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Initial Claims for Unemployment Insurance Are a Wake Up Call
Raymond Richman, 7/11/2013

Economy Goes from Bad to Worse. As readers of this blog know, we have frequently asserted that the unadjusted number of unemployment insurance claims during the previous week reported by the BLS every Thursday is an important indicator of where the economy is going. Used in connection with other economic data which may corroborate the trend or contradict it, it is a valuable tool of economic analysis. The data reported for the week ending July 6 is a good example.

In the week ending July 6, the advance figure for seasonally adjusted initial claims was 360,000, an increase of 16,000 from the previous week's revised figure of 344,000. Much more reliable is the unadjusted or actual figures. The advance number of actual initial claims under state programs, unadjusted, totaled 384,829 in the week ending July 6, an increase of 49,778 from the previous week.

A very few times during the past six months, the number of claims actually filed amounted to 300,000 or less. In the week ending June 1, it fell to 293,792. Since then it has been rising steadily, indicating a worsening economy. Real GDP grew 1.8 percent during the first quarter of 2013, the net growth of employment grew by 195,000 in June,  less than the number entering the labor force.

Internationally, outsourcing of manufacturing continues. GM announced it was building a new Cadillac plant in China. U.S. companies have been in the news recently as making huge profits abroad but keeping and reinvesting those profits abroad. The outlook for a recovery in manufacturing in the U.S. is nil.

We are not the only ones who have been arguing for a policy of balanced trade. This past week, Ralph Gomory, former senior vice-president of science and technology of IBM and currently research professor at NYU, wrote a remarkable opinion piece in which he pointed out that China has used its chronic trade surpluses with the U.S. to accumulate $2 trillion of U.S. government bonds, while, as we have frequently pointed out it imposes trade barriers to the importation of U.S. goods, subsidizes U.S. private investment in manufacturing in China, and subsidizes exports to the U.S. As Prof. Gomory points out, we innovate but our innovations are manufactured abroad, leaving American workers high, dry, and unemployed.  In a cogent paragraph, he writes:

Despite this, many still proclaim that free trade benefits everyone and point as proof to lower prices for the imported Asian products. But lower prices are not low if you lose your job to get them, and the mutual gains predicted by free trade theory do not in fact materialize in a world where the well thought-out subsidies and controls of foreign governments create persistent trade deficits for our country.

Free trade is a good policy when capital and labor are free to move among the trading partners and all are subject to the same laws. The only territory where this is true is within the “formerly” United States of America. As a foreign trade policy, free trade is an absurdity unless you desire the U.S. to decline as a world power with a declining standard of living.

The growth in the number of initial claims for unemployment insurance is a wakeup call to our leaders who spend more of their time like most Americans on trivia and destroying the values that made us a great nation. Wake up.

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]