COMMENTARY: The following short piece is the summary-abstract of the author’s new book, OBAMA’S ECONOMY: RECOVERY FOR THE FEW, the Table of Contents of the Book, and early endorsements by senior labor leaders in the USA. The book may be purchased at the author’s website front page, accessible from this blog’s sidebar, at discount via Paypal credit card payment. The book is also available online, and may be purchased in the USA from the distributor, Palgrave-Macmillan, and from the Publisher, Pluto Books, in the U.K for rest of world locations. It may also appear in local bookstores.

THE FOLLOWING ARE THE SHORT ABSTRACT-SUMMARY OF THE BOOK, THE BOOK TABLE OF CONTENTS, AND EARLY ENDORSEMENTS BY THREE SENIOR UNION LEADERS IN THE USA.

BOOK ABSTRACT

OBAMA’s ECONOMY: RECOVERY FOR THE FEW, by Jack Rasmus, Published by Pluto Press and Palgrave-Macmillan, April 2012, 190 pp., $24.95.

By Dr. Jack Rasmus

After a $9 trillion bailout of banks and financial institutions by the U.S. Federal Reserve, and more than $3 trillion in fiscal stimulus by Congress and the Obama administration, nearly four years after the onset of recession the U.S. economy is still mired in the weakest, and most lopsided, economic recovery since 1947. U.S. stock markets have risen more than 100%, corporate profits have exceeded 2007 levels, CEO pay and bankers’ bonuses have once again returned to pre-recession levels, the largest U.S. companies continue to hoard $2.5 trillion in cash, and banks dribble out loans to small businesses. In contrast, more than 23 million American workers remain jobless or underemployed, home foreclosures exceed 12 million, 15 million homeowners struggle with negative equity, income growth for 80% of households continues to stagnate at best, while state and local governments lay off workers and teachers by the hundreds of thousands, cut services, and raise taxes.

This book explains how the weakest and most lopsided economic recovery since 1947 has been the direct result of the failed economic policies of the Obama administration and the U.S. Federal Reserve. The book provides seven specific reasons—not just insufficient fiscal stimulus argued by liberals—that explain why recovery programs under Obama’s first term in office have failed to generate sustained economic growth. Tracing the evolution of Obama policies from his presidential election campaign in 2008 through the passage of his 2012 budget, the book explains how the US economy got where it is today and continues on a ‘stop-go’ trajectory of short, shallow relapses followed by weak and unsustained recoveries. A sequel to this writer’s previous 2010 book, Epic Recession: Prelude to Global Depression, this book, Obama’s Economy, argues and shows, based on extensive data, why the U.S. economy will once again suffer a ‘third relapse’, or a worse double dip recession, in 2013.

The book concludes by offering an ‘Alternative Program for Economic Recovery’ to the policies of the past four years, which focuses on jobs, housing, and local government immediately, and by introducing concurrent major structural economic reforms targeting the tax system, retirement system, and banking systems in the U.S. The ‘Alternative Program’ concludes with proposals for fundamental, longer term change necessary to reduce household, small business, and State-Local government debt and to restore historic rates of income growth for working and middle class households.

TABLE OF CONTENTS

OBAMA’S ECONOMY:
RECOVERY FOR THE FEW
Jack Rasmus
Copyright 2011

INTRODUCTION: A Systemic Crisis of Recovery
Subtitle: ‘The Wasted $12 Trillion’

Chapter 1: The Weakest, Most Lopsided Recovery
Subtitle: ‘Who Recovered, Who Didn’t, and Why?’

Chapter 2: From Tax Cuts to Tactical Populism
Subtitle: ‘Obama’s 2008 Campaign Promises’

Chapter 3: Obama’s Jobless-Homeless Stimulus
Subtitle: ‘The 1st Economic Recovery Program (2009)’

Chapter 4: A Record Short, Faltering Recovery
Subtitle: ‘The 1st Economic Relapse of 2010’

Chapter 5: How More Is Less of the Same
Subtitle: ‘The 2nd Economic Recovery Program (2010)’

Chapter 6: Historical Parallels and the Midterm Elections
Subtitle: ‘Obama as Franklin Roosevelt or Jimmy Carter?’

Chapter 7: Deficit Cutting on the Road to Double Dip
Subtitle: ‘Economic Recovery Policy in Reverse’

Chapter 8: Sliding Toward Global Depression?
Subtitle: ‘The 2nd Economic Relapse of 2011’

Chapter 9: From Failed Recovery to Austerity Recession
Subtitle: ‘The 3rd Economic Recovery Program (2011)’

Chapter 10: An Alternative Program for Economic Recovery
Subtitle: ‘Fundamentals of Economic Restructuring for the 21st Century’

Editorial Reviews:
Obama’s Economy: Recovery for the Few
By Jack Rasmus

Reviews

“Jack Rasmus has written in Obama’s Economy: Recovery for the Few a revealing exposé of Barack Obama’s economic policies since 2008. Explaining in detail why Obama’s programs have failed to generate an economic recovery for all but big bankers, corporations, speculations, and the 1% wealthiest households, Rasmus predicts more of the same economic stagnation, or perhaps worse, by 2013 if current economic policies continue. Rasmus concludes the book with his own detailed ‘Alternative Program for Economic Recovery.’ It is time to seriously begin public discussion and debate of economic alternatives to the past four years, which Rasmus’s book clearly has begun.”

– Nancy Wohlforth, Co-Convenor, U.S. Labor Against the War

“Obama was elected because he represented hope and the expectation of change. But as Jack Rasmus details in Obama’s Economy: Recovery for the Few, little changed for tens of millions of unemployed, homeowners, and those dependant on local government services for whom economic recovery has been anemic to non-existent the past four years. Rasmus describes in detail how Obama was the most conservative and business oriented of the Democratic candidates in 2008, and how his first term economic policies reflected that pro-business orientation.”

– Chuck Mack, Former International Vice-President, International Brotherhood of Teamsters Union

“Jack Rasmus in his new book, Obama’s Economy: Recovery for the Few, connects the dots and gives new meaning to common sense economics. While working people reel in the downward spiraling economy, Rasmus analyzes how we got where we are and makes recommendations for sustained economic growth and recovery. It’s the kind of reading that makes every leader stop and say ‘Wow! That makes perfect sense. Why didn’t I think of that?’ Then ask yourself, ‘Why wouldn’t our President think of that?’ When you’ve read the book I’m confident that you will conclude that Rasmus has done a brilliant job of defining the impact of the Obama policies and decisions to this continued economic crisis.”

– Donna DeWitt, President, South Carolina AFL-CIO

COMMENTARY:  FOR TWO CONSECUTIVE YEARS DURING THE WINTER OF 2010-11 AND 2011-12 THIS WRITER HAS BEEN FOREWARNING THAT JOBS DATA REPORTED FROM NOVEMBER TO MARCH IS POSSIBLY DISTORTED BY LABOR DEPARTMENT STATISTICAL ADJUSTMENT.  THAT SAME SCENARIO–OF WINTER JOBS GROWTH OVER-ESTIMATION FOLLOWED BY SPRING-SUMMER JOBS CREATION RELAPSE–APPEARS TO BE EMERGING ONCE AGAIN. THE FOLLOWING ARTICLE, TO APPEAR SHORTLY ON PUBLIC BLOGS, EXPLAINS WHY THIS PATTERN HAS BEEN, AND CONTINUES TO BE, OCCURRING.

For the third time in as many years, jobs growth over this past winter 2012 once again shows signs of a major ‘relapse’ this spring and summer.  The Labor Department’s employment numbers released April 6, 2012 indicate a mere 120,000 new jobs were created in March, a number not even sufficient to absorb new entrants into the labor force for the month. This follows reports of more than 200,000 jobs created monthly since last December 2011.

