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Thursday, September 22, 2011

Trade deficit with China cost nearly 2.8 million U.S. jobs since 2001

The growing trade deficit with China has eliminated or displaced nearly 2.8 million U.S. jobs since 2001 -– or about 2% of all domestic employment during that period, according to a briefing paper from the Economic Policy Institute.

California was the hardest hit, losing nearly 455,000 jobs from 2001 to 2010 due to trade with the Asian giant, according to Robert Scott, the institute’s director of trade and manufacturing policy research. Texas lost nearly 233,000 positions the same way.

The increase in imports from China is only part of the picture, according to Scott. Since the Chinese yuan is pegged to the U.S. dollar, the currency remained artificially low, making U.S.-made goods more expensive in China and pushing down exports.

And heavy competition and cheap labor from abroad has pushed down wages for U.S. workers and reduced their bargaining power -– especially among the 70% of the workforce without a four-year college degree. In 2006, for example, a full-time median-wage earner lost $1,400 due to globalization, according to the report.

Since China entered the World Trade Organization in 2001, the trade deficit has boomed to $278 billion in 2010 from $84 billion in 2001.

Over that period, nearly 70% of the U.S. jobs lost were in manufacturing. Factory positions working with computer and electronic parts were especially depleted, but other jobs in apparel, textile fabrics and motor vehicles and parts were also significantly affected.

U.S. ambassador warns China: Foreign businesses feel unwelcome

-- Tiffany Hsu

Photo: Employees stand by a Sany Heavy Industry Co. 86m truck mounted concrete pump as it is introduced at the company's factory in Changsha, Hunan Province, China Monday. Credit: Forbes Conrad / Bloomberg

Commuter Nation

The average time it takes Americans to commute to work is 25.1 minutes, according to a new report based on Census data from 2009. Of all metropolitan areas, New York-Northern New Jersey-Long Island area has the longest average commute time in the country, at 34.6 minutes, and has the highest share of its workers using public transportation to get to work.

CATHERINE RAMPELL

Dollars to doughnuts.

Here’s a look at the distribution of commute lengths across the country:

Dollars to doughnuts.

Interestingly, while the average commute is 25.1 minutes, there are actually relatively few Americans who have a commute of exactly that length. There are just a lot of Americans with commutes shorter than that, and a bunch with commutes much longer than that. A plurality of workers have a commute in the 15-to-19-minute range.

The report also found that the median American leaves for work between 7:30 a.m. and 7:59 a.m.

Here’s a chart showing what percent of workers leave home at a given time:

Over time, American commutes have gotten somewhat less environmentally friendly, as you can see in the chart below. Over three-quarters of the nation’s workers drove alone to work in 2009, with another 10 percent commuting by carpool:

Across the country, only 3.5 percent of American workers had zero carbon footprint because they walked or bicycled to work. The metro area with the highest share of its workers commuting by bicycle is Corvallis, Ore., at 9.3 percent. The area with the highest share commuting by walking is Ithaca, N.Y., at 15.1 percent.

Consumer Confidential: Toys R Us hiring; Wal-Mart gets sunnier

Here's your who's-on-third Thursday (I don't know) roundup of consumer news from around the Web:

--Looking for work? How about a temp job as one of Santa elves? Toys R Us says it will hire about 40,000 seasonal workers for the holidays. Beginning this week and running through November, the company is accepting applications for a range of jobs around the country. Executive vice president of human resources Dan Caspersen said that "we are proud to create tens of thousands of jobs across the country this Christmas, while providing the potential for hardworking individuals to find a permanent position with us." In previous years, the company has hired between 35,000 and 45,000 holiday workers. According to a new report from the outplacement firm Challenger, Gray & Christmas (no relation), companies are expected to hire at about the same level or less than last year's 627,600 jobs from October through December.

--Speaking of big-box retailers, Wal-Mart is going greener. The company says it will install solar-power panels at most of its California stores. A Wal-Mart spokeswoman says the company has installed rooftop panels on about 65 California stores and plans to raise that number to more than 130 -- about three-fourths of its stores in the state -- by the end of 2013. The Arkansas-based company hopes to use solar for 20% to 30% of each store's electricity needs. It says solar energy has cut its energy spending by more than $1 million. That's a lesson plenty of other businesses would be wise to heed.

-- David Lazarus

Photo: Toys R Us needs more helping hands for Santa. Credit: Classic Media

Stocks plunge on concerns about new Fed program

The Dow Jones industrial average plunged more than 300 points in early trading as investors recoiled from the Federal Reserve's new effort to stimulate the economy and the central bank's statement that the economy may be in for a long period of slow growth.

