First of all, revisions to the December and January job numbers meant that there were 167,000 fewer jobs added those two months than first reported. The January employment report in particular was reduced from 353,000 net new jobs to only 229,000.

Second, the unemployment rate rose from 3.7% in January to 3.9% in February. This number comes from a survey of households, which showed a 184,000 fewer people working in February as compared to January. This was the third month in a row that the number of people working has declined, opposite to what the survey of employers is saying.

The broadest measure of unemployment, which includes those workers who are working part-time because full-time jobs aren’t available, workers that have given up looking, and thus aren’t counted as unemployed, continued to rise to 7.3%. This measure was only 6.7% last July. Most of the increase has come from more workers who are taking part-time jobs because full-time ones are not being offered. This explains part of the difference between the growing job numbers and the declining number of people with jobs.

President Biden, in his state of the union address on Thursday, repeated the claims of many mainstream economists that the economy is managing a “soft landing” where job growth continues while inflation continues to cool. But talk of a “soft landing” typically peaks before a recession, so is actually a negative indicator for the future economy.

While the national news reported on the decline in the Federal Reserve’s (the U.S. central bank) favored inflation measure for January, little was said about the rest of the report. The Personal Consumption Expenditure, or PCE, index did decline in January to 2.4% higher than a year earlier, from 2.6% in December. But the income and spending figures were very weak. There was no increase in after-tax incomes after correcting for inflation. And consumer spending, adjusted for inflation, actually declined by one-tenth of one percent in January (this measure, like other government statistics, is adjusted for seasonal changes, in this case holiday spending).

#SanJoseCA #Economics #Inflation #Unemployment

In 2023, there have been many announcements of layoffs by technology firms. This is a result of what the media calls post-COVID normalization. But this “normalization” has also shown that many technology companies that boomed during the pandemic were in fact overproducing and building new capacity too quickly, forcing them now to scale back. In the past ten days this slowdown in the technology industry spilled over into the banking system, triggered by the failure of Silicon Valley Bank, based in Santa Clara, California. Soon after the failure of SVB on Friday, March 10, regulators shut Signature Bank in New York. First Republic bank, headquartered in San Francisco, had to borrow $30 billion from other banks, under the direction of the Federal Reserve. The crisis even spilled overseas, as the troubled Swiss banking giant Credit Suisse was forced to sell itself to the even larger Swiss bank UBS. Fight Back! News sat down with Professor Suzuki to ask him about this crisis. Fight Back!: How is the failure of Silicon Valley Bank related the crisis unfolding in the technology industry?

Masao Suzuki: Because of the slowdown in Silicon Valley, many SVB’s depositors began to pull more and more of their deposit money out because revenue and new capital was not coming in fast enough. To meet their depositors’ demand for their money, SVB had to sell many U.S. government bonds that they had bought with their depositors’ money.

Buying U.S. government bonds is widely seen as safe, as there was almost no risk that the U.S. government would default on this debt. It would seem that this was a very good way to balance against the risk of loans that SVB made to technology startups.

One the failures of the bank and its leadership was that they did not take into account the interest rate risks of the bonds that the bank owned. This risk to owning bonds is that if interest rates go up, the price of the bonds go down, since they pay a fixed interest payment, or coupon. With the Federal Reserve raising interest rates to slow the economy to fight inflation, the market price of these U.S. government bonds began to fall. This wouldn’t matter if SVB was able to hold the bonds until they matured, and the U.S. government paid off their full face value.

The bonds that Silicon Valley Bank had to sell to pay off their depositors were sold at lower prices, causing billions of dollars of losses. When SVB made plans to raise more capital to offset these losses by selling stock, depositors panicked, and California regulators shut down the bank on Friday morning, March 10.

Fight Back!: Were there other reasons that contributed to the failure of Silicon Valley Bank?

Suzuki: One other important reason was rolling back the regulation of bigger banks. Following the 2008 financial crisis, the Dodd-Frank law was passed, increasing regulation of larger banks with at least $50 billion in assets, among other things. But in 2018 Dodd-Frank was weakened under the Trump administration, to raise the limit for greater regulation to $250 billion.

Silicon Valley Bank grew quickly to more than $50 billion in assets in 2017. Facing increasing regulation, the CEO of SVB, along with other banks, lobbied to weaken Dodd Frank, and those reforms passed into law in 2018. By 2023, just before it failed, SVB had grown to more than $200 billion in assets, and yet still had lighter regulation like much smaller banks.

