Together Canada, China and Mexico are about 40% of the United States’ total trade, so that this is the biggest increase in tariffs since the Smoot-Hawley tariffs of 1930. Those tariffs and other countries’ responses made the worldwide economic recession even worse and were a factor in turning a bad recession into a depression. Economic studies show that Trump’s tariffs could push Canada and Mexico into recessions, while economic growth and employment would slow, and prices rise in the United States.

The immediate impact will be higher prices here in the United States. Some of it is predictable, as imported maple syrup from Canada and imported tequila from Mexico go up in price because of these taxes on imports. Other fruits and vegetables like avocados will also become more expensive, raising grocery prices even more.

Gas prices could go up, not only in the Midwest and Gulf Coast, where U.S. gasoline refineries rely on imported oil, but also in places like California that uses imported Canadian oil. Car production will be hit too, as many cars sold in the United States, including U.S. brands such as Ford and GM are either produced in Canada or Mexico and/or use parts made in our two neighboring countries.

The biggest burden of Trump’s tariffs, estimated to be about $830 per household, would be on lower income households.Lower income folks would lose about four times as much of their purchasing power as those in the highest income households. This fall in purchasing power would lower demand for goods and services and slow economic growth and job creation.

But these estimates only count the direct cost of tariffs. There are two types of indirect costs. First of all, U.S. producers could maximize their profits in the short run by raising their prices.This is what happened when Trump slapped 25% tariffs on steel in his first term – U.S. steel producers raised their prices by 22%, padding their bottom line, but causing even bigger overall price increases.

The second type of cost to Americans is retaliation by other countries. The prime minister of Canada has ordered 25% tariffs on more than a $100 billion of imports from the United States in retaliation. Mexico’s president ordered her economy minister to prepare both tariff and non-tariff responses to Trump’s tariffs. The Chinese Ministry of Commerce said that China will file a complaint with the World Trade Organization or WTO and take “countermeasures” against the United States.

China is actually better positioned than either Canada or Mexico because it has been able to diversify its trade away from the United States since Trump’s first term in office. Both Canada and Mexico send 70% or more of their exports to the United States. However, China’s biggest export market is now ASEAN, the Association of Southeast Asian Nations (Vietnam, Cambodia, Laos, Malaysia, Singapore, Philippines, Thailand, Myanmar, Brunei and Indonesia), with the European Union not far behind the United States.

While Trump has threatened to increase tariffs if any of the countries retaliate, an escalating trade war could push Canada and/or China to “go nuclear” by putting export taxes or restrictions on key exports such as oil from Canada or rare earth metals from China. In the long run, both Canada and/or Mexico could follow China’s path and try to reorient their trade to Asia, Europe and Latin America.

Trump’s tariffs are moving the United States to “decouple” its economy from the rest of the world. This response to the relative decline in U.S. economic power, from 40% of world GDP afterWorld War II to only around 15% today (as measured by “purchasing power parity,” which compares the actual prices of goods and services). However, these tariffs, along with Trump’s escalating deportations, and anti-education and anti-health moves, will just accelerate the rate of U.S. decline.

#SanJoseCA #Trump #Tariffs #Economy #China #Canada #Mexico #WTO

Mainstream newspapers have been running articles for weeks and months about how workers’ feelings about the economy don’t match the improving economic data. But these articles are talking about the fall in inflation, which did go down to a 2.9% increase in average prices over the past year, the lowest since April of 2021. And while wages have been outpacing prices recently, the average number of hours has fallen as the labor market has been weakening and the unemployment rate has risen. Put it all together and workers did lose ground again in July of 2024.

#SanJoseCA #inflation #economy #unemployment #recession

The stock price rout was led by Japan, where stock prices fell 12%, the worst day since “Black Monday” in October 1987, when U.S. stocks fell 22%, the worst one-day fall ever. A particular factor in Japan was that the Japanese central bank raised interest rates last week, causing a sharp jump in the value of the Japanese yen.

Back in the United States, the so-called “magnificent seven” of tech companies, including Alphabet (parent corporation of Google), Amazon, Apple, Meta (parent company of Facebook), Nvidia (maker of chip used in artificial intelligence applications) and Tesla have been leading the stock market higher for months.But on Monday, these stocks fell harder on average, as doubts about the profitability of AI joined with recession fears.

Falling stock prices are not a good predictor of a coming recession – in fact the biggest fall in October 1987 had little impact on the economy. But a sustained fall could affect spending by the wealthiest Americans, who own most stocks. As more and more working-class Americans have been cutting back on purchasing and turning to credit cards for necessities, wealthy Americans have kept up spending.

