I'd add that for a time in American history, voting required land ownership. The Jeffersonian vein in American cultural life also places a lot of emphasis on independence through the ownership of property.

^For a relatively short time.  Didn't property requirements for voting end pretty much everywhere in the U.S. except the upper house of the South Carolina legislature by the 1840s at the latest?

That Jeffersoninan vein was also openly anti-urban.  I think we're better off having gone the Hamiltonian way.  Not entirely better off, but pretty much.

Yeah, property requirements usually ended with the rise of the Jacksonians in 1830s, but I think it implanted itself deep in the political culture (read letter to the editors when school districts manage to get their levy's passed).

 

    ^---"Birthrates were actually up above the longer average right through last fall."

 

  Maybe true, but I was thinking of the long-term decline in birthrates. Pioneer families in Ohio often had ten kids. I know of a few families with 5 kids, and those are considered large today. In 1955 the average was a little under 4. Through the last 20 years it's been hovering around 2.0.

 

    2.1 is considered the replacement rate. Anything significantly over that in the long run will increase the population. Anything less will decrease. (Not accounting for immigration and emigration of course.) Increasing population means more people, which also means more housing provided that the average number of people per house is constant.

 

 

The problem with birthrates is that in the modern era we can claim that industrialized countries have generally have had ever smaller families, but there are the cyclical baby boom that mess up all the straight line predictions. The pioneer boom is what much of the Arab world just passed through - there is a spot on the industrial process that sees massive population explosion then it levels off and starts to decline.

If this keeps up it will really dent any potential economic upswing. This would also give us a 15%-17% inflation rate for the year. Either the producers will pass it on to the consumer or take a big hit in revenue.

 

Producer prices soar 1.4% on energy costs

 

"WASHINGTON (MarketWatch) -- U.S. wholesale prices rose a seasonally adjusted 1.4% in January on double-digit increases in gasoline and home heating oil, the Labor Department estimated Thursday."

http://www.marketwatch.com/story/producer-prices-soar-14-on-energy-costs-2010-02-18

 

Novembers PPI was 1.5%

Decembers PPI was .4%

 

While the 'official' federal unemployment numbers goes down, the real unemployment numbers continue to rise.

 

Jobless claims rise 31,000 to 473,000

Total jobless claims rise to 11.8 million, including federal benefits

 

"WASHINGTON (MarketWatch) -- The number of people filing initial claims for state unemployment benefits rose by 31,000 to a seasonally adjusted 473,000 last week, the Labor Department reported Thursday, a sign that labor markets remain very weak."

http://www.marketwatch.com/story/jobless-claims-rise-31000-to-473000-2010-02-18-83100

This could probably go in several threads. Relocate it if you want.....

 

Thursday, February 18, 2010

Chinese Labor Costs, Tea Partiers as True Believers

 

....Let's not put too fine a point on this: guys like Errol are fucked.

 

In fact, the entire working class of the United States is fucked.  Without manufacturing jobs, they are reduced to the small number of jobs installing and fixing the stuff that comes from China, and then low paying unskilled retail and service jobs.  With large numbers of chronically unemployed, the folks who are employed will have no leverage whatsoever on pay and conditions.

 

READ MORE AT:

http://earlywarn.blogspot.com/2010/02/chinese-labor-costs-tea-partiers-as.html

Blame the rich that wants them and their families to stay rich.

I agree that manufacturing employment is never going to return to its level from before the rise of Asia, just as agricultural employment is never going to return to the levels before mechanized agriculture.  That said, while that post was probably right regarding the fact that few blue-collar workers have the wherewithal to reinvent themselves as software programmers (or doctors or lawyers or bankers), I'm surprised to see that sentence about "hardly any work in the machine trade" referencing back to Errol's dream of being a mechanic.  A good mechanic makes a lot more than anyone at Wal-Mart, and will generally find enough work to stay busy.  That trade is also heavily resistant to outsourcing.

 

Unskilled labor will not be competitive in America again for a long time.  Skilled labor, on the other hand, can earn a living on par with many white-collar jobs.

But that pool of skilled mechanics is shrinking.  American cities that aren't advantaged by environmental or circumstantial factors (ie cities that have competitive, advantageous reasons to exist) need to look at the small towns of the early 20th century and figure out why they died and what that means for them.

