Given the other recent economic data that suggested the economy was improving and that the economy might actually be achieving self-sustained growth the November employment report was a major disappointment as the unemployment rate ticked up from 9.6% to 9.8%.
Non-farm employment was little changed as it only ticked up 39,000, less than half the average monthly gains so far this year. Moreover, private payroll employment only rose some 50,000.
Payroll employment continues to look much like it did in the last two recoveries that were also jobless recoveries. Since the emergence of the “Great Moderation” the nature of economic recoveries has changed drastically as this chart demonstrates.
The average workweek was unchanged at 34.3 hours so the index of aggregate hours worked barely changed. This index did move up sharply last month so the three month growth rate of hours worked is still 2.4%, about the same as it was last month.
Compared to the last two jobless recoveries the index of hours worked is doing relatively well this cycle.
But the gain in average hourly earnings only rose $0.01 so the increase in average hourly earnings continues to weaken. The year over year gain is only 1.6%. Moreover, with the weakness in the workweek last months strength in average weekly earnings reversed.
The impact of the weakness in weekly earnings can be seen in the following chart comparing the growth in real income excluding transfer payments and the rebound in real retail sales.
Several factor go into determining real retail sales including lagged monetary policy, inflation and consumer confidence. But after the initial bounce off the bottom that is normally driven by lower inflation, improved confidence and easier money the growth in real retail sales is highly dependent on solid growth in real incomes. The weakness in average weekly earnings calls into question the sustainability of the recent rebound in real retail sales. In November, for example auto and light trucks sales at 12.26 million were essentially from October. The data on real retail sales is only through October.
The first chart is what I show on other web sites. It is easier to look at trends over a 20 year period. If you look at the beginning and you see how unemployment went up, that is because we had inflation. This inflation started under LBJ with his “guns and butter” economics. That is printing money for the Vietnam War and the Great Society programs. As inflation came about some three years later, Nixon tried “wage and price controls” and that failed. Ford followed with “WIN buttons” and failed. Carter did not know what to do, but in his last year he got Paul Volcker in as head of the fed. In all of those years, inflation, interest rates, and unemployment went up.
Under Reagan, Paul Volcker raised interest rates to 21.5% and that broke the back of inflation and for over 20 years thereafter (as we see with the chart) inflation, interest rates, and unemployment went down. Along comes Bush and he pulls another “guns and butter” economics (Iraq, tax cuts, and Medicare). We will pay a price for the next 10 to 20 years on this.
What I have seen besides the financial crisis, is that Bush had his ideology of tax cuts (trickle down voodoo economics), spent our money in Iraq, neglected our infrastructure, and our jobs went overseas. All of this neglect and arrogance, deficits, debt, loss of jobs, factories closed, cities and states struggling, and no investment in our future will take its toll on the middle class. So the line on the charts of high unemployment will stay with us for awhile and we need to reverse the course as we are witnessing the destruction of the middle class as we lose our jobs and/or have pressure on wages.
During the last 10, 20, or 30 years we have left globalization take away our jobs. The ideology of tax cuts and laissez-faire ignored our problems and places like China is growing at 8% a year with cheap labor and other countries have benefited also.
What we need is a plan. A plan to move our country forward. And this is what you have to do.
1. Invest in your country: That is energy independence for security and jobs. Also a new air traffic control system that will save 12% on fuel. The savings to the airlines can go to build new aircraft. A high speed internet system. Perhaps high speed rail.
2. Invest in your people: That is mandatory vocational training. We live in a globalized world and you can no longer rely on factories. We have to be an educated society.
3. Invest in the future: Federal research grants to be given to universities and business to bring out new technologies. Today there are no new jobs to go to for those unemployed. You need new areas of growth. No playing games with embryonic stem cell research.
4. Fix the antitrust laws that Reagan relaxed. Monopolies and consolidations destroyed jobs.
5. Consider an “American job elimination tax” on companies that move out of the country. These companies do not pay middle class wages, healthcare, pensions, social security, or city and state taxes.
6. Get away from failed ideology. We saw it for 8 years. Tax cuts was used as an ideology. It did not prevent recessions. And did not create prosperity. You still have to solve problems. Ideology does not solve problems.
