US unemployment is good for stock market

[ar81]

Found this interesting article that was being discussed by investors.

Calculated Risk: Employment: A dirty little secret and more graphs

It seems that now we know why US employment is having such a slow recovery.

[Curtis2011]

Originally Posted by ar81

Found this interesting article that was being discussed by investors.

Calculated Risk: Employment: A dirty little secret and more graphs

It seems that now we know why US employment is having such a slow recovery.

The graphs were interesting, but he lost me at "it really isn't much of a secret that Wall Street and corporate America like the unemployment rate to be a little high."

I found it especially interesting that the unemployment rate for college graduates is only 4% right now. That is hopeful for myself because I'll be one in just a few days

[ar81]

Originally Posted by Curtis2011

The graphs were interesting, but he lost me at "it really isn't much of a secret that Wall Street and corporate America like the unemployment rate to be a little high."

High increase in employment also means salary raises, which will impact company costs and profits. So in order to protect profits, growth of employment is kept low.

The class of 2011: Young workers face a dire labor market without a safety net

Economic Policy Institute | | Unpaid and Exploited? Examining Interns in the US Labor Market

[1by1]

But then more people working for a company mean itcan produce more and make more money. Econ ies of scale you know.

-philip nelso

[ar81]

Originally Posted by 1by1

But then more people working for a company mean itcan produce more and make more money. Econ ies of scale you know.

-philip nelso

Yes, less people produce less money, which means less employment. One big monopoly company with two accountants will provide less employment than 10 companies with one accountant each.

[SnerpGoodWord]

Originally Posted by Curtis2011

I found it especially interesting that the unemployment rate for college graduates is only 4% right now. That is hopeful for myself because I'll be one in just a few days

Yup - what we're really seeing is unemployment amongst the uneducated. For the educated, the recession ended in March of 2009. For the uneducated, I anticipate it continuing as long as we refuse to enforce the immigration laws and encourage "off-shoring" of manufacturing work. Both these policies are cornerstones of the american left (the former by preventing immigration enforcement, the later by supporting unions driving manufacturing overseas). So if you want to decrease unemployment you know how to vote.

[1by1]

For the uneducated, I anticipate it continuing as long as we refuse to enforce the immigration laws and encourage "off-shoring" of manufacturing work.

This is simply untrue. In fact, it is a common fallacy that there are a 'fixed' number of jobs in an economy, so you often hear things like, "old people are taking all the youngsters jobs". This is not true, the number of jobs is in no way a fixed number, and actually, having more of the population employed is better for the economy and generates more jobs. It is a positive cycle.

In the same way, people often claim immigrants are taking all the jobs. Again, numerous studies show that immigration is a net positive for the economy (and if you will claim otherwise I want to see the studies you are quoting). Immigrants typically set up businesses and companies and so increase the number of jobs available.

Some American companies will also recruit immigrants because they can pay them less than the minimum wage, illegally of course, but it is easier to illegally employ immigrants.

If you want to increase the number of jobs available to uneducated americans, restricting immigration is the wrong answer. Instead you need to make those americans more competitive, for example, by training them in new skills or encouraging them to start their own companies.

[SnerpGoodWord]

Originally Posted by 1by1

This is simply untrue. In fact, it is a common fallacy that there are a 'fixed' number of jobs in an economy, so you often hear things like, "old people are taking all the youngsters jobs". This is not true, the number of jobs is in no way a fixed number, and actually, having more of the population employed is better for the economy and generates more jobs. It is a positive cycle.

I never said it was fixed. What I implied, although didn't directly state, is that it's a matter of supply and demand. Low income jobs tend to be in the following sectors:

- agriculture
- construction
- manufacturing

Now, let's look at each. The demand for agriculture in the US is fairly fixed, albeit dropping slightly as we import more produce. But the supply of agricultural workers is NOT fixed - they're streaming across the southern border by the millions. Result: menial agricultural work pays less than US minimum wage.

Construction demand is clearly NOT fixed - it's falling. We've got more houses and office plexes than we have people who can afford to rent or own them. Hence that whole foreclosure crisis you may have head about. In such an environment building more doesn't make much sense. Similarly, the supply of workers is not fixed - the same Guatemalan who's picking strawberries in California this week would be happy to hammer nails in Arizona next week. Result: construction labor rates fall below US minimum wage (outside of some government contracts where minimum wage is policed more carefully).