Fight Back!: Was that the only other factor?

Suzuki: A third factor is that depositors pulled their money out at a much faster rate than in the past. The last time a bigger bank failed, Washington Mutual in 2008, it took a week for depositors to pull out 10% of its deposits. This gave regulators time to find a buyer – J.P. Morgan Chase – and allowed them to shut the bank over a weekend.

With Silicon Valley Bank, depositors tried to withdraw an amount equal to 25% of total deposits in one day, Thursday, March 9. This was because more than 90% of SVB’s deposits were large, with more than the $250,000 in deposits that are insured. Facing possible large losses, depositors tried to pull tens of billions of dollars. Electronic banking made this even faster.

Fight Back!: Will the deposits of working people be at risk?

Suzuki: Bank deposits are insured by the Federal Deposit Insurance Corporation or FDIC. The banks pay insurance premiums to the FDIC that provide the money to cover deposits at failed banks. I doubt many readers of Fight Back! have more than $250,000 in a checking or savings account at a single bank. But if you do, it would be safest to move your money to separate banks so you have no more than the insured limit at any single bank.

Because the failure of Silicon Valley Bank was quickly followed by the failure of Signature Bank in New York, the FDIC said that it would cover all the deposits of the failed banks, in an effort to stop the banking crisis spreading any further. The Federal Reserve also created a special program to lend to banks and twisted the arms of some big banks to lend up to $30 billion to First Republic Bank. First Republic, based in San Francisco, was just slightly smaller than Silicon Valley Bank, and also had a large number of uninsured deposits, like SVB.

While the Biden administration and others continue to stress that the banking system is “fundamentally sound,” the fact the government continues to provide aid to other banks says otherwise.

#SanJoseCA #Capitalism #economy #economics

Miami, FL – More than 2 million Floridians have now applied for unemployment benefits. Only a fraction of the applications have even been processed and even fewer workers have received payments. Florida’s unemployment system was already terrible before the crisis and it has completely collapsed under pressure from COVID-19.

Florida’s online application process for unemployment was designed to fail. It was created by right-wing former Governor Rick Scott with big business in mind. Its goals were to be as confusing as possible for any worker trying to submit an application and to reject as many applications as possible for minor errors. That way benefits could be cut, and big businesses could pay less in unemployment taxes.

Even those close to current Republican Governor Ron DeSantis admit as much. One DeSantis advisor was quoted in the online magazine Politico as saying: “It’s a shit sandwich, and it was designed that way by Scott. It wasn’t about saving money. It was about making it harder for people to get benefits or keep benefits so that the unemployment numbers were low to give the governor something to brag about.”

Since March, millions of people have been laid off due to COVID-19 and Floridians have been reporting serious problems with accessing the system. The website had technical difficulties and was even shut down for three days to resolve the issues. Phonelines were overwhelmed as there were not enough state workers to process the huge number of calls. Even for those who actually managed to complete an application there have been big problems. 250,000 applications were wrongly rejected because simply because they filed in March instead of April. Those people were asked to reapply. Meanwhile they are left without any income for weeks, perhaps months.

Trying to ease pressure on the system, the governor brought back paper applications. DeSantis was even forced to remove some of the strict requirements, like weeklong waiting periods before money is disbursed and providing proof every two weeks that you are actively looking for work. Due to the changes, last week the percentage of applicants being paid was up to a meager 22%. This represented a dramatic increase from a week before when only 6% of those who applied for unemployment had been paid.

Even when the government pays out, the benefits offered are not enough for working people to get by. In fact, Florida’s unemployment payments are some of the lowest in the country. At most unemployed workers are given a measly $275 per week. On top of that, those benefits are only available for 12 weeks. After that you are kicked out of the system. There is a law that allows for increases in the duration of unemployment benefits based on the overall unemployment rate. That means that if the official unemployment rate goes above 5% then people can be paid for longer than 12 weeks. However, that increase will only kick in in June because the calculation is based on a three-month average. By then many workers will have been left without income, totally abandoned by the government. Meanwhile there has been no moratorium on rent payments for working families.

Florida won’t release its official unemployment numbers for April until May 22. However, there does not seem to be a light at the end of the tunnel for its workers. Some economists are calculating the national unemployment rate to be 20%. The nature of Florida’s economy means that number may be much worse. The tourism industry and farming industry are the largest sectors of the economy. Both are deeply impacted by the pandemic.

