Category

Unemployment

The "Currency Manipulator" That's About to Put 3 Million Americans Back to Work

Think U.S. jobs are destined to drain away to China forever? Think U.S. unemployment will grow and grow while cheap overseas labor supplants American workers? Think your children will be forced to work selling Big Macs to Chinese billionaires?

Well, boy has the Boston Consulting Group (BCG) got news for you.

The United States' No. 1 strategic consultancy's latest study shows 2 million to 3 million manufacturing jobs and about $100 billion in output can be expected to return to the United States from China by 2020.

That's right. China, so often the scapegoat for U.S. joblessness – and an alleged "currency manipulator" – actually is becoming our best ally in the fight against high unemployment.

The BCG team says three things will bring millions of Chinese jobs back to America:

  • Soaring Inflation. China's annual inflation pulled back to 6.2% in August after hitting a three-year high in July. It's rumored that the People's Bank of China will allow the yuan to rise further to curb rising prices. A stronger currency will make the country's exports and labor less competitive.
  • Rising Wages. Chinese labor is steadily becoming better educated and more affluent. The central government is targeting an increase in minimum wages of 13% a year through 2015.
  • And A Stronger Yuan. The yuan has risen about 30% against the dollar since 2005. Again, the great motivator here is not the saber rattling of U.S. politicians, but rather troubling levels of inflation that could spur civil unrest.

Made in the U.S.A. (Again)

Indeed, Chinese manufacturing, which had been much cheaper than U.S. manufacturing for the last decade or so, is suddenly less competitive in certain sectors.

This should come as a huge relief for Americans.

Modern telecommunications and the Internet revolution made it easier and cheaper than ever before to run a global supply chain. Consequently, U.S. manufacturing was priced out of the market.

We saw it first in cheap clothing – a highly labor-intensive industry where U.S. factories were already struggling.

The move to Chinese clothing sourcing, pushed into overdrive by Wal-Mart Stores Inc. (NYSE: WMT), brought immense cost benefits to U.S. consumers. In fact, the Bureau of Labor Statistics price index for apparel has declined by 15% in nominal terms since 1993, compared with a 50% increase in consumer prices as a whole.

U.S. Federal Reserve Chairman Ben Bernanke and his predecessor, Alan Greenspan, helped this process along with their ultra soft money policies. We haven't had much inflation because of the price declines brought by outsourcing, but for many years it has been exceptionally cheap to raise money for investment in emerging markets. China and other emerging markets already had a cost advantage in cheap labor, and the Fed's loose monetary policies further encouraged outsourcing.

As a result, U.S. workers can now buy cheaper clothes from China through Wal-Mart, but are losing jobs and being forced to accept lower wages. And since Bernanke cannot be persuaded to reverse policy and raise interest rates, it was beginning to look as though U.S. jobs would drain away until American wages were at Chinese, or even African, levels.

However, the BCG report is a very welcome sign that this process could actually be coming to an end. Chinese wages have risen so much that U.S. labor is now competitive when its higher productivity and lower transport costs are taken into account.

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Obama's Jobs Plan Will Barely Dent Unemployment

Even if passed intact, U.S. President Barack Obama's jobs plan, though ambitious, would at most nudge down unemployment by a single percentage point over the next year.

Furthermore, the Republican-controlled House of Representatives will surely object to several provisions in the American Jobs Act – particularly the total $447 billion price tag – further diluting its impact.

President Obama's jobs plan includes:

  • Tax breaks for both individuals and businesses.
  • Financial aid to states aimed at repairing schools and retaining public sector jobs such as policemen and teachers.
  • An extension of unemployment insurance.
  • And money to repair and upgrade transportation infrastructure, such as highways, railroads, and airports.

Wall Street, already worried about events unfolding in Europe, seemed less than impressed by the proposals. Stocks started down Friday, the morning after President Obama's jobs speech, and meandered lower throughout the session. The Dow Jones Industrial Average slipped 2.69%, while the Standard & Poor's 500 Index dropped 2.67%.

"There was nothing in the president's speech that would inspire the stock market one iota forward, and I think we can see that reflected already this morning," Money Morning Capital Waves strategist Shah Gilani said on the Fox Business Network program "Varney & Company."

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Don't Expect Any Groundbreaking Proposals in Obama's Jobs Speech

U.S. President Barack Obama's jobs speech Thursday night will address one of the most critical economic factors affecting the country – but the content is likely to disappoint America's unemployed.

Last week's jobs report showed zero job growth in August, and the unemployment rate held at 9.1%, increasing pressure on Washington to deliver relief for the jobless.

But analysts warn not to expect any revolutionary new developments on how to improve the country's weak employment outlook.

"I don't believe we are going to be slack-jawed by the speech," Larry Sabato, director of the Center of Politics at the University of Virginia, told MarketWatch.

