More Bad News From The Jobs Front

Paul Craig Roberts

The Bureau of Labor Statistics headline this morning reads: “Payroll employment increases by 248,000 in September; unemployment rate declines to 5.9%.”
How can this be? As I reported yesterday, US corporations are investing in buying back their own stocks, not in new business ventures that produce new jobs.

According to the Census Bureau’s Poverty Report, US real median family income has declined to the level of twenty years ago.

Consumer credit and real retail sales are not growing. Construction is limited to rental units. Construction shows 16,000 new jobs, half of which are “specialty trade contractors” or home remodelers.

The payroll jobs report lists 35,300 new jobs in retail trade. How is this possible when J.C. Penny’s, Macy’s, Sears, and the dollar store chains are in trouble and closing stores, and shopping centers are renting space by the day or hour?

At a time when there is a surfeit of office buildings and only 500 new jobs in “heavy and civil engineering construction,” the jobs report says 6,000 new jobs have been created in “architectural and engineering services.” What work are these architects and engineers doing?

The 4,900 computer systems jobs, if they exist, are likely short-term contracts from 6 to 18 months. Those who have the jobs are not employees but “independent contractors.”

The payroll jobs report gives an unusually high number–81,000–of “professional and business services” jobs of which 60,000 are “administrative and waste services,” primarily “temporary help services.”
“Health care and social assistance” accounts for 22,700 of the new jobs, of which 63 percent consist of “ambulatory health care services.”

“Performing arts and spectator sports” gave the economy 7,200 jobs, and 20,400 Americans found employment as waitresses and bartenders.

State governments hired 22,000 people.

Let’s overlook the contribution of the discredited “birth-death model” which overstates on average the monthly payroll jobs by at least 50,000, and let’s ignore the manipulation of seasonal adjustments. Instead, let’s assume the numbers are real. What kind of economy are we looking at?

We are looking at the workforce of a third world country with the vast bulk of the jobs in low-pay domestic service jobs. People working these part-time and independent contractor jobs cannot form a household or obtain a mortgage.

As John Titus, Dave Kranzler and I have shown, these jobs are filled by those aged 55 and over who take the low paying jobs in order to supplement meager retirement incomes. The baby boomers are the only part of the US labor force whose participation rate is rising. Of the claimed new jobs in September, 230,000 or 93 percent were jobs filled by those 55 and older. Employment of Americans of prime working age (25-54) declined by10,000 jobs in September from the August level.

As the US labor force continues its transition from first world to third world, real median family income will continue to decline. Ladders of upward mobility will continue to be dismantled, and income and wealth will continue to concentrate in the pockets of the One Percent. America is truly a country run for the few.

World Bank: Food prices at "dangerous levels"

by Christopher Leonard, Ap Agribusiness Writer – Tue Feb 15, 4:39 pm ET

ST. LOUIS – Global food prices have hit "dangerous levels" that could contribute to political instability, push millions of people into poverty and raise the cost of groceries, according to a new report from the World Bank.

The bank released a report Tuesday that said global food prices have jumped 29 percent in the past year, and are just 3 percent below the all-time peak hit in 2008. Bank President Robert Zoellick said the rising prices have hit people hardest in the developing world because they spend as much as half their income on food.

"Food prices are the key and major challenge facing many developing countries today," Zoellick said. The World Bank estimates higher prices for corn, wheat and oil have pushed 44 million people into extreme poverty since last June.

The report comes a day before Finance ministers and central bank chiefs from the Group of 20 leading economies meet in Paris. Zoellick said he's worried some countries might react to food inflation by banning exports or implementing price controls, which would just aggravate the problem.

The World Bank's food price index rose by 15 percent between October and January alone. The increase has been driven by volatile global trading in wheat, corn and soybeans. Global corn futures more than doubled since this summer, from $3.50 to $7 a bushel, in part because of higher demand from developing countries and a growing biofuels industry.

Prices are rising in part because global grain traders have gotten jittery about historically low reserve levels of corn, wheat and soybeans, said Chris Nagel, an analyst with Northstar Commodity in Minneapolis. Growing demand from customers in China and elsewhere is putting pressure on the supply of most commodities, he said.

