THE FOLLY OF TRYING TO "RE-SHORE" LOST JOBS
Source: Shutterstock
One of Donald Trump's major goals is to return the many tens of thousands of US jobs lost to overseas manufacturers. He hopes to make those jobs available to American workers, revitalize the US economy and ensure the US is less dependent for essential goods on often-hostile foreign nations. It is possible that some of those jobs can be returned to the US, but it will be a fraction of the total that have been lost over the last thirty years.
There are two reasons for this. First, few Americans are willing to work in sweatshop-like conditions for 10-12 hours a day, as are third-world workers who happily left behind the hardships and penury of rural subsistence farming. US businesses can build multi-million dollar factories to sew leisure wear and Nike trainers or assemble cell phones and other consumer goods, but they will despair at finding people willing to work grueling shifts. Second, US wages (hourly rates plus cost of benefits) are ten times higher than in many developing nations.
Products assembled abroad by workers earning $4/hour are highly desirable because the cost of the finished product is within the reach of a huge number of global consumers. If a manufacturer were required to pay ten times those wages to US workers, those high wages must be recaptured in the final price or the company will quickly go out of business.
The US, and most developed nations, cannot compete on price with many foreign manufacturers. The "solution" is not to subsidize the wage differential at taxpayer expense because that simply shifts the higher US labor costs onto an already overtaxed public. And the answer is not tariffs on imports because that too raises the cost of goods to the disadvantage of stressed consumers who benefit from the lower prices of imports.
There are two possible responses to low-cost imports. First, local businesses could become vastly more productive to lower their costs for producing comparable goods. Second, US workers could focus their efforts on providing services that foreign businesses and their employees are incapable of providing such as: local tech installations and maintenance; residential and commercial property construction, operation and maintenance; utility construction, operation and maintenance; hands-on health care; interstate and local delivery of goods. In a practical world, that which can be done cheaper abroad should be done abroad.
Some jobs lost to foreign competitors, such as customer service call centers, in due course will be lost to AI call centers that employ fewer people, and may eventually employ none. History is replete with disappearing jobs. Carriage and buggy whip manufacturers shuttered their operations after the widespread adoption of the automobile. Those displaced workers were forced to find employment with the auto manufacturers, auto parts suppliers and endless other new businesses. Just as employees have been forced to change, so too, employers have had to adapt to change - and they will continue to have to do so. This ongoing process of "creative destruction" escapes the understanding of our simple-minded politicians. Their "solution" to change is to create yet another taxpayer-funded government program. Doing so grows the problem rather than solves it.
Have US manufacturers, forced by decades of global competition, succeeded in increasing their output through higher productivity? The following chart is depressing but instructive. US industrial production has been flat for years. Efforts to compete with low-cost foreign producers have been a losing game.
Source: Federal Reserve Bank of St. Louis
We previously reported that a large number of businesses have announced significant layoffs of employees in order to cut their rising costs. Verizon just reported that it will layoff "more than" 13,000 employees, or about 13% of its workforce. Layoffs, both large and small, are certain to continue, creating a growing unemployment problem with its attendant costs. ADP is a very large international company that provides payroll services to businesses around the world. Consequently, it is well dialed into the employment issue. It recently published this chart showing month to month changes in US private sector employment. Is this a picture of a healthy and growing economy?
So far in 2025, 655 large US companies have filed for bankruptcy, per Standard & Poor. That is the most since 2010. Bloomberg reports that the number of "zombie" companies - those that do not earn enough money to pay even the interest on their debt - has hit the highest level since early 2022. As businesses close and layoffs continue, one thing is sure: the newly unemployed will not be working on "re-shored" jobs.
The challenges confronting families
Workers in the US, and most developed countries, face similar problems. Wages have not kept pace with rising living costs. The result has been a frustrating inability to advance along life's expected pathway. Homes are out of reach for an ever larger percentage of the population because prices (purple line below) vastly exceed the growth of wages (black line).
Source: Federal Reserve Bank of St. Louis
The result is predictable. Pending home sales are down significantly.
