Radio commentary, November 6, 2009
[WBAI spent most of October and the beginning of November fundraising, and my show was pre-empted much of the time. I’d been doing mostly re-runs for the KPFA version. The November 6 show was a re-run—or an “encore presentation” as they say in TV—but had this bit of fresh commentary prepended.]
Friday morning brought the release of the U.S. employment report for October. Once again, less bad is what passes for good these days. The headline job loss was the best—meaning smallest loss—we’ve gotten in more than a year. But below the surface, things still look pretty crummy.
Employers shed 190,000 jobs in October. Over the last three months, job losses have averaged 188,000 a month—a sharp contrast with the 691,000 average in the first three months of the year. (Readers may note that that average is lower than the October figure, even though I said that the October figure was the smallest loss in a year. The reason is that losses for the two previous months were revised downward; October’s figure is the lowest initial report since September 2008. With every fresh monthly release, the figures for the two previous months are always revised on the basis of late-arriving information.) Still, the October number is a long way from good: it’s at the 13th percentile of monthly job changes since 1948. Though losses were widespread across industrial sectors, they were concentrated in goods production. Among the sectors showing major losses were construction, manufacturing, retail, by 40,000, and leisure and hospitality. Government was flat. Health care was up, as it usually is. One encouraging feature was a substantial gain in temp employment. That’s often been a portent of broader job gains—though a lot of the old historical norms haven’t been working as they used to.
The composition of construction losses is interesting: residential accounted for less than a quarter of the loss, and nonresidenital, over three-quarters. This suggests that the commercial real estate bust is taking center stage—we’ve already got too many malls, warehouses, and office buildings, and the last thing we need is more. But heavy and civil construction also showed losses—where’s all that stimulus money going?
Hourly wages rose by a decent 0.3% for the month, but they were pulled up by outsized gains in a couple of sectors. Gains are subdued in most private service sectors—and over the longer term, wage growth has slowed considerably, even from last year’s not terribly wonderful pace.
Those figures come from a survey of employers. The companion survey of households painted a darker picture. The share of the population working fell hard for the month to its lowest level in 26 years. As I’ve been saying here for months, all the employment gains of the 1980s and 1990s have been undone by the two recessions we’ve experienced this decade—and the intervening Bush-era expansion was the weakest in modern history, barely undoing the job losses of 2001–2 in its seven tepid years. The unemployment rate rose a stiff 0.4 point to 10.2%, its highest level in 26 years (and I should say that 26 years ago was the year of recovery from the deep slump of the early 1980s). The unemployment rate is now just 0.6 point away from its post-World War II record of 10.8%, set in late 1982. The broadest measure of unemployment, the so-called U-6 rate, which adds those working part-time even though they’d like full-time work and those who’ve dropped out of the labor force because they’ve concluded the job search is hopeless (two groups of people excluded from the headline unemployment rate), rose 0.5 point to 17.5%, which is a terrible number.
Not only is the unemployment rate very high, the composition of the jobless is sad to contemplate. The average length of unemployment rose again to set another all-time record. The duration of joblessness always rises in recessions, but this one is in a league all by itself. Among the unemployed, the share of permanent job losers (as opposed to those on temporary layoff, or those just entering or re-entering the labor force) is at record high levels. And it looks like the probability of finding a job is at an all-time low in 60 years of data. As I’ve pointed out before, what distinguishes this recession from earlier ones isn’t really the rate of job loss—it’s the reluctance of employers to hire.
All in all, it looks to me like we’re well into the transition from a terrifying rate of economic decline and associated job loss to something approaching stabilization. That’s not enough to generate employment gains, however. It could be mid-2010 before we start seeing those.
While that’s bad news for most of us, it could be very bad news for Congressional Democrats in the mid-term elections next November. I noticed that a lot of partisan Dems tried to explain away their losses earlier this week. That’s a mistake. When things are going badly, voters tend to punish incumbents. That may not make sense, but that’s what they do. And the Dems, from the White House on down, aren’t doing a very good job of turning things around. While I think it’s virtually certain that their stimulus program kept the economy from going completely down the drain, it’s hard to sell less negativity as a great positive achievement.
But one group of people that are kind of enjoying this awful economy are bosses and financiers. Corporate profits have been holding up well, and the financial markets have gone from circling the drain to revelry. But their gain is tightly assoicated with everyone else’s pain. Earlier this week, we learned that productivity—the value of output per hour of labor—rose at a stunning 9.5% annualized rate in the third quarter. Output was up and employment was down. That follows a near-7% gain in the second quarter. Employers have been very aggressive in cutting on employment and working the surviving staff harder. We saw this early in the decade, and it looks like we’re seeing it again. To use the old language, which seems as fresh as a daisy to me, the capitalists are greatly increasing the rate of exploitation. The working class is scared and mounting not even a hint of a fightback. This keeps costs low and profits high—the latest version of The American Dream.
And let’s conclude on a totally different note. Over the years, there’s been a lot of talk about how the whole purpose of the U.S. invasion of Iraq was so that U.S. companies steal Iraq’s oil. Recall that back in the old days, Western oil companies used to own Middle Eastern crude reserves. Most countries in the region nationalized their oil back in the 1970s. Many people said that George Bush longed to reverse all that. Maybe that is what Bush had in mind, though we don’t really know for sure. But as with many things about Iraq, things haven’t quite worked out as hoped.
On Thursday, the Iraqi government awarded Exxon Mobil and Royal Dutch Shell the right to develop a large field in the southern part of the country. Earlier in the week, the government awarded contracts to BP, China National Petroleum, Eni (the Italian firm), and Occidental. One thing stands out on first glance: only two of the six oil companies I just listed are based in the U.S. But it gets even more interesting on second glance. These are just service contracts—the companies don’t get title to the oil, and therefore can’t add the billions of barrels involved to their own reported reserves. And the Iraqi government isn’t offering the most generous of deals. For example, the Exxon Mobil team had originally rejected the government’s offer of a $1.90 a barrel payment (which is only about 2.5% of the price of a barrel of oil). Exxon had originally asked for twice that rate, but the government held its ground. It’s quite surprising how the Iraqi government hasn’t quite acted like the puppet regime that one might have expected.