Friday's Employment Report: A Sobering Dose of Reality 18 comments
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In the 1980’s, the Ford Motor Company used the slogan “Quality is Job #1”. This was helpful in its campaign to compete with its Japanese counterparts who were perceived to have higher quality automobiles.
It would seem, based on recent trends in the employment market, that government is now Job #1. Friday morning’s employment situation report contained some real shockers, the biggest being that the US unemployment rate is now at 6.1%, jumping from 5.7% a month ago. Out of the 7 subsectors tracked in the report, only government and education/healthcare are expanding. Since a good percentage of education and healthcare expenditures are financed either directly or indirectly by the government, it would seem that Uncle Sam is about the only one hanging out a Help Wanted sign these days.
Perhaps the worst part of the report though was the revisions for the past two months. June and July had previously been called the bottom of the job market by some pundits in the financial media. August’s report showed not only that June and July were worse than originally thought, but that there is no indication of a bottom.
Here are some of the lowlights of the report:
- Manufacturing continued to lose jobs – 61,000 in August alone.
- July’s nonfarm payrolls were revised downward by 58,000
- July’s service sector jobs were revised downward by 47,000
Keep in mind that these are official numbers, tabulated using methodologies that have been shown to have more holes than a good piece of Jarlsberg Swiss cheese. In any case, the employment situation is bleak, initial claims for unemployment are well over what are generally used to ‘call’ a recession, and even worse, these job losses are causing an increase in individuals raiding retirement savings accounts.
That the government is an area of employment strength should not come as a surprise. The term ‘New Deal’ has been heard more and more often in economic discussions referring to the fact that the government is going to have to spend a whole lot of money to keep the economy stumbling along, much in the way it did during the Great Depression. Unfortunately though, the government of the 21st Century is much different from its 1930’s predecessor. This government is itself saddled with debt – the same problem which is choking off our economic growth. Blame for the current malaise is being passed around with a dizzying quickness and unfortunately, most of the causes that are cited are merely symptoms of the underlying problem as opposed to the actual problem itself.
The real problem, put very simply, is that one cannot borrow and spend one's way to prosperity at any level. Sooner or later the bill must be paid and when that happens, the phony prosperity is over. So the real take home message about the jobs report is that we’re in New Deal mode. We’ve been in this mode for some time and will continue to be there. The bill is coming due. It cannot be avoided. The goal of our leaders at this point is to postpone the due date as long as possible.
It is quite amazing when one considers the shenanigans, distortions, and giveaways that must occur to engineer a 3.3% growth rate in GDP along with the concomitant perception of prosperity. The further along we go along this path, the more intense the information engineering will become. However, there is a proverbial brick wall; an end to the effectiveness of misinformation. It has been said that it is a recession when your neighbor loses his job; it is a depression when you lose yours.
As the trend of joblessness continues and those that remain employed have to pick up part-time work to keep even a semblance of solvency in their personal balance sheets, it will become increasingly difficult to convince Americans that prosperity abounds. The loss of a job has a way of delivering a return to reality – in an instant. While it can become rather easy to justify spending in excess of your income when there is an income, it is another matter entirely when that income is removed.
Friday’s employment report is a sobering dose of reality. Unemployment, in my opinion, supersedes all other leading economic indicators because it affects the very bedrock of economic success in this country – the American consumer. This reliance on spending is what happens when you have decades of overconsumption and decreasing production. You come to rely not only on consumption, but on ever-increasing consumption in order for the economy to ‘grow’.
The American consumer has shown an almost miraculous ability to continue to spend despite collapsing home values, mediocre (at best) returns on investments, and already oppressive levels of debt. It is a good educated guess, however, that if the current employment situation persists we will finally see the end of the Age of Consumerism.
Disclosure: Short DIA.
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This article has 18 comments:
The bang is coming and we can't stop it, we need to
come home, balance our check books, address the total obligations of the USA and Change or directions.
