Personal income plunged by $500 billion in January after it had surged by $350 billion in December. Here is the difference. The surge in December was due to rich people doing tax planning by accelerating income to avoid Obama’s tax hikes. It was completely driven by investment income and bonus acceleration. The drop in January can only be attributed 70% to investment income. Wages hardly ever DROP. They dropped by $43 billion, with all the drop occurring in private industries. GOVERNMENT WAGES went UP!!!!
You’ll be happy to know government entitlement transfers went up as 300,000 more Boomers went on Social Security and thousands more jointed the food stamps rolls and SSDI.
Thank God we live in America – the land of delusion. Even though disposable income crashed by $500 billion and is lower than it was in September, the good old American consumer whipped out that credit card and increased their spending by $22 billion. Something is amiss. Every major retailer in America just reported results as of January 31 that were horrible. Where are these consumers spending the money they aren’t earning? If we supposedly are adding jobs, how can wages be falling?
Inquiring minds want to know. At least our savings rate is back down to 2.4%. That certainly bodes well as taxes increase, gas prices surge, food prices rise, and Obamacare works its magic.
Consumer Taps Out As Income Plunges By Most In 20 Years: Savings Rate Crashes To 2007 Levels
Submitted by Tyler Durden on 03/01/2013 09:02 -0500
When the US income and spending figures for December came out, the punditry couldn’t contain their exuberance following the massive surge in income which as we explained was merely a function of the pulled forward wages and bonuses in December due to fears of what the Fiscal Cliff and the expiration of the payroll tax cut would do to incomes in 2013 (nothing good), as well as a surge in stock dividends to avoid a dividend tax hike resulting in yet another boost in income. The spike in personal income without an offset in spending sent the savings rate to the highest in three years.
Today it’s payback time as moments ago we learned that the US consumer gave back all the December gains and then much following news that while spending did nothing, and came in as expected at 0.2%, personal income imploded by 3.6% on estimates of a modest 2.4% drop. This was the biggest drop in personal income in 20 years just as the US consumer’s confidence was soaring at least according to such manipulated aggregators as UMich. What this also led to was that not only is the stock market back to 2007 levels, but so is the personal saving rate, which crashed from 6.4% to 2.4%, the lowest since November 2007, and leaving Americans with the least purchasing power just as the full impact of a government that is flirting with austerity is starting to be felt. And just as bad was the material 4% pullback in real
disposable personal income or adjusted for inflation.
“Consumers can’t spend what they don’t have, and they don’t much much,” summarized Bloomberg economist Rich Yamarone.
Just don’t tell the TV talking heads on financial comedy TV for whom the only thing that matters is how high two algos can chase the hot potato known as the Dow Jones Industrial Average. .
This graph tells a story of unsustainability. A system that requires infinite growth cannot grow if the young college graduates make less and less money each year. If they can’t move up the ladder, then there is no one to buy houses from the retiring Boomers. If your wages decline, you can’t buy new cars, buy new houses, or buy more iGadgets. The scary part is that this graph only reflects college graduates who are employed full-time. How about the college graduates without jobs or working part-time as waiters? Add a graph of student loan debt over this same time frame and you realize why the economy has no chance of reviving. Millenials will be the first generation in U.S. history whose standard of living will be lower than the previous generation.
The Graph That Should Accompany Every Article About Millennials and Economics
By Derek Thompson
The Atlantic has been on the Millennial beat for a long time, explaining why 20-somethings aren’t buying cars or houses or cable subscriptions, not getting married, not having children, and sometimes not even moving out of their parents’ basements. The answer, again and again, is the economy.
Unemployment for adults between 20 and 24 is 14%, compared to the national average of 8.1%. But even those with jobs are facing something without modern precedent: Steadily falling annual earnings (graph via Progressive Policy Institute).
Real earnings for young grads with a college degree have now declined for six straight years. “Real average earnings for young grads have fallen by over 15% since 2000, or by about $10,000 in constant 2011 dollars,” PPI reports.
Meanwhile, the earnings gap between college graduates and non-college graduates is holding steady, a reflection of falling real wages at the low end.
Ben Bernanke, Chris Hedges, Consumer debt, Criminals, currency debasement, Federal Reserve, for lease signs, for sale signs, fraud, Gold, Hatfield, Home Depot, home prices, Home sales, household income, IKEA, Lowes, Malls, Mcmansions, Middle class, Montgomery County, National Debt, Obama, Poverty, Propaganda, retail stores, Ridge Pike, store closings, strip malls, Suburbia, Target, Tim Gethner, vacancy rates, Wages, Wal-Mart, Wall Street, West Philly
Is it just me, or are the signs of consumer collapse as clear as a Lowes parking lot on a Saturday afternoon? Sometimes I wonder if I’m just seeing the world through my pessimistic lens, skewing my point of view. My daily commute through West Philadelphia is not very enlightening, as the squalor, filth and lack of legal commerce remain consistent from year to year. This community is sustained by taxpayer subsidized low income housing, taxpayer subsidized food stamps, welfare payments, and illegal drug dealing. The dependency attitude, lifestyles of slothfulness and total lack of commerce has remained constant for decades in West Philly. It is on the weekends, cruising around a once thriving suburbia, where you perceive the persistent deterioration and decay of our debt fixated consumer spending based society.
