OurFuture.org Blogs: Charles McMillion

Behind The Numbers: Workforce Dropouts

Charles McMillion — Fri, 03 Apr 2009 09:01:38 -0700

Today’s Bureau of Labor Statistics report on unemployment and jobs in March confirms that the economy continues to spiral downward as deeply stressed households face worsening employment and financial conditions.

Media love to report the unemployment rate but rarely explain what it means. The unemployment rate in March surged to 8.5 percent, from 8.1 percent in February and 5.1 percent in March 2008. This is the worst unemployment rate since October 1983 – and the worst for a Democratic president since FDR. But that only tells a small part of the story.

The other part of the story is who is counted and who is not counted in the unemployment figure. Today’s report shows that another 166,000 people vanished from the labor force in March. That is, they indicated when asked that they were neither working nor looking for work. March was the fifth month out of the last seven months that more people dropped out of the labor force than joined. Indeed, there were fewer people counted in the labor force in March than there were last May.

It is normal for people to be discouraged during a recession – thereby causing the labor force to grow more slowly than the usual 1.5 percent annual growth of the past 30 years, but the current meager 0.1 percent year over year growth is quite unusual. Obviously, if fewer people were dropping out of the labor force, the unemployment rate would be far higher.

The BLS’ most inclusive measure of under-utilized labor (the U-6 unemployment rate) soared to 15.6 percent in March from 14.8 percent in February and 9.1 percent in March 2008.

The BLS’ survey of non-farm business establishments shows 663,000 jobs lost in March, about what was expected. But it also shows that there were 86,000 fewer jobs in January and February than previously estimated. Don’t be misled by reports that the loss of 651,000 jobs in February was unchanged – the downward revision was for January, which now shows 741,000 jobs lost.

The bottom line is today’s report shows that in March there were 749,000 fewer jobs than was previously reported for February and 4.8 million fewer jobs year over year.

By the way, today’s further downward revision to the January jobs data means that the awful jobs record during the Bush administration was even worse than previously believed, creating only 159,000 (0.1 percent) private sector jobs in eight years – less than 20,000 per year. This, despite $5 trillion in new federal debt and almost $7 trillion in new household debt – over $74 million of mortgage and war debts per private sector job added.

Today’s report shows virtually every economic sector losing jobs in March, including state and local governments because of cuts to public education. Indeed, the largest downward revision to the January and February data were for local government’s public schools, as budget cuts now take effect on what had been a consistent engine of current job growth as well as hope for the future.

Now, the only sector that is still adding significant numbers of jobs is the deeply dysfunctional, mostly low-paying, private health care bureaucracy that is bankrupting many other businesses as well as government at the local, state and federal levels. Private health care added another 14,000 jobs in March and has added 327,000 more jobs year over year. Whereas every state has lost manufacturing jobs year over year to February, every state has added jobs in private health/education.

Finally, because of this structure of changes in the workforce, with deeper losses in higher-wage, longer-workweek industries than in lower-wage/shorter work-week services industries, the average paid workweek fell to an all-time record low of just 33.2 hours per week. Some employers, of course, are also cutting hours in an effort to preserve jobs. The result is that even with a slight gain in nominal average wages per hour, the average nominal wages per week fell in March adding further pressures to already deeply stressed household finances.

Also, today the Institute for Supply Management released their March report for non-manufacturing businesses. The report shows a further decline in March to 40.8 in March from 41.6 in February, with the decline in new orders and deflationary price pressures both worsening sharply.

Today’s reports seem to confirm that despite volatility in some indicators, the economy continues to sink deeper into the worst downturn since the 1930s with no end yet in sight.

Soaring State Job Losses

Charles McMillion — Thu, 12 Mar 2009 09:46:17 -0700

Forty-eight states lost jobs during December and January and 44 states have now lost jobs year over year compared to January 2008. As readers of this note know, the past eight years has been — by far — the weakest U.S. job market since the mid-1930s. This is now reflected in the states, as shown in these charts.

Even with job gains in most local and state governments, 17 states lost jobs over the past eight years. When government jobs are excluded (almost entirely in local/state agencies for schoolteachers, etc.) 24 states lost jobs in the private sector over the past eight years. Five of the harder-hit states, with budgets devastated (Michigan, Rhode Island…) even lost government jobs over the past eight years. Seasonally adjusted unemployment rates soared by 1 percent or more in 22 states and the District of Columbia in January and rose in every state except in Louisiana, which remains a special case long after Hurricane Katrina.

But, as I’ve noted many times, the unemployment rate is a very misleading indicator of the jobs market.

