Where is the US economy headed?

Slowly striding
"Common sense suggests the biggest impact will be felt in America, home both to the subprime mess and the worst financial dislocations. At first sight, the economy hit the August turmoil in fine fettle. Output growth in the second quarter was strong; business spending looked perky; wage growth was solid and high petrol prices (which had dragged down consumer spending) were falling.

On closer inspection, however, the picture was less rosy. Output boomed in the second quarter thanks partly to one-off factors, such as the rebuilding of firms' stocks. Consumption growth slowed sharply over the same period, and some areas of consumer spending stayed weak into the summer. Car sales, for instance, fell to a nine-year low in July.

Most important, the economy's weakest link?-the housing market?-was in even worse shape than many realised. The pace of new-home construction plunged in July while the backlog of existing unsold houses rose to a 16-year high. House prices have kept falling.

A still-deepening housing bust left the economy vulnerable well before August's crunch. And that crunch has made the prospects for housing much worse as mortgage instruments have disappeared, or become dramatically more expensive.

Not surprisingly, Wall Street's seers are chalking down their projections for construction and house prices. A construction bust will continue to drag down output growth. The bigger question is what effect double-digit house-price declines would have in a country where consumer debts have soared on the back of housing wealth. Optimists take comfort from consumers' resilience so far. That may be a mistake. Consumer spending will be crimped as homeowners feel poorer, particularly if stockmarkets continue to slide."

http://www.economist.com/daily/news/displaystory.cfm?story_id=9725432&top_story=1

Rama, Good article; our economy hasn't still felt the blow from the downturn in housing, income, and debt. I'm giving it several more months when banks and funds will have to reveal the loss from the subprime loans.

ECONOMIC PROSPECTS

Global Outsourcing and the U.S. Working Class

THE LIVING STANDARDS OF WORKING PEOPLE IN THE UNITED STATES HAVE BEEN BATTERED

for thirty years by the combined forces of globalization and neoliberalism. But this situation is likely to only deteriorate further over the foreseeable future unless progressive forces can bring off a dramatic transformation in the country's economic trajectory.


An article in the March/April issue of Foreign Affairs magazine?-the longtime premier organ of the country's foreign policy elite?-was the unlikely venue for a sobering survey of the problems at hand. The article, "Fear of Outsourcing," was by Professor Alan Blinder of Princeton's economics department. Blinder's establishment credentials are impeccable. He is a former member of President Clinton's Council of Economic Advisors, and a former vicechair of the Federal Reserve Board under Alan Greenspan.

Blinder's main point is simple but farreaching?- that a fundamental transformation is now occurring in international trade. He observes that "traditionally, any item that can be put in a box and shipped (roughly, manufactured goods) was considered tradable, while anything that cannot be put in a box (like services) or was too heavy for shipping (like houses) was thought of as non-tradable. But that is now vestigial thinking." Blinder argues that, increasingly, things don't need to be boxed to be tradable. They simply need to be deliverable through the Internet. And the proportion of services that can be delivered electronically is growing inexorably.

Why should the rise in internationally traded services be a threat to U.S. working class living standards? This becomes clear when we consider the history of neoliberal globalization to date. Globalization has meant that national economies?-including in particular those of rich and poor countries?-are becoming increasingly integrated. Dramatic declines in transportation and communications costs are crucial to this process. But neoliberalism is the main force establishing the terms under which global integration is proceeding.

Neoliberalism combines tax cuts for the rich; monetary policies focused on controlling inflation rather than promoting employment; lowering barriers to international trade; opening up new investment outlets for multinational corporations and financial speculators; and an erosion of public policies and institutions designed to protect working people and the poor from the vicissitudes of the free market. It is therefore no surprise that the living standards of U.S. workers have been declining under neoliberal globalization, even though, of course, not all U.S. companies have been moving their operations offshore. Production of goods and services in the United States remains a $13 trillion enterprise, employing 150 million people. But U.S. workers nevertheless face an increasingly credible threat that they can be supplanted by workers in poor countries willing to accept much lower wages.

This by itself erodes their bargaining power. Just how serious this problem has been is reflected in the pattern of average wages since 1973. As of 2005, the average nonsupervisory worker in the United States earned $16.35 an hour (in 2005 dollars). This figure is 8 percent below the 1973 peak figure of $17.66 per hour. But this is only half the story. The other half is that average labor productivity in the United States rose by 85 percent over this thirty-threeyear period of declining wages. That is, the total basket of goods and services that average U.S. workers produced in 2005 is 85 percent larger than what they could manage in 1973. The workers' reward for producing 85 percent more goods and services in 2005 than 1973 is an 8 percent pay cut.

