No Economy For AmericansPaul Craig Roberts
Prison Planet.com
September 8, 2014
The Dow Jones stock average closed Friday at 17,137, despite the fact that the payroll jobs report was a measly 125,000 new jobs for August, an insufficient amount to keep up with the growth in the working age population.
The low 125,000 jobs figure is also inconsistent with the Bureau of Economic Analysis’ second estimate of second quarter 2014 US GDP growth of 4.2 percent–a figure beyond the capability of the present-day US economy.
Clearly, the economic numbers are out of sync with one another. They are also out of sync with reality.
One of the reasons the stock market average is high is the massive liquidity the Federal Reserve has pumped into the banking system since 2008. Instead of going into consumer inflation, the money went into stock and bond price inflation.
Another reason for the artificial high stock market is the multi-trillion dollar buy-back of their own stock by US corporations. Many of these corporations have even borrowed from the banks in order to drive up their share prices with heavy purchases, thus maximizing executive bonuses and the values of stock options for board members. In effect, they are looting their own firms by loading the companies with debt in order to drive up executive and board incomes.
The stock market’s rise is not because consumer incomes and real retail sales are growing. Real family median incomes have been falling, and real retail sales, at best, are flat.
Let’s look at the composition of the pathetic 125,000 new jobs, and then we will examine whether these jobs are real or make-believe. (Keep in mind that payroll jobs include part-time jobs and that the number of payroll jobs is not the number of people employed, because many Americans make ends meet by working two and even three jobs.)
As I have reported for many years, the US economy no longer is capable of creating goods producing jobs. The Bureau of Labor Statistics August payroll jobs report shows zero manufacturing jobs. I read the other day that the US now has four or five times more people on food stamps than in manufacturing jobs.
The jobs of the New Economy are in lowly paid, nontradable domestic services–the jobs that characterize a Third World Economy.
Perhaps reflecting the collapse of retail sales, retail trade lost 8,400 jobs in August.
“Professional and business services” accounted for 47,000 or 38% of August’s new jobs. Of these 47,000 new jobs, 49% consisted of “administrative and waste services,” largely temporary help services.
“Health care and social assistance” accounted for 42,700 or 34% of the new jobs of which 53% consists of “ambulatory health care services.”
Waitresses and bartenders accounted for 21,100 or 17% of the new jobs.
There were 8,000 new government jobs or 6% of the 125,000 new jobs.
That’s it. That is the job picture of “the world’s only superpower,” “the world’s largest economy,” “the world’s richest people.” It is the picture of employment in a Third World country.
And now for the real question: Are those 125,000 new jobs really there, or are they a statistical mirage. Statistician John Williams (shadowstats.com) says the jobs are a mirage produced by “the changing seasonal adjustments within the concurrent-seasonal adjustment process used by the Bureau of Labor Statistics” and by the birth/death model, which assumes that many more unreported new jobs are created each month by new start-up businesses than are lost from unreported business closings. Williams says that without the gimmicks used by BLS to create jobs that are not there, the actual change in August payrolls “was a solid contraction in excess of 125,000 jobs.” In other words, the economy did not gain 125,000 jobs. It lost 125,000 jobs.
Beginning with the Clinton regime, the American economy has only worked for the One Percent, and it only works for them because the government makes the 99 percent bail out the One Percent. The American economy is an Aristocratic Economy that works for the government-privileged few, but not for anyone else. To understand this hard fact, read Nomi Prins book, All The Presidents’ Bankers.
Of course, the real figures are more like the Ten Percent and the 90 percent. The One Percent caught on, because the upper reaches of that one percent are all multi-billionaires with more money than a family could spend in multiple lifetimes.
The time has passed when American corporations had a sense of social responsibility. Two distinguished Americans writing in Daedalus, one of the few remaining publications not (yet) under corporate control, show that US corporations have become socially dysfunctional because they only serve shareholders and executives.
http://www.amacad.org/pdfs/Sylla_Gomory.pdf Historically in the US, corporations had responsibilities to their customers, employees, communities, and owners. In recent years this has been changed. Today corporations only have responsibilities to their shareholders. If profits go up, executives receive performance bonuses for serving shareholders.
