Friday, August 01, 2003

The Globblog's central theme of overproduction got another boost today with the combination of expanding factory outputs and continued job losses.

The Institute for Supply Management said that the US manufacturing sector began to expand in July for the first time since February. Interestingly, the elements of the ISM index which were expanding most rapidly, and thus those contributing most to the overall evaluation of manufacturing expansion in the US, were: new orders (56.6 -- anything over 50.0 is expansion, under is contraction); imports (56.0); and new export orders (53.8).

Now call me a wet towel, but this doesn't exactly sound like booming economic activity in manufacturing. Two of the measures are prospective, predicting future activity, and the third measures imports, which is not domestic economic activity at all! Nonetheless, the sector does seem to think sunnier days are ahead.

But are they? While the unemployment rate dropped in July to 6.2%, everyone noticed the number-fudging going on.
The nation's unemployment rate dipped to 6.2 percent in July, but businesses cut jobs for a sixth month in a row, still wary despite signs the economy is on the mend. With jobs scarce, close to half a million people gave up looking.
As of July, 9.06 million Americans were "unemployed" and 1.57 million "marginally attached" (according to the Bureau of Labor Statistics, "persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past", which includes the "discouraged"). If we combine the unemployed with the marginally attached, we get an unemployment rate of 7.3%, down slightly from June's 7.4%.

Interestingly, the civilian labor force participation rate has been trending slightly downwards since 2000. It hit a recent high of 67.4% in April 2000; for July 2003 just 66.2% of Americans age 16 and over were working or looking for work.

So as American businesses start ratcheting up production again, there are fewer jobs and fewer jobholders out there to soak up production. Overproduction and disinflation are the likely short-term consequences. Unless, of course, the federal government will be buying up all this excess supply -- and with our war economy, maybe just that will happen.

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