Imports and Jobs

I saw this graph at Carpe Diem and wondered what the Australian equivalent would look like.

So a quick visit to the ABS (I couldn’t easily find real imports of goods and services, so nominal will have to do) and voila:

Not quite as nice a picture as the US data (he used real data, I have nominal) but the same basic story. An Australian correlation between the two series of 0.9874 compared to the US correlation of 0.964. Now I know correlation is not causation blah, blah, blah, but completely and utterly inconsistent with protectionist arguments.

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33 Responses to Imports and Jobs

  1. pbw

    What does the US graph look like against unemployment? What does it look like against average and median wages?

  2. mh

    The bottom third of income earners in the US in 2016 were earning the same as the bottom third of income earners were in 1979 under Jimmy Carter. I don’t mean taking into account inflation, they were earning the same.

  3. John Constantine

    My concern is that the historic data was not derived from an economic environment where the leadership of a country decided to dynamite its cheap reliable electricity supply, then destroy demand for baseload electricity by deindustrialising.

    Importing solid electricity from overseas in the firm of industrial artifacts created with coal power may well fill in a gap, but given my background I cannot see how a services economy and a property Ponzi scheme can sustain this economic model.

  4. JC

    US companies are also re-shoring – not because of Trump threats, but because labor costs in places like China has made it a marginal proposition. Moreover if the corp tax cut goes through re-shoring becomes even more compelling as the US more or less becomes a corporate tax haven.

  5. Roger

    Surely the nature of the jobs available and their pay rates must be factored into the argument concerning the impact of imports on local jobs?

  6. Rev. Archibald

    What do you mean “voila”?
    Employment is flat and imports are going spastic on the Oz chart.
    Also choice of numbers on the two y axis scales looks dodgy to me at first glance on the US chart.pp

  7. Rev. Archibald

    Also we know employment data is flat out lies.
    They define employed completely different now from the seventies.
    This is climate data levels of horse shit.

  8. teddy bear

    You are right correlation is not causation, this type of simplistic “analysis” is precisely what the welfare and other lobbyists love doing. All they do is make the economics profession even less credible, if that is even possible at this point.

  9. Sinclair Davidson

    The bottom third of income earners in the US in 2016 were earning the same as the bottom third of income earners were in 1979 under Jimmy Carter.

    Hmmmmmmm – probably due to the fact that high school drop-outs with chemical dependencies are less comparatively productive now than they were nearly 40 years ago. Doing quite well then to be earning the same.

    What do you mean “voila”?

    As in here is the equivalent graph (more or less) for Australia.

  10. Rev. Archibald

    So US imports have increased by a factor of eight while employment has not even doubled, during a time span of 37 years where the population went from 240 million to 340 million and most households went from single income to requiring two bread winners, and the definition of employed went from having an actual real job to working for an hour a fortnight.
    Fucking hell.

  11. entropy

    I am sure this graph is pretty close to the mark.
    I would also argue, given I make myself remember, that the employment measure is made up of thousands of individuals. How can employment grow in line with imports, yet salaries flatline? Could it be that employment doesn’t change as easily as increasing imports, and what is actually going on is that the old manufacturing industry workers are out of a job and grumpy, and this holistic figure just reflects massive immigration of people more suited to jobs importing goods, education of foreign students, driving taxis and real estate?

  12. mh

    Hmmmmmmm – probably due to the fact that high school drop-outs with chemical dependencies are less comparatively productive now than they were nearly 40 years ago. Doing quite well then to be earning the same.

    Sounds like someone else has chemical dependencies. I’m talking about declining wages for low-wage workers in the United States.

  13. Sinclair Davidson

    I’m talking about declining wages for low-wage workers in the United States.

    No – you referred to the bottom third on income earners – who also happen to be low-wage earners. They are low-wage earners because that group of workers are low-productivity workers and they low productivity because they tend not to complete high school, tend to have children out of wed-lock, and tend to have chemical dependencies. They are also increasingly less productive than comparable individuals in other economies. As such it is unsurprising that their wages have stagnated.

  14. mh

    Sinc, America declined because it was playing the game of free trade when China was not. Stop blaming the workers.