More worrisome is that many economic signs are pointing towards an economic slowdown that could lead into a recession. Claims for unemployment are on the rise. More and more credit card and car loan borrowers are falling behind on their payments. The manufacturing sector has been shrinking, albeit slowly.

#SanJoseCA #SP500 #S&P500 #Economy #Unemployment #Recession #Stocks #StockMarket #AI

The payroll jobs report was also weak, with only 114,000 net new jobs created in July, according to a survey of businesses. This number was much less than the 175,000 new jobs that economists had expected. In addition, the report reduced job gains for May and June by 29,000. The survey of households that is used to determine the unemployment rate also continued to report far fewer people getting jobs, with the number employed rising by only 67,000.

Among the hardest hit in July by rising unemployment were workers without a high school degree, whose unemployment rate rose to 6.7%, up 0.8% from June. Latino workers were the hardest hit among oppressed nationalities, with their unemployment rate rising 0.4% to 4.6%.

The unemployment rate for men rose 0.2%, twice the rise of women. It is typical of recessions that the unemployment rate for men rises faster than the rate for women.

In another sign of weakness, the “diffusion index” fell below 50%, to 49.6% last month. This means that more industries were losing jobs than hiring more, showing that the employment weakness was broad based.

The weak jobs report was a shock to investors on Wall Street, who had bought into the myth of a “soft landing” where inflation comes down without unemployment rising much. In fact, such talk of “soft landings” tends to multiply right before a recession.

With a recession looming, the blame game has begun. Many are trying to blame the Federal Reserve Bank for not lowering interest rates sooner. But all this amounts to is that the Fed doesn’t see the future. Even if the Fed had lowered interest rates earlier, this would not have prevented a future recession. Recessions have been around in the United States since the 1830s, almost a 100 years before the Fed began raising and lowering interest rates. Economic booms and busts are a feature of a capitalist economy.

#SanJoseCA #Economy #Recession #Unemployment

Average weekly wages for workers went up 3.8% over the last year. Subtracting inflation, the “real” or purchasing power of wages went up 0.8% over the last year according to another report of the Department of labor on Real Wages.

But the CPI does not include two important payments made by consumers. The first is interest payments, which have mainly gone up because of the Federal Reserve, the U.S. central bank, which raises interest rates to try to slow the economy and lower inflation. Mortgage interest rates are near 7% and are the highest in more than 20 years. Credit cards now charge more than 20% in interest on unpaid balances, which is the highest level in more than 30 years.

Adding back higher interest costs, for both consumer loans (student loans, credit cards and auto loans mainly) as well as mortgages, would increase the inflation rate by about 0.7% over the course of the year. This is not much, but enough to offset out the 0.8% gain in real wages.

The second omission is that the CPI does not include insurance costs for homeowners. The CPI estimates the equivalent rent for a house, but this does not include rapidly rising home insurance costs. These costs would add about 0.8% to inflation over the last year, mean that purchasing power for the average household in the United States has actually gone down by about 0.7%. This is only an average, so many would be much worse off, while some would be better off. No wonder surveys show so many people are sour on the economy.

#SanJoseCA #inflation #economy #capitalism

While the survey of businesses reported 206,000 net new jobs in June, the job creation for both May and April were revised down by more than 50,000 each. This left the second three months of the year (April, May, and June) with the lowest average job creation since 2021.

In addition, in the survey of households that is part of the same jobs report, only 116,000 more people were employed, implying that many of the new jobs are part-time jobs and more people are working more than one job to make ends meet. While the two surveys rarely match up, this continues the string of much weaker reports from households. In May, households reported 408,000 fewer people working even as the survey of businesses said that there were 218,000 net new jobs.

The unemployment rate also ticked up to 4.1% from 4% in June. The three-month average also rose to 4%, a 0.4% increase from the recent three-month low of 3.6%. This is very close to 0.5% rise that has shown itself to be a reliable predictor of a coming recession. This is also the first time that the unemployment rate has been above 4% since 2021.

Another sign of weakness was the increase in wages, which was only 3.9% from a year ago. This is the lowest rate of increase since 2021. While it is likely to be higher than the rate of increase of prices as measured by the Consumer Price Index (CPI) report coming out this coming week, the CPI and other measures of inflation do not include interest rates, which are at the highest level in decades. The interest rates on a standard 30-year mortgage are the highest in more than 20 years, as are car loans. Credit card interest rates, at over 22%, are at record highs for the 30 years of data.

This past year hotel and restaurant, health care, and government made up most of the job gains. But in June hiring at hotels and restaurants almost came to a standstill, with only 7,000 net new jobs. There was also a loss of almost 50,000 temporary jobs. Businesses often will cut temp workers at the first signs of sales weakness.

