Figures clarify and mystify

So much has been said about the unemployment figures in the US. Debates on whether any smaller percentage means an improvement in the job market keep going.

We all know we have to consider such factors as whether the denominator has diminished because it has excluded those who have been unemployed for a prologed period or simply have given up looking for a job, and whether the numerator has been over-estimated by counting those who are working on a part-time or very temporary basis, and graduates who try to secure a full time job by pledging to work as traineee etc without a salary etc. We also know that when the number of applicants for an unemployment allowance drops, it may be due to the fact that some people are no longer qualified for the benefit because they have been out of work and have "enjoyed" the protection for so long that they must give the place to the new comers.

So, we all believe that the real picture must be more disappointing.

Some hold other views though. It is believed that if the American Jobs Act had been passed, a million or even more jobs could have been added to the market.

It may be true, but in the short-run. The act could have delayed the worsening of the job market but was unlikely to be able to reverse the dim prospect and put most people back to a workplace permanently.

First, big profitable firms, let alone the SMEs, are laying off and the situation is indeed intensifying. Second, the question remains where the money for expansion comes from. The Fed can have quantitative easing again and again but one day it would be like the vain of applying drugs, vacines to terminally ill patients.

It is unless we see any structural change in the economy. A notion has it that the cost of production including cost of labour in America is decreasing thus the country as a place of manufacturing is becoming competitive, again.

Financial news features (in Cantonese) run by TVB Hong Kong recently interviewed heads of some Chinese firms who bought some American companies. Those firms operate plants in low-cost states and have part of their manufacturing process in the US amid rising labour expenditures at an annual rate of 15%-20% on the Mainland. However, such corporate moves are only limited to the production of certain high-end goods that relies a lot on R&D and when profits would not be offset by high transportation cost. Also, Chinese firms have choices eg SE Asia other than America when they consider moving their production line out of Mainland China, provided there are enough finance and technological incentives.

It remains to be seen whether the manufacturing industry will revive in America and become a lifeline for the economy. But that's certainly something economists should look at.