Saturday, June 25, 2011

Missing Jobs vs. Trade Deficit

The following chart shows where nonfarm payrolls would be if the employment trend from 1939 to 2000 was still in effect. I've shared this chart in previous posts.

Click to enlarge.

The following chart shows how much nonfarm payrolls have deviated from the long-term exponential trend. It's just the difference between the current value and the red trend line in the previous chart.

Click to enlarge.

This is not the only chart where this shape appears. Compare and contrast it to the real cumulative trade deficit. In the following chart I have taken our trade deficit each quarter, adjusted it for inflation, and then added them all up.

Click to enlarge.

And now for some sarcasm.

It would seem that if we send our jobs overseas then eventually we don't have as many jobs, and without jobs we can't actually afford to buy overpriced homes. How could anyone have possibly predicted this outcome? It's certainly very puzzling.

June 22, 2011
Fed chief Bernanke's press conference: as it happened

• It's puzzled over the current slowdown and doesn't put it all down to higher oil price

Source Data:
St. Louis Fed: All Employees: Total nonfarm
St. Louis Fed: Balance on Current Account
St. Louis Fed: CPI


Mr Slippery said...

Now this darn scary. I keep seeing Ross Perot with his charts in 1991 warning of the giant sucking sound of jobs going to Mexico. But NAFTA was just the start.

Word verification: redumb

I kind you not.

Watchtower said...

In your opinion how big a part did cheap energy play in the trend line up to the year 2000?

Stagflationary Mark said...

November 15, 2007
Was Ross Perot Right on NAFTA?

Stagflationary Mark said...

In your opinion how big a part did cheap energy play in the trend line up to the year 2000?

I'd split it between seemingly cheap credit (hindsight shows that the credit was not cheap if it was used to buy assets declining in value), cheap oil, and women entering the workforce in ever increasing numbers. I'd probably weight them all equally.

Cheap oil would encourage us to build large homes far from where we work and make us rationalize that borrowing more money to build those homes might be a worthwhile activity. Oops.

Since larger homes take more labor to build, this would clearly lead to more job growth.

This process can play out in reverse if energy prices are rising though.

Few want to be stuck heating a large home and commuting long distances these days. I think the Fed is missing that fact in their analysis. Driving up the price of oil with their easy monetary policies is not exactly producing the desired effect in housing prices.

Anonymous said...

Note when computerization and the internet took off is when the job losses happened.

The internet and computerization means its very, very easy to outsource, to find foreign suppliers, to cut staff, to reduce inefficiencies, etc.

Not only did we have a wave of job destroying technology, we also had a wave of cheap labor to compete with. Nasty combo.

Stagflationary Mark said...


I absolutely agree. US workers are getting hit from all sides simultaneously. We're thinking up ways to destroy jobs much faster than we are thinking up ways to create them. It's something I write about a lot here. Today was one such day.

Restaurant Automation