Global Economic Crisis

Sheldon Filger-blogger for GlobalEconomicCrisis.com

The Labor Department released its jobs reports for December 2020. It is dismal yet not surprising. In the past month the U.S. shed 140,00 jobs. This is the first monthly contraction  in  employment numbers  since April 2020, and the destruction of millions of jobs in the early stages of the Covid-19  pandemic. Though vaccines are slowly being distributed in the United States, having been developed in record time, the nation is currently experiencing the most severe spread of coronavirus, with states responding with further lockdowns and restrictions on economic activity. This portends to further job losses as the Biden administration takes over the White House in a matter of days.

It is not only the Covid-19 contagion that is damaging  the American economy. The risk assessment consultancy Eurasia Group lists political division in the United States as the number one global risk, ahead of the Covid pandemic. As if on cue, 48 hours after the release of Eurasia Group’s, report  on top global risks, riots erupted within  the Capitol building in Washington DC.  The growing political stratification within American society, combined with the continuing damaging impact of Covid on economic  activity, points to a very negative economic outlook for the United States and inevitably for the entire global economy.

A milestone of misery has just been reached in the United States. The Covid-19 pandemic has now claimed more than 100,000 lives in the U.S., and the country’s Labor Department has issued a weekly jobs report showing another 2.1 million Americans have filed jobless claims. This means that in the last 10 weeks, more than 40 million American workers have lost their jobs.

In addition to the above grim statistics, the U.S. Q1 economic report has been revised, showing a higher level of economic contraction of negative 5%. However, this is a mere harbinger of what is to come. The Q2 economic report is forecast by several experts to reveal a contraction of between 20 and 40 percent.

The bad economic news in America is being replicated globally. Virtually every major economy has witnessed an economic shutdown based  on combating the coronavirus. The result has been economic suicide in numerous countries. We are clearly already in a severe recession, far worse than the Global Financial Crisis of 2007-09. Increasingly, we are entering a global economic depression, the Global  Economic Crisis of the 2020s.

The U.S. Labor Department released its worst weekly jobs report, demonstrating that the Covid-19 pandemic has unleashed a full-fledged global economic crisis more severe than the financial crisis of 2007-09, and increasingly likely to exceed the Great Depression of the 1930s in its impact.

Since the Labor Department began issuing its weekly jobless claims report in 1967, the previous record for unemployment filings was 695,000 in 1982. The expectation was that the report released today would be very bad, most estimates being in the range of one million. The actual number: 3.3 million. This is worse than devastating; it is a clear sign that we are beyond a severe global recession, and are almost certainly heading into a global economic depression.

As this is only the initial phase of the impact of the coronavirus induced unemployment, the figures just released by the Labor Department suggests the unemployment rate will likely exceed 20 %, possibly even 30 percent. It is not just the U.S. shedding jobs at an unprecedented rate; the entire global economy is being struck by a tsunami of jobs destruction. This economic catastrophe will inevitably lead to a level of severe social and political strife not experienced globally since the 1930s.

The U.S. Labor  Department has issued its employment data for May, and it is an unmitigated disaster. A mere 38,000 new jobs — many of them part-time — were created, while the supposedly stellar jobs numbers for previous months were revised downwards.  This is an appallingly bad employment report, yet the same Labor Department claims that the unemployment rate in the United States actually declined to  4.7 percent

It should be recalled that to keep pace with population growth, the American economy must add at least a quarter of a million new jobs each month.  If the result of a dismal 38,000 jobs in May is a supposed decline in the unemployment rate in the U.S., the only explanation is that many discouraged job seekers have supposedly “left” the work force, meaning that they are no longer considered by the Labor Department to be unemployed.

The jobs report for May, a disaster by any definition, explains the official and unofficial realities of the U.S. economy in 2016. The Obama administration maintains that the employment situation in the country is excellent; the data , devoid of spin, displays the exact opposite.

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The latest report from the U.S. Bureau of Labor Statistic indicates that only 80,000 jobs were created in the United States in June. One must take into account that the BLS figures are abstractions and not exact, and usually reveal only the most optimistic spin of the employment data. The BLS also reports that the American unemployment rate remains unchanged at 8.2 percent.

Since the U.S., with a population in excess of 300 million, must create between 150,000 and 200,000 jobs a month just to keep even with population growth, the only reason a tepid jobs creation number of 80,000 would also reveal no increase in the unemployment rate is that many Americans formerly classified as unemployed were reported by the BLS as having “left” the workforce in June, so they are no longer counted as unemployed. Such mathematical gymnastics may produce a slightly better spin on the unemployment picture in the United States, but they obviously do not resolve America’s profound economic problems.

It must be pointed out that even the exceedingly poor job creation figures of the past several months have been purchased at a very high opportunity cost. Since the global economic and financial crisis of 2008, the U.S. has been running annual structural mega-deficits of more than a trillion dollars annually. In fiscal year 2012, the U.S. federal budget projects expenditures of $3.8 trillion dollars and revenue of only $2.5 trillion. That means one third of U.S. federal government expenditures are derived from borrowed money. If such a massive fling of red ink can produce, at best, economic stall speed, one shudders to think what will befall the world’s largest economy once the spigot of cheap borrowed money is shut off by creditors who have lost their patience with America’s hopelessly gridlocked political system.

What went wrong with the Obama administration’s stimulus program? In the decades to come, scholars will wax eloquent in their analyses and academic explanations. However, one need only look to the last great American recession, the Great Depression of the 1930s, to note a major difference. The priority of the Obama administration was saving Wall Street, meaning the banks, including investment banks, at all costs, viewing the financial sector as the center of gravity of the American economy. In the case of the administration of Franklin Roosevelt in the 1930s, its policies, known as the New Deal, focused on the industrial sector and job creation as the nation’s economic center, and viewed the financial sector in a punitive manner, requiring investigation and strict regulation and reform. Arguments over the effectiveness of the New Deal continue to this day, however one fact cannot be denied. On the day that Franklin Roosevelt died in office, America was unquestionably the leading industrial and manufacturing nation on earth, and the role of financialization was below 2 percent of GDP. How different things are today.

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