7. Supporting small business sounds nice and it is heard in Washington, but it does not work in my community as the big business left. That means you cannot have small business as people lost their jobs. Besides, small business will never pay what big business paid in wages.
8. We are losing the middle class. We cannot compete with 2 billion cheap laborers in the world that want our jobs. There are not enough jobs to go around. Competition is good, but it can be harmful also. All we are doing in this country is build the same business environment so that we can knock the other guy out. A person loses his job and has no place to go to. And the reason is that we did not invest in our country, in our people, and in the future.
9. Have commissions to cut government spending. It seems to be the only approach to doing this. Obviously, one side or the other will complain, but something has to be done now.
10. Government appointed jobs and organizations need to be slimmed down. Every 50 to 60 years we need to go through this. There are too many secretaries, deputy-secretaries, under-secretaries, and under-under-secretaries. Information gets loss through the process and government becomes ineffective. The last time this was done was with the Hoover Commission in the late 40’s.
A couple of thoughts; greenspan was on MSNBC this morning talking about “creative destruction” and how bankruptcy was good because it sends scarce savings to more productive businesses. On the one hand I wanted to throttle him and point out that whatever gains in productivity capital has achieved in working the remaining employed to early graves is more than lost by the tens of millions who are unemployed or underemployed. In other words we are a failing country not because we rescued GM from dissolution, but because we have had such [persistent declining productivity due to the drag of the un and under employed. On the other hand, I guess I think now in retrospect that that in the long run TARP was a mistake. There is no doubt in my mind that the entire world economy would have collapsed without TARP, but that would have put everyone in the same boat. Instead, we have the wealthy and the desperately poor essentially saying it is business as usual, while the great middle suffers alone with some falling into the desperately poor category and a few making it into the wealthy elite category and the essential policies since Reagan continue in full force and get a boost based on recommendations of the Cat Food Commission and the GOP takeover of the House. Everything is designed to aid the rich and make up the difference on the backs of the middle class. If the elites had been wiped out we might have been able to change direction like FDR during the 30’s. Of course it would have helped to have a president like FDR. Instead we have a milquetoast who makes Jimmy Carter look competent.
Woody, that was a mouthfull. Seems you hit most of the bases though. Of course, it does no good to just write it here, but if you can figure out how to put it out to the public as a whole, preferably at the same time, then perhaps the great sleeping giant will awaken?
OK MG, exactly what significant points did I omit.
How, exactly did these omissions mislead the reader?
Never heard of analysis have you?
Swamping the reader with a morass of details is not good reporting or analysis even though that appears to be your style.
I only provided the original data source link in the interest of saving some readers the time and effort of finding it. I didn’t complain about your post. Looked pretty good to me.
One thing you did omit is the large decline in retail sales employment. I was surprised at that.
I always follow Hispanic employment…and it’s down. And manufacturing is down quite a bit. Not goods news.
Friends and I, including a number of economists and analysts, study the original release in considerable detail. We have bets that we make at the end of each release. I’m in hole after this release. I missed on three categories of employment.
You need to settle down. If you’re going to blow a fuse everytime someone posts the original source link for the data that you are presenting, you might want to take a cold shower. I will always post the original data link for the benefit of all readers any time that you fail to do so. Dan’s blog policy is reasonably clear on identifying source data including available links. The link for your main post is available, sport.
Have a great day!
Commendable comment. But, like so many Americans, you fail to understand the role played by dollar recycling, and so, your analysis is misleading and your recommendations are not doable.
The US for example is not so much dependent on foreign oil as it the dollars that pay for that oil being lent back at very low interest rates. But it isn’t just the cheap capital that the US gains from, it is the ‘control’ of the capital, of global savings, that gives the US its “exorbitant privilege” as de Gaulle put it. It gives American investors control of ‘where’ and ‘how’ global savings are invested. The Bush tax cuts during 2 wars for example, were made possible by dollar hegemony because the foreign inflows were large enough to make government borrowing cheap while allowing tax cuts which increased the private sector’s volume of capital formation. This is the public sector aiding the private sector in the grand scheme of gaining the most possible global market-share. This is also integral to what affords the middle-class its standard of living while consuming far more than what it produces.
