Jack Rasmus

For Readers interested in my day-to-day takes on developments in the US and global economy, my commentary on my twitter account may be of some interest. Here’s my latest two months of comments. (For longer analyses, see my blog, jackrasmus.com, entries. And for feature length published articles, see my website, http://www.kyklosproductions.com, where articles, radio-tv interviews, and public presentations are available.

Follow me on twitter at: @drjackrasmus

Concluding February 28, 2014:

Big China currency drop to continue–will Yuan link to derivatives play similar role that subprimes + derivatives (CDS) did in US in 2008?

Eurozone drift to deflation at 0.8%–statistically insignificant from last 3 months–and before Ukraine crisis his Euro bank lending in 2014

Listen to my radio show, Alternative Visions, every saturday 1pm, eastern time. This March 1: more on China, at http://prn.fm/#axzz26hkFIP6s

Ukraine currency in freefall. Contagion effects on emerging markets Watch out for Austrian banks. EU/US will promise aid, but deliver little

China’s currency decline catching attention. US says it’s manipulating. China denies. Neither mention role of shadow banks playing the Yuan

For my view how emerging markets crisis, China’s economic slowdown, and Euro deflation may converge, go to my blog, http://jackrasmus.com

Recovery Eurozone? No. EZ 0.3% GDP growth not recovery, but stagnation. Drift to deflation, France new ‘bad boy’, German mixed indicators

Japan ‘Abenomics’ QE-liquidity strategy a (mimic of US Fed) not producing real growth recovery, mostly asset inflation & speculator profits

US consumer credit 4Q13 rises at unsustainable near $1 trillion annual rate. No real income growth for most means consumption lag in 1Q14

Holland meets with Obama. What’s it about? New joint push on Transatlantic Free Trade deal, now that TPP is tabled by Sen. Reid until Nov.

Stocks say Hooray to Yellen. No change from Bernanke, slow retreat from QE, and may reverse if real conditions get worse, which they are.

Conclusions my two prior tweets: China turning ‘back to the future’ to export driven and capital inflow driven growth, as 2014 economy slow.

China trade surplus 2013+$188b. Hot money inflow=$242b. Latter going into shadow banks & local mkts=housing & debt bubbles rising

Emerging Mkt capital flight, not just to ‘west’ but to China. Money capital flows into China in 2013=$242B, compared to $16b in 2012.

US jobs low for 2nd month in row. See my predictions of that last Dec. & Oct., in my ‘False Positives’ articles, at http://jackrasmus.com

US auto sales, manuf. & new orders, construction spending all plummeting today. see my prior analyses at http://jackrasmus.com

3rd phase global econ crisis now underway as USA exports crisis to emerging mkts, EZ slides toward deflation, China shadow banks get worse.

Read my contrarian analysis of Bernanke Fed’s performance, ‘Bernanke’s Bank: An Assessment’ at http://www.kyklosproductions.com/articles.html

Fed tapers another $10b. Emerging mkts retreat again. Capital flight to UK-US-EU grows. US durable goods and housing further weaken.

For contrarian view of Obama speech and income inequality see my blog, http://jackrasmus.com

China manuf contracts in latest rept, as global slowdown continues shift to Asia & EmrgMkts, from US and EU, as capital flows back east-west

Official US retail sales rise Dec: 0.2%. Ex-gasoline, less than 0.1%. Retail sales’ bumpy ride 2013: near flat-declines Jan, Mar, Sept,Dec.

Will 2014 see triple dip in US housing? Starts&Permits:1st=2006-08(-40%), 2nd=2010(-18%), 2012-13 decline from 40%to less than 5%

Big question #3 for global recovery ’14: Can China tame its shadow banks and prevent property bubble bust without slowing rest of economy?

Big question #2 for global recovery ’14: will Eurozone ‘epic’ recession (epic=short shallow recoveries followed by relapses) continue?

Big question for global recovery ’14: will goods disinflation in US, EU, and key emerging markts lead to deflation, as Japan prices stalls?

