The Rollercoaster is Over the Top

Jobs, Again

Do You Suppose Economist Will Ever Get It?

This morning's official jobs report was devastating. Unfortunately it was not surprising for those who get the relation between energy and the economy. Oil prices had been running north of $100 on all markets for some time before the Greek crisis reached the current levels of panic. The whole European situation is untenable. Half of the countries in the Eurozone are in or near recession and all of the members are experiencing the effects of debt in a no growth environment. And they have no real understanding of the role energy plays in fueling the capabilities of an economy.

The Middle East continues to be a hotbed of malcontent, mostly motivated by the cost of living rising in a world where unemployment is already unbelievable (by historical standards). And then, on top of all of that the two economies that the world was pinning its hopes on, China and India, appear to be slowing down. China has been highly dependent on exports to Europe and the US. Both of those markets have slowed significantly so China's continued growth is dependent on internal consumption and that, in turn, depends on the average wages of Chinese workers going up. That might be a possibility for a while, as China learns how to print money(!), but obviously that can only go on for so long before the effects on real income become obvious.

Everyone appears to be doing some kind of in-place jig, trying to keep things together until something like consumer confidence returns to restore the global markets to growth. It is simply beyond the cognitive capabilities of the vast majority of people to grasp that economic growth depends entirely on increasing net energy supplies (of high quality). And they cannot imagine a situation in which the economy doesn't basically grow in the long run. So they go on trying to hang on, using old models of sustaining some acceptable level of economic activity, e.g. using increasing debt — borrowing from the future — to ‘fund’ the present. By stalling in understanding the reality, they are actually making the situation worse. Since the success of borrowing from the future depends entirely on a substantial growth in wealth per capita, in order to pay back both principle and interest in that future time, and since growth depends entirely on more energy per capita being available to do the necessary work, this model simply can't work.

I have little hope that the standard-issue economist will ever grasp this.

Reaching the Global Maximum (Highest Peak) of the World Economy - the Top of the Rollercoaster Track

Evidence of this assertion regarding economists is the “surprise” so many of them expressed at this jobs report. So many economists have been expressing hope that the economy was at least weakly growing, a good sign of eventual recovery. What they seem to be completely oblivious of is that the economy is like a giant rollercoaster with respect to net energy supplies. We've reached the global maximum of the track — the peak of energy supply. And from here on we are going to be heading generally downward. Real rollercoasters have multiple ups and downs, but the trend is always down, back to the level where it started. The chain that has been pulling the economy up the ‘big’ hump is the availability of high power fossil fuel energy. Granted this was accompanied by really impressive improvements in technology, which has been acting like applying lubricating grease to the wheels of the economic car. But the real motive force comes from fossil fuels.

The car is headed down now. We've just gone over the peak. Unless there is a giant find of low EROI fossil fuels soon, we have nowhere to go but generally down on a very dangerous ride. From this point on the decline of net wealth per capita will begin to become painfully obvious. It will hurt everyone, even the so-called one percenters. No one can escape this phenomenon.

No politician can promise anything. No candidate for president can claim to know what to do because this isn't like any previous economic problem humans have ever faced (except in the short-run for previous non-globalized civilizations, which collapsed). So as you hear the candidates make claims about what can be done to get the economy going again, realize that they are just blowing smoke. They haven't got a clue, and even if they did, there is nothing at all they can do about it. This is inevitable.

Make Sure Your Seat Belt is Secure and the Safety Rail is Down!

That doesn't mean there aren't things that you can do to prepare for the ride down. I've been pushing learning permaculture and trying to prepare by finding somewhere off the beaten track to settle and set up a sustainable community. With some luck, the kind of disruptions that we will be experiencing from climate changes won't have too much of an impact for several more decades (then again...). That will give time to make it through the major disruptions in the economy. But it is probably not a long-term solution, as I have been suggesting in my “Goal” and “Path” series. In the longer run, as climate change really starts to bite, and the bottleneck event is well underway, a different strategy will be needed.

But for now, the way to increase one's chances of surviving the collapse of civilization is to give up on civilization now, or at least start making way in that direction. People need to learn to live without the accouterments of modern technological life. They need to secure their food, water, shelter, and community resources in a simplified lifestyle. But do so in a manner that allows mobility flexibility just in case things go faster than we currently expect.

By definition the peak is the point where we are experiencing the maximum level of whatever. We have already passed the peak of civilization and economic gain. Just looking around with limited vision, one could be tempted to think everything is OK. Indeed the vast majority of people unconsciously do limit their perspectives so they see what they want to see. And they want to see the continuation of what they saw in the past. While we were able to exploit cheap and abundant fossil fuel supplies, and the economy was growing, civilization was increasing in complexity and innovative ideas. People were getting increasingly dependent on technology and social supports in complex networks. Increasing energy meant increasing dependence, and loss of autonomy. Now, decreasing energy means decreasing support from society for every individual. It means only simple, functional social organizations will be able to function and be sustainable.