Are you saying that that pool of skilled mechanics is shrinking because of reduced demand for mechanics (i.e., actual market shrinkage), or that it's shrinking notwithstanding continued market demand?  If the latter, I would trust that the market would eventually correct itself, i.e., mechanic rates would increase to the point that it would draw more people back into the profession.  If the former is true, of course, that would not be the case; however, my impression is that the pool of skilled mechanics, if it's shrinking at all, is shrinking primarily due to retirements, not unemployment.  I could be wrong, of course, since I wouldn't even know where to begin looking for in-depth statistics on the topic, but it certainly looks like there will be a need for them: there are many more cars out there than in the previous generation, and many people will be tempted to keep their old ones (paying mechanics to repair them as needed) rather than take the risk of a car loan for a new one if the economy stays uncertain and tepid.

The pool of skilled mechanics is srinking for several reasons: Kids don't grow up tinkering with mechanical stuff nearly as much as in the past. Parents and educators steer young people away from the trades and most kids want the four-year-college Caligula scene.

The pool of skilled mechanics is srinking for several reasons: Kids don't grow up tinkering with mechanical stuff nearly as much as in the past. Parents and educators steer young people away from the trades and most kids want the four-year-college Caligula scene.

 

Which is a mistake. People keep crying "Education! Education!" but failing to emphasize that a good education can be in the form of vocational education, and not necessarily a college degree, is really hurting our country. We've pushed so many kids into college that holding a Bachelor's Degree is no longer a major accomplishment or uncommon ...

 

We need to stop pushing the college for everyone agenda and begin to put more emphasis on vocational and entrapreneurial education for those who may not be university material. There will always be a need for people to fix things and there is a lot of money to be made for those who can do the job well and know how to manage a small business.

 

I agree with this, but it's hard for me to sit here with a professional degree and a fairly comfortable material standard of living (especially for someone under 30) and say with a straight face that we need fewer people going to college, since it obviously opened some high-quality doors for me.

 

That said, if I ever needed to install a high-quality door on my house, I would definitely need professional help. :-)

Using the example of the skilled auto mechanic, we actually a number problems not just one of college focus. Cars have become so computerized and complex that mere mechanical tinkering won't get you very far - so the classic model of learning doesn't work very well because you've got so much higher barriers to entry in terms of capital investment in the proper tools. So, the best auto mechanics are not quite mechanical engineers but way more than a guy who has a feel for engines and a strong arm. I'm not sure what the right answer is. I generally believe the place to start is to make high school much harder - get more of education into the 9-12, so that we aren't sending folks off to college to basically learn the basics that they missed in high school and before.

I think that you'd have to do more than that, and it's something that they do in Germany (and probably some other European economies) but would probably make some people in America uncomfortable, and that would be to start tracking who is "college material" earlier.  After all, making high school harder by just doing more of the same (literature, mathematics, etc.) would be of little use to a mechanic; he obviously does need to be able to read and do math, but will probably have very little use for calculus or Shakespeare.  On the other hand, you're right about cars becoming increasingly computerized.  Those kind of systems would probably have to be learned in a vocational-technical program.  In Germany, they start tracking kids into college prep and vocational programs much earlier than we do, and to a much greater extent (as in, it's the norm, not the exception, contra vo-tech high schools in the U.S.).

So lets see, Wall Street and the FEDs are telling everyone the recession is over in the US, green shoots for everyone. Yet the states that make up the US believe the worse is yet to come. Add in the municipalites and their issues on top of this.

 

Bad economies in states to worsen: governors

 

"The situation is fairly poor for a lot of states around the country. In fact, most states," Vermont Governor Jim Douglas, who is chairman of the association, said at a press conference at its annual meeting.

 

"What we're finding out from a fiscal standpoint is that the worst is yet to come," Douglas said."

http://www.reuters.com/article/idUSTRE61J26V20100220

I think that's likely because many states were insulated from the need to make budget cuts by the stimulus, a federal spending measure which is unlikely to get a significant encore.

I think that you'd have to do more than that, and it's something that they do in Germany (and probably some other European economies) but would probably make some people in America uncomfortable, and that would be to start tracking who is "college material" earlier.  After all, making high school harder by just doing more of the same (literature, mathematics, etc.) would be of little use to a mechanic; he obviously does need to be able to read and do math, but will probably have very little use for calculus or Shakespeare.  On the other hand, you're right about cars becoming increasingly computerized.  Those kind of systems would probably have to be learned in a vocational-technical program.  In Germany, they start tracking kids into college prep and vocational programs much earlier than we do, and to a much greater extent (as in, it's the norm, not the exception, contra vo-tech high schools in the U.S.).