While the unemployment rate for whites was the same from May to June, at 3.5%, it jumped the most for Asian American workers, whose unemployment rate jumped by a whole percentage point. The unemployment rates for women and African Americans also went up, by 0.3% and 0.2% respectively.

Despite the signs of weakness, all the major stock market indices rose in the hope that the signs of weakness will prompt the Federal Reserve to begin to cut interest rates in September. Investors have bought into the story of a “soft landing” where inflation slows without a recession. Despite the fact that this almost never happens, investors have convinced themselves that “this time is different.”

#SanJoseCA #Unemployment #Economy #FederalReserve #Feature

San Francisco, CA – On November 11, close to 900 people gathered at San Francisco State University for a counter-summit against the upcoming Asia-Pacific Economic Cooperation (APEC) Summit later that week.

The day was convened by the “No To APEC Coalition,” which had 160 endorsing organizations. The counter-summit was the first action leading up to a week of activity against APEC.

APEC is an inter-governmental forum for 21 member economies in the Pacific Rim that promotes free trade throughout the Asia-Pacific region. While the rhetoric that APEC pushes seem to benefit the member economies, the No to APEC Coalition states that it’s a forum for corporations and institutions to push so-called “free trade” to exploit their workers and put the benefits of corporations over the rights of nations and peoples.

The day began at 9 a.m. with opening remarks that reviewed what APEC and IPEF (Indo-Pacific Economic Framework for Prosperity) were, and why it’s important to mobilize against them.

The keynote speaker was Brandon Lee, who came out to a standing ovation and chants of “Justice for Brandon Lee!” Lee is an indigenous rights activist who in 2019 was shot in four places by the 54th Infantry Battalion of the Armed Forces of the Philippines, rendering him paralyzed. Lee continues to organize for human rights and is a member of the San Francisco Committee for Human Rights in the Philippines.

During his keynote speech, he spoke about how he became an organizer, and the current fight against Chevron. He also joined the chorus to mobilize against APEC and IPEF, “I will continue to fight as long as I breathe. My story is one of many. There are 1000 people here today, diverse and multi-generational, each with their own journey, all united against APEC. And we will not go gently into the night. We will rage!”

After Lee’s speech there was a plenary with speakers from different movements, including organizers from Palestine, Starbucks Workers United, Myanmar, and others.

The afternoon saw two sets of dozens of workshops for people to choose from.

The evening ended with a call to action for November 12 and the march against APEC. It closed out with agitating speeches, that fired people up!

#SanFranciscoCA #NoToAPEC #APEC #Capitalism #Economy #ILPS

The Asia Pacific Economic Cooperation (APEC) Forum will be meeting in San Francisco and progressives need to be there on Saturday, November 11 and Sunday, November 12.

Freedom Road Socialist Organization opposes APEC as a tool of imperialist exploitation, and stands in solidarity with those planning to protest this meeting, such as the People's Counter-Summit being organized by the No to APEC Coalition.

APEC is a forum in which governments and big corporations collude and contend with each other to exploit the workers and oppressed peoples of the Asia-Pacific region. It is a part of the imperialist strategy of neoliberalism, which seeks to deregulate trade, privatize services, increase the exploitation of the oppressed nations, and advance the agenda of big corporations.

APEC exists for the same reasons as the World Trade Organization (WTO), the Indo-Pacific Economic Framework (IPEF), and the United States-Mexico-Canda Agreement (USMCA, known informally as “NAFTA 2.0”): to maximize profits at the expense of working and oppressed peoples.

Freedom Road Socialist Organization stands for a world free of capitalist domination. Institutions like APEC are notorious for meddling in the internal affairs of nations, offering economic ties or “development” loans on the condition of doing away with labor regulations, privatizing public services, or getting rid of tariffs. The U.S. has the most influence within APEC, and its chairperson is Joe Biden. In addition, the U.S. has launched the Indo-Pacific Economic Framework (IPEF), which excludes People’s China, and seeks to limit Beijing’s growing influence.

Wherever the big corporations and their political representatives gather to plot and scheme how to better exploit the workers and oppressed peoples of the world, the people's movements should be in the streets to denounce and expose them. Let’s make them feel our strength in San Francisco November 11 and 12.

No to APEC!

#FRSO #Statement #APEC #Capitalism #Economy

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

San José, CA – Cracks in economy began to show up as Silicon Valley Bank, based in Santa Clara, California, just north of San José, was shut down on Friday, March 10. The bank was the 18th largest bank in the United States, and mainly served high-tech startups, venture capitalists and wealthy individuals.

The recent slowdown in Silicon Valley and interest rate hikes by the U.S. central bank, the Federal Reserve, undid the bank. A run on the bank developed, as depositors pulled their money out of the bank. The bank was forced to sell U.S. government bonds at a loss because of higher interest rates and tried to raise more money or sell itself. When this failed, the bank was shut down by California regulators and control handed over the Federal Deposit Insurance Corporation. or FDIC.