If this latest, third major reversal in jobs creation were a one time occurrence, it could be attributed perhaps to real economic conditions simply shifting. But three years in a row every spring? That repetition means there is likely something more fundamental at work.

A year ago, during winter-spring 2010-11, this writer forewarned that the jobs recovery that was being reported during the winter 2010-11 would not be sustainable, and that job creation would collapse in the summer of 2011. And it did. (see this writer’s published articles: ‘The Truth Behind the December (2010) Jobless Numbers’, ‘Behind the February (2010) Jobs Numbers’, ‘March Jobs Numbers—A Contrarian View’, ‘Why March (2011) Jobs Gains Will Collapse This Summer’, and ‘The Predicted Job Collapse Now in Progress’, all of which are available on this writer’s blog, jackrasmus.com).

More recently over this most recent winter 2011-12, this writer once again warned that the real, raw jobs data reported by the Labor Department was showing a massive mismatch compared to the ‘statistically adjusted’ jobs data reported by the Department.  While it is reasonable to expect some degree of divergence between the raw, ‘statistically unadjusted’ jobs data vs. the ‘statistically adjusted’ data—the latter of which are smoothed out based on assumptions of seasonality, new businesses formed, and other manipulations of the raw, actual jobs data—nevertheless the mismatch between the actual jobs numbers and the statistically adjusted numbers this past winter revealed a massive, extraordinary gap between the two.  (see this writer’s more recent published pieces, ‘Those Peculiar January (2012) Jobs Numbers’ and ‘The US Jobs Crisis—The Bigger Picture’, also available at jackrasmus.com).

For example, this past winter, the ‘gap’ between the decline in raw, actual (statistically unadjusted) jobs and the statistically adjusted jobs numbers between November-December 2011 showed a ‘net swing’, or difference between adjusted and unadjusted, of about 430,000 jobs.  That was not unreasonable. But over the period December 2011-January 2012, the U.S. labor department reported a statistically adjusted gain of 243,000 jobs in January 2012, whereas the raw actual jobs numbers showed an actual decline of –2.7 million jobs.  That ‘net swing’ of nearly 3 million jobs, more than seven times greater than of the preceding November-December period, is unprecedented. That kind of massive gap between declining actual job creation and statistically adjusted, reported job increases requires an explanation. However, the media seemed simply to accept the 243,000 jobs created in January without question.

A corroborating further example is what also happened to the U-6 unemployment rate over this past winter 2011-12: The November to December 2011 U-6 jobless rate showed a ‘gap’ between raw data and adjusted data of only 112,000 jobs. That was reasonable. But the December-January the gap ballooned to a ‘gap’ or net swing of more than a million jobs difference between the actual vs. statistically adjusted jobless numbers. That’s a tenfold difference.

Something is going on, in other words, with the statistical adjustment methodology employed by the labor department to estimate jobs in the winter months and the first quarter of each year. The jobs creation numbers reported by the labor department between each winter the past three years are simply grossly overstated.  That overstated thereafter appears to end come late spring-summer and the jobs numbers, even the statistically adjusted numbers, in turn collapse. This has happened now three years in a row. That means the gains of the past winter will likely again, for a third, time fade during the summer and third quarter of this year.

In this writer’s earlier articles, 2010-11, identifying this trend, it was suggested that at least two of the labor department’s statistical operations—the winter seasonality adjustments and the department’s additional, and grossly inaccurate, assumptions and methodology for estimating ‘new business formation’ (that raise the estimate of jobs created from new business formation)—are seriously deficient. Those methods and assumptions, in other words, may be based on conditions that pre-dated the current unique and qualitatively different and more severe ‘Epic’ recession conditions. These out of date methodologies may well be resulting in gross overestimation of adjusted job creation at certain times of the year (fourth and first quarters) and perhaps even underestimation at other times (second and third quarters). If so, what appears as volatility—gains in the winter and losses of jobs in the summer—may obscure what is essentially stagnant job growth throughout the year during the past three years.

It is also possible that the volatility in job creation may not be all statistical adjustments. It may be due as well to business cautiously hiring at the start of their fiscal years and then not continuing to hire further as the year progresses as it becomes clear, once again each year, that consumers do not have the income to sustain their consumption. Household real income growth for the ‘bottom 80%’ one hundred million or so households has declined steadily since 2009, and has been negatively impacted every spring by speculation-driven oil price hikes every spring the past three years. So too has spending by the wealthiest 10% households, whose buying is largely driven by the stock market. Stocks the last three years have surged in the Fall to Spring period, driven by free money pumped into the economy as a result of the Federal Reserve’s ‘Quantitative Easing’ programs. Those programs for three years ‘run out’ by the spring, the stock market stalls, and the wealthiest households pull back their spending as well.  Like jobs, general economic recovery has also entered a ‘relapse’ in the summer-third quarter in 2010 and 2011. Thus both the economy and jobs are locked in a ‘stop-go’ scenario since 2009.

What all that also means is—notwithstanding a winter economic and jobs resurgence the past three years—there really isn’t, nor has there been, any sustainable job creation of any consequence for the past three years. Jobs aren’t declining in great numbers. Nor are they growing. We are ‘bouncing along the bottom’—both in terms of jobs and the economic recovery in general.

The three economic recovery programs of the Obama administration, introduced in early 2009, late 2010, and now in 2011-12, have not fundamentally resolved the jobs crisis. Nor have they been able to get the economy on a sustained growth path.

This fundamental stagnation in the jobs markets, and the general economy’s trajectory of  short shallow recoveries followed by brief ‘relapses’, is all the more amazing given that more than $1.5 trillion in tax cuts introduced by the Obama administration over the course of its three economic recovery programs since 2009. Another $1.5 trillion occurred in the form of government  spending (mostly subsidies to the states, unemployed, and long term infrastructure projects that haven’t gotten off the ground) since 2009. In addition, more than $9 trillion pumped into the banks and stock and bond markets by the Federal Reserve.

This more than $12 trillion in total fiscal-monetary stimulus has resulted in large corporations accumulating a reported ‘cash hoard’ of more than $2.5 trillion. They have committed little of that to investment and job creation in the US. What was once termed ‘trickle down’ has become a ‘drip-drip’ investment-job creation process. More and more subsidies to corporate America (banks and non-banks) is producing less and less results in terms of US-based investment and job creation. Some job creation is occurring, but when that minimal job creation is contrasted to the massive, $12 trillion of stimulus of the past three years, it becomes clear that economic recovery programs, and related fiscal-monetary policies, are today essentially broken.

To the extent jobs are being created at all, it is heavily skewed toward lower paid temp, part time, and ‘two tier’ wage jobs. Both Obama and Corporations are making a big deal about jobs being brought back to the U.S. by the big Multinational Corporations, like General Electric and General Motors. But the relatively small flow of such jobs are at half pay and often with no benefits. Check out GE’s vaunted job creation at its Kentucky plant. And GM’s alleged new jobs in Detroit. New hires at both are paid $14 an hour, about half that of other workers, with less if any equivalent benefits.

And how many jobs in recent years have really been created in Manufacturing in general, and in Autos in particular?  When the recession started in December 2007, there were 13.9 million jobs in manufacturing in the U.S, and 978,000 in autos, according to the Labor Department’s B-1 Table of Employment. In July 2009, at the official end of the recession, there were 11.9 million manufacturing jobs and 640,000 auto jobs. This past March 1, more than four years after the start of the recession and approaching three years since it was officially declared ‘ended’, there are 11.7 manufacturing and 751,000 auto jobs. In other words, more than a quarter million auto jobs were lost since the recession started and less than half, 110,000, have been recovered (paying half pay remember!). And more than two million manufacturing jobs were lost since the start of the recession and the number of manufacturing jobs today is still less by 100,000 today than when the recession officially ended three years ago!