 

Colleges also need to start making their course requirements and programs more pratical to make them more applicable to real world employment. A liberal arts education is nice but why does an engineer need to take a creative writing or english lit course? If someone wants to become well-rounded, let them use some of their elective  thours for it. I felt GenEds were a huge waste of time. Most were just a re-hash of stuff I learned in HS. I would've been better off using that time studying and practicing technical aspects of my trade more in depth.

 

I agree with this; GEC bloat was a major concern when I was at OSU, and there was a generally cynical consensus that the main driver behind it was the fact that departmental funding was largely calculated on a per-pupil basis, so having a lot of 150-student stats courses was great for the Department of Statistics, for example.  (I'm not knocking stats as a discipline, BTW.  Just saying that the GEC bloat was driven by resource competition as much as pedagogical concerns.)  This is particularly true for people in the natural sciences and engineering.  I was in English and political science, so it was less of an issue.

As long as "the people" keep voting down tax levies and ignoring the fact that local governments, just like most ventures these days, have decreased revenue + increased costs, the States/Counties and Cities/Villages/Townships are gonig to be in trouble financially, the schools are going to consequently get worse and infrastructure will go unmaintained.  People don't want to pay now, so the costs will be shifted to a future generation.  These expenses don't go away by ignoring them.

I'll leave aside the argument about what colleges should be covering. I'm a strong believer that college should always include a substantial core across many disciplines. I agree that some version of the Euro/Asian tracking probably wouldn't be a bad idea. By making high school harder, I think it means students should be able to write, do math up through at least college algebra/pre-calc, and have a firm citizenship education (geography, history, and civics). They should probably have a decent intro to the accounting side of business, which could be useful for small business types.

 

I would also add that some of the emphasis on the homebuilding industry was about providing jobs for moderately skilled and poorly educated - non-outsourceable. We know how that ended.

Here’s a good article from the NYT on the rise of long term unemployment and it’s consequences, which appears to be the next economic issue now that we seem to have bottomed-out in the recesssion:

 

The New Poor

 

The article notes there are some negative feedback loops operating in the economy causing this…

 

Some labor experts say the basic functioning of the American economy has changed in ways that make jobs scarce…

 

….Large companies are increasingly owned by institutional investors who crave swift profits, a feat often achieved by cutting payroll. The declining influence of unions has made it easier for employers to shift work to part-time and temporary employees. Factory work and even white-collar jobs have moved in recent years to low-cost countries in Asia and Latin America. Automation has helped manufacturing cut 5.6 million jobs since 2000 — the sort of jobs that once provided lower-skilled workers with middle-class paychecks….

 

….American business is about maximizing shareholder value,” said Allen Sinai, chief global economist at the research firm Decision Economics. “You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.”….

 

….Traditionally, three sectors have led the way out of recession: automobiles, home building and banking. But auto companies have been shrinking because strapped households have less buying power. Home building is limited by fears about a glut of foreclosed properties. Banking is expanding, but this seems largely a function of government support that is being withdrawn.

 

At the same time, the continued bite of the financial crisis has crimped the flow of money to small businesses and new ventures, which tend to be major sources of new jobs. 

 

And the Times has this nifty set of graphs.  The first one is particularly interesting as it shows how long term unemployment is approaching singularity, fulfilling Karl Marx’s prediction of capitalism creating a “reserve army of the unemployed”

 

 

The BLS has a great long-term data set, starting in the late 1940s, for average weeks of unemployment by month and year.  I aggregate the data to provide average weeks of unemployment by year, and then graph these for the postwar era, starting in 1950.

 

 

Note the 15 week line.  One can see this line gets crossed more and more frequently, until by the 2000s, 8 out of 10 years have average unemployment durations of over 15 weeks, indicating perhaps that its increasingly tough to find work (on average) as the decades roll by. 

 

Another way to look at this is by decade.  Here is the same time frame, but with high/low ranges for each decade plus an average (red line)

 

 

Note how things “recalibrate” in the 1980s, with the 30 years before 1980 having one type of range and average, (more or less, there is a slight rise over the decades), and the years after 1980 having a longer average periods of unemployment. 

 

But, this chart omits the recession year of 2009. 

 

Adding that in we get this…

 

 

...perhaps we are seeing yet another “recalibration” to another regime of even longer average unemployment durations?  Or perhaps 2009 is just an anomaly?

 

Anyway, the duration of unemployment number looks like it's in uncharted waters based on the past 60 years of numbers.

