Employment in an inflationary environment

This post is lifted from the blog of one of the best non-main stream commentators I know, Mike Shedlock whom I often reference anyway.

His post along with the articles that gave rise to the post are worthwhile reading. The jist of the whole thing is that in a debt based fiat monetary system, government must necessarily, if gradually, become the largest actor in the economy. And of this, more proof follows:

http://globaleconomicanalysis.blogspot.com/2011/03/current-decade-of-job-losses-vs-great.html

Follows entire article and graphs:

“Current Decade of Job Losses vs. Great Depression; How Did Quasi-Public Jobs Fare? Who is Whining?

It may surprise you to learn that job losses in the most recent decade ending February 2011 are reasonably comparable to the job losses from 1929-1939. Moreover, if we exclude government and “quasi- government” jobs, the latest decade is the worst ever, by far.

Please consider A Decade of Labor Market Pain by Mike Mandel.

In February 2001, nonfarm payrolls hit their business cycle peak of 132.5 million. Ten years later, the latest data pegs February 2011 payrolls at 130.5 million, a 1.5% decline. To put this in perspective, the ten-year period of the Great Depression, 1929-39 saw a 2.3% decline in nonfarm employment, roughly the same magnitude.

But even that 1.5% understates the extent of the pain for most of the workforce. I divide the economy into two parts. On the one side are the combined public and quasi-public sectors, and on the other side is the rest of the economy. Public, of course, refers to government employees. ‘Quasi-public’, a term I just invented, includes the nominal private-sector education, healthcare, and social assistance industries. I call them ’quasi-public’ because these industries depend very heavily on government funding. For example, social assistance includes ‘child and youth services’ and ‘services for the elderly and disabled’, which are often provided under government contract.

The chart below shows employment growth in the public/quasi-public sector, compared to employment growth in the rest of the economy, with February 2001 set to 100. We can see that public/quasi-public employment rose steadily over the past ten years, and is now up 16%. By comparison, the rest of the private sector is down 8% in jobs over the past 10 years.

Once again, we look at the Great Depression for an analogy. From 1929 to 1939, government employment rose by about 30%. If we back that out, then private sector non-ag jobs fell by 6% over the Depression decade. That compares to the contemporary 8% decline in private non-ag non-quasi-public jobs since 2001. So by this measure, the past 10 years have been worse for the labor market than the decade of the Great Depression.

The first chart below is from the BLS, the second chart below is from Mandel.

Nonfarm Payroll Employment – Seasonally Adjusted Total

The above chart shows the 1.5% drop between February 2001 and February 2011. Note that nonfarm employment is below where it was 11 years ago dating back to February 2000.

The next chart is the one Mandel created.

Public and Quasi-Public Jobs vs. Everything Else

Please see Mandel’s article for a state-by-state breakdown.

Who is Doing all the Whining?

Who is doing all the whining and all the pissing and moaning? The answer of course is those who fared the best in the last decade: the police and fire unions, the teachers’ unions, transit unions, and public unions in general.

Many in private sector fields have been hammered silly with rapidly rising healthcare costs and lower paychecks (assuming they have a job at all). Meanwhile those with the most benefits and those who have suffered the least are the ones unjustifiably bitching to high heavens about how unfairly they are being treated.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com”

End article

 

Deflation…

As the debate rages on, both inflationists and deflationists slug it out each poring over reams of data and making the case for their position.

As far as I am concerned, there is only one obvious parameter that cuts through the fog of confusion that reigns in the various monetary/economic measures that can be distorted at will. The one measure that is hard to fudge or distort is this. For as long as tax revenue continues to decline, that is the most glaringly evident sign of deflation. And granted, just like nothing goes straight up or straight down, deflationary pressures too ebb and flow. Nonetheless, the one single metric you can keep your eye on to make heads or tails of what is going on in the economy is tax revenue. For as long as tax revenue declines, it is the clearest sign that the monetary authorities are unable to inject inflation in the monetary system ergo the economy.

If tax revenue is declining, it follows that states are unable to meet their salary and financial obligations. Thus:

http://www.reuters.com/article/idUSTRE6604DY20100701

“U.S. state and local governments employ around twice as many workers as the country’s manufacturing and construction sectors combined, so the switch to layoffs risks swelling already high unemployment in the United States.

“I can confirm that states are now moving to layoffs they had hoped to avoid,” said Philippa Dunne, who polls state leaders for the economic newsletter she co-edits, the Liscio Report. “To me, this is terrible timing because private hiring remains anemic, so piling on state and local layoffs is dangerous.””

The excerpt above is actually interesting on two fronts. First, it highlights one of the inherent consequences of artificial inflation pumping; that is, that in a fiat monetary system inflation gradually overwhelms all economic metrics till it becomes a goal unto itself. Thus along the inflationary trajectory, government progressively becomes the largest actor in the economy. Second, the excerpt provides evidence of waning state revenue which is the sign of declining inflation if not its absence.