Article 43

 

Next Recession, Next Depression

Friday, April 19, 2019

The Next Recession Part 27

As US Economy Weakens, Economists Struggle to Predict Next Recession

By Dean Baker
Truthout
April 1, 2019

Many of the people who completely missed the worst recession since the Great Depression are trying to get out front and tell us about the next one on the way. The big item glowing in their crystal ball is an inversion of the yield curve. There has been an inversion of the yield curve before nearly every prior recession and we have never had an inversion of the yield curve without seeing a recession in the next two years.

Okay, if you have no idea what an inversion of the yield curve means, it probably means youre a normal person with better things to do with your time. But for economists, and especially those who monitor financial markets closely, this can be a big deal.

An inverted yield curve refers to the relationship between shorter-and longer-term interest rates. Typically, the longer-term interest rate - say, the interest rate you would get on a 30-year bond is higher than what you would get from lending short-term, like buying a three-month U.S. Treasury bill.

The logic is that if you are locking up your money for a longer period of time, you have to be compensated with a higher interest rate. Therefore, it is generally true that as you get to longer durations - say, a one year bond compared to three-month bond - the interest rate rises. This relationship between interest rates and the duration of the loan is what is known as the “yield curve.”

We get an inverted yield curve when this pattern of higher interest rates associated with longer-term lending does not hold, as is now the case. For example, on March 27, the interest rate on a three-month Treasury bill was 2.43 percent. The interest rate on a 10-year Treasury bond was just 2.38 percent, 0.05 percentage points lower. This means we have an inverted yield curve.

While this inversion has historically been associated with a recession in the not too distant future, this is not quite a curse of an inverted yield curve story. Most recessions are brought on by the Federal Reserve Board raising the overnight federal funds rate (a very short-term interest rate), which is directly under its control. The Fed does this to slow the economy, ostensibly because it wants to keep the inflation rate from rising.

The higher short-term rate tends to also raise long-term interest rates, like car loans and mortgages, which are the rates that matter more for the economy. However, longer-term rates tend not to rise as much as the short-term rate. In a more typical economy, we might expect a 3.0 percentage point rise in the federal funds rate to be associated with a 1.0-2.0 percentage point rise in the 10-year Treasury bond rate.

We get an inversion in this story when the Fed goes too far. It keeps raising the short-term rate, but investors in longer-term debt think that they see an end in sight to rate hikes and a reversal on the way. If the short-term rate is going to be falling to 2.0 percent or even lower in future months, then investors would welcome the possibility of locking in an interest rate like today’s 2.38 percent on 10-year bonds, even if it means foregoing a slighter higher short-term rate at the moment.

That’s pretty much the story we have today. Since December 2015, the Fed has raised the federal funds rate from essentially 0 to 2.5 percent. With little evidence of inflation and some signs of a weakening economy, many investors are betting that the Fed has stopped hiking rates and will soon be lowering them. This hardly means there will necessarily be a recession.

It is also worth noting that interest rates in the US are notably higher than in other countries, which do face a recession or near recession conditions. While the US 10-year Treasury bond pays 2.38 percent interest, a 10-year French bond pays just 0.31 percent. In the Netherlands, the interest rate is 0.13 percent, and in Germany, you have to pay the government 0.07 percent annually to lend them money.

The extraordinarily low long-term interest rates in other countries puts downward pressure on interest rates here, which is another factor in our inverted yield curve. The weakness of economies elsewhere does mean trade is likely to be a drag on growth in the immediate future, but it does not mean a recession.

To sum up the general picture, the U.S. economy is definitely weakening. The tax cut did provide a boost to growth in 2018, as shareholders spent much of the money they were given from the corporate tax cut. But there will be no additional boost in 2019. There was no investment boom to give us a big push going forward. Also, the rise in mortgage interest rates last year, following the Fed rate hikes, slowed housing.

As noted, trade is a drag on growth. With Republicans again concerned about deficits, since they got their tax cuts, we can probably expect some cuts in government spending that will also dampen growth.

However, with wages growing at a respectable pace, and job growth remaining healthy, we should see enough consumption demand to keep the economy moving forward. That means slower growth, but no recession.

People should not spend time worrying about the curse of the inverted yield curve, at least not unless something else bad happens to the economy.