The worst unemployment rates in January were 11.6 percent in Michigan and 10.4 percent in South Carolina. The Michigan unemployment rate is its worst since May 1984 and the South Carolina rate is its worst since April 1983. But in the eight years ending in May 1984, Michigan’s jobs grew by 2.9 percent even as over the past eight years Michigan has lost an unprecedented 14 percent of its total jobs and 15.6 percent of its private sector jobs – almost one-in-six non-government jobs. South Carolina added 22.4 percent to its job force (yes, 22.4 percent) in the eight years ending in April 1983 but has added only 1.9 percent to its job base over the past 8 years – a record low.

This dismal job performance over recent months, the past year and especially over the past EIGHT years is particularly important to appreciate with the current economic decline still worsening. Households, businesses and government agencies are accustomed to managing through the short ups and downs of normal business cycles, but few Americans have experience with the conditions that have already confronted many states over the past eight years.

Today’s Recession is Already Far Worse than 1982

Charles McMillion — Fri, 27 Feb 2009 08:12:03 -0800

Today’s Bureau of Economic Analysis report that real gross domestic product plunged at an annual rate of 6.2 percent in the fourth quarter of 2008 is being compared with the 6.4 percent plunge in the first quarter of 1982, the worst of the severe 1981-’82 Reagan recession.

In many ways these two miserable quarters are bookends of an anything-goes political era of “free” market deregulation and cost-cutting at any price. But it is important to keep these two quarters of sharp economic decline in the context of larger economic forces.

The Dow Jones Industrial average lost 6.0 percent in the first quarter of 1982 but lost 19.1 percent in the fourth quarter of 2008. Home values continued to rise rapidly in the first quarter of 1982 but plunged in the fourth quarter of 2008. As a result, the net worth of households continued its decades-long rise in the first quarter of 1982 but household net worth plunged in the fourth quarter of 2008 for the fifth consecutive quarter. (The Federal Reserve reports on March 12 will show exactly how severe was the fourth quarter of 2008 plunge in household net worth.)

And, of course, these household net worth data are aggregate data—including the households of bailed-out Wall Street geniuses as well as the households of unemployed former Circuit City workers. Because household net worth and incomes have become far more polarized since 1982, the actual effect on most households of recent developments is far more severe than the aggregate data might suggest.

In the first quarter of 1982, households saved 11.6 percent of their total after-tax incomes; in the fourth quarter of 2008, households saved only 3.2 percent.

In the first quarter of 1982, total household debt was 66 percent of total after-tax incomes; in the third quarter of 2008 debt was 136 percent of income — more than twice as much — and this figure was likely unchanged in the fourth quarter. Higher interest rates in the first quarter of 1982 forced households to pay 10.7 percent of their after tax incomes to service their debts; with today’s lower interest rates, servicing household debt still takes over 14 percent of after-tax incomes. And then there all the new fees that no one records.

At the end of the first quarter of 1982, the national unemployment rate was 10.8 percent, whereas it was 7.2 percent at the end of the fourth quarter of 2008. But a look at the actual jobs figures—not just how many people were looking for jobs—tells a very different and far more accurate story.

During the first quarter of 1982, 462,000 (0.5 percent) jobs were lost and 780,000 (0.9 percent) jobs were lost year over year to March 1982. But 1,554,000 (1.1 percent) jobs were lost in the fourth quarter of 2008 and year over year to December 2008, 2,974,000 (2.2 percent) jobs were lost. That is, job losses now are more than twice as severe as they were at the worst of the severe 1981-’82 recession.

By virtually every economic measure that matters, the current deep recession is already the worst since the 1930s. It’s time for those wealthy debt industry geniuses — and their political and media retainers and cheerleaders—that got the world into this mess to acquire at least enough decency to be quiet while others try to figure out how to recover.

Is There No Accountability For Amity Shlaes?

Charles McMillion — Wed, 18 Feb 2009 09:18:01 -0800

Flogging her false, ideological claims recently on page one of the Sunday “Outlook” section of the Washington Post, Amity Shlaes claimed to explain the economic failure of Franklin Roosevelt’s New Deal with no mention whatsoever of gross domestic product, private investment, personal income, personal spending, industrial production, jobs or the fact the private group of economists that officially dates business cycles put the end of the 1929 downturn at March 1933—the month that FDR took office.

A “Senior Fellow” at the Council on Foreign Relations, Shlaes did not mention any actual economic indicator because – as I wrote on Feb. 3 – ALL of them soared during FDR’s first term surpassing their 1929 bubble peaks in 1936, ending the Depression.

