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Jobless Recovery, or, The End of Work…

August 10, 2009 2 comments

We thought you might need a primer on how to interpret the unemployment figures released by Washington last week:

PRIMER: Frankly, you can safely ignore the unemployment figures, because they are meaningless, and, in just a few months, Washington will revise them to show how meaningless they were.

End of primer…

*****

new-orleans-unemployment-ine“WASHINGTON HAS STOPPED COUNTING THE UNEMPLOYED”

While the Bureau of Labor Statistics showed a remarkable easing in the pace of job losses – “only” 247,000 jobs lost in the past month – more reliable sources show the rate at which jobs are being lost has not slowed in the least.

According to Mish Shedlock, Washington has simply stopped counting unemployment, and is engaged in a statistical shell game:

Taking one time auto sector anomalies and manipulation of the participation rate into consideration, today’s job report was much weaker than looks at first glance …

… I consider these job losses to be depression level totals. Admittedly conditions are not as bad as the great depression, but this is certainly no ordinary recession by any economic measure including lending, housing, bank failures, jobs, the stock market, commodity prices, treasury yields etc. …

I have been calling for the rate to hit 9.8% by August. With only one month coming, today’s report shows that is not going to happen. However, much of the “improvement” in the numbers today are as a result of the participation rate falling by .2%. In other words, the BLS stopped counting.

TrimTabs’ estimates of the unemployment rate, based on real-time tax data, show breathtaking job losses continuing in July and predicts massive revisions for official economic statistics over the next few months:

TrimTabs Investment Research estimates that the U.S. economy lost 488,000 jobs in July, considerably more than the consensus estimate of a loss of 305,000 jobs. In addition, TrimTabs expects the Bureau of Labor Statistics to revise its job loss estimates sharply higher for the first half of 2009 based on the latest unemployment insurance survey results.

“While Wall Street is convinced the recession is over, the economy continues to shed jobs at an alarming rate,” said Charles Biderman, CEO of TrimTabs.

TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. Historically, TrimTabs’ employment estimates have been more accurate than those of the BLS.

And unemployment is not the only suspiciously less downbeat official stat: Chris Martenson has pointed out that government GDP figures are not even reliably reflecting corporate reported data:

… [W]e are being asked by the Bureau of Economic Analysis (BEA) to accept a reported -2% drop in PCE [Personal Consumption Expenditures] and a decline in corporate revenue of -15% , a figure more than seven times larger.

Of course, the discrepancy between the two cannot be reconciled. It is impossible. One must accept one or the other.

I will point out that a -15% decline in corporate revenues is also in alignment with sales tax data from the states (down some 10% yr/yr), unemployment (9.5% and climbing) and many other economic measures.  I will recall here that good data is that which aligns with other data.

How is such a misleading GDP report created? (Hint: think sausages)

The answer lies in a disturbing mixture of seasonal and hedonic adjustments, imputations and other statistical wizardry not subject to review or insight. We are asked to simply accept the results without question.  Disturbingly,  the Wall Street/MSM (Main Stream Media) spin-machine runs off with the GDP report as though it were the sacred truth itself…

WHY UNEMPLOYMENT STATISTICS ARE SUCH A PROBLEM

Perhaps, we should take a step back from the debate over unemployment statistics and try to find out why unemployment is such a pressing problem in the country – the kind of political problem which exposes them to misleading data, statistical manipulation, and even outright fraud.

The obvious answer, that unemployment is a problem because we like to eat! is not as accurate as it seems on the surface. It actually takes very little time to produce the things we consume in the course of a normal day, week, or year.

And, if the truth be known, new employment adds nothing to our material standard of living – if eating were the problem we could easily get by with almost no employment at all.

We work because we must work, not to put food on the table in any material sense.

This contradiction, that our work produces work, lies at the core of the problem unemployment statistics highlight.

And, the root of this contradiction is found along a little known, less discussed, and even less understood fault line running through our economy: The boundary between what we can call the core of our economy and its superfluous periphery.

At the core of our economy are the big organizations – General Motors, Ford, Apple, Exxon-Mobil, Archer Daniels Midland, etc. – which produce the things we use each day.

These include all of our food, clothing, shelter, iPhones, stretch his and her Hummer limousines, and, of course, that 42 inch, wide screen, high definition plasma television with its 200 channel of reruns of old Seinfeld episodes.

