Why so few jobs in the US?

Feb 6, 2015

- By Bill Bonner

Bill Bonner
Sao Paulo, Brazil

Dear Diary,

Tudo bom.

Stocks up 211 points on the Dow yesterday. Gold flat.

The biggest challenge for us is to figure out what to laugh at first. So many frauds. So much nonsense. So little time.

Last week Zero Hedge reported that a bubble seemed to be developing in the burger business. Shake Shack opened for trading with its stock priced 50% above the initial range. That is, it opened at $21. Then, for no apparent reason, other than investors had taken leave of their senses, the price soared to $49.

SHAK is a hamburger joint. At last week's price, every dollar's worth of profits was judged by the market to be worth $108 of capital, giving the company a total market value of $1.8 billion. Let's see. The double ShackBurger sells for $7.99. So, a $10,000 investment gives you the equivalent of 11 hamburgers per year - if the company distributed 100% of earnings. Maybe they'll give you fries with that.

What's so special about the burgers? We don't know. But we suspect it has more to do with the heady flavor of the stock market than the taste of the fries. Stock prices have been rising 5 times as fast as earnings -- and the earnings themselves are largely fraudulent. One company can increase earnings even in a stagnant economy. But when all companies increase their earnings, more than GDP, you have to ask: where is the money coming from?

We can tell you -- more credit ...and accounting shenanigans. The numbers are embellished by 'adjustments' that hide real costs. Report the figures according to GAAP standards, without the accounting tricks, and earnings for the last quarter were actually 5% lower than those a year ago.

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Meanwhile, today's 5.6% unemployment rate is a "Big Lie," according to the CEO of the Gallup organization, Jim Clifton:
    There's no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.

    I hear all the time that "unemployment is greatly reduced, but the people aren't feeling it." When the media, talking heads, the White House and Wall Street start reporting the truth - the percent of Americans in good jobs; jobs that are full time and real - then we will quit wondering why Americans aren't "feeling" something that doesn't remotely reflect the reality in their lives. And we will also quit wondering what hollowed out the middle class.

    Based on demographic trends, I suggest the real unemployment rate after weeding out disability fraud, forced retirement, kids hiding out in school for lack of a job, and those who are not counted as unemployed simply because they gave up looking.it is more like 9% than 7%.

Why so few jobs?

You probably thought the 'renaissance' in US manufacturing was bringing an employment boost. Foreign labor costs were rising, according to the storyline, even in China. US labor costs have gone down. And with all that cheap oil and gas so handy, America's factories were about to kick butt. In a poll, it was revealed that even US manufacturers themselves believed it - with 57% of them saying it was real.

But guess what? The renaissance in US manufacturing? It's counterfeit too. The Globalist reports:

    At the end of 2013, there were still 2 million fewer manufacturing jobs and 15,000 fewer manufacturing establishments than in 2007, the year before the Great Recession, and inflation-adjusted manufacturing output (value-added) was still 3.2% below 2007 levels. While the U.S. manufacturing sector has grown since 2010, resulting in 520,000 new jobs and 2.4% real value added growth, almost all of this growth has been cyclical in nature, driven by just a few industries that contracted sharply during the recession.
When the worldwide price of oil went down, it went down for the Chinese too. Despite rising wages in China, labor costs there are still only about 1/8th of those in the US. And a higher dollar doesn't make those US costs go down; compared to the rest of the world, they go up.

The US still has a competitive disadvantage in manufacturing, in other words. And it's not likely to go away any time soon.

Tomorrow: even more quackery!

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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