The U.S. Department of Agriculture predicted last week U.S. corn farmers will have just 675 million bushels of corn at the end of August, before next year's harvest begins. That's just an 18-day supply, Nagel said.

The slim reserves mean traders will likely bid up crop prices further at any weather event that reduces next year's planting.

"We need to get good crops, all around the world, in all of these commodities," Nagel said. "You just don't have much foot room for error.

The global price of fats and oils rose 22 percent and wheat rose 20 percent between October and January, according to the World Bank. The prices of sugar rose by 20 percent in that time.

Industrialized nations like the United States are insulated from the price increases because raw ingredients account for just a fraction of the total food costs. But in many developing counties, prices get transmitted more drastically.

Between June and December, wheat prices climbed 54 percent in Kyrgyzstan, 45 percent in Bangladesh and 16 percent in Pakistan, for example.

Zoellick warned that higher prices could stoke political instability in countries like Egypt and Tunisia. Both countries are big wheat importers and higher grain costs could aggravate social unrest as the countries form new regimes, he said.

"That's where the international system needs to try to be aware of these issues, and try to do things at a minimum not to exacerbate food prices," he said.

America's Third World Economy

The Great Transformation
By PAUL CRAIG ROBERTS

For a number of years I reported on the monthly nonfarm payroll jobs data. The data did not support the praises economists were singing to the “New Economy.” The “New Economy” consisted, allegedly, of financial services, innovation, and high-tech services.

This economy was taking the place of the old “dirty fingernail” economy of industry and manufacturing. Education would retrain the workforce, and we would move on to a higher level of prosperity.

Time after time I reported that there was no sign of the “New Economy” jobs, but that the old economy jobs were disappearing. The only net new jobs were in lowly paid domestic services such as waitresses and bartenders, retail clerks, health care and social assistance (mainly ambulatory health care services), and, before the bubble burst, construction.

The facts, issued monthly by the US Bureau of Labor Statistics, had no impact on the ”New Economy” propaganda. Economists continued to wax eloquently about how globalism was a boon for our future.

The millions of unemployed today are blamed on the popped real estate bubble and the subprime derivative financial crisis. However, the US economy has been losing jobs for a decade. As manufacturing, information technology, software engineering, research, development, and tradable professional services have been moved offshore, the American middle class has shriveled. The ladders of upward mobility that made American an “opportunity society” have been dismantled.

The wage and salary cost savings obtained by giving Americans’ jobs to Chinese and Indians have enriched corporate CEOs, shareholders, and Wall Street at the expense of the middle class and America’s consumer economy.

The loss of middle class jobs and incomes was covered up for years by the expansion of consumer debt to substitute for the lack of income growth. Americans refinanced their homes and spent the equity, and they maxed out their credit cards.

Consumer debt expansion has run its course, and there is no possibility of continuing to drive the economy with additions to consumer debt.

Economists and policymakers continue to ignore the fact that all employment in tradable goods and services can be moved offshore (or filled by foreigners brought in on H-1b and L-1 visas). The only replacement jobs are in nontradable domestic services, that is, those jobs that require “hands-on” activity, such as ambulatory health services, barbers, cleaning services, waitresses and bartenders--jobs that describe the labor force of a third world country. Even many of these jobs are now filed with foreigners brought in on R-1 type visas from Russia, Ukraine, Thailand, Romania, and elsewhere.

The loss of American jobs and the compression of consumer income by low wages has removed consumer demand as the driving force of the economy. This is the reason expansionary monetary and fiscal policies are having no effect.

The latest jobs report issued today shows that America’s transformation into a third world economy continues. The economy lost 95,000 jobs in September, mainly due to cuts in local education and federal employment. Part of the loss of 159,000 government jobs was offset by 64,000 new private sector jobs.

Where are the new jobs? They are in nontradable lowly paid domestic services: 32,000 were in health care and social services, and 33,900 were in food services and drinking places.

There you have it. That is America’s “New Economy.”