Reducing executive success to one indicator has has enormous negative consequences for everyone else. Americans are suffering in many ways. Their jobs, both manufacturing and professional tradable services such as software engineering, have been moved offshore and given to foreigners. Americans have been deprived of interest income so that the former bank officials in charge of the US government can save the banks that deregulation permitted to over leverage with debt and risk.
The costs of customer service has been shifted to customers who lose large amounts of time waiting to connect with a live person who can correct the mistake the company has made. The unleashing of greed as the only business virtue and pressure from Wall Street for greater profits has caused many service providers, such as telephone and Internet, to forego maintenance and upgrade of facilities in order to hold down costs and boost profits. My telephone ceased to work on September 3, and my service provider lacks sufficient work crews to repair my line prior to the evening of September 8. Last year my Internet provider could not reestablish my Internet service for 10 days. If you call about a bill or a service problem, the companies keep you on the line forever awaiting a real person while they try to sell you new services even though the ones you have purchased don’t work.
Sufficient service crews to provide satisfaction for customers means higher costs, less profits, less shareholder earnings and less performance bonuses for managers. Guess who pays the price for the large rewards to owners and managers–the customers.
I remember the days of AT&T, a regulated monopoly. Everything worked. Any problem was fixed within two hours, barring a major catastrophe such as a hurricane or tornado. The telephone was answered no later than the third ring by a real person, not a voice recording, and the person who answered could fix any problem. There was no menu of a half dozen or dozen from which to select and to wait another quarter hour while being given sales pitches.
Profits made by imposing costs on customers are not legitimate profits. Profits made by
relocating American jobs offshore are not legitimate profits. Profits achieved by bailouts of managerial mistakes by taxpayers who provide the bailout funds but don’t share in the bonuses are not legitimate profits.
Profits achieved by monopoly concentration, as now exists in the financial “services” industry, are not legitimate profits.
In America, franchises, chains, and big-box stores have destroyed a wide array of independent and family businesses that allowed enterprising Americans an independent existence.
Deregulated free-market America has created an economy that serves only the few, which explains the extraordinary concentration in the 21st century of income and wealth in fewer and fewer hands–another defining characteristic of a Third World country.
American capitalism has failed. It can no longer produce jobs for the work force, and its
profits come from its political ability to impose costs on the American population.
Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.
Small Business Ownership In America Is At An All-Time LowMichael Snyder
Economic Collapse
September 9, 2014
According to the Federal Reserve, the percentage of American families that own a small business is at the lowest level that has ever been recorded. In a report that was just released entitled “Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances“, the Federal Reserve revealed that small business ownership in America “fell substantially” between 2010 and 2013. Even in the midst of this so-called “economic recovery”, small business ownership in America has now fallen to an all-time low. If the economy truly was healthy, this would not be happening. And it isn’t as if Americans are flooding the labor market either. As I detailed yesterday, the labor force participation rate in this country is at a 36 year low. That would not be happening if the economy was actually healthy either. The truth is that the middle class in America is dying, and this new report from the Federal Reserve is more evidence of this very harsh reality.
In order to build wealth, middle class Americans either need to have their own businesses or they need good jobs. Sadly, the percentage of Americans that own a business continues to decline steadily. In the report that I mentioned above, the Federal Reserve says that the proportion of U.S. families that have an ownership interest in a small business fell from 13.3 percent in 2010 to a brand new all-time low of11.7 percent in 2013.
This is one of the factors that is increasing the gap between the extremely wealthy and the rest of us in this country. And of course another of the major factors is the steady decline in good paying jobs.
