Thursday, November 20, 2008

Auto Maker Jobs?

Anybody think that today's equity market sell off has ANYTHING to do with Automotive jobs?

The U.S. Finance, Insurance,  and Real Estate industries, what someone smart called the "FIRE" economy, has a much, much bigger payroll, and the FIRE industry workforce is going to be more than decimated, perhaps quadruple decimation - 40% fewer people working in the FIRE industry by the end of 2010.

(Decimate comes from the Roman habit of motivating losing Legionaires by selecting every 10th member of a losing battalion and executing them on the spot in front of the others.  The root of decimate is Latin for the number 10.)

Forget for a moment how much you detest Real Estate brokers, Stock brokers, and Insurance brokers.  These people made up a huge percentage of income in the economy and tax receipts for the government.  

Add these soon to be members of the newly ungainfully unemployed with folks in the same position in housing and automotive and you are looking at an unemployment number far in excess of 10%, and a loss in aggregate payroll $'s of much, much more.

I am afraid "Hope" and San Francisco "political sensibilities" are going to do little to balance the budgets of the various local, state, and federal governments.  Those fun little social programs, Social Security and Medicare, are funded by payroll taxes.  The end, IN REAL TERMS, of the various social programs that too many people have come to depend on is near.  Sorry, but with the collapse of the Real Estate and stock markets, there are no "Rich" left to tax.  If this keeps up, their won't be much of a middle class left to tax, either.

The folks in favor of wealth redistribution have succeeded, though not in the way they might have intended.

Actually that is not fair.  I just could not help myself.  Much of the "wealth" that was just lost never really existed.  We just got around to recognizing that sad fact.  For at least 15 years we have been arguing over an illusion of wealth.  Oh, it was real enough to benefit the very few, but if you think that Microsoft is (was) really worth more than all of the harvests of all of the food in the world in a given year you must have bats in your belfry.  Of course, that begs the question of future food costs and values...

But I digress.

If the markets continue their decline, we will be in serious trouble - fast.  Pray that the rate of decline slows or that the market finds its footing.  It is not the market that is the problem.  The market is just taking the economy's temperature.  If the market finds the economy has a fatal condition... like too much debt, unfunded pension liability, unsustainable budget deficits, an energy shortage, etc... well, it will let you know it.

No matter what, we have passed a critical point.  It will take years to put humpty dumpty together, and by that time the U.S. will be in the teeth of the final Oil crisis.

This is it.  Get your s--- together.

Good Luck!

Mentatt (at) yahoo (d0t) com


Anonymous said...


Anonymous said...

Sorry for the last spurt of enegy, " YEA" ,that was me. I was dutifully remind of my Marine Corp days. Which reminds me of another oldy but goody.

" We the unwilling,led by the unknown, are doing the impossible for the ungrateful. We have done some much for so long,with so little, that we know can do anything with nothing "

I think of this from to time to time, it keeps me grounded. Through good or bad.

Jeffers thanks for the eye opener, Godspeed!


Dan said...

From the BLS:

In 2006, real estate brokers and sales agents held about 564,000 jobs

Securities, commodities, and financial services sales agents held about 320,000 jobs in 2006.

Insurance sales agents held about 436,000 jobs in 2006.

Financial managers held about 506,000 jobs in 2006.

Loan officers held about 373,000 jobs in 2006.

In 2006, appraisers and assessors of real estate held about 101,000 jobs.

Adjusters, appraisers, examiners, and investigators held about 319,000 jobs in 2006.

Insurance underwriters held about 104,000 jobs in 2006.

Financial analysts and personal financial advisors held 397,000 jobs in 2006

Etc, etc, etc…

In December 2006 the civilian labor force was 151,703,000 so were looking at 2% of the labor force; probably 6% if you figure in support staff and this is a well paid slice of the market. Oy!

bureaucrat said...

