Paul Craig Roberts: Jobs Offshoring and De-dollarization Set to Upend US Living Standards

The US unemployment rate jumped to 3.7% from 3.4% percent in April with wage growth slowing, according to the Bureau of Labor Statistics. At the same time, American employers added a robust 339,000 jobs last month. Sputnik sat down with US economist Dr. Paul Craig Roberts to discuss the seemingly contradictory figures.

"First of all, US employment and unemployment numbers are misleading," Dr. Paul Craig Roberts, an American economist and author who was assistant secretary of the Treasury in the Reagan administration, told Sputnik.

"For example, the nonfarm new jobs numbers have a large part time contingent. Two and even three of these jobs might be held by the same person, so the jobs number is higher than the employment number. Second, the measure of unemployment does not include discouraged workers who have ceased looking for a job. If you are not actively seeking employment, you are not considered to be in the work force and are not counted as unemployed. In other words, the numbers are not very indicative of what the situation actually is," the economist continued.

Last week, the US Bureau of Labor Statistics released new figures indicating that the unemployment rate jumped 0.3% in May, from a five-decade low of 3.4% in April. This means that roughly 440,000 more people were out of a job last month.

Still, the bureau also reported that a booming 339,000 nonfarm jobs were added by US industries in May to keep up with consumer demand. Citing the latter figure, the US mainstream press suggested that the overall picture is "an encouraging one." However, the devil is always in the details.

In particular, the length of the average work week decreased to 34.3 hours in May from 34.4 in April which means the slashing of weekly paychecks. Hourly wage growth also decreased last month: although average hourly pay went up 4.3% from a year earlier, that's down from a nearly 6% growth a year ago.

In addition, US companies have resorted to more job cuts this year than during all of 2022, Bloomberg broke on June 1, citing executive coaching firm Challenger, Gray & Christmas Inc. Thus, planned layoffs mounted to 417,500 jobs through May, beginning in white-collar sectors and spreading to other industries. Most layoffs have been announced by the tech sector with 136,800 cuts. Financial firms have announced 37,000 cuts; the US media industry is ranking third with 17,400 layoffs. US companies mostly cited economic conditions and cost cutting behind the decision, per the report.

"The financial media usually interprets layoffs as evidence of a slowing economy," said Dr. Roberts. "There are signs of recession, but recession or not, there is another explanation for the layoffs. When giant corporations with high stock prices are in danger of failing to make their quarterly earnings expectations, layoffs are a way of reducing labor costs and boosting profits. As a large proportion of executive and board pay comes from performance bonuses, making and exceeding earnings forecasts are the main determinant of executive pay."

Meanwhile, the US media don't rule out that hiring may slow substantially in the coming months, which means that unemployment indicators may grow even further.

Still, the problems haunting the US economy lie deeper than the latest uptick in unemployment and may have more serious consequences, according to Dr. Roberts.

"The problem the American economy faces is that US manufacturing has been 'offshored', that is, moved to China and other Asian locations, with some in Mexico and Canada," the US economist explained. "When the US products made abroad are brought back to the US to be marketed – Apple computers and iPhones, Nike shoes, Levi jeans, etc. – they come into the US as imports, thus swelling the trade deficit."

Dr. Roberts went on saying that traditionally, the US trade and budget deficits have been financed by foreigners who use their trade surpluses to purchase US Treasury bonds. As the US dollar has been the world reserve currency, foreign central banks keep their reserves in the form of US dollars. For this reason, US deficits have not been a problem for the US, he emphasized.

"[However], by imposing sanctions on Russia, Iran and others, by seizing Russia's central bank reserves, Washington has weaponized the dollar, causing other governments to look for alternative currencies to use to settle their international payments," the former Reagan official pointed out. "This has resulted in a notable decline in demand for US dollars. However the trade and budget deficits keep the supply of dollars increasing. Sooner or later the exchange value of the dollar will drop. As the US, having offshored its manufacturing, is import-dependent, this means a sharp rise in inflation and a sharp decline in US living standards."

Globalism only works for the world reserve currency country, which can pay its bills by issuing debt, the American economist pointed out.

"Having offshored its manufacturing and developed food import dependency because of globalism, Washington should have taken steps to protect the dollar's role as the reserve currency. Instead, Washington undermined the reserve currency role of the dollar. Therein is the problem the US economy faces," Dr. Roberts concluded.