Ummm, how could the extra consumer liquidity be less than the cost?
And now the bad news..........
- Thread starter Natoma
- Start date
So the companies wouldn't spend/invest this money?
RussSchultz said:
Corporate spending/investment has been abysmal during this downturn. From 2000-2003 consumer spending stayed strong, but due to pricing pressures, overcapacity, etc, corporate spending/investment fell dramatically.
It's one of the reasons this recovery has been jobless thus far. Corporations are wringing every last bit of productivity out of their current workers before they hire. That's why productivity surged 5.4% last year while payrolls fell by roughly 1 million.
Natoma said:
It's jobless because of productivity gains. You can't just "wring every last bit" of productivity out of their "current workers" as you just stated. There is no basis for this, especially since the average employment (per hour) has decreases 2% year-over-year - during the same period of 4.5% productivity gains. What you're saying just isn't true.
Vince said:
There have been several cuts in the past 3 years. To which are you referring? I'm making a 3 year trend statement, not the past 6 months.
Vince said:
Sigh. Vince you're saying the same thing. Corporations are trying to get every bit of productivity out of their current employees and live with that as long as they can. Productivity rising at 5.4% in 2002 allowed them to decrease their payrolls while maintaining or in some cases increasing productivity. Corporations won't hire until they're forced to hire, i.e. when market demands outstrip productivity gains, which has not happened yet.
Average employment hours have decreased because of the productivity gains as well. This allows corporations to slash hours worked, including overtime, while maintaining productivity levels, which shores up the "bottom line." This has been seen by the increase in unpaid vacations corporations have forced on their employees. It works directly with what has been witnessed in this economy in the past 3 years, not against.
Natoma: Could you provide some links for the current US corporate income tax rate, and what the tax cut was and when it happened?
I cannot seem to find anything concerning a federal corporate income tax. Unless, of course, they're filing as individuals.
I cannot seem to find anything concerning a federal corporate income tax. Unless, of course, they're filing as individuals.
Natoma said:
It's different due to the cause and it's subsequent effect whioch is what I was commenting on. Saying that corperations are wringing out the last ounces of worker productivity (eg. would most likely be manifested in longer hours) and that's why the jobless recovery exists... is wrong. Productivity gains lead this, which are ultimatly lead by profit.
RussSchultz said:
The only thing I've been able to find so far is this:
http://www.cato.org/dailys/04-04-02.html
In 2002 the average corporate tax rate, combining federal and state, in the United States was 40% (NY for instance is 45% combined), but they didn't cite the difference between state and federal, so I'm not sure what the federal rate is when parsed out. There doesn't seem to be much conclusive information. I've searched using "federal corporate income tax rate" to no avail on google, and a few others. I suppose my luck has been as good as yours in this regard...
Vince said:
This only changes due to perception. Productivity is a measure of how much work per hour is accomplished. If a corporation wants to increase their productivity levels, one of the easiest ways would be to decrease the number of hours and grant unpaid vacations while increasing the work load and quota fulfillment requirements.
If you create 1 unit per hour, 8 hours a day, your corporation making you work overtime would only increase the volume, not per hour productivity. If your corporation decreases your work schedule to 7 hours per day, but says you have to meet 2 units per hour to fulfill your quota, voila, productivity soars. This is what corporations have been doing. The reason why they've been able to force 2 units per hour instead of 1, as per my example, is largely because of technology gains.
Natoma, you are completely overlooking the fact that the vast majority of jobs are in the service sector, and it is somewhat misleading to speak of "units" being produced, and assuming that improvements in productivity in that sector would lead to less working hours or more employment.
In the service sector, the primary improvement you get is automation reducing the need for what I'd call "paper IT", people manual information processing, warehouse management, supply chain management, etc which could be done automatically.
What does a 5% productivity gain mean for a McDonalds Cashier, Walmart attendant, lawyer, or doctor? An increase in the number of burgers sold per employee? Increase in number of legal cases handled? These cannot lead to more McDonalds cashiers being hired, regardless of the hours the cashier is working.