Manufacturing demand, on a world scale, is more or less fixed. But where that manufacturing occurs is not. Since the US is the single least attractive place in the world to manufacture anything that requires mostly menial labor, demand in the US is falling. Supply is roughly fixed - since speaking decent English is a requirement of what little manufacturing remains, illegal immigrants generally need not apply. Similarly, we've got unions enforcing wage floors well above minimum wage. Result: wages remain high, but unemployment skyrockets as production moves to anywhere but the US.

So no, it's not fixed. It's way worse than fixed if you're an uneducated person in the US trying to find work.

[SnerpGoodWord]

Originally Posted by 1by1

If you want to increase the number of jobs available to uneducated americans, restricting immigration is the wrong answer. Instead you need to make those americans more competitive, for example, by training them in new skills or encouraging them to start their own companies.

The whole issue with people being uneducated is that there really is no such thing as competetiveness. One strawberry picker is as good as another. Welcome to the real world - please check your platitudes at the door

[Andrew Brunelle]

Unemployment runs rampant through America, and I don't see it getting better anytime soon. This reminds me of a quote from Office Space:

"That is not right, Michael. For five years now, you've worked your ass off at Initech, hoping for a promotion or some kind of profit sharing or something. Five years of your mid-twenty's now, gone. And you're gonna go in tomorrow and they're gonna throw you out on the street. You know why? So that Bill Lumbergh's stock will go up a quarter of a point."

Corporate greed trumps all.

[1by1]

Construction demand is clearly NOT fixed - it's falling. We've got more houses and office plexes than we have people who can afford to rent or own them.

Well sure, construction was a bubble, now it needs to be corrected. Job numbers are going to fall. It doesn't make any difference if you restrict immigration or not, people who used to work in construction will have to work elsewhere and that means retraining.

Manufacturing demand, on a world scale, is more or less fixed. But where that manufacturing occurs is not.

Where on Earth do you get that from? Are you aware that average global growth is something like 4% per year? That means a 4% growth in manufacturing demand each year. The demand is there, but american companies tend to be shortsighted ( GM anyone?) and reluctant to innovate in manufacturng, giving the USA a huge disadvantage.

[SnerpGoodWord]

Originally Posted by Andrew Brunelle

Unemployment runs rampant through America, and I don't see it getting better anytime soon. This reminds me of a quote from Office Space:

"That is not right, Michael. For five years now, you've worked your ass off at Initech, hoping for a promotion or some kind of profit sharing or something. Five years of your mid-twenty's now, gone. And you're gonna go in tomorrow and they're gonna throw you out on the street. You know why? So that Bill Lumbergh's stock will go up a quarter of a point."

Corporate greed trumps all.

Greed runs two ways though - if you're actually making money for the firm you're working for then their greed will keep you employed.

[SnerpGoodWord]

Originally Posted by 1by1

Are you aware that average global growth is something like 4% per year? That means a 4% growth in manufacturing demand each year.

First off, your numbers are off. The FASTEST growing countries grow less than 4% per year.

List of countries by population growth rate - Wikipedia, the free encyclopedia

Second, manufacturing demand doesn't follow from population growth - the places with the fastest population growth are all third world places that can't afford manufactured goods, whereas places like the US and Western Europe that can have growth rates < 1% (or negative). Hence my comment of demand being roughly fixed.

[1by1]

First off, your numbers are off. The FASTEST growing countries grow less than 4% per year.

Apologies, I meant economic growth rather than population growth. Economic growth is relevant because it does increase the demand for manufactured goods. As long as economic growth is faster than population growth then living standards are increasing.

[SnerpGoodWord]

Originally Posted by 1by1

Apologies, I meant economic growth rather than population growth. Economic growth is relevant because it does increase the demand for manufactured goods. As long as economic growth is faster than population growth then living standards are increasing.

OK, but GDP growth is still not the same thing as manufacturing growth which in turn is different from demand for manufactured goods. Most of the economic growth in the first world (both supply and demand) centers around services (like medical and financial), not manufactured goods.