Nothing But Politics

[ThatHawaiiGuy]

The Cruel Economic Recovery

http://www.321gold.com/editorials/benson/benson100803.html

[Click for chart. Note how numbers add up to 100.]

Richard Benson
October 8, 2003

Now that Levi Strauss will no longer be making blue jeans in the United States, I can't help but recall the old days when our exports of blue jeans, rock and roll, and Hollywood movies helped American culture to make the world a better place to live.

Now, sadly, blue jeans are an import while music, film, and computer software are copied for free in Asia. In addition, this week the US Auto manufacturers have signed labor contracts permitting them to shut down 10 auto and parts plants (remember when Stalin was afraid of Detroit because of what it could produce). "Joe Six Pack" used to build a car by day and go to a drive-in by night. Now, Americans who want to work worry about "Drive Bys" both day and night. Without jobs to keep people motivated and out of mischief, the US prison population is up to a record 2,000,000.

The US now only produces 45% of the manufactured goods it consumes. In September, manufacturing jobs declined for the 38th month in a row, and weekly earnings dropped for the first time in 14 years. Moreover, The Bureau of Labor Statistics has interesting and startling information, should anyone care to look below:

Potential Workers Over 16 Years Old
Jan 1993 to Jan 2001 Jan 2001 to Sep 2003
Growth % of Total Growth % of Total
(Totals in Millions)
Labor Force: 15.40 77% 2.75 35%
Not In Labor Force: 4.53 23% 5.14 65%

Total: 19.93 100% 7.89 100%


In the years of good economic growth through the peak of the stock market bubble, over 75% of the increase in population over the age of 16 entered the labor force. Since the beginning of 2001, only 35% of the increase in population over the age of 16 is actually entering the labor force. In the January '93 - January '01 period above, the labor force was growing on average by 160,000 people a month. Since January '01, the labor force is only growing 88,000 a month. These numbers are extraordinary!

While the US Government has been vocal about trying to keep the wrong people from entering the country, the increase in population over the age of 16 looks right on trend. However, where the US Government has been "silent but successful" is in making sure that the labor force does not increase. I question whether keeping workers out of the labor force is sound economic policy? The fact remains that if the US continued adding the same percentage of population to the labor force (as was the case at the normal 77% rate above) the labor force would be larger by 3,328,000. Since not one of these workers would be employed, adding them back as unemployed would make the politically sensitive unemployment rate go over 8.2%. That rate would not be good news for consumer confidence, spending, or the stock market. It's much better for economic policy that workers are kept out of the labor force, particularly in an election year!

Other facts also show that this economic recovery is both "cruel and unusual:"

Initial unemployment claims at levels above those needed to create jobs, and long term unemployment benefits, are caped only because workers exhaust their benefits and drop off the unemployment roles forever.
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Personal bankruptcies remain above 30,000 a week, while mortgage and consumer credit delinquency rates remain disturbingly high.
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The poverty rate has been rising significantly, as well as the number of people who can not afford health care coverage.
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Record numbers of high school and college graduates are not finding jobs and are staying home. Careers remain on hold, while workers scramble to find anything that generates income to keep the wolf from the door..

In September, part-time employment increased (for purely economic reasons) to 5 million, a 9 year high. This was an increase of 1.6 million, or a 47% increase over the two years beginning August 2001.

While tax cuts helped push disposable personal income up at annual rates of $125 billion in July and $74 billion in August of this year, September is likely to see a drop because no "child rebate checks" were sent out. Actual wage and salary growth from jobs remains almost non-existent and because of the Federal Reserve's low interest rate policy, the income from interest on savings is down $2 - $3 Billion a month. Personal income is rising, at most, 0.2% a month. Increases in personal consumption will again only be supported by a continuation of growing consumer borrowing and mortgage debt.

To the extent that jobs are created, they are part-time and service oriented jobs that only pay 1/4 to 1/3 as much as the manufacturing jobs they replaced. Job weakness can be expected for auto manufacturing and parts, mortgage banking, and telemarketing.

The one bright spot for job creation is statistical. Since the government knows that the economy is in economic recovery, they add an estimated 30,000 - 50,000 jobs every month, known as a statistical "plug factor," because they realize that people are starting new businesses. Any job growth in the months ahead will most likely be "part- time" and "plug factor," with the "plug factor" leading the way. (What is really cruel is that these imaginary workers are living such wonderful imaginary lives!).

Welcome to the "Un-Reality TV" of job statistics.