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Nation of Waitresses and Bartenders
May 8, 2006
"The Bureau of Labor Statistics payroll jobs report released May 5 says the economy created 131,000 private sector jobs in April. Construction added 10,000 jobs, natural resources, mining and logging added 8,000 jobs, and manufacturing added 19,000. Despite this unusual gain, the economy has 10,000 fewer manufacturing jobs than a year ago.
Most of the April job gain --72%--is in domestic services, with education and health services (primarily health care and social assistance) and waitresses and bartenders accounting for 55,000 jobs or 42% of the total job gain. Financial activities added 26,000 jobs and professional and business services added 28,000. Retail trade lost 36,000 jobs.
During 2001 and 2002 the US economy lost 2,298,000 jobs. These lost jobs were not regained until early in February 2005. From February 2005 through April 2006, the economy has gained 2,584 jobs (mainly in domestic services).
The total job gain for the 64 month
period from January 2001 through April 2006 is 7,000,000 jobs less than
the 9,600,000 jobs necessary to stay even with population growth during
that period. The unemployment rate is low because millions of discouraged
workers have dropped out of the work force and are not counted as unemployed.
The US current account deficit as a percent of Gross Domestic Product is unprecedented. As more jobs and manufacturing are moved offshore, Americans become more dependent on foreign made goods. This year the deficit could reach $1 trillion.
The US pays its current account deficit
by giving up ownership of its existing assets or wealth. Foreigners
don't simply hold the $800 billion in cash. They use it to acquire US
equities, real estate, bonds, and entire companies.
No-think economists make rhetorical arguments that the decline of US manufacturing employment reflects higher productivity from technological improvements and not a decline in US manufacturing per se. George Mason University economist Walter Williams recently ridiculed the claim that US manufacturing jobs are moving to China. Williams asks how the US could be losing manufacturing jobs to China when the Chinese are losing jobs faster than the US: "Since, 2000, China has lost 4.5 million manufacturing jobs, compared with the loss of 3.1 million in the U.S."
The 4.5 million figure comes from a Conference Board report that is misleading. The report that counts was written by Judith Banister under contract to the U.S. Department of Labor, Bureau of Labor Statistics, and published in November 2005 (www.bls.gov/fls/chinareport.pdf). Banister's report was peer reviewed both within the BLS and externally by persons with expert knowledge of China.
Chinese manufacturing employment has been growing strongly since the 1980s except for a short period in the late 1990s when layoffs resulted from the restructuring and privatization of inefficient state owned and collective owned factories. To equate temporary layoffs from a massive restructuring within manufacturing with US long-term manufacturing job loss indicates extreme carelessness or incompetence.
Banister concludes: "In recent decades, China has become a manufacturing powerhouse. The country's official data showed 83 million manufacturing employees in 2002, but that figure is likely to be understated; the actual number was probably closer to 109 million. By contrast, in 2002, the Group of Seven (G7) major industrialized countries had a total of 53 million manufacturing workers."
The G7 is the US and Europe. In contrast
to China's 109,000,000 manufacturing workers, the US has 14,000,000.
If the US is the high-tech leader of the world, why does the US have a trade deficit in advanced technology products with China?
There was a time when American economists were empirical and paid attention to facts. Today American economists are merely the handmaidens of offshore producers. Apparently, they follow President Bush's lead and do not read newspapers--thus, their ignorance of countless stories of US manufacturers moving entire plants and many thousands of US engineering jobs to China.
Chinese firms, including state owned firms, have numerous reasons, tax and otherwise, to understate their employment. Banister's report gives the details.
Banister points out that the excess supply of labor in China is about five to six times the size of the total US work force. As a result, there is no shortage of workers in China, nor will there be in the foreseeable future.
The huge excess supply of labor means
extremely low Chinese wages. The average Chinese wage is $0.57 per hour,
a mere 3% of the average US manufacturing worker's wage. With first
world technology, capital, and business knowhow crowding into China,
virtually free Chinese labor is as productive as US labor. This should
make it obvious to anyone who claims to be an economist that offshore
production of goods and services is an example of capital seeking absolute
advantage in lowest factor cost, not a case of free trade based on comparative
American economists have failed their
country as badly as have the Republican and Democratic parties. The
sad fact is that there is no leader in sight capable of reversing the
rapid decline of the United States of America."
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.
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