Then too, those dollars being spent on oil but not recycled, are the primary source of income for nations that have little else to offer, and so, ‘green-washing’ as it is increasingly being called, shifts energy producing resources from nations with little else, to a nation that has vast resources otherwise (US), at a time when global aggregate demand is already coming up well short of adequate. Naturally, the oil producing nations need to diversify, but this will take a very long time, especially considering that monies that could have been invested to create this diversification, are the very same monies that have been recycled through the US instead.
The US has simply become far too dependent on its FIRE sector. The recent controversy regarding the ‘spill-over’ effect, which of course culminated at the recent G-20 meetings, was the ROW saying that the US financial services sector has become parasitic to an intolerable degree. The point is, what is now being taken away from the middle-class, is that which they were able to gain in part at the expense of the ROW. But at the point that global AD was compromised by the self-serving policies of the US, the concept of a healthy US economy being crucial to the health of the global economy, is no longer a justifiable argument. In other words, because the past can not be changed, the future must include taking responsibility for the harm caused by poor global leadership by the US. The ROW has made a stand and the standard of living in this country has nowhere to go but down, for most of us.
Greenspan is a kook, it just took us a long time to figure this out.
In normal circumstances bankruptcy is a necessary part of economic activity.
What we don’t want is a bankruptcy festival caused by the racketeering activity on Wall Street (see 2005 – 2008).
Whether the dollar plays into oil or not, there are only so many barrels of oil produced. And as we have a slow economy, oil prices will stay low, but if our economy grows faster then there will be a pinch on the price of oil. China is becoming more middle class and uses up a lot of raw materials and oil, and that will create a higher price for oil. So in a way, we are lucky to be in a slow economy and not drive up the demand for oil.
It is true there is foreign inflows of money, but in any case, Bush did a “guns and butter” economics. And in economics it is bad policy. With LBJ it was inflation as money was printed. And with Bush it was borrowed money-deficits and debt.
I do agree that our standard of living looks dismal and it is increasingly more difficult to deal with as we keep ignoring our problems and globalization. We need a president (with a voice like Donald Trump) to say “this is what we are going to do” until then, the political parties still do not get it. There are things we can do to help save the middle class. We need to do the things I listed. We need to find ways to create jobs and have jobs that stay in our country and jobs that pay well. High speed rail may be one area, as you cannot move that product or service to another country. Unfortunately, we have to rely on technology from other countries. And as long as we keep doing nothing, we will be more dependent on other countries.
I heard Greenspan also, and it irks me (with his laissez-faire, right wing attitude) that we should let everything fail. If they want everything to fail, then replace the failings with something, but they never do. It is the little guy that gets hurt. The world is against him and even more with globalization and 2 billion cheap laboers. Take away the jobs, healthcare, SS, and medicare and there is nothing left. We had the tax cuts to the rich and it failed. Of course, the Greenspans don’t talk of that.
People like Tom Friedman who was also on this morning and a few others get it. We used to have public/private economies work together. While the democrats seem to be lost, I have more disdain for “know it all” republicans that ignore the consequences of their failed ideologies.
I don’t have a problem with the bailouts or TARP, but we have to move on from failed ideologies and invest in our country, in our people, and in the future. But again, no one in Washington is getting it.
Sleeping giant it is.
Attacking Greenspan early on got me thrown off of two blogs. And I attacked him with cold, hard facts.
I am in findamental agreement with most of what you have to say, though NONE of it can possibly happen. Still – Bravo!
I think the real picture is far more bleak than what you paint. Beckworth demonstes a real lack of recovery here.
Employment is in the sewer.
I have been getting progressively (so to speak) more pessimistic since Bush stole the election in Y2K. Now, I am in despair.
The moment Greenspan takes his last breath will be a moment of “creative destruction”. Talk about living beyond your usefulness.
Scarce savings!? WTF is he talking about? What we have is scarce investment….. which creates savings. Savings is the residue of past investment. We dont need savings to invest we get savings from investing.
The destruction he wishes for will eat up any stock of savings not redirect it. The man is delusional, he clearly does not understand how income flows generate stocks of savings which are later depleted when incomes stop flowing. If you just let all these bankruptcies happen en masse, those who are bankrupted will HAVE no savings to redirect they will liquidate their savings to maintain some sort of income flow. He has it all backwards. And this man was in charge for all those years.