Source: Wolfstreet.com
Trump's proposed 50-year mortgage is not the answer. It would more than double the amount of interest paid by buyers over time and they will accrue very little equity in their home for decades. It will eventually dawn them that they are simply renting their homes from their mortgage lenders. "High" mortgage rates are said to be holding back home buyers. The current mortgage rate is not the problem, it is high home prices.
Source: Wolfstreet.com
Those who have managed to buy a home despite high prices are saddled with high mortgage debt. This chart reports that debt - all $12.5 trillion of it.
Source: Wolfstreet.com
Personal credit card debt (red line below) is also rapidly rising as more households are forced to use credit cards to buy daily essentials. Card holders face extortionist interest rates on carried balances - many exceeding 22%. Unless their current charges are paid in full monthly, it will not take long for their balances to swell out of control. According to the New York Fed, at the end of Q3, 2025 12.4% of all credit card balances were more than 90 days delinquent, That delinquency rate is certain to grow as prices continue to outpace wages.
Source: Wolfstreet.com
Total US household debt is now nearly $19 trillion - 4.5% of which was at some stage of delinquency in Q3 2025. That rate is also certain to increase as debtors become more financially stressed.
Source: Wolfstreet.com
While Trump boasts that "inflation is licked", the data refute that - housing being Exhibit A. Second to housing costs for most people are food costs. This chart shows the still-high cost for "food at home". Other essentials are also rising rapidly including insurance, medical care and utilities.
Source: Federal Reserve Bank of St. Louis
While the current rate of inflation - reported by the government - is said to be around 3%, any visit to the store proves that to be utter nonsense. The real rate of inflation is closer to 8%, per ShadowStats.com, which calculates the rate of price inflation in the manner the government did before it started employing a bevy of "hedonic adjustments" all of which are designed to result in a lower "official rate".
When the reported inflation rate is lower than it was previously (called "disinflation" or a "lower rate of inflation") that does not mean prices are now lower. They are just going up more slowly. Price inflation is cumulative - meaning that each year of it is continuously compounded on top of all prior years' price increases. The pain will not begin to lessen until prices start falling ("deflation") - a condition the Federal Reserve Bank will resist with all its might. It fears that falling prices will encourage people to put off making purchases awaiting yet lower prices and the economy will collapse. Consequently, inflation is baked into your financial cake and you must find a way to deal with its insidious consequences.
Due to high prices and largely stagnant wages, many people, perhaps a third of the US population, are living paycheck-to-paycheck, causing them great financial stress. Consequently, people are buying more on credit - both with credit cards and "buy-now-pay-later" (BNPL) credit programs. The Fed reports that nearly 25% of BNPL users were late making payments in 2024. Adobe reports that people have spent more than $10 billion so far this holiday season with BNPL credits, up 9% from last year. It expects $20 billion more BNPL spending for the full holiday season. If borrowers fall behind in their payments, their credit will be cut off, leaving them without a means to buy essentials.
People in large numbers are not yet directing their anger at those in political office - that is, those who cause price inflation through their ceaseless expansion of the money supply resulting in rising prices and the falling value of their wages. Instead, they (with the encouragement of elected officials) are blaming businesses for rising prices. They will increasingly demand "price and rent - but not wage - controls". These have the time-tested result of creating shortages of goods and services (producers will not agree to sell their products at a loss) and the rapid deterioration of the rental housing stock (essential maintenance and repairs will be deferred because owners' costs - taxes, insurance, maintenance - continue to rise but cannot be passed on). NY based essayist Heather MacDonald writes,
New York City is about to be governed by the Columbia University student body. A city that used to think of itself as grown up has just elected a mayor who seems the very embodiment of the American college student: uninformed, entitled and self-important, enjoying a regal quality of life that depends parasitically upon a civilization about which he knows nothing, yet for which he has nothing but scorn.
What is the end game?
History teaches that when a large segment of a population loses faith in an existing political system and sees that most of the nation's financial spoils flow only in the direction of the already wealthy, they will demand fundamental changes. The next chart of US wealth distribution shows that flow of those spoils. The wealth held by the bottom 50% of the population is barely discernible (bottom yellow band). The wealth held by the top 1% of the population (top two bands) is dramatic. The top 10% (top three bands) holds nearly two-thirds of the nation's wealth. Of course, throughout history there has been a dramatic divergence in wealth (pharaohs/slaves, tsars/serfs, nobility/tenant farmers, politicians/wage slaves). There has also been a long history of social upheavals.
