Weak dollar means more US jobs?

[hack89]

Don't claim to be an economics expert but I found this interesting.

The euro's seemingly inexorable drive toward the $1.50 mark may have slowed down for now, but companies in Europe seem to have sped up their search for strategies in dealing with the newly weak dollar (more...). European jet-maker Airbus and auto manufacturer Volkswagen both have decided on a solution: The two companies are actively looking into building factories in the United States.

http://www.spiegel.de/international/business/0,1518,521138,00.html

[TechBear_Seattle]

1. Yup. We are becoming Europe's India n/t

[Toots]

2. Except with labor that is quite uneducated..

:shrug:

[htuttle]

3. ...and no government health care subsidy

[hack89]

5. Building airplanes requires a skilled workforce

the Aerospace Machinist Union is one of the strongest in America - my dad worked for Boeing and was a member. He was treated well by Boeing and retired with a pension and medical.

Depending what industries move, this could be a good deal.

[dipsydoodle]

4. Depends how much you're manufacturing

for export. The weaker dollar makes your good cheaper to the outside world. By the same token it makes imports dearer.

[dmallind]

6. Well that helps, but not necessary

If foreign companies can produce products here for the US - by far the world's largest market - they can take advantage of the weak dollar to build those products (or at least the initial facility and capital equipment) more cheaply. So instead of spending 100 million euros to outfit a new production fascility say they would only have to spend 100 million dollars instead. Now of course they get paid in weak dollars for those goods too when sold in the US, but they use the majority of those dollars to pay for US plant, equipment, workers, suppliues etc there is no relative loss to them until they repatriate the net profits. Not even then if they have plans to expand in the US.

This is the good side of the weak dollar no doubt about it. Works for tourism too not just I sector spending. All of a sudden the choice between travelling to the Alps and travelling to the Rockies for a European who wants to ski on vacataion is starting to get biased in the favor of spending money here.

[dipsydoodle]

10. The upside

is that it will create jobs. Yes - same should apply to your tourist industry but for that to happen you need to lose that four letter word second letter U................B*sh.

[dmallind]

11. That would definitely help too. NT

hh

[Virginia Dare]

7. I've been hearing that spin for a while now...

we'll see, somehow I doubt that all of this is going to be good for the American worker.

[gatorboy]

8. We'll eventually become the flip side of today's China.

producing cheap crap on slave wages for the rest of the world.

[Deja Q]

9. China has said it's pulled over 400,000 citizens out of poverty.

With more to follow.

And India is faring better these days too.

http://articles.moneycentral.msn.com/Investing/StockInvestingTrading/ChinaIntro_SeriesHome.aspx
An interesting series of articles...


So, eventually, we'll be better off again as well.

[Lasher]

12. The disadvantages outweigh the benefits for most people

You would think a lower US dollar would have helped with our balance of trade but it has not. We will continue to import a lot of items, particularly oil. The fall of the dollar will continue to drive up the cost of these imports, making any improvement in our trade deficit unlikely.

Here's another important factor: We're not making anything. What little we do produce could end up being bought by other countries, creating less supply of wheat and corn, for example, for consumption here. Prices of both domestic and imported goods will climb at a faster rate. But your purchasing power will not. Get ready to tighten your belt more as this inflationary trend accelerates.

The average American is being robbed.

[Deja Q]

13. Well, at least someone takes an interest in us.

:shrug:

[Romulox]

14. Just FYI--imports account for only 16% of our economy, and we produce more cars today than in 1950

This talk of "America produces nothing" is waaaay overblown. The US is the #2 exporter in the world.

[Deja Q]

18. In seriousness, thank goodness.

Thank you for the perspective. :thumbsup:

There ARE US-made products out there... and I DO need to remind myself the offshoring problem is somewhat overstated too.

[Lasher]

20. Yes and the US is the #1 importer in the world.

Comparing our quantity of imports and exports with those of other nations is a measure of the current size of our economy, which is not relevant to the point I was trying to make. Comparing US imports with US exports reveals our trade deficit, which is part of the discussion.

Considering the economic growth that has occurred since then, producing more cars today than we did in 1950 seems a low benchmark.

It is clear that the costs of imports impact our economy. For example, the 1973 oil embargo and subsequent price shocks caused observable changes in GDP growth, and were all followed by recessions. And 1973 petroleum imports made up 35% of US supply. Imports now account for over 50% of US consumption.

I confess to exaggeration when I said we're not making anything but I thought it would be understood I was citing our manufacturing capacity that has diminished over time.

[Romulox]

25. "I was citing our manufacturing capacity that has diminished over time"--this is objectively FALSE

What is true is that the growth in our manufacturing capacity has not grown at the same pace as other sectors of our economy, particularly the "service economy".

[Lasher]

29. And what can you cite to show our manufacturing capacity has grown?

Are you going to say again that we're making more cars now than we did in 1950?

