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How Japan Became The Benchmark For America's Fraudulent "Jobs Recovery"
It was one month ago when we showed how, thanks to a lot of statistical sleight of hand, Japan had completely "revised" one year of increasing nominal base wages to declining or flat at best, confirming that all the much-touted wage "improvements" heading into the Japanese election of late 2014 in which Abe was reelected by a wide margin had been purposefully fabricated to give the impression that Abenomics is working, when in reality it was... well, see the pre- and post-revision data for yourselves:
If that had been the full extent of Japan's labor data fabrication we would speak no more of it, however the rabbit hole goes much, much deeper.
As a reminder, in Japan where the Nikkei has been soaring ever since the Bank of Japan decided to crush the Japanese Yen the one missing component from the promised Abenomics recovery has been wage growth, because without rising wages there can be no sustained benign inflation of the kind that the Keynesian brains behind Abenomics require to proclaim success.
This is how Goldman summarized what the virtuous feedback loop of rising wages should look like:
The BOJ’s ultimate goal is to realize the following positive cycle: Increase in actual prices -> rise in inflation expectations -> wage hikes -> boost to consumer spending / improvement in corporate earnings -> inflation -> rise in inflation expectations -> sustained wage hikes in the corporate sector. The underlying notion is that the pursuit of both high wage growth and high inflation expectation ensures stable inflation
That's the theory. The reality is far different because some two years after the start of Abenomics and the launch of Japan's QE, nominal wages are about where they were when Abenomics started, while indexed real wages have never been lower!
The paradox of Japan's lack of wage increases become particularly glaring when one considers that just like in the US, Japan recently reported a post-Lehman low unemployment rate of just 3.4%, in fact in Japan this was the lowest print since 1997. As the following employment indicators suggest, the Japanese labor market should be tighter than at any point in the 21st century, suggesting wage inflation should be rampant:
In the US the most recent unemployment rate was 5.4%, about as close to full employment as possible, and yet neither in Japan nor in the US has there been any wage improvement.
So how does one explain the paradox of a labor market that at least quantitatively has no further slack and yet where real wage growth has never been lower. Simple, and incidentally the explanation is one which Zero Hedge provided all the way back in 2010 when we charted "America's Transformation To A Part-Time Worker Society."
It turns out that in Japan the answer is the same, only when one peeks beyond the merely quantitative and into the qualitative, it is worse. Much, much worse. As the following chart shows, virtually all the job growth in Japan since the great financial crisis has been thanks to part-time jobs!
This is Goldman's explanation which comes 5 years after our own:
As Exhibit 4 demonstrates, growth in the number of full-time permanent workers has more or less leveled off since the 2008 Global Financial Crisis, whereas the number of part-time workers in Japan has risen consistently over the last decade. Having accounted for 20.3% of Japan’s workforce in 2005, part-timers made up 25.1% of the labor market in 2014 (this substantial increase contrasts with far weaker growth in the ratio of nonpermanent full-time workers such as contingent and temporary staff, to 11.5% from 10.3%).
Japan’s part-time worker ratio now exceeds that of the US and the EU average; nevertheless, the Japanese labor market had been characterized by the high fraction of permanent workers in the past. What this essentially means is that growth in part-time workers has persistently depressed Japan’s average wage over the last decade. Exhibit 5 ... illustrates that the decline in average wages due to the shift to part-time labor began in the mid-1990s at the latest and continues to this day. We calculate that growth in part-time labor depresses the average wage by 0.5pp a year.
As a reminder, in the most recent BLS report, part-time jobs in the US once again surged, and have been the only source of incremental job growth since the start of the last recession in December 2007. As we showed, full-time jobs have yet to recover their prior cycle peak, which is the glarinly obvious answer for anyone still surprised why there is no wage gains in the US.
But if you thought the US was bad, in Japan things are - as one would expect of any economy approaching a state of terminal, demographically-facilitated collapse - far, far worse. Back to Goldman:
If companies have been hiring more part-timer workers simply to cut labor costs in line with a slowing economy, then the ratio of part-time workers should in theory fall as the economy recovers, lifting overall wages. In the US, the part-time worker ratio correlates closely with the macro economy (Exhibit 6). In Japan, however, the ratio of part-time workers has risen more or less consistently, suggesting that besides the economic cycle, structural factors are also playing a part.