Let's keep our perspective, people. There is still lots of money worldwide (I have a chunk of it myself), the rich aren't going to disappear, currency and finance isn't going to disappear, 50% of U.S. citizens get a check from a level of government of some type (up from 3% in the 1920s), and, to date, at least 90% of the people here are still employed. We will contract, so it means a few less Plasma TVs. Breathe. "No rich left to tax" Hahahahahahaha!!

Anonymous said...

Hey Bureaucrat,

You still think it's about money, It is not. The rich do not have much money. They don't keep bushel baskets of Franklins in their basements. They own financial instruments that represent a stake in some (hopefully) productive enterprise in the economy. Since the 1980's at least, the dollar value of those investments has been propped up to a greater and greater degree by increased leverage. At the same time, the US has been "outsourcing." That is, sending our productive capacity (REAL WEALTH) offshore. There is an end to leverage. There is proverbial straw that broke the camel's back. In the 1920's everyone was loaded to the gills with stock on the margin. This time it's the sub-prime mortgage market that started it, but the economy is full of overleveraged stuff. That's just the tip of the iceberg. Check out SIVs and CDSs for starters, not to mention the low downpayment requirements on real estate. It's not just the US either. Europe is as bad or worse.

Right now, we're undergoing deflation as markets collapse and the funny money disappears. Enough has already disappeared to make all the pension funds, all the banks and many government agencies insolvent. What this means is that the REAL VALUE of what has been promised DOES NOT EXIST. Taxing more WILL NOT CREATE IT. Taxing more causes fewer dollars to enter the markets, depressing them further and making the problem worse. Money is not wealth.

For a time, the few dollars that are left will be worth more. We are in deflation. Your fellow bureaucrats are working very hard to pump lots more dollars into the economy. This will ( they hope and pray ) cause a lot of inflation. This will allow the promises to be kept in dollar terms, but greatly decreased in terms of REAL VALUE.

The adjustment in markets to the real value of the underlying assets is happening right here, right now. The markets are seeking and finding the ugly truth. There is a lot less actually there than anyone thought three years ago.


Coal Guy

Anonymous said...

Libertarian Somalia, home of the free, the brave and no government interference. Find a warlord or be one. Yeah! We can do it.
Sign up for a warlord training course at your local street corner now. Great growth potential.
Feudalism rules!

bureaucrat said...

When my parents, who pretended to be lower/middle class for the last 40 years, who I now come to estimate actually have millions of dollars in bonds and stocks, when they are crying at my doorstep cause they are hungry, and not buying Cadillac Escalades for cash instead (which they just did), I may believe that there aren't any rich left in America. You are letting your pessimism get the better of real numbers, Coal ;)

Anonymous said...

Hi Bureau!

I've got some cash in the bank too, and good for your parents who have been good stewards of their income over the years. There is lots of money still around, but the promises that the government has made and the promises that have been made to present and future pensioners simply cannot be met given the value of the dollar today. Trillions of dollars have evaporated. If the government succeeds in creating inflation, these promises will be met in dollar terms, but the dollars will be much smaller.

The markets are deleveraging. As that happens, the only way to keep the same number of dollars in the money supply is to make new smaller ones. This is good for anyone in debt, but bad for anyone who holds cash or debt instruments. It is basically a tax on cash that the government will use to reduce its debt load, and its social welfare obligations.

Good luck to your parents. They have earned it.


Coal Guy

bureaucrat said...

One of Jeffers' articles was mentioned in ....

Greg T. Jeffers said...

Coal Guy:

Well said in your first comment.


I do not speak in absolutes. Yes, there were "Rich" people during the Great Depression.


'The poor will always be with us"

it is the percentages and expectations of each, as well as the disparity between the 2.

Few countries during the 20th century survived an environment where the the net worth of the top 10% was greater than 10X that of the bottom 10%.
(Not sure why I brought that up...)

I direct my posts to folks that have worked and saved for a lifetime. I do not write for penniless doomers for the most part. Folks with $1MM to $20MM will have worked and succeeded for naught, unless they interpret their environment correctly.

