U.S. Employment Spikes Up, Chinese Lose Jobs

The reason that U.S. payrolls just spiked up by 292,000, crowning the second-best year for workers since 1999, is that America is now sucking back jobs outsourced to China.

With the China stock market plunging by 10 percent in a week, the United States job boom rolled on with a +292,000 job gain in December, positive revision of +50,000 for the prior two months, and the second best year for payroll growth since 1999. Over the last 3 months, job gains averaged 284,000 per month, according to the Labor Department.

Wall Street analysts’ were looking for only a +200,000 gain and many worried that that China’s continuing turmoil would hurt American demand. The official U.S. unemployment rate was unchanged at 5.0 percent for the third month in a row, but +427,000 Americans not on unemployment rejoining the labor force in 2015.

According to a new Stratfor Global Intelligence report titled ‘The High Stakes of Having a Job in China,’ the days of China powering its spectacular economic gains and employment growth by outsourcing U.S. jobs are over. After relentlessly increasing their monthly trade surplus with the U.S. in the last 20 years, China’s official balance surplus shrank in 2015 to $337 billion from $343 billion in 2014.

The China “Economic Miracle” was powered by a labor-intensive, low-cost export growth models that was put on steroids with a 67 percent devaluation by Communist China in the mid-1990s. The move crushed the Chinese standard of living, but opened the door to massive off-shoring of American manufacturing and jobs to the “Red Dragon”” where manufacturing wages averaged about $3.50 per day.

Since the mid-1990s Chinese devaluation, U.S. manufacturing has shrunk from 15 to about 8 percent of American employment in late 2013. Over the same period, China’s percentage grew from about 20 to 30 percent, a gain of over 80 million jobs.

But 20 years later and over 10 percent average annual inflation, the average factory worker in China now earns $27.50 per day. This compares to much cheaper daily manufacturing wages in Asia of $8.60 in Indonesia and $6.70 in Vietnam.

But more importantly, with American productivity increasing dramatically and energy a fraction of the cost of China, 2/3 of corporations now believe in the necessity to locating manufacturing near their highest centers of demand, which is usually the U.S. According to McKinsey & Company:

“Regional demand looms large in sectors such as automobiles, machinery, food and beverages, and fabricated metals. In the United States, about 85 percent of the industrial rebound (half a million jobs since 2010) can be explained just by output growth in automobiles, machinery, and oil and gas—along with the linkages between these sectors and locally oriented suppliers of fabricated metals, rubber, and plastics.”

Despite glorious announcements of 7 percent “stable” growth that keeps China’s official unemployment rate at 4.1 percent, Diana Choyleva of Lombard Street Research, who produces an “unmassaged” calculation of China’s true economic growth, has been reporting China’s GDP growth has plummeted to below +2 percent since late 2014.

With the urban population growing by about 30 million per year, China need about a million new jobs a month to keep unemployment from rising. But collapsing growth explains why China urban employment has actually fallen in each of the last 19 months, despite government feather-bedding of jobs.

China industrial turmoil has hit almost revolutionary levels. In September, Heilongjiang Longmay Mining Holding Group Co., northeastern China’s largest coal mining enterprise, announced it would cut more than 40 percent of its 240,000-strong workforce in the coming months. In mid-December, authorities in Guangdong province arrested three prominent labor organizers on charges of fomenting unrest.

According to the China Labor Bulletin, the “official” number of large-scale labor-related protests rose to a four-year high of 301 in November, up 30 percent from the prior month and over twice the monthly average in 2014. In the first three weeks of December alone, at least 252 incidents were recorded, according to Stratfor.

The actual number of labor incidences is much higher according to accounts on social media. There were over 2,500 strikes last year in the four provinces of Guangdong, Jiangsu, Shandong and Henan provinces. The majority of protests were about demands for back pay, higher wages and greater benefits and pensions.