The People’s
Republic of China (PRC) appears to have taken the words of American
industrialist Henry Ford to heart. Ford said, “There is one rule for the
industrialist and that is: Make the best quality of goods possible at the
lowest cost possible, paying the highest wages possible.”
Last week, we
learned from CNBC China’s annual
trade was more than $4 trillion in 2013. That pushed the PRC ahead of the
United States and gave it standing as the world’s biggest trader. According to The New York Times, China’s annual trade
surplus, in U.S. dollar terms, was the largest since 2008 and 12.8 percent
ahead of 2012’s surplus. In other words, China exported more than it imported.
It’s interesting
to note imports to China increased significantly. In fact, imports rose more
than exports which reflects strong domestic demand, according to an expert
quoted by CNBC. That demand may have been
driven by rising wages and a growing middle class. The New York Times wrote:
“Export gains…
suggest that despite years of predictions of trouble for China’s export
juggernaut, it has not yet been derailed by fast-rising costs for blue-collar
labor, by an appreciating Chinese currency, or by foreign investment shifts
toward other, lower-wage Asian countries… Blue-collar pay has soared between
fivefold and ninefold in dollar terms in the last decade, wrecking China’s
reputation as a low-wage place for export-oriented manufacturing… A decade ago [a company] paid
about $75 a month for entry-level industrial workers and provided virtually no
benefits. Now, [a company] pays $570 a month plus $100 a month in
government-mandated benefits.”
The Economist forecast China’s economy will overtake
the United States’ in 2019 if economic growth averages 7.75 percent a year in
China and 2.5 percent in America and inflation averages 4 percent and 1.5
percent, respectively, between 2010 and 2020. In late 2013, the Organization
for Economic Cooperation and Development forecast growth in China would accelerate
to about 8.2 percent with 2.4 percent inflation during 2014, according to Reuters. Growth in the United States is
estimated to be 2.8 to 3.2 percent with inflation of 1.4 to 1.6 percent for the
year, according to the Federal Reserve.
is the glass
half full when it comes to unemployment? or is it half empty? You’re probably
familiar with that famous saying about the three types of lies: there are lies,
damned lies, and statistics. When trying to parse the implications of economic
data from government and non-government organizations, the myriad of ways in
which statistics can be sliced and diced quickly becomes apparent.
December’s jobs
report, which was released last week, is a prime example. The unemployment rate
fell from 7.0 percent to 6.7 percent; however, just 74,000 jobs were added in
the United States during the month. That’s less than one-half the number of
jobs economists had anticipated. So, there was less unemployment, but the
number of new jobs created didn’t meet expectations. Does that mean the employment
picture is weaker than experts thought?
Not necessarily. According
to The Economist:
“Payroll gains
were revised up in November to 241,000 (from 203,000) suggesting that some of
December’s hiring may have been pulled forward. The two-month average of
157,000 is probably a better picture of reality than either month’s tally.
Finally, the household survey, which while typically more volatile is still a
useful check on the better-known survey of employer payrolls, shows employment
rose 143,000, one reason the unemployment rate plunged to 6.7% from 7%.”
Does that mean the
employment picture is positive?
Not necessarily.
The number of people participating in the labor force in the United States was trending
south before the recession started back in December of 2007. Our workforce has
been shrinking because of cyclical factors, like people giving up on finding
jobs because jobs are hard to find, and structural factors, such as Baby
Boomers retiring and the participation of women in the workforce has been leveling
off.
All in all, 3.9
million Americans (that’s about 38 percent of all unemployed workers) have been
unemployed for at least 27 weeks. Are they discouraged? Have they retired? Are
they raising children? There are probably some statistics out there that could provide
further insight.
Weekly Focus – Think
About It
“The superior man acts before he
speaks, and afterwards speaks according to his action.”
--Confucius, Chinese philosopher
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