The September 2011 unemployment rate, released on Oct. 7, was dismal and has been virtually unchanged since July, when it decreased slightly on a month-by-month basis from 9.2 percent to 9.1 percent, although it improved over the September 2010 rate, which was at 9.6 percent.
Employment numbers improved slightly in September. However, the improvement was not due to new job openings, but because 45,000 Verizon Communications Inc. workers, who had walked off the job in August, ended their strike and went back to work without reaching a settlement.
Many theories have been brought forward concerning the continued dismal U.S. unemployment situation with most blaming the financial crisis and its subsequent economic downturn.
The unemployment situation has been caused by not just one factor, as economists have told America for years. Factors, such as moving jobs offshore, technological advances, lobbying for special tax treatment for offshoring, greed by unions, political infighting, the federal deficit, and so on, are the most prevalent factors behind the present unemployment situation.
“There is no single reason, but it appears that job losses began to accelerate after the year 2000. Several reasons for the incredible loss in jobs have been given, including job destruction forces from computerization (faster computers, the internet, software productivity tools and applications) and globalization ... shifting jobs out of the United States and around the globe in search of the cheapest possible labor,” according to a 2011 article by PBT Consulting, a business planning and venture capital firm.
Yet lately other voices are being heard from those who appear quite certain as to where the blame should be laid. Financial analysts, economic bigwigs, and think tank staff are putting the blame squarely on the shoulders of U.S. trade with China’s regime and the unprecedented trade deficit the U.S. has suffered because of the Chinese regime’s market and currency manipulations.
“Holding China accountable won’t solve our economic problems on its own, but it can contribute to a solution—and it’s an action that’s long overdue,” said Paul Krugman, a recognized American economist, in his October op-ed piece in the New York Times.
Chinese Regime’s Trade Policy Damaging US Economy
“Our analysis finds that exposure to Chinese import competition affects local labor markets along numerous margins beyond its impact on manufacturing employment,” according to a 2011 report by three economists, funded by The National Science Foundation, Spanish Ministry of Science and Innovation, and others.
The researchers compared manufacturing in specific local U.S. markets and the competition from products imported from the Chinese state, concluding that not only manufacturing jobs were lost, but also the overall employment in that area suffered.
It is just like a domino effect, as not only do the Chinese regime’s cheap exports trigger job losses in the manufacturing sector, but also across nonmanufacturing sectors. Existing wages are also suppressed given the competition for jobs, as many people are unemployed and willing to accept lower wages.
All in all, international trade is beneficial only if each partner doesn’t undercut the other country by subsidizing products and dumping underpriced products into the other’s market, as the Chinese regime has been doing for years.
“There are real costs, real losers to international trade, and the frictions that prevent these workers from being reabsorbed into the economy are also real. The costs are, at the very least, more medium-term than is more commonly assumed,” according to a 2011 article by Mike Konczal, fellow at the Roosevelt Institute, on the Rortybomb Finance blog.
Blame Game Impedes Resolution
“Chinese imports are creating American jobs, too,” said Brian Picone, graduate student at Brown University, on his blog policymic, basing his remarks on the August FRBSF Economic Letter from the Federal Reserve Bank (Fed) of San Francisco.
Picone and the Fed report argue that China’s exporters only earn half of what it costs to buy a product made in China, as the greater portion of what the consumer pays goes to the importer, wholesaler, and retailer in the importing market.
“The vast majority of goods and services sold in the United States are produced here. In 2010, imports were about 16% of U.S. GDP,” according to the FRBSF Economic Letter.
The Alliance for American Manufacturing (AAM), a not for profit organization, posted a guest rebuttal to the FRBSF Economic Letter statement with the headline “Deceptive ‘Made in China’ Statistics.”
The AAM accuses the Fed of playing with numbers to trick the American public into believing that trade with the Chinese regime is beneficial to the United States.
“The growing U.S. trade deficit with China has cost jobs in every one of the nation’s congressional districts,” reported the AAM in a press release, referencing a September study by the Economic Policy Institute.
As of July 2011, the trade deficit for 2011 amounted to $160 billion, with the Chinese state exporting products worth $218 billion to the United States and importing products worth $58 billion from the United States. In 2010, the U.S. trade deficit with China amounted to $273 billion. If 2011 figures were annualized, the trade deficit would reach $320 billion, much higher than the 2010 year-end numbers.
“The U.S. trade deficit with China means that U.S. companies that can’t compete with cheap Chinese goods must either lower their costs or go out of business. ... U.S. manufacturing, as measured by the number of jobs, declined 34% between 1998 and 2010,” according to About.com, a website that provides expert information on a variety of topics, including the U.S. economy.
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Bullying Trade Partners
“China’s Vice Foreign Minister Cui Tiankai warned the U.S. again … that passing the Currency Bill would damage relations between the world’s two largest economies, and cost U.S. jobs. Minister Cui says the legislation could trigger a trade war and hold back the global economic recovery,” according to a Morgan Gold Oct. 10 article.
The Chinese regime is threatening a trade war if the bill concerning currency manipulation results in import tariffs on Chinese goods. From past experience one can deduce that these are not mere threats, and that the Chinese regime means to carry through on its threat.
This month, Norway reported the Chinese state to the World Trade Organization (WTO) over import controls levied against Norwegian salmon in retaliation for that country awarding the Nobel Peace Price to Chinese dissident Liu Xiaobo. The Chinese regime, to show its displeasure, also kept the salmon out of freezers, so it would rot before it could be delivered to retailers or restaurants, according to Norwegian news reports.
In 2009, China was taking retaliatory steps against U.S. automotive and chicken products because President Barack Obama decided to levy tariffs on tires from the Chinese state.
At the time, the WTO had determined that the Chinese state was dumping tires into the U.S. market.
“China’s Ministry of Commerce has announced moves toward launching anti-dumping measures against automotive and chicken products imported from the US. The timing shows it undeniably to be a retaliatory measure after President Barack Obama’s September 11th decision to levy tariffs of up to 35% on China’s huge exports of tires to the US in a previous anti-dumping case,” according to a September 2009 article on China Stakes, a website that reviews China’s economy, finance, and business.