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Posted by Elvis on 04/19/19 •
Section Dying America • Section Next Recession, Next Depression
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Friday, November 09, 2018

Zealots

image: dying america

The Economy Does Not Care Who Won The Midterm Elections

By Brandon Smith

Activist Post
November 8, 2018

Over the past few weeks I received numerous requests from readers to publish my predictions on the outcome of the midterm elections, but I did not do so for a couple of reasons. First and foremost, I view the election process very differently from many people. I do not see it as legitimate in the slightest; therefore, my predictions of the past have been based not on voter turnouts, polls or any other such nonsense. Elections are molded events, framed under the false pretense that the Left/Right paradigm in politics is real. As far as the upper echelons of politics are concerned, the paradigm is completely theatrical.

To be sure, the average American does lean either “left” or “right” on the political spectrum. Such divisions are a natural part of social discourse. However, political theater is designed in most cases to drive citizens away from centrally shared principles of freedom and equal opportunity (not equal outcome) and push them to the far ends of the spectrum toward extremism and zealotry. And to be clear, there is no “good” form of zealotry.

Zealots are not self-aware, and they never subject their own positions to scrutiny. They operate on pure assumption that they are divinely correct in everything they do, and anyone who disagrees with them, even in the slightest, is an enemy that must be destroyed by any means necessary. Zealotry is the root of human atrocity. Zealots are a tidal wave of war and genocide. They are a cancer on the soul of mankind.

Certain groups of people within the establishment, namely globalists that desire total centralized control of every aspect of economy and society, prefer that the public remain as radicalized and divided as possible. For them, zealotry is an asset.

To pursue this goal, they purchase allegiance from politicians through various means, including financial favors, media favors and campaign contributions. There are very few people left in politics that are not part of the club.Ӕ Both Democrat and Republican leaders are essentially on the same side the globalist side. They attack each other with rhetoric, but when it comes down to actual policy and action, they are all very similar.

The outcome of elections is, therefore, erroneous in the long term. Their only purpose is to manipulate public psychology to a certain reactionary end game.

When I predicted the election of Donald Trump in 2016 many months before voting commenced, I did so based on which election outcome better served the interests of globalists. I concluded with the highest certainty that Donald Trump would win based on the same premise that drove me to predict the success of the Brexit vote in the U.K.; that premise being that the globalists would allow ԓpopulists (conservatives) to gain an illusory foothold on political power, only to then collapse the global economy on their heads and blame them for the disaster.

At the time it was unclear whether Trump would play along with the globalist narrative of conservatives as ԓselfish bumbling villains. Today, with his consistent relationships with banking elites and globalist think-tank members, it is obvious that Trump intends to play the role he has been given. TrumpԒs policy actions the past two years indicate that he is following a model very similar to the one Republican President Herbert Hoover used just before the crash of 1929. Trump was a perfect choice for the globalists.

So, the question I had to ask in terms of the midterm elections is, what outcome best serves globalist interests this time? The only conclusion I could come to in this instance was it didn’t matter who wins the midterms. The globalists will get their economic crash regardless and conservatives will still be blamed.

The ultimate outcome turned out to be mixed, with Democrats taking the House and Republicans holding the Senate.  The assertion in the mainstream being that this will result in political gridlock.  In terms of stock markets, the reaction is not surprisingly euphoric, as it has been not long after almost every election event.  But there are many that assume this is a euphoria that will last.  This is a narrow view of the situation that ignores economic reality.

It is certainly possible that equities will sustain a jump on the news of a Republican win, but I see this as a very limited event, lasting perhaps one or two weeks. In the long run as December approaches, stocks and every other sector of the economy will continue accelerated declines seen in October.

Here are the facts:

New home sales, an indicator highly valued by mainstream economists, has been in decline for the past year, hitting two-year lows in September.

This has come as a surprise to many mainstream analysts because the story thus far has been that the U.S. is in advanced recovery which should continue the supposed rejuvenation of the housing market. Alternative economists will give you the real story on home sales, though.

The “housing boom” hailed in the mainstream over the past few years was a farce driven primarily by corporate behemoths like Blackstone.  Companies buying up distressed properties across the U.S. using cheap loans and bailouts through the Federal Reserve and turning them into rentals hardly constitutes a “recovery” in housing.

Regular homebuyers have also enjoyed artificially low mortgage rates for many years. But now, mortgage costs are spiking as the Fed raises interest rates, and corporate debt is becoming more expensive, making it less profitable for companies to continue vacuuming up properties.  Add to this the fact that the Fed is now dumping Mortgage Backed Securities (MBS) from its balance sheet. These are the same securities that constituted a toxicӔ influence that led to the mortgage and derivatives bubble. It is hard to say exactly what the effects will be as they add to existing ARM-style mortgages and derivatives already on the market, but I suspect the result will be destabilizing.