At this point Goldman's economists do the usual thing and spend days of research investigating an answer that is so simple a five year old can figure it out after a few seconds of contemplation. And sure enough, the primary reason why companies prefer to hire part-time workers over full-timers is, drumroll, they are cheaper.
Finally, recall another persistent theme which sadly only Zero Hedge appears to be focusing on: namely that all the hiring since the Financial Crisis has been for workers 55 and older.
The apologists consistently, and erroneously, explain this with "demographics", even though the participation rate of young workers has collapsed, suggesting it is the younger who simply no longer have a motive or a desire to remain in the work force, while that of old workers has remained largely flat since 2007 as more and more old Americans realize they will never be able to retire under ZIRP and as a result will have to work until their death.
Well, now we have confirmation that the surge in hiring of older, part-time workers has little to do with demographic transitions and everything to do with the simplest possible explanation: they are cheap!
Enter the case of Japan, where Goldman finally has a long, long overdue epiphany:
What drew our attention in Exhibit 8 are two responses that rose between the 2006 and 2011 surveys: The re-employment of retirees, and the re-employment of full-time staff who left for family reasons, most likely getting married or having children (the number of businesses that cited labor cost savings as a reason for hiring part-timers has declined considerably).
This suggests to us a change in the structure of part-time employment in recent years. Employers generally recruited part-time staff in the past as a means of reining in labor costs. However, Exhibit 8 reveals that more recently, part-time hiring is increasingly being used as a means of employing senior citizens or re-employing housewives. In Exhibit 9, we see that the increase in part-time hiring over the last decade has been largely driven by senior citizens and housewives entering the labor market.
Here is Goldman's admission that Zero Hedge was correct about what lay in store for America some 5 years ago, by looking at the labor dynamics in Japan:
We attribute this trend to three factors. First is a shift to part-time labor among the elderly generation as Japan’s population ages. Baby boomers – the generation of Japanese born in 1947-1949 – began to turn 60 in 2007 and started retiring around the same period, raising concerns about the so-called “2007 problem” namely a labor shortage in the corporate sector. In the event, major turmoil in the labor market was averted as companies extended employment beyond 60. Five years later, however, the “2012 problem” arose as the same baby boomers turned 65.
Having raised the pensionable age, Japan passed an amended Act on Stabilization of Employment of Elderly Persons in April 2013 that requires companies to offer employment through to 65 for those seeking to work beyond 60. When extending the period of employment, however, companies are under no obligation to offer the same terms that existed before. With the agreement of the employee and employer, companies can switch to a non-permanent arrangement in the form of short-time, contract, or part-time employment (most companies re-employ retirees on non-permanent contracts to reduce their wage bill).
Second – and also linked to the aging population – is that both elderly men and women are remaining in the labor market to supplement a decline in income due to cuts in pension payments. Japan began raising the pensionable age in the early 2000s, meaning that the current generation of people in their 60s faces fewer pension payments. Pension cuts have gained further traction since April 20134, and the labor participation rate among people in their 60s has accordingly risen at a faster rate over the past two years. For senior citizens aged 65-69, the labor participation rate has reached 42% (FY2014 average, versus a FY2000 average of 37%). How this generation is employed has also changed notably over the past 15 years: whereas in 2000 around 50% of people aged 65-69 were self-employed/family workers, by 2014 the ratio of employees had reached almost 75%.
Third, female labor participation rates are rising in all age groups except women under 25, as Womenomics manifests itself. Exhibit 9 shows a marked increase in part-time female workers in their 40s and 60s. A key factor is the impact of a rise in the labor participation rate within this more populous generation (of baby boomers and junior baby boomers).
To summarize the Japanese economic recovery under Abenomics (and before): all the labor growth has been thanks to senior citizens and housewives. And this comprises the bulk of the surge in part-time jobs, which as shown above, is the only component of Japan's employed workers that has grown. As a result, Japan's real wages are the lowest in history.
And now to summarize the US labor picture as well: more part-time workers, and more old workers.
In other words, Japanification is truly coming to the US, and unfortunately in the one place where it hurts the most: the labor market. And not just any labor market, but one which is touted by the press as improving which while perhaps true quantitatively, is absolutely false qualitatively: in fact, if one extends the Japanese comparison to its logical conclusion, real wages in the US are due to tumble in the coming months and years as the Japanese economic and demographic reality is unrolled in the US.
Precisely as we warned in 2010.
