracy" - which the powers that be in the Middle East would just as soon have none of, thank you.
Gas Bites and Yen
The underlying movers to the market today will no doubt be the OPEC decision to cut production by 4% - the www.drudgereport.com notes that there's a report out that at a minimum that ought to raise prices at the pump by a further 8¢ a gallon over the next couple of weeks.
Other underlying driver to the markets is that our earlier report that the Japanese were done intervening in the dollar's behalf was spot on. (Surprised? Don't be...) http://www.nypost.com/business/17903.htm. The net effect of this will be to see the price of all things made in Japan slowly pressured up by the increasing valuation of the yen relative to the buck.
All of this, of course, feeds back into the producer price index, if your company happens to buy raw materials from Japan - and with that we have a perfectly circular reference! [return to top and read the PPI figures again]
Wednesday
Two Reasons Why $5 Gas is Coming:
The first reason is that OPEC's ministers are sticking by their guns on the planned production cuts just around the corner. They have a goal of cutting output by 1-million barrels a day starting tomorrow. And, if the reports can be trusted, that will happen: http://ap.tbo.com/ap/breaking/MGA8RQ9FHSD.html.
The second, and more immediate reason is that last night, four explosions rocked the BP-Amoco refinery at Texas City, Texas - about 200 miles from us here in East Texas - and the immediate fall out has been an increase in gasoline futures prices.
What's amazing to us is how the Texas City incident is being downplayed in major media. This is the third-largest refinery in the U.S., the 12th biggest in the world. Able to process 435,000 barrels of crude per day (about half of OPEC's planned production cut) this is no small puppy. This will cause major issues in U.S. refining capacity and distribution in the Gulf States (the US gulf states, silly!). The explosion follows the March 25th FBI terrorism alert that al Qaida operatives were targeting just such facilities, although the official story is that it was an accident. Here's the back story: If it was a terrorist attack, it's doubtful that anyone would admit it because to do so would mean the War on Terror was costing a ton and not getting results. That is likely why no one dares call it terror...
I do feel more than a bit prescient when I did last weekend's subscriber update. Remember this from Monday?
For Subscribers:
This week's report explores the strange new land of $5 and $3 diesel - coming soon to a world near you! If you're not a subscriber click here. If you do subscribe, click here.
Iraq: Civil War Update
Five troops have died in another bombing attack in Iraq - which appears to us to be in the midst of a bloody civil war, regardless of the "happy talk" and "surveys of attitudes" to the contrary. You do remember the ill-fated "hearts & minds" hype from Vietnam coverage, right? Well, not only are the attacks continuing, but its now being accompanied by atrocities like the mutilation of victims: http://news.bbc.co.uk/1/hi/world/middle_east/3585765.stm. No oil and no peace - Does this sound like a situation that is anywhere near over?
Pipeline Payoffs
We noted with interest a world conference on aid for Afghanistan in Berlin. Afghanistan, which is a crown jewel in the petroleum pipeline races, is trying to drum up $27.5 billion over the next seven years - and 50-nations have shown up to hear their pitch: http://news.bbc.co.uk/1/hi/world/south_asia/3581875.stm.
Speaking of Occupations...
A group of settlers has moved into east Jerusalem, sparking more violent repercussions from Palestinians: http://news.bbc.co.uk/1/hi/world/middle_east/3584903.stm. You read the reports and make your own mind up on whether property rights are being respected...
Musharraf: Clock Set:
India and Pakistan have been at each other's throats over the Kashmir region a number of times, and now, to make matters more "interesting", both sides have nuclear tipped missiles and they don't have the 20-minutes of flight time that allows the U.S. and Soviet Union to think things through in the old days. Now, Pakistan President Musharraf ( a multiple assassination attempts survivor) has said that if there is no progress by August, Pakistan will pull out of the talks - which is the same thing as going back to their trigger-finger-itching stance: http://news.bbc.co.uk/1/hi/world/south_asia/3584855.stm.
Vlad Builds his own Police State
Perhaps learning from the Bush administration, which makes sure that there are no protests visible to the emperor, Vlad Putin's Duma (the Russian equivalent of Congress) is set to outlaw peaceful protests near government buildings, on public roads, or near (those dear) oil pipelines... http://news.bbc.co.uk/1/hi/world/europe/3586249.stm. While I'm sure any Republican would say Bush isn't building a police state, when you look at the global trend, we have world leaders becoming more and more isolated from the will of the people. Why? Why, indeed! Global leaders who used to work for the people now work for corporations which put them in power and pull strings according to their corporate needs and those of the international bankster cabal behind the scenes, of course. But, turn your head from this kind of news because when you couple this with last week's decision by the U.S. Fifth Circuit Court that now allows warrantless searches by police, and the return of the draft right after the election, you can see global corporatist police states unmistakably emerging from the slime of chaos in global affairs.
