Disaster Lurks In April Jobs Numbers

There is no good news in the

April payroll data
released last Friday by the
Bureau of Labor Statistics. Disaster lurks in the jobs
numbers: the US labor market is becoming

Third World
in character.

The April jobs data show a
continuation of the troubling pattern established in
recent years. Despite a massive

trade deficit
that pours $500 billion annually into
foreign hands, the US economy cannot create jobs in the

or import-competitive sectors of the economy.
The US economy can only create jobs in

domestic services—jobs that cannot be

located offshore
or performed by foreigners via the

The 280,000 private sector jobs
created in April break out as follows: 104,000 were
hired as temps and in administrative and waste services,
34,000 were hired as

waitresses and bartenders
, 30,000 were hired in

health care and social assistance,
29,000 in

wholesale and retail trade
, 21,000 in manufacturing
(half of which are in fabricated metal products), 20,000
plumbers, electricians and specialty contractors, 10,000
hired by membership associations, 10,000 in legal,
architectural and engineering services, 8,000 in
management and technical consulting, and 4,000 in real

The vast majority of these jobs do
not require a

college degree.
One can only wonder what will become
of the

June graduating class

Since January 2001, the US has lost
2.7 million manufacturing jobs. Job loss by sector: wood
products 50,000, nonmetallic mineral products, 61,000,
primary metals, 145,000, fabricated metal products
272,000, machinery 300,000, computer and electronic
products 536,000, electrical equipment and appliances
136,000, transportation equipment 209,000, furniture and
related products 97,000, misc. manufacturing 79,000,
food manufacturing 53,000, beverages and tobacco
products 13,000, textile mills 128,000, textile product
mills 33,000, apparel 172,000, leather and allied
products 18,000 paper and paper products 90,000,
printing and related support activities 137,000,
petroleum and coal products 10,000, chemicals 79,000,
plastics and rubber products 125,000.

Since January 2001, financial
activities created 247,000 jobs, and nontradable
domestic services (education services, healthcare and
social assistance, leisure and hospitality, and
membership associations) created 2,026,000 jobs.

These service jobs were offset by
302,000 lost jobs in retail, 261,000 lost jobs in
transport and warehousing, 124,000 lost jobs in
management of enterprises, and 1,222,000 lost jobs in
tradable services such as telecommunications, ISPs,
search portals, and data processing, accounting and
bookkeeping, architecture and engineering, computer
systems design, and business support services.

That leaves a net increase of
488,000 jobs in domestic services created during the
past 3 and one quarter years. Offsetting these jobs with
2.7 million lost manufacturing jobs, leaves the US
economy with 2.2 million fewer private sector jobs at
the end of April 2004 than existed in January 2001.

Once free trade was a reasoned
policy based in sound analysis. Today it is an ideology
that hides labor arbitrage. Because of the low cost of
foreign labor, US firms produce offshore for their US
customers. The high speed Internet permits people from
all over the world to compete against Americans for
knowledge jobs in the US. Consequently, the “new
is being outsourced even faster than the
old manufacturing economy.

Where does this leave Americans? It
leaves them in low-pay domestic services. As the BLS
10-year job forecast made clear, 7 of the 10 areas that
are forecast to create the most jobs do not require any
university education—definitely not the picture of a
high-tech economy.

Why then will Americans attend
universities? Will

require an MBA to stock its shelves? Will
nursing homes want their patients

by engineers?

Obviously, education and retraining
are not answers to job loss from US employers
substituting foreign labor for American labor.

One does not have to be an economic
genius to understand what is happening. Capital is most
productive where labor is most abundant, and labor is
most productive where capital is most abundant.

Thus, we see US capital flowing to
Asia where labor is cheapest, and Asian labor flowing
via the Internet to the US where capital is abundant.

US labor loses both ways. Products
Americans used to make are now made offshore, and the
Internet lets foreigners compete against Americans in
the US labor market.

An engineer in Boston, Seattle,
Atlanta, or Los Angeles

cannot compete
with an Internet hire in India,
China, or Eastern Europe, because the cost of living in
the US is much higher. The Boston engineer cannot work
for the Indian salary, because his mortgage debt and
grocery prices will not adjust downward with the salary.

The man in the street has no
difficulty comprehending this simple fact, but for
ideologues, free trade is a virtue—regardless of the
harm done to American labor and the US economy.


Craig Roberts was Associate Editor of the WSJ editorial
page, 1978-80, and columnist for “Political Economy.”
During 1981-82 he was Assistant Secretary of the
Treasury for Economic Policy. He is the author of

Supply-Side Revolution: An Insider`s Account of
Policymaking in Washington