The Fading American Economy


Government is the largest employer

According to the

Bureau of Labor Statistics,
the US economy lost
98,000 private sector jobs in March, half of which were
in manufacturing. Today 13,643,000 Americans are
employed in manufacturing, of which 9,849,000 are
production workers.

Government employs 22,387,000 Americans, 8,744,000
more than manufacturing. Even the category leisure and
hospitality employs 13,682,000 Americans, slightly more
than manufacturing. There are as many waitresses and
bartenders as production workers.

Wholesale and retail trade employ 21,467,000
Americans. Professional and business services employ
18,036,000 Americans of which 8,368,000 are in
administrative and waste services. Education and health
services employ 18,699,000 Americans.

Financial activities employ 8,228,000 Americans. The
information sector employs 3,010,000. Transportation and
warehousing employ 4,532,000. Construction employs
7,338,000, and natural resources, mining and logging
employ 751,000. Other services such as repair, laundry,
and membership associations employ 5,516,000 Americans.

This is the portrait of the US economy according to
the Bureau of Labor Statistics. It is an economy in
which government is the largest employer. Manufacturing
employment comprises just under 10% of total employment
and about 12% of private sector employment. Everything
else is services, and not particularly high level
services.

Is this a portrait of a super economy?

To help answer the question, consider that

US imports
in 2007 were 17% of US GDP, according to
the National Income and Product Account tables provided
by the Bureau of Economic Affairs. In contrast, the BEA
industry tables show that in 2006 (2007 data not yet
available) US manufacturing comprised only 11.7% of US
GDP.

If US imports actually exceed total US manufacturing
output by 5% of GDP, it does not seem possible that the
US can close its massive trade deficit. Even if every
item manufactured in the US was exported, the US would
still have a large trade deficit.

The NIPA and industry tables from which the
percentages come are not calculated identically, and I
do not know to what extent differences might exaggerate
the differences between the percentages. However, it
seems unlikely that mere calculation differences would
account for US imports exceeding US manufacturing
output.

If the US cannot close its trade deficit, it is
unlikely that the US dollar can remain the world

reserve currency.
If the dollar were to lose the
reserve currency role, the US government would not be
able to finance its

annual red ink budget
by borrowing from foreigners,
as the US saving rate is about zero, and the US would
not be able to pay its import bill in its own currency.
The rest of the world continues to hold depreciating US
currency, because the dollar is the world reserve
currency. The dollar is certainly not a good investment
having declined dramatically against other traded
currencies.

From March 2007 to March 2008 the US economy created
1.5 million new jobs (in services). Legal and illegal
immigration and work visas for foreigners exceed US job
creation.

During the current school year, 3.3 million high
school students are expected to graduate. If we assume
that half will go on to college, that leaves 1.6 million
entering the work force. College enrollment in 2007
totaled 18 million. If we assume 20% graduate, that
makes another 3.6 million job seekers for a total of 5.2
million. Clearly, immigration, work visas, and high
school and college graduates exceed the 1.5 million jobs
created by the economy. Unless retirements opened up
enough jobs for graduates, the unemployment rate has to
rise.

The US unemployment rate is creeping up, and

according to John Williams,
the official
unemployment rate greatly understates the real rate of
unemployment. Williams has followed the changes that
government has made to the official indices over the
years in order to spin a more politically palatable
picture. Williams uses the original methodology prior to
the decades of spin. The original way of measuring
unemployment indicates the current rate of unemployment
in the US to be 13%, much higher than the 5.1% official
number.

Williams also calculates the CPI according to the
same way it was officially calculated prior to the
recent decades of spin. Williams estimates the current
CPI at 12%, three times higher than the official 4%
figure.

Williams

reports
that upward growth biases built into GDP
modeling since the early 1980s "have rendered this
important series nearly worthless as an indicator of
economic activity."
Williams estimates that US GDP
growth has been in negative territory during almost all
of the 21st century. The notion that the US is just now
entering a recession is nonsense if we have in fact been
in recession for most of the 21st century.

America`s post-World War II economic dominance was
based on the destruction of other economies by war and
socialism. It is a different world now, and Americans
have given little thought to the economic challenges of
the 21st century.

Paul Craig Roberts [email
him
] was Assistant
Secretary of the Treasury during President Reagan`s
first term.  He was Associate Editor of the
Wall
Street Journal.  He has held numerous academic
appointments, including the William E. Simon Chair,
Center for Strategic and International Studies,
Georgetown University, and Senior Research Fellow,
Hoover Institution, Stanford University. He was awarded
the Legion of Honor by French President Francois
Mitterrand. He is the author of


Supply-Side Revolution : An Insider`s Account of
Policymaking in Washington
;
 Alienation
and the Soviet Economy
and

Meltdown: Inside the Soviet Economy
,
and is the co-author
with Lawrence M. Stratton of


The Tyranny of Good Intentions : How Prosecutors and
Bureaucrats Are Trampling the Constitution in the Name
of Justice
. Click

here
for Peter
Brimelow`s
Forbes Magazine interview with Roberts
about the recent epidemic of prosecutorial misconduct.