To think I still call myself what my late father labeled as a Time Magazine Republican (conservative on fiscal issues and liberal of civil rights and pretty much a strict Constitutionalist). One sharp reader sent me a note advising me that the Republicans and Democrats are both the same (run by Skull & Bones grads from Yale) club. "The real Republics," he advised, "are now called Libertarians and they hold personal Freedoms and the Constitution - as written- over all else." Heck of a concept. I'm so old I can remember when Republicans did that! Not that we can do much about it now that the megacorps have the people by the "gas goanies" http://news.bbc.co.uk/1/hi/business/3584883.stm.
FTM & SP
Oh, you'll notice our masthead has been changed a bit. It now reads: "We follow the money and speak plainly." Yup, sounds like no other media will compete with us on that basis...
Tuesday
Updated 10 AM CST
Bernanke's Big Lie
OK, comments on remarks of the Fed's anointed one, Bernard Bernanke - my comments in blue - and I will keep them short:
Remarks by Governor Ben S. Bernanke
At the Distinguished Speaker Series, Fuqua School of Business, Duke University, Durham, North Carolina
March 30, 2004Trade and Jobs
Economists are often accused of not being able to agree on anything. Although we are indeed a contentious bunch, one proposition commands almost unanimous assent within the economics community. That proposition is that free trade among nations promotes economic prosperity. I for one take exception to this proposition. Free trade means instead of competing with another American who makes $5.85 an hour, you are competing with someone in Mumbai who makes $0.30 an hour. If the narrow proposition of "economic prosperity" is corporate profits, I would agree. But if it's about maintaining a standard of living, meaningful U.S. employment etc, no way! I don't want to compete with a 10¢ an hour worker in the third world!) The economists argument for free trade is disarmingly simple.1 Trade is beneficial because it facilitates the division of labor, allowing each person to specialize in the type of production at which he or she is relatively most efficient. Not Exactly, Ben. The BIG LIE is in the use of the term "most efficient." As any of us who have been through B-school know efficiency means least cost for a given quality level! It's all about the definition of "efficient, isn't it? To most economists there's no quantification of lifestyle in any of this. It's all a least cost for given quality and quantity level.
At the most basic level, a world in which each person produced everything that he or she consumed would be primitive indeed, as no single person or family in isolation could produce more than a few rudimentary goods and services. In contrast, if each person concentrates on just a few activities, economies of scale and the development of specialized skills allow production to become much more efficient. Thus, if each of us focuses our efforts on just a few types of production and then trades our output with others, we can enjoy a far more varied and abundant supply of goods and services than we could if each person remained an isolated economic unit.2 Moreover, specialization tends to encourage innovation and hence promotes dynamism and growth as well as efficiency. So far, so good.
What applies to individuals would seem to apply to nations as well. Two centuries ago the economist David Ricardo famously observed that, if England specializes in making cloth while Portugal specializes in producing wine, international trade allows both countries to enjoy more of both goods than would be possible if each country produced only for domestic consumption and did not trade. A telling confirmation of Ricardo's insight is that, when nations go to war, the first order of business is often for each combatant to try to block the others access to trade. The Union won the Civil War in large part because its blockade of Southern ports prevented the Confederacy from exporting its cotton, and the outcomes of both World War I and World War II turned on the fact that Great Britain and its allies were able to disrupt German trade more successfully than Germanys submarines could impede the flow of goods into and out of Great Britain. Ben's perversion of Ricardo is well disguised. What Ricardo didn't say was that given both countries producing essentially the same goods, but one at a lower cost, that trade would facilitate increased share of total market (greater SAM of TAM) for the least cost country. Thus, if the US makes auto engines at the same quality as Mexico but a higher price relative to the country of sale, then US SAM (severed available market, or market share) will decline. But you're not supposed to be able to figure this out. You're supposed to believe Ricardo is being properly applied... but it's not.
Ricardo has little or nothing to do with global "least cost" jobjacking in today's world. This is not Ricardo's world of nation-segmented production. This is the world of Urban Survival where all goods can be made everywhere. The key variables are unit labor costs and transportation costs. That's why all those textile workers are unemployed in the Carolinas and why Detroit's engines are built in Mexico or Canada.