Given the deep disappointment of the US jobs data along with everything else that is going wrong in the global economy, I think it is about time we all considered it time to act. The rollercoaster ride is about to get serious. Strategic planning should be taking an increasing amount of your time.

Comments

[Bruce]

George, the situation is worse than implied. The US has not created a net new full-time private sector job since the mid- to late '80s; and for males not since the early to mid-'60s in per-capita terms.

The US (un)economy no longer creates full-time living-wage employment.

It's not a surprise why this is the case. Since '00-'01 the only incremental "growth" for the US economy has come from "health care" and gov't spending, primarily because of spending for war and transfers. Had "health care" and gov't spending grown at the average GDP rate, US nominal GDP would have grown 2.5% vs. 3.6%, 0% in real terms vs. 1.6%, and -0.8% real per capita vs. 0.7%.

The US economy for 11-12 years has "grown" because we are becoming older, fatter, sicker, unemployed, and have expanded imperial wars around the planet. Needless to say, this is perverse and utterly unsustainable.

The energy sector has grown dramatically but has not contributed to a net increase in US economic activity; that is, the energy sector's gain owing to soaring energy costs is the economy's loss (as was the case in the '70s). And the price of oil has soared because of the structural factors associated with Peak Oil, which is in large part a function of China's incremental demand, which in turn is a result of the $2 trillion in US and Japanese supranational firms' foreign direct investment (FDI) in China-Asia since the '90s, creating demand that otherwise would not have occurred.

Now Peak Oil, peak debt, falling net energy per capita, emerging fiscal constraints, population overshoot, the Boomer demographic drag, and China and much of the rest of Asia encountering the "middle-income trap" means China-Asia's growth boom is over, risking the developed world and China-Asia following the path of Japan since the late '90s.

As you imply, there are no viable capitalist, socialist, communist, monetarist, Austrian, Keynesian, supply-side, or any side's solutions to the global structural constraints now taking hold.

I might need a dry place to sleep and to practice permaculture. I have my own sleeping bag, I eat very little, I don't smoke, drink much, or snore, I'm a good cook, handy with tools, and I have experience fishing and raising chickens, rabbits, and goats. Let me know if you have a garage in which I can sleep when the time comes. ;-)

[Tom]

Bruce - that is an amazingly accurate and yet terse explanation of what's happened to get us to where we are. Thanks to you and of course our host George for continually clarifying our predicament and offering some kind of personal "solution" for the interim (between the collapse and the big reset).

i've been especially cognizant of the on-going decay of society, erosion of our infrastructure, the dumbing-down of our education, the cluelessness of both political parties, the lack of leadership and the changing climate since the late 1960's and it appears we're reaching a crescendo.

Not only do i have no faith whatsoever in mankinds ability to "solve" these problems - i also see humanity going the way of all those species we so blithely condemned to extinction by our carelessness, greediness and callousness.

For all the great humans that came before and exist now telling us what's to come and leading by example, millions have been duped by the "clever" ownership class to follow the road to personal wealth. The Industrial Revolution itself was a bad idea as we now plainly see.

The fact that we never developed our sentience as those aforementioned great humans like Ghandi, Jesus, Buddha, and the like had suggested has lead to our demise. The wages of sin are indeed death. We are not as intelligent or sentient as we like to think we are (bias, delusion) and Mother Nature (or reality) is coming to reclaim its rightful spot. We'll be gone before the next century the way it looks by a combination of climate change causing rising sea-levels, droughts ("dustbowlification"), floods, increasingly strong storms, and all manor of wild temperature swings that will make food production increasingly difficult. Add to that the nuclear radiation threat as that fiasco adds to Fukushima (which is by no means "over" yet) and Chernobyl, aquifirs being depleted, soil erosion, factory farming collapse, pollinator extinction, ocean acidification and overfishing, methane geysers, solar prominances and quadripolar shift, magnetic reversal of the earth, tropical diseases and insect population explosion, the meltdown of the global financial system and the penchant for humanity to kill each other, and you get a pretty good "trajectory" of our "path" in the "future."

In my humble opinion: we're toast. i sincerely hope i'm wrong.

[Tom]

i forgot to mention volcanic activity and earthquakes are both way up all over the world.

[Anywhere But Here Is Better]

One aspect of my personal philosophy sustains me, as we catalogue and discuss these catastrophic issues. It's that we only die once, so I don't fear death. And if we are able to eliminate fear of dying as a prime driver of human conduct, we can make one of two sapient choices, given the future that is likely heading our way:

1. Heed George's sagacious advice on how to prepare to survive the bottleneck, which will provide at least temporary refuge.

