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08 May 2011

13.47% Unemployment with Glacially Slow Improvement

The so-called unemployment rate of 8.66%, without seasonal adjustment, or the 9.0% unemployment rate with seasonal adjustment, remains virtually meaningless.  As I do most months, I will calculate the number of missing jobs based on the percentage of Americans who wanted to work when jobs were plentiful and desirable in January 2000.  The result is that the real unemployment rate in April 2011 is 13.47%, which is down from March 2011 when it was 13.86%.  In January 2011, it was still worse at 14.59%.  We are presently missing 21,739,000 jobs.  This is 868,000 more missing jobs than in April of 2010.  Clearly, while the recent real unemployment rate is falling, it is doing so with glacial slowness and our jobs recession is still very much bearing down on us.

The graph of missing jobs going back to November 2009 is updated below:

We made progress to some degree in job creation because the U.S. manufacturing base is doing relatively well compared to the rest of the world.  We are very competitive.  Take a look at this chart from the JPMorgan Global PMI Report of 3 May in which values over 50 represent expansion:

As we see, U.S. manufacturing output dipped lower at the end of 2008 and the start of 2009 than that of China, the U.K., and the Eurozone, though not so deep as Japan.  Since then, U.S. manufacturing output has rebounded strongly, despite the federal government's best efforts to squeeze it dry with excessive regulations and taxes.  We now have the highest corporate taxes in the developed world.  Corporate taxes are particularly onerous as a double tax, since shareholders are taxed again on their dividends and any capital gains and prices of sold goods and services are raised to consumers.  Despite this, American manufacturers are making an heroic effort, which is much under-appreciated.  U.S. manufacturing output fell in April relative to March, but we are still beating the Eurozone, China, and Japan.  This is why manufacturing employment rose by 29,000 in April.  The drop in the manufacturing output in April may have been due to a lack of parts from Japan and sharp increases in many commodity prices in April.  Monetary tightening in China contributed to the downturn there.

The manufacturing employment index from the JPMorgan report is also interesting, with values greater than 50 indicating expansion again:

Manufacturing unemployment took a deeper dip in the U.S. than anywhere in this Great Socialist Recession, but since early 2010, U.S. manufacturers have beaten the Eurozone, China, and Japan in increasing manufacturing employment.  This has been done because U.S. manufacturers have been increasing the productivity per employee and increasing exports.  The manufacturing export index is shown below:

Note that the manufacturing export index for the U.S. did not dip as low as those for China, the Eurozone, and Japan at the worst of the recession and that we now and recently have been beating out the Eurozone by a hair and China and Japan more handily.  Some of this expansion, however, is driven by the lower value of the dollar.  Caterpillar Inc. is selling construction equipment abroad at record rates, especially excavators and underground mining trucks.  Heavy spending on infrastructure in Latin America and Asia is especially a factor in these sales.  About 90% of their large mining trucks are exported.  In the U.S., severe environmental regulations and constant lawsuits are crimping our mining operations despite strong demand for metals and materials.  Since the low point in employment in mining in October 2009, employment has increased by 107,000 jobs in mining.  Crown Equipment Corp. manufactures forklifts and is reporting strong sales abroad as well.

Construction spending is also increasing in the U.S.  It increased by 1.4% in March.  The increase in the private sector was higher at 2.2%.  Construction employment was unchanged in April, however.  It has been very flat since early 2010.  In April, retail trade employment increased by 57,000, professional and business services by 51,000, leisure and hospitality by 46,000, and health care by 37,000 jobs.  The information, financial, and transportation and warehousing industries remained unchanged in employment numbers.  Fortunately, the number employed in state and local governments decreased somewhat.

First quarter 2011 output per hour worked productivity was 1.3% higher than it had been in the first quarter of 2010, but this continued a trend since the first quarter of 2010 of smaller and smaller productivity gains.  Companies are struggling to increase productivity further with the already very lean workforces they have.

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