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#131640 - 11/06/09 09:13 PM Re: Unemployment rate highest since 1983 [Re: 2wins]
NW Ponderer Offline
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Registered: 09/09/11
Posts: 15953
Unemployment is what is referred to among analysts as a "lagging indicator" - meaning that lags the conditions that create it by 6-18 months (typically). In other words, not yet Obama's fault. What it portends, however, is how long we are likely to be in this recession muddle created by the last administration. When Reagan took over, in January 1981, the recession had just begun. Early 1980s recession - Wikipedia. Unfortunately, President Reagan took exactly the wrong action and exacerbated the situation by cutting taxes dramatically and fueling deficits, making it the longest, and deepest, recession in modern U.S. history to that point. The tax increases of 1982, however, led to the recovery. (Yes, Mr. Cheney, deficits do matter!)
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#131648 - 11/06/09 10:42 PM Re: Unemployment rate highest since 1983 [Re: Harvey3]
loganrbt Offline
old hand

Registered: 02/20/08
Posts: 5850
Loc: Massaphuggintwoshirts
 Originally Posted By: Harvey3
As to the supply of "real jobs", IMHO the domestic agenda of the current administration is a real job killer.


A bit premature to make the call on that but some historical data is informative. When George W. Bush took office, with Replublican majorities in both the House and the Senate, the unemployment rate was 4.2%.

When George W. Bush left office, two weeks after his party lost control of the Senate and effective control of the reins of government, the unemployment rate was 7.6%.

An increase of 3.4%, and proportionately an 81% increase in the unemployment rate. 10 months later, the rate is up to 10.2%, an increase of 2.6% and a proportionate increase of 34% over the end point of the Bush/GOP regime.

I would love to see the analysis that leads you to suggest that it is the current administration that is killing jobs!

Remember, it took Reagan more than two years to reverse the downward spiral that began under Nixon, and continued through Ford and Carter. 10 years.

I am pleased by one aspect of your analysis. You certainly appear to be disappointed that the Obama superpowers have not been able to do what Reagan accomplished in 1 twelfth of the time! It is refreshing to see that you ascribe to the presence of those powers.
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#131683 - 11/07/09 12:59 PM Re: Unemployment rate highest since 1983 [Re: loganrbt]
Harvey3 Offline
journeyman

Registered: 09/28/09
Posts: 560
Loc: Texas Hill Country
 Originally Posted By: loganrbt
[snip]The Obama administration has been in place two weeks shy of 10 months. Our 1983 president, the sanctified-by-some Ronald Reagan, had been in office at least 24 full months when the nation last had 10.2 of its labor force out of work. Yet our 1983 president is roundly hailed by many, with the kind or regard generally assigned only to saints, of the same others truly who assail Obama for not solving problems in fewer than 10 months.[snip]
So if yours truly understands correctly, it took the late Ronald Reagan two years to get to a level of unemployment that Barack Obama reached in only 10 months? Perhaps Mr Reagan is highly regarded because he worked hard to keep unemployment low? ;\) In any case, there doesn't seem to be much value in such comparisons; more than 20 years ago and vastly different circumstances.
_________________________
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#131684 - 11/07/09 01:09 PM Re: Unemployment rate highest since 1983 [Re: ]
Harvey3 Offline
journeyman

Registered: 09/28/09
Posts: 560
Loc: Texas Hill Country
 Originally Posted By: NW Ponderer
[snip] Unfortunately, President Reagan took exactly the wrong action and exacerbated the situation by cutting taxes dramatically and fueling deficits, making it the longest, and deepest, recession in modern U.S. history to that point. The tax increases of 1982, however, led to the recovery.[snip]
Learned counsel's bias in favor of raising taxes is well-known, but he appears to argue here against deficit spending during recession times' But, yours truly thought such deficit spending is the agreed-upon Keynesian remedy for economic recession? Counsel overlooks other contributory events.
_________________________
"For a successful technology, reality must take precedence over public relations, for nature cannot be fooled.”- Richard Feynman