2. Stay calm and witness the End without participating in the melee over resources that will accompany the final collapse.

Option 1 offers "hope" while option 2 is about "acceptance".

I suspect that our little population of awake sapients will divide along these lines, according to taste. I'm not sure of the ratio at this stage.

[George Mobus]

Bruce,

That may be true about net jobs. I am constantly amazed, however, by the many former students of mine that are getting jobs in CS in spite of the economy. Computer programming and engineering appear to remain in high demand as the service sector based on computerized capabilities is still seeming to expand. I do not expect this situation to continue for much longer as the general malaise in the economy will surely hit the service sector sooner or latter (e.g. the health care system). For the moment I still try to educate students not only in CS and programming but in critical thinking and some general systems thinking so that they might stand a chance of finding meaningful work even as the computer industry slows. But, really, who knows?

If you're into organizing an intentional community such as described here, I know the place! Just need the people.

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Tom,

Of course humans as they exist today are going to go extinct. That is the whole basis of my thoughts about what to do in the short run. Homo sapiens is destined to extinction just as every species is, but that doesn't need to mean that the genus, Homo need go extinct. Not, that is, if some small remnant can form a breeding population that allow it to be subject to natural selection again.

As for the Industrial Revolution being a bad idea: I'm of two minds on that matter. On the one hand, yes, the way Homo sapiens has played it out it is proving to be bad for the Ecos and humanity in general. But, on the other hand, it has produced a rich trove of knowledge about how things work, how the universe works, as well as supporting the arts, etc. It isn't all bad. I think the trick is to preserve the good aspects of industrialization (the knowledge) and let the bad parts (greed, resource over consumption, pollution) go the way of the Dodo.

The path you describe? All part of the bottleneck event.

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Anywhere,

I'm thinking it is just a matter of the statistics. Some humans are going to survive the initial collapse through just dumb luck. Others may try to improve their odds by doing things like what I've suggested. But realistically many who try will not succeed and many who don't do anything may succeed just due to circumstances. Its a crap shoot. But I do think that the more little bands of those who are trying to prepare there are, the more likely some of them will make it.

George

[Bruce]

George, I do not doubt that CS and engineering students are still finding employment opportunities, as STEM jobs make up no more than 0.22% (2 out of 1,000 workers) of total US employment. By definition, the small number of grads and experienced professionals in these occupations as a share of the total employment base makes them dear to employers.

But even at a 2.5-5% annual growth rate anticipated, the total number of jobs created in ten years will be be no more than the number of jobs required in one month just to keep up with the US labor force growth and thus to prevent the unemployment rate from rising.

Moreover, how many graybeard 45 to 65 year-old computer geeks does one encounter? The nature of the industry since the '80s is such that if a deep techie has not become a stock option multi-millionaire by age 35-40, one's career as a well-paid techie is likely over, or at least will be harder to sustain.

I'd appreciate any information you could share about the intentional community (communities) to which you refer. Feel free to contact me privately via the listed e-mail address at our convenience. Thanks.

[Bruce]

Strike that STEM count above, which is only for the state of Illinois. DUH!

The broadest measure used by US Commerce Dept. counts slightly fewer than 8 million STEM jobs in the US, 5% (1 out or 20 workers) of the employment base, which is expected to grow 1.5%/year over a decade.

Still, the additional 120,000 jobs/year is fewer than one month's worth of jobs required at the trend labor force growth rate to reduce the unemployment rate.

[Bruce]

One more bit of trivia: The bottom 80% of US households have a household income per capita equivalent to the income per capita (PPP terms) for the countries of Mexico, parts of Central and Latin America, Eastern Europe, and South Africa, for example.

This is the real "America", not the one portrayed by mass-media advertising/corporate propaganda. The working-class masses of the US can no longer afford (falling real wages, crushing debt service, impending insolvency of social welfare programs, and no financial wealth accumulation) to emulate the spending behavior modeled by mass-media advertising intended for the professional middle class or next 9% of households (who receive 25% of US income and hold 40-45% of financial wealth) after the top 1%.

By population proportion, the US is not a "middle-class" nation but a subsistence working-class/peasant population living on the legacy of 70 years of cheap crude oil extraction and subsequently 30 years of expansion of debt/GDP (at falling nominal interest rates) and gov't spending/GDP that is coming to an end.

[Robin Luethe]

If there is a way out, I think it will go something like this:

Gradually replace the important GNP with an even more important Quality of Life National Index

Cut carbonn dioxide addition to the atmosphere and oceans by 2% a year

Partly by energy conservation, aim for 3-5% a year.

and Partly by green energy production.

Continue to close coal power plants, slow down natural gas.