To conclude, after three years and three repeated false job recoveries the outlook for a sustained jobs growth today is once again in decline.  The fiscal-monetary policies of the past three years have not resurrected the jobs market in any sustained way, any more than they have succeeded in restoring the housing market or helping homeowners in foreclosure or have in any way stabilize state and local governments’ finances.

As this writer points out in his new book ‘Obama’s Economy: Recovery for the Few’,  there has never been a recovery of the economy from recession since 1947 without a sustained recovery of jobs, without the housing sector leading the recovery, and without state-local government increased spending on jobs and services.

So long as current economic recovery policies focus on more tax cuts for business and investors, on more subsidies for corporations, more free trade, more deregulation, and more deficit cutting for the rest of us—there will be no sustained recovery. It will at best result in a continuation of the ‘stop-go’ economy of the past three years that is the defining characteristic of today’s on-going ‘epic’ recession.

Jack Rasmus

Jack is the author of the just released book, ‘Obama’s Economy: Recovery for the Few’, published and distributed by Pluto Press and Palgrave-Macmillan and the 2011 ‘An Alternative Program for Economic Recovery’. His website is: www.kyklosproductions.com and blog, jackrasmus.com, where the above referenced articles on jobs are available.

INTRODUCTORY COMMENTARY:

LATER THIS MONTH, APRIL 2012, THIS WRITER’S MOST RECENT BOOK—“OBAMA’S ECONOMY: RECOVERY FOR THE FEW”—WILL BE AVAILABLE IN BOOKSTORES. THE BOOK IS AN ANALYSIS OF THE OBAMA ADMINISTRATION’S THREE ECONOMIC RECOVERY PROGRAMS INTRODUCED IN 2009-2011 AND RELATED FISCAL-MONETARY POLICIES OF THE PAST THREE YEARS.

THE BOOK ADDRESSES THREE QUESTIONS:

· WHY HAS THE RECOVERY BEEN THE WEAKEST ON RECORD SINCE 1947
· WHY HAS IT BEEN THE MOST ‘LOPSIDED’, BENEFITING MOSTLY BANKS, CORPORATIONS, INVESTORS, CEOs, AND THE WEALTHIEST HOUSEHOLDS
· AND WHY HAVE MORE THAN $12 TRILLION IN TAX CUTS, GOVERNMENT SPENDING, AND FEDERAL RESERVE ‘FREE MONEY’ TO BANKS RESULTED IN ONLY AN UNSUSTAINED ‘STOP-GO’ RECOVERY?

THE BOOK CONCLUDES BY OFFERING AN ALTERNATIVE PROGRAM FOR RECOVERY TO THE POLICIES OF THE PAST THREE YEARS.

THE FOLLOWING ARTICLE IS THE FIRST OF A FOUR PART ESSAY THAT SUMMARIZES THE ABOVE MAJOR THEMES OF THE BOOK.

· PART 1 DOCUMENTS HOW OBAMA’S ECONOMY HAS BEEN THE WEAKEST RECOVERY ON RECORD SINCE 1947
· PART 2 TO FOLLOW WILL DOCUMENT TO WHAT EXTENT THE PAST THREE PLUS YEARS HAVE BENEFITED THE WEALTHY AND THEIR CORPORATIONS.
· PART 3 WILL UPDATE THE BOOK’S THEMES BY EXAMINING WHAT HAS HAPPENED TO THE US ECONOMY SINCE NOVEMBER 2011. IS A RECOVERY FINALLY REALLY UNDERWAY, OR ARE WE IN YET ANOTHER, A FOURTH, STOP-GO SCENARIO?
· PART 4 WILL OFFER AN ANALYSIS WHY FISCAL-MONETARY POLICIES HAVE FAILED TO RESULT IN A SUSTAINED ECONOMIC RECOVERY IN THE U.S. SINCE 2007 AND WHY THEY WILL STILL CONTINUE TO DO SO AFTER THE UPCOMING NOVEMBER 2012 ELECTIONS.

(The first three parts of this series are combined in an article, ‘Obama’s Economy: The Limits of Economic Recovery’, that will appear in the May 1 Issue of ‘Z’ Magazine).

Part 1

Since January 2009 the U.S. economy has been mired in the weakest, most lopsided recovery on record since 1947. It has limped along the past three years in an historic ‘stop-go’ trajectory, during which two brief, shallow recoveries were followed in the summer of 2010 and again in 2011 by two short economic ‘relapses’—the latter defined as a condition where momentum toward recovery fails and the economy falls back to near stagnant growth in key economic sectors.

After two weak recoveries and two subsequent relapses, since last November 2011 the economy has been undergoing yet a third brief, shallow rebound. Although hyped by the media and public officials, this current ‘third recovery’ is limited once again only to certain sectors of the economy and is being driven by forces that are temporary and cannot be sustained. The ‘stop-go’ trajectory—characteristic of the US economy since early 2009—has therefore not been fundamentally checked or reversed. The economy remains on a path that will experience yet another relapse, or possibly an even worse double dip, sometime no later than 2013—as this writer previously predicted last January.

Forty-five months after the start of the current recession in December 2007, the U.S. economy as of October 2011 was therefore no larger in terms of GDP than it was in late 2007. In other words, nearly four years after the recession began there was no net additional economic growth. The net growth of the economy over the past four years was 0%. After nearly four years the economy was merely back where it began.

Repeated economic relapses since 2009 indicate an inability of the economy to achieve a sustained recovery. This failure to achieve sustained recovery stands in stark contrast to the 11 previous recessions that have occurred in the U.S. since 1947, the worst of which took place in 1973-75 and 1981-82. According to U.S. Commerce Department data, 45 months after its start of the 1973-75 recession the U.S. economy had grown by 15.95%, or at a rate of 4.25% per year. Similarly, 45 months after the start of 1981-82 recession, the economy had grown by 13.65%, or at a rate of 3.64% per year. Another way to illustrate the historic weakness of the current recovery is to consider the rates of annual GDP growth for the two non-recession years following the end of each of the three recessions: 1976-77, 1983-84, and 2010-11. The following Table 1 provides the comparison:

TABLE 1
Percent Change in Gross Domestic Product After Recessions
Source: Bureau of Economic Analysis, Historical Table 1.1.1

1973-75 Recession   1981-82 Recession     2007-09 Recession

1976: 5.4% GDP           1983: 4.5% GDP           2010: 3.0% GDP
1977: 4.6% GDP          1984: 7.2% GDP            2011: 1.7% GDP

Once again the comparison is dramatic. The recovery the past two years has averaged barely 2% per year, after a fiscal stimulus of more than $3 trillion and monetary stimulus of more than $9 trillion. In contrast, prior recoveries from the two worst previous recessions averaged two and three times that. Furthermore, even the current 2% is a high-side estimate and is about to weaken further in 2012.

The Obama ‘recovery’ since 2009 has been the weakest of the 11 previous recessions on record not simply in terms of GDP growth, but the weakest in the three critical areas of jobs, housing, and state-local government. These three key areas have hardly participated at all in recovery since 2009. This fact in turn explains much of why the U.S. economy today still remains locked in a ‘stop-go’ trajectory and why another relapse is virtually guaranteed, or why an even more serious double dip recession in 2013 is increasingly possible.

For example, as of the official end of the recession in June 2009, there were a total approximately 25 million unemployed. After more than $3 trillion dollars in tax cuts and government spending by the Obama administration, today about 23 million are still jobless. That’s a cost of about $1.5 million per job. Since mid-2010 Obama has placed his bet on manufacturing, exports, and free trade to lead the jobs recovery. He put multinational corporation CEO, Jeff Immelt, in charge of his ‘Jobs Council’. Immelt delivered more free trade deals, more tax cuts for multinationals, and more deregulation of business as the latest ‘jobs program’. But manufacturing has not led a jobs recovery. There were 11,869,000 manufacturing jobs in the U.S. in June 2009; at year end 2011 there were 11,790,000 manufacturing jobs, for a net decline of nearly 80,000. So much for a manufacturing-driven jobs recovery.

