Monday, December 11, 2006

The Latest Job Report: A glass half full, half empty or leaking?

Originally posted by Nadir at Reformed Leftist (and Friends)

This September at Camp Democracy in Washington DC, I heard a lecture by author Larry Beinhart, whose novel American Hero was turned into the film Wag the Dog. Beinhart asserted that the terms “liberal” and “conservative” are dead. What generally exists now are “realists,” those who examine the world as it really is, and “true believers,” those who follow a dogmatic ideology that they believe is true even though reality is often quite different.

The differing reactions to the Bureau of Labor Statistics' November Report offer an interesting case study on this concept. "Conservative" commentators or "the true believers" are thrilled with the numbers, while the "liberals" or "realists" believe they offer a grim harbinger of a bad economy headed south.

The Heritage Foundation says:
The Bureau of Labor Statistics's November employment report makes for some Christmas cheer. The report's good news is that the unemployment rate increased only slightly, to 4.5 percent, despite that nearly 400,000 people entered the job market. The number of payroll jobs increased by 132,000, slightly below the average monthly average of 149,000 for 2006. While these preliminary numbers are certain to change, they should diminish fears of a soft economy.
The job picture remains bright even as the construction industry softens along with the housing market. For the third month in a row, construction has shed jobs. But overall, employment in construction fell by just 2,000 jobs over the course of the year, alleviating concerns of a hard landing due to the housing market slump.
Heritage even takes a jab at left-wing pundits who have taken a "glass half empty" view of the bright economic numbers:
The employment report also challenges another myth about the economy. Liberal commentators complain that despite signs of outward strength, the economy is shortchanging workers. Specifically, they argue that workers' pay has not kept pace with increases in workers’ productivity, as it has historically. The economy is growing and businesses' profits are rising, liberals argue, but only the wealthiest Americans are seeing their incomes grow.
Heritage argues that differences between earnings and productivity are not uncommon, "and they are not evidence that workers are getting shortchanged." They cite the years following the 1991 recession as a time when productivity rose 9.7% while wages only rose 6.1%. But by the end of the 90's low unemployment numbers meant companies were competing for workers.

The implication, if one takes the Heritage Foundation at their word, is that good times are not only lurking around the corner, they are here!
The U.S. economy may be at that point now. Employees are enjoying substantial raises. Even as productivity growth has slowed, workers' wages have risen rapidly. Over the past 12 months, average hourly wages have increased by 4.1 percent. Earnings have not risen this quickly since February 2001, right before the collapse of the tech bubble.
Wait. Isn't that the same tech bubble that was the reason for the wage increase and the "low unemployment numbers" you were just talking about? Wasn't the bursting of said bubble (and the horrific economic and foreign policies of a certain president that will go nameless) the reason for the "economic slowdown" the nation has experienced over the last five years?

Heritage's outlook and other similar analyses are hogwash according to the liberal - scratch that - socialist commentators at the World Socialist Website linked here.
...the details of the report confirm several trends pointing to basic structural problems in the US economy, particularly the decline of the housing market and the continued deterioration of the manufacturing sector.

Construction employment declined by 29,000 jobs in November, due in large part to a sharp slowdown in new home building. According to the Labor Department report, “Since peaking in February of this year, employment in residential specialty trades was down by 109,000.”

The continued decline of the housing market will have a major impact on consumer spending, since many Americans have sustained spending by borrowing against their rising home prices. As the value of property begins to decline, homeowners will be faced with mortgages that exceed their underlying assets...
The socialists quote heretical employment consultants Challenger, Gray & Christmas who blasphemously state, “There is no question that the economy is slowing. Weakness in the housing market is expected to continue and higher-paying jobs in manufacturing and construction continue to shrink.” They offer "76,773 announced layoffs in November, up 11 percent from October" as evidence.

Additionally the decline in manufacturing is having the greatest impact on Michigan's number one economic engine, the automotive industry, which we follow here because our livelyhoods depend on that sector.
The destruction of jobs in the auto industry is particularly pronounced. So far this year, the auto industry has announced planned job losses of 151,457, surpassing the previous record of 133,686 set in 2001.
Those high productivity numbers with low wage growth coupled with slides in the housing an manufacturing sectors look like bad news to a realist like me. Americans are working harder for fewer gains. We're watching high paying jobs go to India and not enough of them are being created here. Losses in the housing sector affect many aspects of the economy from construction to retail to food and agriculture to entertainment.

The Democrats want such a modest increase in the minimum wage that it could very well have a negative effect on low wage workers who will see prices increase beyond the means of the $2.00 per hour raise they will see. True believers in both parties will continue to fund a war that is hemorrhaging funds from the federal coffers.

This penchant for "true believers" to paint a rosy picture of the economy and spread it's news as "Christmas cheer" denies the "reality" as viewed by those who see and feel what's really happening on the ground. To paraphrase my buddy Ike's economic analysis, the writers at the Heritage Foundation have a "ve$ted intere$t" in you believing their half full analogies.


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