 

I think that you'd have to do more than that, and it's something that they do in Germany (and probably some other European economies) but would probably make some people in America uncomfortable, and that would be to start tracking who is "college material" earlier.  After all, making high school harder by just doing more of the same (literature, mathematics, etc.) would be of little use to a mechanic; he obviously does need to be able to read and do math, but will probably have very little use for calculus or Shakespeare.  On the other hand, you're right about cars becoming increasingly computerized.  Those kind of systems would probably have to be learned in a vocational-technical program.  In Germany, they start tracking kids into college prep and vocational programs much earlier than we do, and to a much greater extent (as in, it's the norm, not the exception, contra vo-tech high schools in the U.S.).

 

Yep. +1 on this post and Johios reply #1433.

I think this is almost a given now. There are going to be more sovereign defaults, potential state defaults, and municipal defaults and sooner or later the US printing press will be turned off and taxes are going to increase significantly.

 

Other options:

- The US decides to default on our debt and give the world the finger.

- Another option is the world creates a single currency.

 

Harvard’s Rogoff Sees Sovereign Defaults, ‘Painful’ Austerity

 

"Feb. 24 (Bloomberg) -- Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks."

 

"The U.S. is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets, Rogoff said in an interview after the speech. Fiscal policy won’t be curbed until soaring bond yields trigger “very painful” tax increases and spending cuts, he said."

http://www.bloomberg.com/apps/news?pid=20601087&sid=aaeViPPUVSw4

US Jan mass layoffs edge up on weak manufacturing

 

"A total of 182,261 workers were affected last month."

 

"Since December 2007, when the worst recession in 70 years started, the U.S. economy has shed 8.4 million jobs."

 

"Payrolls have declined every month since then except for last November when they increased by 64,000."

http://www.reuters.com/article/idUSN239866720100223?type=marketsNews

 

I think this is almost a given now. There are going to be more sovereign defaults, potential state defaults, and municipal defaults and sooner or later the US printing press will be turned off and taxes are going to increase significantly.

 

More likely, at the Federal level, there will be draconian cuts before taxes go up, since the politics of the situation would favor cuts. We are already seeing that. 

 

The state and local situations would be actual defaults since the revenues aren't there any more to support extensive local and state governements.

 

 

 

I think this is almost a given now. There are going to be more sovereign defaults, potential state defaults, and municipal defaults and sooner or later the US printing press will be turned off and taxes are going to increase significantly.

 

More likely, at the Federal level, there will be draconian cuts before taxes go up, since the politics of the situation would favor cuts. We are already seeing that. 

 

The state and local situations would be actual defaults since the revenues aren't there any more to support extensive local and state governements.

 

If the politics actually favored cuts, we would have been cutting for the last two years rather than exploding the deficit.  Cuts are popular in the abstract, but any specific cut is politically perilous.  After all, there was someone lobbying for whatever expenditure is proposed for elimination--and once spending programs are in place, they tend to generate their own constituencies.  I am firmly convinced that we would be substantially better off as a country if Social Security, welfare, Medicaid, and Medicare had never been enacted--but now that they have been, they've generated massive voting blocs dependent upon them.

I think this is almost a given now. There are going to be more sovereign defaults, potential state defaults, and municipal defaults and sooner or later the US printing press will be turned off and taxes are going to increase significantly.

 

More likely, at the Federal level, there will be draconian cuts before taxes go up, since the politics of the situation would favor cuts. We are already seeing that.

 

The state and local situations would be actual defaults since the revenues aren't there any more to support extensive local and state governements.

 

 

 

 

I don't think the US government will take drastic spending cuts unless they are forced too by external forces out of their control. i.e. No one buys our debt.

 

I believe they will go with higher taxes first.

They are still building to many. Inventories are still way to high.

 

New home sales hit record low

 

"The Commerce Department said sales dropped 11.2 percent to a 309,000 unit annual rate, the lowest level since records started in January 1963, from an upwardly revised 348,000 in December."

http://finance.yahoo.com/news/New-home-sales-hit-record-rb-2868445540.html?x=0

 

Home purchase loan demand at lowest since 1997

 

"NEW YORK (Reuters) - U.S. mortgage applications fell for a third straight week, with demand for home purchase loans sinking to the lowest level in 13 years as inclement weather weighed, data from an industry group showed on Wednesday."

http://finance.yahoo.com/news/Home-purchase-loan-demand-at-rb-1475575272.html?x=0&sec=topStories&pos=7&asset=9cd52a405695cff9b75ccfab2864c519&ccode=1

 

Darn winter weather. :wink:

...perhaps we are seeing yet another “recalibration” to another regime of even longer average unemployment durations?  Or perhaps 2009 is just an anomaly?

