Phony job growth numbers:

Life in the Bush Economy: Fat, Drunk and Broke
A Nation of Waitresses and Bartenders

By PAUL CRAIG ROBERTS

The Bureau of Labor Statistics payroll jobs report released May 5 says
the economy created 131,000 private sector jobs in April. Construction
added 10,000 jobs, natural resources, mining and logging added 8,000
jobs, and manufacturing added 19,000. Despite this unusual gain, the
economy has 10,000 fewer manufacturing jobs than a year ago.

Most of the April job gain --72%--is in domestic services, with
education and health services (primarily health care and social
assistance) and waitresses and bartenders accounting for 55,000 jobs or
42% of the total job gain. Financial activities added 26,000 jobs and
professional and business services added 28,000. Retail trade lost
36,000 jobs.

During 2001 and 2002 the US economy lost 2,298,000 jobs. These lost
jobs were not regained until early in February 2005. From February 2005
through April 2006, the economy has gained 2,584 jobs (mainly in
domestic services).

The total job gain for the 64 month period from January 2001 through
April 2006 is 7,000,000 jobs less than the 9,600,000 jobs necessary to
stay even with population growth during that period. The unemployment
rate is low because millions of discouraged workers have dropped out of
the work force and are not counted as unemployed.

In 2005 the US had a current account deficit in excess of $800 billion.
That means Americans consumed $800 billion more goods and services than
they produced. A significant percentage of this figure is offshore
production by US companies for American markets.

The US current account deficit as a percent of Gross Domestic Product
is unprecedented. As more jobs and manufacturing are moved offshore,
Americans become more dependent on foreign made goods. This year the
deficit could reach $1 trillion.

The US pays its current account deficit by giving up ownership of its
existing assets or wealth. Foreigners don't simply hold the $800
billion in cash. They use it to acquire US equities, real estate,
bonds, and entire companies.

The federal budget is also in the red to the tune of about $400
billion. As Americans have ceased to save, the federal government is
dependent on foreigners to lend it the money to operate and to wage war
in the Middle East.

American consumers are heavily indebted. The growth of consumer debt is
what has been fueling the economy. Social Security and Medicare are in
financial trouble, as are many company pension plans. Decide for
yourself--is this the economic picture of a superpower that can dictate
to the world, or is it the picture of a second-rate country dependent
on foreigners to finance its consumption and the operation of its
government?

No-think economists make rhetorical arguments that the decline of US
manufacturing employment reflects higher productivity from
technological improvements and not a decline in US manufacturing per
se. George Mason University economist Walter Williams recently
ridiculed the claim that US manufacturing jobs are moving to China.
Williams asks how the US could be losing manufacturing jobs to China
when the Chinese are losing jobs faster than the US: "Since, 2000,
China has lost 4.5 million manufacturing jobs, compared with the loss
of 3.1 million in the U.S."

The 4.5 million figure comes from a Conference Board report that is
misleading. The report that counts was written by Judith Banister under
contract to the U.S. Department of Labor, Bureau of Labor Statistics,
and published in November 2005 (www.bls.gov/fls/chinareport.pdf).
Banister's report was peer reviewed both within the BLS and externally
by persons with expert knowledge of China.

Chinese manufacturing employment has been growing strongly since the
1980s except for a short period in the late 1990s when layoffs resulted
from the restructuring and privatization of inefficient state owned and
collective owned factories. To equate temporary layoffs from a massive
restructuring within manufacturing with US long-term manufacturing job
loss indicates extreme carelessness or incompetence.

Banister concludes: "In recent decades, China has become a
manufacturing powerhouse. The country's official data showed 83 million
manufacturing employees in 2002, but that figure is likely to be
understated; the actual number was probably closer to 109 million. By
contrast, in 2002, the Group of Seven (G7) major industrialized
countries had a total of 53 million manufacturing workers."

The G7 is the US and Europe. In contrast to China's 109,000,000
manufacturing workers, the US has 14,000,000.

When I was Assistant Secretary of the Treasury in the Reagan
administration, the US did not have a trade deficit in manufactured
goods. Today the US has a $500 billion annual deficit in manufactured
goods. If the US is doing as well in manufacturing as no-think
economists claim, where did an annual trade deficit in manufactured
goods of one-half trillion dollars come from?

If the US is the high-tech leader of the world, why does the US have a
trade deficit in advanced technology products with China?

There was a time when American economists were empirical and paid
attention to facts. Today American economists are merely the
handmaidens of offshore producers. Apparently, they follow President
Bush's lead and do not read newspapers--thus, their ignorance of
countless stories of US manufacturers moving entire plants and many
thousands of US engineering jobs to China.

Chinese firms, including state owned firms, have numerous reasons, tax
and otherwise, to understate their employment. Banister's report gives
the details.

Banister points out that the excess supply of labor in China is about
five to six times the size of the total US work force. As a result,
there is no shortage of workers in China, nor will there be in the
foreseeable future.

The huge excess supply of labor means extremely low Chinese wages. The
average Chinese wage is $0.57 per hour, a mere 3% of the average US
manufacturing worker's wage. With first world technology, capital, and
business knowhow crowding into China, virtually free Chinese labor is
as productive as US labor. This should make it obvious to anyone who
claims to be an economist that offshore production of goods and
services is an example of capital seeking absolute advantage in lowest
factor cost, not a case of free trade based on comparative advantage.

American economists have failed their country as badly as have the
Republican and Democratic parties. The sad fact is that there is no
leader in sight capable of reversing the rapid decline of the United
States of America.

Paul Craig Roberts was Assistant Secretary of the Treasury in the
Reagan administration. He was Associate Editor of the Wall Street
Journal editorial page and Contributing Editor of National Review. He
is coauthor of The Tyranny of Good Intentions.He can be reached at:
paulcraigroberts RemoveThis @yahoo.com