Despite what seems to economists to be a compelling case for trade, non-economists are far more skeptical. A perennial public concern, from the emergence of the Rust Belt in the 1980s, to the days of Ross Perot's giant sucking sound, to the more recent debate about the effects of international outsourcing, is that the expansion of trade will cause production to move abroad, at the expense of domestic employment. Such worries become particularly acute at times like the present, when the labor market is weak and net job creation is depressed. Depressed? You mean nonexistent, right? back out government job creation and it's all bad. We expect one of the all-time works of fiction to come out this Friday with the release of the BLS Employment Situation report. Why? Because the Gang that couldn't count straight is under incredible pressure. If you work for BLS, please send me an email - I'm looking for someone in the agency to tell us the truth!
From an economists perspective, focusing on the impact of trade on jobs alone is unduly narrow, as many of the benefits of trade accrue to consumers, in the form of greater access to goods and services, rather than to producers. Ben seems to miss the idea that jobs are central, because without jobs there are no consumers because we don't have anything to go out and buy things with!
Nevertheless, employment is certainly an important issue, particularly given recent experience. In my remarks today I will explore the much-debated connection between trade and jobs. I will begin by asking whether trade in general destroys jobs, then consider the specific case of trade in business services, often referred to as outsourcing abroad or offshoring. Broadly, I will argue that, although trade in general, and outsourcing abroad in particular, may bring with them structural change in the economy, they are not the principal reason for the current underperformance of the labor market. Rather, the sources of slow job creation are primarily domestic. Not slow really, it's just thatthe jobs are being created in India like crazy, aren't they? I will conclude by discussing the role of government policies in addressing both the current weakness of the U.S. labor market and the plight of displaced workers. I should note before beginning that the views I express today are not necessarily those of my colleagues at the Federal Reserve.3
[A huge section is deleted here in the interest of time but you can read it at http://www.federalreserve.gov/boarddocs/speeches/2004/20040330/default.htm but I warn you, bring your skepticals with you!]
So Why Is the Recovery Jobless?
We have little evidence to show that trade in general, or outsourcing abroad in particular, is a major source of net job loss. Apparently half of "we" doesn't read about the 43 acre software complex that Microsoft has built in India because they can get labor cheaper there, or about the growth rate in India and dozens of other third world least cost nations. Yet, two-and-a-half years into the economic recovery, the pace of job creation in the United States has been distressingly slow. Slow? You mean no existent, right? Back out government hiring (some of which has been on paper only) and we have large net losses. In fact he goes on to admit that: Job losses in manufacturing have been particularly deep, with employment in that sector apparently only now beginning to stabilize after falling by almost 3 million jobs since 2000. Why has the recovery been largely jobless thus far? India, dude, India!In a speech presented last November (Bernanke, 2003), I discussed a number of factors underlying the reluctance of U.S. firms to increase their workforces. (It's bad form to quote yourself, Ben.) I concluded then, and continue to believe, that the single most important factor explaining lagging job creation is the astonishing gains in labor productivity that have been achieved in the U.S. economy in the past few years. According to the Bureau of Labor Statistics, (the guys who can't even get the January PPI right by April? You want to trust them as a source???) labor productivity in the nonfarm business sector increased 4.3 percent in 2002 and 5.4 percent in 2003. For comparison, productivity advanced at an average rate of 2.5 percent per year from 1996 to 2000, a period that was viewed at the time to be one of exceptionally strong productivity growth. Or, and here's the shocking concept, the numbers have been so hosed up by application of non-rigorous hedonic adjustments that no one can see anything straight because the numbers are all cooked. If a car has more plastic in it, the hedonic adjustment says it has the same value as the Jag with the genuine burled dashboard. That's how you adjust - by saying that a plastic dashboard and a burled walnut one are equivalent - then you adjust "productivity" on that based. Hosed, huuh?
Most economists would agree that new information and communication technologies, together with organizational changes facilitated by those technologies, have been an important source of these impressive productivity gains. Not all. While there has been some improvement in productivity due to the expansion of communications infrastructure, that same technology has facilitated the jobjacking processes. See the article below about the ITAA's fabbed up study [story below] claiming Bernanke-like nonsense. What do they have in common? There's not a single concrete example of one company that has been tabled yet where domestic job growth in a single company has been cited. Every company that offshores makes greater profits and doesn't hire more U.S. workers. Absent a number of real-life examples? It's all hyperbole (BS?) designed to obfuscate the issues in this election year. Note that, because the productivity figures are based on measures of domestically produced output and domestic employment, to a first approximation cost savings reflected by outsourcing abroad are not reflected in, and thus cannot explain, the recent surge in productivity.11 You mean put another way, the numbers don't hold water?
