“If we care about building a fast growing economy that provides opportunity for every American, then we must enact policies that build it from the middle out, not the top down. Tax the wealthy and corporations–and invest that money in the middle class as we once did in this country. Those polices won’t just be great for the middle class, they’ll be great for the poor, for businesses large and small, and the rich.”
— Nick Hanauer, “A 1 percenter tells the truth about “job creators”, Hullabaloo
U.S. workers are getting squeezed like never before. Hourly pay for nonfarm workers (you and me) fell at an annual rate of 3.8 percent in the first three months of the year. This represents the biggest decline in wages on record. Factory workers took an even bigger hit. They saw their wages plunge by nearly 7 percent in the same period. These grim figures were released last week by the Bureau of Labor Statistics (BLS) in their quarterly Productivity and Costs Report. The report was ignored by virtually all the mainstream media, and for good reason, it shows that the recovery is largely a mirage created by tub-thumping media pundits and their miscreant corporate bosses.
Last week’s news on wages was followed by even bleaker data on US manufacturing (which dipped into contraction in May) and a tepid unemployment report where nearly all of the jobs created were execrable part-time, low-paying service sector positions that provide neither benefits, pensions, health care nor sufficient income to feed and clothe oneself. Wall Street reacted to the wretched job’s report in predictable fashion, by buying up everything that wasn’t bolted to the floor of the NYSE. The Dow Jones ended Friday up 207 points while the S&P and the NASDAQ catapulted higher.
Falling wages, lackluster hiring and a slowdown in manufacturing have to be seen in the broader context of record-high corporate profits, ever-widening inequality, and steadily-shrinking budget deficits. Corporate earnings have consistently beat estimates despite weaker revenues mainly because cost cutting CEOs have trimmed their workforce wherever possible and slashed expenses to the bone. Meanwhile, all the gains from increased productivity have gone to management, which means labor no longer has sufficient income to sustain demand. (See charts here)
So, while US workers are busy mopping tables at Denny’s or cleaning bedpans at the local retirement center for minimum wage, US companies are rolling in clover. Take a look at this from the Wall Street Journal:
“American companies are keeping a record cash pile. U.S. nonfinancial corporations held $1.78 trillion in cash and other liquid assets in the first quarter of the year, up $46 billion from the end of 2012, the Federal Reserve said on Thursday.” (“Vital Signs Chart: Companies Holding Record Cash Pile“, Wall Street Journal)
US corporations have so much money they don’t know what to do with it. But they know what they DON’T want to do with it. They don’t want to invest in a sinking economy where demand is weak, unemployment is high, and 47 million people are scraping by on food stamps. Oh no, they don’t want that at all. They don’t want to recycle their hard-earned lucre into Obama’s black hole economy when they can double or triple their dough via stock buybacks. The beauty of buybacks is that they goose share prices higher while adding absolutely zilch to production. Swapping paper assets is just another way for the uber-rich to skim more cream off the top. Check this out from Trader Magazine:
“Companies authorize buybacks and carry them out from time to time through brokerages as a way to reduce outstanding stock and increase per-share earnings. U.S. firms have announced about $275 billion of repurchases this quarter, the highest total in more than five years, Jeffrey Kleintop, chief market strategist at LPL Financial Holdings Inc. (LPLA), wrote in a report this week.” (“Goldman Sachs Buyback Orders Reach Highest Level of Year“, Traders Magazine)
The rich are getting richer, but none of the wealth is trickling down to the wage slaves below. In fact, things are getting worse for working people all the time. Did you know that wages, as a share of gross domestic product GDP are at a record low? In the booming ’70’s, wages accounted for more than 50 percent of GDP. Now that figure has dwindled to less than 44 percent and is on track to drop even further. Of course, everyone knows why wages are flatlining. It’s because all the money is flowing upwards to the Scotch-guzzling bankers and their shifty plutocrat friends. As U.C. Berkeley economics professor Emmanuel Saez discovered in his research on inequality, 65 percent of the country’s income growth between 2002 to 2007 went to the top 1 percent of households.
Surprisingly, it’s gotten worse since the recession ended. According to the Pew Research Center the top 7 percent of US households increased their wealth by 28 percent from 2009 to 2011, while the bottom 93 percent saw their wealth slashed by 4 percent. So, while the moneybags 1 percenters at the top of the fiscal foodchain have recouped all their losses from the financial crisis, (thanks to QE3) working people are still facing the same problems they’ve faced for the last 5 years; droopy paychecks, soaring unemployment, and government cutbacks that suck the life’s-blood out of the economy. All of these are going to get worse as the sequester tightens its grip in the second half of 2013. This is from the New York Times:
“In the last three months, the federal work force has shrunk by about 45,000 positions, including 14,000 in May alone. In part, that is because federal offices have gone on hiring freezes and taken other steps to wrench down their spending.
Tens of thousands of federal workers are also seeing their hours cut through mandatory furloughs and bans on overtime. …expect those furloughs to take a significant bite out of income and consumer spending. Come July, for instance, the Pentagon is going to start to furlough 680,000 civilian workers – out of about 800,000 total – for up to 11 days each.
Sequestration is having an impact on private businesses as well, even if it is harder to see given the way the recovery continues to chug along. Millions of their customers have less money to spend.” (“The Sequester Starts to Show”, New York Times)
Still think the sequester’s not going bite?
Think again. Falling wages are the unavoidable result of government deficit reduction policy which keeps unemployment needlessly high. The administration’s obsession with budget cutting has pushed wages below 2012-levels when worker pay grew by a measly 1.9 percent year-over-year barely keeping pace with the rate of inflation.
While the sequester accounts for less than 50,000 lost jobs (so far), the sum is much higher when one adds the 750,000 public sector jobs (mostly state and local) that were cut during the recession. Had Obama provided desperately needed fiscal aid to the states during the worst part of the slump, most of these jobs could have been saved which would have boosted tax revenues, increased activity, and turbo-charged GDP. Instead, Obama chose to follow the advice of his nincompoop deficit hawk advisors who see high unemployment as an opportunity to crush organized labor and reduce living standards across the board. Here’s more from Andre Damon at the World Socialist Web Site:
“Since June 2009, the public sector as a whole has eliminated 737,000 jobs, nearly half of which have been in state and local education.
The millions of people who remain out of work are having any remaining government assistance taken away from them. Two million people had their unemployment benefits cut back by up to 20 percent due to the “sequester” budget cuts. Many have been cut from rolls altogether as a result of cuts in states throughout the country.
The U-6 unemployment rate, which includes those working part-time for economic reasons, remained essentially unchanged at 13.8 percent, meaning that 22 million people in the US are either unemployed or underemployed…..
The May jobs report points to the fact that there has been no economic recovery for working people in the United States: millions remain unemployed, and millions more have left the labor force because no jobs are available. Wages, which have plunged in real terms since 2008, remain stagnant, while government assistance for the poor and unemployed is being slashed.” (“Anemic US jobs report points to ongoing slump”, World Socialist Web Site)
The weakest recovery in US history is about to get weaker still. According to the CBO, fiscal deficits will drop 1.4 percent per year for the next three years, which means that GDP will sputter-along at a pathetic 1 percent during that same timeframe. Less fiscal stimulus, means higher unemployment, sluggish growth, and more grinding hardship for working stiffs.
Obama is implementing the Reagan’s “strangle the beast” agenda, albeit with greater skill and eloquence than his mentor.
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. Whitney’s story on how the banks targeted blacks for toxic subprime mortgages appears in the May issue of CounterPunch magazine. He can be reached at [email protected].