[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.]
Things today…
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.
November employment
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!
LBO News from Doug Henwood 
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Posted on December 18, 2009 by Doug Henwood
Radio commentary, December 10, 2009
score one for the cows
An interesting article in the New York Times earlier this week, reporting that Congress has done absolutely nothing to reform the credit-rating industry. You may recall that the credit rating industry helped give us the recent financial crisis, which, though ending, has left behind a toxic economic residue. The industry is paid by the issuers of securities to rate them. Investors then choose whether or not to buy these securities based on the ratings.
You may wonder how objective these ratings are if they’re paid for by the companies being rates. The answer is they’re not. This was frankly discussed in an IM exchange between two Standard and Poor’s analysts that was revealed during a Congressional hearing in October 2008, when it seemed like there might actually be some serious financial reforms. Analyst 1 said “that deal is ridiculous…we should not be rating it.” Analyst 2 agreed, but explained: “We rate every deal. It could be structured by cows and we would rate it.”
In fact, these deals were structured by bankers, who are probably more dangerous than cows. And now that memories of the crisis are receding, Congress has just given up on regulating the rating agencies. According to the Times article, that’s not so much because of intense lobbying—the thing that has killed or watered down most other attempts to regulate finance—but fear of interrupting the flow of credit. The U.S. economy apparently cannot survive without insanely easy credit.
Happy days are here again! Until the next time….
recovery
Meanwhile, it does look like the recession has ended and some kind of recovery is underway. I’ve just been looking at several important indicators, and their behavior is conforming to the patterns seen in earlier recovery phases. This is particularly true of first-time claims for unemployment insurance—up slightly in the latest week, but in a strong downtrend—and industrial production. Still broken, however, is bank lending to businesses for day-to-day operations; that’s contracting, which could put the kibosh on the recovery. And I still think the job market is going to be the last to get the recovery news. But the worst does seem to be over.
terrible perversions
Finally, GE chair Jeffrey Immelt gave a speech on Wednesday—at West Point, curiously the same place that our current Nobel peace laureate announced his plans to escalate the war in Afghanistan—said that his fellow CEOs had allowed “tough-mindedness, a good trait [to be] replaced by meanness and greed, both terrible traits…. Rewards became perverted. The richest people made the most mistakes with the least accountability.” He lamented the increasing inequality of American society, and in particular the dismal fate of the poorest 25% of the population. He didn’t disclose what he planned to do about it, because no corporate chief would ever endorse taxing the rich and giving the money to the rest of us, or funding a generous welfare state. Or welcoming a revival of organized labor (which would be funny, given GE’s antiunion history). That’s just not done. You can issue moral lamentations, but don’t do anything about it, because that would be un-American and, omigod, socialist.
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Posted on December 4, 2009 by Doug Henwood
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.]
Things today…
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.
November employment
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:
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!
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Posted on November 30, 2009 by Doug Henwood
Seattle, ten years ago
A memory of a rather different time than 2009: http://www.leftbusinessobserver.com/Seattle.html
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Posted on November 29, 2009 by Doug Henwood
LBO 123 on its way
LBO issue 123 has been emailed to electronic subscribers, and is on press for the dead-tree crew.
Contents: throwing money at homeowners • regulating finance: newfangled schemes • the stimulus program: how much, who’s getting it, is the debt a problem? • what comes after the Great Recession? • Iraq oil • Mishkin talks more nonsense
Tastes of each: LBO 123 contents.
This is the fifth on-time issue in five months! If you don’t subscribe, repent and offer appropriate monetary sacrifices at LBO subscription info.
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Posted on November 29, 2009 by Doug Henwood
Radio commentary, November 28, 2009
Dubai melts
Iceland, only about 80 degrees warmer? The latest sovereign financial crisis is Dubai, whose national holding company declared on Thursday that it needed to stop servicing its debts for a few months. (Wouldn’t it be nice if all of us could do that?)
Dubai is a small country, less than 1600 square miles, on the Persian Gulf. It is one of the seven members of the United Arab Emirates. Its population is only about a million and a half, three-quarters of them male, and less than a fifth are citizens. Most of the population consists of imported workers, mainly from South Asia. Although the basis of its wealth is oil, its worldwide reputation has come from Dubai World, its government-owned investment company. One of its subsidiaries attracted a lot of ugly attention back in 2006 when it tried to acquire some port operations in the U.S. Washington loves free trade and capital flows when it’s calling the shots, but if an Arab entity is involved, demogogues quickly invoke national security.