President Obama and the White House have only previewed some of the details. The president is expected to propose a $300 billion job creation plan delivered through tax cuts, infrastructure spending and state and local government aid.

President Obama faces strong opposition from congressional Republicans who vehemently oppose more government spending when the country is already more than $14 trillion in debt. He'll also face many skeptics who see small business hiring as the only way to successfully cut the country's unemployment rate.

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Obama May Soon Join America's Unemployed

It may not be long before U.S. President Barack Obama joins the swollen ranks of America's unemployed.

A government report released Friday showed no job growth in August.

President Obama is scheduled to address a joint session of Congress Thursday night with his latest proposals on how to reduce the nation's stubborn 9.1% unemployment rate.

He faces numerous obstacles, including a glum economic outlook that has held employers back from hiring, public dissatisfaction with how he has handled the economy, and an uncooperative mood among congressional Republicans who have spoken openly of making him a one-term president.

At this point everyone in Washington realizes that high unemployment is probably Obama's greatest obstacle to re-election in 2012.

"Our nation faces unprecedented economic challenges, and millions of hardworking Americans continue to look for jobs," President Obama wrote in a letter to congressional leaders requesting time for the speech. "It is my intention to lay out a series of bipartisan proposals that the Congress can take immediately to continue to rebuild the American economy by strengthening small businesses, helping Americans get back to work, and putting more money in the paychecks of the middle class and working Americans, while still reducing our deficit and getting our fiscal house in order."

Jobs Picture Bleak

The Bureau of Labor Statistics data released Friday was almost uniformly bad, with most categories either holding steady or getting worse.

Although private employers added 17,000 jobs, equal losses in the public sector, mainly from local governments meant that net job growth for August was zero – something that hasn't happened since World War II.

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New Obama Job Creation Plan Coming Next Month

Faced with a stagnating economy, U.S. President Barack Obama intends to unveil a job creation plan and deficit reduction proposal shortly after Labor Day, Sept. 5. The Obama job creation plan is expected to include proposals on middle-class tax cuts, new infrastructure spending, and ways to assist the long-term unemployed. For now, the White House […]

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With Small Businesses Sidelined, the U.S. Job Market is Headed for a Double-Dip

After showing some improvement over the past year, the U.S. job market is now beginning a double-dip.

The reason is simple: The number of start-up businesses has hit its lowest level since at least the early 1990s.

Indeed, small businesses are the main drivers of job growth and no amount of stimulus can compensate for their absence.

For instance, between the recession that ended in late 2001 and the start of the most recent recession in late 2007, businesses that employed fewer than 500 workers added nearly 7 million employees, according to ADP payroll services. Larger businesses cut nearly 1 million employees in that period.

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Advancing Technology and Globalization Threaten U.S. Job Growth

The U.S. job market's sluggish pace of recovery has kept many workers jobless and discouraged, and now many feel advancements in technology and globalization will hurt U.S. job growth.

The U.S. Department of Labor reported earlier this month that the country's unemployment rate in April rose to 9.0% from 8.8%. Employment in more than a dozen sectors hit four-year lows in April, and another 10 have gained little since hitting lows in the beginning of this year.

But it's not just a slow economic recovery that is leaving people unemployed. The U.S. job market is changing, as companies find ways to function with fewer workers and some shift operations overseas.

More than 13 million people are searching for work, and even though U.S. companies have collected about $940 billion since the credit crisis, many aren't hiring.

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Are You Worried About the Future of the U.S. Job Market?

The U.S. job market has improved since the unemployment rate's 10.1% high in 2009, but the sluggish pace of economic recovery has kept many workers jobless and discouraged.

The U.S. Department of Labor reported earlier this month that the country's unemployment rate in April rose to 9.0% from 8.8%. Employment in more than a dozen sectors hit four-year lows in April, and another 10 have gained little since hitting lows in the beginning of this year.

But it's not just a slow economic recovery that is leaving people unemployed. The U.S. job market is changing, as companies find ways to function with fewer workers and some shift operations overseas.

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Zero Job Growth: Low Rates and High Deficits Aren't Helping U.S. Workers

When the government released its latest jobs report last week, economists were initially cheered because it showed that the nation's unemployment level had dropped much more sharply than anyone expected.

But that cheer immediately turned into concern when the report also revealed that the U.S. economy created only 36,000 new jobs in January. That's so far below the norm for this stage of an economic recovery that it would take us 10 years to put back to work all the folks who have lost their jobs since 2007.

In short, it's going to take a decade – and probably more – for normalized job growth to return to the U.S. economy.

Something has gone very wrong with the U.S. job-creation machine. Economists have been trying to solve this puzzle for more than 30 years.

And we found the answer.

To see what we discovered, please read on…

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