True Low Unemployment Would Mean Things We Are NOT Seeing

Corporate media is fond of saying that unemployment is low, which would mean employment is up. I have previously covered the Labor Participation Rate, the Bloomberg report calculating that 600,000 jobs have been lost just since December, unreported and that report came out several months ago. However, even that isn’t necessary because the evidence that employment is as high as claimed does not add up with what we see all around us.

For one thing, if employment were truly up, we would not be having the discussion about immigration at all. We have seen incidents in the past when employment was high. At that time, the US was welcoming immigrants with open arms. Compare to what we see occurring right this minute.

Deporting large numbers of immigrants may have some impact on employment but barely enough to budge percentages or numbers. Consider that the estimate was that there were 11 million illegal immigrants in the US. Not all of those were in any condition or age to be employed. Many are children, as we can clearly see from the children being caged at the border this very minute. Others have been here for years and are too elderly to work. Still more are disabled in some way.

Thus, we can consider that possibly 3 million may have possibly been employed and most of those have worked in low-wage agricultural or similar jobs. In cases where they have occupied jobs with higher pay and skills, deporting them does more damage than good to the economy, as many corporations have moved jobs to South American countries. Those are the DREAMERS, who have gained education and skills which many natives lack. In other words, not only are the immigrants being deported but the jobs they occupied are being deported as well.

Even without the above, if employment was as high as claimed, immigrants would be welcomed to occupy lower levels of employment, allowing more skilled Americans to fill higher positions.

Next, consider that if employment were up, we would not be seeing other signs of a declining economy which we are seeing. Student loan defaults are at record levels. Vehicle loan defaults have been increasing for several years while new vehicle sales are down, causing mass layoffs in the auto industry. New and used home sales are declining. Consumer credit debt is rising rapidly as consumers are forced to use credit to meet basic needs. While we already have the highest level of consumer and corporate debt in world history.

In times of high employment, pay and benefits increase because employers compete for the best, most qualified workers first and then move down the skill/experience ladder from there. Wages do not remain stagnant at any level.

It is well known we are living in a “gig economy”, with a large percentage of jobs being contract or temporary work. I had written that this was coming in 2001, beginning primarily with medical professionals and then spreading to other fields. That is precisely what happened. However, what has changed over time has been a decline in pay and benefits for such positions as they became more common across industries. In fact, that is why it has become more common. Temporary and contract workers were once used to fill positions which were short-staffed and as a result, pay and benefits were above average. They typically led to offers of permanent employment for good workers. Today, these positions are used to avoid the need to hire full time staff. Workers are offered part time and contract positions or nothing at all, while they rarely lead to offers of permanent employment. This does not happen in times of high employment because employers are anxious about being stranded with inadequate staffing. In fact, they would be offering nearly unlimited hours to the best temp/contract workers who have already shown their value.

In times of truly high employment, one can see an initial anomalous dip in the stock market as employment rises due to wages being seen as a cost. Then stocks increase as profit margins rise due to consumer spending due to the employment and wage levels.

Right now we see prices rising in comparison to wages. In times of high employment, prices rise but only secondary to higher wages and employment. Yes, tariffs are playing into inflation but there has not been a time that prices have decreased at any time since the 2008 crash. In fact, rent in general has continued rising unabated since that time.

In times of high employment, employers will eagerly subsidize or even pay for higher education for valuable employees wishing to advance. Today, companies are mandating continued education at employee expense, with or without advancement. Note that some may use the example that employers once paid for travel and attendance to conferences and this has become less common. I find this not anything abnormal with technology advancements which have resulted in video conferencing becoming far more common gradually over time, reducing the need for travel.

When employment is high, increased wages and benefits result in a decrease in out of pocket costs for workers. That leads to increased consumer spending. Increased consumer spending results in a further cycle, maintaining and creating more jobs. Right now we are seeing reduced consumer spending outside of absolute essentials. Tariffs would have some effect to slow the volume of goods being sold but would not by itself result in a depressed consumer market resulting in mass layoffs and loan defaults.

Obviously, capitalists will be capitalists and rent prices will continue rising, as we have seen in this battered economy. That leaves even less disposable income for consumers to spend.

These conditions are only going to get worse due to Trump’s trade war with China. No matter how much he gives farmers in subsidies at our expense, that does nothing for downstream jobs in trucking, packaging and shipping. Tariffs are a tax on the American people which slow consumer spending by volume purchased. When consumers have a limited budget, that budget does not increase because prices do, meaning they spend the same but obtain less. The tariffs do not mean more profit for retailers, so they see reduced sales volume. Less sales volume means less requirement for labor. That means more layoffs but will be less immediately evident because it will not be mass layoffs and instead be widespread and gradual reduction in staff. Then more downstream reductions in trucking, shipping, manufacturing and so on.

When corporate media is telling you anything about how well the economy and job markets are doing (among other things), it is highly advisable to question it very critically.

Leave a Reply