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EconIntersect article of the week
The essential theory of BubbleOmix is that Ying follows Yang or in other words What Goes-Around Comes Around.
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.