But the biggest problem is not that the underlying economics is devastating when one looks behind the populist headlines. It is that both in Japan and in the US, the mainstream economists - who we can only hope are not all idiots, and can figure out what even Goldman now sees - are engaging in open fraud when spinning disastrous labor trends into what the mainstream press touts is a "labor recovery."
But at least we know the reason: recall that for Janet Yellen the only "data-dependent" economic indicator which holds back a rate hike is the lack of wage growth. And as long as there are no rate hikes, the Fed and other central banks will continue flooding the global markets with trillions in liquidity while keeping rates at 0% or negative, pushing global stock markets and asset prices to ever recorder highs.
Who benefits from this fraud? Why the 1% of course, because while the hope for 99% of the population - and the lie - remains that wage growth is just around the corner - a story repeated in 2010, 2011, 2012, 2013, 2014 and 2015... and which will be repeated in the coming years without a doubt - who benefits from this fraudulent status quo here and now? Those who could care less if the average wages for everyone continue crashing, does care very much that the S&P 500 hits another record high tomorrow and the day after.
And as long as the fraud behind wage growth, and the lack thereof, remains, they will get precisely what they want, with the blessings of every central bank in the world.
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Numbers don't lie. Oh, wait.
#japjobsmatter
Japan = America's vassal state since late 19th century
BOJ = FED sub-bank
Yen carry-trade = Proxy dollar flood (this is what will kill the market in the end, the YEN carry trade unwind)
Japanese Society = DESTROYED by Jewish mafia that controls Japan's underworld. Pornography, Child Porn, Bizzaire sex....fucked because they cannot fuck anymore.
Japan = High Tech NWO test bed
Troof...
https://aadivaahan.wordpress.com/2010/09/03/the-curse-of-free-energy/
jews in japan , of course! it's the fucking jews! slanty eyed basterd jews!
Japan is in terrible shape - fifteen years of a down economy, 25% unemployed, 265,000 foreign immigrants pouring in with fake degrees taking all the computer jobs that once made the nation great, 10 million savages a year pour in from the southern states and a health care system that forces the poor to give their money to fatcat doctors and bureaucrats who earn seven figure salaries...
Oh wait that's America, me bad
As countries become more in debt, the creditors be sure to restrict the freedoms of their debtors because of their concerns about not getting their capital returned.
Problem is, the restrictions they impose prevent the freedom of thought and action required to creatively utilize the loaned capital as a productive investment.
THAT is the "debt trap"
The entire Western World has fallen into that hole.
Japan, like the u.s, u.k and europe has off shored a lot of their production to China. Many products I purchase used to say Made in Japan now say Made in China.
Looking at this picture it becomes obvious the off shoring was to equalize the ship so to speak. Real wages globally will decline as there were more low wage workers in the developing nations than the developed. This I believe to be a requirement of the one world system the corporations dream of.
You just can't make this stuff up.... Oh wait!
Put on your deflation hats. Decreasing global wages means demand destruction. The globalists will have cheap labor but nobody to buy their products. How long before the strorming of the Bastille?
ZIRP also finances excess capacity, which leads to deflation. Depressed wages + increased capacity = one thing. The need for world war to create demand for goods that will be consumed.
Which is why any talk of the Fed raising rates is sheer fantasy.
[We are ALL Japan now...]
Bizzaro central banking leads to bizzaro macro indicators. Who'd have thunk?
You Look at Exhibit 1 and you know that is the Anglophile Plan for the USA, Beta Tested in Japan.
Smash US Wages since 1970 OSHA Legislation was the Straw to Break the Robber Barons Back.
Late Add:
And Damn look how the Wrecked the Current Account Balance.
- Current account balance compares a country's net trade in goods and services, plus net earnings, and net transfer payments to and from the rest of the world during the period specified. These figures are calculated on an exchange rate basis.
Current Account Balance: Total Trade of Goods for the United States©, 2013: -703,911,000,000 US Dollars,
Sum Over Component Sub-periods (2013 was last data, USA ranked 193 out of 193 Countries, Dead Last), Annual, Not Seasonally Adjusted, BPBLTD01USA637S, Updated: 2014-04-03
http://research.stlouisfed.org/fred2/series/BPBLTD01USA637S
https://www.cia.gov/library/publications/the-world-factbook/rankorder/21...
FRED CHart shows 1987 was a big fist time low after Ronald Reagan Years. They you see George H.W. Bush fight back to 1991 Zenith. Then it is all down hill from there on.
Bill Clinton & George W. Bush years were Cruel.
What can we conclude here??
