Global Economic Crisis

The U.S. Labor Department just released its weekly number of jobless claims, and in a mocking twist of painful irony, the figures were an exact match for the previous week: 6.6. million additional jobless applications. This means that over the past three weeks, 16 million Americans have filed unemployment claims, adding another 10 percent to the unemployment rate in the United States, which now stands at just under 14%.

Never in history, not even during the Great Depression of the 1930s, has there been such a rapid rise in unemployment. The collapse of the job market in the U.S. has been replicated in virtually every advanced economy. This means that the health crisis created by policy responses to the coronavirus pandemic has now unleashed a destructive global economic crisis of unparalleled dimensions. And this is only the beginning. In the weeks ahead, the economic news will only get worse.

Such a swift collapse in employment numbers mean two simultaneous tsunamis of economic doom have been unleashed: an unprecedented rate of demand destruction, combined with an implosion in governmental revenues across the globe. The latter trend, at a time of increasingly vast deficit spending by sovereigns, will in due course unleash another wave of economic calamity; a sovereign debt crisis.

Never before in human history has a public health crisis created in its wake such economic calamity, resulting in the Global Economic Crisis of 2020.

The December 2013 jobs reported recently released by the U.S. Bureau of Labor Statistics  shows, on paper, a steep decline in the unemployment rate, to 6.7 percent, versus 7 percent for November. Yet, not even the usual happy chorus was cheering what, on the surface, was positive economic news. The BLS also showed that a mere 74,000 jobs were created in December by the U.S. economy.

Depending on various statistical measurements, the American economy must produce at least 150,000 jobs per month, and more realistically 200-250,000 just to keep even with the normal flow of new entrants into the U.S. labor market, based on natural population growth. In other words, based on the statistic of 74,000 jobs created in December, the actual unemployment rate in the United States should have increased rather than decrease. The reason why the official U.S. unemployment rate dropped to 6.7 percent is that a large number of long-term unemployed Americans have left the job market, either voluntarily, or arbitrarily based on the BLS statisticians deciding not to count them among the officially unemployed.

The official numbers can be ignored; in truth the United States continues to suffer the ravages of high unemployment-and underemployment-nearly six years after the onset of the global economic crisis.

If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:

Hillary Clinton Nude

Hillary Clinton Nude

HILLARY CLINTON NUDE

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.

WALLSTREET KILLS-A CHILLING NOVEL ABOUT WALL STREET GREED GONE MAD

To view the YouTube video overview of “Wall Street Kills,” click image below:

Despite the attempt by statisticians to bend and twist the employment numbers to create the illusion of robust job creation in the  United States, even those manipulated numbers could not conceal the bitter reality; the U.S. has effectively zero job creation, with 150,000-200,000 additional job-seekers coming into the labor market each month. Officially, the American unemployment rate rose to 9.2 percent, while more credible unofficial estimates  exceed 20 percent.

The structural mega-deficits have failed to increase employment in the United States, and now President Obama and Congress are deadlocked on the issue of raising the debt ceiling. The ugly truth is that America is effectively insolvent. It can only pay interest on its debts by accruing more debt. This cannot end well.

In a surprise and disturbing development, weekly unemployment assistance claims in the United States have reached 474,000. This is the largest weekly jobless claims report in eight months, and an increase of about ten percent over the prior week, despite predictions by economists that this week’s jobless report would actually show a drop in unemployment claims.

The current report is a major negative shift from several weeks earlier, when jobless claims dropped below 400,000. The unexpected and rapid acceleration in jobless claims is a clear indicator that the U.S. economy remains mired in deep crisis, with persistent and historically high rates of unemployment.

With the Obama stimulus expenditures running out of steam, a Republican dominated Congress unwilling to further increase deficit spending for more stimulus, and the Federal Reserve’s massive monetary intervention proving to be ineffective in facilitating job creation, all the signs are that the American economy is headed for a double-dip recession.

The latest U.S. official employment data states that fewer than 40,000 new jobs were created in November, well below the level required to cover new entries into the workforce due to natural population growth. Officially, the U.S. unemployment rate stands at 9.8%, though factoring in discouraged workers and part-time employees unable to find full-time work, the actual figure hovers near 20 percent. More alarmingly, long-term unemployment in America stands at the highest level since the Great Depression of the 1930s.

Despite the dismal employment numbers, there remains among economic commentators in the United States eternal optimists who believe there are still “green shoots” pointing to an economic recovery. Some even maintain that the actual job creation numbers for November are much higher than the official numbers, despite much more voluminous contrary evidence.

In contrast with the optimists, the Federal Reserve Chairman, Ben Bernanke, is already hinting at the need for a third round of quantitative easing, after his recent unleashing of QE2, a $600 billion orgy of money-printing by the Fed. Bernanke knows that the employment situation in the U.S. is a catastrophe, meaning there can be no consumer-led recovery of the economy, that at a time when the Obama stimulus money is running out. With a second stimulus program off the table now that the Republicans have taken control of the House of Representatives, the Federal Reserve sees itself as the only avenue for stimulus in a desperate drive to revive job creation in America. However, to think that monetary policy can be more effective than fiscal policy in facilitating job creation seems like the last great gasp of an incorrigible fool.

