The essential theory of my BubbleOmix is that Ying follows Yang or in other words What Goes-Around Comes Around.
Employment in USA is a market, some people look to buy services, and interestingly 35% of companies in USA these days can’t find qualified people for the jobs they are offering (no prizes for guessing where those jobs will go). The fact that there may be a lot of unemployed (and unemployable) people doesn’t change the numbers of jobs on offer; it just changes the wages the jobs pay…slightly.
The “fundamental” for the numbers of jobs on offer is exactly equal to US GDP (nominal) divided by wage-inflation (nominal), that’s the black line on this chart:
So there was a bubble starting in 2003 thanks to all the demand created by American consumers using their houses as ATM Machines which resulted in a lot of people getting employed to create what the Austrians call “mal-investments”.
Then the bubble burst, and America found itself full of a whole pile of mal-investments that no one needed, so all the people who had been producing that sort of stuff, lost their jobs, plus a lot more lost their jobs because there was an over-supply of stuff, so for a while no one needed to produce more of that.
BubbleOmix says that
(1) the amount of time that was devoted to producing mal-investment in a bubble, is typically equal to the amount of time it takes to clear out the garbage after the party winds down, and
(2) the departure from the “fundamental” in the bubble is typically mirrored by the departure below, once the bubble pops.
Like if you throw a pebble in a flat pond, you get an “up” wave, followed by a “down” wave, and the Ying and the Yang of both of those are identical, just mirrored.
Put that all together, that says total employment in USA will go up from about 141 Million now, to 146 million by mid 2013.
By the way, that’s nothing to do with the policies of the Obama administration; it’s just a simple Law of Nature. Although they will probably claim credit for it, which I suppose is fair enough since they have been blamed for the Charlie Foxtrot, which in all fairness was nothing to do with them.
If they want to make themselves useful though, they might like to spend a moment contemplating why 35% of the job openings can’t find suitable candidates, which is a structural problem, and one might imagine that by the time the demand goes up by 5-Million that could be 50%, so America will be creating 10-Million job opportunities over that period, 5-Million of which will be filled outside of America.
About the Author - Andrew Butter is Managing Partner of ABMC, an investment advisory firm based in Dubai that he set up in 1999, and has been involved advising on large scale real estate investments, primarily in Dubai. (EconMatters author archive here)
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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