Tag Archives: unemployment

Bits and Pieces – 20170307, Tuesday

Commentary: One of the biggest problems facing us is the loss of jobs due to RAAI. Not only will we not be able to cope with the surplus labour but the double whammy of increased entitlement payouts and decreased revenue from income and sales taxes will lead to collapse in government finances. But there are other social implications as well: When Factory Jobs Vanish, Men Become Less Desirable Partners. This is another tear in our social structure.

Now view this 6-minute video also at the end of the article:

Automation is introduced to cut labour costs by displacing workers or increasing productivity. That is, automation enables an increase in production without hiring more workers. A company will do this to gain a competitive advantage or maintain one. Since competition is the dominant force in most markets, automation will only increase, particularly as its costs continue to drop while labour costs rise. When all humans have been displaced, the process will go on by replacing older robots with newer, more efficient ones. We are entering a future where there will be far fewer jobs, particularly well-paying ones. Simply put, we already have too many people in our societies.

Bits and Pieces – 20161210, Saturday

What We’re Reading Today

Commentary: I’m going to feature a concept that I have been chewing on for a while. The idea is that each revolution in human productivity rising with the industrial revolution has displaced a huge number of workers. People that try and dispel the fear that such job losses create unemployment argue that the technology of the revolution spawns new jobs in new industries that absorb the displaced labour force. While this has been apparently true in recent times, such people miss a key point.

Each technological revolution creates jobs that require a higher level of education/training and skill than the laid off workers have. This has become identifiable in the “knowledge revolution” where the required skill and education levels have moved up to requiring community college or university degrees.

To get an idea of the current state of employment in the US and by inference, Canada and other developed countries, read: Paul Craig Roberts – The Matrix Of Lies And What The Elite Are Really Up To Is Terrifying. In short the government defines the employment rate in a manner that excludes a large number of employable people while burying the fact that a lot of the jobs do not pay a living wage.

To see what’s coming next, read: Rise Of The Machines: Millions Of American Jobs Will Be Wiped Out In The Next Five Years. Government pronouncements of creating jobs are delusional. Bringing in a large immigrant population because we need their skillsdoes not change the current number of unemployed but increases the future number of unemployed when and immigrant lucky to land a job is displaced in the future. Programs like the 35,000 refugees with their education and skill levels simply moves the crisi forward in time.

Finally, the strongest argument supporting the idea of the start of a large permanently unemployed segment of society comes from the nature of the final stage of the industrial revolution that we are now in. The core product of this stage is the creation of labour and service units, growing in sophistication, that will displace large numbers of workers previously thought immune to automation.

Bits and Pieces – 20161117, Thursday

What We’re Reading Today

Commentary: The Trump tsunami has passed. Now it’s the cleanup phase, and I expect the MSM to discover that planet earth is larger than the US and other things are continuing on. Our attention will probably diversify.

Trump team: Building bridges within the Republican party: Romney Meets Trump This Weekend, Will Discuss SecState Role In New Administration? And one bridge that doesn’t appear likely: Newt Gingrich Confirms “I Will Not Be In Donald Trump’s Cabinet”.

Main Stream Media (MSM): Two articles on ongoing MSM bias: Zero Hedge Targeted On Liberal Professor’s List of “Fake News” Sources and Mike Krieger Rages At The ‘Fake News’ Debacle: “It’s An All Out Media War”. Are we seeing the impact of the biased reporting during the election: Huffington Post Owner AOL Lays Off 5% Of Staff: 500 Workers Lose Their Jobs?

Civil Unrest: This topic has become the current dominant one. Martin Armstrong’s model has a peak for unrest in 2021. We shall see. But disturbing trends are emerging, particularly the acquiescence of the liberal left to the social disorder and violence: Have the Democrats Unleashed a New Age Communist Revolution?.

Bits and Pieces: In the Democratic camp, Bernie Sanders Shuns Democrats: “I Will Finish This Term As An Independent”. The youth vote may follow Sanders wherever he decides to go. This is not good for the Democrats, just as the Trump vote was not good for the old Republicans unless Trump creates a new Republican party with his followers.

A recent discussion with friends involved the idea of repatriating jobs to America. Apple may be considering it: Trump Wins? Foxconn Looks To Make iPhones In America. This process actually eliminates jobs (not American) because companies that build new plants invest much more heavily in automation creating a net loss of jobs associated with the product. This has been going on for a couple of years.

The UN has just come out with a disturbing report backing this jobless reshoring: Two-Thirds Of Workers In Developing Nations To Be Replaced by Robots, Report Warns.