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#131686 - 11/07/09 01:31 PM Re: Unemployment rate highest since 1983 [Re: loganrbt]
Harvey3 Offline
journeyman

Registered: 09/28/09
Posts: 560
Loc: Texas Hill Country
 Originally Posted By: loganrbt
 Originally Posted By: Harvey3
As to the supply of "real jobs", IMHO the domestic agenda of the current administration is a real job killer.
[snip]I am pleased by one aspect of your analysis. You certainly appear to be disappointed that the Obama superpowers have not been able to do what Reagan accomplished in 1 twelfth of the time! It is refreshing to see that you ascribe to the presence of those powers.
Thanx for the trudge thru history, but Ronald Reagan,Geo.H.W. Bush and Geo.W.Bush are so yesterday! Harvey3 agrees it is too soon to judge results of Mr Obama's agenda because so little of it has been signed into statute. Perhaps there is a reason why his party's over-whelming majorities in Congress are unable to move these measures? Can "loganrbt" account for the political unpopularity of Mr Obama's agenda apart from redistributionist measures and parceling out "honest graft"?
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#131691 - 11/07/09 01:49 PM Re: Unemployment rate highest since 1983 [Re: ]
Ma_Republican Offline
old hand

Registered: 02/12/04
Posts: 6466
Loc: USA
 Originally Posted By: NW Ponderer
Unemployment is what is referred to among analysts as a "lagging indicator" - meaning that lags the conditions that create it by 6-18 months (typically). In other words, not yet Obama's fault. What it portends, however, is how long we are likely to be in this recession muddle created by the last administration. When Reagan took over, in January 1981, the recession had just begun. Early 1980s recession - Wikipedia. Unfortunately, President Reagan took exactly the wrong action and exacerbated the situation by cutting taxes dramatically and fueling deficits, making it the longest, and deepest, recession in modern U.S. history to that point. The tax increases of 1982, however, led to the recovery. (Yes, Mr. Cheney, deficits do matter!)


NW,
The idea that unemployment is a "lagging indicator" is optimistic. Unemployment is the answer to the equation. The equation is:

P(x)*G=J where P = profit, G= growth of the economy and J = Employment.

In the real world, a business is established to earn a profit. The natural trend of any business is that as the company matures, the staffing requirements shrink due to the ability of the company to refine their processes. Employment at Company X grows for two reasons, during the start-up period there is a need for excess workers to create the proceses needed for success and the need to advertize and sell its product. The second reason for a company to hire new employees is that growth of the company, ie sales and profit, create the need for more people to preduce the product or create new products from the profits of the original one. Every dime you remove from a company's bottom line is one less dime the company can spend on product development. Tax cuts create jobs because they inject currency into the ailing economy. The argument that it doesn't is absurd. If you give a person a raise that person will spend more money. They buy washing machines, televisions, computers, go out to eat, etc. When a company's profits are reduced the first thing that happens is people get laid off. As profits get reduces further, the company tries to find an equalibrium between profit and manpower. If that equalibrium becomes too out of wack the comapany goes out of business and all of the people get laid off. The reason is simple, a business is created to make a profit, without profit there is no need for the business.

In a perfect world companies would be sympathetic of its employees, and they are to a cretain extent, but large companies have stock holders and VC investors that remain at the top of the food chain, in a small company where profit margins are much smaller, there is much less ability for a company to absorb any cost increase. Unemployment is not a indicator of anything other than the fact that the economy sucks. The economy is a living organism, and it relies on pubic sentiment for its base. If the public believes that the economy is going to do well, they will spend money creating the need for new hires. But, if a business doesn't believe that the new demand will create enough profit to justify hiring more people they will not do it.

The current business atmosphere sucks. New taxes are on the horizon, new requirement are going to be forced onto all businesses, causing profit to drop further. With high unemployment the consumer base cannot support the price increases necessary to pay for those new requirements, so the whole mess will spin out of control.

Ambitious programs aside, sometimes ambition has to be tempered against reality. The stimulous outlays were supposed to create jobs, but they haven't had the expected (by some) result. Another one isn't politically acceptable at the moment. Either the country has to live with 10% unemployment or the business policies have to change.