The gains in domestic labor productivity are great news for Americans in the long run, as they will promote higher wages if you have a job, maybe, and then too it might just be an inflation effect, but let's gloss over that for now, profits, and living standards in this country. Note that Ben has no evidence of an increase in the standard of living, and he sure doesn't want to talk about the destruction of America's Middle Class and the continuing concentration of more and more wealth into fewer and fewer hands.. In the short term, however, increased productivity has permitted the U.S. business sector to meet strong final demand for its output without having to hire significant numbers of new workers. Why? Because we have exported job growth. Come on, Ben! How stupid do you think American's are?
The effect of productivity gains has been particularly marked in the U.S. manufacturing sector. Productivity gains of 3.8 percent in 2001, 6.4 percent in 2002, and 5.8 percent in 2003 (as reported by the BLS) have permitted U.S. manufacturers to reach levels of production only about two percent below the cyclical peak in mid-2000, despite the sharp decline in employment.12 Be careful Ben, don't let George hear you saying this... The general trend toward higher productivity and decreased employment in manufacturing has been observed for decades in the United States, although the process has recently intensified. Of course we don't want to talk about how if there has been such a marvelous increase in productivity, why are virtually 90% of married couples both working to make ends meet? Answer: We're not competing on a level playing field. We're competing with some third party worker who makes 30¢ an hour! Other countries have had similar experiences. For example, while U.S. manufacturing employment has declined 18 percent since 1990, the comparable figure for Japan is nearly 22 percent and for the United Kingdom it is more than 27 percent. Developing countries have experienced a similar pattern. Even China, supposedly the destination of U.S. manufacturing jobs, has seen manufacturing employment shrink by more than 15 percent since its peak in 1995.13
The long-run trend in manufacturing in the United States and other industrialized countries is similar to what occurred earlier in agriculture. At one time a majority of the U.S. population lived on farms. However, agricultural productivity has improved so much over the years that, although farm workers make up only about 2-1/2 percent of the workforce, they are able both to feed the nation and (as noted earlier) export substantial quantities of food as well.
When will the U.S. economy begin to create jobs in significant numbers? The recent rates of productivity growth are unprecedented, and hence likely unsustainable. Put another way, the numbers will be pushed until they become so incredible that like the BLS PPI numbers, they will pass from calculation to interpretation to complete fabrication. Thus, if output growth continues at its current robust pace, job creation will surely follow. (In India) However, because we do not know exactly how either productivity or aggregate spending will evolve, predicting the timing of a jobs resurgence is difficult. (Which means: we think some day a job might be created here in the U.S.) Although, like many economists, I have been surprised by the unusually slow recovery of the labor market, I continue to believe that steady improvement in the labor market over the remainder of this year is the most likely outcome. Nope: The (craftily adjusted) numbers might improve, but the lot of us working folks won't. Liars can figure and figures can....
What Can Policy Do?
I have argued today that, in general, increased trade does not reduce employment and, more specifically, that trade bears little responsibility for the recent slow pace of job creation in the United States. Of course he hopes people are dumb enough not to think it through and that people won't understand how you can take Ricardo out of context to provide anything. Moreover, the economy taken as a whole clearly benefits from trade. What he means when he talks about the "economy" is the health of global corporatists and central bankers, not the well-being of your family.Still, as I have noted, to say that the U.S. economy benefits from trade is not to say that every individual American worker or family benefits, or that the structural changes induced by trade are not disruptive. Be amazed at this admission! Suffer for the good of the country, citizen! Clearly, some workers who have been displaced or have had a difficult time finding work during the past three years can accurately claim to have been made worse off by international competition. Job loss in particular causes significant hardships for affected workers. What empathy! For example, an analysis by Henry Farber (2003), using BLS data (which we know is not reliable, story below) on workers displaced for any reason, suggests that only about two-thirds of displaced workers found re-employment within three years, with some settling for part-time work. In other words the number of software engineers working at McDonalds has increased. Even when successful in finding full-time work, displaced workers experience on average a decline in earnings on the new job of about 8 percent. And that's if you believe the BLS numbers. What he doesn't mention is that the 8 percent decline is after working two (or more) jobs in many cases! Focusing on workers displaced by trade in particular, Kletzer (2001) found that job losers in industries facing high levels of import competition were slightly less likely to be re-employed and experienced greater earnings losses, at about 13 percent on average, than workers displaced from industries facing less import competition. That's why all those call centers in Mumbai are thriving...
What can be done to help workers who lose their jobs because of competition from imports? Attempts to restrict trade through the imposition of tariffs, quotas, or other trade barriers are not a good solution. Why? The country survived for decades with no income tax and collecting tariffs on foreign goods! I'll tell you why: because it's not in the interests of corporations. Such actions may temporarily slow job loss in affected industries. But they do so by imposing on the overall economy costs that typically are many times greater than the benefits. Says who? A central banker with an interest in globalism working?
