This is the first of a multi-part post on CWP=D (consumption without production equals debt) that will hopefully provide some clarity into how we got into this current mess (high levels of debt and unemployment) we are in. The reason for the multi-part structure? I am not exactly sure where this is going.
Let’s see how this goes…
Part I: Where Are The Jobs At?
The chart below outlines the dramatic shift in the Chinese labor force from 1999-2009, which along with a number of mercantilist emerging economies dramatically shifted the global labor force. Specific to China, the number of workers within primary sectors (defined as sectors that extract or harvest products from the earth) declined, while the number in secondary sectors (sectors of the economy that manufacturer finished goods) and tertiary sectors (those that provide services to the general population) spiked. To put this in perspective… that 50 million increase in the secondary sector labor force is equal to roughly 40% of the ENTIRE U.S. labor force.
U.S. – China Trade
Chinese Currency Reserves
The impact of a huge supply shock in any good or service (all else equal) should be a substantial decrease in the price of that good or service. In the case of U.S. employment, which tends to be sticky (i.e. prices have a hard time going down), the impact would also mean a decline in the quantity of U.S. labor demanded by the global economy.
Source: Haver Analytics