The sad state of administration jobs creation program is illustrated by the recent misnamed JOBS (‘Jumpstart Our Business Start-Ups’) bill passed by Congress—a bill about jobs in name only and, in fact, a proposal for more business financial deregulation, more freedom for financial speculators, and more small business tax cuts.

In the housing sector, 3.6 million homes were foreclosed during the recession years of 2007 and 2008. Yet during the first three years of the Obama administration there were an additional 8 million homes foreclosed, with the number projected to rise by at least another million or more in 2012, according to the industry source, Realtytrac. While a couple dozen big banks got $9 trillion in bailouts from the Federal Reserve, 8 million homeowners facing foreclosure got nothing in mortgage principle reductions or else were given a pittance of less than $10 billion in temporary, partial interest rate reductions under the Obama HASP and HAMP housing programs introduced in 2009.

The Obama administration’s recent HARP 2.0 is another handout to the big 5 bank mortgage lenders. HARP is supposed to require mortgage lenders to refinance principle owed by homeowners with mortgages in ‘negative equity’, something the lenders have successfully blocked for three years now. In exchange for doing so, the Obama administration has forced States’ attorneys general to accept a $26 billion ‘cap’ on legal suits pending against the mortgage lenders arising out of the 2010 ‘robo-signing’ housing scandal where millions of homeowners were illegally foreclosed and thrown out of their homes by the banks. But HARP is already being gamed by the banks. As they put aside funds for refinancing negative equity mortgages, they are raising mortgage interest rates and fees on all non-negative equity mortgage applications to cover the cost of the negative equity refinancings. In other words, charging non-negative equity homeowners more to pay for the negative equity homeowners. Immediately upon announcement of HARP, mortgage rates began once again to rise, thereby dooming any nascent housing recovery.

In the previous worst recession in the 1970s and 1980s, the loss of jobs in the private sector were offset by hiring by state and local governments, thereby dampening the depth and duration of the recession and accelerating the recovery process. In contrast, since June 2009 state and local government has not only not increased hiring to offset private sector job loss, but has itself become the biggest contributor to job loss. From June 2009 through 2011 the number of state and local government workers declined by more than 640,000—most of them teachers.

The answer to the question previously posted—i.e. why has the Obama recovery been so short and shallow, so uncertain, and characterized by repeated relapses—can be explained in large part by the failure of Obama policies to address jobs, housing, and state-local governments. There have been three distinct economic recovery programs introduced by the Obama administration—in early 2009, late 2010, and late 2011. The fact that a third has been introduced in the past six months is testimony to the failure of the first two. But none of these three programs have resulted in a rapid recovery of jobs; none have resolved the foreclosure mess and continuing veritable depression in housing; and none have succeeded even remotely in stabilizing state and local government finances that would prevent layoffs, cuts in services, or rising local taxes and fees.

The importance of jobs, housing, and state-local government spending to recovery is evident by the fact there has never been a recovery from any recession since 1947 without increased spending and hiring by state and local government; without the housing sector recovery leading the way; or without job creation averaging at least 400,000 to 500,000 each month for at least six consecutive months.

The logical question of course is why has there not been a sustained recovery thus far—after more than $1.5 trillion in federal government spending since early 2009, after more than another $1.5 trillion in tax cuts, and after the Federal Reserve, the central bank of the U.S., has pumped in more than $9 trillion in virtually ‘free money’ into the banks (by purchasing at full price mortgage and other bonds worth pennies on the dollar and after lending banks all the money they can carry away at a mere 0.1% to 0.25% interest rates)?

The answer to the question is that a pittance of the cumulative $12 trillion of fiscal and monetary stimulus since 2009 has ‘trickled down’ to job creation, to stopping foreclosures or stimulating the housing sector, or to increase state-local government spending. What was once called the ‘trickled down’ economy in the U.S. in the past has basically changed since 2008. It has become, at best, a ‘drip-drip’, leaky faucet economy, with most of the $12 trillion spent by Congress and the Federal Reserve having been siphoned off by large multinational corporations and the big 19 banks, by speculative investors manipulating commodity, oil, and currency markets, by CEOs, hedge fund, and private equity managers ensuring huge personal income gains for themselves, and by the wealthiest 10% of households in the U.S., about 1 million of the approximate 130 million households in the U.S., reaping the harvest of record stock and bond market expansion set in motion by trillions of dollars of Federal Reserve free money.

Jack Rasmus, April 3, 2012

Jack’s book, Obama’s Economy: Recovery for the Few, is published by Pluto Press and Palgrave-Macmillan. It is available online April 1 at Amazon and from the author’s website, http://www.kyklosproductions.com, and his blog, jackrasmus.com

COMMENTARY: THE EUROPEAN CENTRAL BANK, THE ECB, IN THE PAST FEW DAYS PUMPED ANOTHER $1 TRILLION OR SO INTO THE EUROPEAN BANKING SYSTEM, AN INDICATION THAT THE SO-CALLED EURO DEBT CRISIS IS FUNDAMENTALLY A EURO BANK CRISIS. THE ECB IS FOLLOWING IN THE FOOTSTEPS OF THE US FEDERAL RESERVE, THE BANK OF ENGLAND, AND THE BANK OF JAPAN: ALL HAVE PUMPED TRILLIONS INTO THE GLOBAL BANKING SYSTEM TO PREVENT A SECOND GLOBAL BANKING CRISIS. BUT THE CONSEQUENCES OF “FREE MONEY” IS A GROWING ADDICTION BY THE BANKS AND EVEN NON-BANKS ON THAT FREE MONEY, A REPEATED STOCK AND COMMODITY BUBBLES CYCLE, AND COMMODITY INFLATION (ESPECIALLY OIL) THAT LOWERS REAL INCOMES FOR HUNDREDS OF MILLIONS OF HOUSEHOLDS, CONSTRAINS CONSUMPTION GROWTH, AND PREVENTS A SUSTAINED ECONOMIC RECOVERY.

Growing sectors of Capital are becoming addicts—dependant on virtually free money from central banks, from Europe to the USA to Japan. That means, in particular, banks, financial intermediaries, stock market and commodities institutional speculators, and even a growing segment of non-bank corporations.

Since 2008 the US central bank, the Federal Reserve, has pumped more than $9 trillion into the banking and financial system to prevent it from collapsing. It has done this at great cost, however. The trillions of dollars of liquidity injections from the Fed have not eliminated the original problem that that liquidity was supposed to resolve: i.e. removal of the bad assets on financial balance sheets. Those bad assets still remain for most part, especially for institutions like Citigroup and Bank of America that – were it not for phony bank stress tests and suspension of normal accounting rules since 2009 – would be technically bankrupt today. The Fed has not ‘removed’ those bad assets, which have only in part been written off as losses; the Fed has merely mirrored them by adding them to its own balance sheet. In so doing, it has bought some time. But that is all. It has not resulted in sustained recovery of the US economy in any real sense.

For the past three years since February 2009, the Obama administration and supporters have argued that the Fed’s $9 trillion bailouts would generate recovery for the rest of the U.S. economy. But in this objective, it has clearly failed. Except for stock and bond markets, large company corporate profits, CEOs pay and bankers’ bonuses, and the wealthiest 10% households, nearly all economic indicators today still remain below their level when the recession began. And some indicators—especially jobs, housing, and local governments’ finances—are significantly below pre-recession levels.

The Fed’s virtually zero interest loans to banks, and its more than $2.7 trillion in direct purchases of bonds from the private financial sector using printed money (called ‘Quantitative Easing’ or QE), has not revived the economy. What that massive injection of liquidity to banks and investors has accomplished is a hand-stuffing of the capitalist goose with free money. That liquidity has financed stock and commodity market booms, that in turn have provoked inflation which reduces the real incomes of a 100 million US working and middle class households. That process, moreover, has occurred on three separate occasions in the US since 2008.

