Job Growth lagging still; pundits perplexed at paltry pace

A good article on the topic:

Outsourcing Is An Old Story With New Critics

By ILA PATNAIK

The most important fact about the present outsourcing debate is that it is not new. The world economy has been through the same phenomenon before, and when U.S. politicians attack White House chief economist Gregory Mankiw for pointing out the potential economic benefits of relocating some jobs to lower-wage countries, they betray a lack of knowledge of American history.

Many decades ago, technological improvements dramatically drove down the cost of cargo transported by ship and air. Suddenly, the electronics assembly work that was done in Maryland could be done cheaper in Malaysia. That led to massive growth in trade in goods.

Production chains broke up, with specialized manufacturing taking place across the globe, exploiting opportunities for the lowest costs. Companies that did this benefited -- they were able to cut costs and reduce prices. Consumers benefited from cheaper goods. The manufacturing work which went to poor countries helped ignite economic development, particularly in Mexico, China and the four Asian tiger economies -- Hong Kong, Singapore, Taiwan and South Korea.

That process was obviously unkind to the blue-collar workers in the West who lost their jobs. And it is equally unkind to the many middle-class workers who are now losing their jobs due to outsourcing. The difference is that these middle-class workers are closer to the political elites in their country, so they are in a position to make a louder fuss about it.

But what those who complain forget is that, throughout this earlier transition, world gross domestic product grew. Output and productivity -- in both rich and poor countries -- rose. The workers who were formally in manufacturing got absorbed into other parts of the economy.

Throughout this episode, populist politicians periodically complained about job losses, and fitfully tried to do something about it. But the basic logic was loud and clear. The essence of capitalism is a ceaseless quest for cost reductions. The companies that manufactured at the lowest cost venues were the ones that prospered.

This identical story is now being repeated afresh, through a different technological impetus. The driver here is the incredible progress in telecom, where high bandwidth is now available virtually across the globe at extremely low prices. Suddenly, it became possible to think of "global production chains" for services as well.

Once again, we are seeing production being sliced up into pieces, and each piece is placed at the best production venue available globally. And once again populist politicians are exploiting the understandable concern about job losses in an attempt to score cheap political points. That has been demonstrated in Washington over the past few days, as those who should know better rushed to condemn Mr. Mankiw's observation, at a news conference Monday, that sending U.S. service jobs abroad "is probably a plus for the economy in the long run." Prominent among the critics was Democratic presidential front-runner Sen. John Kerry.

Their short-sighted criticisms ignore the fact that the companies, such as General Electric, that have taken advantage of the incredible progress in telecommunications to relocate jobs have benefited by being able to cut costs and prices. Consumers in Western countries have benefited too -- from cheaper goods and services, to more responsive help lines they can call. The services work that goes to countries like India is helping to ignite economic development. Thanks to this, World GDP is growing.

The benefits of outsourcing are not limited to companies. Governments and public-sector entities in the West are also finding that sending work to India is a way of making ends meet. When health-care work gets done in India, all consumers in the West benefit from cheaper health care.

The deepest consequence of this new outsourcing is perhaps found in research and development. The cost of doing R&D in India is roughly half that of doing it in the West. Startups in Silicon Valley are now routinely structured as a marketing operation in the U.S., and the entire engineering work is done in India. When research is cheaper, the CEO can place more bets. More avenues are explored, and more risks are taken. This can lead to an acceleration of technological progress, which could have a profound impact upon world GDP growth in coming decades.

What is perhaps different here is that when blue-collar workers were losing jobs, they were far removed from the political elites of advanced countries. In contrast, job loss in services strikes closer to home with respect to middle class, high-skill families. This is a novel feeling of insecurity for many prosperous people.

It is perhaps unsurprising that populist politicians will try to harness the insecurity in the minds of many workers. But the basic logic is clear: Companies that will exploit global production chains will out-compete companies that don't. Corporations and citizens alike have a direct interest in blocking the new protectionism. Perhaps Sen. Kerry should remember that before he abandons his former free-trade credentials to attack a trend that can only benefit America -- and the world -- in the long run.

 

Interesting reading. Either it's about as straightforward as I expected, or it's been "dumbed down" adequately. My only quibble is that this is going to be "good" for the average american worker. Competition encourages betterment, yes, but competition with people who make $0.50 an hour encourages people to work for $0.50 and eat dirt, basically.

I suppose the best solution will be forming unions of global extent. Heh heh. Maybe I can have a new goal in life now.

 

"George, you repeatedly have failed at your tasks. You don't instill any sort of confidence in the people you lead. YOU'RE FIRED"

 

Well we only need about four million more private sector jobs and Bush will be able to truthfully state that tax cuts for the rich create jobs.

