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This is looking really good. Just look at those productivity gains. We continue to do more work with fewer people. We're right on the exponential trend. Hurray!
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Thanks to the cumulative effects of automation, outsourcing, and a never ending debt crisis we need fewer workers. Productivity miracle! As intended, the US worker is becoming a milk cow. We have 60% fewer milk cows now than we had in the 1940s but each one does more work. Fantastic!
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There does appear to be an unintended consequence though. Note that overall real GDP growth peaked the same time employment peaked. It would seem that unemployed workers cut back on their spending. Who knew?
July 29, 2011
Weak GDP Report Suggests Economic Recovery Will Remain Slow Through 2011
“I think we could bounce along for a couple of years at this really miserably slow growth rate,” Bivens told HuffPost. “So we’d never technically enter a recession, but we would still have high and maybe even rising unemployment.”
A couple of years of "really miserably slow growth" and then what? A miracle occurs? I've been bearish since 2004. A few more years and it will be a decade. I can say with 99% certainty that I'll still be bearish.
Source Data:
St. Louis Fed: Real GDP
St. Louis Fed: Civilian Employment
22 comments:
I have a solution! Robot shoppers.
Robot shoppers can roam through malls and buy things (to be destroyed later so inventory doesn't build). They can park in the mall utility room at night and be activated if spending is not keeping up with productivity.
Then, we can all just sit back and watch the miracle economy grow. We'll even need robot shopper repairmen. Jobs!
Mr Slippery,
Yes!! Awesome solution!
I'm running with your idea.
Robot politicians.
They can roam through Congress and bicker endlessly, 24 hours per day 7 days per week!
Just think how prosperous we'll be with 1+ million robot politicians! Government jobs! Creating bills (both legal AND monetary) to nowhere!
My solution is to follow Mish's and Denninger's advice. Somalia and Afghanistan are the closest things to free market capitalism on the planet and they have the prosperity to prove it! You don't see them handing out food stamps or pandering to unions. No sir, it's the law of the jungle and the race to the bottom is a thrill ride.
D'oh! Sometimes it helps to eliminate the obvious first. Besides, there's just no reasoning with fanatics.
Somalia!
There's just no denying that sailing on the high seas with the wind blowing through your hair is the ultimate form of freedom.
Take what you want whenever you want. What a life!
It ranks right up there with investment banking. D'oh! ;)
Mark, I don't think your graphs show what you think they show. Increased productivity does increase our means, but that does not prevent us from spending *beyond* our means, which is exactly what we've done. Now we're in serious debt, and the piper must be paid. Automation and outsourcing didn't just suddenly appear in 2007 and cause employment and real GDP to drop off a cliff -- what did just suddenly appear is the realization that there is a big debt problem. And when people realize that, their natural reaction is to cut back on spending. (Subsequent unemployment then adds in a certain amount of positive feedback to this cutting back on spending.)
Productivity has never meant that we need fewer total workers. It only means we need fewer workers to produce a given amount of goods. What has happened for the vast majority of the time since the start of the industrial revolution has not been that the number of workers has decreased with increasing productivity, but instead that the number of goods produced has increased. (If that were not the case, then by now only something like 2% of the population would still be employed.)
foo,
Automation and outsourcing didn't just suddenly appear in 2007 and cause employment and real GDP to drop off a cliff...
True. The last straw on a camel's back is not solely responsible for the collapse of the camel either though. It is the cumulative effect that creates the problems.
Our real cumulative trade deficit (each quarter adjusted for inflation and summed) is now over $10 TRILLION. In my opinion, it is not a coincidence that the debt problems you speak of (and I agree with) are of similar magnitude.
Productivity has never meant that we need fewer total workers.
It has for milk cows (as seen in the link in my post).
It has for farm workers. There are fewer more highly paid workers.
It has for manufacturing. Some factories are now fully automated and that trend will continue.
You assume that because we've managed to think up new jobs in the past (to replace lost jobs) that we also will into the distant future. I'm not at all convinced. Maybe it's true. Maybe it isn't.