Back to the current crisis. The first thing that Dubai World isn’t going to pay is about $4 billion owed by its real estate subsidiary that’s due next week. Like many so-called sovereign wealth funds, Dubai’s went wild during the bubble, investing both in a domestic building boom and a foreign acqusition spree. Dubai’s binge was exceptional, however. It built three artificial islands off the coast of the country, and is in the midst of creating a 300-island archipelago off its shore as well. It bought, among other corporate assets, the Queen Elizabeth II (the ocean liner, not the monarch); the MGM Mirage in Las Vegas; The Union Square W Hotel in New York and the Fountainbleu Hotel in Miami; Barney’s, the high-end New York department store; a bunch of luxury golf and ski resorts; and a 20% stake in Cirque de Soleil, the Canadian circus, or performance art troupe, or whatever it is exactly.
Who’s going to take a hit on this? Mainly, it seems, European banks, though many are denying that they will. The amounts involved are far smaller than the trauma that the U.S. mortgage market inflicted on the world. But this is a reminder that the financial crisis is still with us, optimists’ longings to the contrary. Adding to the worries are concerns that Greece may have trouble servicing its government debt; its economy is a mess. I think we’re in for years of troubles.
I keep being struck by the continuing signs of economic trouble and the placidity of the political realm. In the U.S., despite an unemployment rate north of 10%—and likely to rise further before beginning a only painfully slow descent—the only disturbances are mainly coming from the teabaggy right, consumed as it is with delusions that Obama is turning the U.S. into a socialist state. If only.
Retail scene
Ah, returning to more familiar return, how’s this holiday shopping season going to be? Economic analysts always obsess over the results from Black Friday, the day after Thanksgiving, when the season traditionally begins (though I started seeing holiday promotions several weeks ago—and the Christmas lights are already up on some of the shopping streets around my neighborhood in Brooklyn). So far, retailers are looking scared, and have been very slow to do the usual November hiring. Early reports are that shoppers are out, but concentrating on necessities and bargains, with discounters in the lead, and luxury retailers only moving the cheaper stuff. What a change from a few years ago, when luxury, or at least aspirational, outlets like Tiffany were booming and Walmart was lagging. Now, Walmart is thriving as consumers trade down. Saks’s flagship store on Fifth Avenue in New York reported that people were buying deeply discounted Christmas ornaments and Godiva chocolates, but leaving the couture on the racks. It’s looking like only the deeply discounted stuff is moving.
This is all of more than immediate economic interest. Has this retail recession, the deepest in modern American history, changed the whole shopping culture in some structural way, or is it just a drawn-out cyclical affair? My guess is that something structural is going on, but you never know. At least I haven’t seen any reports of people being killed over $19 DVD players at doorbuster specials. Yet.
Employment notes
In other economic news, first-time claims for unemployment insurance, filed by those who’ve just lost their jobs, declined by 35,000 last week, and are now at their lowest level in nearly a year. And the count of those continuing to draw benefits, available only with a week’s delay, fell by 190,000 to its lowest level since March. The pace of layoffs continues to slow, but the rate of hiring has yet to increase.
Perspective on this can be obtained from a fairly obscure data series from the Bureau of Labor Statistics known as Business Employment Dynamics. The familiar monthly figures on job gains and losses are net results, the difference of a truly massive number of gross gains and losses. For example, in the first quarter of this year, we lost about 2.7 million jobs. But that loss was the result of 8.5 million jobs lost and 5.7 million gained. (That’s a little amazing: even at the nastiest spot in this recession, almost 6 million people got jobs. Of course, a lot more were losing them.) The losses were about 8% of total employment, and the gains, about 5%, a record low. But, amazingly, the loss rate is actually lower than it was in the 2001 recession. What’s really out of line is the low rate of gain. Even at the worst spot of that 2001 recession, gains were 2 percentage points higher. So the decline in claims for unemployment insurance has to be understood in this light: employers aren’t laying people off as harshly as they were early in the year. But there’s no sign that they’re about to start hiring in any quantity.
