Has the U.S. economy lost the ability to create middle class jobs?

In November the U.S. economy was able to create only 50,000 private sector jobs—almost all in low-paying services: temporary help, accommodations and food services (hotels, restaurants and bars), and hospitals and ambulatory health care services. This pattern has held throughout the second year of the "economic recovery" that began in November 2001.

Such jobs cannot support families and most might be filled by recent legal and illegal immigrants.

During the course of the last year (11/02-11/03), the U.S. economy has created pitifully few reasonably paying jobs: 94,000 jobs in specialty trade contractors (electricians and plumbers), 1,000 jobs in heavy & civil engineering construction (roads and bridges), 1,600 jobs in architecture and engineering services, 9,000 jobs in legal services, and 11,000 jobs in managerial and technical consulting (possibly laid-off managers and engineers). Many of these jobs are for support staff. [Bureau of Labor Statistics,The Employment Situation: November 2003, December 5, 2003]

Together that makes at most 116,600 reasonably paying jobs created during the second year of economic recovery. In addition some of the 62,000 jobs in finance and insurance, 18,000 in real estate, and 303,000 in education and health services provide a middle class income.

But all of the incomes from these 500,000 jobs is offset by the loss of 549,000 manufacturing jobs in the last 12 months. During its second year of "recovery," the overall economy experienced a net loss of 183,000 private jobs!

Looking at the job numbers by category is sobering. Currently the U.S. is running a $500 billion trade deficit. Where among the growth sectors of the economy—temporary help, restaurants and bars, hospitals and ambulatory health care services, real estate, electricians and plumbers, depository credit intermediation and commercial banking—are there any potential exports to close the massive gap in our balance of trade?

Substituting ideology for thought, free market pundits pretend that the massive U.S. trade deficit is caused by an inflow of foreign investment.

However, if these pundits were to examine the actual figures, they would discover that this "foreign investment" actually represents foreign acquisition of existing U.S. assets, not construction of new businesses. As Warren Buffett recently made clear in Fortune magazine, we are paying for our excess consumption by giving our wealth to foreigners.

As Buffett puts it, the U.S. has ceased to be Thriftville and has become Squanderville.

Jobs in the export and import-competing sectors of the U.S. economy continued to decline during the second year of "economic recovery." Among the lost 548,000 manufacturing jobs during the past 12 months are: 89,000 loss jobs in computers and electronic products, 26,000 in electrical equipment, 43,000 in transportation equipment, 18,000 in furniture, 94,000 in textiles and apparel, 47,000 in machinery, 55,000 in fabricated metal products, 36,000 in primary metals, 22,000 in paper and paper products, 14,000 in printing, 17,000 in chemicals, 25,000 in plastics and rubber products.

During the past 12 months, the U.S. economy lost 148,000 jobs in trade, transportation, and utilities, including 47,000 in wholesale trade and 27,000 in retail trade.

The information sector lost 117,000 jobs, including 53,000 in telecommunications.

Looking for something to extol, pundits have seized on the high productivity numbers. Pundits tend to associate "productivity" with factories and assume the high number means manufacturing is prospering. But, alas, the high productivity number means something very different.

The loss of 74,000 jobs in wholesale and retail trade during a year of economic recovery reflects the inroads made by merchandising giants such as Wal-Mart and Home Depot. The ratio of labor hours to sales in these stores is much lower than in the businesses Wal-Mart and Home Depot have displaced. The higher sales to labor ratio boosts the productivity number.

Other aspects of a service economy result in artificially higher productivity numbers. Cell phones, computers, home offices and the pressure "to make our numbers" result in a divergence between hours worked and hours paid for many service employees. Sales representatives, programmers, managers, and bookkeepers, for example, put in many hours at home for which they are not paid. The effect is to overstate productivity.

September 11 and the "War on Terror" have set off much chest-thumping on the part of pundits anxious to display their patriotism. The same chest-thumping that led to a miscalculated invasion of Iraq can produce incorrect expectations about the economy.

What happens to engineering and architectural graduates when the economy during a year of economic recovery can create at most only 1,600 places for them?

What will happen to engineering enrollments and to innovation if the things that engineers produce are not made in America?

What will become of engineering schools?

Can a country without engineers, scientists, and manufacturing be a superpower?

Perhaps real jobs will return to the U.S. economy in 2004 or 2005. If they do not, will the chest-thumping continue?

COPYRIGHT CREATORS SYNDICATE, INC.

Paul Craig Roberts is the author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice. Click here for Peter Brimelow's Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.