The last two weekends I’ve needed to travel the highways of Montgomery County, PA going to a family party and purchasing a garbage disposal for my sink at my local Lowes store. Montgomery County is the typical white upper middle class suburb, with tracts of McMansions dotting the landscape. The population of 800,000 is spread over a 500 square mile area. Over 81% of the population is white, with the 9% black population confined to the urban enclaves of Norristown and Pottstown.
The median age is 38 and the median household income is $75,000, 50% above the national average. The employers are well diversified with an even distribution between education, health care, manufacturing, retail, professional services, finance and real estate. The median home price is $300,000, also 50% above the national average. The county leans Democrat, with Obama winning 60% of the vote in 2008. The 300,000 households were occupied by college educated white collar professionals. From a strictly demographic standpoint, Montgomery County appears to be a prosperous flourishing community where the residents are living lives of relative affluence. But, if you look closer and connect the dots, you see fissures in this façade of affluence that spread more expansively by the day. The cheap oil based, automobile dependent, mall centric, suburban sprawl, sanctuary of consumerism lifestyle is showing distinct signs of erosion. The clues are there for all to see and portend a bleak future for those mentally trapped in the delusions of a debt dependent suburban oasis of retail outlets, chain restaurants, office parks and enclaves of cookie cutter McMansions. An unsustainable paradigm can’t be sustained.
The first weekend had me driving along Ridge Pike, from Collegeville to Pottstown. Ridge Pike is a meandering two lane road that extends from Philadelphia, winds through Conshohocken, Plymouth Meeting, Norristown, past Ursinus College in Collegeville, to the farthest reaches of Montgomery County, at least 50 miles in length. It served as a main artery prior to the introduction of the interstates and superhighways that now connect the larger cities in eastern PA. Except for morning and evening rush hours, this road is fairly sedate. Like many primary routes in suburbia, the landscape is engulfed by strip malls, gas stations, automobile dealerships, office buildings, fast food joints, once thriving manufacturing facilities sitting vacant and older homes that preceded the proliferation of cookie cutter communities that now dominate what was once farmland.
I should probably be keeping my eyes on the road, but I can’t help but notice the telltale signs of an economic system gone haywire. As you drive along, the number of For Sale signs in front of homes stands out. When you consider how bad the housing market has been, the 40% decline in national home prices since 2007, the 30% of home dwellers underwater on their mortgage, and declining household income, you realize how desperate a home seller must be to try and unload a home in this market. The reality of the number of For Sale signs does not match the rhetoric coming from the NAR, government mouthpieces, CNBC pundits, and other housing recovery shills about record low inventory and home price increases.
The Federal Reserve/Wall Street/U.S. Treasury charade of foreclosure delaying tactics and selling thousands of properties in bulk to their crony capitalist buddies at a discount is designed to misinform the public. My local paper lists foreclosures in the community every Monday morning. In 2009 it would extend for four full pages. Today, it still extends four full pages. The fact that Wall Street bankers have criminally forged mortgage documents, people are living in houses for two years without making mortgage payments, and the Federal Government backing 97% of all mortgages while encouraging 3.5% down financing does not constitute a true housing recovery. Show me the housing recovery in these charts.
Existing home sales are at 1998 levels, with 45 million more people living in the country today.
New single family homes under construction are below levels in 1969, when there were 112 million less people in the country.
Another observation that can be made as you cruise through this suburban mecca of malaise is the overall decay of the infrastructure, appearances and disinterest or inability to maintain properties. The roadways are potholed with fading traffic lines, utility poles leaning and rotting, and signage corroding and antiquated. Houses are missing roof tiles, siding is cracked, gutters astray, porches sagging, windows cracked, a paint brush hasn’t been utilized in decades, and yards are inundated with debris and weeds. Not every house looks this way, but far more than you would think when viewing the overall demographics for Montgomery County. You wonder how many number among the 10 million vacant houses in the country today. The number of dilapidated run down properties paints a picture of the silent, barely perceptible Depression that grips the country today. With such little sense of community in the suburbs, most people don’t even know their neighbors. With the electronic transfer of food stamps, unemployment compensation, and other welfare benefits you would never know that your neighbor is unemployed and hasn’t made the mortgage payment on his house in 30 months. The corporate fascist ruling plutocracy uses their propaganda mouthpieces in the mainstream corporate media and government agency drones to misinform and obscure the truth, but the data and anecdotal observational evidence reveal the true nature of our societal implosion.