 

I find it intresting that the markets were hesitant all week when the large job number was expected, and exploded bullishly today when the numbers disapointed.

It seems that the market doesn't really care that much about the unemployment figures, and is more concerned about intrest rates, at least in the short term. Wheather the markets know what they're talking about is another subject, of course...

 

Right on, robbie and I were having this discussion the non-serious hangout forum a few months ago. I keep pulling for Hari Seldon to solve this for us...

 

Exactly!!!

 

I am working with some folks that are visiting from Mexico and India. They have jobs that probably would have been American jobs...they now can afford houses, cars, nice clothes, and other things that they could not have before.

Every one of them has been able to get their children into good schools, get their parents out of poverty, and overall, improve their communities.

They buy products from American companies...the guys in Mexico have an Outback steakhouse and a Chile's down their street. They drive Ford's and Chevy's, the guys from India where Ralph Lauren shirts, and where Docker's. They not only don't "eat dirt," but make salaries high above their national averages and have a better way of life, all the time while pumping money back into the world economy.

They pump money into companies from American and elsewhere.

They have HP printers, the have Sony stereos, they bank with international banks, they have opportunities that they never had.

Do I think it sucks that there are Americans losing jobs to lower cost workers? Yes...but in the long run, it will bring about an economic boom on an International scale.

Henry Ford created a landscape in America where he paid his employees enough to be able to afford the products that they make.

If American companies can make it so the entire WORLD can afford the products they make, EVERYBODY wins. So I don't buy the argument at all that these guys barely make enough to "eat dirt."

Also, I know everybody keeps saying these tax cuts only affect the rich, but I noticed my tax bracket percentages are significanly lower than they were last year, and I am Definitely not rich.

 

That's good that it works out for their country, and that their continuing support of those companies will continued to help build jobs from American companies in their countries,

but meanwhile back in the U.S. ...

 

I have to agree with Supermac and Trader Jorge that trade in the long run will be a positive for both us and the rest of the World. We are suffering some terrible dislocations right now in our job markets but at the same time are benefitting from lower prices and improved economies elsewhere will benefit our own economy in export.

Also in regard to liberals and others who decry the plight of the third world the only way that is sustainable and mutually beneficial to helping those countries out is trade with them. While we may complain that Indonesians, Vietnamese, Chinese and Philipinos are taking our textile jobs those jobs are a boon to them and the only sustainable way to transfer wealth from the First World to the Third.

I will head off the inevitable cries about sweat shops by saying that what changed my opinion about trade is seeing people living off of garbage dumps outside Jakarta. Those people came to Jakarta to try to get a better life and the key to that life was working in the city even in a sweatshop. That beat living off of a garbage dump or backward village at the whims of the weather any day.

To deny trade to those people because by our standards they are being abused is to doom them to continued backwardness and deprivation. Aid is fine but giving aid is an unsustanable incentive compared to trading with them where they get our money and we get cheap goods.

The current trade system isn't perfect and like everything else as job and investment get shifted overseas there will be pain and dislocation. The only alternative I see is a protectionist strategy that will hurt us and the world economy in the long run. (For you GW Bush supporters remember that he has tried that with his steel, textile and softwood tariffs.)

Finally I don't think all the current job situation can totally be blamed on free trade. Our economy is still unstable and as long as confidence is low among businesses they won't hire new employees. I work for a small architecture firm and we're getting work but we are reluctant to hire for that very reason, even though that means I regularly end up working 15 hour days, and our work can't be outsourced.

 

Bill Maher mentioned on his show this week that he was convinced that Bush & Co. have things rigged so that job growth will start up just in time for the election. I wouldn't put it past some of his cronies to hire a bunch just before November, especially if it means another round of tax cuts for the rich.

BTW, Supermac,
Your taxes may have gone down a bit, but nowhere near as much as those making $300K have. Those people are making out like bandits while regular Americans are left with the crumbs. I got more this year (due mostly to the baby born on 12/29) too, but it has been more than made up for in increases to the cost of insurance, reductions in pay, and reductions of services. They gave me $300 or so extra this year while taking away over $200 per month, and yes, it is directly attributable to Bush's dividends to the wealthy.

 

They had better hope that the perception hasn't already become that the economy is bad and the only person who can fix it is John Kerry.

Clinton was able to ride a recession that was already over into the White House. Now, granted, the unemployment rate was higher in November 1992 than it is now, but a lot of the deciding of who to vote for happened during the year, rather than directly before the election.

By November, it may appear, regardless of what the unemployment rate is then, that the Bush Administration simply doesn't know how to properly handle the economy.

Of course, I'm not sure how the Administration could rig it to keep unemployment relatively high.

