The April 2nd Wall Street Journal ran this headline: Factories Revive Economy, but the sub-headline took the joy away: Manufacturing Expands Globally, But U.S. Producers Remain Reluctant to Hire. L Unemployment’s sticky figures held the March figure to a constant and miserly 9.7%, but those who have fallen out of this statistic but still don’t have full-time work continues to rise. With 13 months of manufacturing growth, there is a light on in the window, but U.S. employers are still holding a workforce that is at slightly above 80% capacity. They have to absorb that excess capacity and will probably opt for more overtime before they trust the economy to ramp up their employment demands; this suggests that employers have about 30% of capacity to fill before they create that recovery vector we all want to see in unemployment statistics.
Fact is, the next generation is graduating and finding limited if any traditional job opportunities. They watch their parents, and their notion of job security is probably shattered for all time. Work for a company your whole life, move up the ladder (with lots of older workers refusing to retire or let go) and retire on a nice pension? To them, this is the stuff of the new mythology. Indeed, as healthcare become more universally available other than through employer benefit plans, the very scope and notion of work is changing. Younger folks with some semblance of education and skill are looking at working for a while on a project they like and perhaps for themselves, maybe as a full-time employee, but most likely as independent contractors not included on the employment rolls of the company for whom they work. Saves the company money in fringe benefits, covers what happens when they no longer need the capacity, and it allows this new work force to pick and choose where it will deploy; traditional notions of company loyalty and long-term commitments are disappearing rapidly as the world of work changes.
Which brings me to the title of this piece, a thaw in relations motivated by the hour-long phone call between President Obama and China’s President Hu Jintao, which resulted in an invitation (accepted) for Hu to visit the United States, technically as part of a nuclear power summit (April 12-13) hosted by Obama, but more realistically because of recent tensions between the two countries. We’ve differed on sanctions for Iran, control and censorship of the Internet and the balance of relative currency values. Google left China amid its refusal to abide by China’s censorship requirements, and China is ‘damming’ (in a Green way) Google’s efforts all over Asia in retaliation. China likes Iranian oil and doesn’t want to piss off its supplier for “moral reasons.” But most importantly, there is the issue of the relative value of the Yuan and the dollar.
We all know China holds trillions of our national debt instruments and still is a huge net exporter into the U.S. economy. They really don’t want to see dollar values tank as we borrow ourselves silly in building our “recovery-driven” national debt. They also don’t want to reduce the value of the dollar, making their exports more expensive and potentially reducing U.S. consumer demand as a result. We want their currency to be worth more for precisely that reason – to reduce the U.S. importation of Chinese goods (which impacts our balance of payments deficit). Effectively, American Treasury officials see China as a currency “manipulator” in forcing the Yuan to maintain lock-step parity with the dollar, no matter how hard we try to separate those values. But if the Treasury report on this currency issue – due on April 15th – lambasts China (and hence Hu) two days after his departure… well, that ain’t happenin’, and so we are seeing a “thaw” in relations between the two nations. Just in case, the government delayed the report: “Treasury Secretary Timothy Geithner said on [April 3rd] he was delaying an April 15 report on whether China manipulates its currency but pledged to press for a more flexible Chinese currency policy.” Washington Post, April 3rd. Hey, China actually might be a currency “manipulator”!
Which brings me back to the way our younger generation is likely to work in the future. Since you pay back harsh deficits by inflating your currency (solves all those homes underwater, mortgage-wise, doesn’t it?) or creating new values that allow future generations the ability to earn more, well the solution to the repayment obligation may have a strange solution. Since we aren’t really upgrading the educational system, perhaps a nation of millions of not-employees-but-independent-contractors will begin to develop new values and new businesses and new inventions and methodologies to create that future earnings wealth in ways we just cannot expect. We call that the American spirit and maybe we might find it coming back with a vengeance in this new dynamic workforce.
I’m Peter Dekom, and we really do surprise ourselves every once and a while.
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