Edited by Ma_Republican (11/07/09 01:51 PM)
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#131699 - 11/07/09 02:20 PM Re: Unemployment rate highest since 1983 [Re: Harvey3]
loganrbt Offline
old hand

Registered: 02/20/08
Posts: 5850
Loc: Massaphuggintwoshirts
Loganrbt has decided that the third person is so yesterday that he no longer will read nor react to any such attempts at literary flourish.
_________________________
"The white men were as thick and numerous and aimless as grasshoppers, moving always in a hurry but never seeming to get to whatever place it was they were going to." Dee Brown

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#131702 - 11/07/09 03:35 PM Re: Unemployment rate highest since 1983 [Re: Ma_Republican]
loganrbt Offline
old hand

Registered: 02/20/08
Posts: 5850
Loc: Massaphuggintwoshirts
Employment lags, inevitably, because of the very factors that you describe in your text.

Profit does not respond immediately to change in demand, in either direction, at the retail, or even the wholesale point of sale. There is a lag between a change in demand and the corresponding change in profit. Ergo, the lag in employment.

Depending on the sensitivity of management and production systems in place within X, the lag may be rather short or rather long, but there will be a lag. A company that grows and sells fresh-cut flowers with a plant-to-ship time of a week will show a much shorter lag than a company that designs, builds, and sells automobiles. But both will have a lag.
In the real world a “for-profit” business is established to earn a profit. Whether maturity shrinks or expands the demand for labor depends on the nature of the business and the level of “automation” that is possible/affordable in that business. See your second reason for growth. In some businesses, growth is possible ONLY by adding labor force.

Accepting for argument’s (I mean that in the discussion sense, not the anger sense) your suggestion that “dime you remove from a company's bottom line is one less dime the company can spend on product development”, the corollary is not true; that every dime removed from product development is a dime removed from employment levels. And this thread is about employment. I don’t need to develop a new toaster to continue to employ the same number of people on the assembly line; I just need a sales force that understands better how to sell the old model.

If my focus is on employment, however, then any tax incentives need to go to business, not the people who got rich from their profits. And I want to structure those incentives so they are most favorable to those companies that keep employment in this country. Giving tax breaks to rich people who then can choose between investment in Chunking province or Akron is not helpful when the unemployment rate is rising. To be effective in the employment context, any tax incentives must go to businesses (and I count investment firms as businesses) with a commitment to in-country production.

As for profit levels, we must distinguish between profit rates and profit volumes. Wal-Mart has one of, if not the, lowest profit margins in the business world today. Yet they have long been one of the most profitable companies in the world. Discount retailers of everything from the above mentioned toaster to automobiles have proven this theory repeatedly. Unit profits are less significant than total profits. Ergo, the focus should be not on cost of production but on cost of going to market. Very different financial models within the company and based on fundamentally different concepts of the business.

Further, the “profit today” view versus a “cumulative profit over time” view has killed more U.S. businesses than any tax policy. Short term profit is almost guaranteed to drive long-term viability into the ground.
“Unemployment is not a indicator of anything other than the fact that the economy sucks.”

Well, I suppose that may be true if one is discussing global employment, but much of the issue in the U.S. economy is the massive transfer of the work force to overseas labor pools. The shift of help desk staffing to Mumbai or Banalore greatly enhances short term profit because the labor pool is less expensive there. That move takes buying power out of the U.S. population and leads to fewer purchases by those of us who live here. That kills domestic markets. If the products and services being produced are priced beyond the reach of those in Mumbai or Bangalore who have the jobs now but can’t afford the same life style that the folks they replaced had, then global demand drops as well. Ergo, the economy sucks because, in many industries, the short term view of profitability led to labor force decisions that killed the market. Employment decisions made the economy suck.

Completely agree that business policies have to change. And taxation and government spending policies have to change to create the incentives that will drive that change.

