1 US job growth beats forecasts (BBC) The US economy added 321,000 jobs in November, while the unemployment rate stayed at 5.8%, official Labor Department figures show. The number of jobs created was well above analysts’ forecasts of about 225,000 new jobs in the month. US employers have added at least 200,000 jobs for 10 months in a row, the longest period of jobs growth since 1995.
The number of jobs created has averaged 241,000 a month this year. But as in the UK, stronger job creation has yet to lead to a significant increase in salaries. Analysts said the US economy would continue to improve, despite lower global growth expectations. The US economy is less dependent on exports than Germany, China and Japan, but is more reliant on domestic consumer spending.
Most recent figures suggest Americans are buying more cars, which is likely to keep factories busy in coming months. Auto sales last month rose to their second-fastest pace this year. Car sales are on track to rise 6% this year from 2013. The economy is expected to slow in the final three months of the year to an annualised growth rate of 2.5%, down from 4.3% from April to September.
2‘Currency wars bode ill for world economy’ (Nouriel Roubini in The Guardian) Central banks in China, South Korea, Taiwan, Singapore, and Thailand, fearful of losing competitiveness relative to Japan, are easing their own monetary policies – or will soon ease more. The European Central Bank and the central banks of Switzerland, Sweden, Norway, and a few Central European countries are likely to embrace quantitative easing or use other unconventional policies to prevent their currencies from appreciating.
The cause of the latest currency turmoil is clear: in an environment of private and public deleveraging from high debts, monetary policy has become the only available tool to boost demand and growth. As fiscal austerity and asymmetric adjustment have taken their toll on economic performance, monetary policy has borne the burden of supporting faltering growth via weaker currencies and higher net exports.
You can lead a horse to liquidity, but you can’t make it drink. In a world where private aggregate demand is weak and unconventional monetary policy eventually becomes like pushing on a string, the case for slower fiscal consolidation and productive public infrastructure spending is compelling.
Such spending offers returns that are certainly higher than the low interest rates that most advanced economies face today, and infrastructure needs are massive in both advanced and emerging economies (with the exception of China, which has overinvested in infrastructure). Moreover, public investment works on both the demand and supply sides. It not only boosts aggregate demand directly; it also expands potential output by increasing the stock of productivity-boosting capital.
The right policies – less fiscal austerity in the short run, more public investment spending, and less reliance on monetary easing – are the opposite of those that have been pursued by the world’s major economies. No wonder global growth keeps on disappointing. In a sense, we are all Japanese now.
3 Disintegration of rural China (Joe Zhang in Straits Times/NYT) Many of China’s rural towns have been brought to ruins by the breakdown of traditional social norms that followed decades of failed policies and neglect by the state. China’s traditional social fabric has become shredded – and the disintegration is most obvious in the countryside, where families are falling apart, crime is soaring and the environment is killing people. Many villagers who were happy to have the state retreat from their private lives in recent decades are now crying for government intervention. Something has to be done to rebuild China’s languishing village life.
Beginning in the late 1970s, the communes were split up into family farms, prompting a surge of productivity and more freedom for rural residents. Peasants suddenly had the power to decide what crops to grow, how to grow them and how to sell their harvests and other products. Many farmers decided to leave the land to work in factories in the boom towns along the south-east coast, bringing home money as well as fresh knowledge from the outside world. Average monthly wages in the cities surged from a few hundred yuan two decades ago to about 4,000 yuan today, while incomes in the countryside lagged far behind.
Factories eventually emerged in towns near rural villages, sucking the lakes dry and poisoning the rivers and the air. Experts estimate China has more than 450 cancer villages, towns where cancer cases cluster at much higher than average rates. Villagers have paid a steep price. Some residents of my village have died of unknown ills in their 40s and 50s. Rural families are suffering. The suicide rate in the countryside is three times as high as in the cities, according to reports from 2011.
In many cases, men go to jobs in the cities while their wives stay behind with the children in the village. They get to see each other only a few days a year. Distance, emotional stress and financial frustration tear families apart.
Beijing’s effort to decentralise the country’s governance over the past few decades has played a major role in this social decay. The elections of village heads are often rigged and corruption is rampant. The retreat of the state has left a dangerous power vacuum, and many villagers have been left to fend for themselves. There is a lot of talk of mafia-like groups wielding power behind the scenes.
The misery in the Chinese countryside is severe but fixable. The government and the public must come out from the shadows and prioritise the rebuilding of village life. The state has the financial resources and expertise to do something. It just needs the will.