There have been three stock and commodity market booms since 2008. Remember gas prices hitting nearly $5 in the spring of 2008, then again in the spring of 2011, and now once more this spring 2012? Stock market and commodity price boomlets accompanied the massive liquidity injections during each of those same periods. Both stock market and commodities booms, and the resultant inflation, were immediately ‘fed’ by the Federal Reserve’s QE policies: The 2008 event was highly correlated with the Fed’s bailout of Bear Stearns and rescue auctions of the shadow banks in 2008. The 2010 stock-commodity boom was similarly set off by the Fed’s QE1 $1.75 trillion direct bond purchases and zero interest loans to banks in 2009. When the QE1 bond buying stopped in late spring 2010, the stock and commodity markets immediately collapsed. When the Fed announced another $600 billion QE2 in the fall 2010, the stock-commodity booms took off again in late 2010 and into the spring of 2011. When that QE2 buying binge finished in late spring 2011, the stock-commodity markets quickly fell back once again. Banks and investors once more demanded another round of Fed bond buying and free money. That led to the Fed’s ‘operation twist’ bond buying in late 2011, as well as demands for even more generous QE3 money injection since late last year. With that, the stock market surged again from late 2011 continuing today into 2012. Highly correlated with all the QE1, 2 and 3 and free money have been three corresponding bouts of stock and commodity – especially oil – price expansion and speculation. In other words, there’s an almost perfect correlation between Fed monetary bailouts, QE, and zero loan policies ‘coming and going’ and corresponding stock and commodity speculation ‘stop-go’ since 2008 to the present.

Here’s how it works: The Fed pumps no cost money into the banks. The banks then loan it at 5%-10% to speculators like hedge funds, private equity firms, ‘dark pool’ stock buying consortia, and other institutional and wealthy individual speculators. The latter then funnel the money into large block stock purchases, into commodity futures, speculate with credit default swaps on Euro sovereign bonds in Greece, Spain, etc., further exacerbating those crises, or into currency speculation (one favorite: the Brazilian currency, the Real), Hong Kong and Chinese property, etc. Where the Fed money doesn’t go, however, is into loans to small and medium businesses in the US for which it was originally purportedly intended or to aid the recovery of the collapsed housing and commercial property markets in the U.S.

After three years, 2009-12, it appears the U.S. financial system is becoming increasingly addicted to this Free Money from the Fed, increasingly (QE) money printed by the Fed instead of traditional Treasury bond open market operations.

But when the Fed stops, the stock and commodity markets flop.

The fundamental question therefore: if the Fed ever permanently ceases providing free money, can the stock, commodity, and even bond markets function on their own any more without that prop of multi-trillions of dollars? And there’s a converse to all this, of even greater importance: what happens when the Fed tries to retrieve those trillions of free money by cutting off the free money and raising interest rates? If it takes the recent massive liquidity injection just to keep the Capitalist financial system barely functioning, what happens should the Fed try to retrieve that liquidity? The Capitalist system may be ‘super sensitive’ to attempts to slow an economy, as well as ‘super insensitive’ to attempts to stimulate an economy. What that means is that it takes an ever-increasing massive liquidity injection to keep the system from collapsing in a recession phase, but that it will take very little Fed shift from free money and raising interest rates to choke off a nascent recovery of the economy in an early expansion phase. Stated differently in economists’ parlance, this means the financial system today may have now become ‘liquidity and interest rate inelastic’ in efforts to stimulate recovery, but conversely ‘liquidity and interest rate elastic’ given attempts to slow a recovery.

This addiction is not limited to the US financial system. It appears to be spreading as well to the non-banking sector. Large corporations increasingly do not appear eager today to invest their massive earnings and cash now on hand, estimated at more than $2.5 trillion, nor even to distribute most of it to their shareholders. They prefer to hoard it. The super-cheap Fed money means they either borrow it, through their financial subsidiary if they have one, directly from the Fed, or borrow from banks at today’s super low interest rates. Or they issue cheap corporate bonds, take on more debt, and use the borrowed funds to buy back their company stock and pay dividends to their shareholders. In other words, they borrow money at the super low rates and pay themselves the unearned capital gains ‘profits’. They don’t have to ‘make’ profits; they just transfer the free money from the Fed to their shareholders.

Among smaller and medium sized businesses, the main ‘play’ is to issue a mountain of high risk, ‘junk bond’ debt on their companies’ assets. Often, they issue new junk bonds to roll over and payoff old junk bonds, compounding the debt on their balance sheets. Junk bond issuance hit record levels in 2010 and now again in 2012. But the junk bond booms are made possible by the Fed’s free money. Much of this junk bond debt is set to come due in 2013-14. But should interest rates rise, small-medium business defaults will almost certainly escalate to record levels for those non-financial companies now addicted, it appears, to junk bond debt.

Another way to look at the addiction to free or super low cost money is that it is being made available because banks, speculators, and even non-bank companies are increasingly unable to generate profits from traditional normal business activities. So the central bank in a crisis must spoon-feed them the money to prevent their collapse. Capitalist companies are less interested today in making money by making things than in turning speculative profits, based on Fed free money availability and by borrowing in lieu of real profits creation. Of course, there are exceptions—in emerging markets infrastructure investment, making cars and iPads in China, and so forth. But I’m talking here about a growing trend and growing apparent dependency—that is, an addiction.

And the phenomenon increasingly is not limited to the US economy today. We now see this same development and trend occurring in the Eurozone with the European Central Bank, ECB.

Late last year, as the Eurozone economy and financial system began approaching a crisis stage with Greece, Spain, Portugal, Italy, etc. and, beneath the surface, the private banking systems throughout Europe. To prevent a run on the Euro private banking system, the European Central Bank, ECB, embarked upon a strategy almost exactly like the U.S. Federal Reserve’s. Last week alone, the ECB pumped 530 billion euros, or $777 billion, into the banks at 1% interest. That follows a previous 489 billion euros injected late last year, i.e. another $700 billion. (Which followed another $500 billion in 2010). That’s a total of more than $1.5 trillion in just six months of virtually free money pumped into the euro banking system, no doubt in anticipation of bank failures occurring in the wake of the Greek and other European bond crises. That massive recent ECB injection has temporarily stabilized the banking system in the Eurozone, much as this writer predicted last December would happen. However, ‘temporary’ is the operative term here. It is not likely another such liquidity injection will occur prior to a string of bank collapses taking place first, given growing opposition by the Germans to the ECB ‘printing money’ like the Federal Reserve. Meanwhile, the Greek debt crisis will almost certainly erupt once again before year end 2012. And Spain and Portugal and other Euro periphery economies are not far behind. The point is: massive liquidity injections by central banks may temporarily stabilize a banking crisis, but not permanently. Furthermore, they do not result in economic recovery—and in ways actually serve to constrain that same general economic recovery by precipitating inflation and reducing consumption. Here’s how massive liquidity injections, ‘free money’, restrain recovery:

The massive liquidity injections now commencing in Europe, just as they have been in the US since 2009, have not to date resulted in the European economies avoiding recession. Nor will the Fed’s ‘free money’ prevent the coming of another recession in the US by 2013. Today’s European recession train has left the station and Europe is now well on its way toward a generalized downturn. It’s only a question of how deep and how long. That rapid Euro slowdown has already begun impacting the rest of the global economy, as exports to Europe from China, India, and Japan are now falling, in turn slowing growth in China, India, and the rest of the global economy. The European recession will also mean fewer US exports and a further slowdown of the U.S. economy as U.S. manufacturing pulls back, which is already underway. Contrary to business pundits and the Obama administration, there is no way manufacturing can lead the US economy to a sustained recovery this year, next, or ever!

