By Mike Whitney
On Thursday, Gallup reported that “More than half of Americans say the U.S. economy is in a recession or a depression despite official data that show a moderate recovery…..The April 20-23 Gallup survey… found that only 27 percent said the economy is growing. 29 per cent said the economy is in a depression and 26 per cent said it is in a recession, with another 16 per cent saying it is “slowing down,” Gallup said.”
55 percent of Americans believe we are in a depression or a recession a full 5 years after the housing bubble burst (2006) and 3 years after Lehman Brothers collapsed. (2008) Gallup’s findings jibe with other surveys that indicate growing desperation among the public. For example, Globescan found that a large number of Americans have given up on free-market capitalism altogether, while other polls show dwindling confidence in government institutions, the Federal Reserve, the Congress, the judicial system and the media.
This is from the New York Times:
“Americans are more pessimistic about the nation’s economic outlook and overall direction than they have been at any time since President Obama’s first two months in office, when the country was still officially ensnared in the Great Recession, according to the latest New York Times/CBS News poll….
Capturing what appears to be an abrupt change in attitude, the survey shows that the number of Americans who think the economy is getting worse has jumped 13 percentage points in just one month…..
Frustration with the pace of economic growth has grown since, with 28 percent of respondents in a New York Times/CBS poll in late October saying the economy was getting worse, and 39 percent saying so in the latest poll. (“Nation’s Mood at Lowest Level in Two Years”, Poll Shows, New York Times)
No amount of “Sunny Jim” propaganda has been able to change the public’s belief that things are getting worse. And things are getting worse, although not if one happens to be a hedge fund manager or one the lucky few at Goldman Sachs. Then, things have never been better. The Fed has flooded the market with low interest jet-fuel and All’s Well in Wall Street’s Bubbleworld. But if you’re one of the 3 million less fortunate working slobs; you’re probably hanging on by your fingernails hoping like hell that you haven’t hit your credit card limit when you reach the checkstand at the grocery store or you’ll have to slither red-faced for the exit. Here’s a quote from the Wall Street Journal which explains what the Fed’s been up to:
“Starting essentially last year on Aug. 27—the day Fed Chairman Ben Bernanke laid the groundwork for QE2—investors have flocked to riskier investments. Since Aug. 26 the Standard & Poor’s 500-stock index has gained 28 per cent. Smaller, generally riskier stocks have done even better, with the small-company Russell 2000 Index gaining 41 per cent. …
“Corporate bonds have rallied and commodity prices have risen sharply, too. Gold is up 22 per cent since Aug. 26 and silver is up 143 per cent, both hitting nominal record highs. Even subprime mortgage securities, which were largely blamed for causing the financial crisis, are back in demand.” (“Fed Searches for Next Step”, Wall Street Journal)
Up, up and away. Everything’s up. The S&P’s up 28 per cent, the Russell’s up 41 per cent, and there’s even goldrush on mortgage-backed securities. Thanks to Bernanke loosey-goosey monetary policies, the markets are soaring while workers languish in a protracted slump barely able to make ends meet. The disparity between rich and poor is greater now than anytime since the Gilded Age and there’s no sign of a reversal. The rich get richer while everyone else slides further into pauperism.
Meanwhile, the dollar continues its downward trek eroding consumers’ buying power and forcing working people to decide between filling the gas-tank or fixing little Jenny’s overbite. Most folks opt for the gas, at least then they can totter off to the factory on Monday for another week hump-busting drudgery. Here’s more from the Wall Street Journal:
“The dollar fell to multi-year lows against most major currencies Thursday, undermined by an unpalatable mix of loose U.S. monetary policy and a fiscal imbalance that made investors reluctant to hold the battered greenback…..the primary negative for the dollar has been the Federal Reserve’s loose monetary policy. In a market where investors are gravitating to higher-yielding assets, the dollar has been jettisoned by traders who appear more comfortable holding euros–even though Europe is struggling to contain a debt crisis that has raged on for nearly two years.
“The driver is (U.S.) monetary policy and the subtext is fiscal policy. We know there’s a train-wreck coming and it makes people uneasy,” said Andrew Busch, global currency strategist at BMO Capital Markets.” (“Dollar Tumbles With US Monetary, Fiscal Policy In Focus”, Wall Street Journal)
“Train-wreck”; that’s aptly put. The flagging greenback is causing some real pain for households that find themselves less able to save or pay-down the debts they inherited when the bubble burst and their housing equity dropped into the red. Now they’re paying steeper prices at the pump and the grocery store, leaving zero discretionary income for anything else, including medical emergencies. If Sammy falls off the jungle gym at school and snaps his clavicle, it all gets piled onto the VISA, that is, unless you’re over your limit. Then you’re outta luck.