For my contrarian analysis of US jobs market, see my blog, http://jackrasmus.com , ‘False Positives Revisited: Dec. US Jobs Report’, 1-15-14

Real news on Dec.retail sales today=auto sales in big retreat. Rest of retail rise due to deep discounting. Both likely to weaken in Jan-Feb

US stock volatility coming: US jobs market retreat again+EU deflation+France economy sags+China property debt rises+Japan QE effect fades

US Dec jobs plummet, as I predicted. Prior gains based on record business inventory buildup 3rdQtr, followed by low holiday sales=layoffs

China shadow banks have run up debt as % GDP there higher than in US in ’07 and Japan in ’90 CHina rate measures so far have little effect

Eurozone deflation trend continues. 0.8% rate in December, after similar Oct-Nov. Watch for ECB to lower rates again–to no effect.

Last week Boeing Union workers were forced into massive concessions demanded by the company. Listen to their story at http://prn.fm/category/archives/alternative-visions/ …

On my theme global economy is in long-run slowdown, note today’s 4 China purchasing mgrs reports–all 4 in decline nearing 50.0 stagnation

For a 10mTV interview on the 100th anniversary of the Fed’s history of bank bailouts, go to http://www.kyklosproductions.com/videos.html

Starting January 2, 2014

For the Print Version of ‘The Emerging Global Economic Storm’, see the March 2014 issue of ‘Z’ magazine.

The draft of the Z magazine article is also available on Dr. Jack Rasmus’s webstite at:

http://www.kyklosproductions.com/articles.html

Alternative Visions – An Emerging Global Economic ‘Perfect Storm’? – 02/19/14

Feb 19th, 2014 by progressiveradionetwork

Dr. Jack Rasmus explains why the global economic crisis that emerged in 2007-08 may now be entering a ‘3rd Phase’. Dr. Rasmus discusses what’s happening now with the economies in China, Japan, Emerging Markets (India, Indonesia, Brazil, Turkey, So. Africa and others), and Europe. Why is China on a long term growth slowdown path? Why is Japan’s USA-like central bank QE money injection policy failing to stimulate Japan’s real economy and leading to Japan’s ‘fourth dip’ recession since 2008? Why is Europe drifting toward deflation and its recovery stagnating, with France now the ‘bad boy’ economy of Europe? Why are the emerging market economies locked into a growing crisis, with massive capital flight flowing back to the west, falling currency values, and inevitable slowing economies? What are the possible ‘contagion effects’ between the three ‘stormfronts’—China, Emerging Markets, Eurozone—and how are ‘mutually amplifying’ feedbacks about to exacerbate problems in each—creating a three front global economic ‘perfect storm’? Finally, what might this ‘Emerging Economic Perfect Storm’ mean for the USA economy, once again slowing in 2014 after its latest ‘false start’ last summer? (For more on this topic, read Dr. Rasmus’s forthcoming March 2014 ‘Z’ magazine article, ‘The Emerging Perfect Storm’, his last October 2013 ‘Z’ article, ‘The Slowing Global Economy’, and shorter entries on his blog, jackrasmus.com, since January).

To Listen to the above show of 2-19-14, go to:

http://www.alternativevisions.podbean.com

Dr. Jack Rasmus interviews Ellen Brown on her run for California State Treasurer, and on the topics of public banking, ‘bail-ins’ and BItcoins.

The interview is archived and downloadable later today at:

http://prn.fm/category/archives/alternative-visions/

And is also available at: http://www.alternativevisions.podbean.com

ANNOUNCEMENT OF SHOW:

‘Dr. Jack Rasmus welcomes back Ellen Brown to discuss her just announced candidacy for California State Treasurer. Ellen explains how, as Treasurer, she would create a California Public Bank, modeled on the existing North Dakota state public bank. The advantages of public banking are explained, and how it would operate in California to invest the State’s current $54 billion investment fund pool to benefit the people of California, instead of big global financial institutions. Ellen explains why low cost 1% or less loans to California citizens and businesses are possible if a public bank existed, and why recent past proposals for a Public Bank in California got to governor Jerry Brown’s desk and were allowed to expire. Jack and Ellen also discuss the likelihood of future ‘bail ins’ in the next financial crisis, where depositors would have their savings confiscated in exchange for worthless bank stock to bail out the banks next time. Jack also gives his view of ‘Bitcoins’ as ‘digital tulips’ that will eventually collapse but are a threat nonetheless to credit card companies and government tax collectors.’