I would also add that working harder OR working smarter was enough to get ahead in the past. That OR is becoming an AND. You seem capable of doing both. I'd like to think I am as well. The average person probably isn't. The average person is by definition of average intelligence.
I was a lead software engineer. The level of productivity between programmers is staggering. You mentioned the mythical man-month on MaxedOutMama's blog. I hear that. I'd take 2 really good programmers any day over 20 mediocre ones. In my opinion, no amount of training would make mediocre programmers really good. They just don't have it in them. So what should society do with them? You tell me and we'll both know.
In any event, employment growth cannot repeat what it did from 1939 to 2000. It is not physically possible. Employment was growing faster than the population overall. That era is over and nothing we do can bring it back to its former glory.
As far as I'm concerned, all other long-term exponential trends are therefore also suspect. Tha's especially true of debt trends that were based on unsustainable future prosperity.
OK, I should not have included outsourcing because outsourcing *is* related to debt accumulation in various ways. (What I was non-thinking when I included it was that we might have different ideas about the biggest causes of outsourcing -- but that non-reasoning for inclusion was an error on my part as the cause of outsourcing is not necessarily relevant to the amount of debt accumulation the outsourcing produces.)
"You assume that because we've managed to think up new jobs in the past (to replace lost jobs) that we also will into the distant future."
Actually, I don't assume that. I haven't "done the math" (and I don't know if "the math" is even humanly solvable) so I don't presume to know how this plays out in the future -- I just think that the historical evidence doesn't indicate that we have reached such a failed state yet. (I also don't assume that our growth can continue indefinitely into the future -- and the future where either we learn to live without growth or growth fails is that much sooner if we remain stuck on a single planet with its limited resources.)
"The average person is by definition of average intelligence."
Yes, but as a society we seem to be doing our best to sabotage "average intelligence". I believe that is one of a number of things that is really hurting a lot of people right now (and will only hurt them even more in the future). But, I also acknowledge that even if we fix/replace the large failure known as the education system, there will still be an average with lots of people below it.
"So what should society do with them [mediocre programmers]?"
Well, I don't think society should do anything with them -- instead it is up to them to find a useful niche. In this case, if despite their mediocre programming abilities that is still their most marketable skill, then it might mean working on programs that the better programmers aren't working on.
Do we ever run out of new programs people would want? I'm not sure whether to consider it a sign that the end is near or that demand is endless when I see the number of iPhone fart applications. I can say from my own perspective that there is absolutely tons of work remaining to be done -- but my perspective is pretty buried in the stuff I find interesting and challenging, which means I don't have as good a perspective on how much mediocre programmers have available to work on. (Games come to mind though -- as a player I am still very disappointed with the lack of depth and scope of RPGs, and I don't think it would take a genius bunch of programmers to work on that. Right now no game companies are even aiming for that space, so it's a wide-open niche.)
And I wish people (not you, but I've seen it elsewhere) wouldn't equate "niche" with "bad". Having people producing in niches means that we as consumers get to have our needs met more to our liking. I believe targeted customization of goods is going to be a big (and successful) part of our future that people would be better embracing than belittling.
"In any event, employment growth cannot repeat what it did from 1939 to 2000."
I would say that population growth had better not repeat what it did. Forget jobs -- the resource crunch alone would likely be devastating.
I see population and "the state of the human condition" as kind of a single-hump function. At first, as you get more people, increased population is a good thing as it provides more minds to come up with all of the stuff we'd like. But eventually an increasing population starts running into resource issues, driving up the cost/relative-scarcity of those resources, and making things miserable or untenable for those with less means. And I don't see "let's see how many people we can pack on this planet while distributing the misery equally" as a desirable solution.