Auto sales, another fundamental indicator used in the mainstream as a signal for economic health, is also failing recently. U.S. auto sales plunged in September from 11 percent to 25 percent depending on the company and make of vehicle. While the mainstream media argues this massive year-over-year decline was due to destructive hurricanes in 2017 creating overt demand, the truth is that the average monthly payment on new vehicles has rocketed to over $525 and interest rates rise due to the Federal Reserve.

Car sales, new and used, have thrived in recent years in most part because of artificially low rates and ARM-like loans to people who cannot afford them. Much like the mortgage bubble in 2008, the auto bubble is set to implode as car payments become too expensive for the average buyer and defaults increase.

The US budget deficit climbed to six-year highs under Donald Trumps watch in 2018 as fiscal spending skyrockets.  Conservatives hoping for budget responsibility and reduced government spending are given a rude awakening once again, as Republicans and Democrats and Trump ALL seek bigger government.  This is hardly gridlock.  In fact, there has been resounding unity in Washington for ever increasing power, and ever increasing costs.

The trade deficit, which was supposed to decline aggressively in the face of Trump’s trade war, has actually climbed to record highs with China (among other nations).  I have heard claims that the outcome of the midterms will force Trump to end the trade war because he is no longer receiving backing from the Federal Reserve or Congress.  The trade war will not stop.  It provides perfect cover for central banks as they continue to remove artificial support from the overall economy.

Perhaps the biggest factor in economic decline in the U.S. will be corporate debt, as mentioned earlier. Corporate debt has jumped to record highs not seen since 2008, with debt-to-cash levels in 2017 hitting lows of 12 percent. Meaning, on average for every $1 of cash a company has in reserve it owes $8 in debt.

How is all this debt being generated? Its all about stock buybacks. In 2018, U.S. corporations increased spending on stock buybacks by 48%, while only increasing spending on development by 19%. Meaning, corporations are spending far more capital, and borrowing far more money, just to keep their stock prices artificially propped up than they are spending money to invest in future growth.

In 2016, globalists needed a conservative president to sit in the Oval Office as the Federal Reserve pulled the plug on artificial economic life support by raising interest rates into the greatest corporate debt crisis since 2008. At this point, that program seems to be in full swing.

The midterms are now over, but it is important to understand that where economic consequences are concerned, the result would have been the same no matter who came out on top. It makes sense for the globalists to desire a dominant Republican party, for when they crash markets the blame would fall entirely on the heads of conservatives. On the other hand, it also makes sense for globalists to introduce a Democratic takeover of Congress, for they can continue to push citizens to further political extremes as the Left blames the Right for the financial crisis while the Right blames the Left for political interference.

In the meantime, the banking elites can simply blame the extreme political divide, wait until the crash runs its course and then sweep in after the dust settles to admonish the capitalist structure, barbaric nationalism, populism, etc. They will shake their fingers at all of us as if we should be ashamed and then offer their own solution to the disaster, which will surely include even more centralization and more power for the banking class.

The Fed will continue to raise rates and cut assets.  The trade war will escalate. The housing market will continue to falter, auto markets will implode, and corporate debt will become a millstone on the neck of stock markets.

Economic function and repair are far beyond the scope of any political body to fix when the dysfunction reaches the point we are at today. To believe otherwise is foolhardy.  To believe that the political elites actually want to fix the economy is even more foolhardy. The answer is not replacing one set of political puppets with another set of political puppets, but for regular people to begin localizing their own production and trade - to decouple from dependency on the existing system and start their own system. Only through this, and the removal of the globalist tumor from its position of power and influence, will anything ever change for the better.

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Posted by Elvis on 11/09/18 •
Section Dying America • Section Next Recession, Next Depression
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Thursday, October 05, 2017

Bad Moon Rising Part 69 - The End Of Empire

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“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. . . . corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”
- Abraham Lincoln

“The economic anarchy of CAPITALIST SOCIETY as it exists today is, in my opinion, the real source of the EVIL."
- Albert Einstein - Why Socialism, 1949

“Capitalism is the extraordinary belief that the nastiest of men for the nastiest of motives will somehow work for the benefit of all.”
- John Maynard Keynes

“I wouldn’t call it fascism exactly, but a political system nominally controlled by an irresponsible, dumbed down electorate who are manipulated by dishonest, cynical, controlled mass media that dispense the propaganda of a corrupt political establishment can hardly be described as democracy either.”
- Edward Zehr Columnist, 1936-2001