In the short run, the costs of trade barriers include higher prices for consumers and higher costs (and thus reduced competitiveness) for U.S. firms. But the flip side would be huge amounts of U.S. job creation! Trade barriers typically provoke retaliation from trading partners as well, with potentially large costs for exporters. And your point is? And history shows that in the longer run, economic isolationism and retreat from international competition lead to bloated, inefficient industries, lower productivity, and lower living standards. Of course the flip side is that you will have to work for Mexican or Indian wages, but that's OK, right?
The better policy approach is two-pronged. First, at the macro level, policy should be directed at helping to ensure that jobs become available for those who have been displaced. In what industries should we be looking for this miracle to occur? In particular, over time, appropriate monetary policies can help the economy achieve maximum employment with low inflation, irrespective of the trade situation. = "I'm a central banker, trust me." The nations trade policies, rather than attempting to restrict trade, should be used to push for even more trade. So we can work for wages typical in Nigeria, too. By opening markets abroad, trade policy provides greater opportunities for U.S. firms and workers. To work at Vietnam wages...
The second piece of a constructive policy toward trade is to help displaced workers train for and find new work. Some steps in this direction have been taken. Currently, the governments principal program for helping workers displaced by trade is the Trade Adjustment Assistance program, or TAA. The Congress has recently extended the TAA through 2007, while adding a special TAA program for older workers and a separate TAA program for farmers. The TAA program offers up to two and a half years of job training, allowances for job search and relocation, and income support for eligible workers, the latter for up to 104 weeks after the initial 26 weeks of conventional unemployment insurance benefits have been exhausted. The recently passed legislation also provides for health insurance assistance for some eligible workers. The U.S. Department of Labor certified about 208,000 workers for trade adjustment assistance during fiscal year 2003, spending $551 million on the program. Finally, although current TAA legislation is generally interpreted to apply only to jobs displaced in manufacturing, bills to extend TAA to service-sector workers were introduced this month in both the House and Senate. But once again, other than providing training, the real issue is where will the job creation be? No answers on this one because offshoring is stealing from everywhere.
TAA is certainly not a perfect program. A recent report by the General Accounting Office (2001) described the challenges of effectively retraining older, less-educated workers. It noted also that TAA does not address all the problems of communities that have suffered from plant closings and the like. More general criticisms can be raised about the program: First, in a complex and interdependent economy, identifying workers affected by trade is not always a straightforward matter. Second, one may well wonder why workers displaced by trade should be assisted but not workers displaced by other factors, such as restructuring or automation. So in other words, this approach doesn't work...
Lately, a number of proposals have been advanced to help displaced workers more generally, including changes in law that increase the portability of pension and health benefits. Other proposals include a program of wage insurance, which would help to cushion the wage loss that often occurs when job losers take new jobs (Kletzer and Litan, 2001) and tax credits for firms that invest in worker training (Mann, 2003, 2004). Time does not permit me to evaluate these and other alternative proposals today. In other words, Ben doesn't have the answers. Instead I will conclude by noting that helping displaced workers is good policy for at least three reasons. First, reducing the burdens borne by displaced workers is the right and fair thing to do. Agreed. Second, helping workers who have lost jobs find new productive work is good for the economy as well as for the affected workers and their families. But Ben doesn't know where those jobs will be, because they're all leaving to hire workers fractional cost wages offshore.
Finally, if workers are less fearful of change, less pressure will be exerted on politicians to erect trade barriers or to take other actions that would reduce the flexibility and dynamism of the U.S. economy.14
In other words, embrace unemployment and jobjacking and take whatever the corporatists give you because it's their game, not yours.
In the long run, avoiding economic isolationism and maintaining economic dynamism will pay big dividends for everybody. And Central Bankers like Ben will remain in control, stealing the fruits of our labors through insidious inflation.
What Bernanke and the rest of the Fed seem to miss is that a) we are past peak oil and b) we need to be rebuilding our energy and agricultural infrastructure and c) when oil runs out, globalism is dead so we better start working on the concept of an environmentally sustainable, defensible, America of the future.
Foiled!
Eight suspects have been arrested in London on suspicion of planning terrorist attacks: http://www.thisislondon.com/til/jsp/modules/Article/print.jsp?itemId=9969473 Also a report out this morning that al Qaida was planning follow-on strikes in the wake of 9/11: http://www.washtimes.com/world/20040330-120655-9785r.htm Those plans were foiled when airlines were shut down almost immediately. This feels a lot like progress in the WOT.