A report by the Census Bureau this past week inadvertently reveals data that confirms my observations on the roadways of my suburban existence. Annual household income fell in 2011 for the fourth straight year, to an inflation-adjusted $50,054. The median income — meaning half earned more, half less — now stands 8.9% lower than the all-time peak of $54,932 in 1999. It is far worse than even that dreadful result. Real median household income is lower than it was in 1989. When you understand that real household income hasn’t risen in 23 years, you can connect the dots with the decay and deterioration of properties in suburbia. A vast swath of Americans cannot afford to maintain their residences. If the choice is feeding your kids and keeping the heat on versus repairing the porch, replacing the windows or getting a new roof, the only option is survival.
All races have seen their income fall, with educational achievement reflected in the much higher incomes of Whites and Asians. It is interesting to note that after a 45 year War on Poverty the median household income for black families is only up 19% since 1968.
Now for the really bad news. Any critical thinking person should realize the Federal Government has been systematically under-reporting inflation since the early 1980’s in an effort to obscure the fact they are debasing the currency and methodically destroying the lives of middle class Americans. If inflation was calculated exactly as it was in 1980, the GDP figures would be substantially lower and inflation would be reported 5% higher than it is today. Faking the numbers does not change reality, only the perception of reality. Calculating real median household income with the true level of inflation exposes the true picture for middle class America. Real median household income is lower than it was in 1970, just prior to Nixon closing the gold window and unleashing the full fury of a Federal Reserve able to print fiat currency and politicians to promise the earth, moon and the sun to voters. With incomes not rising over the last four decades is it any wonder many of our 115 million households slowly rot and decay from within like an old diseased oak tree. The slightest gust of wind can lead to disaster.
Eliminating the last remnants of fiscal discipline on bankers and politicians in 1971 accomplished the desired result of enriching the top 0.1% while leaving the bottom 90% in debt and desolation. The Wall Street debt peddlers, Military Industrial arms dealers, and job destroying corporate goliaths have reaped the benefits of financialization (money printing) while shoveling the costs, their gambling losses, trillions of consumer debt, and relentless inflation upon the working tax paying middle class. The creation of the Federal Reserve and implementation of the individual income tax in 1913, along with leaving the gold standard has rewarded the cabal of private banking interests who have captured our economic and political systems with obscene levels of wealth, while senior citizens are left with no interest earnings ($400 billion per year has been absconded from savers and doled out to bankers since 2008 by Ben Bernanke) and the middle class has gone decades seeing their earnings stagnate and their purchasing power fall precipitously.
The facts exposed in the chart above didn’t happen by accident. The system has been rigged by those in power to enrich them, while impoverishing the masses. When you gain control over the issuance of currency, issuance of debt, tax system, political system and legal apparatus, you’ve essentially hijacked the country and can funnel all the benefits to yourself and costs to the math challenged, government educated, brainwashed dupes, known as the masses. But there is a problem for the 0.1%. Their sociopathic personalities never allow them to stop plundering and preying upon the sheep. They have left nothing but carcasses of the once proud hard working middle class across the country side. There are only so many Lear jets, estates in the Hamptons, Jaguars, and Rolexes the 0.1% can buy. There are only 152,000 of them. Their sociopathic looting and pillaging of the national wealth has destroyed the host. When 90% of the population can barely subsist, collapse and revolution beckon.
Extend, Pretend & Depend
As I drove further along Ridge Pike we passed the endless monuments to our spiral into the depths of materialism, consumerism, and the illusion that goods purchased on credit represented true wealth. Mile after mile of strip malls, restaurants, gas stations, and office buildings rolled by my window. Anyone who lives in the suburbs knows what I’m talking about. You can’t travel three miles in any direction without passing a Dunkin Donuts, KFC, McDonalds, Subway, 7-11, Dairy Queen, Supercuts, Jiffy Lube or Exxon Station. The proliferation of office parks to accommodate the millions of paper pushers that make our service economy hum has been unprecedented in human history. Never have so many done so little in so many places. Everyone knows what a standard American strip mall consists of – a pizza place, a Chinese takeout, beer store, a tanning, salon, a weight loss center, a nail salon, a Curves, karate studio, Gamestop, Radioshack, Dollar Store, H&R Block, and a debt counseling service. They are a reflection of who we’ve become – an obese drunken species with excessive narcissistic tendencies that prefers to play video games while texting on our iGadgets as our debt financed lifestyles ultimately require professional financial assistance.
What you can’t ignore today is the number of vacant storefronts in these strip malls and the overwhelming number of SPACE AVAILABLE, FOR LEASE, and FOR RENT signs that proliferate in front of these dying testaments to an unsustainable economic system based upon debt fueled consumer spending and infinite growth assumptions. The booming sign manufacturer is surely based in China. The officially reported national vacancy rates of 11% are already at record highs, but anyone with two eyes knows these self-reported numbers are a fraud. Vacancy rates based on my observations are closer to 30%. This is part of the extend and pretend strategy that has been implemented by Ben Bernanke, Tim Geithner, the FASB, and the Wall Street banking cabal. The fraud and false storyline of a commercial real estate recovery is evident to anyone willing to think critically. The incriminating data is provided by the Federal Reserve in their Quarterly Delinquency Report.