 

Jeffery,

 

I like all your charts in the above post, and think they point out a major shift in employment pre- and post 1980.

 

Pre 1980 employment was largely man-powered centered.  Companies needed bodies to carry out the work.

 

Bu coming out of the early 1980s depression, major shifts in companies quickly took place.  Manpower was replaced by automation  - computers in the office, robotics on the factory floor, etc.  This create the need for a very different workforce.  Gone were the droves of shop-floor workers, office secretaries, and office clerks.  In their place was the need for a more educated workforce in the company, and a host of new companies of educated workers to come up with all the technology.

 

The result - employment became much more education-based and much more specific.  This transition started in earnest in the early/mid 80s, and was in full force by mid 1990s.

 

So the typical worker became fairly specialized in the mid 80s, and job openings became very specialized at the same time. Naturally, it takes a lot longer for skilled employees to match up with skilled job opening.

 

(I know none of this is new to you, but thought it should be thrown out there for discussion by whomever.)

 

-------

As to the question of whether 2009 is an anomoly or a recalibration, I vote for a recalibration. 

 

I don't think we're set for a repeat of 1980 in which the nature of jobs and employment skill-set changed dramatically.  Instead, I think we are in for a more macro shift in the need for employees. 

 

Macro in the sense that....

 

1) employment in the US is likely to remain stagnant for the next couple of decades (gone are the need for all the new retail jobs, finance jobs, construction jobs as the country stagnates economically for the next 20 years.)

 

2) job growth is likely to shift geographicaly to outside the US borders.  We simply won't need as many jobs in the US for the remaining knowledge workers.

 

I guess most of us will have to become government workers - or restaurant workers. :-D

 

(sorry for the doom and gloom prediction.  And yes, I't still trying to reconcile this line of thinking with my 'things can't get worse because we have nothing left to cut' thinking.

The notion that the country is just going to stagnate economically for the next 20 years is absurd.  Even though I'm extremely skeptical about the entitlement budget crisis looming in the not-so-distant future, I'm still bullish on the American economy long-term.  I certainly haven't jumped on the bandwagons moving money out of the U.S. and into emerging markets; only a tiny part of my wealth is offshore.  I would feel much more confident if we had entitlement spending under control and a balanced budget amendment in the U.S. constitution to force it to stay under control, but that's a long way from saying that the country is going to stagnate economically for the next 20 years.

The notion that the country is just going to stagnate economically for the next 20 years is absurd.

 

He is talking about employment, not economic growth.

 

 

The US needs new industries peroid.

Being a history buff I get a kick out of these long-range time series from the BLS (though since I lived through a lot of this history its more nostalgia).  Anyway, here is a time-series that starts in the 1950s, but I start counting in 1960 for clean decade-to-decade comparison.

 

This is people who are working part time but would prefer to work full time.  The BLS has this by month, but I aggregate to an annual average. 

 

 

One again the big spike in 2009 is noticeable compared to the highs  & lows for the past 40 years.

 

Stripping away the decade lines one sort of sees eras of involuntary part-time work.  The low numbers of the postwar prosperity into the 1970s, then the growth of part-time work (or, involuntary part time work) during the Reagan/Bush era, which represented sort of a high plateau for this kind of employment.  The Big 80s was a time of 6% unemployment and also apparently a lot of short hours.

 

This was followed by the “dot-com’ expansion, when, presumably, there was more full time work, then the increase in involuntary part time work in the 2000s (though not quite to 1980s levels, until the recession blew the roof off).

 

 

I recall reading at I think the Cleveland Fed site that the part time numbers in this recession are due in part to employers cutting back hours, moving away from 40 hour weeks, vs. people hiring into new part time jobs.

 

Another BLS number that goes back to the late 1940s is the Employment-Population Ratio.

 

The E-P Ratio (for short) is the number employed divided by the non-institutionalized population over 16 years old,  times 100.  So, the higher the number the more of this working age population is employed, the lower the fewer.

 

 

 

I start counting in 1950 for the following chart.

 

 

One can see how this number is affected by the business cycle. Taking the ranges and averages one can also  see the number rising from a low plateau to a high plateau.  Meaning more and more of the working age population was actually working during the past 20 years than in the 1950s & 1960s

 

 

,.. with the 20 years between 1970 and 1990 being an era of recalibration. 