You really think that being able to replace McDonalds employees with automated cash registers (which will count as a productivity gain) and which leads to a non-increase in jobs in that sector can be explained by claiming that the remaining McDonalds workers are just working longer hours? You really think the European model of "job sharing" (trying to fix unemployment by making people work less hours) will work? It hasn't worked for them.
The fact of the matter is, productivity measurements are full of problems (especially the service sector) and adjusting for that yields a quite anemic 0.88-3% improvement for the entire 1990s, and now even that service sector jobs are being outsourced to India, how is it that you expect anemic real productivity gains and foreign outsourcing to lead to a recovery in jobs, or explain the failure to recover purely in terms of increased working hours.
In the service sector, the primary improvement you get is automation reducing the need for what I'd call "paper IT", people manual information processing, warehouse management, supply chain management, etc which could be done automatically.
What does a 5% productivity gain mean for a McDonalds Cashier, Walmart attendant, lawyer, or doctor? An increase in the number of burgers sold per employee? Increase in number of legal cases handled? These cannot lead to more McDonalds cashiers being hired, regardless of the hours the cashier is working.
You really think that being able to replace McDonalds employees with automated cash registers (which will count as a productivity gain) and which leads to a non-increase in jobs in that sector can be explained by claiming that the remaining McDonalds workers are just working longer hours? You really think the European model of "job sharing" (trying to fix unemployment by making people work less hours) will work? It hasn't worked for them.
The fact of the matter is, productivity measurements are full of problems (especially the service sector) and adjusting for that yields a quite anemic 0.88-3% improvement for the entire 1990s, and now even that service sector jobs are being outsourced to India, how is it that you expect anemic real productivity gains and foreign outsourcing to lead to a recovery in jobs, or explain the failure to recover purely in terms of increased working hours.
DemoCoder said:
Productivity doesn't have to be measured necessarily in "units" produced. That was just the easiest example I could come up with, but it was not meant to be the panacaea descriptor. Productivity can also be measured in ROI per employee per hour for instance.
Anyway, the main reason I made that assessment is not because I believe this to be true in all cases. What we have witnessed is a recovery unlike any other. This recovery has sustained increased productivity without a subsequent increase in jobs. On the contrary, jobs have been shed at a rate not seen since Herbert Hoover's term, but productivity has continued to improve.
Under normal circumstances, a recovery would bolster the job market, and I would be in agreement with you that believing improvements in productivity would lead to less hours per employee is an erroneous statement to make. The current market however makes it far easier for employers to dictate hours, pay, and workloads, because supply is far greater than demand, putting the pressure on workers to find and keep a job, not on employers to retain employees. Nice role reversal from the late 90's actually. Kind of funny in that sense.
The current market simply belies historical measurements.
DemoCoder said:
Agreed. This in part allows the company to employ less workers, and have the ones who remain work less hours. This is why I said that the vast majority of productivity gains have come from technological improvements/investments from the 90's. More work with less workers and less hours = better bottom line.
DemoCoder said:
I never said that the remaining employees are working longer hours. In fact I'm claiming that productivity gains have allowed employers to lessen the hours that their employees work, and one such way is mandatory un-paid vacations that some corporations have enforced. This is something unheard of in past downturns.
DemoCoder said:
As I stated earlier, I've never argued that productivity gains would lead to more jobs or increased working hours. In fact, productivity gains merely help the bottom line of a corporation. What spurs job creation is market demand, which generally has little to do with corporate productivity. In the past productivity was completely tied in to job creation, but with today's technology investments and outsourcing, this is no longer the case. I also argued that productivity increases can very well lead to decreased working hours.
The productivity gains in the late 90's were on average 4% a year. The early 90's, yes, were marked by low productivity gains, i.e. more in line with the historical 2% averages of the past. However what has been shown is that while the economy went bust and apparently much of the stock market was "fluff," the productivity gains of the late 90's were more than real, as evidenced by the 5.4% explosion last year, and the fact that even in our current economy, we are on pace for a 4.5% rate this year.