  15. Rev. Archibald

    It isn’t only that the survey questions and methodology change:

    ..

    February 1978, the survey frequency changed from quarterly to monthly

    and the definitions change to include whole new categories of people into the ranks of the employed, such as the inclusion of those doing unpaid work for family businesses, but the actual thing being measured changes too.
    From warehousing large numbers of young people in useless tertiary courses to bloating out public sector jobs the overall effect is to minimise the unemployed numbers and maximise the apparent number of people in productive employment.
    Lie upon lie upon lie.

  16. Rev. Archibald

    Forbes:

    ..
    All in all, the U-3 unemployment number is deeply flawed and should not be relied on as the business media and even the capital markets do. A better (though still flawed) indicator of labor market conditions is the U-6 measure. For both August and September, U-6 showed an unemployment rate of 14.7%. Unlike U-3, U-6 adds back to both the labor force and to the unemployed “discouraged’ and “marginally attached” workers, i.e., those who have stopped looking for work but still want a job, and accounts for part-time workers who want full time employment. The flaw is that U-6 removes the long-term discouraged worker after 52 weeks of unemployment. Nevertheless, it is still a much better indicator than U-3. John Williams estimates that if U-6 counted the long-term discouraged workers, the unemployment rate would be 22.8%.

  17. egg_

    +1 Rev

    Comparing apples and oranges with a lovely bunch of coconuts.

  18. Rev. Archibald
    #2550528, posted on November 12, 2017 at 2:28 pm

    So US imports have increased by a factor of eight while employment has not even doubled, during a time span of 37 years where the population went from 240 million to 340 million and most households went from single income to requiring two bread winners, and the definition of employed went from having an actual real job to working for an hour a fortnight.
    Fucking hell.

    The Rev beat me to it.
    The axis are a log scale. What the fuck are you trying to pull Sinc?
    Look, when two things are so different, so unlike each other that they won’t both fit on the same graph, YOU CREATE A LOG SCALE.
    There is NO CORRELATION, not that that would mean anything anyway.
    FMD

  19. entropy

    No – you referred to the bottom third on income earners – who also happen to be low-wage earners.

    Who clearly are only there because, what was the piquant way you put it Sinc? Ah yes. “High School drop outs with chemical dependencies”. Shame on you.
    Having done enough work with economists over the years to know enough to be dangerous, I would observe a common behavioural fault amongst academic economists is to forget they are dealing with people, thousands of individuals who make choices to maximise their utility in ways that would never occur to be desirable to an economist. Why choose to work as a shearer in Blackall, or a timber worker in Ravenshoe? Choose coal mining as a career?
    Why would you when you could live like a university professor, for example?
    This blind spot is a bit like climate scientists and their salivatory response to the latest run of a climate model. Let economists loose with a GCM, or worse, a spreadsheet, and they forget the output is not fact.

    Labour is not as liquid as capital. A timber worker does not become a barista. A car factory worker does not apply for and get a public service policy job. A farmer does not become a banker, even if they know a thing or two about lending practices. These people either never get another job, or they end up working for much less than before. Odd jobs here and there. They do not suddenly become high income earners in service industries. Those jobs get taken by the next generation, or by immigrants, particularly when there is a high intake to make it easier for employers.

  20. Peter

    I am far from being a numbers wonk. So I struggle to understand what this post is about. Apart from nuances about the scale and whether the numbers are dodgy and so forth isn’t there and obvious reason for such a correlation. This being that when people have jobs they have money. When they have money they have confidence. When they have confidence they spend – some of it on imports. Isn’t it as simple as this? What am I missing?

    And to be honest the growth in imports surely has to be attributable to a little thing known as the internet. More specifically eBay. Surely other people are like me too and buy imported stuff online. Or doesn’t that stuff get counted in the inbound figures? I concede I do not know but if it is counted …………………

  21. Let’s put it another way.
    Visualize that US graph like this. Take that light blue jobs line, and stretch it to only where the 110,000,000 line is and relabel that line 150,000,000. That’s a 50% increase and it takes 37 years to reach.
    The dark blue imports line reaches that mark in just 7 years (400,000 to 600,000).
    NO CORRELATION.

