And the Recovery That Never Was Continues to Sputter Along

U.S. employers added only 96,000 jobs last month, more evidence of just how anemic the so called economic recovery has been. The news has the potential to derail the president’s bid for reelection but will most likely matter little to his most ardent followers.

Many of the jobs were in lower-paying industries such as retail, which added 6,100 jobs, and hotels, restaurants and other leisure industries, which gained 34,000. Higher-paying manufacturing jobs fell by 15,000, the most in two years.

The unemployment rate fell to 8.1 percent from 8.3 percent in July, but that’s only because more people gave up looking for jobs. People are only counted as unemployed if they are actively looking for a job.

The economy has added just 139,000 jobs a month since the start of the year, below 2011’s average of 153,000, while 41,000 fewer jobs were created in July and June than first estimated.

Hourly pay fell, manufacturers cut the most jobs in two years and the number of people in the work force dropped to its lowest level in 31 years.

The sluggish figures make the Federal Reserve more likely to unveil a new bond-buying program at its meeting next week to try to lift the economy, said John Silvia, chief economist at Wells Fargo. The goal of the bond purchases would be to lower long-term interest rates to encourage borrowing and spending.

“This weak jobs report is going to feed into their argument that the economy is growing at a sub-par pace,” Silvia said.

No president since Franklin D. Roosevelt during the Great Depression has been re-elected with a jobless rate over 8 percent.

 

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Former Secretary of Labor Robert Reich: If These Trends Continue We’re All Screwed

Former secretary of labor and current professor, Robert Reich wrote a blog for the San Francisco Chronicle entitled “College Grads Face Gloomy Prospects“. Not exactly high on optimism Mr. Reich tells like it is:

Fewer than half of the graduates from last year’s class have as yet found full-time jobs. Most are still looking.

That’s been the pattern over the last three graduating classes: It’s been taking graduates more than a year to land the first job. And those who still haven’t found a job will be competing with you, making your job search even harder.

Contrast this with the class of 2008, whose members were lucky enough to get out of here and into the job market before the Great Recession really hit. Almost three-quarters of them found jobs within the year.

A little sliver of hope?

Overall, the unemployment rate among young people (21 to 24 years old) with four-year college degrees is now 6.4 percent. With just a high school diploma, the rate is double that.

Not so Fast:

Even when you get a job, it’s likely to pay peanuts. Last year’s young college graduates lucky enough to land jobs had an average hourly wage of only $16.81, according to a new study by the Economic Policy Institute. That’s about $35,000 a year – lower than the yearly earnings of young college graduates in 2007, before the Great Recession. The typical wage of young college graduates dropped 4.6 percent between 2007 and 2011, adjusted for inflation.

Presumably, this means that when we come out of the gravitational pull of the recession, your wages will improve. But there’s a longer-term trend that should concern you. The decline in the earnings of college grads really began more than a decade ago. Young college grads with jobs are earning 5.4 percent less than they did in 2000, adjusted for inflation.

The bottom line?

If unemployment stays high for many years, if the wages of young college grads continue to fall, if the costs of college continue to rise and state and local spending per college student continues to drop, and if the college-debt burden therefore continues to explode – well, you do the math.

At some point in the not-too-distant future, these lines cross. College is no longer a good investment.

That’s a problem for you and for those who will follow you into these hallowed halls, but it’s also a problem for America as a whole.

You see, a college education isn’t just a private investment. It’s also a public good. This nation can’t be competitive globally, nor can we have a vibrant and responsible democracy, without a large number of well-educated people.

So it’s not just you who are burdened by these trends. If they continue, we’re all screwed.

Gallup: Unemployment Up to 9% Mid-February

According to Gallup’s mid-month reading of the U.S. unemployment rate, the percentage of Americans without work is up from 8.6% in January to 9.0% in mid-February. That number does not include a seasonal adjustment.

Based on the 30 days ending Feb. 15 Gallup’s mid-month reading serves as an estimate of the U.S. government’s employment report. Gallup found that unemployment decreased to 8.3% in its mid-January report, and suggested that the U.S. unemployment rate the Bureau of Labor Statistics reported for January would decline.

Gallup also finds that 10.0% of U.S. employees in mid-February were forced to settle for part time due to a lack of full-time work, the same as in January.

Underemployment, a combination of the percentage of workers who are unemployed and the percentage working part time but wanting full-time work, is 19.0% in mid-February, up from the 18.7% recorded for January.

In early March the Obama administration will report its February unemployment rate. That rate will be based on mid-month conditions. Gallup’s mid-month unemployment reading, based on data collected through the 15th of the month, normally provides a good basis on which to estimate the direction of unemployment rate for the month.

 

CBO Report: Real unemployment at 15%

President Barack Obama has been touting the recovering economy as part of his bid for reelection this November, but the non-partisan Congressional Budget Office (CBO), have released a new report that reveals a very poor outlook on the future of America’s economy.

