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Watching the Economy by Clint Burdett CMC® FIMC

November 2011 - Will the US add new jobs coming out of the Great Recession, a credit debacle, to replace those lost?

Specifically, will jobs recover at the similar rate to total capacity utilization?

The long term trends in the percentage of the US population employed suggests NO, not enough consumer demand!

Bill Gross in an OpEd in the Washington Post observes that our aging population will spend less, jobs are moving to lower costs nations and technology is reducing the number of workers needed to make something or provide services. Our debt angst is not the core problem, it is a symptom of not enough consumer demand.

Warren Buffett in NYT OpEd argues, with analysis, that we need shared sacrifice from all to increase government revenues and that coddling the rich with tax breaks does not increase the percentage of our population employed.

Starting in 2002, fewer jobs have been created as the US rebounds from the last two recessions (red line after 2000), rather we continue to lose jobs compared to previous recoveries.

Since 1975, our industrial base peak capacity has declined after each successive recession (blue trend line).

There is no evidence in these measures that the Bush tax cuts have created more jobs for Bush2 or Obama as Buffett concludes. I suspect that argument is myth; creating demand and incentives for business to hire is reality.

But since 2009, slack capacity was absorbed as jobs continued to decline. The trend is ominous yet both political Parties are divided on solutions, I think neither Party is "at fault," though both seem stuck in their rhetoric and finger pointing.

Traditional successful solutions (Truman, Eisenhower, Kennedy, Reagan) are: improve education, improve or create infrastructure, recruiting the worlds best to become US citizens and set an audacious goal to motivate us all.

Total Capacity Utilization to % of US Population Employed 1/1967 to 6/30/2010
(Click on chart for larger image)

We Are Not Spending Enough to Spur Demand

Real Personal Consumption Expenditures (Real PCE = US aggregate cash flow - savings - inflation deflator) is a measure of cash exchanged with others.

The blue line represents our ability to grow. A rule of thumb is greater than 2 percent year on year change in real PCE spurs demand and therefore healthy growth. In August 2011, real PCE is trending down .

Nominal to Real PCE
(Click on chart for larger image - updated monthly)


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