Outsourcing in the "new economy" has only become a problem in the past year. I can only speculate at this time what effect it will have on productivity, but I assume that in the long run it will be negligible to the economy as a whole. Outsourcing occurred en masse in the 1970's amongst "blue collar" jobs in the manufacturing industry, and was a large part of the recessions of the 70s. While manufacturing never truly recovered, other industries picked up and prospered. Witness the IT boom of the past 24 years.
Now outsourcing is occurring in today's "blue collar" jobs, i.e. data entry, data center phone service, low level programming, et al. No doubt the economy will feel a crunch, but I have no doubt that the next boom will occur in a field not so easily outsourced, as it has in the past. Probably bio/nano tech or higher level computer information services.
#1 many people would vehemently disagree on the so-called "productivity" explosion/miracle statistics. In the services industry, many of these figures are derived by taking sales vs baseline labor costs.
(how do you measure the productivity of a software company or
consulting company?)
Let's say I sell $10 million in software, and my labor costs are $1 million Prod = $1 million per labor. I then outsource to India, my labor costs go to $300,000, coupled with a recession where I only sell $5 million, my Prod = $1.6 million per labor. There's my "productivity miracle" of a 60% gain in one year.
When the tech industry is averaged in with other productivity figures in the rest of the industry (many anemic), it gives the appearance of huge gains. For the last 5 years, economists have been lamenting the distortions that the tech sector and boom industries have on overall productivity statistics, because a) they are hard to measure and b) they were incredibly large. I'm not saying we didn't get any productivity gains, I'm just saying that productivity is misleading. Manufacturing sector declined again (2.1% lower output), but had 6.1% less hours worked, so they claimed a productivity gain!
You chain of reasoning works like this:
a) we are in a recovery (arguable, we are in a temporary blip of a double dip)
b) ergo, jobs have not returned
c) therefore, something wierd is going on, and damn the Bushies
Here's what I see
a) we had a credit-financed expansion of the 90s from cheap capital and retirees dumping capital into markets. Where was Clinton warning people from irrationally exhuberant credit spending?
b) consumers also took advantage of cheap credit and spent themselves silly
c) market imploded, investment capital crunch, businesses scale back spending
d) consumers lose confidence (savings imploded in market), debt ridden, borrowing decreases, consumption decreases
e) Government takes steps to prop up demand
1) expand money supply further (lower interest rates)
2) raise government demand (spending)
3) tax cuts to consumers and businesses
f) short term effect of higher government spending, and cheaper credit is more consumption. This "cushioned" the recession.
but
g) consumers still heavily debt ridden (now with lower interest rates on refinanced debt). Same salary + same debt +altered interest payments != long term sustained recovery.
h) businesses still debt ridden. corporate profitability low. Business debt and low profitability means hiring freeze.
So I ask, why do you think we're in a recovery? How can consumers and businesses in just 2 short years wipe out a decade of burdensome debt and swing the pendulum back the other way? Answer, they can't, which is what the Economist has been warning about for the last 5 years. You will not see jobs return until consumers and businesses shed some more debt, and there is little the government can do to alter this.
I would argue that any spikes in productivity gains you see now are simply statistical anomalies and that many are really non-existent, but simply driven by a decline in output and an even bigger decline in work. In the services sector, you can outsource everyone but the cashiers and sales people in the stores, and get huge declines in labor costs, but with no fundamental change in the efficiency of the work being done.
(how do you measure the productivity of a software company or
consulting company?)
Let's say I sell $10 million in software, and my labor costs are $1 million Prod = $1 million per labor. I then outsource to India, my labor costs go to $300,000, coupled with a recession where I only sell $5 million, my Prod = $1.6 million per labor. There's my "productivity miracle" of a 60% gain in one year.
When the tech industry is averaged in with other productivity figures in the rest of the industry (many anemic), it gives the appearance of huge gains. For the last 5 years, economists have been lamenting the distortions that the tech sector and boom industries have on overall productivity statistics, because a) they are hard to measure and b) they were incredibly large. I'm not saying we didn't get any productivity gains, I'm just saying that productivity is misleading. Manufacturing sector declined again (2.1% lower output), but had 6.1% less hours worked, so they claimed a productivity gain!