The Death Spiral Appears Unstoppable

By By Chris Hedges
TruthDig
October 1, 2017

The American empire is coming to an end. The U.S. economy is being drained by wars in the Middle East and vast military expansion around the globe. It is burdened by growing deficits, along with the devastating effects of deindustrialization and global trade agreements. Our democracy has been captured and destroyed by CORPORATIONS that steadily demand more tax cuts, more deregulation and IMPUNITY from prosecution for massive acts of financial fraud, ALL THE WHILE looting trillions from the U.S. treasury in the form of BAILOUTS. The nation has lost the power and respect needed to induce allies in Europe, Latin America, Asia and Africa to do its bidding. Add to this the mounting destruction caused by climate change and you have a recipe for an emerging dystopia. Overseeing this DESCENT at the highest levels of the federal and state governments is a motley collection of imbeciles, con artists, THIEVES, OPPORTUNISTS and WARMONGERING generals. And to be clear, I am speaking about Democrats, too.

The empire will limp along, steadily losing influence until the dollar is dropped as the world’s reserve currency, plunging the United States into a crippling depression and instantly forcing a massive contraction of its military machine.

Short of a sudden and widespread popular REVOLT, which DOES NOT SEEM LIKELY, the death spiral appears unstoppable, meaning the United States as we know it will no longer exist within a decade or, at most, two. The global vacuum we leave behind will be filled by China, already establishing itself as an economic and military juggernaut, or perhaps there will be a multipolar world carved up among Russia, China, India, Brazil, Turkey, South Africa and a few other states. Or maybe the void will be filled, as the historian Alfred W. McCoy writes in his book “In the Shadows of the American Century: The Rise and Decline of US Global Power”, by “a coalition of transnational corporations, multilateral military forces like NATO, and an international financial leadership self-selected at Davos and Bilderberg” that will “forge a supranational nexus to supersede any nation or empire.”

Under every measurement, from financial growth and infrastructure investment to advanced technology, including supercomputers, space weaponry and CYBERWARFARE, we are being rapidly overtaken by the CHINESE. In April 2015 the U.S. Department of Agriculture suggested that the American economy would grow by nearly 50 percent over the next 15 years, while Chinas would triple and come close to surpassing America’s in 2030, McCoy noted. CHINA became the world’s second largest economy in 2010, the same year it became the world’s leading manufacturing nation, pushing aside a United States that had dominated the world’s manufacturing for a century. The Department of Defense issued a sober report titled “At Our Own Peril: DoD Risk Assessment in a Post-Primacy World.” It found that “the U.S. military no longer enjoys an unassailable position versus state competitors,” and it no longer can automatically generate consistent and sustained local military superiority at range. McCoy predicts the collapse will come by 2030.

Empires in decay embrace an almost willful suicide. Blinded by their hubris and unable to face the reality of their diminishing power, they retreat into a fantasy world where hard and unpleasant facts no longer intrude. They replace diplomacy, multilateralism and politics with unilateral threats and the blunt instrument of war.

This collective self-delusion saw the United States make the greatest strategic blunder in its history, one that sounded the death knell of the empire - the invasion of Afghanistan and Iraq. The architects of the war in the George W. Bush White House, and the array of useful idiots in the press and academia who were cheerleaders for it, knew very little about the countries being invaded, were stunningly naive about the effects of industrial warfare and were blindsided by the ferocious blowback. They stated, and probably believed, that Saddam Hussein had weapons of mass destruction, although they had no valid evidence to support this claim. They insisted that democracy would be implanted in Baghdad and spread across the Middle East. They assured the public that U.S. troops would be greeted by grateful Iraqis and Afghans as liberators. They promised that oil revenues would cover the cost of reconstruction. They insisted that the bold and quick military strike “shock and awe” - would restore American hegemony in the region and dominance in the world. It did the opposite. As Zbigniew Brzezinski noted, “this unilateral war of choice against Iraq precipitated a widespread delegitimation of U.S. foreign policy.”

Historians of empire call these military fiascos, a feature of all late empires, examples of “micro-militarism.” The Athenians engaged in micro-militarism when during the Peloponnesian War (431-404 B.C.) they invaded Sicily, suffering the loss of 200 ships and thousands of soldiers and triggering revolts throughout the empire. Britain did so in 1956 when it attacked Egypt in a dispute over the nationalization of the Suez Canal and then quickly had to withdraw in humiliation, empowering a string of Arab nationalist leaders such as Egypts Gamal Abdel Nasser and dooming British rule over the nation’s few remaining colonies. Neither of these empires recovered.