The joint Federal Reserve and ECB massive injection of free money into the global economy will continue to set off stock and commodity price inflation worldwide. For the rest of us non-professional investors that translates into more inflation, which is already happening, as commodity prices like gasoline and food escalate in both Europe and the U.S. In the U.S. gasoline prices alone in some places rose by 40 cents a gallon in a matter of just two weeks last month. And that’s well before the spring take-off in gasoline prices kicks in. That inflation means a further fall in household income, already declining for the past three years, less consumption in turn, more household credit card spending to try to make up for it, and especially severe stress on retiree fixed income households. It will also mean the recent passage of the extension of the payroll tax cuts will be largely absorbed by the oil companies—just as half of the same payroll tax cut in 2011 was absorbed by rising gas prices. The overall consequences for the US economy in turn later this year could prove negative.

To sum up, a real question remains whether the global capitalist system today, in particular in the northern tier of Europe, North America, and Japan—can function any longer as it once had. It may have become so addicted to, and so dependent upon, free central bank money, that it is questionable whether it can wean itself off that ‘fire hose’ injection of free money. Europe looks much like the US now in that regard, and both look very much like their predecessor capitalist invalid, Japan.

Like true addicts, attempts at some point to return to pre-crisis arrangements may result in such severe ‘withdrawal symptoms’ that the US and Euro economies may rapidly contract at the first attempt to shake the addiction. Going ‘cold turkey’ could result in a more severe economic contraction and recession than even that experienced during the 2007-09 initial downturn. Some form of ‘monetary methadone medical’ injection may have to continue. The patient may prove permanently in need of assistance—paid for by the rest of the economy. That means us. It also means more or less permanent ‘austerity’ blood transfusions. But blood transfusions cannot go on indefinitely. As some point the donors will shout, ‘I’m not going to die’ to save them and will tear off the hyperdermic needle.

However, before that occurs, in the interim the Eurozone’s current massive money injection by the ECB to the euro banks, and the U.S. Federal Reserve’s continuing liquidity injection to US banks, will no doubt continue. Continuing as well will be repeated stop-go cycles of stock market and commodity bubbles that stifle economic recovery, gasoline and food price inflation, further pressure on real incomes, hesitant consumption spending, and weak, unsustained economic recovery.

Jack Rasmus

Jack is the author of the forthcoming, April 2012 book, OBAMA’s ECONOMY: RECOVERY FOR THE FEW, Palgrave-Macmillan (US) and Pluto books, (UK). His website is http://www.kyklosproductions.com and his blog, jackrasmus.com

COMMENTARY: THE FOLLOWING ENTRY REPRESENTS A FORAY INTO COMMENTARY ON THE CURRENT GREEK DEBT CRISIS AND THE RISING DIRECT OPPOSITION IN THE STREETS OF GREECE TO EFFORTS BY BANKERS AND POLITICIANS TO MAKE THE GREEK PEOPLE PAY FOR THE CRISIS. PARALLELS BETWEEN GREECE TODAY, AND THE US AUSTERITY PROGRAM TO COME IN 2013 IMMEDIATELY AFTER THE NOVEMBER US ELECTIONS, ARE MADE

The crisis in Greece is not a ‘sovereign, or government, debt’ crisis. That’s the surface appearance of the problem. The below the surface struggle is about how bankers, bondholders and speculators–together with their politicians in government–can offload the cost of bad assets they created onto the shoulders of the Greek people. It’s about ‘who’s going to pay for the bad assets’.

The news coming out of Greece, reported in the western press, is that the big boys of northern Europe, US, and their hedge fund-banker buddies, are willing to ‘take a hair cut’ and lose 70% of the value of their existing bonds. But the real facts are that 70% reduction includes only 30% of the current bonds that have become ‘bad assets’. No mention is made in the press of the other 70% of bonds that are not required to take a loss.

The reported Greek debt is somewhere between $300-$400 billion. The current ‘loan’ in question is about $170 billion. But the real Greek total debt is likely around $600-$650 billion. That’s just about the total on hand for the European bailout fund. (Total bailout that will be needed for all of the Eurozone is likely around $4 trillion, this writer estimates, to cover not only Greece but Portugal (next up for another $200 billion), Spain, Italy (more than a $trillion), as well as other ‘lesser economies’ also increasingly in trouble, such as Hungary, Austria, Belgium, and soon perhaps even economic stalwarts like Norway, whose housing bubble is now about to burst.

In other words, the Greece and overall Eurozone debt crisis is far from over and has a long course yet to run. That means little Greece’s problems are also far from over as well. As they say, ‘you ain’t seen nothing yet’.

If you want to see what a bona fide economic depression in the 21st century looks like, look at Greece. One out of two youth unemployed. General unemployment in excess of 25% (the worst year level in the US in the 1930s). GDP collapsing. Pensions shrinking. Jobs melting away at an increasing rate. And the bondholders-bankers behind the Germany-French and other Euro governments want the Greek people to pay for something they didn’t create. They want the people to cover the lion’s share burden of making up for their bad assets.

Greece is also a good example how an economy cannot ‘austerity its way to recovery’. Cutting incomes of those whose spending make up the overwhelming majority of the economy is not a path to recovery–as Obama and Congress will soon find out in 2013. Already the $2.2 trillion US deficit cuts mandated in 2011, which are scheduled to take effect AFTER the upcoming November 2012 national elections, will slow the US economy to a less than 1% GDP growth. Those aren’t my numbers; they’re the cautious Congressional Budget Office’s numbers. And that less than 1% growth is BEFORE Congress and the next president (doesn’t matter who) set to work cutting another $4 trillion immediately after the elections. That’s when the real US deficit cutting crunch will start–and the next double dip of the US economy.

Obama and Congress will discover what an ‘austerity recession’ is, come 2013. In that they will join Japan and most of western Europe, including the French and the British. Austerity, or deficit-budget cutting, only makes a debt crisis worse. Dont’ believe me, ask the Greeks!

There are only two ways to get out of deep debt-driven economic contraction that remains ‘systemically fragile’ today across the board. I’m talking about both the US and the Eurozone, as well as Japan. One way is to reflate the economy by generating inflation. The other is to liquidate the bad assets.

The Federal Reserve has done a horrible job at reflating the economy. The trillions it has spent on bailing out the banks, printing money, buying banks and mortgage lenders’ bad subprime loans at near full purchase price instead of the real 15 cents on the dollar they are worth, has led not to inflation in product prices (that would stimulate investment) but instead resulted in the Federal Reserve spoon-feeding speculators around the globe. The Fed has pumped up stock markets, real estate, currency speculation and volatility, oil and commodity prices, and financial securities in general. The money and credit from the Fed has not gotten to those parts of the economy that need it most. The Fed is not broke. It can always print money. It’s just that Fed policy is itself broken.

The other option is to ‘liquidate’ the bad assets. That too the Fed and the Obama administration have sadly failed at. The essence of the Fed-Obama bank bailout strategy since 2009 has been to ‘rescue’ the banks–not by removing the bad assets from their balance sheets but just by pumping liquidity into these zombie institutions (many of which have been technically insolvent and bankrupt now for years), to in effect ‘offset’ the bad assets on their balance sheets. The bad assets are still there. The Fed and Congress have not only just ‘offset’ the bad assets on the private balance sheet, but have in so doing mirrored those bad assets on the public balance sheet side. So it not only failed to remove (liquidate) the bad assets; it doubled them. Now the public sector has become as ‘fragile’ as the banking sector. But liquidation, you see, is abhorred by the bankers and bondholders. They don’t want their asset values ‘reduced’ or expunged. They want the people to pay for the losses. And that, once again, is Greece today–and the USA come 2013 and beyond.

Jack Rasmus
For an ‘Alternative Program for Economic Recovery’ that makes bankers and bondholder-speculators pay for the losses on their bad assets, see Jack’s program by the same title on his website, http://www.kyklosproductions.com, accessible from the right side of this blog page.