 

This growth has been attributed to women entering the workforce.  The reasons for this can be debated.  I note that based on the yearly averages the rise past the 1950s/60s high range was in the later 1970s, when the economy was experiencing stagflation and real wages were starting to stagnate.  So I speculate that two-earners became a necessity to ensure a household living wage, or at least to maintain a middle-class standard of living. There is also the more conventional explanation that due to cultural influence of feminism women started to self-actualize, leading them into the world of work.  Probably both explanations work. Perhaps they also support one other, too; a symbiotic relationship between ideology and necessity?

 

Yet, on top of all that, it is a testament to the robustness of the US economy that enough jobs were being generated during the past 30 years to accommodate this increased female participation as well as population growth due to immigration and natural increase.

 

Then the number crashes in this recession, falling down to early 1980s levels, indicating a massive drop in working age people actually working.

 

This is just stunning.    And that’s a lot of what I find unbelievable in these numbers; the drops are off a cliff, the jumps are skyrockets, the ratios swing wide. It's so extreme.

 

"I'm still bullish on the American economy long-term."

 

What is long-term to you? 20 years? 100? 1000?

 

The U.S. economy has been growing exponentially for the last 300 years, which is of course longer than a single lifetime. No one alive can remember a time when our economy wasn't growing. But long-term exponential growth is unsustainable in a finite world. There are some who think we are reaching the peak.

 

Population is not quite the same as the economy, but it is related. The U.S. Census projects that Ohio will peak in population in 2018, and then decline thereafter, based on current trends with regard to birth rates, death rates, immigration, and emigration. Ohio will be the fourth state to peak. This isn't necessarily bad, but it comes as a surprise to many. No one can remember a time when Ohio's population declined.

What is long-term to you? 20 years? 100? 1000?

 

The U.S. economy has been growing exponentially for the last 300 years, which is of course longer than a single lifetime. No one alive can remember a time when our economy wasn't growing. But long-term exponential growth is unsustainable in a finite world. There are some who think we are reaching the peak.

 

Population is not quite the same as the economy, but it is related. The U.S. Census projects that Ohio will peak in population in 2018, and then decline thereafter, based on current trends with regard to birth rates, death rates, immigration, and emigration. Ohio will be the fourth state to peak. This isn't necessarily bad, but it comes as a surprise to many. No one can remember a time when Ohio's population declined.

 

This concept of declining population has captured my interest for several years now. While I know its not an apple to apple comparison, we will get to watch this process play out in many European countries, Japan and Russia over the next several decades. It may give some insight into how this might affect some of the US states if they enter a similar population decline. It might also give helpful solutions on how to deal with this shift in population and its economic affects.

 

"I'm still bullish on the American economy long-term."

 

While I think the US has plenty of growth potential in the future, I am not convinced its a given that we will grow. Right now we have done a very poor job at allocating our resources. We have squandered a lot of our financial wealth developing a built environment that we can't afford to maintain (car oriented, sprawl, etc) and its cost are growing every year. This poorly built environment is not well positioned to be successful in a 21st century world economy. If we don't correct these misallocations then we may very well find that a stagnate economy is what we will get for decades to come. History has shown time and again, that countries/empires that poorly allocated their resources became irrelevant or less relevant as time went on.

"I'm still bullish on the American economy long-term."

 

What is long-term to you? 20 years? 100? 1000?

 

All of the above.

 

The U.S. economy has been growing exponentially for the last 300 years, which is of course longer than a single lifetime. No one alive can remember a time when our economy wasn't growing. But long-term exponential growth is unsustainable in a finite world. There are some who think we are reaching the peak.

 

Long-term exponential growth is sustainable, and is in fact the way to bet.  The linear-progress fallacy falls apart upon closer examination; see, e.g., <a href="http://www.kurzweilai.net/articles/art0134.html?printable=1">here</a>.  There may be some who think that we are reaching the peak; they are wrong, plain and simple.  No individual paradigm of land, energy, and other resource use is sustainable in the long term; however, humanity has the ability to shift from paradigm to paradigm as necessary, and has done so with accelerating alacrity almost regardless of governmental structure, war or peace, boom or bust, and other variables for centuries now.

  From Kurzweil, link provided by Gramarye

 

  "When the scientists evolve to be a million times more intelligent"

 

  That doesn't change the fact that we live in a finite world.

And large numbers of males out of work (already 20% of males aged 25-54 are not working) leads to civil unrest.

 

Thats what we have the police and National Gaurd for.

 

I wonder if we are more in an 1870s era, where there was a financial crisis that led to a decade of joblessness (and labor unrest).  It also led to "an army of tramps", which I guess means more homelessness.