In my reading of the Obama administration's campaign promises and, indeed, of the structure and status of the ARRA (stimulus bill) take that fully into account. What we produce in this country needs to change to reflect global realities. How we produce it has to change to reflect the unsustainable way we drive the factories and offices that produce what we produce. And where we produce needs to be matched up against the long-term viability of the domestic market.
_________________________
"The white men were as thick and numerous and aimless as grasshoppers, moving always in a hurry but never seeming to get to whatever place it was they were going to." Dee Brown

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#131704 - 11/07/09 04:07 PM Re: Unemployment rate highest since 1983 [Re: loganrbt]
Ma_Republican Offline
old hand

Registered: 02/12/04
Posts: 6466
Loc: USA
My perspective is based solely on the High Tech industry. I have worked in this industry for going on 30 years and have seen the cycle play out multiple times.

A company like Walmart does not rely on product development, and their profit matgin will increase during a down economy when compared to the more upper crust retail department stores. They sell good stuff cheap. Even if people don't have desposable income, they still need cloths, screws, nails, etc. Walmart thrives because their business is based on providing good, not great, product for a reasonable price.

I currently work for a company that had $8B in sales last year. Their base business is defense and DHS, so money is pretty steady even during the down periods. My company, a very profitable company btw, has had layoffs over the last year. All of them have been small to moderate, but they have started a cost cutting effort with an eye toward what might happen in the future. When a company is as large as mine is, profit is built into every product as a function of its sale price. Labor is tracked closely and labor reporting is tracked on a weekly basis. It is a good company to work for, they care as much for the wellbeing of their employees as much as other company their size, but when profits started falling, employees got let go.

I suppose we are talking about symantics, you call it a lagging indicator and I call it a result, but the fact is the people who were laid off will not be hired back by my company. It wasn't a furlow, it was a termination. To be a lagging indicator one must assume that the people who are unemployed today will be employed in the near future, but I am not sure that it is the case. I do not want this thread to drift, but future taxes and fees have to be included in the calculus of this situation. If Cap and Trade and/or Healthcare "Reform" are enacted the cost of doing business in America increases dramatically. The unemployment figures from that eventuality haven't even been included in these reports. The amount of money that just those two programs will cost American businesses will have to be found from somewhere inside their business because those costs can't really be passed on to a public with 10% unemployment. What is worse is that Congress wants to pass those two bills while unemployment is still climbing. It is as I mentioned on another thread, the MA sales tax was increased by 25% a couple of months ago, and tax revenues have continued to go down. The reason is when you add cost to a public that is struggling, they spend less. I had some business in another state yesterday. On my way home I stopped in NH to get tires on my truck. Just that stop saved me almost $50.00 because NH has no sales tax. That is money that MA will never see, money that I might have spent in MA had the sales tax not gone up. Had the tax not increased, I probably would have bought tires at the tire company down the street. It's not that I saved a whole lot over what it would have cost me before the increase, but because of that extra $15, it became cost effective to do it on my way home.

There is never a good time to increase taxes, but doing it in a recession is not good business. All the talk about increased energy costs and healthcare costs are making businesses cut spending, what do you think will happen if they actually do increase those costs? I know I won't be able to go to NH and get a better deal on my energy or my insurance. That money comes directly out of the economy.


Edited by Ma_Republican (11/07/09 04:13 PM)
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“The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.”
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#131706 - 11/07/09 04:21 PM Re: Unemployment rate highest since 1983 [Re: loganrbt]
Harvey3 Offline
journeyman

Registered: 09/28/09
Posts: 560
Loc: Texas Hill Country
 Originally Posted By: loganrbt
In my reading of the Obama administration's campaign promises and, indeed, of the structure and status of the ARRA (stimulus bill) take that fully into account. What we produce in this country needs to change to reflect global realities. How we produce it has to change to reflect the unsustainable way we drive the factories and offices that produce what we produce. And where we produce needs to be matched up against the long-term viability of the domestic market.
So you believe ARRA provides proper guidance as to WHAT, HOW and WHERE we produce. Isn't there a name for such government economic leadership?
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