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Posted on November 15, 2009 by Doug Henwood
Radio commentary, November 14, 2009
[November 12 was the first new show I did on WBAI since the fundraising began in mid-October. Most of the opening commentary was a reprise of the previous week’s analysis of the October employment report, which the New York audience didn’t hear, though the California audience did. The following are the only fresh bits in this week’s punditry.]
Now, the usual words on the economic news. In general, we continue to see signs of stabilization, but no serious signs of a turnaround. I suppose that coming after such a deep recession, a period of feet-finding can be expected, but it’s still a long way from even an overture to anything resembling prosperity. And since there have been essentially no structural reforms of the U.S. economy, or even a serious discussion of same, I’m wondering if anything resembling prosperity is in our near future.
[October employment dissection redacted.—Ed.]
And now a few words on the stimulus. I’ll have more to say about all this in a few weeks, since I’m reserving the details for an article for my newsletter, Left Business Observer, and subscribers will get first dibs on it, but I’ll just say a couple of quick things for now. (All the stats are here.) One is that spending so far is quite small—about 1% of GDP has been actually disbursed and received. By contrast, the WPA during the 1930s spent about twice that much—and built thousands of schools, rebuilt thousands of hospitals, repaved 280,000 miles of road, etc. No one is even talking about anything like that now. And two, the spending by state is kind of amazing. Toward the top of the list, measured against total income in the state, are small places like Alaska, North Dakota, Montana, and South Dakota. Toward the bottom, a lot of big ones: New York, New Jersey, and Connecticut among them. California just missed making the bottom 10. Fascinating how Washington redistributes money away from states that are more liberal towards those that are most conservative—and most likely to rail against Washington. Can we just cut them off?
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Posted on November 15, 2009 by Doug Henwood
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.
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Posted on November 3, 2009 by Doug Henwood
Tomorrow’s election analysis tonight
A year after being pronounced dead, the Republicans are resurgent! Liberals will say that this proves that Obama must move to the left, but Obama will tack to the right. The rightward tilt will prompt a spate of anguished blog posts and Nation editorials wondering why Obama is doing it.
You read it here first.
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Posted on October 24, 2009 by Doug Henwood
Fresh postings to LBO site
Just posted to the Left Business Observer website:
Adolph Reed, The limits of antiracism
and
samples from #122, just out: LBO current issue contents.
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Posted on October 23, 2009 by Doug Henwood
LBO #122 out
The new timeliness continues! LBO #122 has just been emailed to subscribers, and is off to the printer to accommodate the dead-tree brigade.
Contents: pity suffering Wall Street! • a memoir of the Florida real estate boom and bust (a state where felons can’t vote, but could sell mortgages!) • 2008: a year of less money and more poverty • more job carnage as lunatics demand exit strategy • declining employment share • why the Senate sucks (it’s no accident)
If you don’t subscribe yet, what are you waiting for? Click here here and your first copy will be on its way very soon.
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Posted on October 9, 2009 by Doug Henwood
Radio commentary, October 9, 2009
Job market somewhat less miserable
In U.S. economic news, the slow improvement of the U.S. labor market continues, emphasis on “slow,” of course, and the baseline of general awfulness on which this improvement is founded. First-time applications for unemployment insurance fell by 33,000 last week to the lowest level since last November, just as the economy was beginning its fall from a cliff. The four-week moving average of initial claims, which is a better way of looking at these volatile figures, fell by 9,000, to its lowest level since last December. The fly in this particular jar of ointment is that over a half million Americans a week are still visiting the unemployment insurance office to sign up for benefits. While that’s down more than a hundred thousand a week from its peak last April, it’s still quite elevated—nearly twice as high as what we’d see in a strong labor market. And the count of those continuing to draw benefits is edging down, but more slowly, and it remains higher than the first-time series when they’re compared to their historical averages.
That suggests to me that, as I’ve been saying for a while, the pace of job loss is slowing, but the rate of hiring isn’t really picking up. And it’s not likely to any time soon. There’s an old rule of thumb in economics, called Okun’s Law (named after the Kennedy-era economist Arthur Okun), that says that you need about two points of GDP growth above a certain baseline level to get the unemployment rate down by a point. That baseline level is thought to be around 2.5%—so to get the unemployment rate down by a point over the next year, we’d need growth of 4.5%. That’s quite strong by historical standards—and we averaged just 2.7% during the 2001-2007 expansion, the weakest in modern history. Even in what was thought to be the boom of the 1990s we averaged just 3.6%. Since growth is typically quite weak for a long time after a major financial crisis, it’d be a stretch to expect anything like 4.5% growth in the next year or two. Even if we can get it up to 3.5%, it’d take a year or more to get the unemployment rate down to 9%. So we’re likely to see a persistently high level of joblessness even after the U.S. economy starts growing again.