A little more than an hour into the trading session, the Dow was down 300.91 points, or 2.7%, to 10,823.93. The broader Standard & Poor's 500 index was down 2.3%.

The losses built on declines late Wednesday after the Fed announced it would attempt to bring down long-term interest rates by replacing $400 billion of its holdings of short-term government debt with long-term U.S. Treasury bonds.

Analysts have questioned whether the program will have the desired beneficial impact, given that the economy is facing significant headwinds and long-term interest rates are already quite low.

The Fed also rattled investors Wednesday by highlighting "significant downside risks to the economic outlook." The statement ramped up fears that the economy could be headed for a new recession.

The continuing fallout from the central bank's announcement overshadowed a report Thursday showing that new claims for unemployment benefits dropped slightly last week from the week before.

Moody's cuts BofA, Wells Fargo and Citigroup credit ratings

Q&A: How the Fed move could affect the economy and markets

--Nathaniel Popper

twitter.com/nathanielpopper

Photo: Getty Images/Michael Nagle

Mortgage rates hold steady, Freddie Mac survey says

The interest rate on a 30-year fixed mortgage held steady this week at a 60-year low while the 15-year fixed loan edged down to a new record low, mortgage finance company Freddie Mac said in its weekly rate snapshot.

Freddie's survey, out Thursday morning, showed that the rate lenders were offering to solid borrowers for a 15-year loan fell from 3.30% to 3.29% -- a statistically immaterial amount.

Borrowers would have paid 0.7% of the loan amount upfront in lender fees and points on the 30-year mortgage and 0.6% on the 15-year loan, Freddie Mac said.

The government-controlled loan buyer said start rates were up slightly on fixed-rate home loans.

Freddie surveys lenders Monday through early Wednesday each week. It asks them to report popular combinations of rates and fees that they are offering to borrowers with good credit and 20% down payments or that much home equity if they are refinancing.

Although the housing markets showed a glimmer of recovery in August, with sales up sharply, more than three-quarters of all home-loan applications are for refinances these days, according to the Mortgage Bankers Assn.

The volume of refis, which rose slightly last week, could get another pop from the Federal Reserve's newly announced program to load up on mortgage securities, which could drive down rates even further.

New holiday forecasts signal subdued season

U.S. home sales up sharply in August

-- E. Scott Reckard

Photo: Newly built homes in Corona. Credit: Konrad Fiedler / Bloomberg

Report: U.S. spending billions of dollars to subsidize junk food

A new report released this week has found that, among the billions of dollars spent each year in federal subsidies for commodity crops, a steady flow of these taxpayer dollars are going to support high fructose corn syrup and three other common food additives used in junk food.

The report, “Apples to Twinkies: Comparing Federal Subsidies of Fresh Produce and Junk Food” by CALPIRG and the U.S. PIRG Education Fund, studies the interesting question of whether the nation's problem with obesity is fueled by farm subsidies.

From 1995 to 2010, $16.9 billion in federal subsidies went to producers and others in the business of corn syrup, high fructose corn syrup, corn starch and soy oils, according to the report.

The findings come as the White House has been rallying to battle childhood obesity, and Congress is poised to potentially either quash or curtail direct farm subsidy payments in the future.

So how much is America spending? Enough for each U.S. taxpayer to buy 19 Twinkies a year, according to the report. In comparison, it said, federal subsidies for fresh produce would cover only a few bites of an apple per taxpayer a year.

One of the more interesting findings: Taxpayers in the San Francisco area spend $2,762,295 each year in junk food subsidies, but only $41,950 each year on apple subsidies.

“If these agricultural subsidies went directly to consumers to allow them to purchase food, each of America’s 144 million taxpayers would be given $7.36 to spend on junk food and 11 cents with which to buy apples each year –- enough to buy 19 Twinkies but less than a quarter of one Red Delicious apple apiece,” CALPIRG officials said in a statement.

You can read an executive summary of the report, and get a copy of the full report, here.

ALSO:

Healthier fast food for kids?

Got alcohol? Gov. Brown legalizes flavor-infused drinks

Consumer Confidential: Soda warning; free Chick-fil-A meals

-- P.J. Huffstutter

Photo: Hostess Twinkies. Credit: Justin Sullivan / Getty Images / AFP

Can the I.M.F. Save the World?