On February 1 current Federal Reserve chairman, Ben Bernanke, will leave office. The accolades and praises of the Fed’s performance under his lead have begun to flow. Not surprisingly so, since Ben has ‘saved’ the capitalist banking system by providing about $20 trillion in near free and subsidized money for the banks, shadow banks, and wealthy investors since 2008. Conversely, that ‘liquidity’ injection unmatched in history has done little for the rest of the economy and the remaining 99% US households.

There is a great misunderstanding that the purpose and primary function of the Fed is to regulate the money supply and to supervise the banks. The purpose of the Fed, as the below referenced article, ‘Bernanke’s Bank: An Assessment’ clearly shows, has been from the Fed’s inception in 1913 to bail out the banks first and foremost. And money supply management and bank supervision have always been sacrificed to that primary objective. From the Fed’s creation to the recent ‘Bernanke Bailouts’ that is the historical record.

The article provides an historical overview of the Fed’s performance under Bernanke, as well as a view of the origins of the Fed and an overview of its performance since the 1970s.

The corollary point is also made that the Fed, in bailing out the banks, not only sacrifices money supply management and bank supervision but sets in motion processes that lead to still further financial instability, crashes, and subsequent bank bailouts. In short, bailing out the banks leads to further need to bail out the banks. But that’s how capitalist finance evolves, survives, and continues as finance capital increasingly ‘socializes its losses’ in order to privatize still further financial gains.

The 5k word feature article, ‘Bernanke’s Bank: An Assessment’, may be read in full in the February 2014 issue of ‘Z’ magazine, as well as accessed from the author’s website at http://www.kyklosproductions.com/articles.html

Today, January 28, 2014, President Obama will address the nation in his State of the Union (SOTU) speech to Congress. A major theme of the address will be the growing income inequality in the US.

His speech represents an echo of similar themes and talks that have been presented this past week at the World Economic Forum (WEF) in Davos, Switzerland. That’s where every January the big capitalists of the world gather to discuss amongst themselves the major issues of the past year and what to do about them—in between being entertained by various cultural celebrities and performers who have been allowed into their club as junior partners in wealth. The annual Davos cultural events are not unlike the small venue side-shows held in the big Las Vegas casinos: the entertainers strut and sing while the real betting and dice-rolling discussions involving future capitalist policy initiatives go on behind ‘invitation-only’ doors requiring tickets for entry costing hundreds of thousands of dollars to attend ( the typical ticket price of entry for a Corporate CEO and his entourage at Davos, for example, exceeds $500,000).

This year the WEF and global capitalists have ‘discovered’ income inequality, now accelerating and intensifying worldwide to a dangerous degree, and especially in the US. The dimensions of the inequality problem have grown so severe in recent years it may, they themselves are now warning, result in unwanted ‘social unrest’ in the near future.

Now that it has become an ‘acceptable’ discussion theme, Obama and Democrat party politicians (and a few clever Republicans) have also discovered income inequality. Together they plan to raise the rhetoric on the topic in upcoming midterm and 2016 national elections. Therefore, in Obama’s SOTU speech today we’ll hear some basic facts about the problem, some vague proposals that are never intended get to the earliest legislative stages, and a lot of general talk about how improving ‘opportunity’ is the only answer to reducing inequality—all of which means let’s not do anything significant in the short run but instead focus on very long run solutions like improving childhood education, creating long run opportunities, and other very long term solutions.

The politicians’ new discovery of inequality follows liberal academics discovery of the same in recent years. Well known fellows like Paul Krugman, Robert Reich, Joe Stiglitz, James Galbraith and others have all written their books on the topic in recent years. But they too, like the politicians they support, have been very careful about recommendations for resolving the problem, mostly repeating time-worn, mushy old liberal proposals involving ‘education and opportunity’ once again.

The growing income inequality in the US goes back at least to the late 1970s, accelerating during the 1980s and early 1990s, and then again after 2000 under George W. Bush. It’s grown the worst under Barack Obama, with latest figures showing the wealthiest 1% households accruing for themselves since 2009 nearly all (more than 90%) of all the income gains during the so-called ‘recovery’.