Constricted credit
One drag on growth is the constriction of credit. Despite trillions in government aid to the banks, they’re not lending—but then again a lot of people aren’t borrowing. We do have a long-term issue to worry about here: there’s too much debt throughout the economy, and we’ve become way too dependent on fresh extensions of credit to finance growth. With employment weak and wage growth in the doldrums, borrowing is about the only thing that can give consumer spending a kick, but neither borrowers nor lenders seem thrilled at that prospect. On Thursday, the Federal Reserve reported that consumer credit contractd at a 6% annual rate in August, the seventh consecutive month of negative numbers. There are few precedents for this in modern history, but it’s likely we’re going to see more of it as we all adjust to less borrowing. For an economy that’s been dependent on debt-supported consumption, and for a political system that’s dependent on high levels of consumption for legitimation, it’s going to be a challenge to make the transition.
Dollar drama
Another challenge: a spreading panic in the financial markets about the U.S. dollar. The price of gold broke $1,000 recently, and has been setting new highs—a sign that investors are distrusting paper assets, especially the kind with pictures of dead presidents on them. This has several implications. One, the U.S. economy remains highly dependent on borrowing abroad. During the bubble years, the borrowing was for consumption and housing; now, it’s so the federal government can bail us out of the consequences of that bubble. It may well get harder and more expensive to do all that borrowing. And, two, if the aversion to the dollar gets strong enough, the greenback may lose its status as the world’s dominant currency, which would make it even harder and more expensive for us to borrow, and would probably make imported goods like oil more expensive. Countervailing that negative effect would be a positive one: U.S. exports would be rendered cheaper, and therefore more competitive, in international markets. But, in general, countries with depreciating currencies are in a state of long-term relative decline; devaluing your way to competitiveness can be the weakling’s strategy.
So far, though, worry about the international role of the dollar is affecting only the far right, which is using it as yet another stick to bash Obama (as if Republican administrations had nothing to do with getting us so deep into debt). The coastal elites seem less concerned. As Ken Rogoff, the IMF’s former chief economist who’s back teaching at Harvard, told the Financial Times, “The financial crisis probably has brought forward the day when the dollar is no longer dominant—but maybe from 75 years to 40 years.”
Whistling past the graveyard, is he? Or a voice of calm amidst anxious markets and excited political extremes? Answer next week.
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Posted on October 9, 2009 by Doug Henwood
Me on the CBC
I’m going to be on the CBC’s The Current this morning, discussing the 20th anniversary of Oliver Stone’s Wall Street. Starts at 8:30. Also on Sirius channel 137.
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Posted on October 2, 2009 by Doug Henwood
Radio commentary, October 3, 2009
[No, not time travel—this is the version that will be delivered on the KPFA version of the show on Saturday morning. Much of it was on Thursday’s WBAI show, except for the bit about the September employment report, which was added for the KPFA and podcast audiences. Oh, and Chicago didn’t get the Olympics, but the analysis of the politics behind Obama’s huckstering is still relevant.]
Breaking news from the change we can believe in front! The Obama administration is opposing Congressional legislation to protect reporters from being jailed for refusing to reveal who disclosed confidential information to them. For national security reasons, of course. As Charlie Savage put it in a story in the New York Times the other day, “The bill includes safeguards that would require prosecutors to exhaust other methods for finding the source of the information before subpoenaing a reporter, and would balance investigators’ interests with ‘the public interest in gathering news and maintaining the free flow of information.’” Obama doesn’t like this. And he’d like judges to be told to be “deferential” to the executive branch when it screams “national security” in such cases.
And, as the inaptly named Jason Ditz reported on Antiwar.com a couple of weeks ago, the administration is seeking the extension of several major provisions of the Patriot Act, including one that would allow the gov to subpoena library and bookstore records, and others that make it easier to wiretap on the executive branch’s whim.
Oh, and given Congressional Democrats’ opposition to sending more troops to Afghanistan, in the pursuit of god knows what, the admin is going to turn to the Republicans for backing. On issues of imperial war and the national security state, Obama 1 is looking more and more like Bush 3.