There has been ongoing chatter for the last couple of years about a cashless society. It is moving forward by taking larger bills out of circulation on the pretext of fighting money laundering and illegal activities of all sorts. Pity the poor girl guide wanting to sell you cookies: Sweden Begins Planning Transition From Cash To Digital Currency.

The Ontario Jobs Picture in February: Not Good Under the Hood

With the media and the politicos largely silent on the February Labour Market Survey jobs report, we were anxious to get a look at the data. First we did a literature search. Reuters reported a Canada-wide loss of 2,300 jobs in total with a loss of 51,800 full-time jobs (offset by an unreported rise in part-time jobs), and a rise in the unemployment rate to 7.3%. The Financial Post and the Globe and Mail both reported similar numbers. Are these numbers accurate and what do they mean? Let’s take a look.

Socialism: Taxes and Unemployment

There is an inverse relationship between taxation and unemployment in a socialist economy. An article by Martin Armstrong, Socialism v Capitalism, has prompted this essay.

under construction

Share Europe’s Malaise: The New Normal?

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By George Friedman

Russia and Ukraine continue to confront each other along their border. Iraq has splintered, leading to unabated internal warfare. And the situation in Gaza remains dire. These events should be enough to constitute the sum total of our global crises, but they’re not. On top of everything, the German economy contracted by 0.2 percent last quarter. Though many will dismiss this contraction outright, the fact that the world’s fourth-largest economy (and Europe’s largest) has shrunk, even by this small amount, is a matter of global significance.

Europe has been mired in an economic crisis for half a decade now. Germany is the economic engine of Europe, and it is expected that it will at some point pull Europe out of its crisis. There have been constant predictions that Europe may finally be turning an economic corner, but if Germany’s economy is contracting (Berlin claims it will rebound this year), it is difficult to believe that any corner is being turned. It is becoming increasingly reasonable to believe that rather than an interlude in European prosperity, what we now see is actually the new normal. The key point is not that Germany’s economy has contracted by a trivial amount. The point is that it has come time to raise the possibility that it could be a very long time before Europe returns to its pre-2008 prosperity and to consider what this means.

Flash Point: Why High Unemployment Is Structural

We have argued in the past that the current high unemployment rate in the West is structural, not cyclical (Signs of a Structural Change in the US Economy). We have also supported research that suggests that the high level of debt will depress economic growth for a decade or two (The Policy of Doom). In effect, since debt is incurred to increase current spending, while the debt is active (An Insight into the Impact of Debt on Economic Growth), future disposable income and hence future spending is depressed.

In short, debt has these effects:

  • Future income is moved into the present.
  • Future spending is moved into the present.
  • Future economic activity is moved into the present.

The part we had missed until now is this:

  • Future employment is moved into the present.

The massive credit bubble created over the last two decades created economic activity in that time frame that would have occurred in the future. The employment rate during that period would have been elevated by this elevated activity and future employment will be depressed as a result of unavailable economic activity.

On the issue of whether unemployment is cyclical or structural, the answer becomes both. In terms of the credit super-cycle, it is cyclical (discounting other events in the labour market) but in terms of the business cycle which is much shorter, it is structural.

It’s wonderfully simple!

Update: 20120127

Zero Hedge posts an article, The Stock Market Is Back To December 2007 Levels; Here Is What Isn’t, that graphically demonstrates how employment is not coming back as the policy wonks expect.

Flash Point: Twenty More Years (If We’re Lucky)

We have argued two themes in recent months:

  1. Low economic growth is structural and will persist for 20 years or more. See Signs of a Structural Change in the US Economy, The Hole in Jackson Hole.
  2. High unemployment is structural and here to stay. See The Hole in Jackson Hole, What’s the Future for Jobs?

Two new eletters contribute significantly to both points.

Signs of a Structural Change in the US Economy

We had the privilege, a few days ago, of speaking with Dr. Lacy Hunt of Hoisington Investment Management on the topic of structural change in the US economy. In his most recent Quarterly Review and Outlook, he argues for depressed GDP growth for twenty years or more due to the high levels of debt in the US (see our discussion of his letter in The Policy of Doom). This we suggest represents a structural change.

Motivated by Dr. Hunt’s writing, we analyzed Chairman Bernanke’s Jackson Hole speech in The Hole in Jackson Hole. We suggested that both employment (Figure 6) and GDP (Figure 4) have recovered to trend and have little room for improvement from this point on. Furthermore we argued that these trends represent a structural shift and not a cyclical correction. In our conversation, Lacy suggested that we were on “the right track”.

Apart from discussing what we had previously written, Dr. Hunt suggested a number of aspects of the US economy that point to a structural shift. These we review briefly below.