Again today (Feb. 18) Bloomberg.com is distributing Shlaes’ utter nonsense. In a piece titled “Cheering for Obama Stimulus Buys into 1930s Myth,” Shlaes writes:

“Obama bases his confidence on an old story line with some appealing parallels to today: A disastrously high stock market caused by excessive faith in the private sector generated an epic crash. A Republican, Herbert Hoover (George W. Bush), let us down. A new president, FDR (Obama), knew that action was imperative and understood the value in ‘bold persistent experimentation.’”

Shlaes pretends that the economy was fine during Hoover’s term (and Bush’s terms) but that it was FDR (and Obama) that let us down. She ignores any actual economic facts – from the Department of Commerce, the BLS, the Federal Reserve, etc – about the utter economic collapse during Hoover and Bush’s terms. Rather, she again whines that too many people were encouraged by FDR’s remarkable progress and again started looking for work and again, particularly Shlaes complains that the Dow did not return to its 1929 peak until the mid-1950s.

Remarkably even for Shlaes, she implies that the Dow was fine under Hoover (and Bush) but FDR (and Obama) were bad for the stock market. Earth to Shlaes – and to the Council on Foreign Relations, Bloomberg and The Washington Post – the Dow plunged by 84 percent during Hoover’s four years in office. The Dow also fell 25 percent and the Nasdaq fell 48 percent during W. Bush’s term. By contrast, the Dow soared by 267% during FDR’s first term and was at least double the levels of when he came into office for virtually all of his tenure – including during the darkest days of World War II, which someone might inform Shlaes was not good for stocks.

Now, with corrupt and/or incompetent Wall Street “analysts,” rating agencies, accounting firms and other compromised professions being called to account, is there no accountability for those such as Shlaes and those that pay her and those that distribute her false and misleading nonsense? It is factual misrepresentations by ideologues like Shlaes – and her promoters -- that got the world into the current catastrophe and now simply lie to prevent us from getting out.

Everyone has the right to their own opinion but not to their own facts. Those who lie or purposefully mislead during the current crisis must not be ignored.

Economic Meltdown Deepens: Worst Since 1933

Charles McMillion — Wed, 18 Feb 2009 08:47:52 -0800

Two important economic reports today again make clear that, properly understood, current meltdown conditions are the worst since FDR took charge in March 1933.

The Federal Reserve reports today that industrial production (which includes utilities and mining as well as manufacturing) plunged another 1.8 percent in January and is now down 10.0 percent year over year. The production plunge in January means that total industrial production DECLINED over the past eight years for the first eight-year period since the eight years ending in 1938. And unlike that period—production soared by 18.6 percent from Jan. 1938 to Jan. 1939—every indication is that industrial production now will continue to plunge sharply over the next year.

Manufacturing output plunged by 2.5 percent in January, down 12.9 percent year over year, and is down 3.5 percent over the past eight years. This is the first eight-year decline in manufacturing production since the demobilization from World War II from 1944 to 1952. And manufacturing production rebounded in 1953, growing by 12.2 percent from Jan. 1952 to Jan. 1953, whereas every indication is that manufacturing production will continue to plunge over the next year.

Manufacturers had 32 percent of their existing productive capacity sitting expensively idle in January 2009, with a capacity utilization rate of just 68 percent - the lowest rate in records back to 1948. This enormous level of unused capacity not only raises unit costs, squeezing profits and wages, but indicates further sharp job cuts are ahead with little new private sector investment.

I’ve attached my graphics of the eight-year historical data for production in total industry and for manufacturing. The file also contains my earlier graphics showing the first eight-year decline in total hours worked since early in the Depression, the worst eight-year loss of manufacturing jobs – perhaps ever! – and the worst eight-year record of total and private sector jobs – including private service sector jobs – since 1927-1935.

The unprecedented $5 trillion shortfall in global current accounts trade over the past eight years not only made the U.S. dependent on foreign lenders but also destroyed U.S. production, companies and millions of jobs.

The Census Bureau also reported today that new starts and new permits to build homes both plunged again in January to the worst levels on records that start in 1959 – when new permits and starts were three times today’s levels. New permits to build homes were down 4.8 percent in January, down 50.5 percent year over year and down 77.0 percent from their bubble peak in Sept. 2005. New home starts in January plunged 16.8 percent, are down 56.2 percent year/year and down 79.5 percent from their irresponsible bubble peak in January 2006.

At their worst in the deep Reagan recession, single-family home starts were 50.7 percent higher in October 1981 than they were in January 2009.

