Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Support Our Annual Fund Drive! We only shake you down once a year, but when we do we really mean it. It costs a lot to keep the site afloat, and our growing audience, well over TWO million unique viewers a month, eats up a lot of bandwidth — and bandwidth isn’t free. We aren’t supported by corporate donors, advertisers or big foundations. We survive solely on your support.
FacebookTwitterGoogle+RedditEmail

The Path to Full-Employment

by

Despite the latest jobs report showing that the economy added 175,000 jobs in February, economists agree that job growth and recovery are not as robust as they should be. The goal of full employment, where nearly all persons willing and able to work have the chance to do so, remains elusive.

Yet, few economists see a significant role for manufacturing, which historically has powered job growth during recovery periods. Although the manufacturing sector has shed 30 percent of its jobs since 2000, output growth at the nation’s factories during this period exceeded growth in the economy overall, except during recessions. These facts have led many economists to conclude that American manufacturing is strong and steep job losses in the sector are largely due to labor-saving technology. Such conventional wisdom also has kept economists from pursuing policies to boost manufacturing jobs.

This view, however, reflects a fundamental misunderstanding about what manufacturing statistics measure and what they mean. For arcane technical reasons, virtually all of the sector’s real output growth results from the way domestically manufactured computers and semiconductors are counted in U.S. statistics. Output growth in most manufacturing industries — those that account for the large majority of the sector’s value-added and employment — has been weak or negative since 2000. And although automation undoubtedly has displaced some workers in manufacturing, a growing body of research suggests that trade and the decline of the United States as a location for production have accounted for much of the sector’s job loss.

In addition, the employment effects of manufacturing production extend well beyond that sector. The breakup of vertically integrated firms and the growth of complex supply chains mean that a large share of workers needed to produce manufactured goods — now about half — works outside the manufacturing sector. Recognizing that the United States has lost competitiveness as a location for production and that globalization and international trade are largely responsible for the steep loss of manufacturing jobs is an essential first step for fashioning appropriate policy responses.

Addressing the trade deficit is an important starting point. The current (2013) level of $500 billion (3 percent of gross domestic product) means that a large amount of demand is directed outside of the United States rather than at home, where it could create employment.

Boosting exports or reducing imports enough to bring trade into balance would generate 4.2 million jobs directly and another 2.1 million jobs indirectly. The 4.2 million jobs directly created would be disproportionately manufacturing jobs, which continue to be a source of relatively high-wage employment for the 70 percent of the workforce that lacks a college degree.

The trade deficit gets remarkably little attention in today’s discussion about economic recovery, even among those who recognize its size. Many assume that the United States has a long history of running large trade deficits, but that’s not the case. The trade deficit actually had been relatively small through most of the 1990s. This changed following the East Asian financial crisis. Countries throughout the developing world deliberately depressed their currencies against the dollar to accumulate foreign reserves causing our trade deficit to soar.

The value of the dollar relative to foreign currencies is a major factor influencing the trade deficit. The challenge to returning the trade balance to its pre-1997 level in line with the dollar is that losses in some of the industries might not be recovered when the dollar falls back to its earlier level. Manufacturing operations have become more sophisticated and critical supply networks have developed in emerging economies. In many cases, the dollar would have to fall well below its original value in order for manufacturers to find it profitable to bring back or expand production in the United States, a fact that shows the permanent cost of enduring a prolonged period in which the dollar is overvalued. Taking immediate steps to lower the value of the dollar is essential to making the United States a competitive location for producers and bringing the trade deficit down.

The most likely way that the value of the dollar will fall is by negotiating agreements with the countries that have deliberately propped up the dollar against their own currencies. But, while a lower-valued dollar is important to workers and many domestic businesses, it’s not going to be popular with certain powerful interest groups that benefit, directly or indirectly, from an overvalued dollar. In other words, a major obstacle to lowering the value of the dollar is political.

It’s time that policy makers and political leaders consider the long-term benefits of reducing our trade deficit and creating a resurgence of manufacturing jobs – a move that will not only help return the country to full employment and close the gap in income inequality but also promote the global competitiveness of American workers.