You chain of reasoning works like this:
a) we are in a recovery (arguable, we are in a temporary blip of a double dip)
b) ergo, jobs have not returned
c) therefore, something wierd is going on, and damn the Bushies
Here's what I see
a) we had a credit-financed expansion of the 90s from cheap capital and retirees dumping capital into markets. Where was Clinton warning people from irrationally exhuberant credit spending?
b) consumers also took advantage of cheap credit and spent themselves silly
c) market imploded, investment capital crunch, businesses scale back spending
d) consumers lose confidence (savings imploded in market), debt ridden, borrowing decreases, consumption decreases
e) Government takes steps to prop up demand
1) expand money supply further (lower interest rates)
2) raise government demand (spending)
3) tax cuts to consumers and businesses
f) short term effect of higher government spending, and cheaper credit is more consumption. This "cushioned" the recession.
but
g) consumers still heavily debt ridden (now with lower interest rates on refinanced debt). Same salary + same debt +altered interest payments != long term sustained recovery.
h) businesses still debt ridden. corporate profitability low. Business debt and low profitability means hiring freeze.
So I ask, why do you think we're in a recovery? How can consumers and businesses in just 2 short years wipe out a decade of burdensome debt and swing the pendulum back the other way? Answer, they can't, which is what the Economist has been warning about for the last 5 years. You will not see jobs return until consumers and businesses shed some more debt, and there is little the government can do to alter this.
I would argue that any spikes in productivity gains you see now are simply statistical anomalies and that many are really non-existent, but simply driven by a decline in output and an even bigger decline in work. In the services sector, you can outsource everyone but the cashiers and sales people in the stores, and get huge declines in labor costs, but with no fundamental change in the efficiency of the work being done.
Willmeister
Newcomer
Economist, The
def. A magazine which hides the names of the journalists who write its articles in order to create the illusion that they dispense disinterested truth rather than opinion.
This sales technique, reminiscent of pre-Reformation Catholicism, is not surprising in a publication named after the social science most given to wild guesses and imaginary facts presented in the guise of inevitability and exactitude. That it is the Bible of the corporate executive indicates to what extent received wisdom is the daily bread of the managerial civilization. See also Mussolini.
--
This is also a publication back in 92 or 93 that was devoted to bashing those who were protesting the rise of child labour...
def. A magazine which hides the names of the journalists who write its articles in order to create the illusion that they dispense disinterested truth rather than opinion.
This sales technique, reminiscent of pre-Reformation Catholicism, is not surprising in a publication named after the social science most given to wild guesses and imaginary facts presented in the guise of inevitability and exactitude. That it is the Bible of the corporate executive indicates to what extent received wisdom is the daily bread of the managerial civilization. See also Mussolini.
--
This is also a publication back in 92 or 93 that was devoted to bashing those who were protesting the rise of child labour...
Democoder:
First off, I must say that your first mistake in all this is reading The Economist. Businessweek my friend.
Seriously though, my question to you is why do you believe we're not in a recovery?
From January 2002 - July 2003, retail sales have increased from $290 billion to $320 billion, after a sharp decline from 2001 - 2002. In the last quarter, retail sales grew at 1.4%. They were expected to grow at 0.9%.
Industrial output of high tech equipment, after bottoming out in 2000 and 2001, has returned to levels not seen since 1997. Why is this occurring? Overcapacity in that sector has decreased dramatically, not to mention the coming "upgrade" cycle that usually takes 3-5 years to complete.
Housing was expected to decline 1.7% but instead grew 1.5% in the past quarter, jumping to a 17 year high. Industrial production was expected to grow at 0.2% but instead grew at 0.5%. Exports, mostly due to the weakened dollar, skyrocketed 2.4% even though the expectation was 0.5%. Core CPI growth was expected at 0.1%, but it actually grew at 0.2%. Jobless claims have slowed enough to where a slight shift more will push the economy into job growth phase.
These numbers are part of the continuing trend of positive growth noticed since early 2002. We've basically been digging ourselves out of the hole created in 2000 and 2001 for the past year, and growth prospects show the economy hitting 4.5% this year after 5.4% last year.