“While rising empires are often judicious, even rational in their application of armed force for conquest and control of overseas dominions, fading empires are inclined to ill-considered displays of power, dreaming of bold military master strokes that would somehow recoup lost prestige and power”, McCoy writes. “Often irrational even from an imperial point of view, these micromilitary operations can yield hemorrhaging expenditures or humiliating defeats that only accelerate the process already under way.”

Empires need more than force to dominate other nations. They need a mystique. This mystiquea mask for imperial plunder, repression and exploitation - seduces some native elites, who become willing to do the bidding of the imperial power or at least remain passive. And it provides a patina of civility and even nobility to justify to those at home the costs in blood and money needed to maintain empire. The parliamentary system of government that Britain replicated in appearance in the colonies, and the introduction of British sports such as polo, cricket and horse racing, along with elaborately uniformed viceroys and the pageantry of royalty, were buttressed by what the colonialists said was the invincibility of their navy and army. England was able to hold its empire together from 1815 to 1914 before being forced into a steady retreat. Americas high-blown rhetoric about democracy, liberty and equality, along with basketball, baseball and Hollywood, as well as our own deification of the military, entranced and cowed much of the globe in the wake of World War II. Behind the scenes, of course, the CIA used its bag of dirty tricks to orchestrate coups, fix elections and carry out assassinations, black propaganda campaigns, bribery, blackmail, intimidation and torture. But none of this works anymore.

The loss of the mystique is crippling. It makes it hard to find pliant surrogates to administer the empire, as we have seen in Iraq and Afghanistan. The photographs of physical abuse and sexual humiliation imposed on Arab prisoners at Abu Ghraib inflamed the Muslim world and fed al-Qaida and later Islamic State with new recruits. The assassination of Osama bin Laden and a host of other jihadist leaders, including the U.S. citizen Anwar al-Awlaki, openly mocked the concept of the rule of law. The hundreds of thousands of dead and millions of refugees fleeing our debacles in the Middle East, along with the near-constant threat from militarized aerial drones, exposed us as state terrorists. We have exercised in the Middle East the U.S. military’s penchant for widespread atrocities, indiscriminate violence, lies and blundering miscalculations, actions that led to our defeat in Vietnam.

The brutality abroad is matched by a growing brutality at home. Militarized police gun down mostly unarmed, poor people of color and fill a system of penitentiaries and jails that hold a staggering 25 percent of the worlds prisoners although Americans represent only 5 percent of global population. Many of our cities are in ruins. Our public transportation system is a shambles. Our educational system is in steep decline and being privatized. Opioid addiction, suicide, mass shootings, depression and morbid obesity plague a population that has fallen into profound despair. The deep disillusionment and anger that led to Donald Trump’s election - a reaction to the corporate coup d’tat and the poverty afflicting at least half of the country - have destroyed the myth of a functioning democracy. Presidential tweets and rhetoric celebrate hate, racism and bigotry and taunt the weak and the vulnerable. The president in an address before the United Nations threatened to obliterate another nation in an act of genocide. We are worldwide objects of ridicule and hatred. The foreboding for the future is expressed in the rash of dystopian films, motion pictures that no longer perpetuate American virtue and exceptionalism or the MYTH OF HUMAN PROGRESS.

The demise of the United States as the preeminent global power could come far more quickly than anyone imagines,” McCoy writes. “Despite the AURA OF OMNIPOTENCE empires often project,” most are surprisingly fragile, lacking the inherent strength of even a modest nation-state. Indeed, a glance at their history should remind us that the greatest of them are susceptible to collapse from diverse causes, with fiscal pressures usually a prime factor. For the better part of two centuries, the security and prosperity of the homeland has been the main objective for most stable states, making foreign or imperial adventures an expendable option, usually allocated no more than 5 percent of the domestic budget. Without the financing that arises almost organically inside a sovereign nation, empires are famously predatory in their relentless hunt for plunder or profitwitness the Atlantic slave trade, Belgiumӗs rubber lust in the Congo, British Indias opium commerce, the Third ReichҒs rape of Europe, or the Soviet exploitation of Eastern Europe.

“When revenues shrink or collapse,” McCoy points out, “empires become brittle.”

ҔSo delicate is their ecology of power that, when things start to go truly wrong, empires regularly unravel with unholy speed: just a year for Portugal, two years for the Soviet Union, eight years for France, eleven years for the Ottomans, seventeen for Great Britain, and, in all likelihood, just twenty-seven years for the United States, counting from the crucial year 2003 [when the U.S. invaded Iraq], he writes.