BLS: Numbers Pulled
Backpedaling and excuses - that's the latest from the Bureau of Labor Statistics which in this crucial election year has become the Hindenburg of the Bush economic fantasy. You know that the February report, which was supposed to be out on March 12th has been delayed - until who knows when. The confessional is on the BLS web site at http://www.bls.gov/ppi/delaynotice.htm.
But the real story of the day is that BLS has gotten some tough questions from economists and they have gone so far as to revise in the incumbent's favor four key statistics from the very tardy January report! For example:
The Table 3 all commodities index has been revised downward to 141.0 from the preliminary 143.0 (a 30% annual rate compared with December) which has now been toned down to a some more "sellable" 13.7%. You'll see that even this revision still bolsters our December forecast for 13% real inflation in 2004!
Farm products and processed foods and feeds was revised to 136.4 from 135.9 and when compared to the December reading of 139.8 suggests that rampant deflation in the farm sector - which any farmer will tell you is bogus - is made less crazy.
Nearly Instant Reader Feedback (9:45 CST):
"That feed number isn't crazy-it's imaginary!! Chicken feed (high quality) has gone from $6.75 per bag last summer to $8.50 per bag now a whopping 26% increase! These are real numbers I am paying at the feed store-look out food prices!
Industrial commodities are now pegged at 141.9 versus the more likely honest 144.4 reported in January. When compared to the December 2003 of 139.4, this tones down the implied inflation rate in the PPI from an annual rate of 43% inflation to 21% basis December.
Finally, the category "all commodities except farm products" was toned down to 142.6 from we have no idea what previously because that series is not shown on the "revised" BLS Table 3! See if you can find it at http://www.bls.gov/news.release/ppi.t03.htm yourself. There should be a fourth asterisk in the right-hand column.
With all the blunders in the PPI figures, we can hardly wait till tomorrow's regional state employment report comes out. That should be followed by the employment situation report this Friday. Right now, against all evidence that jobs are being destroyed by outsourcing, we're convinced that tomorrow's numbers will show a modest gain in employment, even though there has probably been none.
A Jobjacking Discussion
Want to read a report that will bring tears of joy to a global corporatist's heart? Here's a dandy story from an AP business writer headlined "Study: Outsourcing Tech Jobs Helps Economy" http://biz.yahoo.com/ap/040329/outsourcing_tech_survey_1.html. Let's look for the logic of how outsourcing will help the employment picture here in the U.S., OK?
The first paragraph claims that outsourcing of white collar jobs to low wage countries will ultimately lower inflation and boost productivity here in the U.S. That's a damn interesting assertion.
The next couple of paragraphs admit in understated terms that yes, a lot of jobs have been lost, and declines from U.S. software engineers will shrink through 2008! But what Urban Survival readers want to know is - if this "report" is real - and logically sound, here are a couple of simple questions we're not clear on from the AP story:
WHEN will the forecast "help" the economy occur - because might as well be the second coming - and
WHY will it occur.
The AP is generally pretty diligent about writing stories that cover the "basic five" of journalism - who, what, why, where, and when. But as I read on, I was having trouble coming up with the "why" and just "when" part of the story. "The report shows that, assuming the recovery continues, the number of IT jobs will actually increase." is a quote that's a non-answer to the question of "why?" It's like Coke saying if everyone in China drinks a bottle of Coke a day they would be the biggest company on earth. True, but why would they?
Then we get into what feels to me like a convoluted explanation of how outsourcing jobs allows companies to save money which is then used to create jobs. Say what? Fire a bunch of U.S. workers and hire cheap foreign workers and we'll hire someone back home? I'm not tracking. I'd sure love to see an example of a company where this has worked - or, perhaps they could share that bowl with us.
Next, we get to the real heart of the story where we see that outsourcing bans, such as being considered in more than two dozen states are being labeled "protectionist" and "unwise" by the ITAA, whose membership reportedly sports names like Microsoft , HP and Amazon.
But now to my point: The ITAA is a group I was not previously aware of. I was a card-carrying member of the American Electronics Association and a user of Gartner Group consulting. But the ITAA? Hadn't heard of it. So I visited their web site. Darned if I can get much of anything to load. If you can give it a try at www.itaa.org and send me some contact information, I would sure like to read the whole study.
Meantime, I was pleased to note that in testimony last fall, the association president, Harris Miller, was quite precise in defining the differences between outsourcing (which can be done within the U.S.) and "near shoring" which is outsourcing to Mexico or Canada (Thanks, NAFTA!) and off-shoring which we call plain old jobjacking.