The Department of Labor claims that the unemployment rate dropped from 8.5% in December 2011 to 8.3% in January 2012, but the CBO report states that, The official unemployment rate excludes those individuals who would like to work but have not searched for a job in the past four weeks as well as those who are working part-time but would prefer full-time work; if those people were counted among the unemployed, the unemployment rate in January 2012 would have been about 15 percent.

These numbers reflect the actual status of labor in the country that many outside of the mainstream media have been pointing to as indicators of the overall health of the economy.

The rate of unemployment, according to the White House, has been above 8% since February 2009, making the past three years under President Obama the longest stretch of high unemployment in the United States since the Great Depression.

Additionally, the CBO reports that the unemployment rate in America will stay above 8% through the election of 2012 and even until 2014.

“…the unemployment rate will remain above 8 percent until 2014. The share of unemployed people who have been looking for work for more than six months — referred to as the long-term unemployed — topped 40 percent in December 2009 and has remained above that level ever since.”

When Obama took office in 2009, the official rate was 7.8%. He promised to keep unemployment under 8%, but only three years into his administration has it finally dropped below 9%.

Historically, presidents do not get re-elected with unemployment over 7.2%.

 

The ever shrinking middle class…

Middle class incomes have been stagnant for at least a generation, while the wealthiest Americans have seen their income surge ahead at warp speed.

In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. 20 years later not much had changed, the average income was still just $33,000 in 2008, according to IRS data. During that same time the richest 1%, those making $380,000 or more,  of the country have seen their incomes grow 33%.

One of the causes for wage stagnation that experts point to is the decline of unions and other labor protections, said Bill Rodgers, a former chief economist for the Labor Department, now a professor at Rutgers University. Through deals struck by way of collective bargaining, union workers have traditionally earned 15% to 20% more than their non-union counterparts, Rodgers said.

But union membership has declined rapidly over the past 30 years. In 1983, union workers made up about 20% of the workforce. In 2010, they represented less than 12%.

“The erosion of collective bargaining is a key factor to explain why low-wage workers and middle income workers have seen their wages not stay up with inflation,” Rodgers said.

Without collective bargaining pushing up wages, especially for blue-collar workers, average incomes have remained flat.

International competition is another factor. While globalization has lifted millions out of poverty in developing nations, it has had a negative affect on middle class workers in the U.S.

Factory workers have seen many of their jobs shipped to other countries where labor is cheaper, putting more downward pressure on American wages.

“As we became more connected to China, that poses the question of whether our wages are being set in Beijing,” Rodgers said.

Finding it harder to compete with cheaper manufacturing costs abroad, the U.S. has emerged as primarily a services-producing economy. That trend has created a cultural shift in the job skills American employers are looking for. 50 years ago, there were plenty of blue collar opportunities for workers who had only high school diploma, now employers seek “soft skills” that are typically honed in college, Rodgers said.

While the average American was losing ground in the economy, the wealthiest were capitalizing on these issues.

Globalization has been a major issue for the countries labor force, but it’s also been a major win for corporations who’ve used new global channels to reduce costs and increase profits. New markets around the world have also created greater demand for their products.

“With a global economy, people who have extraordinary skills… whether they be in financial services, technology, entertainment or media, have a bigger place to play and be rewarded from,” said Alan Johnson, a Wall Street compensation consultant.

As a result, the disparity between the wages for college educated workers versus high school grads has widened significantly since the 1980s. In 1980, workers with a high school diploma earned about 71% of what college-educated workers made. In 2010, it was 55%.

Another driver of the rich has been the stock market. The S&P 500 has gained more than 1,300% since 1970, which has helped the American economy grow but the benefits have been disproportionately reaped by the wealthy.

Over the last 30 years regulation of the financial industry has been on the decline. President Regean was very much anti-regulation, but it was during the Clinton years in which barriers between commercial and investment banks, enacted during the post-Depression era, were removed. In 2000 the Commodity Futures Modernization Act also weakened the government’s oversight of complex securities, allowing financial innovations to take off, creating unprecedented amounts of wealth both for the overall economy, and for those directly involved in the financial sector. Tax cuts enacted by the Bush administration and extended by President Obama have also been a major windfall for the wealthy. Former Federal Reserve chairman Alan Greenspan brought interest rates down to new lows during the last decade and the housing market experienced explosive growth.

“We were all drinking the Kool-aid, Greenspan was tending bar, Bernanke and the academic establishment were supplying the liquor,” Deutsche Bank managing director Ajay Kapur wrote in a research report in 2009.

We all know what was the end result of these economic policies. The worst economic crash since the great depression.

The unemployment rate is still higher than 9% and the real estate market is showing few signs of rebounding, meanwhile corporate profits are at historic levels and the stock market continues to charge ahead. The wealthiest people continue to eclipse their middle-class counterparts.

“I think it’s a terrible dilemma, because what we’re obviously heading toward is some kind of class warfare,” Johnson said.

Anyone still having a hard time figuring out what Occupy Wall st. is all about?

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