Many of the estimated 69 empires that have existed throughout history lacked competent leadership in their decline, having ceded power to monstrosities such as the Roman emperors Caligula and Nero. In the United States, the reins of authority may be in the grasp of the first in a line of depraved demagogues.

ӔFor the majority of Americans, the 2020s will likely be remembered as a demoralizing decade of rising prices, stagnant wages, and fading international competitiveness, McCoy writes. The loss of the dollar as the global reserve currency will see the U.S. unable to pay for its huge deficits by selling Treasury bonds, which will be drastically devalued at that point. There will be a massive rise in the cost of imports. Unemployment will explode. Domestic clashes over what McCoy calls Ӕinsubstantial issues will fuel a dangerous hypernationalism that could morph into an American fascism.

A discredited elite, suspicious and even paranoid in an age of decline, will see enemies everywhere. The array of instruments created for global dominance, wholesale surveillance, the evisceration of civil liberties, sophisticated torture techniques, militarized police, the massive prison system, the thousands of militarized drones and satellites - will be employed in the homeland. The empire will collapse and the nation will consume itself within our lifetimes IF WE do not WREST POWER from those who rule the corporate state.

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Posted by Elvis on 10/05/17 •
Section Bad Moon Rising • Section Dying America • Section Next Recession, Next Depression
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Tuesday, June 07, 2016

Steady Fall Of Labor Participation

image: Truth is Treason

Why you should never blindly trust the official unemployment rate

By Jeff Spross
The Week
June 6, 2016

Friday’s JOB REPORT was a study in whiplash.

The unemployment rate dropped a remarkable 0.3 percentage points: It was 5 percent in April, and fell to 4.7 percent in May.

Which sounds great!

But only 38,000 jobs were created last month. That’s absolutely abysmal. It’s likely the Verizon strike TEMPORARILY ELIMINATED 35,000 to 40,000 jobs in May, which will return now that the strike is over. But even that would’ve only brought May’s count to just under 80,000 new jobs. By COMPARISON, 2015 averaged 221,000 jobs per month, and 2014 averaged 260,000 per month. On top of that, job creation numbers for both March and April were revised down for a total loss of 59,000.

Which is not good at all.

The way to make sense of these two conflicting indicators is to realize the unemployment rate is not always the best indicator of the economy’s health. In fact, it’s probably a much worse indicator right now than it’s been in a long time.

Friday’s jobs report actually provides an excellent opportunity to explain why.

There’s some silly CONSIPRACY-MONGERING out there about how the unemployment rate isn’t the “real” unemployment rate.

But the thing to realize is that the “official” unemployment rate is designed to measure a specific thing, and you can’t ask that measurement to tell you more about the economy than it’s designed to. The “official” unemployment rate everyone always talks about is actually called the ”U-3” rate, and it’s the total number of unemployed Americans as a percentage of the labor force.

So what does that mean? The labor force is everyone over the age of 16 who is either employed or has looked for a job within the last four weeks. So a 4.7 percent unemployment rate means 4.7 percent of that population doesn’t have a job.

Now let’s look at another measure the government tracks: the EMPLOYMENT-TO-POPULATION ratio. This is the percentage of everyone over the age of 16 who has a job. And it held steady: 59.7 percent in April and 59.7 percent in May.

So the percentage of everyone over age 16 who is unemployed held steady. But the percentage of people over 16 who looked for work in the last four weeks and who are unemployed fell. How did that happen? Because some of them stopped looking for work. They left the labor force, not because they found a job, but because they no longer met the criterion.

You can see it in the data that doesn’t get the headline treatment: The labor force participation rate itself fell from 62.8 percent to 62.6 percent in May. And the number of unemployed people who stopped looking for work ticked up sharply.

Obviously, that’s all bad. But the way the math works, it results in a lower official unemployment rate.

This all gets at a deeper problem. The official unemployment rate is affected by the health of the economy. But the labor force participation rate is affected by it, too. It fell from 67 percent in the late ‘90s to 66 percent after the 2001 recession and never recovered. Then it fell again after the Great Recession, all the way down to between 62 and 63 percent. It has yet to recover.

image: Labor Participation Rate May 2016

It looked like the labor force participation rate might have finally started climbing again, but its fall over the last two months basically wiped out all its gains. The one bit of good news is that its post-Great Recession drop leveled off around the start of 2014, and there’s no sign yet it’s starting a new fall.