Mark, I realized that the place I used to work at was actually a good example of one thing you can do with mediocre programmers. Basically the code was divided up into application-specific code and library code. Pretty much all applications made extensive use of the library code. In any given shipped product, the vast majority of the complexity was actually in the library part. Only more skilled programmers ever touched library code (and then with strict review procedures). Less skilled programmers stuck to writing application code. And that was made even easier by the fact that we had skilled people converting customer-provided requirements into more detailed requirements (that customers then signed-off on). All the application programmer had to do was translate those detailed requirements into code, and the requirements were so detailed (and the libraries took care of so many low-level details) that it was almost a pure 1:1 translation at the application layer. This, solid testing, and a good software development process meant they could take inexperienced programmers (literally 0 years experience -- straight from getting their BS) and use them to crank out lots of high quality product. (I was already an experienced developer when I started there, but I still learned a lot about effective testing and the seemingly miraculous benefits a good development process can have. They don't teach those in school, and at my current job where programmers tend to have MS's and PhD's, most have never learned these skills -- and it shows up quite painfully in their code.)
Or to put it in more general terms, less skilled people can be quite productive when good tools and processes provided/defined by those with the necessary skills are leveraged.
Mark, I realized that the place I used to work at was actually a good example of one thing you can do with mediocre programmers. Basically the code was divided up into application-specific code and library code. Pretty much all applications made extensive use of the library code. In any given shipped product, the vast majority of the complexity was actually in the library part. Only more skilled programmers ever touched library code (and then with strict review procedures). Less skilled programmers stuck to writing application code. And that was made even easier by the fact that we had skilled people converting customer-provided requirements into more detailed requirements (that customers then signed-off on). All the application programmer had to do was translate those detailed requirements into code, and the requirements were so detailed (and the libraries took care of so many low-level details) that it was almost a pure 1:1 translation at the application layer. This, solid testing, and a good software development process meant they could take inexperienced programmers (literally 0 years experience -- straight from getting their BS) and use them to crank out lots of high quality product. (I was already an experienced developer when I started there, but I still learned a lot about effective testing, writing maintainable code, and the seemingly miraculous benefits a good development process can have. They don't teach those in school, and at my current job where programmers tend to have MS's and PhD's, most have never learned these skills -- and it shows up quite painfully in their code.)
foo,
I would shock and horrify you with my many stories of working within a computer game company that eventually folded. In general, the company was not a well-oiled machine. Each team was left to its own and there was very little code sharing. That worked fine for my team but not so well for a few others. (Fortunately, I preferred relying on code that I personally wrote and could maintain rather than relying on others.) It would be especially hard on the teams with mediocre lead programmers.
My claim to programming fame was being the lead on a (kid's) game that was ranked #1 in Consumer Reports and won a Codie. It was a product that took about 9 months to create and was shipped on time simultaneously on two platforms (PC and Mac) and in three different languages (English, German, and French).
I'm a believer in your "seemingly miraculous benefits a good development process can have" theory. Our team pretty much had it down to a science (we shipped many products successfully). One rule I had as a lead was that bugs would never be allowed to accumulate. Ship week for that product was actually rather mild. Our bug trays were mostly empty during testing and it shipped with no known bugs. (I was a friend of the QA lead and he shared the story of how he was supposed to send a known bug list to tech support. The list was empty and management didn't believe him.)
I was also a stickler for memory and resource management. They didn't teach that in college. One of my interview questions for potential new hires was, "What would you do to ensure that a product you work on has no memory leaks?" Here's an answer I was hoping for (although I would settle for less if I saw the gears turning). Write code that would track memory allocations and point to the very line of code that was leaking (was fairly easy to do in C++). That made memory leaks trivial to fix. That's what I ended up doing. That fix would often fix related bugs as well (probably half of the leaks were due not to forgotten cleanup but unintended code paths that could create crashes).
It went to you know where in a hand basket when I switched divisions though (to work on games that I would want to play). I had never seen such anarchy. I was the lead on a project for nearly 2 years and it never did have a design document. I'll take that back. It did have one I guess, if you count a 5 page document that was so generic it could make any game ever shipped. Sigh. Meanwhile, we had a full team of artists creating art on day one for a game that was mostly undetermined. (The Designer had never worked on a game before and management in its infinite wisdom also made him the Producer. He'd never done that before either.)