COMMENTARY: LAST WEEK’S JANUARY JOBS REPORT FROM THE LABOR DEPARTMENT HAD SOME VERY PECULIAR AND STRANGE NUMBERS, INCLUDING A MASSIVE UPWARD REVISION OF 3 MILLION JOBS DUE TO SEASONALITY ASSUMPTIONS. WAS THERE REALLY 243,000 ACTUAL (REAL) JOBS CREATED LAST MONTH, OR WAS IT LARGELY STATISTICAL LEGERDEMAIN? HERE’S SOME QUESTIONS RAISED ABOUT THE NUMBERS. (What follows is somewhat ‘wonkish’ but for those interested, do read on).

‘Those Peculiar January Jobs Numbers; Or, When 243,000 Jobs Aren’t’ by Jack Rasmus, copyright 2012

The January 2012 jobs report released by the US Labor Department on Friday, February 3 indicated that 243,000 new jobs were created in the nonfarm sector of the US economy last month. Additionally, the U-3 unemployment rate fell from 8.5 to 8.3%. How real are those numbers? Are they actual jobs created? Whats the true unemployment rate?

First, it is important to note that the 243,000 January jobs numbers are not the actual jobs created. They represent seasonal adjustments made to the raw data for jobs, referred to as the not seasonally adjusted jobs tally for the month. The January jobs report reflects an anomalous massive upward revision of the raw jobs data, due to assumptions about seasonality and new business formations.

Lets look at trends from November 2011 through January 2012 for both the seasonally adjusted and not seasonally adjusted for purposes of comparison.

The actual (not seasonally adjusted) jobs numbers for November 2011 show there were 133.179 million nonfarm jobs in the US economy that month. The following month, December 2011, total nonfarm jobs had declined to 132.952 million, for a decline of 227,000 jobs. That makes sense, given that 203,000 jobs were lost in construction, which is typical for Decembers, while 74,000 jobs were reduced by states and another-72,000 by cities and schools that month. Offsetting the construction-public sector job losses were 142,000 jobs added in Retail, mostly department stores, which also makes sense given the holiday season. Manufacturing and other service sector jobs changed little, some up and some down slightly over the month. Again, these are the not seasonally adjusted jobs for November.

What about the seasonally adjusted jobs numbers for November? One would expect some differences in numbers here, of course. Lets look. Total nonfarm jobs increased in November, by 203,000 instead of declined (per the not adjusted numbers) by 227,000. That represents a net difference and swing of 430,000 jobs.

Now lets make a similar comparison of seasonally adjusted and not seasonally adjusted for jobs between December 2011 and January 2012 that were reported on February 3, 2012 for last month. What appears is an incredible 7 to 10-fold increase in the difference between seasonally adjusted and not seasonally adjusted.

The not seasonally adjusted, raw jobs numbers show a loss of jobs for January 2012, after the holiday season, of 2.7 million jobs. That includes about 300,000 construction jobs, which is not strange given the mid-winter slowdown typical of this sector. Plus another 600,000 jobs in retail, which makes sense after the typical holiday sales hiring surge typical in November-December. And another 400,000 in business professional services as most businesses trim their labor force at the start of the year to keep costs down and to watch when and where to add jobs back in the subsequent months. However, the adjusted, upward revised numbers for January showed a gain of 243,000 jobs instead of the unadjusted 2.7 million fewer jobs. That 243,000 gain in jobs includes adding construction jobs in mid-winter, and adding even more jobs176,000in Retail and Services after the holiday season hiring surge. This retail-services job gains for January occur, moreover, despite the dismal retail sales holiday season when, except for autos, retail sales actually declined by 0.1% compared to the previous year. Why would retail employers add jobs after that poor sales season? Why would they not reduce the huge numbers of part time and temp hires of November-December in January, as they typically do after the holidaysespecially given the poor retail sales performance? And why would the construction sector add jobs in mid-winter? And why would business professional sector companies add 1.1 million jobs, according to the seasonal adjustment assumptions, instead of trimming jobs, as reflected in the unadjusted numbers? In other words, why would professional-business services not make their typical beginning-of-the-year labor force temporary reductions?

It is interesting to note that instead of a net swing between the seasonally adjusted-not seasonally adjusted numbers of 430,000, as occurred during November-December, we get a net swing, or difference, between seasonally adjusted vs. not adjusted of nearly 3 million jobs for December-January? Does this make sense? One would expect major differences between seasonally adjusted-not seasonally adjusted numbers. But a seven-fold increase in the difference from month to month–from 430,000 to 3 million–is not credible.

Lets look at this massive difference and net swing anomaly from another perspective: the unemployment numbers. To start, forget about the U-3 unemployment number preferred by the press, with its reported reduction in unemployment rate from 8.5% in December to 8.3% in January that the administration and press have been hyping. The more accurate U-6 unemployment rate is a better indicator since it accommodates part time, discourage workers, and underemployed workers. It too underestimates true unemployment by about another 2%, per this writers calculations, but not nearly as dramatically as the U-3 number.

In December the U-6 unemployment rate for 15.2%, both for not seasonally adjusted and seasonally adjusted total employment. That means, for the unadjusted employment levels there were 20.208 million jobless in December 2011 and 20.096 million unemployment in December per the seasonally adjusted numbers. Thats a difference of only 112,000 unemployed.

But look at the December-January difference in unemployed between the two sets of numbers: The U-6 unemployment rate for seasonally adjusted fell to 15.1% in January (from 15.2%) in December, while the not seasonally adjusted number of unemployed rose from 15.2% in December to 16.2% in January. The U-6 indicates the number of unemployed rose, which makes sense for construction, retail, and other sectors per the preceding argument. But for the seasonally adjusted numbers, unemployment declined for the U-6 by 0.1% (and 0.2% for the U-3). The net swing between the two sets of data for December-January was 1.108 million, compared to the net swing for November-December of only 112,000. The difference represent a ten-fold jump for December-January.

How can the seasonally adjusted vs. not seasonally adjusted jobs numbers be so large for December-January compared to previous months? How can what appears to be a decline in jobs clearly in January end up reported, after seasonality and other statistical adjustments, as an upward revised 243,000 jobs?

Other economists have been focusing on the possible problem with the seasonality assumptions in the January jobs numbers this past week, but their commentary is not reaching the public press. The essential point is that the January jobs report is peculiar, and requires an explanation by Labor Department statisticians why there was a swing of about 3 million jobs last month between the raw jobs numbers data and the upward revisions in the seasonally adjusted numbers for the month.

Jack Rasmus

Jack is the author of An Alternative Program for Economic Recovery, available at his website, http://www.kyklosproductions.com, and the forthcoming April book, Obamas Economy: Recovery for the Few, by Pluto Press-Palgrave.

COMMENTARY: THE HYPE IS ON AGAIN IN THE PRESS THAT RECOVERY IS AROUND THE CORNER. LAST MONTH’S JOBS NUMBERS ARE CITED AS THE LATEST PROOF OF RECOVERY. THE ECONOMIC DATA PUFFERY WILL NO DOUBT PROVE INTENSE IN THE COMING MONTHS, IN THIS ELECTION YEAR. BUT A CLOSER LOOK AT THE FACTS SHOULD TEMPER THE FALSE CONFIDENCE. LAST WEEK’S JOBS NUMBERS WILL BE ADDRESSED IN AN ANALYSIS TO SHORTLY FOLLOW. IN THE MEANTIME, A BROADER LOOK AT THE STILL ONGOING JOBS CRISIS IN THE U.S. IS ANALYZED IN THE FOLLOWING

“THE U.S. JOBS CRISIS–THE BIGGER PICTURE” by Jack Rasmus, copyright 2012

Despite last Fridays January 2012 Labor Department jobs report, more than three years after President Obama assumed office the crisis in jobs in the U.S. continues as the number one problem of the US economy. The seasonally adjusted official numbers may have indicated 243,000 jobs created last month, but the actual, raw data on jobs was dramatically different, as will be explained in a follow up analysis to this item on jobs in the U.S. economy. In the interim, for those readers inclined to get excited about January’s very short term jobs picture, to start here’s some more sobering facts on the bigger picture.