  22. sfw

    What sort of jobs? Often low paying in the service sector, often jobs that men are not suited to especially after a working life using your brains and hands, feeding and washing people in an old peoples home whilst necessary and admirable isn’t something that many people can do or enjoy doing.

    Even if the pay was good many people especially men just aren’t suited to many service sector occupations. That’s ok, perhaps the majority are better off and probably are. Perhaps we should take into account those who paid the price of others prosperity. When Hawke / Keating dropped the protection for the textile and footwear industries the benefits flowed to all of us but don’t forget that many thousand of people, mainly women and many from migrant backgrounds lost their jobs and never worked again, we don’t see that now because most of them are retired or dead but they paid the price for our increased prosperity.

    Just sayin…….

  23. Tel

    https://fred.stlouisfed.org/graph/?g=fHec

    The correlation is not that great.

    Anything that has a plausibly steady growth rate will end up looking a bit like a straight line when you plot it on a log scale. Then the left vs right axis are separated, so even though those growth rates are quite different we can still get the slope to line up.

    What else is in it? Well, the curves dip after a recession. Hmmm, lots of macro numbers tend to dip after a recession, that’s kind of the whole deal with recessions. Anyway, the curves don’t consistently dip in all cases when you go back and use all the available data. You can call me skeptical.

  24. entropy

    I guess I should try to be more positive. All these two curves show is that they have grown. There is at best an indirect correlation, but you have ignored substitution effects. If you looked at one job, say the Ravenshoe timber worker, their job ended at the stroke of Graham Richardson’s Pen. They got jobs after, fake jobs planting subcommercial rainforest timber blocks, and now they are unemployed. All this was done to assuage city voters with vague, warm feelings about trees and sugar gliders. There were no economic signals going on there.

    All across regional Australia, jobs which would probably disappear gradually are accelerated to their demise by government policies on energy prices, vegetation management, IR laws, gun laws, you name it laws imposed on people that have never worked out of the political bubble their entire lives. It happens too fast for them to adjust

    Your little spreadsheet indexed curves show nothing about that.

  25. Rob MW

    I’m sure that if RMIT professors had actual experience in export business, job and employment creation with hands on decisions in the physical side of domestic exporting businesses, both in perishable goods and preserved goods & services that are not only attempting to compete with lower cost of production countries, and losing their skilled workforce to those countries in the meantime then having to pay an even higher cost of production to attract and upskill from a pool of leftovers that lack initiative and would much prefer to be on the government payroll, then just maybe the same professors might take a look at the unintended consequences of over advocating the import economy bias, after all, what has RMIT actually risked ? and picking up a risk free fortnightly cheque does not count.

  26. Snoopy

    There should be more posts like this.

    🙂

  27. Rohan

    Aussies are cheap bastards and Yanks aren’t?

  28. BorisG

    the law I can derive from the US graph is that Imports=k*employment^3.6. Interesting power law.

    We know unemployment has barely changed (on average). This increase in employment has a lot to do with (adult) population growth. why imports increase is so well correlated (but with a very high exponent)? Interesting.

    Ausrtralian graph shows almost no growth in employment.

  29. Paul Farmer

    Its always good to highlight this, that imports add significantly to the economy and create jobs. I don’t know how many times in my career I have read ( but its many) mainly from brain dead bank economists or the clowns you see on the business news on TV making forecasts for GDP say something like, we expects imports to be up in the coming period and hence GDP growth to be negatively impacted. It drives me insane…….I think you have managed to get a degree in economics and not understand a damn thing.

    Because most of them have just rote learnt the Keynesian Samuelson equation in undergrad macro and it has imports in the equation as a negative most therefore believe imports subtract from economic growth, never having in their life thought through that its only negative to prevent double counting in the Consumption and Investment term, but yes imports surprise surprise actually in the real world add to economic growth.

  30. Rev. Archibald

    imports surprise surprise actually in the real world add to economic growth

    ..
    Prove it.

  31. Oh come on

    Gotta say that the graphs don’t really look that similar to me. And the Aussie chart doesn’t look like an obviously good news story, to boot.

    I don’t think ‘imports’ is a dirty word, and I reckon mercantilism and autarky are really bad ideas. Not sure these graphs are the best proof of these beliefs.

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