If that doesn't speak to you of a recovery, what does? Recovery != end of debt to finance new spending. For instance, my bf and I have reduced our revolving debt load by 30% since we moved out in 2001. We still have a good amount of revolving debt, but we've begun spending again. Why? We're able to manage our debt far more easily now while upping our spending. Hell we just spent $4K on new computer equipment in the 2nd quarter and it hasn't phased us, due to our debt level management, higher pay, and lower interest rates. We're still in debt, but that doesn't mean we can't manage it and spend.
I don't think you'll see a sustained 3-5 year period of 4%+ growth in this country over the next decade, but it will return to 3%+ growth, which is still higher than our historical average of 2%, due in large part to productivity gains from technology and low inflation, which in and of itself is a byproduct of increased productivity.
The productivity gains that you state are statistical anomalies have continued since the mid-90s, despite the downturn. So I doubt they can be so flippantly dismissed as mere anomalies. In fact, productivity gains are accelerating. As I said earlier, it takes roughly 5 years for technology investments to be fully integrated, which means that the technology investments of 1997-1998 are taking full effect in 2002-2003. Considering the aggregate growth for 2002-2003 is expected to be 5% higher than the historical average for a two year period of 4%-5% (2%-2.5% a year vs 5.4% in 2002 and 4.5% in 2003), I would say that the economy has many things to look forward to in the coming years, which we are noticing in this past year and a half period. Continued low inflation rate is one of them.
First off, I must say that your first mistake in all this is reading The Economist. Businessweek my friend.
Seriously though, my question to you is why do you believe we're not in a recovery?
From January 2002 - July 2003, retail sales have increased from $290 billion to $320 billion, after a sharp decline from 2001 - 2002. In the last quarter, retail sales grew at 1.4%. They were expected to grow at 0.9%.
Industrial output of high tech equipment, after bottoming out in 2000 and 2001, has returned to levels not seen since 1997. Why is this occurring? Overcapacity in that sector has decreased dramatically, not to mention the coming "upgrade" cycle that usually takes 3-5 years to complete.
Housing was expected to decline 1.7% but instead grew 1.5% in the past quarter, jumping to a 17 year high. Industrial production was expected to grow at 0.2% but instead grew at 0.5%. Exports, mostly due to the weakened dollar, skyrocketed 2.4% even though the expectation was 0.5%. Core CPI growth was expected at 0.1%, but it actually grew at 0.2%. Jobless claims have slowed enough to where a slight shift more will push the economy into job growth phase.
These numbers are part of the continuing trend of positive growth noticed since early 2002. We've basically been digging ourselves out of the hole created in 2000 and 2001 for the past year, and growth prospects show the economy hitting 4.5% this year after 5.4% last year.
If that doesn't speak to you of a recovery, what does? Recovery != end of debt to finance new spending. For instance, my bf and I have reduced our revolving debt load by 30% since we moved out in 2001. We still have a good amount of revolving debt, but we've begun spending again. Why? We're able to manage our debt far more easily now while upping our spending. Hell we just spent $4K on new computer equipment in the 2nd quarter and it hasn't phased us, due to our debt level management, higher pay, and lower interest rates. We're still in debt, but that doesn't mean we can't manage it and spend.
I don't think you'll see a sustained 3-5 year period of 4%+ growth in this country over the next decade, but it will return to 3%+ growth, which is still higher than our historical average of 2%, due in large part to productivity gains from technology and low inflation, which in and of itself is a byproduct of increased productivity.
The productivity gains that you state are statistical anomalies have continued since the mid-90s, despite the downturn. So I doubt they can be so flippantly dismissed as mere anomalies. In fact, productivity gains are accelerating. As I said earlier, it takes roughly 5 years for technology investments to be fully integrated, which means that the technology investments of 1997-1998 are taking full effect in 2002-2003. Considering the aggregate growth for 2002-2003 is expected to be 5% higher than the historical average for a two year period of 4%-5% (2%-2.5% a year vs 5.4% in 2002 and 4.5% in 2003), I would say that the economy has many things to look forward to in the coming years, which we are noticing in this past year and a half period. Continued low inflation rate is one of them.