More recent, damning revelations about the extent of growing inequality go back to 2002 at least—long before the politicians and the more well known liberal economists acknowledged it. In 2002 University of California, Berkeley economist, Emmanuel Saez, began publishing his analyses of IRS income data, since all pre-existing sources of income inequality by the government and business more or less obfuscated the true picture. Saez has updated his ground-breaking results periodically ever since. Most of what is reported and published about the income gains of the wealthiest 1% are from his researches.

This writer relied heavily on Saez’s data in his 2004 book, ‘The War At Home: The Corporate Offensive From Ronald Reagan to George W. Bush’, which attempted to identify the various policies since the late 1970s that have been largely responsible for the inequality shift that Saez so well documented in 2002. Saez’s hard data—then and ever since—is irrefutable. However, the political implications behind Saez’s data were not spelled out, except for some suggestions concerning the tax structure.

But Income inequality in the US is no accident. It has conscious, deliberate origins, to be found in the policy initiatives of corporate America since the late 1970s, and the willingness of the politicians Corporate America elects in Congress, Presidents, and at State levels—Democrat and Republican alike—to implement those policy initiatives.

There’s the tax restructuring in favor of the rich and their businesses, the free trade and offshoring, the atrophying of the real minimum wage, the dismantling of real pensions and employer contributions to healthcare, the shift from full time permanent jobs to part time and temp work, the destruction of unions and higher paying union jobs, the displacing of higher paid jobs with technology, substitution of credit for lack of wage growth, failure to invest in the US by corporate America, so on and so on.. That’s why jobs, real wages, and incomes for the vast majority of American households has stagnated at best, and declined in real terms for most. That’s why wage earners’ income of the bottom 80% households have contributed to income inequality.

But all that’s still only half the story of income inequality. The other ‘half’ of the story is why the incomes of the 1% have risen so sharply as well. Both their rise, and the stagnation-decline of the bottom 80%, are jointly responsible for the income inequality.

Corporate America and their politicians, and the policies they’ve initiated and implemented, are responsible for the accelerating capital incomes of the rich (1%), very rich (0.1%), and mega-rich (0.01%). And much of that has to do with the enabling of financial asset speculation and financial securities inflation that has been the defining characteristic of the US (and global) economy since at least the 1980s. Reagan unlocked that door. Clinton opened it. And George W. kicked it in. And Obama has done nothing to repair the entry.

Real solutions to income inequality would have to include proposals not only to enable the recovery of incomes of the middle working class, and the working and non-working poor, but would have to include proposals to reign in the runaway income accumulation of the very rich, the mega-rich and their friends. But you won’t hear the latter even suggested in Obama’s SOTU speech. What you’ll hear are token long run proposals to slow the decline in income growth for the working poor perhaps, and a lot of vague suggestions about the middle class.

What the middle class needs is decent jobs and tens of millions of them, just to restore what has been lost in the past 15 years. There are still 20 million unemployed in the US, and more than 5 million more have left the labor force. 60% of the jobs that have been created since 2009 have been low paid, while 58% lost have been high paid. Retirement systems are broken and retirees income for tens of millions are in freefall. Obamacare has meant those with insurance now have to pay more for less. Tens of millions of students are effectively indentured and can’t find jobs. If Obama and his politicians want to do something about income inequality, let’s hear concrete legislative proposals to address these issues now, immediately, in the short run.

It took the Krugmans, Reichs, and Stiglitzes only a decade to ‘discover’ their academic colleague, Saez’s, significant work. Better late than never, I suppose. However none of the liberal economists bother to point the finger at the politicians responsible, especially their Democratic party friends, for the inequality trends. But if anything serious is going to be done about income inequality in the US, it will have to include not only real, short term solutions to raise the incomes of the many but also serious, real measures to take back the excessive income gains of the rich and super-rich as well.
For the latter will be necessary to fund and restore decent jobs and wages, to revitalize a crumbling retirement system, to save a collapsing healthcare system, and, yes, even to provide affordable education opportunities for all.