The last commercial real estate crisis occurred in 1991. Mall vacancy rates were at levels consistent with today.
The current reported office vacancy rates of 17.5% are only slightly below the 19% levels of 1991.
As reported by the Federal Reserve, delinquency rates on commercial real estate loans in 1991 were 12%, leading to major losses among the banks that made those imprudent loans. Amazingly, after the greatest financial collapse in history, delinquency rates on commercial loans supposedly peaked at 8.8% in the 2nd quarter of 2010 and have now miraculously plummeted to pre-collapse levels of 4.9%. This is while residential loan delinquencies have resumed their upward trajectory, the number of employed Americans has fallen by 414,000 in the last two months, 9 million Americans have left the labor force since 2008, and vacancy rates are at or near all-time highs. This doesn’t pass the smell test. The Federal Reserve, owned and controlled by the Wall Street, instructed these banks to extend all commercial real estate loans, pretend they will be paid, and value them on their books at 100% of the original loan amount. Real estate developers pretend they are collecting rent from non-existent tenants, Wall Street banks pretend they are being paid by the developers, and their highly compensated public accounting firm pretends the loans aren’t really delinquent. Again, the purpose of this scam is to shield the Wall Street bankers from accepting the losses from their reckless behavior. Ben rewards them with risk free income on their deposits, propped up by mark to fantasy accounting, while they reward themselves with billions in bonuses for a job well done. The master plan requires an eventual real recovery that isn’t going to happen. Press releases and fake data do not change the reality on the ground.
I have two strip malls within three miles of my house that opened in 1990. When I moved to the area in 1995, they were 100% occupied and a vital part of the community. The closest center has since lost its Genuardi grocery store, Sears Hardware, Blockbuster, Donatos, Sears Optical, Hollywood Tans, hair salon, pizza pub and a local book store. It is essentially a ghost mall, with two banks, a couple chain restaurants and empty parking spaces. The other strip mall lost its grocery store anchor and sporting goods store. This has happened in an outwardly prosperous community. The reality is the apparent prosperity is a sham. The entire tottering edifice of housing, autos, and retail has been sustained by ever increasing levels of debt for the last thirty years and the American consumer has hit the wall. From 1950 through the early 1980s, when the working middle class saw their standard of living rise, personal consumption expenditures accounted for between 60% and 65% of GDP. Over the last thirty years consumption has relentlessly grown as a percentage of GDP to its current level of 71%, higher than before the 2008 collapse.
If the consumption had been driven by wage increases, then this trend would not have been a problem. But, we already know real median household income is lower than it was in 1970. The thirty years of delusion were financed with debt – peddled, hawked, marketed, and pushed by the drug dealers on Wall Street. The American people got hooked on debt and still have not kicked the habit. The decline in household debt since 2008 is solely due to the Wall Street banks writing off $800 billion of mortgage, credit card, and auto loan debt and transferring the cost to the already drowning American taxpayer.
The powers that be are desperately attempting to keep this unsustainable, dysfunctional debt choked scheme from disintegrating by doling out more subprime auto debt, subprime student loan debt, low down payment mortgages, and good old credit card debt. It won’t work. The consumer is tapped out. Last week’s horrific retail sales report for August confirmed this fact. Declining household income and rising costs for energy, food, clothing, tuition, taxes, health insurance, and the other things needed to survive in the real world, have broken the spirit of Middle America. The protracted implosion of our consumer society has only just begun. There are thousands of retail outlets to be closed, hundreds of thousands of jobs to be eliminated, thousands of malls to be demolished, and billions of loan losses to be incurred by the criminal Wall Street banks.
The Faces of Failure & Futility
My fourteen years working in key positions for big box retailer IKEA has made me particularly observant of the hubris and foolishness of the big chain stores that dominate the retail landscape. There are 1.1 million retail establishments in the United States, but the top 25 mega-store national chains account for 25% of all the retail sales in the country. The top 100 retailers operate 243,000 stores and account for approximately $1.6 trillion in sales, or 36% of all the retail sales in the country. Their misconceived strategic plans assumed 5% same store growth for eternity, economic growth of 3% per year for eternity, a rising market share, and ignorance of the possible plans of their competitors. They believed they could saturate a market without over cannibalizing their existing stores. Wal-Mart, Target, Best Buy, Home Depot and Lowes have all hit the limits of profitable expansion. Each incremental store in a market results in lower profits.
