Last week's jobs report shows unemployment dipping to a slightly less dismal 9.1%. However, the participation rate, which measures the percentage of Americans trying to work fell to 63.9%, the lowest level since 1983 -- a time when the number was structurally lower because many women had not entered the labor market. Those in the remaining 36.1% are simply not considered as part of the unemployment survey.
Now there are reasons that the participation rate could decline, such as folks deciding to quit work because their spouses' careers are going great -- probably not. Another might be that many are retiring early because their 401ks are booming and their pensions are strong -- again, not so much.
The reality is that many have given up finding work after four years of the Bush-Obama depression. Cynical economists estimate the actual unemployment rate is more like 13%. The lost 4% are in school, in prison, or just sitting at home in their boxers playing World of WarCraft. Many of the 9.1% officially unemployed have no hope of finding work, and do little more than hunt video game gold and draft emails to Congress demanding benefits extensions.
Worse, America has a huge, hidden under-employment problem. Wages are not growing, and adjusted for inflation, they have been in a decline for a decade. Hardworking folks that once worked as foremen, safety officers and HR directors at manufacturing plants are now lucky to be feeding their kids with a job selling Chinese goods at Wal-Mart. Or perhaps they are working two 30-hour shifts in fast food or struggle with an unprofitable home business, while the Administration counts up the jobs "created."
This decade of disaster has an obvious cause and a solution entirely outside the mainstream media's myopic discussion of tax cuts and stimulus spending. The reason that no amount of government largess or sub-zero real interest rates can create a single real job in Milwaukee or Las Vegas is that we are sending too much of our consumer spending, corporate investment and interest payments to Wuhan and Guangzhou. The only economy stimulated is the Chinese one.
America has a lot of domestic issues including decaying infrastructure and out-of-control entitlements that must be tackled to secure long-term competitiveness. However, like some unlucky cancer patient pursued by an armed robber, we must deal with the obvious, external threat just to live until our national chemotherapy session. A dragon is chasing us with an economic gun in one hand and a growing military arsenal in the other.
China accounts for about 70% of our trade deficit outside of oil and that deficit is sucking nearly a full percent out of our tepid GDP growth. That's about a million jobs a year or 10 million over the last decade. It's the difference between 9% unemployment and 6% unemployment and the core cause of our recessionary predicament.
If you doubt the numbers, then:
1. Take a stroll thru your local Wal-Mart and look at the labels.
2. Type "Pudong" into a search engine and marvel at Shanghai's sparkling skyline.
3. Run a Google Earth tour of the disaster area called "The Motor City."
4. Connect those dots.
If this transfer of jobs were due to superior Chinese quality -- give us a break -- or low paid labor working its way toward global equity, a free trader could hardly object. However, that just ain't the case at all. China's labor advantage is nearly meaningless in expensive high-tech devices like iPhones and it can't possibly outweigh the shipping costs for most heavy goods like steel pipes or wallboard. And yet these very products flow across the Pacific as though it's efficient. What gives?
Firstly, labor is not only abundant and cheap in China, it is conveniently repressed by China's jackboots. Workers demanding better conditions? Call the cops in and let them break a few jaws. Thousands die in coal mine accidents every year. Tens of thousands are maimed, poisoned, blinded and burned in working conditions that can resemble -- and sometimes are -- prison camps. Workers, including children and the mentally ill, are sometimes "recruited" and more often held against their will.
Secondly, there is the fantastic advantage of being able to dump just about any odious byproduct into the air or waterways. China has rightfully been designated as the world's most polluted nation in several studies and any seasoned traveler can tell you that you really have to see it, and breath it, to understand the magnitude of this offense. The World Health Organization estimates that Chinese air alone kills 700,000 each year.
Thirdly, China uses a plethora of trade cheats. There's unbalanced tariffs, such as the 2.5% for a car entering America vs. 25% for a car coming into China. Then there's the odd arrangement where China requires firms to engage a Chinese "partner", who maintains majority interest, saps most of the profits, and has the real control. Actually owning anything more sophisticated than a fried chicken chain is all but impossible. Yet, Chinese firms purchase American businesses straight out. Worse, for access to its markets, China requires US firms hand over their technology and relocate their R&D centers to China.
Finally, there is the ever-present currency peg, which simply makes every little iPod and every Bay Bridge that China ships out 40% cheaper than a potential American competitor. Anything daring to go the other way will have a corresponding 40% disadvantage in the Chinese market -- after clearing all the previously mentioned hurdles.
Can any manufacturer compete with all this? Not bloody likely and that's why century old parts factories and band new solar panel plants are being boarded up in cities like Cleveland, Ohio and Devens, Mass.
If you are in the retail industry will you find customers to buy your Chinese inventory? Of all people, Wal-Mart CEO Mike Duke has commented that his customers are "running out of money"!
If you're a state or municipal government worker, you've seen the writing on the wall. Closed factories and foreclosed homeowners can't pay taxes. Struggling retailers contribute less and less and unemployed citizens demand more and more. Cuts are sweeping our schools, hospitals and police departments. Federal civil servants and the military are clearly next on the block.
If you work in the services sector your business depends on these near-death manufacturers, sickly retailers, or some level of our bankrupt government and the future doesn't look bright.
It is time to admit the China trade is neither free nor fair and in any case it's killing us. Let your congressperson know that you found your stolen job and you want it back. If they don't get that, the time has come to outsource Washington DC.
© 2011 Peter Navarro and Greg Autry, authors of Death by China: Confronting the Dragon -- A Global Call to Action