And still the major corporate media is full of the same anti-regulatory crooks and fools that misled the world into this catastrophe, now demanding more of the same.

The "FDR Failed" Myth

Charles McMillion — Tue, 03 Feb 2009 08:33:09 -0800

The current recession will soon become the longest since the Great Depression. The U.S. is losing over 500,000 jobs each month, and a new president, elected overwhelmingly, is pleading for unity and urgent action on a scale not seen since the New Deal.

At such a moment, it is imperative to expose a dangerous popular myth regarding the efficacy of President Roosevelt’s actions: that it was not the programs of the New Deal, but only the placing of the nation on a wartime footing years later, that restored the health of the nation’s economy.

This belief, though widely held, cannot stand up to even the most basic economic analysis. Yet the mainstream corporate media, which abound with anti-government ideology, seek to reinforce this myth. Just this past Sunday, The Washington Post featured on Page One of its Outlook section an article by Amity Shlaes headlined “FDR Was a Great Leader, But His Economic Plan Isn’t One to Follow.” Underscoring Shlaes’s made-up claims, the Post ran the continuation of her piece under the title: “FDR’s Plan Failed to Spark Real Growth.”

In it, Shlaes, having passed over the anything-goes policies that led to the financial crash in 1929—and, to a great extent, the devastating economic losses that occurred between 1929 and Roosevelt’s 1933 inauguration—also completely leaves out any specific data on gross domestic product, incomes, consumer spending, production, investment or jobs even for the New Deal period she presumes to explain. Indeed, her pitch is based entirely on emotional misrepresentation.

The basic economic facts from the 1930s—according to the Department of Commerce, the Federal Reserve, and other official sources—are fundamentally different from the unsupported claims put forward by Shlaes and prominent in popular myth. The monthly data for industrial production show a near three-year collapse under President Hoover, ending when FDR came to office in March 1933. Production rocketed by 44 percent in the first three months of the New Deal and, by December 1936, had completely recovered to surpass its 1929 peak.

GDP, only available as annual averages, plunged 25.6 percent from 1929-1932, including by 13.0 percent in 1932. It stabilized in 1933, and then soared by 10.8 percent, 8.9 percent and 12.0 percent, respectively, in 1934, 1935 and 1936. Real GDP surpassed its 1929 peak in 1936 and never again fell below it. After-tax personal income, consumer spending, real private investment and jobs all reached or surpassed their 1929 peaks by late 1936.

In fact, like every decade between 1850 and 1990, the 1930s suffered two distinct downturns. The official U.S. Business Cycle Dating Committee established that the downturn that began in August 1929 ended in March 1933 with the remarkable economic expansion that started within days of FDR’s bold—if trial and error—New Deal programs. By any normal definition, the Great Depression had ended by late 1936, with all major indicators surpassing their previous peaks.

A second cyclical downturn officially began in May 1937 when FDR, always a fiscal conservative, mistakenly thought the economy had become self-sustaining and slashed public spending programs to balance the budget. These harsh and premature spending cuts caused another severe recession that ended after 13 months in June 1938.

Even in this severe downturn, annual GDP did not fall back below its 1929 peak. And although many suffered and most economic measures did fall back below their 1929 levels, not one fell anywhere close to its March 1933 low. For example, although industrial production fell sharply in the 1937-38 recession, at its low point, in April 1938, it remained 49 percent above its level of March 1933.

When the economy again contracted sharply in late 1937 and early 1938, FDR quickly reversed course and rapid growth immediately began again. GDP soared by 10.9 percent in 1939 and industrial production soared by 23 percent.

Shlaes’s Post article begins with a misleading, emotional story of a young, desperate boy’s tragic suicide in 1937. She does not inform readers that FDR had reversed course and was sharply cutting—not adding to—New Deal spending at the time this suicide likely occurred. Rather, she uses this emotional tale to turn facts on their head, asserting—with no actual evidence—that public spending was ineffective and New Deal programs failed.

Like other ideological critics of government, Shlaes sites only two economic indicators of the 1930s: the falling but persistently high unemployment rate and the length of time required for the stock market to recover after its bubble burst. Neither of these is used in any serious economic or policy analysis.

Media emphasize the unemployment rate but, because it is known to be lagging and misleading, it is not considered at all by economists in determining the start or end of a recession or depression. This is because people stop looking for jobs when there are none to be found and begin looking again when conditions improve. Serious analysis, including recession and depression dating, use the separate business reporting of actual jobs added or lost.