My trip to my local Lowes last weekend gave me a glimpse into a future of failure and futility. Until 2009, I had four choices of Lowes within 15 miles of my house. There was a store 8 miles east, 12 miles west, 15 miles north, and 15 miles south of my house. In an act of supreme hubris, Lowes opened a store smack in the middle of these four stores, four miles from my house. The Hatfield store opened in early 2009 and I wrote an article detailing how Lowes was about to ruin their profitability in Montgomery County. It just so happens that I meet a couple of my old real estate buddies from IKEA at a local pub every few months. In 2009 one of them had a real estate position with Lowes and we had a spirited discussion about the prospects for the Lowes Hatfield store. He assured me it would be a huge success. I insisted it would be a dud and would crush the profitability of the market by cannibalizing the other four stores. We met at that same pub a few months ago. Lowes had laid him off and he admitted to me the Hatfield store was a disaster.
I pulled into the Lowes parking lot at 11:30 am on a Saturday. Big Box retailers do 50% of their business on the weekend. The busiest time frame is from 11:00 am to 2:00 pm on Saturday. Big box retailers build enough parking spots to handle this peak period. The 120,000 square feet Hatfield Lowes has approximately 1,000 parking spaces. I pulled into the spot closest to the entrance during their supposed peak period. There were about 70 cars in the parking lot, with most probably owned by Lowes workers. It is a pleasure to shop in this store, with wide open aisles, and an employee to customer ratio of four to one. The store has 14 checkout lanes and at peak period on a Saturday, there was ONE checkout lane open, with no lines. This is a corporate profit disaster in the making, but the human tragedy far overrides the declining profits of this mega-retailer.
As you walk around this museum of tools and toilets you notice the looks on the faces of the workers. These aren’t the tattooed, face pierced freaks you find in many retail establishments these days. They are my neighbors. They are the beaten down middle class. They are the middle aged professionals who got cast aside by the mega-corporations in the name of efficiency, outsourcing, right sizing, stock buybacks, and executive stock options. The irony of this situation is lost on those who have gutted the American middle class. When you look into the eyes of these people, you see sadness, confusion and embarrassment. They know they can do more. They want to do more. They know they’ve been screwed, but they aren’t sure who to blame. They were once the very customers propelling Lowes’ growth, buying new kitchens, appliances, and power tools. Now they can’t afford a can of paint on their $10 per hour, no benefit retail careers. As depressing as this portrait appears, it is about to get worse.
This Lowes will be shut down and boarded up within the next two years. The parking lot will become a weed infested eyesore occupied by 14 year old skateboarders. One hundred and fifty already down on their luck neighbors will lose their jobs, the township will have a gaping hole in their tax revenue, and the CEO of Lowes will receive a $50 million bonus for his foresight in announcing the closing of 100 stores that he had opened five years before. This exact scenario will play out across suburbia, as our unsustainable system comes undone. Our future path will parallel the course of the labor participation rate. Just as the 9 million Americans who have “left” the labor force since 2008 did not willfully make that choice, the debt burdened American consumer will be dragged kicking and screaming into the new reality of a dramatically reduced standard of living.
Connecting the dots between my anecdotal observations of suburbia and a critical review of the true non-manipulated data bestows me with a not optimistic outlook for the coming decade. Is what I’m seeing just the view of a pessimist, or are you seeing the same thing?
A few powerful men have hijacked our economic, financial and political structure. They aren’t socialists or capitalists. They’re criminals. They created the culture of materialism, greed and debt, sustained by prodigious levels of media propaganda. Our culture has been led to believe that debt financed consumption over morality and justice is the path to success. In reality, we’ve condemned ourselves to a slow painful death spiral of debasement and despair.
“A culture that does not grasp the vital interplay between morality and power, which mistakes management techniques for wisdom, and fails to understand that the measure of a civilization is its compassion, not its speed or ability to consume, condemns itself to death.” – Chris Hedges
Half of all wage earners made less than $26,364 in 2010, and the typical American wage is at its lowest level since 1999, after adjusting for inflation.
The chart above explains the chart below.
Is this a sustainable economic model?
The numbers don’t lie. The top 10% of income earners have seen their wages increase by 33% since 2002. The bottom 90% of income earners have seen their wages barely move. Inflation is up 30% since 2002, even using the fake BLS numbers. In reality it is up at least 60%. Consumer debt is up $654 billion since 2002, a 35% increase. The bottom 90% have tried to keep up with the top 10% by going heavily into debt. This economy is a farce. The solution proposed by Bernanke and Obama is for your wages to stay flat and for you to borrow even more.
This short little piece from http://confoundedinterest.wordpress.com/ explains exactly why the average person is pissed off. Our real wages have not gone up since 1987. Twenty four years of no wage growth makes people irritable. Over this same time frame consumer debt outstanding has gone from $660 billion to $2.5 trillion. Guess who benefitted from that trend? Could it be the Wall Street banks? We’ve become debt slaves over the last quarter of a century. OWS is a result of this anger.