In his remarks, Miller admits that what we call jobjacking in quite painfully real:
"As an example, a scripted call center worker in Mumbai might earn $1.50 per hour, compared to $10 per hour in Kansas City. An insurance claims adjuster in this country might earn $1,500 per month, compared to $300 per month in India. And the $75,000 annual take home pay for a certified public accountant in the U.S. might be only $15,000 in India.2 Whether cost savings continues to be a significant driver remains to be seen. As one travels up the “value chain,” the need for personal interaction with the customer increases, training increases, complexity increases, the potential for lost productivity increases, and so the total cost spread between the American and Indian worker decreases. From this perspective, the savings might be as little as 20 cents on the dollar." http://www.itaa.org/govt/cong/102003test.pdf
He then goes on to attack the notion of trade barriers:
"The fourth hard truth is that while it may be emotionally satisfying to try to protect jobs by throwing up barriers, free trade and global markets spark investment, trade and job creation. For Americans caught in the riptide of a transitioning job market, economic abstractions like positive trade balances and expanding free markets may be the source of cold comfort. I reject, however, the notion that offshore development is a zero sum game or that every job shipped offshore is a job permanently lost to an American worker. On the contrary, evidence abounds that the working capital U.S. companies save by moving jobs and operations offshore results in new investment, innovation and job creation in this country."
That last sentence is where a lot of us unemployed people begin to gag - and run to the bookshelf to reread the facts presented by Michael Moore in "Downsize this".
I'd sure like to see a disinterested third-party audit of some company - preferably a half dozen or more - that would back up the assertion that there's evidence that the working capital U.S. companies save results in new investment and job creation in the U.S. Show us some companies, show us some hard numbers - not hollow assertions - and maybe the industry association could get some grassroots support. Meantime, our suspicion is that the money saved by jobjacking is landing in executive compensation, on the P&L, and ultimately in shareholder pockets. Assertions that more money is being invested in America because of off shoring just doesn't appear a supportable notion.
Monday
The Leaky Borders
Not that George Bush can be held personally responsible, but it hasn't escaped the notice of Arizona media that the border with Mexico continues to leak like a sieve, no doubt thanks to all the do-gooders who want Mexican illegals made quasi-residents. http://www.nytimes.com/2004/03/29/national/29BORD.html?ei=5062&en=1db791b0580cf4ef&ex=1081141200&partner=GOOGLE&pagewanted=print&position=
Let me see if I have this right? We have thousands coming across each day and none of them are militant jihad fellows, huh? Sure, you betcha.
Bummed
at the Pumps
The latest gasoline price survey finds that gasoline across the nation is up to $1.80 a gallon. That's from the latest Lundberg survey: http://apnews.myway.com/article/20040329/D81JNDEG0.html.
For Subscribers:
This week's report explores the strange new land of $5 and $3 diesel - coming soon to a world near you! If you're not a subscriber click here. If you do subscribe, click here.
EO: Brazil "Hurricane"
Earth Oddity: Hundreds of homes destroyed and a lot of meteorologists are scratching their heads trying to figure out out why Brazil had its first-ever hurricane over the weekend. http://news.yahoo.com/news?tmpl=story&u=/cpress/20040329/ca_pr_on_wo/wea_brazil_storm_2. Scientists are not sure what to call this. Seems a hurricane has a "hot" eye and this one was cold, so it was some kind of cyclonic wind system technically, but in our book it's just one more sign that the world isn't what it used to be - it's all nuts now days.
Freedom of the Press
Freedom of the press is one thing, but by the calculation of U.S. forces in Baghdad, inciting people to violence against the occupation armies is quite another. So, one of the newspapers in Baghdad is padlocked for 60-days - a "journalism" time out for those that would seize arms against U.S. soldiers: http://cnn.worldnews.printthis.clickability.com/pt/cpt?action=cpt&title=CNN.com+-+Protests+as+U.S.+closes+Iraqi+paper+-+Mar+28%2C+2004&expire=&urlID=9753698&fb=Y&url=http%3A%2F%2Fedition.cnn.com%2F2004%2FWORLD%2Fmeast%2F03%2F28%2Firaq.main%2Findex.html&partnerID=2006.
Meantime, more whipping up of frenzy by Islamic clerics over the coming of the prophesied Mahdi : http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=37782
Searches Without Warrants
Last week, an appeals court held that police in Louisiana didn't have to get a search warrant to go into someone's home. http://www.theneworleanschannel.com/news/2953483/detail.html. To their credit, two of the judges in the case called it the "road to hell." You are welcome to count 'em as you like, but in our book, the Constitution and Bill of Rights comes first and this sure reads like step one to end our protections against illegal search and seizures... 4th Amendment? What's that?
UN vs. NATO?