Now, some of that collapse is due to normal demographics changes, in particular old and retired people becoming a bigger share of the overall population. But that doesn’t account for all of the collapse. Some of it is people giving up because they just can’t find work. That means, until the labor force participation rate recovers by several percentage points, the official unemployment rate simply won’t be a good measure of the health of the economy.

“A 5 percent unemployment rate today is a distinctly different indication of labor market slack than a 5 percent unemployment rate would have been before the recession, in 2007,” Patrick O’Keefe, director of economic research at the accounting firm CohnReznick, told The New York Times.

So what should we be looking at to judge the health of the economy?

There are actually SIX different measures of unemployment the government tracks: “U-1” through “U-6.” The U-6 RATE in particular is WORTH WATCHING when labor force participation is depressed; it INCLUDES unemployed people who look for work less often and people who want to work full-time but can only find part-time jobs, for instance. There’s also the EMPLOYMENT-TO-POPULATION RATIO FOR AGES 25-54. That is, out of all Americans age 25 to 54, what percentage has jobs? It’s HELPFUL because it filters out a lot of the demographic questions like whether people are retired or students - that bedevils other measures.

But ultimately, the best measure is just THE RATE at which wages are growing. The economy is at full health when the number of jobs available matches the number of people who want to work. When that happens, workers stop competing for jobs, and employers start competing for workers, which causes wages to rise.

Back at the height of the 1990s boom, wages grew at roughly 4 percent. Right now they’re growing at around 2.5 PERCENT.

So we’ve got the metrics to tell us how well the economy is (or isn’t) doing. We just have to be more flexible about which ones we use.

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Posted by Elvis on 06/07/16 •
Section Dying America • Section Next Recession, Next Depression
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Sunday, March 23, 2014

The Next Depression Part 53 - You’re Next

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Do Not Make Fun Of Those That Have Fallen Out Of The Middle Class - You Could Be Next

By Michael Snyder
Ecomomic Collapse Blog
March 20, 2014

There are millions of American families that once lived very comfortable middle class lifestyles that have lost it all.  When you are unemployed and you can’t find a decent job, it can crush your soul.  Every day you can see the disappointment or the disapproval in the eyes of your family and friends, and it can be really easy to want to give up completely.  And then there are always those that choose to actively vocalize their disdain for those that are down on their luck.  But telling people “to get a job” or shaming them for being on welfare isn’t going to solve anything in an economy where there simply are not enough jobs for everyone.  Only a small minority of welfare recipients are actually trying to abuse the system.  Most people just want to work hard and take care of their families.  Unfortunately, that is much harder to do than it was before the last financial crisis.

At this point, our economy has stabilized at a much lower level than it was at before.  For example, 32 million Americans were on food stamps when Barack Obama took office, and subsequently that number shot up to about 47 million.  Fortunately, that number has been relatively stable for the last couple of years, but there has been no recovery.  This can be seen in lots of other economic statistics as well.

If we were going to have an “economic recovery”, it should have happened by now.

Unfortunately, it has not materialized, and now the next downturn is coming.

Since I run a website called “The Economic Collapse”, a lot of people seem to assume that I actually want an economic collapse to happen.  But that is not the truth at all.  I love this country, and just like most other people I really enjoy life in modern America.  I wish that the party could go on forever.  But I know that it cannot.

And every day I hear from people that are deeply suffering in this economy.  Anyone that has a heart that hears of such suffering would want things to get better.  Why would anyone want to see even more pain?

But I know that more pain is coming.

In the years ahead, a tremendous amount of love and compassion are going to be needed.  When people lose their jobs, their entire lives can be turned upside down.  Just consider the case of one formerly middle class woman named Abby Henson…

Last winter I ran into a friend pushing his two youngest children in a stroller. When I asked how he was doing, he told me hed recently lost his job. I walked away thinking, ғThank God thats not us.Ҕ Fast-forward seven months and now were the family people walk away from with a sigh of relief.

One day this summer, my husband came home early from work with the news he’d lost his job. Since then, weve gone through all the stages of grief, with a few additions of our own. I’ve gone into what Ive dubbed “Mama Bear” mode, wanting to do everything with my husband and our two small children, maybe because I just don’t want to face anyone alone. How are you doing? is a hard question to answer in the rush of school pickup. So I keep my mate and cubs close, or we hibernate at home, trying to avoid scrutiny.

Sadly, this kind of thing has happened to millions of families.  Those that doubt this just need to look at the survey numbers.

Back in 2008, 53 percent of all Americans considered themselves to be “middle class”.

In 2014, only 44 percent of all Americans still consider themselves to be “middle class”.