Olympic-quality payback
Speaking of Obama, his little junket to Copenhagen to plead Chicago’s case before the International Olympic Committee is rather strange. [Alas, it didn’t work.—Ed.] My first thought was that this is an odd mission for a president to undertake, especially one with a collapsed economy to revive, a disastrous health plan to promote, and a failed war to escalate. My second thought, on listening to Obama flack Keith Olbermann tout the economic development aspects of hosting the Olympics, was to be deeply suspicious. As I recall the history of the Olympics—a topic I covered when I was first doing this radio show, at the time of the 1996 Atlanta games—they’re typically a pretext for urban renewal, which is the polite way of saying displacing poor people in the interest of gentrification. So I concluded it was time to do a little research.
Thankfully, the Chicago Reader, especially in the person of their contributor Ben Joravsky, has done a lot of work on the issue, all of it conveniently available on their website. In a nutshell, the Chicago bid is a project of Mayor Richard Daley and the city’s real estate and business elite. (Polls show that city residents are about equally divided on whether the Olympics will be good for Chicago or not.) The roster of contributors to Chicago 2016, the group of local worthies leading the campaign, is a Who’s Who of Chicagoland’s corporate elite. Winning the games would greatly satisfy their lust for prestige—and money, of course. But the major recipients of that money would probably be the real estate interests who’d see buildings erected with public subsidy and neighborhoods cleared of troublesome poor people.
What about other economic benefits? There probably are some, mostly short-term ones—jobs for construction workers, parking lot attendants, and hot-dog vendors. But the evidence is that there’s little or no long-term payoff from hosting the Olympic Games. Even the accommodations industry might not gain all that much; the Reader’s Deanna Isaacs reports that European studies show that while there’s a boost to tourism from the games themselves, the number of visitors before and after the games often declines, resulting in a wash.
So what’s in it for Obama? Well, a lot of his friends are in on the game. His advisor and close friend Valerie Jarrett was on the board of Chicago 2016, and two current members were money people in his campaign. Many of the business cheerleaders for the effort were crucial early supporters. In other words, the trip is payback. So this is why the chief executive of the world bourgeoisie, as the folks at Workers Vanguard call the occupant of the Oval Office, is comporting himself like a big city mayor.
September employment: more bleeding
And now a special breaking news update prepared especially for the KPFA and podcast audiences. Friday morning brought the release of the September U.S. employment report, and it was pretty bad. About the only good thing you can say about it is that it wasn’t as bad as the ones we were getting early in the year. And that’s about it for good things.
As I always point out when reviewing these things, the monthly employment numbers are based on two surveys, one of about 300,000 employers, and the other of about 60,000 households. The first, known as the establishment or payroll survey, is the most reliable source of information on employment levels, along with wages and the length of the workweek; the second is the source of the familiar unemployment numbers.
The payroll survey reported the loss of 263,000 jobs in September. That’s a half to a third as much as we saw in the first part of this year, but it’s still an awful number. There was an unusually large loss of 53,000 government jobs, mainly at the local level. Some of this may be technical factors, like back to school oddities, but it’s also likely that fiscal troubles are really beginning to bite. The private sector lost 210,000 jobs, with hardly any major sectors showing even tiny gains. Hardest hit were construction and manufacturing, but retail also was down hard. Even the indefatigable health care sector added far less than usual.
September was the 21st consecutive month of job loss, the longest streak since monthly figures begin in 1939. Since the recession began, we’ve lost more than 7 million jobs. In percentage terms, this is easily the harshest recession since the post-World War II demobilization. Thanks to the recession’s severity and the weakness of the 2002-7 expansion, private employment is now well below where it was at its December 2000 peak. We’ve never seen anything remotely like that kind of long-term carnage in 70 years of monthly stats.