Florida has the highest concentration of service sector jobs in the country, many based in cities like Orlando where Disney and Universal are some of the largest employers. With few tourists willing to travel and the state’s significant population of elderly baby-boomers sheltering in place, the future looks bleak for the hospitality business. We have seen farms experiencing serious difficulties due to interruptions to food supply chains. Some have even been dumping milk and other produce, abandoning fields of crops and euthanizing animals. As long as restaurants remain closed, produce prices seem likely to stay low. Owners are already suggesting cutting wages for farmworkers.

As the state moves into hurricane season, a storm is brewing for Florida’s public sector workers as well. As tax revenues fall, the right-wing legislature will try to impose vicious cutbacks and layoffs to balance the budget. Without a doubt a serious fight will be on for the future of workers’ pensions, union contracts and public education in the Sunshine State.

#MiamiFlorida #CapitalismAndEconomy #PoorPeoplesMovements #Unemployment #US #Healthcare #Florida #economics #DonaldTrump #SunshineState

San José, CA – In December of 2015 the Pew Research Center released a report on the decline in middle-income Americans, who now make up a minority of the population, down from 60% in the 1970s. Their share of income has fallen even more, from more than 60% in the 1970s to only 43% in 2014, as upper-income households share has risen from 30% to 49% over the same period of time. The Pew report also has other important information on wealth, debt, occupation and education, which were generally not reported in the mainstream corporate media.

But the report, and to an even larger extent, mainstream corporate media articles on the report, used ‘middle-income’ to mean ‘middle class’ when the two are not the same. Middle-income, in the Pew report, was defined as households earning between two-thirds and twice the median income, or $42,000 to $126,000 a year for a household of three. Middle class refers to those who are between the working class (who have to work for others) and capitalists, who make a living from the businesses, land and financial assets that they own. The middle class would include small businesspeople and farmers, managers and supervisors, as well as high-skilled professionals such as doctors, lawyers and four-year college professors.

Most of the households that the Pew report calls middle-income are in reality working class. Only 20% of middle-income households in 2015 were made up of executives, managers, professionals such as engineers, and medical professionals who could be considered middle-class. The other 80% were more working class occupations such as clerical workers, sales workers, service workers, mechanics and others.

The Pew report also documented the growing inequality in wealth, as defined as the difference between household assets and debt. Between 1983 and 2013, the wealth of lower-income households shrank 18%. The wealth of middle-income households stayed about the same, while the wealth of upper-income households doubled. Another way to put this was that in 1983 upper-income households held 30 times the wealth of lower-income households, but by 2013 upper-income households had 70 times the wealth of lower-income households.

Lower and middle-income households also had their debts rising faster than upper income households as they tried to make up for lost income by borrowing more. Debt for upper-income households rose 90% between 1983 and 2013, while middle-income household debt went up 132%. Lower-income households had the largest increase in debt, which rose 183% or almost tripled between 1983 and 2013.

Teachers were the occupation that lost the most, -8.6, meaning that the percentage of teachers who were low income increased 8.6 percentage points more than the growth of high-income teachers. Factory workers (-6.4) and clerical (-6.2) were other occupations that lost the most ground in terms of income. Not surprisingly, executives and managers were among the occupations that gained the most (+20.4) in terms of more high-income and less low-income households.

College education also became more necessary to earn enough to be middle-income. In 1971, only 24% of middle-income households were headed by someone with some college, the vast majority (76%) had no college and 35% didn’t even graduate from high-school. But by 2015, 60% of middle-income households had at least some college, and only 9% had not graduated from high-school. Despite the rising level of education over the last 45 years, the middle-income household sector has shrunk, showing that more schooling is not the key to

reducing income inequality.

Masao Suzuki is a professor of economics at Skyline College. The Pew report is online here.

#SanJoseCA #housing #Capitalism #economics #EconomyMasaoSuzuki #Commentary #Income

But much of the drop in the unemployment rate came from 432,000 people leaving the labor force. By giving up looking for work, they are no longer counted by the official unemployment rate. Many of those who gave up on the job market came from the ranks of the long-term unemployed (out of work for six months or more) whose numbers fell by 381,000 in June.

The Labor Force Participation Rate, which measures the percentage of adults who are either working or looking for work, fell to 62.6% in June, the lowest rate since 1977, when more women were starting to join the job market. This number is another sign that the economic expansion is still weak, as a strong expansion would draw more people into the labor force.

#SanJoséCA #Unemployment #Capitalism #LaborForceParticipationRate #economics