Despite the new record peak in the number of jobs by late 1936, because of population growth and because more people were encouraged to seek jobs, the unemployment rate did remain very high until public spending programs truly exploded with the start of World War II. But even here, it was again vastly expanded government spending, this time to fight the war, that ended high unemployment.

Finally, Shlaes points to the long time before the Dow Jones industrial average regained—in 1954—its 1929 bubble levels as a key factor “that made the Depression Great.” This is, again, Shlaes’s own unique perspective, absent from serious assessments by economists but used by her as a basis for advocating further income and capital gains tax cuts for upper-income Americans. Unmentioned is that these policies were implemented by President Bush and yet, over the eight years of his presidency, the Dow Jones industrial average fell 25 percent and the NASDAQ plummeted 48 percent.

Myth and ideology aside, the data show that from 1933 through 1936 the New Deal produced double-digit annual growth in GDP, production, after-tax income and private investment, with strong consumer spending and job growth exceeding their peaks in the 1929 bubble. The Great Depression ended by late 1936.

While a new, severe recession began in May 1937 because FDR prematurely slashed public spending on New Deal programs, rapid growth quickly resumed in late 1938 when funding was restored.

Today, the U.S. and the world again face extreme crises similar to those in the early days of the 1930s. The largely unregulated private financial and commercial sector has utterly bankrupted itself. I personally believe the recent and current bailout and stimulus packages are grossly misdirected and inadequate when compared with the remarkable trade and industrial policy strategies being implemented elsewhere, particularly in China.

But history has shown that crisis can bring people together in common, public purpose or it can set them against one another. Our circumstances are far too dangerous to leave uncorrected the antigovernment disinformation and myths from the 1930s, and in our own generation.

Charles W. McMillion, president and chief economist of MBG Information Services, is the former associate director of the Johns Hopkins University Policy Institute and a former contributing editor of the Harvard Business Review.

Going Down Fast

Charles McMillion — Thu, 16 Oct 2008 08:54:34 -0700

Four important economic reports today show the real economic downturn is worsening very rapidly.

The Federal Reserve reports that industrial production plunged 2.8 percent in September following a plunge of 1.0 percent in August. The plunge in industrial output in September is the worst one-month loss since December 1974 as the first OPEC oil-price hike devastated U.S. industry. Part of the September shut-down was the result of Gulf Coast storms, but even with the far greater devastation of Katrina, output fell only for one month and that was a 1.8 percent decline in September 2005.

Indeed, industrial production (which includes mining and utilities as well as manufacturing) has now plunged in seven of the past eight months and by 4.5 percent yr/yr. Over just the past three months (July to September) U.S. output plunged by 3.8 percent; again the worst three month plunge since early 1975 and one of the worst in U.S. history. Manufacturing output plunged by 2.6 percent in September, the worst one-month plunge since May 1980, when the Federal Reserve slammed on the monetary policy brakes, sending interest rates skyrocketing. Manufacturing production has fallen in six of the past eight months and by 4.8 percent year over year.

Over the 82 months of the current business cycle, industrial and manufacturing output growth have been the weakest since the cycle that began in 1927 and roughly one-fourth the average cyclical strength for all industrial output and one-sixth the average strength in manufacturing. (See charts below.)

Even as the U.S. continues to import more than $125 billion of manufactured goods each month, manufacturing firms within the U.S. now have over one-quarter of their existing productive capacity sitting expensively idle. This means there will be very little new business investment so long as consumer spending remains extremely weak.

T. Boone Pickens, Sen. John McCain and now Sen. Barack Obama are wrong: Even now, the U.S. transfers more than three times as much wealth abroad to import foreign-made manufactured goods as to import foreign crude oil. As I have noted in each of these past 82 months, this historic weakness in production was substituted for unsustainable debt with the inevitable consequences of the economic and financial train wreck that is now playing out.

That the unsustainable must stop is a shock only for those debt-industry “triumphalists” who relentlessly ridiculed the need for production and earnings.

The Bureau of Labor Statistics reports today that plunging gasoline prices in September offset soaring food and health care costs, leaving consumer prices (CPI-U) unchanged in September. Year over year, consumer prices remain up by 4.6 percent but will be stagnant or declining in coming months as the recession becomes far more severe. Even with consumer prices unchanged, the BLS also reports today that price-adjusted average (not median) weekly wages fell slightly again in September (by 0.04 percent) and are now down 2.5 percent year over to levels lower than in 1999 and up just 0.07 percent since January 2001. Although the sharp polarization in wages and incomes is almost certainly being reduced during the current crisis, median wages are certainly falling even more rapidly than average wages.

