Radio commentary, December 5, 2009
[Not retrieved from the future. Most of this was delivered on WBAI last night, but the bits about the employment report and liberal disillusionment were written for tomorrow morning’s KPFA version.]
Two stories on the front of Thursday’s Financial Times tell you a lot about life in today’s USA. Above the fold—a phrase that probably doesn’t mean that much to anyone under the age of 35—the lead story tells us that the Bank of America is about to pay back the $45 billion the U.S. government lent to it when it was on the verge of collapse last year. The bank finds those mild pay restrictions and government snooping too onerous and just can’t wait to slip the yoke. About two-thirds of the money will come from the bank’s healthy stream of profits, and the balance will come from the sale of new stock to the public. The price of the stock rose on the news, suggesting healthy appetites for a security that wasn’t desirable even with the intervention of the proverbial 10-foot pole as recently as March, when you could buy a share for $2.50, not much more than you’d pay for a cash withdrawal at an ATM. Now it’s trading at over six times that price. What remarkable powers of resilience.
What this means, among other things, is that the government bailout worked, in some sense. That is, throwing hundreds of billions at the financial system kept things from going totally down the drain. Still, the unemployment rate is over 10%, jobs continue to disappear, and nothing serious has been done to prevent future crises of this magnitude. The Bush–Obama scheme to restore the status quo ante has been pretty successful on its own terms.
Further proof of that can be seen in the failure of the markets to begin a fresh journey towards oblivion with last week’s news of Dubai’s debt default. I noticed that some of the more fevered corners of the Internet commentariat were convinced that this week’s trading would bring a relapse of last year’s crisis, but that hasn’t happened. I’d never say that a relapse is impossible. But it does look like we’ve moved onto a new phase of thie melodrama—financial stabilization followed by some kind of economic recovery. I still expect it to stink. But Armageddon has been postponed.
Plus ça change…. The other telling story on the front of Thursday’s FT reported on a survey by the FDIC—an entity rendered nearly bankrupt by rescuing failed banks over the last year—showing that 17 million adult Americans live without bank accounts, and another 43 million are “underbanked,” as they say, using pawn shops, payday lenders, check cashing joints, and other other shady operators to handle many of their financial transactions. The latter gang charge enormous fees and interest rates, making straight bankers—who aren’t shy about their fees and interest rates—look like pikers in comparison. The FDIC found huge racial disparities in underbankitude, with 3% of white households lacking bank accounts—but 22% of black households, seven times as many, so deprived.
So big finance thrives, while regular folks are squeezed. A serious financial reform would squeeze the financiers and force bankers to provide basic financial services at reasonable prices to everyone. But there’s nothing like serious financial reform on the horizon. In a lot of ways, Barack Obama is the best friend that Wall Street ever had. It’s one thing to coddle bankers in good times. It’s another entirely to give them a blank check to enable them to go back to making the mischief that got us in trouble in the first place.
Bubbly, busty Ben
Speaking of mischief, trouble, and first places, Fed chair Ben Bernanke’s renomination is making its way through the Senate. Some Senators, like Connecticut’s Chris Dodd, facing a tough re-election campaign in a state that is heaquarters to much of the hedge fund and insurance industries, made a show of tongue-lashing Bernanke, but I bet he ends up voting for him. Bernie Sanders is using a parliamentary technique that will require Bernanke’s confirmation to get 60, instead of the usual 51, votes to pass, but I bet he’ll get those.
Why is this guy getting reappointed? He let the bubble inflate, dismissed worries about the dangers of subprime mortgages and derivatives, said in mid-2008 that the recession was unlikely to get too serious (just as it was about to get very serious)—and then, when everything fell apart, set about writing big big big giant big checks to Wall Street. Yes, in a financial crisis, it’s essential that a central bank flood the system with money to keep things from imploding utterly. But he’s done so without any clear strategy or accountability, and absolutely no commitment to insuring that it doesn’t happen again. Truly the American ruling class is a rotting social formation.
And now an update specifically for the KPFA and podcast audiences. On Friday morning, we got the employment report for the month of November. It was something of a pleasant surprise. I’d been expecting job losses of around 150,000 and no change in the unemployment rate. What we got was a decline of 11,000 in employment and a 0.2 point decline in the unemployment rate. Of course, the report was still mildly negative, not robustly positive—but, as they say, flat is the new up.
Most of the job losses were in goods production, meaning manufacturing and construction. But the housing bust looks to be running its course, with most of the losses in construction coming from the nonresidential sector; the commercial real estate bust, part II of the whole real estate disaster, is really biting now. Private services gained 51,000, its best performance since the recession began in December 2007. Most of the rise came from increases in temp employment and in health care. Health care is almost always up, and most temp jobs aren’t the stuff of dreams, but over the long term, temp has led broader employment trends. Most other service sectors showed small losses.
