There’s been a running conversation between Paul Krugman and Financial times economist Martin Wolf. In the latest talk, the two observe that over the past years, the number of female workers has increased, in the US and elsewhere, while the number of male workers has steadily declined. Hence, the emergence of a growing number of angry out-of-work males in advanced economies, while overall employment numbers are relatively benign. How so? A change in the nature of work. Wolf’s take is that machines have replaced male brawn over the past decades. If so, it would seem that the Trump strategy that raising the price of imported goods will force firms to establish labor-intensive manufacturing operations in the US won’t work. We’ll just have more robots, instead.
Torsten Slok, the Apollo chief economist, published a chart today based on Bloomberg data that shows the percentage of mid- small-cap Russell 2000 companies that aren’t profitable. It’s over 40%. This is a number previously seen only in/after deep recessions, like the banking collapse of 2007-08 and the pandemic. The chart shows a pandemic-related spike to 45% and a levelling off (though little progress) during the Biden term.
It’s always risky, I think, to take charts at face value, since tweaking the x- or y-axis, or both, can make molehills look like mountains and vice versa. It does look like the Trump economic strategy of raising the price of imports, shrinking the workforce and devaluing the currency may have clipped a couple of percentage points off the recent (Biden) peak of 45%. Hard to know why, though. For what it’s worth, my guess is this is mostly devaluation. It could also be, though, that consumers are trading down to local or regional brands (think: Ollies Bargain Outlet) because national brands are too expensive.