Another BLS report today shows that their already deeply recessionary 4-week moving average of first-time claims for unemployment benefits rose again to 483,250 last week. Plunging production and falling wages even for those that remain employed, together with the falling number of jobs and the sharply falling value of household assets means that the much hyped “deleveraging” of unprecedented household debt is NOT occurring. Indeed, incomes and asset values are falling far faster than household debt is being written off, leading to INCREASED leverage of debt to income and debt to assets. Household finances face unprecedented and worsening stress and will be cutting back spending while struggling to pay their bills and preserve savings for many months to come.

No one who has read my notes over these past many years should be surprised by current conditions. Still, these are scary and unprecedented times without the strong, informed leadership that is so urgently needed.

Today's Jobs Report: We're Poorly Prepared For the Storm Ahead

Charles McMillion — Fri, 03 Oct 2008 09:36:06 -0700

Today’s Bureau of Labor Statistics jobs report shows jobs losses worsened sharply in September. Hours worked fell even more sharply than jobs suggest losses in October could be quite severe. Because the number of paid hours worked per week was reduced sharply in September, weekly wages also fell even before adjusting for inflation.

This is an ominous sign for households that already face unprecedented financial pressures with little or no current savings.

The report shows net job losses of 159,000 in September including a gain of 9,000 government jobs; the private sector lost 168,000 jobs in September. This is the ninth consecutive monthly loss of total jobs and the 10th consecutive loss of private sector jobs. The economy has lost 760,000 jobs since December; excluding gains in government jobs. The private sector has lost 983,000 jobs (almost 100,000 a month) since last November.

It’s important to appreciate that even the sharp loss of jobs in September represents only a 0.1 percent loss of overall jobs. But because of reduced hours worked per week, the total number of private sector hours worked in September plunged by 0.5 percent. This converted a small gain in wages per hour (before inflation) to a small decline in weekly wages and a big decline in total wages. When BLS reports on prices and real wages in two weeks (Oct. 16) we will likely find that even modest inflation pushed weekly wages down about 0.3 percent in September to purchasing power levels that are down 0.6 percent year over year.

The equally important implication of the sharp reduction in hours worked is that it is the typical pattern employers use before cutting more jobs. For example, machinery manufacturers cut 4,000 jobs, 0.3 percent, in September but they reduced total hours by 2.5 percent. Financial activities cut 17,000 jobs, 0.2 percent, but cut total hours by 0.5 percent. Construction cut 35,000 jobs, 0.5 percent, but total paid hours worked were cut by 1.3 percent. Even education and health services—a category that added 25,000 jobs, up 0.1 percent—cut the number of total paid hours worked by 0.2 percent. Even before considering job losses due to hurricanes, October is shaping up to be a very bad month for jobs and wages.

Along with the now-chronic condition of job losses in virtually every industry that faces imports (or is capable of exporting) or that can be easily be moved to cheaper sites offshore, September shows broad weakening in those industries where soaring debt helped create jobs in the past. Bars and restaurants lost 5,000 jobs in September, private health care and education bureaucracies added only 25,000 jobs. Even local governments began to show the budget strains as their jobs cuts outside public education all but offset small gains in their education bureaucracies. (My full table of industry job losses and gains is attached.)

Those on Wall Street and elsewhere, who have just discovered the weak economy, may also find of interest my updated industry jobs table since January 2001. The past 7 2/3 years has seen only 3.14 million, 2.8 percent, more private sector jobs. This is the weakest overall job growth of any such period since the 1930s. But even worse than the weakness in overall job growth is the remarkable distribution along the lines noted above. Private Health Care bureaucracies added 2.4 million jobs since January 2001 and bars and restaurants added another 1.5 million jobs for a combined 3.9 million. Aside from these, the U.S. private sector has lost over 750,000 jobs in the past seven-and-two-thirds years.

These graphs on job losses and charts on industry job performance show that even over the 82 months since the end of the previous recession in November 2001, the private sector has added just 5.8 percent to total hours worked. This is not only the weakest on record but is less than one-third of the 17.8 percent average growth in past cycles. Hours worked in manufacturing over the past 82 months has plummeted by an unprecedented 12.8 percent.

Today’s report provides more evidence of just how poorly is the economy prepared to weather the current storms that Wall Street’s wealthy geniuses have created.

Ten Things You Should Know About China

Charles McMillion — Mon, 11 Aug 2008 08:24:20 -0700

Whether or not China ultimately wins the most Olympic medals over the next two weeks, the unrivaled triumph of the events’ government-planned and executed opening ceremony has awakened interest in China and its stunningly rapid modernization.