Willmeister
Newcomer
Because they've been saying we're in recovery off and on for a year and a half now. Why should we believe them now when they've been proven false in the past?
What's that story? Oh, yeah. The Boy Who Cried Wolf...
There have been significant structural changes and reductions that have taken place in the economy during the past 3 years. No one has been mistaken in that the economy has been recovering. The economy doesn't all of a sudden burst out to a 5.4% growth rate one year, then 4.5% the next. Structural improvements have to be in place in order to realize those gains.
So no, no one was mistaken that the economy was recovering. The only thing is that it hasn't "felt" like a recovery because jobs are still being lost. But the underlying structural changes have occurred that will allow this economy to grow at a fast enough pace to recover those jobs.
It's a difference in perception, not reality.
So no, no one was mistaken that the economy was recovering. The only thing is that it hasn't "felt" like a recovery because jobs are still being lost. But the underlying structural changes have occurred that will allow this economy to grow at a fast enough pace to recover those jobs.
It's a difference in perception, not reality.
As I said, this is a short term blip, not a stable recovery. What do you think is going to happen to housing in the next couple of months? Interest rates will only go higher as the bond market believes there is a recovery. Not only will this reduce demand for housing, but it will cause a shock in the housing market and potentially deflationary pressure, which means there will be few buyers who can afford the $800k house I just bought if mortgage rates soar past 7%. The dollar is already strengthening again, so there goes the temporary export blip. And of course, the tax cuts and fed rate cuts are going to run out of steam soon. What then? Like Reagan and Bush I, Bush II might be forced to raise taxes again and/or cut spending, which will siphon demand out of the economy too.
No, I think you will see a sputtering, blip based economy for the next few years, not sustained real growth. The fundamentals of the economy have not changed, and while the so-called "New Economy" did make some industries more efficient, it primarily allows service sector jobs to be exported over long distance via internet and telephony, yielding "productivity" increases (no increase at all in amount of product produced per worker, only a decrease in labor cost)
If this recovery is anything like Reagan's recovery in the 80s, it will be 2012 by the time anyone "feels" it.
No, I think you will see a sputtering, blip based economy for the next few years, not sustained real growth. The fundamentals of the economy have not changed, and while the so-called "New Economy" did make some industries more efficient, it primarily allows service sector jobs to be exported over long distance via internet and telephony, yielding "productivity" increases (no increase at all in amount of product produced per worker, only a decrease in labor cost)
If this recovery is anything like Reagan's recovery in the 80s, it will be 2012 by the time anyone "feels" it.
It's probably safe to say we're not going to agree on this.
Suffice it to say I hope you and The Economist are wrong, and I and Businessweek are right. My uncle, for example, just lost his job of 17 years due to downsizing at Reich & Tang, so more than anything else, I hope my interpretation of the facts proves completely correct.
Suffice it to say I hope you and The Economist are wrong, and I and Businessweek are right. My uncle, for example, just lost his job of 17 years due to downsizing at Reich & Tang, so more than anything else, I hope my interpretation of the facts proves completely correct.
I hope you are right too, but the only difference between BusinessWeek and the Economist is that the Economist hasn't changed it's tune, and BusinessWeek has. Warren Buffet is predicting 8 years till a full recovery BTW.
I fully expect that when I sell my house in 5 years in CA, I will have a big problem getting more than I paid for it.
I am planning and arranging my finances around a pessimistic economy, not an optimistic one. If I am wrong, I'll have more money to spend. If I'm right, I'll be more prepared for a sluggish economy.
Funny how if you're right, you're going to get another Bush term.
I fully expect that when I sell my house in 5 years in CA, I will have a big problem getting more than I paid for it.
I am planning and arranging my finances around a pessimistic economy, not an optimistic one. If I am wrong, I'll have more money to spend. If I'm right, I'll be more prepared for a sluggish economy.
Funny how if you're right, you're going to get another Bush term.