Jack Rasmus,

FOR MY MOST RECENT ASSESSMENT OF THE BUDGET DEAL OF 2013 AND THE US ECONOMY HEADING INTO 2014, ACCESS THE VIDEO OF MY TV INTERVIEW OF JANUARY 9, 2014, AT THE ULR NOTED BELOW.

Dr. Jack Rasmus on ‘The US Congress’ 2013 Budget (Mis)Deal’
Other Voices TV, Palo Alto, California
January 9, 2014 (58 min 25 sec)

Access this 58min. Video at: http://www.kyklosproductions.com/videos.html
(also available on Youtube)

Jack Rasmus is interviewed by host, Paul George, as guest on the TV show, Other Voices, and explains in detail the terms of the US Congress December 2013 budget deal. Defense spending remains untouched while pensions, unemployment benefits and food stamps are cut, contrary to the various ‘spin’ reports in the press. Austerity American Style is explained, contrasted to European versions. Dr. Rasmus predicts big corporate tax cuts coming after the November 2014 midterm national elections in the US, explains his idea of ‘epic’ recession which forecasts continued long term US ‘stop-go’ recovery, and explains how the $15-$20 trillion Federal Reserve bank-investor bailout under departing chairman, Ben Bernanke, has left the rest of the US economy still struggling.

Alternative Visions – Save Our Unions’ Book Interview with Author, Steve Early – 01/22/14

Jan 22nd, 2014 by progressiveradionetwork

Jack interviews author, Steve Early, on the release last week of Steve’s new book, ‘Save Our Unions’. An important book providing numerous cases and examples of specific union worker efforts over the past four decades to defend their unions and interests. Jack discusses with Steve, in the attempt to glean from the book’s many case examples what lessons it suggests for union labor’s current strategic impasse in bargaining, organizing, and political strategy—a continuing theme of recent Alternative Vision shows and interviews. Jack and Steve discuss the strategic implications of the past four decades of partial victories, and numerous defeats, suffered by union labor in America, and what ‘needs to be done’ going forward if unions are to rise again to play the economic and social role in the future they once did in the past. Jack argues more ‘thinking out of the box’ by unionists is needed in order to resurrect union labor, including revising internal union structure and organizational practices—locally, nationally, and globally.

This interview is available at http://www.alternativevisions.podbean.com

In a blog post this past November 2013, this writer offered a contrarian analysis of the October 2013 government jobs report. That report indicated a jobs gain of 204,000 for October. While others heralded the number, claiming it was evidence that the US jobs market had (yet again) ‘turned the corner’, this writer forewarned the October job gains would prove temporary. My contrarian view was that the October job gains reflected a temporary surge in 3rd quarter U.S. GDP, which was itself based largely on a short term surge in business inventory accumulation that Qtr., with a lagged October hiring effect. The October jobs numbers were therefore “nothing to get excited about” and “can disappear quickly from the economy and may in fact do so by December should consumer spending come in well below expectations.” (see my ‘False Positives’ piece on this blog, of November 12, 2013).

It appears that ‘disappearance’ is what has happened, as last week’s December jobs report showed a net job gain of only 74,000. So what’s going on?

Last month’s jobs report shows not only that job creation has relapsed once again, but that weak job creation is not the only problem with the US labor market. While only 74,000 jobs were created, the labor force in the US shrunk by a further 347,000 workers in December as well. Hundreds of thousands of workers have been dropping out of the labor force in recent months. Both indicators—weak job creation and massive labor force exiting—reflect a labor market in deep trouble still, after nearly five years of so-called recovery.

The 347,000 exits from the labor force in December follow another, even greater exodus of 700,000 in October. Even if half of that number may be due to the government shutdown event of that month, it’s still another 350,000 exits. What the last three months shows, therefore, is that at least as many workers are leaving the labor force, as there are jobs are being created. A kind of a ‘churn’ is therefore taking place.

During the first six months of 2013, about two thirds of all the jobs created were ‘contingent’ jobs—i.e. part time and temp jobs—paying well below the average hourly rate. So in the first half of 2013 another kind of ‘churn’ was also taking place: full time jobs were being lost while part time and contingent jobs were being created. That also meant that higher paying jobs were being replaced by lower paying—a trend that has been going on for several years now.