1987 Was Last Year When Wages Exceeded Inflation (Social Security Payroll Data) – And It’s Getting Worse!
“Anyone who wants to understand the enduring nature of Occupy Wall Street and similar protests across the country need only look at the first official data on 2010 paychecks, which the U.S. government posted on the Internet on Wednesday.
The figures from payroll taxes reported to the Social Security Administration on jobs and pay are, in a word, awful.”
David Cay Johnston, the author, does an excellent job pointing out the decline in growth in wages.
Here is his chart:
But if David Cay Johnston thinks his chart is scary, look at this one!
Rather than report the inflation-adjusted data as Mr. Johnson did using the standard inflation deflator(CPI), I chose to look at the data after correcting for inflation using the inflation index from Shadow Government Statistics that goes back to a previous definition of inflation. Hence, my numbers are more scary that Mr. Johnston’s numbers.
The last year that the Social Security Wage Index (taken from payroll numbers) exceeded the traditional (or SGS Inflation Rate) was … 1987. And it is has been getting worse since 1992.
So, when we are discussing the difficulty of how to make loan modifications successful and why the economy is slow to rebound, negative real wage growth is certainly one of the valid explanations.
Another manacle on the legs of the housing recovery.
Barack Obama and his minions were out in force on Friday declaring that the 216,000 jobs added in February are proof of a recovering economy. The unemployment rate fell to 8.8%, down from 9.8% in April 2010. All it took was 2.8 million Americans to leave the labor force to achieve this fabulous reduction in the unemployment rate. The percentage of Americans in the labor force of 64.2% is the lowest since 1983. The employment to population ratio of 58.5% is also the lowest since 1983. These atrocious figures are after a supposed economic recovery that has been underway for the last 18 months.
There are now 1.8 million more people employed than at the depths of this Greater Depression. The working age population has grown by 3.2 million people since 2009. Inexplicably, the civilian workforce has actually declined by 736,000 over this same time frame. The government drones at the BLS want us to believe these people voluntarily left the workforce. Obama apologists declare this is because Baby Boomers are leaving the workforce as they retire into the sunset. That is laughable, as all studies show Boomers have not saved enough to retire and will be forced to work into their 70′s.
The manipulation of data in order to spin the economic situation in this country in the best light possible has become so blatant that only the most ignorant could possibly believe it. The corporate mainstream media dutifully reports the propaganda, without ever critically assessing what is being distributed by the government. The percentage of the American working population in the workforce consistently ranged between 66% and 67% from 1998 through 2008. Then, suddenly in 2008, after the economy went in the tank, a couple million Americans found better things to do with their spare time and left the workforce. Anyone with an ounce of brains knows these people gave up and are really unemployed. The percentage of people in the labor force should be 66.5%. Using this 20 year average would add 5.5 million people to the civilian labor force and the unemployment rolls. This exercise in reality gives a real unemployment rate of 12%.
It is interesting that Obama and his top economic propagandist Austin Goolsbee were out in full force on Friday, taking credit for the “tremendous” job gains, but had nothing to say earlier in the week with a much more revealing government report. There is now an all-time high of 44.2 million Americans and 20.7 million households in the food stamp program. This is 14.3% of the American population and 18% of all the households.
I’d like to hear the Administration spin for the SNAP program. Since the supposed end of this economic recession in late 2009, the number of people added to the food stamp rolls has increased by 8 million. The annual cost for this program will reach $70 billion this year, up from $33 billion in 2007. If the economy is recovering and people are voluntarily leaving the workforce, why have the number of people on food stamps increased by 22% since the official start of the recovery? Why does the number of people going on food stamps go up every month? The answer is that there has been no economic recovery for the average American. Wall Street bankers and the ultra-wealthy elite are the only people who have experienced a recovery.
|SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM|
|( Data as of March 31, 2011)|
|Fiscal||PARTICIPATION||BENEFIT||AVERAGE MONTHLY BENEFIT|
|Year||Persons||Households||COSTS||Per Person||Per Household|
The true picture of the American economy is that in 2007 there were 146 million Americans employed, or 63% of the working age population. Today, there are 139.9 million Americans employed, or 58.5% of the working age population. Over this time frame, an additional 7.1 million Americans entered the working age population. In 2007 there were 26.3 million Americans on food stamps, or 8.6% of the US population. Today there are 44.2 million Americans on food stamps, or 14.3% of the US population. To call the current economic disaster a recovery is to practice the art of the Big Lie.
Real Median Household Income, which is calculated using the dodgy government CPI, has not grown in 14 years. Using a true, non-manipulated inflation figure and real median household income is no higher than it was in 1987. The mainstream media reports the headline figures like the good lapdogs they are. The BLS Establishment data going back to 1965 is a treasure trove of interesting data. The average hourly wages have declined for the last three months and are essentially flat in the last year.