[Romulox]

31. I'm really busy today, but here are the numbers from Dept. of Transportation

These data only happen to go to 1960, but I don't have time to dig up anything better atm.

http://www.bts.gov/publications/national_transportation_statistics/html/table_01_15.html

[Strelnikov_]

15. Imported oil is the killer

~13 Mbbl/dy @ $85/bbl = ~ $1.1 B/dy

[Lasher]

21. Yep, just as I demonstrated upthread.

It's hard to imagine a part of our economy that is not impacted by rising petroleum prices. The decline of the dollar and peak oil are a double whammy.

[Johonny]

28. Plus

The rising dollar is tied to the rising government debt. Government debt has been spent mostly to produce none revenue generating items such as weapons. Thus the increased US spending has not built up the US infrastructure which really could create new jobs but on one time use things such as bombs. This is a really bad investment. A weak currency is a sign of a weak economy and a weak economy is not “good” for America.

Aerbus has a unique problem. Their long term contracts are signed for them to be paid in US dollars. As the US dollar sinks their contracts have become less valuable. Most Europeans companies are not tied to such contracts.

[HamdenRice]

16. It's elementary economics

As the dollar falls against the Euro, American products become cheaper to Europeans, so they substitute American goods (imports) for domestic production, which in turn generates employment.

One unprecedented situation, however, is that the Chinese have tied their currency to ours so the cheaper dollar will not cause Americans to substitute American goods for Chinese goods.

[Lasher]

23. China has started to consider removing the 'peg' to the US dollar. n/t

[ProfessorGAC]

24. Unfortunately, Elementary Economic Constructs. . .

. . .move glacially, so the these currency fluctuations rarely show any statistically significant change. By the time the leverage begins to be fully exerted on the system, something else changes and the expected result is smaller than anticipated.

That's one of the objections folks like me have with conventional economists. There are far too many "elementary" aspects that work as X v. Y. But, with dozens of inputs and dozens of outputs, the economy is not two dimensional.

That's not a slam on you. I know you didn't say that. Just stating a case.
The Professor

[HamdenRice]

27. Not necessarily

After all, China's growth has largely been spurred by massive trade imbalances, which in turn are partially the result of an artificially depressed currency, which have caused explosive growth in non-agricultural employment.

Moreover, here in New York, the stores are already bursting with European tourists. There was a report on the radio over the weekend that interviewed some Irish tourists. Basically, they could fill up a few suitcases with clothes and electronics purchased here and pay for their airfare. Consumer goods are now half price in New York compared to European cities. This is already generating retail employment in New York City.

But I agree that there would need to be sustained growth in exports for a depressed currency to generate, for example, manufacturing employment, because it takes some time to un-mothball slack capacity, let alone to build new capacity.

I suspect the decline of the dollar is going to be medium to long term, so it's my guess that this is going to have a measurable positive effect.

[ProfessorGAC]

32. We're Sympatico, But In Disagreement

I think this will be a short term effect, and the China thing, while accurate, is not related to the value of either our of their currency.

It's a combination of rampant speculation on the long-term development there, and the low labor costs for export to here.

The currency valuation is a tangential, and low leverage variable.

Other than that; well, we're in the same book, if not on the same page.
The Professor

[johnaries]

17. That's Bush's strategy. Stop outsourcing to 3rd world countries

by making us a 3rd world country.

[Deja Q]

19. So many 'strategies' (and I tend to think of a few too) yet there's no proof.

Maybe it's Occan's razor; the simplest explanation is the correct one. (cheap money)

[Romulox]

26. Even simpler: we're overextended

"Elementary economics" suggests that foreigners have less incentive to subsidize our debt by purchasing it when other markets offer less risk (e.g. intelligent oversight of the secondary mortgage market) and/or greater reward (e.g. higher interest rates.)

[magellan]

22. Some time ago I said the jobs would come back around to us eventually

We just won't be paid as much for them.

The wonders of Free Trade!

[Deja Q]

33. The cost of living makes the wages paid to such workers very nice

$75 for a lawyer in India is much less expensive than $300 here...

And their cost of living makes that $75 heaven personified.

[flashl]

30. We have proven the benefits of cheap labor

we have factories behind prison walls paying a low as .23 per hour. Capitalism creates poverty, poverty creates prisoners. The prison industrial complex (PIC) is a multi-billion dollar industry complete with lobbyists, trade shows, and conventions.

The Prison Industry have proven to be successful converting high-cost public jobs to cheap prison labor. In many states, the department of corrections is the single and largest employer.

Prison labor has risen to the level where state corrections agencies are even advertising their prisoners to corporations by asking these questions such as: "Are you experiencing high employee turnover? or Worried about the cost of employee benefits?

These "uneducated" prisoners labor compete with commerical areas such as computer repair, airline reservations, building limousines, farming, replacement of municipal employees, etc.

Follow the money.