 

 

That "boomerang kids" article that C-Dawg posted reminds me of the 1980s recession, the early Reagan years, when there was a lot of the same thing happneing (to me, for example).  In fact this is looking like a bad version of the early 1980s economy.

 

 

From Kurzweil, link provided by Gramarye

 

"When the scientists evolve to be a million times more intelligent"

 

That doesn't change the fact that we live in a finite world.

 

If you can still say that, you missed the point of the article.  By the time we run up against the physical limits of any given paradigm of resource use, we will be ready to shift to the next.  In addition, the increasingly efficient and productive use of resources magnifies the effect of extracting new resources from the Earth (and, ultimately, from beyond it, which renders the fact that we technically live in a finite world meaningless--we also technically live in a finite universe, but we don't need to start thinking about the economic consequences of the black hole death of the universe just yet).  In other words, a pound of silicon or iron or just about any resource you care to name is effectively more resources today than it was 100 years ago because the ability of humanity to utilize it has increased exponentially, and continues to do so.

 

The whole "world is running out of ________" meme should have been long since discredited by now.  Have we learned nothing from the almost comically wrong predictions of The Population Bomb?  The world is only as finite as human creativity and freedom to use it.  The former is infinite.  The latter varies from country to country, but as long as there are even a few countries willing to give people room to work, that's all that's really necessary.

The economy is already "booming" (GDP growth). Unemployment will remain high for quite some time. These are permanent job losses. Average joe American (and I must stress the "joe" part since 80% of the job losses have been male) will get screwed.

 

...yeah its been noted that male unemployment has been quite high this recession.  But you are also correct about the GDP coming back out of negative territory...from the Cleveland Fed site:

 

 

The final reading for 2009 real GDP growth was −2.4 percent, slightly ahead of December’s Blue Chip consensus forecast. The consensus estimate for 2010 growth ticked up 0.1 pp in January to 2.8 percent, while no quarter in 2010 is currently forecasted to top 3.0 percent. According to forward-looking forecasts, real GDP growth is first expected to reach its long-run trend again in the fourth quarter of 2010. January’s survey also started a forecast for 2011 growth and that value came in at 3.1 percent. Overall, these forecasts match the overwhelming concern that a recovery from the current recession will be a slow one.

 

The Fed analyses continues, backing away from Rosey Scenario:

 

A deeper look into the larger-than-expected growth for the fourth quarter of 2009 shows what some economists have been calling an “inventory blip.” When looking at the final sales of domestic products—which is just GDP less the change in inventories—it shows that demand for domestic goods grew only 2.3 percent. Comparing this to the third quarter numbers, what appears to be a 3.5 pp quarter-to-quarter increase in GDP translates into only a 0.8 pp increase in final sales. The picture turns even bleaker in looking at a measure of domestic demand for domestic goods, or final sales to domestic purchasers, which nets out exports and imports. In this case, there is a 0.5 pp drop from third-quarter to fourth-quarter sales, and final domestic sales grew only 1.8 percent. Effectively, this means that there is a more muted return to demand. Growth through 2010 should reflect such a soft return, as forecasters are predicting growth rates closer to the long-run average in all four quarters of the year.

 

 

Source

 

..in other words, a weak recovery.

 

 

 

But wait, theres' more!

 

Since this is a manufacturing state, here is some news for the Rust Belt:

 

 

Industrial production increased at an annualized rate of 11.8 percent in January, following increases of 8.2 percent and 7.0 percent in December and November, respectively. As of January, the 12-month growth rate in industrial production was up 0.9 percent, its first positive reading after nearly two years of declines. Manufacturing production jumped up 12.6 percent in January, following a virtually flat (−0.9 percent) reading in December. Both durable and nondurable goods production surged in January, rising 18.4 percent and 8.7 percent, respectively. Moreover, the release noted that output for all the major durable goods industries rose during the month, except for furniture and related products. Manufacturing production is now up 7.7 percent over the past three months, outpacing its year-over-year growth rate of 1.7 percent. Mining output rose 8.9 percent in January, rebounding from a slight 1.8 percent dip in December. Utilities production increased 8.3 percent during the month, follow an out-sized (and cold-snap induced) 108.4 percent gain (6.3 percent nonannualized) in December. Capacity utilization continued to improve in January, rising from 71.9 percent to 72.6 percent.

