June 3, 2004

Economy News Roundup

First-time jobless claims continue to trend strongly downward, suggesting tomorrow's employment report for the month of May is likely to show another large monthly jobs gain. Also from the bipartisan Senate Joint Economic Committee comes this report exploring the relationship between employment growth in the United States and international trade. The report uses data (facts!) to debunk the notion that job growth has lagged because American jobs are being sent overseas.

American firms are also benefiting from the global marketplace, dominating the services market and remaining a net supplier of services to the world by a large margin. To sustain this demand for U.S. services, companies must hire staff at home to support overseas operations, meaning more good-paying jobs for Americans. Any movement to close off our borders to services trade will thus ultimately reduce employment, raise prices, and harm the competitiveness of American businesses.

Businesses are able to hire and retain people only to the degree that these new people generate additional profit. The jobs sustainability ratio tells us, therefore, the “solidness” of the jobs that were created at the end of the Clinton boom compared with the jobs that are being created now.

The numbers are dazzlingly clear: During the late 1990s, rapid jobs growth was supported by weak growth in profits. Not so under Bush. In fact, in the first three years of the Bush administration, each new job was backed up by an average increase in profits of $285,000. Unfortunately, during the last three years of the Clinton administration each new job was backed by an average decrease of $28,000. It’s no wonder that those jobs did not last long and were entirely swept away by the first recession that appeared.

Ironically, the fact that jobs are not appearing at a hyper-growth rate during this current recovery demonstrates most conclusively that this is boom, not a bubble.

I blame the Bush tax cuts.

And, finally, be sure to check Jeff Cornwall's blog, The Entrepreneurial Mind, often. Today, he's got news/comments/links about niche banks, entrepreneurs and venture capital, and more.