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Feature Article by Stephen Lendman
America’s Fiscal Cliff
by Stephen Lendman
America’s weak economy shows further deterioration. According to former Fed Governor Kevin Warsh, “(t)he fiscal cliff in early 2013 – when the government stimulus spending and tax relief are set to fall – is not misfortune. It is the inevitable result of policies that kick the can down the road.”
In other words, chickens inevitably come home to roost. Reckless money printing, free lunch handouts to corporate favorites and rich elites, and other policies favoring super-rich Americans won’t last forever. When the music stops, watch out.
The latest jobs report perhaps warns what’s coming. Characterized by some as bad Friday, it was much worse than reported. It suggests trouble ahead, perhaps by late spring or summer.
The Labor Department reported 120,000 new jobs. Its web site says “The confidence level for the monthly change in total employment is on the order of plus or minus 430,000 jobs.”
BLS so manipulates data, place no confidence whatever in its reports. In good times, employment growth may be understated. During Main Street Depression conditions, it’s mirror opposite.
Moreover, the so-called “birth-death model” distorts reality. It reflects estimated net non-reported jobs from new businesses minus losses from others no longer operating.
During expansions, it works because start-ups exceed shut-downs. During economic weakness, it fails. Yet BLS assumes employees from non-operating companies still work. In addition, around 48,000 monthly jobs are added whether or not new companies exist. Removing them drops Friday’s number close to 70,000, but it’s worse than that.
Weakness showed up across the board. Over 160,000 stopped looking for work. Around 90% of the fastest growing job areas are low-pay service ones. Most are part-time or temp. High-pay full-time jobs are becoming an endangered species. Economies can’t grow and prosper that way.
America’s been declining for years. It’s heading for third world status, and planned domestic spending budget cuts promise worse times ahead. Bipartisan complicity assures it. Most reductions take effect post-election and continue incrementally for years. Others not yet enacted will follow.
America’s social safety net’s on the chopping block for elimination. It includes Medicare, Medicaid and Social Security, as well as other vital supports like food stamps.
The April 6 jobs report was revealing. Employment and participation rates dipped. The work week declined. So did the aggregate number of hours worked. It’s a proxy for output. It fell for the first time in seven months.
Moreover, fewer hours and tepid wage gains caused a 0.1% drop in weekly earnings at a time gasoline prices are rising and household incomes are squeezed. Reduced consumption follows. Retailers anticipate the crunch. They cut 33,800 jobs after 28,600 the prior month.
Hiring intentions are down. Year-over-year, they collapsed 8.8%. The diffusion index fell. Weak data suggest sluggishness and decline. For three consecutive months, the ISM/inventories ratio fell.
Household survey employment dropped for the first time since last June. On a population/payroll adjusted basis, it suggests nearly 420,000 March job losses, the most since December 2009. It paints a much different economic outlook.
Moreover, favorable March weather skewed numbers higher than expected. Had normal conditions existed, a weak report would have been much worse. Later spring and summer data will reflect it. Expect cold shower reality to show economic trouble.
Least advantaged households are hardest hit. So are youths. March U-3 unemployment for Whites aged 16 – 19 is 22.5%. For same aged Latinos, it’s 30.5%, and for Blacks it’s 40.5%. In some major cities, it tops 50%. At issue is how long will people put up with what no one should tolerate. Eventually they’ll react, perhaps violently.
Earlier, Progressive Radio News Hour regular Jack Rasmus warned that BLS data showed “a massive mismatch” compared to “statistically adjusted” numbers.
Last winter, the difference between raw and actual data was extraordinary. For example, the December 2011/January 2012 period reported 243,000 net January job gains. However, raw data revealed 2.7 million lost. It was an unprecedented disparity.
Something’s rotten somewhere, but scoundrel media don’t explain. Neither does BLS. For the past three years, Rasmus says its reported winter data was “grossly overstated.” Late spring/summer washes them out. He expects a similar pattern this year.
BLS uses “grossly inaccurate” manipulated assumptions and methodology. In other words, garbage in, garbage out. Headline monthly job totals are “seriously deficient.”
Economic weakness is masked. At best, job growth is stagnant. Household income’s too weak to sustain consumption. For America’s bottom 80%, real income growth declined annually since 2009. It’s also heavily impacted by rising energy, food, medical, transportation, and other important costs.
Since 2009, job growth’s been stagnant. Around 25 million are unemployed. Millions more are underemployed. Most jobs created are low wage, low or no benefit, part-time or temp service ones. America’s manufacturing base exists offshore.
We “bouncing along the bottom in terms of jobs and economic recovery,” says Rasmus. Crisis conditions continue. Expect worse ahead. Despite over $12 trillion in fiscal/monetary stimulus, so-called “recovery” is moribund.
It’s because benefits went largely to corporations and America’s 1% in bailouts, other handouts, tax breaks, and other benefits, while austerity harms most others.
Job growth is dead. So is America’s economy. Companies hoard cash. They’re not investing. They’re speculating and consolidating larger. Ordinary people are harmed most. Millions haven’t enough to get by. Millions more can’t find work.
Housing in America is in crisis. Prices keep declining. Foreclosures continue. Without sustained job growth and a healthy housing sector, recovery and prosperity are impossible. As long as policy focuses on tax cuts for the rich, corporate handouts, deregulation followed by more of it, and austerity when stimulus for America’s 99% is needed, Main Street Depression conditions will continue.
Rasmus calls it an “epic recession.” His new book explains further. Titled, “Obama’s Economy: Recovery for the Few,” it says bad policies yield dismal results, including growing poverty, high unemployment, and a nation mired in trouble.
While trillions go for militarism and wars, trillions more for Wall Street, other corporate favorites, and America’s super-rich, most households are on their own, out of luck.
Post-election, expect more of the same. Unless public anger reacts, the worst is yet to come.
Stephen Lendman lives in Chicago and can be reached at email@example.com.
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.