That contingent hiring trend in the first half of the year has moderated somewhat in the second half of 2013, and replaced by the new trend of an accelerating exodus of workers from the labor force.

So it is not just stop-go, month to month job creation , but low-paid contingent job creation, and the massive number of workers leaving the labor force that together represent the major defining characteristics of the US labor market over the past year. It’s not a pretty picture.

The fact that between 700,000 and 1 million workers have left the labor force in just the last three months makes the unemployment rate as an indicator of the health of the jobs market an irrelevant statistic. Because of the way the US erroneously calculates the unemployment rate, a massive drop in the labor force results in a convenient fall in the unemployment rate. Those who leave the labor force are not included in the determination of the unemployment rate. They may be jobless, but aren’t included as unemployed in the government’s oxymoronic method for calculating unemployment. Consequently it is the mass exodus—not a big increase in actual jobs—that is lowering the unemployment rate.

Most serious economists know the unemployment rate is misleading, and don’t put much trust in the unemployment rate as an indicator. They supplement it by looking at other indicators: job openings, turnovers, quit rates, average work week, jobless claims, duration of unemployment, etc. But most of these are short term indicators, and can be volatile and unpredictable month to month.

A better indicator of the long term declining health of the US labor market is the labor force participation rate, and the related employment-to-population ratio. They show how well the US economy has been producing jobs longer term and as the population grows. And both these indicators continue to show a deep malaise in the US job market.
The labor force participation rate has steadily declined for years in the US, starting before 2008 and accelerating after. In June 2009, the declared official ‘end’ of the current continuing recession for the bottom 95% of us, the civilian labor force in the US totaled 154,926,000 workers. This past December 2013 the total labor force was 154,408,000. At first this appears as if there’s been no change in the labor force. However, one must include in this the estimate that, on average, about 100,000 to 150,000 new workers enter the labor force each month. Taking the low end 100,000 figure, it means in the four and a half years since June 2009, no less than 5.4 million workers have left the labor force. (100,000 x 12 months x 4.5 yrs). That’s about the same number of jobs created in the 4.5 year period.

In June 2009 approximately 139,800,000 workers were employed in the nonfarm labor force in the US. In December 2013, that number had risen to 144,400,000. So about 5 million new jobs have been created in the past 4.5 years, averaging 93,000 a month, while about 100,000 a month on average have also been leaving the labor force. (Numbers for both the labor force and nonfarm jobs above are from the US Labor Department’s ‘Current Population Survey’).

What we have therefore is a ‘great jobs churn’ going on in the US labor market since 2010—new entrants coming in at low pay, often contingent, service jobs while roughly the same number of workers leave the labor force who were once higher paid. And because the labor force drop outs aren’t counted as unemployed, it appears as if the labor market is improving since the unemployment rate is declining.

The December picture is even more dismal than the numbers above indicate. Both the 74,000 jobs and -347,000 drop in labor force that occurred in December 2013 are ‘statistics’. That is, they are not the actual numbers. Statistics are manipulations on raw data and actual numbers. They are ‘operations’ on the data, in most cased designed to smooth out the swings and fluctuations in the raw data that occur due to seasonality and other factors.

The raw data on jobs created and labor force exits for December show an even worse picture than that reported by the ‘stats’. The raw data show total nonfarm jobs actually fell by -246,000 instead of growing by 74,000, and the labor force declined by -502,000.

Whether statistically smoothed or the actual raw data, the jobs numbers for December were disastrous. Some argue the abysmal December numbers reflect a correction to the excessively high, 200,000 plus numbers for October and November. Others argue that the bad December numbers result from bad weather. But weather metaphors aren’t an explanation; they are an excuse for those without an explanation for what’s going on. And if the US government is consistently that inaccurate estimating jobs month to month—i.e. widely over-reporting one month and under-reporting another—then that should raise red flags about its methods to being with.

