Here Comes Trouble: Stories from My Life

"Outstanding…Moore Triumphs! Publishers Weekly

Mike & Friends Blog

Dean Baker

Dean Baker is co-director of the Center for Economic and Policy Research

January 3rd, 2012 7:11 AM

Keystone Jobs Versus Competitive-Dollar Jobs

The new great hope for job creation in Washington is the Keystone pipeline, a plan to create a pipeline that would transport oil from Alberta, Canada, as far as New Orleans. According to the Republican leadership and other proponents of the pipeline, it is expected to create 20,000 jobs in the construction and supplier industries.

There have questions raised about this number by analysts and by the State Department, which must approve the pipeline. It seems that this 20,000 number refers to "job years," not jobs. This means that if a construction worker is employed for two years working on the pipeline, she would count as holding two jobs in the 20,000 jobs number. The number of jobs created at a point in time would likely be closer to half of this figure, perhaps less than 10,000.

It's also likely that many of these jobs will go to Canadians. This is good for them, but beside the point if the goal is to create jobs for people in the United States.

But even 10,000 jobs would be better than nothing. The question is: how much better? Without some context, the public is not well positioned to assess the economic argument for the pipeline.

One basis of comparison is the economy's normal rate of job creation. Back in the late 1990s, the economy created 3 million jobs a year for four years. At this pace, the jobs created by the Keystone pipeline would be equal to about 30 hours of job creation.

Of course, the economy created jobs at an even more rapid pace in the recoveries following the 1974-75 and 1981-82 recessions. If we were to see the sort of normal recovery that is expected after a steep downturn, then Keystone pipeline jobs would be equal to around 20 hours' worth of job creation.

But we can't just snap our fingers and get the economy back into a job creation mode. The question is how Keystone measures up to other potential job-creation policies.

One that should be on the agenda is lowering the value of the dollar. If the dollar falls in value, it will make our exports cheaper to people in other countries, causing them to buy more US exports. Similarly, imports will be more expensive for people living in the United States, leading people to buy domestically produced goods instead of imports.

Suppose that the dollar fell by an average of 10 percent (adjusting for differences in inflation rates) against the currencies of our trading partners. Economists often assume that the change in the quantity of imports and exports will be roughly twice as large as the change in relative prices.

This means (using some simplifications) that if the dollar fell by 10 percent, then our exports would rise by 20 percent and our imports would fall by 20 percent. Since most of the items traded are manufactured, this would translate into a huge increase in the output of our manufacturing sector.

Working off the 2010 trade data, this decline in the value of the dollar would imply an increase in manufacturing output of more than $500 billion a year. This is equal to almost 44 percent of current manufacturing output. If employment increased proportionately, that would translate into more than 5 million additional manufacturing jobs.

Comparing this to the Keystone pipeline, we could say that a 10 percent reduction in the value of the dollar would have roughly the same impact on employment as 500 Keystone pipelines. Since the effect of the dollar on exports is roughly proportionate, even a 1 percent drop in the value of the dollar would create as many jobs as 50 Keystone pipelines. A drop in the value of the dollar of just one-tenth of one percent would create as many jobs as 5 Keystone pipelines.

Of course, these calculations are oversimplifying issues considerably. First, trade flows will not adjust immediately to changes in prices. It will likely be many months after a change in currency prices before we see any effect, and close to two years before most of the effect is felt.

Furthermore, these numbers assume that no steps are taken to offset the decline in the value of the dollar. For example, importers may squeeze their profit margins rather than lose market share. On the export side, our trading partners may impose tariffs or other barriers to keep out US-made goods, especially in countries that are still reeling from the recession themselves.

But the general story is right. If we want to create jobs and put the stimulus genie off the table for superstitious reasons, a more competitive dollar provides an excellent alternative to the Keystone pipeline. It can create many more jobs, and it won't threaten the environment.

You must log in to comment.

You must be logged in to leave a comment. Log in | Register

My father, Francis (Frank) Moore, passed away this morning a few months shy if his 93rd birthday. He was a great dad I am blessed to have had him in my life. I...

Apr 20th
2:58 AM
Read More

Time to put the cuffs on Chris Christie -- not for the bridge scandal, but for this: Chris Christie's $300m pension proposal broke state anti-corruption...

Apr 18th
7:31 PM
Read More

George W. Bush Debuts New Paintings Of Dogs, Friends, Ghost Of Iraqi Child That Follows Him... www.theonion.com President Bush has a new hobby -- painting! --...

Apr 17th
7:28 PM
Read More

Big new story from David Sirota and Pando on top Christie adviser and appearance of corruption at New Jersey's pension fund: REVEALED: Gov....

Apr 17th
12:41 PM
Read More

FBI Uncovers Al-Qaeda Plot To Just Sit Back And Enjoy Collapse Of United States www.theonion.com WASHINGTON—The FBI announced today that it has uncovered a...