I do not profess to know exactly what that means to any individual. Nor do I seek to profit by selling them a "solution" (notice that there are no advertisements on my blog?) I merely point out what i think are the salient risks. Each thinking person then makes his/her own decision. Very similar to the markets.

For reasons not even clear to me I like to vent my observations while working in this Den of Thieves (the financial markets) in an exercise of futility.

I just call 'em the way I see 'em

Greg T. Jeffers said...


I was not suggesting that you were a "doomer". I get plenty of email from them, and I try to discourage them from this Blog.

Anonymous said...

Well I am a wealthy doomer but doomer none the less. What you describe Greg is Doomer stuff. Perhaps not mobs in the streets but a breakdown in normality (or perhaps a new normality) which finds people worrying about what they are going to put on the table and I don't mean a new tablecloth with a matching runner and a Martha Steward centerpiece.

Some of the wealthiest people I met were doomers. At the beginning on November I talked to a guy who retired from high level position in the World Bank and who said that the unthinkable was going to happen. At first when I pushed him he said that the "Unthinkable" was having the Big Three Detroit Automakers having to be bailed out by the US Govt. I laughed and said that far from unthinkable it was already a virtual certainty. Then he said what he was really concerned about was the US loosing its AAA credit rating and going down to BBBs. I told him I was thinking more like the little ccc. Didn't get an argument out of him. Once he realized I was a doomer and there was no risk of being considered fringe we had a nice doomfest together. Nice to have a validation. Now mind you he was retired and flying around the world "eradicating poverty" on the tab of a poor African country. What he was doing at the relatively wealthy end of the world where we live is not clear. But in any case he didn't have to talk the book of WB anymore. You can't get honest opinions of people who are still working at these institutions. As Samuel Clemens said so well: "Show me where the man gets his Corn Pone and I will tell you what his opinions are?"

Where was I? Keep doing a great job Greg.

Best regards,
Chuck H.

bureaucrat said...

Aww, so much self-analysis here. ;) I'll just add in that for a country that may have hit its final economic wall, more important than the money we accumulate is now the ability to say "I did it/I saw it/I predicted it" before everyone else. That is the "climb every extreme mountain" thing, where people just can't find fulfillment in "doing a good, boring job everyday." 35 years of cleaning up trash & pushing paper. Everyone has to be the first one to say "I predicted Great Depression #2 before everyone else did." Most people can't easily show their money to everyone, but they can "earn" the respect of people by being the one who saw the turn in the bend before everyone else. I'm just as guilty of thinking that way. :)

Greg T. Jeffers said...

Coal Guy:

I guess by your definition that I am a "doomer"... thought not penniless, I would not refer to myself as wealthy... maybe upper, upper, upest? middle class... formally VERY working class (lowest end)...

It disturbs me, for whatever reason, to think of people like me that have dug their way out of the muck and mire over decades could have their life's work and their family's security snatched from them in a short period of time.

For the very reason that "I been rich, and I been poor. Rich is better." And I don't mean beach front mansions and Gulfstream IV rich, I mean rich enough to not be freaking out each month when the end of the money comes before the end of the month and fried Spam and melted Velveeta are considered a balanced lunch, and this was hardly the worst of the indignities that come with being poor. Been there, done that. It wasn't that great. I don't wish a return trip, and I hope to help others to avoid that trip, too, irrespective of whether or not it is a return trip or a first time there kind of thing.

Greg T. Jeffers said...

Coal Guy:

When I mention "penniless doomers" I really meant the kind of folks that are HOPING and PRAYING for an Armageddon style collapse. Their numbers are legion.


Of course, you are much more optimistic than most. Whose job is more secure than a Federal Employee?

Thank you for your comments

bureaucrat said...

Only optimism worth anything now would be finding a way to synthetically make crude oil (cheaply and without the pollution). Why can't long-chain hydrocarbons be manufactured, dammit? Why does only the carbon atom easily combust??? :)