Based on the U.S. Department of Labors U-6 unemployment rate, at the official end of the recession in June 2009 there were 25.4 million jobless; By January 2012 more than 30 months later, there still remained 23.4 million without work. That’s a total of only approximately 67,200 jobs created a month over two and a half years–a monthly number barely half of what is needed to even absorb new entrants into the labor force each month.

Most of the two million jobs created in the private sector since Obama assumed office three years ago have been lower paid service jobs, part time jobs, and temporary forms of employment–all providing lower wages and few benefits. Higher paying and benefit jobs in manufacturing and construction have, in contrast, continued to decline since the June 2009 recession low-point. Today there are still 79,000 fewer jobs in manufacturing and 680,000 fewer jobs in construction than there were at the recession low-point of June 2009. There were 21.1 million manufacturing and construction jobs when the recession began in 2008. There are only 17.3 million manufacturing-construction jobs today.

Unlike all previous 11 recessions in the U.S. since 1945, the government sector has not created jobs to offset private sector job loss during the recession. Government instead has become a major contributor to job destruction. Local governments have laid off 643,000 workers since June 2009, nearly a quarter million247,000of whom have been teachers. Public workers and teachers continue to be laid off at a rate of 20,000 a month or more. At that pace, by the end of his first term, President Obama may have presided over a loss of nearly a million public workers’ jobs.

Other indicators of the continuing sad state of the jobs markets in the U.S. after three years further corroborate the continuing crisis of jobs in the U.S. For example, the duration of long-term unemployed–i.e. those out of work 27 or more weeks–has continued to rise steadily since June 2009 from 24% of all those unemployed to more than 40% today. Another indicator of the continuing severity of today’s jobs crisis, the Employment to Population Ratio that measures how well the economy is creating jobs in relation to the growth of population, shows the U.S. economy is growing fewer and fewer jobs as the U.S. population rises. In other words, we are not even keeping up with the population growth. At the start of the current recession 63% of the US population was employed; today only 58.5% of the U.S. population has jobs. Not least, the Job Opening to Labor Turnover (JOLT) ratio shows there are still today 4.2 workers looking for every job offered, i.e. well more than double the 1.8 to 1 ratio that existed before the recession began.

The Jobs Creation programs offered by the Obama administration and Congress over the past three years have proved dismally inadequate. In January 2009 the Obama administration promised to create 6 million jobs if its 1st stimulus program costing $787 billion were passed by Congress, 40% of which were tax cuts. In June 2009 there were approximately 25 million unemployed. By mid-summer 2010 there were still 25 million unemployed and job losses began to rise again that summer.

The Obama administrations answer was to propose even more tax cuts for corporations and investors, another $802 billion in tax cuts including a two year extension of the Bush-era tax cuts costing $450 billion. The administration then added another new twist to its jobs strategy in late 2010: it brought in corporate CEOs like Jeff Immelt of the General Electric Corp., and Bill Daley, a big banker, to run the Presidents new jobs council. Their corporate answer to a jobs program was more free trade agreements, an end to more business regulations, lowering corporate tax rates for offshore multinational companies hoarding their profits in foreign subsidiaries to avoid paying US taxes, patent law reform, and taking hundreds of billions in funds from social security to cut payroll taxes. That corporate-designed jobs program failed in turn as well.

Obama administration business tax cuts, its corporate friendly and job-destroying free trade deals, and its raiding social security to give workers with jobs a paltry tax cut at the expense of retired workers deferred wages have all failed to even dent the 23-24 million still unemployed. The stimulus and tax cut programs of the past three years have bailed out big business and big banks, but have not created jobs beyond a mere trickle. What was once a trickle down approach to job creation has become today a drip-drip policy.

While the Democrats have thus far failed to provide any effective programs to restore the millions of jobs lost since the recession began, Republicans continue to propose old retread solutions that destroyed millions of jobs over the past decade. Republicans continue to propose more tax cuts for corporations and wealthy investors, still more job-destroying free trade agreements, more cuts in social security-medicare-medicaid and other social programs, and a further expansion of defense spending. These programs not only have failed to produce jobs, but actually have eliminated them by the millions over the past decade.

The historical record shows that $3.4 trillion in Bush tax cuts, given mostly to business and investors, were associated with no job creation at all during his term. The number of private sector jobs when Bush came into office in January 2001 was 111,634,000. The number of private sector jobs when he left office in January 2009 was 110,981,000. The U.S. economy and taxpayer paid $3.4 trillion to lose 653,000 jobs. By December 2011, three years later and after another year extension of the Bush tax cuts, there were 109,928,000 private sector jobs. The more the Bush tax cuts, the fewer the jobs. Yet Republicans continue to beat their broken drum that tax cuts create jobs, when in fact there are still 1.7 million fewer private jobs in the U.S. than there were a decade ago.
Republicans further continue to chant for more cuts in social programs, when countless studies show it will result in the loss of millions more jobs. And they continually call for more defense spending and wars as a way to create jobs. But the facts here again are the contrary. Increasingly, defense spending results in more high tech-high cost weapons systems that only boost still further the bloated profit margins of defense giants like Lockheed, Raytheon, Boeing and others, and actually result in more jobs outsourcing to these same companies foreign defense contractor partners in Japan, Germany, Israel, the United Kingdom and elsewhere.

The S&P-Fortune 500 largest corporations today sit on more than $2 trillion in cash and refuse to spend it to invest in America and create jobs here at home. The big tech-big bank-pharmaceutical companies sit on another cash hoard of more than another $1 trillion sheltered offshore and refuse to bring it home to create jobs. And the big 19 banks sit on still another $1 trillion and refuse to lend to small businesses to create jobs.

If big banks and big business refuse to use their bailed out $4 trillion cumulative cash hoard of the past three years to create jobs, then the government must tax it, must take it back from them and directly create jobs itself. The U.S. needs a 21st century version of the 1930s Depression-era New Deal jobs programs, adapted from the past to present conditions. What the U.S. economy needs is the immediate creation of a Civilian Conservation Corp (CCC) program similar to that created in 1933. In just 90 days the CCC created the equivalent of 1.2 million jobs in today’s economy. Intermediate and longer term, what the economy now needs is a new 21st century Works Progress Administration (WPA), that created between 1935-40 the equivalent today of 25 million jobs.

More specifically, the U.S. needs a new Alternative Energy Public Investment Corporation (AEPIC), in which the government would invest directly in alternative energy infrastructure. It needs a modern version of the 1930s CCC, a Civilian Reconstruction Corporation (CRC), to directly build, repair and maintain urban areas and urban renewal. It needs a Community Health Services Administration (CHSA), to build medical clinics in communities and provide direct health services to the working poor, those on Medicaid, and the 50 million uninsured. And it needs a 21st Century Works Progress Administration(21WPA), that targets job creation in non-infrastructure and non-health services employment across all other industries and occupations.

The $4 trillion to fund these direct job creation programs are there. There s no need to raise the deficit or debt. If the super-wealthy and their big corporations and banks wont spend the trillion dollar bailouts they were provided by the US taxpayer, to invest in America and create jobs, then the only alternative is for the government to reclaim those trillions and spend it on direct job creation programs itself.

Jack is the author of An Alternative Program for Economic Recovery, available at his website, http://www.kyklosproductions.com, and the forthcoming March 2012 book, Obamas Economy: Recovery for the Few, by Pluto Press and Palgrave-Macmillan.