 

You've obviously never heard of the Vast Right Wing Conspiracy!

 

The Unrecognizable Recovery
By BOB HERBERT


The Bush crowd couldn't have been more pleased with the timing of the Martha Stewart verdict on Friday afternoon.

The big news heading into the weekend was almost guaranteed to be the awful jobs report released by the Labor Department Friday morning. The White House needed a world-class distraction and the Stewart jury, eager to wrap things up before the weekend, obliged. It strolled in, as if on cue, with a verdict of guilty on all counts. Distractions don't get much bigger.

The Labor Department report was as grim as faces on a bread line. Despite all the president's promises, the economy added just 21,000 jobs last month. No jobs were added by the private sector. <b>The 21,000 additional jobs were all government hires.</b>

The report also showed that job growth in December and January was worse than previously believed. The January tally was revised from 112,000 to 97,000. The December count dropped from 16,000 to a pathetic 8,000.

A number of demographic groups are getting absolutely hammered. A new study by Andrew Sum, director of the Center for Labor Market Studies at Northeastern University, found historic lows in the reported labor force participation of 16- to 19-year-olds. According to the study, "The estimated 36.8 percent employment rate for the nation's teens was the lowest ever recorded since 1948."

A more ominous finding was that over the past three calendar years the number of people aged 16 to 24 who are both out of work and out of school increased from 4.8 million to 5.6 million, with males accounting for the bulk of the increase.

The Economic Policy Institute and the National Employment Law Project, in a joint analysis of newly released data, reported a disturbing increase in long-term joblessness. Unemployment lasting half a year or longer grew to 22.1 percent of all unemployment in 2003. That was an increase from 18.3 percent in 2002, and the highest rate since 1983.

Among those having a particularly hard time finding work, according to the report, are job seekers with college degrees and people 45 and older.

"The new data," said Sylvia Allegretto, one of the authors of the report, "show us an economy that is just not generating enough high-quality jobs to get highly educated and highly experienced workers back to work."

The nation is in an employment crisis and the end is not in sight. The Bush administration has no plan, other than a continued ludicrous reliance on additional tax cuts. The White House continued to say on Friday that making the president's tax cuts permanent would be an important step toward solving the employment problem.

What is happening in some sectors of the black community is catastrophic. The Community Service Society studied employment conditions among black men in New York City. Using the employment-population ratio, which is the proportion of the working-age population with a job, it found — incredibly — that nearly one of every two black men between the ages of 16 and 64 was not working last year.

In the current environment, even apparent good news can have its troubling aspects. An article in The Wall Street Journal a couple weeks ago indicated that Latino workers have been doing well, taking a "disproportionate share" of new jobs, especially in the construction and service sectors, since the economy began its recovery.

The article referred to a demand for young, male Latino workers.

It then went on to say: "Typical of them is Jorge Alberto, a 22-year-old Guatemalan, who doesn't speak English, didn't complete high school and had never held a job — until he slipped across the border into California from Mexico last year. In Los Angeles, `I found a job almost immediately,' he says, pushing a cart through the muddy lot where he and five other Hispanic men are laying the foundation for a house."

Workers are facing these bleak employment conditions in a so-called recovery. What happens if we slip into another recession?

A favorite metaphor associated with an expanding U.S. economy is "A rising tide lifts all boats."

Right now, a lot of the boats have leaks, and they are taking on water fast.
http://www.nytimes.com/2004/03/08/opinion/08HERB.html

 

Squawk! Lagging indicator! Squawk! Lagging indicator!

 

Why do terrorist chip designers hate America?


http://www.taipeitimes.com/News/worldbiz/archives/2004/03/09/2003101806

S Korea to get Intel R&D center

KOREAN CLUSTER: The company is hoping to capitalize on South Korea's highly wired market, while Seoul wants to attract as many high-tech research labs as it can

AFP , SEOUL
Tuesday, Mar 09, 2004,Page 12
US high-tech giant Intel Corp said yesterday it had agreed to open a research center in South Korea, the world's leading high-speed broadband market.

The agreement was reached at a meeting here between Patrick Gelsinger, Intel's senior vice president and chief technology officer, and Yim Chu-jwan, president of the state-run Electronics and Telecommunications Research Institute, a joint statement said.

It highlights a new push by global high-tech giants into South Korea, which has the world's highest broadband penetration rate at 73 percent and the world's fastest mobile phone network.

IBM Corp, the world's largest computer company, agreed last year to open a research and development center in South Korea to develop software for mobile communications.

Intel said its research center in Seoul will focus on "advanced wireless communications technology, high-quality media coding and next generation platforms for content distribution and consumption.
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