These trends have proceeded even though, as Blinder points out, the number of U.S. jobs that have been outsourced thus far is surprisingly low, probably no more than a half-million jobs per year. This is about one-third of one percent of the 150 million total U.S. jobs. However, the number of U.S. jobs that are outsourced is likely to expand rapidly, as more services deliverable over the Internet are produced in poor countries. How many jobs could plausibly be transferred to poor countries under this logic? Blinder emphasizes that neither he nor anybody else can possibly give a good answer. But he is willing to offer some surmises. To begin with, he reasons that all the remaining 14.3 million manufacturing jobs could possibly be outsourced, since virtually all manufactured goods can now be boxed up in poor countries and delivered cheaply and quickly to the United States.

Then we come to services. Here, Blinder draws a distinction between what he calls personally- delivered and impersonally-delivered services. Personal services?-including taxi drivers, janitors, nurses, high-school teachers, child care workers, psychiatrists, waiters and lobbyists?- all require face-to-face contact, high levels of personal trust, or other location-specific attributes. These jobs cannot be outsourced.

But impersonal services, including a wide range of professional, information, and technical services, can, and increasingly will be, sent off shore. We already know about telephone operators sitting in Bangalore, India, answering our requests for telephone numbers, hotel reservations, and concert tickets. But Blinder suggests that the services provided by back-office accountants, lawyers, engineers, and laboratory technicians, as well as their support staff, could also be effectively supplied by employees in poor countries that work for, say, onefifth the wages of their U.S. counterparts.

Blinder suggests that somewhere in the range of 28 to 42 million impersonal service jobs are susceptible to outsourcing. Adding these to the 14 million manufacturing jobs that are vulnerable, Blinder concludes that something like 42 to 56 million jobs that are in today's U.S. labor market are capable of being performed by workers in poor countries. This is something like one-third of all jobs in the United States today. Is Blinder right? I think he is broadly accurate in estimating the number of jobs that are vulnerable to outsourcing. In any case, the crucial point for wage bargaining is that the employers of these 50 million workers will gain increased leverage over their workers, because their power to make credible threats to outsource will grow.

What is to be done about these gathering pressures? Blinder himself is deeply troubled by the scenario he describes. However, beyond a general call to rethink all public policies, starting with education, he does not offer positive proposals for how to address the problem. He is clear on a negative point: that trade protection is not a viable solution. I broadly agree with him, even while recognizing that a few crucial policy changes, including a weaker dollar and national health insurance, would go far to improve the global competitiveness of U.S. firms (a subject for future columns).

Fundamentally, trade protection cannot reasonably offset the fact that workers in poor countries are increasingly capable of producing services as well as goods that consumers in the United States will want to buy. We also need to recognize a central fact regarding U.S. trade policies: that poor countries need access to the markets in rich countries like the United States more than U.S. firms need protection from third world producers. Workers in poor counties, in particular, can benefit substantially from the jobs that are created when their employers succeed in selling things in the United States.

These benefits are not inevitable. Being locked in a sweatshop for sixteen hours a day hardly constitutes decent employment. But the potential is there. Either way, this still doesn't address what happens to U.S. workers. In fact, there is really only one possible choice, which is for employment creation to become a fundamental centerpiece of public policy in the United States. Otherwise, if neoliberalism prevails, the only remaining questions would be how far down we go, and how fast we get there.

An employment-targeted alternative to neoliberalism would start with promoting more high-quality personal service jobs. This means, among other things, substantially more money for health care, education, child and elderly care. It also means supporting union organizing and allied political efforts to convert what are now poorly-paid personal service jobs?- such as those in hotels, restaurants, and airports?- into decent and remunerative ones. This is what current organizing struggles like Justice for Janitors and the living wage movement are mostly about. But we also need to recognize the historic opportunities provided by a pivotal convergence between two long-term imperatives facing the U.S. economy. In addition to undertaking efforts to aggressively expand decent work opportunities over the next generation, we need to work equally aggressively to end our dependence on fossil fuels as an energy supply.

Ending fossil fuel dependency will of course be a massive project, equivalent to previous epochmaking transformations in the United States, such as rebuilding the economy around the railroad or the automobile. Depending on how it is organized, the transformation to a renewableenergy based economy can become a formidable force for job creation, in industrial research and design, manufacturing, construction, and transportation, though not enough research has yet been done to establish whether the possibilities are comparable in scale to the roughly 50 million jobs that are threatened by outsourcing.

Some obvious examples for major job-creation projects in the area of energy conservation include creating viable light-rail systems in all U.S. urban areas, improving home insulation systems through retrofitting, and transforming our existing housing stock from singlehome to community-based heating-and-cooling systems. In addition, even Bush and likeminded Republicans now support the idea of subsidizing the domestic production of renewable energy sources. What's needed now is to establish which of wide range of renewable energy possibilities?-such as biomass fuels, wind energy, or direct solar sources?-will also be most effective at promoting long-term job growth in the United States. The renewable energy projects most favored with public subsidies should be the ones that also are capable of promoting substantial job growth.

