Radio commentary, March 7, 2009
[This is the KPFA version, which includes an analysis of the February employment report that came out the morning after the original WBAI show.]
I’ve been off the air at WBAI for three weeks, though doing shows for KPFA during that hiatus. I can now disclose to the New York audience that the economy hasn’t recovered since I was last here. In fact, it’s not even starting to find its footing. And when I say “the economy”—a phrase I sometimes recklessly use, as if getting and spending weren’t somehow embedded deeply in social life, but just some thing existing above and apart from human affairs—I don’t mean just the U.S. Most of the world economy is sinking rapidly, in many cases more rapidly than here.
But since I live in the U.S., I do pay closest attention to what goes on here, and what’s been going on here isn’t very good. Car sales are down more than 40% from a year ago to the lowest levels in modern history. That’s good news for the atmosphere, but not much else; until we make a transition to the post-carbon world, the huge portion of our economy, heavily concentrated in the midwest, that depends on making motor vehicles will be on the ropes. Housing, too, continues to sink, and gives no real sign of stabilizing.
The Institute for Supply Management‘s surveys of purchasing managers, the people who buy things for corporations, which I quote here frequently, look awful. The ISM’s manufacturing index was flat in February, but its employment component sank to an all-time low (and it’s a survey that goes back almost 60 years). Their service sector survey, which has only a twelve-year history, fell slightly for February. Cheeringly, if it’s not a meaningless blip, this survey’s employment component rose slightly, suggesting that maybe just about everyone who could be laid off already has been. Well, not really, but that’s what passes for cheer these days.
And on Thursday morning we learned that first-time claims for unemployment insurance (main page here), a very timely and sensitive indicator of the state of the job market, fell last week, though it remains at quite a high level. This thing does bounce around some from week to week, so it’s best to average the last four weeks results to get a better fix on what’s going on. That measure rose slightly from its previous reading.
Putting all this together, it looks like the economy is still declining, though the rate of decline is no longer accelerating. Add to that some signs of stabilization in the Economic Cycles Research Institute’s leading index, which is designed to forecast turns in the U.S. economy three to six months ahead, and you’ve got some straws to grasp at.
My best guess is still that the recession won’t bottom out for another six to twelve months. The economy is going to get a lift from the stimulus package, whose scores of billions will start hitting the economy in a matter of weeks. But I suspect that any stabilization won’t be followed by a quick recovery, but instead a long, grinding period of flatness that will feel to most of us like a recession. This is, without a doubt, not just an ordinary business cycle, but instead a sign of a structural shift. The old neoliberal model of deregulation and debt-fueled consumption and speculation is dead beyond revival. It’s going to take a whole new economic model to get things going again, and I hope that that model has large green and social democratic components.
bear market: not over yet?
Oh, and some bad news for those of you who care about such things. I’ve just worked up some long-term analyses of the stock market, which compares prices to their long-term trends and to underlying corporate profits. On both measures, the market was overvalued by record dimensions at the peak of the dot.com mania in 2000. It’s come well off those highs—not surprising, considering that it’s down about 50% over the last year—but it’s still 30-40% above the levels it’s been at at the troughs of earlier bear markets. And while day-to-day movements in stock prices don’t matter much for those not in the market, big long-term moves do reflect and set an economic tone. Another big leg downward would suggest that any signs of economic stabilization were mere false positives, and there’d be more bloodletting on the way. I hope not, but that’s what the history says.
employment: another dive
And now a special update, added for the KPFA and podcast audiences. Friday morning brought the release of the U.S. employment report for Febraury from the Bureau of Labor Statistics, and it was another major stinker. You have to work really hard to find a single consoling detail hidden beneath the wretched headline numbers.
The monthly report is assembled from two separate surveys, one of employers and one of households. The highlights of each.
The employer survey reports a loss of 651,000 jobs last month, the third consecutive month of losses north of 600,000. (It would be four consecutive months had November’s loss been just 3,000 higher.) Goods production led the way down, with construction off 104,000 and manufacturing, 168,000. Within construction, it wasn’t just housing – losses in nonresidential construction actually exceeded the residential kind. And within manufacturing, it was just about everything; motor vehicles, which have been taking it on the chin, were off a mere 1,000. But it wasn’t just the goods-producing sector that got hammered; private services fell by 384,000. Retail, transportation, finance, leisure and hospitality, and professional and business services all took major hits. Even health care, which has been in a tireless expansion, added just 27,000 – a weak number for its own standards. Government added just 9,000 – which isn’t surprising, given the strain on public finances.
Since the recession began in December 2007, employment is off by almost 4 1/2 million, or 3.2%. That’s not a record-breaker—though it’s now slightly ahead of the losses of the early 1980s recession, it still has some work to do to catch up to the losses of the 1948-49 and 1957-58 downturns. But these are now well within hailing distance, even if the pace of job loss slows in the coming months.
The household survey looked about as bad as the survey of employers. The share of the adult population at work fell to its lowest level since 1985, meaning that what was once celebrated as the Great American Job Machine is badly broken. And the unemployment rate rose to 8.1%, its highest level since 1983. “Hidden” unemployment also rose, with those working part-time for economic reasons up 838,000 (and almost 4 million for the year). The broadest measure of unemployment, the U-6 rate, which includes unwilling part-timers and discouraged workers, rose 0.9 point to 14.8%. That’s probably a better real world measure than the headline indicator.
And the forward-looking indicators in this report, like temp and retail employment and the length of the workweek, are all pointing towards more weakness in the coming months. Let’s hope the stimulus money, which starts hitting the economy in a few weeks, helps put the brakes on this slide. Because otherwise, we’re in deep trouble.