The average hourly wage was up only a hair, and was unchanged in the service sector. With the job market as weak as it is, it’s no surprise that wage growth is almost nonexistent. But the average workweek rose a decent 0.2 of an hour. Since movements in the length of the workweek, like movements in temp employment, often presage broader employment trends, this too is encouraging news for the future.
Aside from the unemployment rate, the stats I’ve been quoting came from the monthly survey of about 300,000 employers. The survey of 60,000 households, done about the same time as the employer survey, showed mixed results. The household survey painted a mixed picture. As I said, the unemployment rate fell 0.2 point, its biggest decline in four years. At 10%, it’s still very high, and it’s quite likely it will rise again in the coming months, but this is one of the better bits of economic news we’ve gotten in a long time. The broadest measure of unemployment, the so-called U-6 rate, which adds to the official measure those who are working part time though they’d prefer full time work and those who’ve given up the job search as hopeless, fell 0.3 point. It’s still an astronomical 17.2%, but at least it’s heading in the right direction.
As I’ve been saying here for a long time, the savage declines in employment over the last couple of years have been driven more by an extreme reluctance on the part of employers to hire rather than very high rates of job loss. Friday’s report contained only the slightest hint that that is about to change. The probability of a person unemployed in October finding a job in November rose some over the previous month, but is still quite low—and below the levels of earlier this year, when the economy was bleeding jobs. But the rate of job loss did ebb between October and November, to the lowest level we’ve seen in a year and a half. (I should say that I borrowed the techniques for making these estimates from the economist Robert Shimer.)
Nothing in the November jobs report would lead me to change my expectation for only a weak and slow recovery in employment in the coming months. This looks more like the end of recession than the beginning of a strong recovery. Still, you take encouragement where you can find it, and there’s some to find here. Not much, but some.
What would be scary, though, is if the authorities and their associated pundits concluded from November’s employment report that, in Julian of Norwich’s words, “All shall be well, and all shall be well, and all manner of things shall be well.” (I’d always thought that that phrase originated with T.S. Eliot, but a little Googling set me straight.) Later in this show, we’ll hear from Heidi Shierholz of the Economic Policy Institute about their ambitious jobs program. We still need something like that, even if the labor market is beginning to heal. The economy is facing too many headwinds, and too many people are suffering, not to treat the current level of unemployment as a social emergency. Calls to cut spending and raise interest rates are getting louder every week. Fed chair Ben Bernanke was before the Senate just the other day urging Congress to cut Medicare and Social Security. I suspect that the upper reaches of American society are deeply interested in imposing an austerity program on most of us in order to pay the bills for the bailout and stimulus programs. It’s never too early to gear up for that fight.
And, finally, in noneconomic news, I see that the process of liberal disllusionment with Obama is well underway, somewhat earlier than I’d expected it to set in. Let me quote something I wrote for my newsletter, Left Business Observer, back in March 2008, just as Obama’s stock was really taking off:
As this newsletter has argued for years, there’s great political potential in popular disillusionment with Democrats. The phenomenon was first diagnosed by Garry Wills in Nixon Agonistes. As Wills explained it, throughout the 1950s, left-liberal intellectuals thought that the national malaise was the fault of Eisenhower, and a Democrat would cure it. Well, they got JFK and everything still pretty much sucked, which is what gave rise to the rebellions of the 1960s (and all that excess that Obama wants to junk any remnant of). You could argue that the movements of the 1990s that culminated in Seattle were a minor rerun of this [in response to the disappointments of Clintonism, that is]. The sense of malaise and alienation is probably stronger now than it was 50 years ago, and includes a lot more of the working class, whom Stanley Greenberg’s focus groups find to be really pissed off about the cost of living and the way the rich are lording it over the rest of us.
By the way, I searched the FCC’s website to see if it’s ok to use the phrase “pissed off” on the air. It is. According to a 2002 ruling, it is, because it’s a slang term for “angry with,” and doesn’t refer to an excretory function, and I’m not using it to pander or titillate. Nor is the phrase “repeated or dwelled upon.” So I’m in the clear.
Back to the analysis. In one of those historical ironies, I now see that none other than Garry Wills himself, the very writer I borrowed this notion of productive disillusionment from, wrote on the New York Review of Books website the other day that he’s had it with Obama. The escalation in Afghanstan was the final straw.
Onward to mass radicalization!