There was a Coup in the 1980 Election where among other things we put a CIA Director/Military Establishment/MIC Industry Expert in the White House.
Certainly there was a Coup.
LOYD!!!!!!!!
Governments lie. Always have, always will. The question is: are you smart enough to figure out they're lying?
The next question: what are you going to do about it? If you think voting will change things, you are part of the problem.
The next question after that one: "Is that a booger on your fingernail?"
Nah, he's just sniffin' it after using it to scratch his bung hole.
Capital vs. Labor in the global wage rebalancing.
Until a lot of labor is 'removed' from the system, Capital will continue its rebalancing efforts.
First, employer/employee loyality died in Neoconica during the 1980's/1990's. Quality suffered, both in terms of product and job. Next 'Independent Contractors' began substituting for corporate employment - all the better to cut costs of Social Security withholding, pension benefits, and healthcare. Then - spurred on by ZIRP and QE and ObamaCare - part-time employment began replacing full-timers. Now, cheaper and probably more reliable elderly - earning pennies on their retirement accounts - are swamping the supply of part-time available jobs, leaving the youngins to have fun in Baltimore.
All this is structural and nearly all of it can be laid at the doorsteps of insane debt-based monetary central planning, which caters to the TBTF banksters, all the while it strangles the middle class that once kept society steady as she goes. No longer.
Notably Japan did not import millions of illegal's to provide fodder for the bankers to not only reduce wages for the semi to unskilled labor, but also restock Black and other perceived minority grievances to take to the streets or threaten DOJ civil rights suits to hamstring / arrest anyone who is not compliant.
I keep seeing evidence that employers are hiring older folks in droves while getting rid of young folks. At some point one has to wonder whether the braindamage caused by modern schooling combined with damage by chemtrails (which is worse at younger ages) has rendered the youth unable and unwilling to be productive. Hence the ever-increasing desire to hire older folks, who already have skills, and who still retain some remblance of "work ethic" (rather than "work is for suckers").
Was wondering the same thing. If employers are realizing the only thing kids have in their favor is... they're kids. Absent a work ethic, punctuality, basic literacy skills, zero customer service skills and most importantly... no experience... what does a kid have to offer?
true, their 'skills' are
1. iphone
2. i something else
3. staring at a tv
they lack verbal and writing skills.
Old people can be cheaper for part time work too - if they are already collecting social security.
I have talked with Home Depot, Wal Mart, and Lowes managers, and they say they no longer hire full time people. They will hire part time and then they will not put them on the schedule anymore when no longer needed. What about good, full time work with benefits, paid vacation, and a future career? Companies have eliminated them to make more profit. I have seen this disturbing trend for the past couple of years in this exploitative job market.
Keep up the remarkable work, Tyler.
obamacare
Abenomics/Obamanomics both disasters.
Happening everywhere destroys money velocity
Fuck you , Obama care built that.
Nice provocative post ZH. You have made a lot of good points.
Most entertaining was the vilification of the “rocket scientists” at Goldman. It’s so nice to be enlightened by greatness – especially when that enlightenment is provided by the perpetrators.
There are some important distinctions, however, between the Japan situation and the world-wide challenges faced by European civilization. The Japanese never began (at least to the degree we have) burning their ethnicity, culture and civilization on the altar of cultural Marxism like the Europeans did, under the false auspices of reparations for past sins. Although one could argue that the recent cabal-orchestrated Miss Japan victory represents a chink in that armor. If their economy collapses, at least they will still have their culture.
What European civilization is engaging in:
1) the mass immigration into predominantly European countries of cheap labor that will never be culturally compatible with European civilization, and
2) a proxy for this behavior, the unbridled access to the markets of predominantly European countries of goods produced by such labor overseas, with no reciprocity that sustains that European civilization
is much more dangerous, because the outcome might in fact be the genocide of European peoples, who will have no home countries with sufficient homogeneity to preserve the very economic systems that the world feeds upon (some would argue parasitically).
What the globalists and cultural Marxists fail to realize, because they refuse to accept the fact that there actually are differences between peoples, is that the framework for economic development and stability that the world has relied upon historically is largely an offshoot of the very European culture that their policies and ideologies are hell-bent on destroying.
In a healthy and productive economy, demand and supply are both required (the substance of your article), but neither can flourish if the fundamental foundation and values upon which that productivity is based is undermined by a self-serving elite.