It also produces all the things we need to produce the things we use: factories, computers, and so forth.

While it might seem like a lot of stuff, in fact, the production of the things we use everyday, and the production of all the things we need to produce the things we use everyday only comprise a small portion of our economy.

The superfluous periphery of our economy, by contrast, is actually the largest part of our economy, and is composed of economic activity which produces nothing.

It includes, Goldman Sachs, lawyers, economists, aircraft carriers cruising the Persian Gulf, and you – most likely: which is to say, in all likelihood, you go to work each day and engage in work which produces no real good.

It is not that you do nothing of ethical value – you could, for instance be a social worker, protecting at risk kids from life on the streets; but, in this capacity you produce no more economic value than a trader at the proprietary trading desk at J.P. Morgan, or, that worthless swine, Doctor Dre, shilling for some filthy beer company.

Only work that produces a good which eventually ends up on your kitchen table, or otherwise consumed, is work which produces economic value.

All other work – from slaughtering entire villages in Afghanistan, to figuring out how to scam more money for Medicare, under the guise of reforming health care, in Washington, to selling the idea that global warming can be slowed by the Cash for Clunkers program – belongs in the superfluous periphery of the economy.

And this is the heart of the problem we face regarding unemployment: The two parts of our economy work in entirely different ways.

howamericansworked

THE CORE ECONOMY: SHRINKING SINCE BEFORE THE GREAT DEPRESSION

Let us take the core economy – which we can call the “agriculture-industrial complex”: It hums with energy; people who work in this sector of the economy take their shower after they come home from work, because the work is dirty, monotonous, and … well – its industrial.

People work in industry for years, so they can save money to send their kids to college, so their kids don’t have to work in the factory.

It’s the American dream.

The point of the core economy is to produce as much stuff – Hummers, iPhones, and 42 inch, high definition, wide screen plasma televisions – with as little effort as possible.

And, for the most part, the agriculture-industrial core of the economy has been very successful in that regard: in the not too distant past about 60 percent all people worked in this part of the economy.

Today, industrial work makes up a relatively insignificant part of the labor force; and, agriculture, which once occupied the work of 98 percent of the population, now occupies the work of less than one percent of the labor force.

All of this is obvious to you, but we touch on it for this reason: The industrial core of our economy is shrinking, and has been shrinking since before the Great Depression.

Since the big D, all the growth in employment has occurred outside the industrial core of the economy.

This is probably no shock to you as well, and it is simply a continuation of the same shrinking labor force which occurred in agriculture as people moved off farms and into industry.

In much the same way as agriculture was converted from small family farms into massive industrial production facilities, producing a massive increase in the productive capacity of our society (so much so, that we don’t even really keep track of agricultural employment in the monthly statistics) – the same process has been taking place in industry in general since the Great Depression.

The industrial core of the economy has become so massively productive that it probably takes as little as 10-15 million people to supply all the goods produced in the society – everything from iPhones to Trident submarines to the physical network connecting you to this web page.

That’s the material needs of 300 million people satisfied by the efforts of about five percent of the population.

In theory, the core agriculture-industrial complex of the economy provides a staggering example of the ease with which we can produce everything we need to live on with the most minimal effort.

In practice, however the case is precisely the opposite: The more productive the core of the economy becomes, the more work looms as the most pressing issue of society – a matter of life and death, an insistent angry throbbing to which even the most maladroit, rhythm-less, clumsy politician must dance.

The beat in this Totentanz is laid down by the peculiarity of the capitalist mode: On the one hand, capital revolutionizes work, magnifying its productive powers beyond anything previously witnessed in human history; but this vastly expanded power to produce carries the most bizarre historical irony: Work achieves greatly enhanced productive power only to become its own end – and we become the mere means to its further development.

To put this in less metaphysical terms: A progressively longer social work day becomes the essential condition for the exploitation the productive capacity of work – to realize our enhanced ability to produce 42 inch, high definition, wide screen plasma televisions, we must work harder and longer.

This may not seem like a contradiction to you, but it is: the entire point of increased productivity is to produce more goods with less effort, yet we are now faced with a situation where the ability to produce more goods with less work itself requires an increasingly longer social work day.

To understand how this happens, it is important to understand how differently the two major sectors of our economy work.