IOUSA is a shame on all of US
The bang is coming and we can't stop it, we need to
come home, balance our check books, address the total obligations of the USA and Change or directions.
IOUSA is a shame on all of US
Then they dismiss all third party reports of the obvious as "partisan". This administration has redefined Republican as wildly fraudulent, and has made a fine art of lying, and then when somebody points out the facts, saying that person is lying, partisan, unpatriotic and soft on terrorism!
I used to respect the Republican position of controlled spending, small government, low debt and free markets while enforcing anti-trust. I cheered Reagan's deregulation of the airlines. Too bad they are gone, replaced by plutocrats bent on robbing the country and pandering to a thoroughly duped religious right.
When they got their last paycheck we didn't know it in Labor Dept stats - but they too will contribute their part to the end of the Age of Consumerism -
These 1099's won't help the economy until some sanity returns to Housing/Banking -
So when you see the 6.1% Unemployed - it's probably another 0.8%
or a total right now of 6.9%.
BTW, regarding the 'New Deal' - in fact, those policies did not 'save' America back in the 1930s - rather, they tipped us from a bad recession into a full-out depression - and then into a global war to obscure that fact! And the war itself did not 'rescue' our economy - that did not happen until 1947, after some (but only some) of the socialist economic controls had been dismantled (does nobody in America believe in free market capitalism anymore? the New deal was socialism, pure and simple - how anyone can still entertain the notion that gross misallocations of capital and monstrous distortions of the pricing system could have led to 'prosperity' is beyond me). The mythology that FDR 'saved' us is just one of the innumerable absurd illusions to which Americans cling, and which have led us to the edge of the precipice, where we stand today, confronting the abyss.
So what is to come? Well, let's not forget that America does not operate in a vacuum. A vast amount of government debt is held by foreign nations, and in many cases we've worked hard to ensure their enmity even as we've begged them to keep buying US Treasuries. As we continue to follow hegemonic policies (and make no mistake - both McCain and Obama are solidly on board with continuing these illusion-driven policies) which give the rest of the world cause to hate us, it seems more and more likely that a global realignment is coming, with America left purposefully isolated. Does anyone seriously think that the Chinese, the Indians, the Russians, the Japanese, the EU and others are not discussing amongst themselves possible new monetary systems to replace the post-Bretton Woods insanity? It was the US, after all, which reneged on that agreement and pushed the rest of the world toward fiat money which is the underlying engine of destruction.
Consider: we now have a 3rd world political system and a 3rd world banking system, in terms of the egregiousness of institutional fraud in both systems (not to mention the more general corporate entanglements in every aspect of that corruption). And it seems likely that we are descending into 3rd world status economically as well - though never was a 3rd world country so despised, even by its friends.
Is it so hard to grasp that our situation may not be a problem which needs to be fixed (it's unfixable), but rather a new condition to which we will need to adapt? At some great cost, obviously.
There seems to be every reason to think so (and very strong historical lessons which indicate this is highly probable) and very few logical or fact based reasons to think not. The Age of American Empire is over. We were warned - over 200 years ago, by a great American allegedly esteemed by all but in fact all but ignored except by a few:
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
- Thomas Jefferson
There is always movement among classes. Some folks go up; some go down. Those on the way down always speak loudest that the system is broken.
The problem is that interest rates were kept too low, too long, and people who were not middle class got to spend as if they were. And people who were only middle class spent as if they had rich uncles.
Maybe the government should have forced people not to spend beyond their means?? Who would want that?
Economic cycles, and ups and downs are a normal part of life.
LordDarley
Social problens all around the world!
Lets talk about Social Life here at social.pi.edu
Please give your Contribution!\
I agree with on that!
Tanks for saying!
Consumerism -- does not the wealthiest 12% purchase over 50% of luxury goods?? The rest of us can eat cake, or join the bushleague stated above.
One way to resolve the problem is to form a lawyer brigade and ship them over. They'll have the Iraqi's signed up for life threatening investments in no time flat, and war will be over.