Sorry elitist globalists, liberals, and neo-cons, (i.e. the cabal), but the party is over, the bitter harvest of your failed ideologies has arrived. True Europeans, those that truly live the values that 2000+ years of cultural and economic evolution created, the same values that created most of the world’s prosperity despite the ranting of the apologists, are beginning to rear their heads.
Frankly, we are tired of carrying you.
Someone simplistic IMO because you fail to account for the white liberal class in Western Europe that has been effectively regnant from the late-1960's
onwards but they are yet to be really singled out for, at the very least, the criticism they deserve.
In the future, I think a line should be drawn at the Maginot Line. France, England, Belgium, Netherlands, Luxembourg and Sweden can all go.
Norway is obviously a special case because of their oil and gas resources otherwise they could go too. Some type of association between
the remaining countries of Europe, spearheaded by Germany, and Russia would be something truly special, given the industrial might of
the former and the oil and gas reserves, to say nothing of their culture, of the latter.
Thanks for your feedback.
However, I do mention the white liberal class in Western Europe, because my reference to "elitist globalists, liberals and neo-con's" includes white Western Europeans that happen to fall in one of those categories. As far as I am concerned, if they are complicit in the destruction of European nations and culture, along with other groups that are more traditionally identified with the cabal, they are just as much a part of the problem. Perhaps I could have been more clear.
I do not agree with your suggestion, however, that promoting division within the various European peoples is wise (you call for the exclusion of certain European peoples from the larger body of Europe). I think that these groups, once they become more aware of the destruction that is being wrought by the "failed ideologies" that I mention will become as supportive of change as any other Europeans. For example, there are already groups forming throughout Europe, such as the Generation Identitaire movement (which started in France, and has since spread to Germany and the Netherlands), that is concerned about the future of the European peoples. I believe that divisions such as the one you advocate, that have been promoted in the past by the cabal (I am not suggesting that this is your view or intent), have contributed greatly to the weakening of European cultures - even to the extent that unnecessary and destructive wars have been fought based on these artificial divisions.
I think that at this point, we already have plenty of enemies of the European peoples; we don't need to complicate matters by fostering divisions within our own people. This said, I am not an advocate of the EU, because in my view, it actively seeks to destroy the individual national identities of the European peoples. Our challenge is to revitalize pride in these national cultural identities (which all have something to offer to a stronger whole) and work together to protect the values and genetics that we share as peoples of European descent.
I'm also all for welcoming Russians of European descent, as you suggest. These people have been more abused by the cabal (in this case by the Bolsheviks, etal) than any other people in history (with the possible exception of the Germans).
IMO, our future is not about hate of other groups, it is about rekindling a spirit of pride in and support for our own European peoples - and the realization that we have common enemies that are at odds with these objectives.
Thank you for your feedback.
It's difficult to be as explicit here as I would like therefore I'll trust you can read between the lines. France, Sweden and England are already on their way out.
With respect to these countries, the Baby Boomers will be all largely dead by 2030-2045, if not sooner. Once they are gone, the complexion of those countries will
have changed markedly, and that's assuming everything else is equal in the meantime. One of my recent comments on ZH was I expected an Islamic insurrection
within France in the next 10-20 years. Is that something the indigenous French will deal with? If the will were there it could be dealt with easily but I doubt it is.
My point with respect to saying goodbye to some countries is because of their demographics. What matters is the village. If a few houses within the village burn
down with their inhabitants inside, so be it. What better lesson would there be for the rest of the villagers to never follow the same policies that led to those
houses burning down? I appreciate my suggestion is ruthless and ruthlessness will be needed in the future.
With respect to Germany + satellites and Russia, I am really talking here about some type of geopolitical joining. Russia natural resources and German+satellites
manufacturing excellence really would be something special, a global superpower in fact. Personally, I find Pepe Escobar is excellent on some of these issues and geopolitics
generally, for those of us who are only willing to devote limited time to the subject, e.g. http://rt.com/op-edge/256985-germany-merkel-eu-russia-nato/
I take all your points with respect to the Cabal, I know them well. They have one great gift to give to us though and that gift is moral particularism. If our own
moral particularism is to re-assert itself, which I view as necessary in the long term, what better way to rekindle that moral particularism than the rest of
the villagers watching their neighbours' housing burning down?
One thing is for sure, life will not be dull in the decades to come but the future will belong to those who take it.
A bientot mon ami.
Excellent article, as were the ones on Chinese bond shenanigans.
Thanks Tyler.
It is a good article and it is good that people don't have to work.