Moving to an employment-targeted and renewable energy economy can become feasible only through large-scale government initiatives. This may sound far-fetched given the domination of public policy thinking by neoliberalism. Yet, the choices are clear: either we break with that agenda, or working-class living standards will deteriorate even more sharply in the coming generation. ••

The SYTEM of usa is
Rotten
barbarism
banal
and
inhuman.
Let the world teach the powers that be in usa
to understand
OUR DREAMS and not your
unfulfilled AMERICAN DREAMS

au, Another good article; the middle class continues to see a deterioration of their income while the wealthiest continues to gain multiples in the pay and bonus'. Our form of capitalism is broken when productivity increases, but the workers continue to lose buying power.

So I read today that American workers are the most productive in the world. Each American worker produces something like $63,000 worth of stuff a year, well above anyone else.
Okay, I can understand that, I thought. We are more technologically advanced. We have people running machines that produce stuff.
But then it was noted that Americans work a lot more hours then, say, the Euopeans. So, annual production per employee would obviously be higher here.

The only reason household income is increasing is because more family members are in the work force; not because their pay is keeping up with inflation.

Our economy is going to start feeling the pain.


Economy loses 4,000 jobs, first drop in 4 years
Updated 7m ago



By Sue Kirchhoff, USA TODAY
WASHINGTON ?- There were 4,000 fewer jobs on U.S. payrolls in August, though the unemployment rate stayed at 4.6%, the Labor Department said Friday in a report that portrayed a far more dismal picture than economists expected ?- and raised the odds of a Federal Reserve interest rate cut.
The monthly job loss was the first since August 2003. It was led by continued problems in the goods-producing sector of the economy. The construction industry lost 22,000 jobs during the month, while factory payrolls plunged by 46,000, despite an improving export picture.

c.i. wrote-



You would expect that with continuously improving efficiency.

If 68,000 jobs were lost in those sectors and only 4,000 lost overall it means there has been a transfer of occupation for 64,000 jobs. Doesn't it. Presumably into "don't get your hands dirty" occupations.

Hasn't such a trend been going on for a couple of hundred years?

I wonder what % of A2Kers are in "hands dirty-overall" type jobs. Does anybody know? My impression, for what it's worth, is not many. Thus certain types of bias are explained.

Spendius, I've invited some of them to come to Oklahoma and throw some hay bales in the barn, but so far no takers. You hit on an important point. Libs don't understand being poor so they all have this guilt complex. I was poor, so I don't need their bleeding heart mindset. I have even been accused of calling the poor "scum," by one poster here, which was of course only a revelation of his own bias.

okie, Your ignorance is limitless.

Business week

The feds need to reduce interest rates ASAP to make credit available at lower cost to consumers for our economy to survive.

I made a generalization, imposter, and figured it would cause a comment or two. I am very serious however, in believing that many rich libs, hollywooders being good examples, have a guilt complex over their own wealth because they were either born with a silver spoon in their mouth or they got rich too easily by making a worthless movie, that they somehow have this compulsion to "help the poor" or plead their perceived cause. It is very common for such to have some cause, for many of them it is the environment, which they have little or no understanding of by the way. It makes them feel better about themselves.

And they represent what percentage of the total US population?

okie: Libs don't understand being poor so they all have this guilt complex. I was poor, so I don't need their bleeding heart mindset.

This is a "generalization?" Sounds pretty personal to me!

Not a rosy picture.
"Typical families see income and earnings decline

by John Irons

American families today are increasingly feeling the pinch of higher energy prices, housing market uncertainty, and growing health care costs. Historically, typical families could expect to see annual increases in their earnings to help cope with financial challenges, improve their standard of living, or just save for a rainy day. These expectations of economic progress are no longer being met."

http://www.epi.org/content.cfm/webfeatures_snapshots_20070905

For those who are/were long on this market, remember that I warned you right at the time the DJIA was hitting all time highs.

One of the dumbest posts yet. Of course, people feel good about helping others. In fact, brain imaging has shown this. It is not a matter of guilt or shame, it is just a matter of doing the right thing. Liberals are generally very compassionate people. Where do you think the word "bleeding heart liberal" comes from. Those of us who are better off are grateful that fate dealt us a kind card. Me, I don't have much now but I no longer crave material things to a large degree (I mean I still love to shop, buy clothes etc) I don't have money to give so I volunteer my time.

Those you who do not have compassion and sneer at people who do are livng in your own personal hell. Those of you who aren't closet queers are self-loathing in other ways and try to project your anger, jealousy, envy, fear and hatred on those who can care and feel compassion and love for all beings. There used to be a time when conservatism was a philosophy, like the type espoused by Barry Goldwater. Not anymore. Conservatism these days is pathological.

Only the most warped of minds can equate philanthropy or care for the poor and downtrodden with something negative.