by Guest Author Andrew Butter
Putting aside all the doom and gloom about the recently released unemployment figures, there may be a silver line…tarnished but silver all the same.
The important number is employment, that’s the demand side of the equation which is broadly independent of the supply side. Companies (and the government too but they are never a good marker for free-enterprise), look to buy services, The fact that there may be a lot of unemployed (and unemployable) people doesn’t change the numbers of jobs on offer; it just changes the wages the jobs pay…slightly.
Interestingly 35% of companies in USA these days can’t find qualified people for the jobs they are offering (no prizes for guessing where those jobs will go).
The “fundamental” for the numbers of jobs on offer is exactly equal to a constant x US GDP (nominal) divided by wage-inflation (nominal), that’s the black line on this chart:
So there was a bubble starting in 2003 thanks to all the demand created by American consumers using their houses as ATM Machines which resulted in a lot of people getting employed to create what the Austrians call “mal-investments”.
Then the bubble burst, and America found itself full of a whole pile of mal-investments that no one needed, so all the people who had been producing things that looked like a good idea at the time, Hummers and Houses, and producing services of equally dubious value, for example pet psychotherapy and dog-walking services (I never understood what’s the point of a dog if it doesn’t get you off your backside to walk it), lost their jobs, plus a lot more lost their jobs because there was an over-supply of all that stuff, so for a while no one needed to produce more of that.
BubbleOmix says that (1) the amount of time that was devoted to producing mal-investment in a bubble, is typically equal to the amount of time it takes to clear out the garbage after the party winds down, and (2) the departure from the “fundamental” in the bubble is typically mirrored by the departure below, once the bubble pops.
Like if you throw a pebble in a flat pond, you get an “up” wave, followed by a “down” wave, and the Ying and the Yang of both of those are identical, just mirrored.
Put that all together, that says total employment in USA will go up from about 141 Million now, to 146 million by mid 2013.
Of course that’s nothing to do with the policies of the Obama administration whatever they are, and I’m still scratching my head about what actually “changed”, it’s just a simple Law of Nature. Although they will probably claim credit for it, which I suppose is fair enough since they have been blamed for the Charlie Foxtrot, which in all fairness was nothing to do with them.
But if they want to make themselves useful they might like to spend a moment contemplating why 35% of the job openings can’t find suitable candidates, which is a structural problem, and one might imagine that by the time the demand goes up by 5-Million that could be 50%, so America will be creating 10-Million job opportunities over that period, 5-Million of which will be filled outside of America.
But that’s “structural” and it’s been going on a long, long time; hidden to some extent by the irrational exuberance of the bubble, as in who wants to pick tomatoes…all day, in the sun, on piecework, if you can make twice the money walking dogs?
BLS Employment Rises 120,000 in November 2011, Unemployment 8.6% by Steven Hansen
ADP Employment Data Shows Job Growth of 206,000 in November 2011 by Steven Hansen
About the Author
Andrew Butter started off in construction in UAE and Saudi Arabia; after the invasion of Kuwait opened Dryland Consultants in partnership with an economist doing primary and secondary research and building econometric models, clients included Bechtel, Unilever, BP, Honda, Emirates Airlines, and Dubai Government.
Split up with partner in 1995 and re-started the firm as ABMC mainly doing strategy, business plans, and valuations of businesses and commercial real estate, initially as a subcontractor for Cushman & Wakefield and later for Moore Stephens. Set up a capability to manage real estate development in Dubai and Abu Dhabi in 2000, typically advised / directed from bare-land to tendering the main construction contract.
Put the unit on ice in 2007 in anticipation of the popping of the Dubai bubble,defensive investment strategies relating to the credit crunch; spent most of 2008 trying to figure out how bubbles work, writing a book called BubbleOmics. Andrew has an MA Cambridge University (Natural Science), and Diploma (Fine Art) Leeds Art College.