Thoughts from the Frontline

What Happened to the Jobs?

By John Mauldin

July 8, 2011

Choose your language

So How’s That Stimulus Thing Working Out?
This Time Is Different
Vancouver, New York, and Maine

The US jobs report came out this morning, and it was simply dismal. This week we look at not only the jobs report but also “what-if” proffers for the US and global economies. There’s a lot to cover, so let’s jump in.

First, there were only 18,000 jobs created in June, the lowest since September 2010. While private employment rose by 57,000, government workers dropped by 39,000, continuing a trend as governments at all levels work to cut their budgets. Long-time readers know I think it is important to look at the direction of the revisions, and we got no help. May was revised down by 29,000 jobs and April a further down 15,000.

I…

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david rosenstock

July 10, 2011, 1:46 p.m.

Glad to see the employment/population ratio chart. 

A different view here.  I noticed the fall to 58% a few weeks ago.  Looking at government data back to 1950, we observe the ratio did not reach 60% until 1985. 

Additionally, in the 1950s, agriculture routinely contributed 10% of all jobs.  (Now ag is 1.6% of jobs.)  So, we have had times where non-ag employment was around 50% of the population - and unemployment was under 5%.

I suggest the problem can be viewed as “too large a workforce” as opposed to “too few jobs.”  This is a result of several major societal shifts.  For example, I saw a piece that mentioned marriage rates among the “working class” (those with high school degrees only) had fallen from maybe 75% to 48%...  this means there are now millions of extra single people in the workforce, boosting unemployment numbers.

1985-2008 saw a number of job boosters…  defense spending in the 1980s, internet and dot-com bubble in the 1990s, and most recently construction of hundreds of thousands of homes that were not needed—and many jobs in financial services participating in that bubble. 

Now we are post-bubble.  And large companies finally are realizing the productivity that software has long promised—fewer people are needed to process data of all kinds.  Manufacturing has sought lower labor cost and found it outside the US.  Etc.

A worthwhile article, book, or doctoral thesis for someone…  what ratio of employment to population is sustainable in a healthy economy?  What has been the ratio in Germany and other developed countries?

What sacrifices should Americans make to reduce the number of zero income households?  Radical and outrageous idea…  Some affluent dual income families could “give up their seat on the bus” to make room for others who need the jobs more…

Mark Sladoje

July 10, 2011, 11:09 a.m.

Reading your comments from week to week, tells me that you are becoming more fearful for the USA. ( I would say “good ole USA”) but things are looking dire for us from where I sit.  And now with the President wanting to help Greece help the banks in Europe, I say the President shold get his head out of the sand and fill in the hole so that we do not become one of the PIIGS.
Congress should realize that they run the country, not the President and act accordingly.

Mark Sladoje

Klara Gotz

July 10, 2011, 10:19 a.m.

So what can the government do to create jobs at small businesses? Is it more commercial and industrial lending at banks or is it simply a question of confidence that comes with time?

Mary Taylor

July 9, 2011, 11:14 p.m.

I’m wondering if the looming “Obamacare” hinders the small businesses from investing in new employees. I’m also wondering if small businesses have lost confidence in the US & in the entrepreneurship that has marked this country. Just thoughts as I am a neophyte in economic studies.

William Volz

July 9, 2011, 10:53 p.m.

Not one of the best columns, but you were busy…

1st - when taking the stimulus and dividing by the number of jobs and come up with $266,000 per job is not honest - you need to take out the hundreds of billions paid out to states, etc., and the net amount used.  Still not great, but only half the amount.  And then you “forget” to factor in the multiplier effect and revenues collected.

If you have an extra week of Sundays why not show PRECISELY how the $700 billion of stimulus was used, and the impact on each level.  Common sense says you will come up with a much different analysis, and the counter factual, this Great Recession would make the Great Depression seem like an economic slowdown.

But the BIG tease was, “Banking crises are followed by credit crises by 2-3 years. It is getting close to that time. We need 3-3.5% GDP growth in the US to really make a dent in jobs. We are not going to get it. There is nothing we can do other than Muddle Through as best we can. Prepare accordingly.”

What the heck does this mean?  1937 except this time caused by Republicans?  Please John, speak to this next week…

Rodger Malcolm Mitchell

July 9, 2011, 5:02 p.m.

Cutting federal deficits to grow the economy is like applying leaches to cure anemia.

Rodger Malcolm Mitchell

Evad Renter

July 9, 2011, 4:14 p.m.

Blah, blah, blah.  Mauldin has been bearish on the stock market since 2009.  He’s missed the greatest 24 month bull market in history.  I’m up almost 100% in 2 1/2 years.  If I had listened to Mauldin, I would be in a 0.10% money market fund.  The stcok market IS NOT going down.  It’s headed to 15,000 by Q1 2012.  Watch & learn.

James Eaton

July 9, 2011, 3:58 p.m.

John, I read your book (Endgame), and this is following the script you outlined from Rogoff and Reinhart. You have hit it exactly with this article.  Perhaps we should have simply sent each family in the US $50,000 to stimulate demand rather than to shore up banks (LOL). Less money and less bureaucracy. As an aside, continued downsizing of the government will be a good thing 5-10 years out. It will probably stop the recovery in its tracks.

Regarding tax cuts. The GOP has it wrong by advocating a general reduction in business taxes. Since, as you point out, only the small and start-up businesses have generated jobs, THAT is the target for steep tax cuts!

GREAT article.

Jim eaton

Ton van Kleef

July 9, 2011, 3:37 p.m.

“Everything is very fluid, but the headlines in todayâ??s Wall Street Journal suggest a deal on the order of $4 trillion in on the table. I assume it will be back-loaded, but it is a start.”

Since that $4 trillion is spread over 10 years, that start is weak also, considering a $ 1,5 trillion deficit every year. this is childsplay… Debt growth should be stopped as soon as possible. When interest rates start rising, like here in Europe, things will go worse and worse.

Dan Haggarty

July 9, 2011, 2:09 p.m.

IMO, for a society to have a high, sustainable, per capita standard of living, it might have high, sustainable, per capita production of economic value.  The United States, for example, has relatively high labor productivity, thanks to historically high levels of capital investment, but when a large proportion of the population is incarcerated in the prison system or is unemployed, officially or otherwise, it’s hard to maintain a high per capita GDP even with above average labor productivity. 

When high incarceration rates and elevated unemployment levels are then combined with reduced trade deficits and lower consumer debt levels, which can temporarily and artificially boost consumption, it seems inevitable to me that a society’s per capita standard of living will drop.  In this scenario, an ugly Hobbesian scramble for economic supremacy seems inevitable.

It’s important to be optimistic but I worry because sometime it’s the cynical realists that survive.

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