We have often pondered whether now that there's no evil Empire of Soviets left, how long NATO would last, as it seems to be in a sort of competition when compared to the UN. We note that NATO has big doings in D.C. this week where George Bush & co. will be welcoming NATO's seven newest recruited countries into the fold: http://news.bbc.co.uk/1/hi/world/europe/3578837.stm Maybe I'm a bit dense, but when NATO talks about sending troops to Afghanistan and Iraq, isn't that sort of like UN kinda business? OK, so just between us the answer is heck yes, but NATO is a lot easier for the U.S. to dominate than the UN, giving Bush, Powell, Rove, et all a lot more direct command and control over a global police force...
Russia's Anti-Star Wars Weapons
Help me out here? I thought we had laid down the arms race when the Berlin Wall came down. But now that Russia is exporting more oil than Saudi Arabia, the Russians seem to be flexing a little more muscle than Bush & co. would like. For instance, there's a story this morning that Russia now has the means to defeat the U.S. Star Wars defense strategy: http://ap.tbo.com/ap/breaking/MGATAIXMESD.html. So we dug our Star Wars budget hole for what purpose? Try to remember that George Bush and the corporatists of the military-industrial complex voided the Anti Ballistic Missile treaty in the summer of 2001 and then formally withdrew from the pact in 2002.
We have to connect some dots here, don't we? We have Russia pumping more oil than the Saudis, making pipeline deals with China, and the Russians are whacking away at our Star Wars program. Now we bring back the draft (something Bushco won't talk much about until after the election) so what is the only conclusion we can read into this? Someone is preparing for a war. Notice the price of copper and strategic metals are skyrocketing, too. Odd, huh?
Jobjacking Con Job?
The headline says an Indian firm is outsourcing work to U.S. computer giant IBM. Sounds like a great think has happened and jobjacking might be reversed, right? Nope way. It's just a paper shuffle to hand IBM responsibility for an Indian telecom player. According to the story at http://english.aljazeera.net/NR/exeres/C4F3D57A-4483-45A3-86FF-4B102531A994.htm IBM will still be using outsourced (non-U.S.) workers: " Under the 10-year contract, 200 Bharti computer engineers will be transferred to IBM but some of them will still work on the premises of the Indian group. "
EIR On Housing Bust
No, we don't normally frequent Lyndon LaRouche's web site, but a reader sent along this little tidbit which has an eerie ring of truth to it...
PRESS RELEASE
Housing Boom: `History's First
Global Property Bust' Coming?by Lothar Komp
March 26 (EIRNS)--Since the "LTCM crisis" of 1998 and the start of the meltdown of global stock markets in March 2000, central banks around the world geared up their money printing machines to postpone a systemic collapse. Within two years, starting in January 2001, Federal Reserve chairman Alan Greenspan pushed down short-term interest rates from 6.0% to 1.0%, with European central banks following. And while Fed governor Ben S. Bernanke repeatedly refers to the use of "helicopter money" as the next possible escalation, the Bank of Japan, with its zero-interest-rate regime, tries to assure the markets every day that it can print money even faster than its U.S. or European counterparts.
As a result, we are witnessing the biggest explosion in consumer and mortgage debt in history. The average American household's debt grew by 11% in the last year, for example, while its wage income grew by only 1.6%. The generation of trillions of dollars in new debt every year—about $2 trillions in the U.S. economy alone—helped to build up new bubbles which now pose an even larger threat to the financial system and the world economy, than the "new economy" stock market hype a few years ago.
In the center of these new bubbles is the global housing boom. Representing a combined financial asset value of roughly $50 trillion in the OECD countries—for the moment holding up a private debt mountain of similar dimensions—the housing market certainly has the potential to bring down the whole system. And everybody knows it might happen soon.
Following an unmistakable warning in the Bank for International Settlements (BIS) quarterly review for March 2004, on the systemic threat posed by global housing markets, a series of alarming statements on the same matter have been issued by financial officials and experts in Britain. On March 17, economics editor Pam Woodall of London's Economist magazine appeared at a conference organized by the Investment Property Databank, and declared that the global housing boom is teetering on the edge of a crash. "House prices look seriously overvalued in Australia, Ireland, Netherlands, Spain, the UK and U.S., and will fall by at least 20% in many economies over the next four years."
This time, Woodall emphasized, it wouldn't require large interest rate hikes, as in the late 1980s, to trigger a sharp fall in house prices. This is because the ratio of house prices to average income is now at record highs in the United States, Australia, and Britain. America in particular has just seen the biggest housing boom in its history, but "the U.S. has very little fiscal or monetary ammunition left to support its economy if house prices collapse. If the U.S. falls, it would be the first global property bust in history."
There's a lot more to the article at http://www.larouchepub.com/pr/2004/040326wld_hsg_bubble.html that's worth reading for the stats analysis.
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