This next story that I want to share with you is from a reader named Joe.  Please look past the lack of punctuation, and consider what he is saying.  This is a man that has had his heart broken…

I’m not sure whats worse. never having a career and family or losing them both. I know that when i got the honor of handing 20 years of hard work to the chinese it plunged me in to despair and a horrible spin. 3 years later and a college degree and ive lost my home and my family over it. and all i got was, you could have, you should have. so its all my fault that someone elses greed caused all this. by the way the corporate CEO that did this makes 7 million bucks a year. she caused 2 divorces. a dozen early forced retirements, countless career losses and multiple wrecked families. I’m lucky i still have my RV which is home now. i used to have a nice 4 bedroom house with all the middle class trimmings. now i consider myself lucky to have a job where i barely make the space rent and no hope of recovering my former career or my family. i had it all and lost it so i dont know whats worse having or never having it at all and pining for it. either way it hurts knowing that no one wants you after you fall apart you’re just a hot potato. all i know is that im lost with no hope with a clean 30 year work history thats now moot. in retrospect i wish i had stayed in the saddle and kept riding my motorcycle till i was no more.

And it is not just older Americans that are suffering in this economy.

Many young people that worked incredibly hard through school and that did everything “right” now find the door to the middle class completely shut.  The following is testimony from a recent college graduate that is incredibly sad.

I’m a college graduate. I live at home. I am on food stamps. I graduated about two years ago and the only work I’ve been able to get is sign waving. Temp agencies are all so flooded with applicants they are almost useless. I’ve sent out hundreds of resumes, filled out dozens of applications, and nothing ever happens. Everyone acts like it’s YOUR fault. That used to be hurtful, but now I’m past caring, because I realize what life holds for me: nothing. I will never have a family or career. I will never own a home or even live on my own again. I will never be able to have a social life again. I will never be financially independent, like I was for a brief period of time at an age younger than most because I worked so hard for it. And all of it was for this nothing. A lifetime of hard work, completely wasted. I wish I had just partied and screwed around my whole life - the outcome probably would have been better.

The despair that our young adults are feeling right now shows up very clearly in the survey numbers.

Back in 2008, 25 percent of all Americans in the 18 to 29-year-old age bracket considered themselves to be “lower class”.

In 2014, 49 percent of them do.

That is an astounding shift in just six years.

Anyone that believes that the U.S. economy is “just fine” is crazy.

When you lose everything, it can plunge you into a spiral of depression and desperation that can be incredibly difficult to break free from.

Some people get tempted to give up completely, but that is never a good answer.

I hope that some people will take hope from a comment that a reader named Paul left on one of my recent articles…

Due to a lack of job security and all the bad economic news I have lapsed into a clinical depression. I have been susceptible to anxiety and depression in the past. However, I did not have to deal with a bout of depression for about 5 years. I am writing this as a wakeup call to other people who may be feeling what I am feeling right now. I am extremely angry about the rampant corruption, laziness, hubris, and ignorance that is permeating through society today. I have shifted between anger, apathy, and sadness. However, I have family that I must protect. One of my purposes in life is to give people hope. Also, below is a list of actions I took to combat my depression.

Take up a new hobby. Dancing helped me.

Take stock of how your life impacts others.

Prepare for harder times ahead. This is extremely empowering.

Engage in acts of kindness. I found a twenty dollar bill on the floor at a store. Instead of keeping it I gave it to lost and found at customer service. I also removed a sharp piece of wood from the middle of a residential street.
I remember the saying “Suicide is a permanent solution to a temporary problem.” Feelings of sadness, anger, hopelessness are transitory. If you have thoughts about taking your life please get help.

Typing this has made me feel better.

I will continue to fight my depression. I am in a dark place right now. However, I am searching for the light.

Please pray for Paul and others just like him as they struggle with their pain.

The truth is that there is always hope.

If you are reading this and you are hurting, I want you to know that almost everyone hits a very deep low at some point.  But if you keep fighting, there is always a way for things to be turned around.

Personally, God took the broken pieces of my life and turned them into a beautiful thing, and He can do the same for you.

So never, ever, ever give up.

Yes, very challenging economic times are coming.

But our lives should not be defined by our material possessions anyway.

Personally, I am very glad to be alive during this time of human history.  When times are the darkest, that is when light is needed the most.  And times of great crisis also often bring great opportunity as well.

The years ahead are going to present an awesome opportunity to make a difference in this world.

Posted by Elvis on 03/23/14 •
Section Revelations • Section Dying America • Section Next Recession, Next Depression
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