It may very well be that the Labor Department’s established methodologies for estimating jobs are today out of whack and unable to account for the fundamental changes in the labor markets that the recent deep recession has caused—such as the accelerating rise of contingent labor, the massive swings and exits from the labor force, the shift of millions from employment to disability insurance, a growing urban shadow economy that is mis-estimated in terms of jobs, methods for accounting for new business formation effects on job creation, the diversion of job creating investment from the US to offshore emerging markets and/or into financial asset speculation, the hoarding of trillions in cash by big multinational corporations, the increasing job displacement effect of capital investment, the negative effects of expanding free trade on jobs, and so on.

All this is not to say the December job statistics are purposely ‘falsified’ by the government in some conspiratorial fashion. The methods are perhaps just outdated. The Labor Department does report the raw data for jobs, for example. It is just that the capitalist media simply chooses to report the less severe statistical data as the sole ‘truth’, ignoring the raw data, and saying nothing about how changes in the real economy may be undermining the accuracy of the old statistical methodologies. Or the press hypes the weather as the cause of the poor job numbers, or suggests temporary technical factors are responsible.

However, neither technical factors nor bad weather are necessary to explain the poor December jobs numbers. In my initial ‘False Positives’ piece written in early November, it was suggested that the big surge in 3rd quarter 2013 GDP in business inventory accumulation likely explains much of the lagged big surge in October-November jobs. Business bulked up on inventories in the 3rd quarter, in what has proven to be an erroneous expectation of a big consumer spending surge over the recent holiday season. The production of those inventories, and expectations of follow-on retail sales in the closing months of 2013, explain the brief hiring surge in October-November—as well as the subsequent sharp slowdown (seasonally adjusted) or actual decline (raw data) in December jobs. The ‘False Positives’ piece predicted that the anticipated retail sales at year end would not follow the 3rd quarter inventory buildup—and that would all result in a major reduction in job creation by December.

Data for December just reported show an overall growth of retail sales of only 0.2%–which is a decline from a prior, already weakening, November number of 0.4%. In fact, retail sales have been consistently weak since the September ‘back to school’ event. Sales have slipped ever since. Sales this past holiday season were the worst since 2009, according to a ‘Market Watch’ business research review of the data, as of the week ending December 28.

At the heart of the December slowdown in retail were auto sales. Autos have been the major force holding up consumer spending throughout the past year. However now it appears the US auto market, after several years of historic discounting to boost auto sales, is now becoming relatively saturated. For example, GM’s auto sales declined 6% in December from the prior year and its truck sales even more.

While others note that non-auto retail sales rose in December, non-auto sales also reflected weak economic conditions as retailers introduced large discounts in the final weeks of the month as it appeared consumers were reducing their expenditures. Those discounts will soon result in lower retail profits, and in turn therefore disappear in January-February 2014. Thus both autos and non-auto retail are therefore set to slow or even decline in coming months. In turn, the job creation picture could weaken still further in early 2014.

To summarize, what lies behind the December jobs slowdown, and the accelerating exodus of jobless workers from the labor force, is the likely pullback in business inventory spending at year end and the weak prospects for retail sales. Hiring slowed significantly at year end, and many of those that were hired in the fall—as inventories bulked up and big retail sales were anticipated—will soon be laid off once again.

Entering 2014, the picture will likely be one of further retreat in business inventory accumulation, more softness in retail sales, fewer hires, and a continuing slowdown in auto sales, and in turn fewer hires and more layoffs.

But the raw jobs numbers for early 2014 may be ‘smoothed out’ once again by the statistical changes forthcoming in early 2014, as the government is scheduled to change its ‘benchmarks’ for estimating jobs that could ‘statistically’ boost jobs by several hundred thousand. That statistical adjustment could effectively ‘drown out’ a continuing weak jobs creation picture when measured by the actual raw jobs data. It may appear the jobs picture is not as bad as it actually is in fact—when the raw data will show otherwise. But you won’t hear that from the mainstream press.

Jack Rasmus, 11-13-14

Jack is the author of the book, ‘Obama’s Economy: Recovery for the Few’, Pluto press, 2012 and ‘Epic Recession: Prelude to Global Depression’, Pluto, 2010. He is the host of the weekly radio show, ‘Alternative Visions’, on the Progressive Radio Network. His website is http://www.kyklosproductions.com, his blog, jackrasmus.com, and twitter handle, @drjackrasmus.