Decades of Decay
The current state of disarray in the job market did not occur overnight. It took decades of bad choices, willful ignorance and delusion. By charting BLS data over the last five decades, a picture of an empire in decay appears before your very eyes. We aren’t the first empire to experience this decay and won’t be the last. It is only in retrospect that it becomes clear that all empires gravitate from producing and creating to finance, debt and lending. The hubris of great empires leads them to believe they have been chosen by God as a special nation destined for eternal wealth and success. The seventeenth century Spanish empire thought so. The Dutch and their glorious maritime empire thought so. The all-powerful British Empire thought so. Do you hear much about these empires anymore? They all sacrificed productive activities and embraced the glories of a debt based society. Kevin Phillips details these declines in his brilliant book American Theocracy :
“Understandable as this cockiness might be, history teaches a crucial distinction: nations could marshal the necessary debt-defying high wire walks and comebacks during their youth and early middle age, when their industries, exports, capitalizations, and animal spirits were vital and expansive, but they became less resilient in later years. During these periods, as their societies polarized and their arteries clogged with rentier and debt buildups, wars and financial crises stopped being manageable. Of course, clarity about this develops only in retrospect. However, even though war related debt seems to have been part of each fatal endgame, the past leading world economic powers seem to have made another error en route. They did not pay enough attention to establishing or maintaining a vital manufacturing sector, thereby keeping a better international balance and a broader internal income distribution than financialization allowed.”
The chart below paints a clear picture of decay, debt and delusion. In 1961 the population of the United States was 184 million. There were 54 million employed Americans, with 15 million of them manufacturing goods for America and the rest of the world. Today the population of the United States is 310 million. There are 11.7 million people manufacturing goods, mostly weapons for export to our favorite despots. The population has grown by 68%, while manufacturing jobs have declined by 22%. Consumer spending accounted for 62.8% of GDP in 1961. Investments totaled 14.3% of GDP and we ran a trade surplus of $4.9 billion. Today, consumer spending accounts for 71.1% of GDP. Investments total 12.5% of GDP and we are running a $500 billion trade deficit. Over the course of 50 years, we’ve devolved from a production and exporting society into a consuming and borrowing society.
|Total Goods Producing||18,647||22,179||24,264||23,723||24,649||22,233||17,755||17,939|
|Trade, Transport, Utilities||11,040||14,144||18,413||22,666||26,225||26,630||24,605||24,797|
|Professional & Business Services||3,744||5,267||7,544||10,848||16,666||17,942||16,688||17,075|
|Education & Health Serv.||3,030||4,577||7,072||10,984||15,109||18,322||19,564||19,875|
|Leisure & Hospitality||3,468||4,789||6,721||9,288||11,862||13,427||13,020||13,156|
|Total Service Producing||35,459||48,826||66,266||85,764||107,137||115,366||112,064||112,799|
A perusal of the chart shows the dramatic downturn has really occurred since 1980. Goods producing jobs have declined by 6.3 million in the last 30 years, while service jobs have grown by 46.5 million. Who would want to get their hands dirty on an assembly line when they could shuffle papers, invent CDOs, MBOs, and CDSs, create financial models to destroy the world, bribe rating agencies, file frivolous lawsuits, teach Keynesianism, or use the 60,000 page IRS code to help GE pay no taxes on their $14 billion of income. Alan Greenspan and many other “thought leaders” declared that America could succeed through its ingenuity and creative thought process. The rest of the world could handle the messy business of building things. So goes the hubris of an empire that has peaked. To get a clearer view of the conversion from a productive society to a consumption society, converting the above chart to a percentage basis is useful.
|Total Goods Producing||34.5%||31.2%||26.8%||21.7%||18.7%||16.2%||13.7%||13.7%|
|Trade, Transport, Utilities||20.4%||19.9%||20.3%||20.7%||19.9%||19.4%||19.0%||19.0%|
|Professional & Business Services||6.9%||7.4%||8.3%||9.9%||12.6%||13.0%||12.9%||13.1%|
|Education & Health Serv.||5.6%||6.4%||7.8%||10.0%||11.5%||13.3%||15.1%||15.2%|
|Leisure & Hospitality||6.4%||6.7%||7.4%||8.5%||9.0%||9.8%||10.0%||10.1%|
|Total Service Producing||65.5%||68.8%||73.2%||78.3%||81.3%||83.8%||86.3%||86.3%|
In 1961 America was a well balanced economic powerhouse. Goods production accounted for 34.5% of all jobs, with manufacturing making up 27.7% of all jobs. Goods production now accounts for a pitiful 13.7% of all jobs in the country. The slack was picked up by financial analysts, accountants, lawyers, tax specialists, and bankers. They surged from supporting roles in a production society with 11.7% of the jobs in 1961 to the dominant big dogs today, with 18.9% of the jobs. The rest of the slack was taken up by teachers, school administrators, nurses, cabana boys and waitresses as they surged from 12% in 1961 to 25.3% of all jobs today. There is one problem with this shift. We have millions more educators, but our school systems churn out millions of functionally illiterate non-critical thinking drones. We have millions more healthcare professionals and are the most obese, unhealthy nation on earth even though we spend more per person than any other country. A country that employs one quarter of their workers in jobs that do not increase the wealth of the country is a country in decline. This shift has also pushed people into lower paying jobs.