Antigovernment U.S. “experts” have incessantly assured us of an imminent Chinese slowdown or collapse. But the pace of China’s development accelerated after it was admitted to the World Trade Organization in 2001. Since then, China’s economy has grown four times faster than the U.S. and twice as fast as the rest of the world.

China is now the world leader in producing computers, mobile phones and most other electronic equipment, as well as a widening array of more traditional manufactured goods. Next year it will likely surpass the U.S. and Japan to become the world leader in auto production. Despite constantly false “news” reports, virtually all autos sold in China are made in China, and although many are foreign brands (Volkswagen, Buick, Toyota), ALL are made in plants where China’s state-owned firms have controlling interest.

There are now over 600 million mobile phone accounts in China—all in government-owned firms—and they are increasing by as many as 9.5 million per month. Taking advantage of this immense, captive market, China just launched the use of a long-awaited, government-owned telecom standard, TD-SCDMA, to compete at home and abroad with the standards used in the U.S. and the rest of the world.

Already, more Chinese than Americans use the Internet, and the potential growth—and China’s influence—is enormous. China’s government has shifted its powerful strategic focus for future growth away from manufacturing to high-quality professional services.

Over the past decade, China transformed its state-controlled companies into some of the largest, most sophisticated companies in the world. Almost entirely state-controlled, China’s financial services sector was believed by deregulation extremists to be a basket-case in 2001. Today, the major concern of China’s highly profitable financial services firms is their relatively small holdings of U.S. subprime housing debt. The biggest global financial firms are now eagerly sending their best talent and their best product ideas, paying premium prices to acquire the legal limit of 20 percent minority “partnership” in China’s financial institutions—just as manufacturing firms have done for the past 20 years. The Industrial and Commercial Bank of China surpassed Citigroup last year to become the most highly capitalized in the world. China now has several financial firms in that league.

Economists normally expect countries growing faster than the world economy to import more and export less, thereby having current account trade deficits. Yet despite its soaring growth, China’s global current account surplus rocketed from $17 billion in 2001 to $372 billion in 2007. China imports so much oil and other non-manufactured raw materials that even its overall surplus in current accounts or goods trade obscures the even more remarkable surplus for manufactured goods, which reached $401 billion last year and will likely exceed $500 billion in 2008. China was the world’s largest manufacturing exporter last year and the largest exporter of goods to the U.S.. Because of rising prices for imported oil, iron ore and other commodities, China’s overall global trade surplus is down about 11 percent in 2008, but its manufacturing surplus is up over 30 percent!

China has accumulated global current account surpluses of $1.1 trillion since 2002. These current account surpluses, strong foreign investment in China and other factors, has built China’s war chest of foreign currency reserves from $212 billion at the start of 2002 to almost $2 trillion now. In April alone, China added $103 million each hour to its foreign reserves. Together with China’s newly restructured and healthy financial system, and their large firms’ new access to equity and bond markets, China is now uniquely capable of cherry-picking today’s worldwide “fire sale” opportunities for patents, talent, natural resources, brands, distribution channels and much more.

An important indicator of China’s modernization is the loss of the long-held U.S. surplus in advanced technology products. Globally, the traditional U.S. surplus in these products turned to a deficit for the first time in 2002. Since then, the U.S. has suffered advanced technology product deficits that are far larger than any past U.S. surplus. China accounts for more than the entire U.S. global deficit in these products—concentrated in advanced machinery and electronics. U.S. import payments for advanced technology products from China are almost four times as much as export earnings. The U.S. deficit in this area with China is more than eight times the U.S. deficit with Japan, 35 times the size of all U.S. intellectual property earnings in China, and 10 times the size of all reported U.S. corporate profits in China.

The weakness of the U.S. dollar affects trade and investment flows. From the time China was admitted to the World Trade Organization until now the Chinese yuan was allowed to strengthen somewhat against the dollar but most other currencies strengthened far more against the dollar. That is, since 2002, the yuan strengthened somewhat against the dollar but it weakened slightly against the Japanese yen and it has weakened sharply against the euro.

Whether in the Olympics or in the competition to create good jobs with a promising future, a winning plan and strategy is usually essential. China has such a plan; the U.S. does not.

Charles W. McMillion is president and chief economist of MBG Information Services in Washington, DC. He is a former associate director of the Johns Hopkins University policy institute and a former contributing editor of the Harvard Business Review. For more on China’s modernization read this document and refer to the work of the U.S.-China Economic and Security Review Commission.

