Employment in Manufacturing and Government and the Deficit with China

I heard a couple of talkers on business news and talk radio note that government employment had exceeded manufacturing employment in the United States. When I looked into it, I found the origin of this meme at a blogpost of Fabius Maximus entitled America passes a milestone!, with interesting charts and analysis. The charts are from subscription site Contrary Investor. Instapundit, Dr. Melissa Clouthier and Citizen Paine are among the analysts who picked up the story from Fabius, and well done to him.

But I wanted to see the original data, and I found it on one of my favorite sources for primary material, the website of the Bureau of Labor Statistics, for which the relevant interactive dialog box is here.

It is the work of a few minutes to find that, yes indeed, according to BLS, the non-seasonally-adjusted figure for workers employed in the goods producing sector of the US economy was set preliminarily at 21,404,000 for 2008, down from 22,221,000 in 2007, while the comparable employment-in-government figures were 22,457,000 preliminarily for 2008, up from 22,203,000 in 2007.

The services sector is bigger than both put together, with a preliminary 115,648,000 employed for the year 2008.

It was two days after Fabius’s article that Timothy Geithner had his confirmation hearings in the Senate Finance Committee. One of the hostile Senators, Jim Bunning (R-KY), roasted Geithner over the US-China trade and financial relationship. He got started in his opening statement:

Thank you, Mr. Chairman.

The financial crisis we are experiencing today did not happen overnight and it could have been avoided. As Mr. Greenspan now admits, the easy monetary policy that he and Mr. Geithner championed at the Federal Reserve created an asset bubble. Large capital inflows from countries like China, for the purpose of keeping its currency low, contributed to the bubble and they went unchecked. But, the collapse of the bubble would not have been so devastating if Mr. Geithner had been effective in his role as a regulator. . . .

. . . and in questioning he was if anything tougher, blaming Chinese manufacturers and workers, in effect, for the financial crisis in which we now find ourselves. This, I believe, is a dangerous new aspect of international financial and trade relations, as I stated in my posting of January 26.

It strikes me that there is a direct line between the manufacturing implosion and the current account deficit with China and certain other trading partners, if anyone just cared to draw it. And there’s not a thing Mr. Geithner could have done about it in his role as a regulator.

The capital inflows that so trouble Senator Bunning are just the flip side of America’s trade deficit with that country. It’s a matter of double-entry accounting identities, rather than any cunning device to “keep its currency low.”

It can be shown — I have done the work, and will put it here at some point — that a portion of the trade deficit with China is really with American companies who have investments there.

Nevertheless, it is clear that the US economy has gone post-industrial.

Our trading partners will not buy our manufactures if we do not manufacture.

They will buy very little of the output of our large and growing government sector.

They will buy some of our services, but of course in these times of financial crisis and straitened circumstances, they too have less need of the financial and creative services in which American business specializes.

Our trading partners will buy hardly any of the spa, tanning, psychotherapy, handyman, coaching, self-actualization, pet grooming, personal-shopping, kitchen-designing, dog-walking, SAT-essay tutoring, Search Engine Optimization consulting, skateboard training, party-planning, eBay-auctioning, credit-counseling, baby-sitting and similar personal services in which a huge number of Americans now occupy themselves and try to scratch a living.

An entrepreneurial Chinese person might as well try his hand at manufacturing. An entrepreneurial American might as well shoot himself in the head as try his hand at manufacturing. The thought of going into the business of manufacturing a product for sale, with all the nightmares of taxation and regulation that go with that in the United States in the year 2009, is not for the faint-hearted among the business-minded.

And that is why perfectly serviceable industrial parks near my home in New Jersey are rented out to ballet schools, medical offices, day care centers, basketball clinics, gymnastics facilities, skate parks, senior centers, art studios, martial arts gyms, fitness centers, churches, mosques, schools, and even government offices, but hardly at all to industry.

If this cannot be changed — and if anything the anti-manufacturing tide is still at the flood stage — then how can the US current account deficit be anything but a huge long-term structural problem for us?

Leave a Reply




You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>