Charles Hugh Smith describes the process,
Social revolutions arise, not because a new idea takes hold. They arise because the quality of life people expected as their birthright is no longer tenable, and the status quo system has depleted its ideas, elites and institutions. Short term expediences [e.g., massive Fed bailouts of failing banks and corporations] have hollowed out our ability to pursue the radical adaptations needed to restore the system's balance. The status quo solution is to mask this decay with new extremes of artifices. That such expediences only accelerate collapse is lost on those focusing on maintaining the façade of stability at all costs. With reform no longer an option, people seek a new set of values and a new way of understanding our world that renews purpose and hope.
This kind of revolution is not simply a transfer of power from one elite to another; it replaces a failed faith in favor of a new set of convictions. This is not merely a change in political ideology; it is the abandonment of the gods that failed, a rejection of the entire status quo and the elites and institutions that squandered their legitimacy by enriching themselves at the expense of our shared interests.
Such transitions are not revolts against the self-serving elite, but against the entire constructive values and institutions that failed. The core values holding the society together have fragmented, destabilizing the entire status quo.
This condition confronts all developed and most developing countries. Herbert Stein, chairman of the Council of Economic Advisers to presidents Nixon and Ford, famously stated the obvious when he said that, "If something cannot go on forever, it will stop." Huge government deficits and government, corporate and personal debt cannot grow to the sky without consequences. The undeniable fact is that nothing is being done to stem these trajectories. Everything being done is to paper them over. The only unknown is when "it will stop".
The next chart shows the rapid growth of the US "Total Public Debt" (as of April - it is now over $38 trillion). This consists of more than $30 trillion owed to the owners of Treasury bills, notes and bonds and another $7.5 trillion of "intergovernmental bonds" - of which $2.5 trillion is owed to the Social Security System. There are also trillions of dollars of un-funded and under-funded obligations including government employee pensions. Those who, in good faith, used their money to buy "no risk" Treasury obligations are being repaid in devalued dollars - a "soft" default. When the inevitable crisis arrives, there may be a "temporary moratorium" on making interest payments - a "hard" default. This recalls Polonius' famous admonition in Hamlet, "neither a borrower nor a lender be."
Source: Federal Reserve Bank of St. Louis
The US is not alone regarding unmanageable debt and the days of reckoning that await. Ed D'Agostino writes,
The world economy carries close to $350 trillion in debt—government, corporate, and household combined. With an average maturity of about five years, that means $70 trillion must be refinanced annually (very little of this debt is actually paid off). That’s three-quarters of global GDP flowing through financial markets just to keep existing debts rolling over. Rolling over that debt requires high levels of liquidity (available money) – when liquidity dries up, a crisis develops as lenders then demand repayment of principal rather than rolling the debt over - a shortage of liquidity will ensure that central banks will engage in more QE, flooding the market with more fiat money to prevent that crisis – ensuring a continuing debasement of the currency. (Emphasis added.)
Stock market valuations
There is an enormous disparity in growth between the so-called "Magnificent Seven" companies and the remaining 493 businesses of the S&P 500. The Seven's equity returns have risen at a furious pace as seen below in the top line, while the remaining companies have languished, bottom line. Do these facts support the index's soaring highs?
Clearly, the S&P index is highly skewed and unrepresentative of the larger market. More worrisome, the Mag Seven have poured hundreds of billions of dollars into AI capital expenses and plan to continue doing so. Morgan Stanley forecasts that they will spend another $3 trillion on such projects by 2028. The unknown is whether they will be able to recover these monumental investments any time in the foreseeable future. Should it become apparent that they will not be able to do so, their share prices can be expected to plummet - taking the entire index with it. Is it time to trim your sails as we head into uncharted waters? That is a question to be considered both by investors and everyone else, as we all will be dramatically affected by a sudden market crisis/deep recession.
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