Susan Houseman is Senior Economist at the W.E. Upjohn Institute for Employment Research.

Dean Baker is Co-Founder of the Center for Economic and Policy Research. Both are participating in the Center on Budget and Policy Priorities national dialogue on full employment, to take place April 2 at the National Press Club in Washington, D.C.

2016 Fund Drive
Smart. Fierce. Uncompromised. Support CounterPunch Now!

  • cp-store
  • donate paypal

CounterPunch Magazine

minimag-edit

September 29, 2016
Robert Fisk
The Butcher of Qana: Shimon Peres Was No Peacemaker
James Rose
Politics in the Echo Chamber: How Trump Becomes President
Russell Mokhiber
The Corporate Vice Grip on the Presidential Debates
Daniel Kato
Rethinking the Race over Race: What Clinton Should do Now About ‘Super-Predators’
Peter Certo
Clinton’s Awkward Stumbles on Trade
Fran Shor
Demonizing the Green Party Vote
Rev. William Alberts
Trump’s Road Rage to the White House
Luke O'Brien
Because We Couldn’t Have Sanders, You’ll Get Trump
Michael J. Sainato
How the Payday Loan Industry is Obstructing Reform
Robert Fantina
You Can’t Have War Without Racism
Gregory Barrett
Bad Theater at the United Nations (Starring Kerry, Power, and Obama
James A Haught
The Long, Long Journey to Female Equality
Thomas Knapp
US Military Aid: Thai-ed to Torture
Jack Smith
Must They be Enemies? Russia, Putin and the US
Gilbert Mercier
Clinton vs Trump: Lesser of Two Evils or the Devil You Know
Tom H. Hastings
Manifesting the Worst Old Norms
George Ella Lyons
This Just in From Rancho Politico
September 28, 2016
Eric Draitser
Stop Trump! Stop Clinton!! Stop the Madness (and Let Me Get Off)!
Ted Rall
The Thrilla at Hofstra: How Trump Won the Debate
Robert Fisk
Cliché and Banality at the Debates: Trump and Clinton on the Middle East
Patrick Cockburn
Cracks in the Kingdom: Saudi Arabia Rocked by Financial Strains
Lowell Flanders
Donald Trump, Islamophobia and Immigrants
Shane Burley
Defining the Alt Right and the New American Fascism
Jan Oberg
Ukraine as the Border of NATO Expansion
Ramzy Baroud
Ban Ki-Moon’s Legacy in Palestine: Failure in Words and Deeds
David Swanson
How We Could End the Permanent War State
Sam Husseini
Debate Night’s Biggest Lie Was Told by Lester Holt
Laura Carlsen
Ayotzinapa’s Message to the World: Organize!
Binoy Kampmark
The Triumph of Momentum: Re-Electing Jeremy Corbyn
David Macaray
When the Saints Go Marching In
Seth Oelbaum
All Black Lives Will Never Matter for Clinton and Trump
Adam Parsons
Standing in Solidarity for a Humanity Without Borders
Cesar Chelala
The Trump Bubble
September 27, 2016
Louisa Willcox
The Tribal Fight for Nature: From the Grizzly to the Black Snake of the Dakota Pipeline
Paul Street
The Roots are in the System: Charlotte and Beyond
Jeffrey St. Clair
Idiot Winds at Hofstra: Notes on the Not-So-Great Debate
Mark Harris
Clinton, Trump, and the Death of Idealism
Mike Whitney
Putin Ups the Ante: Ceasefire Sabotage Triggers Major Offensive in Aleppo
Anthony DiMaggio
The Debates as Democratic Façade: Voter “Rationality” in American Elections
Binoy Kampmark
Punishing the Punished: the Torments of Chelsea Manning
Paul Buhle
Why “Snowden” is Important (or How Kafka Foresaw the Juggernaut State)
Jack Rasmus
Hillary’s Ghosts
Brian Cloughley
Billions Down the Afghan Drain
Lawrence Davidson
True Believers and the U.S. Election
Matt Peppe
Taking a Knee: Resisting Enforced Patriotism
FacebookTwitterGoogle+RedditEmail
[i]
[i]
[i]
[i]