Friday, September 16, 2011

WSJ: "Indicators Signal Recovery's Fragility"


September 16, 2011 p. A4

The WSJ is reporting that new claims for unemployment insurance rose to 428,000 "seasonally adjusted" for the week ending Sep 10, which is up 11,000 from the previous week. Here are the data points reported:

At the height of the recession, initial jobless claims "seasonally adjusted" exceeded 600,000

Prices are now up 3.8% from a year ago and core inflation, a measure that includes food and fuel, is up 2%

"Economists Say that U.S. Recession Looks More Likely"

Majia here: The idea that the US ever truly left the recession is flawed. Although technical numbers such as GDP stopped contracting, they did so primarily because of government stimulus spending.

Some of the stimulus spending was well targeted (such as funding for infrastructure and schools), but programs such as cash for clunkers were, in my opinion, absurd because they merely stole demand from the future.

In general, the stimulus did little to halt the hemorrhaging of private sector jobs and only staunched the loss of public sector jobs at state levels and below.

The stimulus effect is wearing off now and the recession continues unabated.

Job losses are likely to continue, although the massive numbers of unemployment claims filed in 2008 and 2009 will probably not be matched because so many corporations have already elminated as many employees as possible and cannot eliminate too many more without disrupting work flow.

More and more of the population is falling out of the middle class as a result of the structural downsizing of the economy. The 2011 Census Report observes that poverty increased between 2009 and 2010 and household income shrank. These developments occurred also between 2008 and 2009.

In effect, the average American has experienced 4 years of declining household income and loss of benefits such as health care and retirement savings.

The US alone among developed economies lacks a national health care policy. Consequently, in the US people without health care suffer and die. Without a job, few people can afford health care because of its exorbitant cost.

Health care is also a sort of tax on corporations and businesses that operate in the US.

Without expanding our social safety net, more and more Americans are going to be without steady income and without basic services such as health care.

There is a concept in social theory called a revolution of rising expectations.

Americans and many people in the world expect that their hard work will, across time, result in moderately improving standards of living.

The Wall Street Journal reported earlier this week that the US has an inequality ratio comparable to Mexico and the Philippines.

What do you think is going to happen as the average American household finds it year over year more difficult to pay for housing, utilities, food, transportation and health care?

Declining standards of living coupled with gross inequality are together going to produce significant social unrest.

Revolutions of rising expectations are likely to be angry revolutions.

The structural changes occurring in the US economy are not inevitable outcomes of technological progress.

Rather, the decisions to automate to eliminate labor, to outsource to reduce costs, and to prioritize executive salaries and rising stock values over all other considerations are going to result in profound societal dislocations.

The slogan "off with their heads" may again resonate with the dispossessed.



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