As that project died, I remember being offered the lead on another project where there would be multiple lead engineers. As if that wasn't bad enough, I found out through the rumor mill that the team just spent 10+ man-hours (in a meeting) debating the shape of elf ears. I wanted no part of that. Needless to say, that project died too.
The General Manager confided in me that he just gave a "Coming to Jesus" speech to yet another team and nobody came, lol. Sigh. One day I saw the lead and asked how it was going. He said it was going great and he seemed genuinely happy. It surprised me. He then said he just quit! That project did eventually ship, but only after it churned and burned through many, many developers.
I left that company as a rat would leave a sinking ship. I'd been there about 8 years. The very day I left another lead quit (who also had been there about 8 years). Neither of us knew the other was quitting until that very morning. HR referred to it as "disconcerting" and rightly so.
P.S. One of your posts was caught as SPAM. I released it.
One more thought.
In no way am I trying to claim that I think automation is a bad thing. It might seem like it because I lump it in with outsourcing and debt.
Automation is inevitable and should be a good thing. I'm just not convinced that our society is able to deal with it at a job creation level.
Thought experiment time.
Let's say a new robot was invented overnight that could instantly eliminate half of all American jobs What would happen? What should happen?
The answer to the first question would be something bad. Companies would instantly convert to it and we'd have mass unemployment.
The answer to the second question would be something good. That automation SHOULD make all our lives better.
It isn't automation that's the problem. It is how we deal with it that is. If automation leads to increasing income inequality and we don't deal with the income inequality issues, then our society could easily collapse.
That's my opinion for what it is worth.
Mark,
I think you are right to lump outsourcing and debt with automation. I think that cheap labor in the developing world could be a form of "automation." Technology hasn't developed quickly enough to replace enough workers to maximize profit. Hence, cheap labor as a temporary substitute. The problem with this massive rush to "maximum efficiency" is who is left to consume the products? I DO NOT want to find Candy Mountain. I have two kidneys, and would like to keep both of them.
The problem with this massive rush to "maximum efficiency" is who is left to consume the products?
I hear you. George Jetson worked 9 hours a week and his wife didn't. How did they afford the robotic maid? Could it be that all the cartoons I grew up watching were not entirely accurate? Say it isn't so!
Perhaps all our economy really needs is some good old-fashioned World War II style global factory destruction to reduce existing capacity and put us back to work (assuming the war isn't too severe and we don't actually lose it). SARCASM!!!! GALLOWS HUMOR!!
In all seriousness, World War II did give us an advantage. If Detroit's current condition, our debt situation, and our trade deficit are any indicators, we definitely squandered it though.
Mark,
Maybe http://www.nakedcapitalism.com/2011/07/time-to-take-stock.html
I still can't do the hard link. Sorry.
From your link:
The problems, if there were problems and sometimes it was just a trading fiction, had usually accumulated for years.
Or even decades! I'm definitely a believer in accumulation theories.
I'm working on a response to your thought experiment, but I'm not sure how soon I'll find the free time to finish it. (It's an interesting topic and I think merits some thought.)
In the mean time, you might "like" this: China's Answer To Inflation: SkyNet - Foxconn Plans To Replace Workers With Millions Of Robots
Professor Farnsworth: Good news everyone! Apple will no longer have to listen to whiny Americans complaining about the working conditions at Foxconn!
That Foxconn story is amazing.
I spotted it last night and was planning to do a post about it.
I don't buy that a million robots will replace a million workers though. Robots tend to be more efficient than that. They work 24 hours a day every day without taking breaks. So how many workers (both existing and future hires) would ultimately get displaced by a million robots? Who knows!
What do robots consume?
Aside from electricity? Buy utilities!
nanute,
But do robots need lighting, heating, air conditioning, and mass transportation? And do not these things consume energy?
Kung Fu - grasshopper dialog
Never assume that because a robot has no light that he cannot see.
D'oh! ;)
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