LEVERAGING THE CORE ECONOMY TO PAY FOR SUPERFLUOUS WORK

We have already touched on how incredibly productive the core economy is, and how this is leading to shrinking employment in the core economy; but, we should add that this core is not simply the source of all the goods we use, it is also the ultimate source of all the profits in the economy, all the government receipts, and all the wages paid in the economy.

To put it another way: The output of the core economy is being “leveraged up” to pay for the wages and profits of the non-core economy, including government expenditures.

This is how the leverage works: In the core economy the wages paid to the labor force and profits of the companies require so many hours of work – in our own economy, this is about six to eight hours per week. However, the official work week – the point at which your employer is required to begin paying you for overtime – is 40 hours.

The difference between eight hours require by our economy to put food on the table and the 40 hours mandated as the official work week – 32 hours – is the basis for wages, profits and government expenditures in the non-core superfluous economy.

In other words, unless workers in industry were worked longer than is necessary, superfluous work in our economy could not exist.

And, conversely, all work performed beyond this same eight hours, by all employees in the labor force, is waste on a grand scale: If superfluous work was removed from the economy, no one would have to work more than one day a week.

What caused this difference to emerge – between the time we have to work, and the time we actually do work – is the drive on part of the companies in the core economy to maximize their profits by maximizing the length of the work day in the core economy, no matter how productive the labor force becomes.

This drive to maximize the length of the work day in industry ultimately backfired in a big way: causing the Great Depression. As the productivity of the labor force increased in the early decades of the 20th Century, more and more goods were thrown on the market, until it produced a permanent generalized glut of goods, which brought economic activity to a near standstill.

Economists call this problem insufficient aggregate demand, but you can call that explanation the unadulterated bullshit of professional obscurantists.

The crisis had been predicted, and should have been no surprise to anyone – and the solution was not only obvious, it was actually introduced into the Senate in 1934 – The Black-Connery bill to reduce the work week to 30 hours.

It was defeated, of course, but we are not the least bit concerned with this – we are only concerned with the result: Once Black-Connery was defeated, and Washington ignored the voices who said the Depression required shorter hours of work, it became necessary for Washington to find some other way to reduce the massive unemployment which created an urgent threat to social stability.

200px-IrvingfisherThe economist Irving Fisher put the problem succinctly:

Those who imagine that Roosevelt’s avowed reflation is not the cause of our recovery but that we had “reached the bottom anyway” are very much mistaken. At any rate, they have given no evidence, so far as I have seen, that we had reached the bottom. And if they are right, my analysis must be woefully wrong. According to all the evidence, under that analysis, debt and deflation, which had wrought havoc up to March 4, 1933, were then stronger than ever and, if let alone, would have wreaked greater wreckage than ever, after March 4. Had no “artificial respiration” been applied, we would soon have seen general bankruptcies of the mortgage guarantee companies, savings banks, life insurance companies, railways, municipalities, and states. By that time the Federal Government would probably have become unable to pay its bills without resort to the printing press, which would itself have been a very belated and unfortunate case of artificial respiration. If even then our rulers should still have insisted on “leaving recovery to nature” and should still have refused to inflate in any way, should vainly have tried to balance the budget and discharge more government employees, to raise taxes, to float, or try to float, more loans, they would soon have ceased to be our rulers. For we would have insolvency of our national government itself, and probably some form of political revolution without waiting for the next legal election. The mid-west farmers had already begun to defy the law.

To maintain artificially long hours of work in the core economy, Washington had to expand government employment and employment the rest of the superfluous periphery of the economy – which expansion continues today and which has become more urgent as productivity increases.

HOW TO CREATE WORK WHEN THERE IS NO NEED FOR MORE WORK: The political-economy of Green Jobs

The problem of unemployment in this recession, therefore, is not simply a problem of creating jobs, it is the creation of a specific type of job: a job which produce nothing, add nothing to your material standard of living; jobs which only serves to engage you in meaningless, monotonous, and thoroughly superfluous activity, to your disadvantage, and to the disadvantage of the global ecology.

That would be bad enough, but it only gets worse:

Since productivity is increasing faster than the population is growing, the core economy continues to shrink, adding pressure on the economy to produce even more jobs. Now, in addition to creating jobs to offset the increase in productivity, we have to create jobs to replace the jobs lost in agriculture and industry.