Ohio Job Losses Worst Since Great Depression

Charles McMillion — Thu, 21 Feb 2008 12:45:14 -0800

According to the U.S. Department of Labor, Ohio had 209,400 fewer nonfarm jobs in December 2007 than it had in December 2000. This loss of 3.7 percent of Ohio’s jobs is the worst seven-year loss in state records that begin in 1939 as the Great Depression was ending. (The details are in my special report.) The previous seven-year job loss record was the period ending in 2006 (3.6 percent of jobs lost) and before that the record was held for the period ending in 1962 when 3.4 percent of jobs were lost in the demobilization after the Korean War.

Nine of the state’s 13 metropolitan areas suffered recent job losses more severe even than Ohio’s statewide losses. Most devastated is the Springfield area, losing 10.0 percent of its jobs over the last seven years. The other areas with job losses worse than statewide include Canton (8.6 percent job loss), Dayton (7.6 percent), Mansfield (6.5 percent), Youngstown (6.3 percent), Lima (5.7 percent), Cleveland (5.5 percent), Toledo (5.0 percent) and Steubenville, Ohio–Weirton, W. Va. (3.8 percent).

Only three of Ohio’s metropolitan areas added jobs over the past three years and none of them even matched the 4.3 percent overall U.S. job growth, the weakest seven-year period since the mid-1940’s demobilization from World War II. The Akron area has the best recent record in Ohio, adding 4.1 percent to its job base since 2000. Jobs increased by 2.0 percent over the period in Cincinnati and by 1.7 percent in Columbus while declining by 2.7 percent in the Sandusky area.

The industrial composition of Ohio job losses and gains reflect recent record trade deficits and the explosion of household and federal debt stimulus. Over the past seven years Ohio lost 23.3 percent of its manufacturing jobs (236,000 jobs,) lost construction jobs, lost jobs in wholesale and retail, lost jobs in information services and even in financial activities. Recent job growth came in private health services bureaucracies (100,100 jobs), restaurants and bars (24,500 jobs), and in state and local governments (18,700 jobs), mostly for public education, health care and prisons. Since 2000, Ohio added just 2,500 jobs in firms providing professional, scientific and technical services.

That is, every industry that is capable of exporting and faces foreign imports or routine outsourcing lost jobs in Ohio over the past seven years. All new jobs are in domestic consumer services that rely on soaring levels of debt.

Ten of Ohio’s metropolitan areas suffered plunging jobs in manufacturing that are even more severe than for the state as a whole. Over the past seven years Springfield lost 46.9 percent of its manufacturing jobs, Sandusky lost 36.5 percent, SteubenvilleWeirton 31.4 percent, Dayton 31.2 percent, Lima 30.7 percent, Canton 30.6 percent, Youngstown 27.3 percent, Mansfield 25.7 percent, Cleveland 25.2 percent and Columbus lost 24.4 percent.

Even the three areas with less precipitous manufacturing job losses than the state as a whole suffered severe losses. Akron lost 17.5 percent of its manufacturing jobs over the past seven years, Cincinnati lost 18.4 percent and Ohio lost 22.6 percent.

The U.S. lost a record 19.8 percent of its manufacturing jobs over the past seven years. The previous record, before recent years, was the loss of 14.6 percent from the peak of the World War II buildup in 1942 to the depth of the demobilization in 1949.

Record-smashing U.S. manufacturing trade losses (production shortages) totaled over $3.0 trillion over the past seven years as the full current account trade losses reached $4.3 trillion.

Together with the unprecedented loss of total jobs — particularly highly productive/high wage manufacturing jobs — the industries that are creating jobs in Ohio are also of concern. These jobs are almost entirely in less productive, lower-paying industries — including the low end of the “professional and business services” category — that cannot create export earnings to offset the cost of imported oil, autos, computers, clothing, etc. But with rising health care costs a serious obstacle for U.S. businesses and households alike, it is troubling that the vast majority of new jobs in Ohio are in private and public health care bureaucracies.

The jobs data tell only one important part of Ohio’s past seven-year economic story. Yet these record job losses bare strong witness to the depressing effects of record trade deficits and the loss of U.S. production that they represent. Another key part of Ohio’s past seven-year economic history is the unprecedented levels of household and federal debt stimulus that — even in Ohio — played a vital role in moderating the effects of import competition, outsourcing and job loss. With the soaring engine of household debt now sputtering and debt service payments rising, strong industrial and trade policies seem urgently needed to halt Ohio’s further decline.