Apr 15th
3:28 PM
Read More

Revealed: Rahm Emanuel's top donor bought stock in Marriott just before it was awarded huge contract pando.com As schools are closed and pensions cut,...

Apr 9th
2:00 PM
Read More

I'll be at First Time Fest today in New York City at the screening of my first film, Roger & Me. Loews Village 7 at 12:30 pm. Come see it on the big...

Apr 5th
9:48 AM
Read More

Revealed: Rahm Emanuel cuts public pensions, diverts money to benefit campaign donors pando.com If you've read the financial news out of Chicago the last...

Apr 4th
2:19 PM
Read More

Please take a moment today to think of Casey Austin Sheehan, son of Cindy and Patrick, who was murdered by U.S. foreign policy in Sadr City, Baghdad ten years...

Apr 4th
2:00 PM
Read More

ICYMI - I've joined this "thunderclap" to support the Connecticut legislators who voted yes on last year's Act Concerning Gun Violence...

Apr 3rd
7:38 PM
Read More

I've joined this "thunderclap" to support the Connecticut legislators who voted yes on last year's Act Concerning Gun Violence Prevention...

Apr 2nd
8:27 PM
Read More

I am opposed to the death penalty, but to every rule there is usually an exception, and in this case I hope the criminals at General Motors will be arrested...

Apr 1st
3:55 PM
Read More

How Long Some in the US Will Survive Under New Health Law ...by Donna Smith www.michaelmoore.com Those who must access care to live and can afford it are not...

Mar 31st
10:13 PM
Read More

Last night, The Good Wife on the East Coast started 40 minutes late due to the overrun of the NCAA basketball game. If you had your DVR set for the show, you...

Mar 24th
5:41 PM
Read More

Watching films today, looking for the ones I'm going to pick for my film festival this summer. I (and a whole bunch of others!) have this thing we put on...

Mar 23rd
4:48 PM
Read More

When the U.S. Health Care System Keeps Killing, Who Cares Enough to Fight? ...by Donna Smith www.michaelmoore.com We have largely forgotten that people are at...

Mar 21st
5:56 PM
Read More

Tell the White House not to give up on Dr. Vivek Murthy's nomination as Surgeon General despite the ferocious opposition from the NRA: Don't give...

Mar 21st
5:38 PM
Read More

This criminal would never see a jail cell, nor would his cronies. In fact, they'd later be rewarded with re-election: Presidential Address on War with...

Mar 19th
9:40 PM
Read More

The crime of the century -- our invasion & slaughter in Iraq -- started 11 years ago tonite in this 7pm (ET) hour, March 19th, 2003: CNN Coverage of...

Mar 19th
9:08 PM
Read More

Washington’s Back-to-the-Future Military Policies in Africa ...by Nick Turse www.michaelmoore.com Nick Turse is an award-winning journalist, historian,...

Mar 17th
4:59 PM
Read More

"I think democracy is the most revolutionary thing in the world." -- Tony Benn, 1925-2014 Tony Benn in 'Sicko'

Mar 14th
10:07 AM
Read More

RIP Tony Benn, one of the UK's greatest leaders: Tony Benn, veteran Labour politician, dies aged 88 www.theguardian.com Former cabinet minister died at...

Mar 14th
9:53 AM
Read More

Please read this important story from K. Ford K.: Am I the Face of the New American Middle Class? www.huffingtonpost.com I began to feel I had slipped so low...

Mar 13th
2:24 PM
Read More

Yesterday Dianne Feinstein revealed that the CIA has been spying on the Senate Intelligence Committee. This is all about the report the committee has produced...

Mar 12th
6:48 PM
Read More

Health Care for All Colorado has brought Mercy Killers, a show written and performed by Michael Milligan about our murderous for-profit healthcare system, to...

Mar 10th
1:08 PM
Read More

Health Care Dramas that Sting and Why We Have to Watch ...by Donna Smith www.michaelmoore.com The realities Milligan has written into the show cut deep into...

Mar 10th
1:02 PM
Read More

Did you know the Lehrer Newshour on PBS has been produced for 20 years by a company owned by conservative cable billionaire John Malone? Me neither. After...

Mar 7th
8:39 PM
Read More

Mr. Obama, if int’l law is so damn crucial . . . | RootsAction.org act.rootsaction.org The Russian intervention deserves criticism. But let’s be clear. The...

Mar 6th
1:21 PM
Read More

Enron billionaire John Arnold thinks everyone should believe him when he says we've got to cut pensions because he's so incredibly rich: John...

Mar 5th
4:20 PM
Read More

Subscribe to Mike's Blog RSS

Click here to suggest an article

Mike's Blog

See More Blogs

Vew the archives

View older articles