And that’s not all. The monthly surveys do a heroic job of trying to capture a complex and rapidly changing job market; I have no patience for anyone who says that government statistiicans are hacks or liars. But they have a hard time dealing with turning points. They have to make assumptions about business creation and destruction—and most of the time these assumptions are well-grounded. But when a recession is beginning, or a recovery is taking off, reality gets ahead of their assumptions. That’s why the numbers are benchmarked every year by comparing the monthly estimates with the rigorous, near-100% coverage of the employment universe provided by the unemployment insurance system. Most of the time, these so-called benchmark revisions are small, a few tenths of a percent. But not this time. Every October, the Bureau of Labor Statistics announces the likely size of the revision to be applied to the data for the previous March. This is only an estimate; the official, detailed revisions will come in February. And the numbers for this year are very big: -824,000. That is, 824,000 fewer people were employed in March than we thought. Since over 2 million jobs were lost in the first part of the year by the previous reckoning, that makes the bloodletting even more savage—now close to 3 million, in just a few months.
Wage growth was very weak, and the workweek also fell to a record low. The job market is very sick.
And the household survey was, if anything, worse than its establishment counterpart. The unemployment rate rose again to 9.8%; it’s likely to break 10% in a month or two. And the share of the adult population working, the employment/population ratio, fell hard, to its lowest level since 1983. This is a stunning reversal of history; the capitalist norm has been to bring more and more people into paid work. Today’s U.S. economy has thrown that into reverse.
But this is entirely consistent with how economies behave after severe financial crises. Several times I’ve mentioned the IMF’s studies of financial crises around the world. While the IMF has a lot to answer for, given its long history of torturing the world’s poor, their staff economists often do good research work, especially when they’re covering the rich countries. The latest instance of that is the October edition of their biannual World Economic Outlook, which extends the examination of post-crisis slumps they did in the April edition. The broad story is the same: the recessions that follow banking crises are savage and persistent.
A couple of things that stand out in their latest iteration of this research. One, the income losses after a financial crisis are on the order of 10%. These are permanent, and not recovered in the subsequent recovery. That is, the standard textbook pattern of a V-shaped recession—a sharp fall followed by a strong bounceback—doesn’t operate in such crises. And two, the job losses are also of a deep and sort of permanent sort. That is, the total number of jobs in the U.S. economy is likely to stay several million below what we otherwise would have seen had there been no crisis for many years to come. Again, no V-shaped recovery—more of an L, or the mirror image of a J. In other words, this recovery is going to resemble what happens in an intensive-care unit more than what happens in the Econ 101 textbooks.
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Posted on September 25, 2009 by Doug Henwood
LBO #121 out!
I’ve been reticent about promoting LBO, the newsletter, on LBO News, the “blog,” but why should I?
Anyway, emailed to electronic subscribers and on press for the crushed-tree kind, #121, the third issue in three months, includes:
For a taste, see LBO 121 contents.
I suspect many readers of this site already subscribe to the newsletter, for which many thank you’s. But I suspect a few of you might not, which is tragic, and an occasion for serious soul-searching. And then an invigorating visit to LBO subscription info.
Not only is LBO more needed than ever, it’s even coming out on time!
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Posted on September 23, 2009 by Doug Henwood
Ralph Nader & the plutocrats
I’ve long been struck by Ralph Nader’s imperious view of politics—his preference for progressive change via litigation, not legislation, and a career (during which he accomplished many very good things, don’t get me wrong) capped by a few celebrity presidential campaigns in which he never made any effort to build a movement out of the crowds and publicity they generated. So now he’s out with a “novel” that apparently argues that a small posse of enlightened plutocrats will save us. Citizens’ groups aren’t up to the task, Ralph tells Amy Goodman. Only enlightened businesspeople, working from inside (with the assistance of a perky parrot), can:
So the problem isn’t private ownership and a competitive system driven by profit maximization—it’s simply scale (small good, big bad) and temperament (replace the evil bizpeople with the good ones). He seems to have no idea that competition and profit maximization make people, who may be perfectly warm and lovely in their private lives, do monstrous things. I once heard a very similar line from Ben “Ben & Jerry’s” Cohen, who couldn’t understand how CEOs could both go to church and be nice to their families and then go to work and exploit and pollute.
Of course, as Liza Featherstone pointed out long ago, when faced with a union organizing campaign in crunchy Vermont, B&J fought it as roughly as any thuggish Southern mill owner would. “It’s business, man!,” as Liza’s title explained. Oh, and Ralph did pretty much the same thing when faced with organizing campaigns in a couple of his own shops, Multinational Monitor and Public Citizen. He fired the troublemaking editor of MM, Tim Shorrock, and spread nasty rumors about him, which led Shorrock to this conclusion about Nader:
And now he’s fully out of the closet as an admirer of the nice sort of plutocrat.
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