|Total Private Industry||$2.63||$3.40||$6.85||$10.20||$14.02||$17.43||$19.07||$19.30|
|Total Goods Producing||$2.63||$3.52||$7.66||$11.46||$15.27||$18.67||$20.28||$20.48|
|Trade, Transport, Utilities||$2.94||$3.65||$7.04||$9.83||$13.31||$15.78||$16.83||$16.99|
|Professional & Business Serv.||$3.28||$4.04||$7.22||$11.14||$15.52||$20.15||$22.78||$23.10|
|Education & Health Services||$2.12||$2.88||$5.93||$10.00||$13.95||$18.11||$20.12||$20.45|
|Leisure & Hospitality||$1.17||$1.82||$3.98||$6.02||$8.32||$10.41||$11.31||$11.38|
|Total Service Producing||$2.63||$3.34||$6.43||$9.72||$13.62||$17.11||$18.81||$19.05|
|Consumer Price Index||31.50||38.80||82.40||130.70||172.20||207.34||218.06||221.31|
The insidious effects of Federal Reserve generated inflation can be seen in the above chart. The BLS Establishment data going back to 1965 reveals much about the hidden impact of inflation over time. In 1965 the average hourly wage was $2.65. Back then, Americans put in a full work week, averaging 38.6 hours per week. The average American was making $101.52 per week. This was enough for a family to live comfortably on with only one spouse working. Fast forward to today and we have an average wage of $19.30 per hour and work week of 33.4 hours. This yields an average weekly pay of $644.62. It is also necessary for most households to have two working spouses to make ends meet. I added the government reported CPI at the bottom of the chart to provide some perspective on our 50 years of middle class wage compression. Applying the change in CPI since 1965 to the change in average weekly earnings provides the clearest view of what has been done to our country by the Federal Reserve and the government/corporate oligarchy. It would have taken weekly wages of $713.25 to have kept up with inflation since 1965. The average worker today is making 10% less than they did in 1965, on an inflation adjusted basis.
Wages in the service industries fell behind by even more, with the exception of bankers, doctors and teachers. The finance sector wages and the healthcare/education sector wages are 25% higher than their inflation adjusted wages in 1965. You reap what you sow. The country has decided that bankers, doctors, and teachers are relatively more important to our economy than people who make products, create wealth, and increase the productive capacity of the country. Any impartial outcome based assessment of these choices would conclude these choices have been an unmitigated failure.
The financial/ banking sector has peddled debt to the masses that didn’t realize their standard of living has been declining for 50 years, and blew up the worldwide financial system through their greed and fraudulent business practices. We spend more per child on education than any country in the world and test scores are lower than they were 40 years ago. Our children graduate high school with no critical thinking skills and the inability to decipher propaganda from truth. We spend more per person on healthcare than any other country, but obesity, diabetes, and heart disease are rampant. Administrative bureaucracy and vast amounts of rules and regulations consume billions in these sectors of our economy. The simple art of creating and producing things that other people need or want has been cast aside by a country who thought they could borrow and spend their way to long-term prosperity.
So, here we find ourselves 18 months into a “recovery” and the country has added 1.3 million jobs in the last year. We’ve added 529,000 lawyers, accountants, consultants and tax specialists. We’ve added 420,000 teachers, nurses and administrators. We’ve added 193,000 waitresses and hotel busboys. And we’ve added 238,000 Wal-Mart clerks. Our well balanced economy is back in gear. What could go wrong?
The truth is that the country remains in a 50 year death spiral of bad choices, delusion and fraud, created to benefit the few at the expense of the many. The average American wallows in a reality of low wages and high debt. Some of this reality has been self inflicted. Willful ignorance is a choice. Educating yourself to the truth is available to every American. Spending less than you make is something everyone can do. But, at the end of the day, the 1% at the top of the food chain controls the levers in this country. While the average American has fallen behind over the last 50 years, the ultra-wealthy elite have prospered. The top 1% takes home 25% of the national income and control 40% of the financial wealth in the country. Their lives have improved considerably. Twenty-five years ago, the ruling elite “earned” 12% of the national income and controlled 33% of the financial wealth. These are the people who control the message. They own the mainstream media. They run the Wall Street banks. They control the Federal Reserve. They write the laws and the tax code. They control the politicians like puppets on a string. An economic system based upon debt and Federal Reserve generated inflation benefits these chosen few, while destroying the middle class of America. We’ve chosen this path and are destined to experience the same fate as Spain, the Dutch, and Britain.
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