But the real problem is jobs. There just aren’t any, and no one in Washington wants to do a damn thing about it. Here’s a clip from Friday’s column by Paul Krugman:
“Last month more than 14 million Americans were unemployed by the official definition… Millions more were stuck in part-time work because they couldn’t find full-time jobs. And we’re not talking about temporary hardship. Long-term unemployment, once rare in this country, has become all too normal: More than four million Americans have been out of work for a year or more. …
“It all adds up to a clear case for more action. Yet Mr. Bernanke indicated that he has done all he’s likely to do. Why?” (“The Intimidated Fed”, Paul Krugman, New York Times)
Yes, why? If Bernanke’s bond buying program (QE2) was such a rousing success, as Bernanke claims, then why not crank ‘er up one more time and put people back to work? Is that too much to ask? There are 14 million people unemployed, 42 million on food stamps, the homeless shelters are bulging, foreclosures are tipping 2 million per year, and the majority of people believe we’re still in a Depression. Do you think we can get a hand here, Benny?
Do you have any idea how bad unemployment really is? Take a look at this from Calculated Risk:
“There are currently 130,738 million payroll jobs in the U.S. (as of March 2011). There were 130,781 million payroll jobs in January 2000. So that is over eleven years with no increase in total payroll jobs.
“And the median household income in constant dollars was $49,777 in 2009. That is barely above the $49,309 in 1997, and below the $51,100 in 1998……
“There are currently 7.25 million fewer payroll jobs than before the recession started in 2007, with 13.5 million Americans currently unemployed. Another 8.4 million are working part time for economic reasons, and about 4 million more workers have left the labor force. Of those unemployed, 6.1 million have been unemployed for six months or more.” (“More than a Lost Decade”, Calculated Risk)
No new jobs in a decade! No one is hiring, wages are frozen, and the mushrooming current account deficit provides $500 billion per year to create new jobs overseas. And all Obama wants to do is talk about is slashing the deficits.
But what about the jobs that are left? At least those are good paying jobs, right? I mean, at least a guy can put food on the table and pay the bills, right?
Right now, roughly 65 million of the 130 million jobs in the country pay between $55,000 to $60,000 per year. In other words, they provide a “living wage”, so that families don’t have to scrape by in abject poverty. The other 65 million people are muddling by with part-time jobs or low-wage donkeywork that pays a lousy $20,000 to 25,000 per year.
So, here’s the deal: (According to David Stockman) Since 2007, we’ve lost 6.5 million of these good paying jobs, but added zero during that same period. All the growth has been in low wage jobs.
Stockman says, “For the last decade we have lost 10 per cent of the middle income economy and, so far in this alleged recovery, we’ve not replaced one of the 6.5 million middle class jobs we’ve lost….. We’ve got a real income distribution problem in this economy, and it’s getting worse, not better.” (David Stockman: Lack of Middle Class Jobs plus Low Growth equals “Alleged Recovery”, Yahoo Finance)
A former Reaganite talking about “income distribution”?!? Now there’s a shocker.
Bottom line: The good-paying jobs are being shipped overseas pushing the middle class to the breaking point. And the situation is getting worse, because now even the low paying jobs are getting harder to find. Take a look at this, from Bloomberg:
“McDonald’s and its franchisees hired 62,000 people in the U.S. after receiving more than one million applications, the Oak Brook, Illinois-based company said today in an e-mailed statement…..” (Bloomberg News)
One million applications to flip burgers. That says it all.
So, even the most servile, demeaning jobs are getting scarcer, which is more proof that we’re in a Depression. At the same time, unemployment claims have started inching higher again casting more doubt on the so-called “recovery”. New unemployment filings jumped 25,000 in the third week of April. Businesses are cutting costs to offset the rise in commodities prices which is hurting profits. Once again, claims have tipped the benchmark 400,000 for three weeks straight signaling more softness in the economy.
This from the Wall Street Journal:
“Roughly 1 million people in the U.S. were unable to find work after exhausting their unemployment benefits over the past year, Labor Department data released Thursday suggest….
“About 8.2 million idled workers were receiving unemployment benefits as of the week ended April 9, the Labor Department said in its weekly jobless claims report. This compares with about 10.5 million individuals at the same time last year, resulting in a decline of roughly 2.3 million people.” (“One Million exhausted jobless benefits in past year”, Wall Street Journal)
This is the cruelest blow of all, and also the most misleading. On the one hand, people who lost their jobs through no fault of their own are being tossed off the unemployment rolls and into a world of grinding poverty. While, on the other hand, their loss of benefits lowers the unemployment numbers, which makes it look like Obama’s “do nothing” policy is actually working. So, it’s a double whammy.
Finally, this last note on wages from Clinton-era Labor Secretary Robert Reich:
“The most significant economic news from the first quarter of 2011 is the decline in real wages….. In order to keep the jobs they have, millions of Americans are accepting shrinking paychecks. If they’ve been fired, the only way they can land a new job is to accept even smaller ones.
The wage squeeze is putting most households in a double bind. Before the recession, they’d been able to pay the bills because they had two paychecks. Now, they’re likely to have one-and-a half, or just one, and it’s shrinking…..
America’s jobless recovery is becoming a wageless recovery. That puts the odds of another recession greater than the risk of inflation.” (“The wageless recovery”, Robert Reich’s blog)
Did someone say “Double dip”?
Wages are shrinking, jobs are scarce, unemployment benefits are running out, and the greenback is plunging. Is there really any doubt that we’re in a Depression?