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

The finance ministers and central bank governors of the world gather this weekend in Washington for the annual meeting of countries that are shareholders in the International Monetary Fund. As financial turmoil continues unabated around the world and with the I.M.F.’s newly lowered growth forecasts to concentrate the mind, perhaps this is a good time for the fund – or someone – to save the world.

Today’s Economist

Perspectives from expert contributors.

Yet there are three problems with this way of thinking. At least in a short-term macroeconomic sense, the world does not really need saving. If the problems do escalate, the monetary fund does not have enough money to make a difference. And the big dangers are primarily European — the European Union and key euro zone members have to work out some difficult political issues, and their delays are hurting the global economy.

Perspectives from expert contributors.

But very little can be done to push them in the right direction.

The world’s economy is slowing, without a doubt. The latest quantification was provided Tuesday in the I.M.F.’s World Economic Outlook (see Table 1.1), perhaps the most comprehensive forecast of global growth and its main components. (Disclosure: I helped produce and present these forecasts when I was chief economist at the I.M.F., a position I left in summer 2008.)

The fund has reduced its forecasts for both 2011 and 2012, and while the latter is a more notable change, we can see the gloomy 2011 picture all around us. Compared with its view in June, the fund now expects global growth in 2012 to be one-half of one percentage point lower than previously expected.

Part of the pessimism is about the United States – total growth of gross domestic product in 2012 is expected to be only 1.8 percent, anemic at best. (Remember that our population typically grows at just under 1 percent annually, so this level of growth would barely put a dent in unemployment.)

But the really stark message is for Europe. According to the I.M.F., the euro zone as a whole will expand only 1.1 percent in 2012, and hopes that troubled countries will grow out their debts seem increasingly like a stretch. Just to take one example, Italy’s forecast for 2012 has been marked down to just 0.3 percent — and even in the best case, credit availability in Italy will probably get tighter over the coming months, which may further slow growth.

A potential recession in the euro zone and a weak recovery in the United States does not make for a world crisis. So beware people who demand that the world be saved; usually they are making the case for a bailout of some kind.

Don’t get me wrong — a serious crisis could develop. Plenty of warning signs regarding the situation in Greece and its potentially broader impact abound.

According to the fund’s Fiscal Monitor, also released this week (see Page 79), Greece’s general gross government debt is now forecast to rise to nearly 190 percent of G.D.P. in 2012 before falling back toward 160 percent by the end of 2016. At this point, Greece needs a global growth miracle — and there is no sign of this on the horizon.

If Greece pays less on its debt than is currently expected, this will push down the market value of other sovereign debt in Europe. As The Economist asserted last week, the government debt of some large euro zone countries has unambiguously moved from the category of “risk-free” to “risky” in the minds of investors.

The numbers involved are big. Italy, for example, had public debt of more than 1.84 trillion euros at the end of 2010 (using the latest available Eurostat data, “general government gross debt,” annual series). The G.D.P. of Germany is around 2.5 trillion euros, and there is no way German taxpayers would be comfortable in any way guaranteeing a substantial part of Italy’s debt.

The entire euro zone has a G.D.P. of around 9.5 trillion euros, but no one is volunteering to take on debt issued by someone else’s government (again, I use end-of-2010 data from Eurostat).

To put these issues in perspective, compare them with the International Monetary Fund’s ability to lend to countries in trouble. The technical term is the fund’s “one year forward commitment capacity,” which for “Q3 to date” is 246 billion special drawing rights, or S.D.R.’s, which exist only at the I.M.F. (see the Sept. 15 update).

On Sept. 20, one S.D.R. was worth 1.57154 United States dollars, so the fund could lend no more than $386 billion. With one euro worth about $1.37 this week, this is around 280 billion euros.

Or you could think of it as 15 percent of Italy’s outstanding debt. This is not the only way — and not a precise way — to think about what the fund could bring to the table, financially speaking. But it makes the right point. The European issue is way above the I.M.F.’s pay grade.

Germany, France, Italy and their neighbors need to sort out how to bring the situation under control – to decide who will definitely pay all their debts and who needs some kind of restructuring. About a quarter of the world’s economy therefore remains in limbo, beset by repeated waves of uncertainty. And financial market fears can spread to other places, including the United States.

Complaints may be heard this weekend, but no one at the I.M.F. meetings can persuade the key European players to move faster in their decision-making. The politicians will take their own time – prodded periodically, no doubt, by the financial markets.

Do not expect a fast resolution or a quick turnaround in the global economy.