 

 

New orders for manufactured goods outpaced expectations in December, rising 1.0 percent, after a 1.0 percent increase in November. Much of the unexpected strength came from an upward revision to durable goods orders, revised up from a 0.3 percent increase to 1.0 percent in December. The 12-month growth rate in new orders has pared its losses since reaching a cyclical low of −23.4 percent reached in April, and now stands at 3.6 percent (its first positive reading since September 2008). Orders for nondefense capital goods excluding aircraft jumped up 2.2 percent in December, after surging 3.2 percent in November, though is still down 1.0 percent on a year-over-year basis. Shipments increased 1.9 percent during the month, posting its fourth consecutive gain, while inventories ticked down a slight 0.1 percent after a 0.2 percent gain in November.

 

 

Ironically, I actually think the automobile industry will actually do pretty well, if we can pry some money out of the banks. Anything associated with housing industry is f@cked for a very long time. However, I think other parts of the economy may start to grow, especially if Europe spends the next year trying decide if they can give Greece to the Chinese or the Turks or Russians or even the Maltese if it comes to that. I'm pretty sure the Germans are ready to hand the Greeks back to the Turks if they'd ask.

I've always found it amusing and somewhat said when I here average people who aren't importers say how concerned they are about the strength of the U.S. dollar.  The worst thing about the Greek crisis from an American perspective (in my opinion) is that it could raise the value of the dollar vis-a-vis the euro.  We need more manufacturing, because that is producing real value, and a weak dollar would really help that.  Plus, it would give the Red Chinese fits.

 

I agree, I think the U.S. auto industry is posed for a comeback (and that actually includes manufacturers like Toyota and Honda that have lots of factories in the U.S.) so long as Detroit focuses on putting out a quality product and not simply marketing.

The US desperately needs a pro-industry policy.  Great posts Jeffery and C-Dawg.

LincolnKennedy:

 

The issue is that we're *all* importers.  The entire U.S. economy is an importer economy.  We import much more than we export.  A weak dollar could help domestic manufacturers, but it would do so at the expense of almost everything else, and wouldn't even help domestic manufacturers all that much if they're manufacturers that get a lot of their raw materials from outside the U.S., since a weak dollar would drive up the costs of those raw materials.

 

Keep in mind that the way a weak currency makes manufacturers more competitive is by allowing them to pay their employees less in real terms.  It's the cultural resistance to pay cuts that makes it an "attractive" alternative to simply paying workers fewer dollars that are worth more as opposed to more dollars that are worth less.  The strong dollar does a lot more than just keep the price of most consumer goods (which are either imported or assembled from imported materials and components) low; it also allows American companies to buy out their competitors rather than being bought out by them (since we get to bid in dollars and they get to bid or defend with whatever their local currency is).  It also is absolutely critical to maintain the dollar's standing as the world's reserve currency.  This is something that very few voters comprehend and yet is absolutely central to our global financial clout, which directly benefits everyone in the country from top to bottom.

Jeffery's Employment-Population percent graph above is facinating....

 

This is often refered to as the "Labor Participation Rate", and I'd heard it had dropped from 64% to something lower recently.  What;s facinating to me is that the Labor Participation rate dropped over 5% during the current decade.  This could be due to a number of factors:  people retiring, more people going to college, more people staying home with children, etc, etc.  Of course, inability to find a job is a major factor as well.

 

The notion that the country is just going to stagnate economically for the next 20 years is absurd.

 

"He is talking about employment, not economic growth."

 

I think US employment will definetly stagnate for the next generation.  I also think the US Economy will experience a significant reduction in annual growth (on average) over the next generation.

 

I think the days of 3.5+ annual GDP growth are in the rear-view mirror.  Maybe half that over the next decade, say 2%.  But keep in mind that the US population grows about 1% a year (not with-standing RageRunner's examples of population decline elsewhere in the world).  So that 2% GDP growth is only a 1% GDP growth when population-adjusted.  I think 1%, or even 2% GDP growth will feel like economic stagnation to most people.

 

There will be areas that grow fast, and areas that decline.  A nation our size with an economy as diverse as ours will have very uneven economic performance.  But on the whole, I don't see the nation growing like it did post-WWII when it rebuilt the world, or 1985-2000 when we truely entered the Information Age.  Globilization will put a big constraint on our GDP growth over the next 2 decades, in my opinion.

 

But I am bullish on US stocks, particularly those that have a large oversees presense - GE, P&G, Cat, etc.

 

I hope I'm wrong on US GDP growth over the next 20 years.  The next few years are much easier to predict than something 15 years from now.  But for reasons mentioned by others - Entitlement programs, possible population stagnation, etc,  I'm sticking with my prediction of both economic and employment stagnation (sub-par growth).

 

 

 

oops... my post above did not format the way I wanted.