The U.S. Competitiveness Project at Harvard Business School is chaired by professors Michael E. Porter and Jan W. Rivkin. It just released a new report entitled “An Economy Doing Half Its Job”, and it addressed the fact that the middle class is deeply struggling even though many large U.S. corporations have been thriving. The following is an excerpt from an article in the Boston Globe about this report…
In a statement, Porter added: “Shortsighted executives may be satisfied with an American economy where firms operating here are winningwithout lifting US living standards. But leaders with longer perspectives understand that companies can’t thrive for long while their workers and their communities struggle.”
Unfortunately, this is not likely to change any time soon. In fact, that same report discovered that Harvard Business School alumni foresee “falling pay and fewer openings for full-time jobs” for American workers in the years ahead…
U.S. workers face a dim future, with stagnant or falling pay and fewer openings for full-time jobs.
That’s the picture that emerges from a survey of Harvard Business School alumni.
More than 40 percent of the respondents foresee lower pay and benefits for workers. Roughly half favor outsourcing work over hiring staffers. A growing share prefer part-time employees. Nearly half would rather invest in new technology than hire or retain workers.
The Obama administration continues to tell us that the unemployment rate is “going down” and that the economy is recovering, but that does not match the reality of what most Americans are experiencing on a day to day basis.
As David Stockman recently so aptly put it, outside of health and education the U.S. economy has not produced a single job since mid-2000 even though our population has grown greatly since that time…
In a few deft seconds, a “no jobs” nobody who apparently doesn’t actually have one himself, essentially explained the contents of the chart below to his silenced CNBC hosts. Over the course of 170 “jobs Fridays” since mid-2000, the latter have apparently never noticed the single most stunning fact embedded in the monthly BLS report. Namely, that outside of health and education there has not been one net new job created in the American economy since July 2000! Yes, not a single new job—as in none, nein, nichts, nada, zip!
In addition, most of the new jobs that are being “added to the economy” each month are part-time jobs. Right now, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the population each month.
What this means is that the middle class is shrinking.
We are witnessing an increasing concentration of wealth among the ultra-wealthy, and most of the rest of us are getting poorer. As a recent CNN article detailed, the Federal Reserve has also discovered that the gap between the rich and the poor in America is larger than the Fed has ever recorded before…
In its Study of Consumer Finances, released every three years, the Fed found that the wealthiest 3% of American households controlled 54.4% of the nation’s wealth in 2013, a slight increase from its last survey in 2010. It’s also substantially higher from the 44.8% they held in 1989, showing how quickly the income divide has been growing over the past decade or so.
At the same time, the share of wealth held by the bottom 90% fell to 24.7% in 2013. That’s compared to 33.2% in 1989.
How close does the share of wealth for the bottom 90 percent have to go before we admit that we have a major problem on our hands?
Is there anyone out there that would be okay with it hitting zero percent?
One of the big reasons why the wealthy have been doing so well is because the stock market has been soaring. The money printing policies of the Federal Reserve have sent stock prices to unprecedented heights. This has overwhelmingly benefited the extremely wealthy…
According to recent data from the Federal Reserve, America has the lowest level of stock ownership in 18 years. Yet stock ownership for the wealthy is at a new high—and that has accounted for most of their good fortune compared to the rest of America.
In fact, the Fed says that the wealthiest top 10 percent of all Americans now own 81 percent of all stocks…
Stock ownership is even more concentrated when it comes to share of total stock holdings. In 2010, the latest period available, the top 10 percent of Americans by net worth held 81 percent of all directly held or indirectly held stocks, according to Edward N. Wolff, an economics professor at New York University who specializes in inequality and Federal Reserve data.
Wolff said that share—which has not been released yet for 2013—has probably gone even higher than 81 percent since 2010.
Since the last financial crisis, the Federal Reserve has been very good to the elite.
But most of the rest of us have had a really hard time.
Until more Americans start getting good jobs and building small businesses, things are not going to turn around for the middle class.
But the policies being pursued by our politicians continue to kill good jobs and continue to kill small businesses, so I wouldn’t expect significant changes any time soon.