This all may not work, what are the alternatives.

[Robindatta.wordpress.com]

trying to keep things together until something like consumer confidence returns
Consumers imply consumables. The economy is the conversion of resources into products/consumables through the skillful manipulation of energy streams. With shrinking streams, there will be decreases in consumables and consumers.

Granted this was accompanied by really impressive improvements in technology
Technology was the harnessing of energy streams in greater volumes and in more sophisticated ways to convert more resources into more and fancier products.

[Bruce]

Robin L., the rentier-oligarchs have little concern about the well-being of the bottom 99%+, only that they (we) can be controlled and prevented from challenging the power of the top 0.1%.

The issue of CO2 emissions will be resolved by the inexorable decline hereafter in real incomes and consumption per capita for the bottom 90-99%.

Robin D., precisely, as well as the financial and political gains from techno-scientific breakthroughs and incremental innovations increasingly concentrating to the top 0.1-1%, including gains in net energy terms per capita.

[Larryshultz]

Bruce, 3% of the households have 38% of the discretionary income. The lowest 60% have 3% of the discretionary income, this includes the bulk of the middle class. In the last 20 years only jobs in the lowest quarter of labor skill have grown and the bulk of that is in the lowest decile. I expect this trend to continue independent of jobs keeping up or not keeping up with population growth. Part time jobs are becoming more prevalent.

[Bruce]

Larry, quite correct. The US economy no longer creates net new living-wage employment.

Given that the mass-consumer economy wastes a COLOSSAL amount of resources and net energy per capita, one can make a case that the US is experiencing gross "overemployment" as a consequence of obscene maldistribution of income and wealth rather than unemployment/underemployment.

We possess the techno-scientific knowledge, tools, and sustainable resources services throughput per capita to guarantee quite literally a socially acceptable voluntarily LOWER standard of material consumption for all Americans; however, we would have to get rid of advertising and fractional reserve banking, tax consumption heavily or exclusively (notably energy), restrict or eliminate auto/truck use for commuting and recreation, and overtly reduce population by means most would consider unacceptable.

But Nature and "the market" will impose these checks on the human ape population irrespective of our individual and collective desires.

One hears occasionally the discussion of bubbles in the financial markets, unreal estate, commodities, etc., however, the greatest bubble in world history, population growth, is among the last taboos. Since the onset of the effects of the "Green Revolution", world population has grown at a doubling time of just 35-40 years. Had the population grown at the trend rate from 200 BC to the onset of the Industrial Revolution and the Oil Age era, the world population today would be less than 800 million (approximately the combined population of the English-speaking world and Europe today).

As we know, it can require decades and longer for forests, grasslands, and watersheds to replenish or adapt to conditions of degradation or depletion in order to support a diverse set of species. A doubling time of 35-40 years for human population and the associated increase in demand for finite resources makes ecosystem restoration impossible within the necessary time to support the existing population.

Apart from a precious few ecological or biophysical economists at the "fringe" attempting to inform us, the mass of economists, business executives, Wall St., politicians, and the financial media influentials continue to espouse the need to tweak tax rates or a gov't borrowing and spending plan so as to continue to encourage the impossible: perpetual growth of debt, population, and resource consumption on a finite planet.

[George Mobus]

Bruce,

I'm not imagining the demand for computer scientists/engineers, etc. will really last much longer. Other events in the markets are going to eventually show that demand for products and services that are computer-based is waning. For example it will be interesting to track the demand for Apple products as a stereotypical example - the new iPad (or whatever it is).

I guess I am just grateful that in the meantime, the demand for CS-E degrees will keep me getting an income so I can keep doing this stuff!

PS. the intentional communities are all over the place, some good, some weird. Transition Towns and Re-localization organizations abound and should be easy to find via Google or Wikipedia.

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Robin L.,

IF there is a way out...

emphasis added!

These blog pages have several years of writing that include reasons why the IF part of your statement looks more the case with each passing day. The prescriptions you gave have been suggested by many before, and thus far no one has found ways to make them work. Sorry.

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Robin D.,

There is growing evidence that the innovation in technology has significantly slowed down when it comes to finding tech that will truly improve efficiencies or supply new sources of energy. Some politicians, media types, and economists attribute this to a lack of investment in innovation (e.g. good ole Tom Friedman and Paul Krugman). Yet there is all kinds of investment in entertainment and novelty. I suspect that if a truly innovative technology that would boost productivity were found there would be plenty of investments to see it to market. I suspect we have simply run out of good ideas.

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Larry and Bruce,

Thanks for the numbers. Pretty much makes the situation clear.

George

[binary options signals]

That is for sure a big problem when working people do not earn enough to have a decent life. Prices in every field do increase while salaries remain the same they were years ago. Difficult to feel like going backward.
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