And, that is not all – not by a long shot: Leveraging the core economy to create jobs in the non-core economy is itself inflationary – raising the cost of producing everything.

So, as you might have noticed, we have been in an unprecedented inflationary spiral for the last seven decades, which not only forces us to pay more for the same goods we purchased for less yesterday, it also drives core manufacturing companies off-shore – to Mexico, China, and other low wage venues – in search of lower costs of production.

So jobs have to be created to replace the ones which are lost to off-shoring and out-sourcing, and, if this proves more profitable for these companies, even more jobs have to be created to offset the booked profits of these companies.

So, it is not too difficult to understand why the Messiah’s stimulus plan predicted that it would cost some $200,000 to produce a job which pays less than $40,000 a year: Each jobs created has to waste an astounding amount of resources from the core economy.

An interesting example of this waste can be found in the Cash for Clunkers program – the stimulus program which gives you up to $4,500 to trade in your old gas guzzler for one of the more efficient new models. One writer had this to say about the program:

Reduce-reuse-recycle, right? Wrong. Let’s run down that three-item hierarchy of how to be kind to the earth: What’s getting reduced, fuel consumption and pollution by the new car relative to the clunker? Not given the staggering amount of pollution produced and resources consumed to manufacture even the smallest, most fuel-efficient vehicle. Exactly how staggering is tough to nail down definitively; what constitutes “making” a car? Where in the process do we start? Do we count only the material and energy used within the factory grounds? Or do we go a step upstream and count the material and energy used to make those materials used at the factory, and the energy spent to transport them thereto?

We can keep taking steps further and further back until we get to the energy required to extract crude oil and mineral ores from the earth, and that’s what we have to do if we’re looking for the real total energy that goes into a new car. We don’t need actual numbers here, just orders of magnitude, and it quickly becomes clear to all but the most strident Prius-preacher that driving an old car half a million miles is really less taxing to the greater environment than making even just a single new one.

What’s getting reused? Not the powertrain of the clunked cars; as has been amply covered here and elsewhere, the scheme requires their engines be not just disabled but utterly destroyed. Why? Even if we grant the shaky assumption that incoming engines are so worn as to be relatively high polluters, all it would take to ensure they’re refurbished before returning to useful service would be removing one spark plug and filling its cylinder with ordinary playground sand. Voila: the engine is quickly and definitely disabled, yet still reusable after disassembly and reconditioning—and without the clouds of toxic smoke created by an engine being permanently spoiled by sodium silicate. (Transmissions and rear axles are not subjected to the same permanent destruction, they’re simply not allowed to be sold. Why? Well, that’s a very good question and I’m glad you asked it.)

So we haven’t reduced and we’re not reusing; what’s getting recycled? Not much, except maybe sundry non-powertrain parts from the clunked cars and giddy bromides from the pirates who built us a house-of-cards economy financed by money pretended into existence, then arranged for that money to be magicked into their pockets at everyone else’s expense.

It is, however, that last point – money magicked into the pockets of finance capital at everyone else’s expense – that reveals the real horror of the Cash for Clunkers program: To repay the loan incurred by the government and you for that “green” new car will require an income stream lasting as long as 5 years.

For most of us, that means you will have to get and keep an unproductive, superfluous job that will provide the income stream necessary to repay the debt you incurred when you purchased your new efficient automobile.

How much energy will you consume in that five years as you commute back and forth to the office – and, how much will you consume in that office as you perform some meaningless task – while trying to earn enough to pay off that loan?

Welcome to the green economy!

THE END OF WORK

So, you can decide to engage in the mass delusion which says unemployment is peaking and recovery is on the horizon.

Or, you can face up to the difficulty of creating superfluous jobs in an economy where real work is rapidly being abolished by improvements in productivity.

Either approach ends at the same destination: Work will be abolished, and you will be forced to figure out what to do with your spare time – Who knows, you might even decide to enjoy yourself instead of sitting at the kitchen table trying to balance a checkbook.

Whatever you decide, you should know this: In the past two recessions, and in this current one, productivity has been increasing even as unemployment has been collapsing – a situation so dire, and so unprecedented in the post-war economy that economists don’t even have a word for it yet.

They have been floating the term jobless recovery, but absent jobs, how is recovery possible? What company is going to make the investment to produce goods which can never be sold because the customer has no job?

We have coined our own term for it: The End of Work.

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