Contrary to the expectation of pundits and economists, May’s employment numbers released by the U.S. Labor Department are an unmitigated disaster. At first glance, though, the uninformed would think that the vast deficit funding on economic stimulus by the Obama administration was working. Supposedly, “employers” added  431,000 jobs, and the overall U3 unemployment rate dropped to 9.7%. However, the so-called “employers” consisted almost entirely of the U.S. federal government, which added  411,000 temporary census jobs in May. These jobs, which will disappear in a few weeks, are responsible for about 95% of the claimed job creation in May in the United States.

In May, according to the government’s own data, private sector job creation was statistically insignificant. I personally believe, based on past patterns, that  the U.S. government statisticians consistently over-report private sector employment in most of the initial monthly tabulations.

One other factor should be noted. The drop in unemployment from 9.9% to 9.7% was due not to vast job growth in the U.S. economy, but rather due to the fact that 322,000 unemployed workers were eliminated from the officially counted workforce. In fact, when one counts this category of so-called discourage workers, in addition to part time workers unable to find preferred full-time employment, the more inclusive U6 unemployment rate is close to 20%, or one in every five U.S. workers.

With continuing high rates of unemployment, it is clear that there will be no consumer-led economic recovery in major advanced economies. This means that massive government deficit spending is the only means of propping up national economies. However, with the global economic crisis rapidly mutating  into a virulent sovereign debt crisis, the option of public pump-priming clearly has its days numbered.

As the U.S. federal government sinks ever deeper into irreversible fiscal imbalance, a cadre of pro-deficit economists, led by Nobel laureate Paul Krugman, have been pounding the airwaves, making the case for an emergency government jobs program, funded by, no surprise, an even larger dose of deficit spending. The case presented by Krugman rests on two pillars: 1. The rate of unemployment is so severe, it risks undermining any sustained economic recovery, threatening larger deficits down the road; 2. Low interest rates mean the U.S. government can fund  additional debt cheaply, those rates in turn assured by the current state of the bond market.

I sympathize with Paul Krugman’s concern about unemployment. Clearly, TARP and the other bailout and stimulus measures were aimed at Wall Street’s recovery, not Main Street’s. But I disagree with his optimism regarding the ability of the United States economy to absorb more sovereign debt. In only nine years, America’s national debt to GDP ratio has doubled, currently standing at 80%. Furthermore, his belief that interest rates offered on U.S. government debt can be maintained at perpetually low rates is based on theology, not economic science. It is inevitable that interest rates will rise for a host of reasons, not the least being that  the U.S. will find increasing competition in the sovereign debt market from other deficit-seduced governments. Even a modest rise in bond yields will utterly devastate the capacity of the American government to service its public debts. Fiscal collapse would be the result, bringing in its wake a level of unemployment that would leave even Paul Krugman pining for the jobless rates of late 2009.

The U.S. Labor Department came out with the latest official jobless figures, showing that unemployment has now reached double digit territory: 10.2%. However, shortly after  this grim milestone was revealed, The New York Times had a front page headline that proclaimed the actual unemployment rate was 17.5%, meaning one in six American workers was either unemployed or forced to take a lower-paying part-time job due to the unavailability of a suitable fulltime position.

Since 1961, the Bureau of Labor Statistics has excluded discouraged workers from the official unemployment count, disseminated as U3. The more inclusive U6 unemployment figure, published in The New York Times, stands at 17.5%. However, there are other estimates that indicate true unemployment in the United States stands in excess of 20%.

More important than the competing unemployment figures in the change in  total labor income, equivalent to the gross number of hours worked multiplied by the mean average hourly wage. Over the past year, hours worked in the United States has declined by 7%, simultaneously with wages being frozen or reduced. In an economy dependent on the American consumer for more than 70% of GDP, these statistics do not augur well for a sustained economic recovery in the U.S., despite the official boasting of “green shoots” on the horizon.

The Department of Labor’s report on unemployment for September was just released, and it came as a dismal surprise to those proclaiming an end to the recession. Instead of a further reduction in lost jobs, the number actually increased in September.

According to the Department of Labor, a net total of 263,000 Americans jobs disappeared in September, taking the official U.S. unemployment rate to 9.8%, its highest level since 1983. In addition, the average workweek was reduced to 33 hours, the worst showing since the end of World War II. Those are the official numbers.

However, when one looks at the real  unemployment numbers, factoring in discouraged workers and the underemployed, the numbers are in excess of 17%; some estimates rank as high as above 20%. While the government can manipulate the unemployment statistics all it wants to artificially deflate the actual rate of unemployment, there is one number that cannot be played with; tax receipts. Fewer employed Americans mean less tax revenue for Washington. The U.S. federal government’s tax receipts are down by more than 20%, while spending is soaring to record levels. If this is an economic recovery, it is heavily disguised.