Flash Point: QE Coming

We’ve decided to initiate an ongoing series of short notes that address a single point. We have long been of the view that QE has no longer any significant impact on the economy and therefore no central bank (CB) will embark on more. We note that QE has major (economic) impacts on markets but this translates into little impact on the economy. We have written extensively on this before. We will summarize why QE will have no impact on the economy and present our view why in fact QE will come.

The only real tool CBs have to stimulate the economy is their control of interest rates. Lower rates encourage borrowing and spending leading to economic growth. Control at the front end of the yield curve was broken when the zero bound was reached (ZIRP – do a search on this site). QEs (note that the FED definition of QE includes the requirements that interest rates be at zero) in various forms were then used to lower rates across the curve. Later ones addressed the long (30-year) bond to lower mortgage rates with an insignificant effect on the housing market.

In short, QE has reached its limit in being able to affect the real economy which is why we have argued that the Fed in particular will not engage in more of it. The reason for this we have detailed in other posts: the consumer who is responsible for 70% of GDP in the US has reached a debt ceiling. He has no capacity left for borrowing more. Moreover as we have described, this condition (high debt among all players in the economy) will lead to reduced growth and lower GDP for decades.

For support of these points see Bloomberg yesterday – Banks Use $1.77 Trillion to Double Treasury Purchases:

  • There’s all sorts of good long-term developments that are occurring on household balance sheets, but you sense the Fed would like them to be not quite as thrifty and instead put a little more money to work
  • It’s a function of inherently weak demand for loans and that relates to inherently weak demand in the economy, … Consumers, households, businesses: they’re paying down debt, they’re saving money, they’re not borrowing. They don’t have an appetite.
  • Household purchases, which account for about 70 percent of GDP, grew at the slowest pace in a year, according to the commerce department’s report on GDP.

The Europeans, however, are using monetization, of which QE is one form, to purchase the sovereign debt of peripheral countries whose yields are out of control. The latest plan by the ECB to cap interest rates is described by Ambrose Evans-Pritchard in Germany backs Draghi bond plan against Bundesbank. If Mario Draghi gets his way, this will result in massive open-ended purchases of Italian and Spanish debt initially and several more countries ultimately. This of course will require a massive printing of euros, dropping its value, possibly precipitously.

The Fed will likely have to respond in kind to maintain a currency alignment that is not destructive to US export industries. This falls into the area of currency wars that Jim Rickards has lately been pounding the table about to promote his new book on the subject (Reserve Bank of Australia Under Pressure, ABC NewsHow China Is Driving Federal Reserve Policy). His argument is the Fed will have to entertain some form of QE such as GDP targeting in some kind of an open-ended policy, in an effort to combat the Chinese yuan.

The market has largely priced in (we recently saw an 80% figure: BofA: QE3 is 80% priced into the markets) QE3. A clear signal from the Fed that there will be no QE will cause a sharp equity correction. This would not sit well with a weak economy in front of presidential elections. On the other hand, to announce QE3 would have the appearance that the Fed had abandoned its neutrality to support Obama. Look for more equivocating similar to what has come out of the last few FOMC meetings, to come out of the Jackson Hole conference this weekend.

Ultimately the fed will probably have to intervene from the currency market rather perspective rather than the job market perspective (we have shown how QE has had little or no effect on the unemployment numbers). However the latest FOMC minutes show a growing view that more may be necessary and relatively soon (Zero Hedge: FOMC Minutes Indicate No Shift In Fed’s Views, Even As Many Members See More Easing Likely Warranted):

Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.

This sentiment has been slowly but steadily growing over a number of FOMC meetings.


Momentum is moving in the direction of massive ECB bond purchases and monetization. Germany may yet block the initiative but the signals are becoming if anything, more mixed. The Finns may prove to be the source of any effective block to the strategy. They are a small player but have taken very hard positions all along and recently stated effectively ‘no more money’. We think the ECB at this point may prevail and the result will be called QE in some eurozone parlance.

Pundits keep saying Bernanke needs an economic event such as a really bad non-farm payroll number, to justify a new QE program. We think the Fed should know that they really have no leverage left over unemployment despite this being one of their mandates. However, the increasing sentiment towards some form of stimulus intervention suggests they think they still have a card or two left to play. They may try to drag it out hoping for signs of a real recovery. Eventually they will have to decide which side of the fence appears to have the greener grass (less risk or pain). The easiest route is more QE. The currency angle is a wildcard. In either case, we think they will probably announce something by year end.


Since posting this we have found support for argument on the limitations of Fed policy from Jeffrey Lacker, president of the Federal Reserve Bank of Richmond. Reported in USNews, in an interview with The Associated Press, he said that the Fed can only do so much to lower the 8.3 percent unemployment rate. There are a lot of people overestimating the extent to which monetary policy is capable of having any sustained effect on growth or labor markets.

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