This bank failure is the largest since 2008 when Washington Mutual was taken over by J.P. Morgan Chase during the financial crisis. The failure of Silicon Valley Bank followed the announcement by Silvergate on Wednesday that it would be winding down because of losses in cryptocurrency markets. These two bank failures in one week shook Wall Street, extending the selloff in stocks and sending Bitcoin back below $20,000.

Another sign of a slowdown came on Thursday, March 9 when the Department of Labor reported that new claims unemployment insurance rose more than 20%, to 211,00 for the week ending March 4. While the total number is relatively low, this is the biggest increase in new application in eight months.

The Labor Department’s report on jobs and unemployment released the next day also showed a slower job market. 311,000 net new jobs were created in February, a good pace but far lower than the more than 500,000 new jobs in January. Industries hit hardest by the 2020 pandemic were still in recovery mode, led by gains in the leisure and hospitality. But the announced job cuts by tech firms and falling online sales caused losses in information, transportation and warehouse jobs. The slowdown broadened across industries, as the percent of industries showing job losses grew from 32% in January to 44% in February.

The unemployment rate in February ticked up by two tenths of one percent from the record low in January, coming in at 3.6%. But while the unemployment rate for white Americans only rose at 0.1%, jobless rates of oppressed nationalities all increased much more, with the highest increase among Latinos, whose unemployment rose 0.8% to a total of 5.3%.

The unemployment rate for teenagers (16-19 years old) and those who had not graduated from high school saw their unemployment rates rise by 0.8% and 1.1%, respectively. A big surge in the number of people unemployed for less than five weeks increased 17.5% to 2.3 million, showing that job loss were driving the rising unemployment rates

Average hourly wages were up 0.2%, but average hours of work per week fell by 0.3%, meaning that average weekly earnings fell in February. But these were money wages, while purchasing power fell even more because of continuing inflation.

#SanJoséCA #economy

Recent announcements of job cuts means that unemployment will continue to rise. Technology firms are leading the layoffs, with Twitter cutting half their workers (3700 jobs), and Snapchat 20% (1300 jobs). In the post-pandemic period, exercise equipment company Peloton cut 32% of its workforce (1250 jobs) in two rounds of layoffs, and used car retailer Carvana cut 25% (2500 jobs).

A different picture was painted by the jobs report, which said there were 261,000 net new jobs created. While this is a solid gain, it is the lowest number since December of 2020, and is another sign of a slowing economy. The slowdown in job growth was broad based, with only accommodation (hotels) and local governments hiring more than this year’s average.

Part of this divergence between the unemployment rate and new job creation is that more and more people are having to work more than one job to make ends meet. Different government agencies estimate that between 5 and 15% of workers are doing this, which would mean more jobs but not more people with jobs.

One of the reasons for this is that over the last two years price increases have outpaced wage gains. In addition, the average number of hours worked has gone down. Between the two, the purchasing power of workers’ weekly earnings was down by more than 9% since the end of the last recession.

In response to high inflation, the Federal Reserve, the U.S. central bank, has been raising the interest rate at the fastest rate in 40 years. On Wednesday, November 2, the Fed raised the interest rate for the fourth time in 2022. The Federal Funds Rate that the Fed targets has gone from around zero in March to a bit over 3.8% this week, and more increases are coming. The Fed’s goal is to slow demand for goods and services, and thus bring down inflation.

One problem that will make this task more difficult is that big corporations have been increasing their prices when demand slacks off. For example, Campbell Soup, which has a bit more than half of the canned soup market, actually raised their prices when demand for Campbell Soup dropped off as restaurants reopened and people started eating out more as the pandemic eased.

The vast majority of economists think that the fall in demand from rising interest rates will lead to the start of a recession in 2023. Total domestic demand for goods and services made in the United States has been slowing over the last nine months, with the July to September 2022 period showing only a 0.1% growth. The last two quarters, or six months, have seen a fall in spending on business investment on new plant and equipment and new residential construction. A drop in this investment sector of GDP is typical of a period leading into a recession.

While most economists think that the recession will be relatively brief and mild like 1991 and 2001, they are assuming that a financial crisis will not break out. But in fact, there are growing strains the in financial system, especially in the market for U.S. government bonds that centers the financial sector. Aside from that, the Federal Reserve is not going to slash interest rates as they did in 1991, 2001, 2008 and 2020, because of continuing high inflation. The last time a recession happened when the Fed was raising interest rates, was the brutal 1981 recession where unemployment topped 10%, the highest rate since the Great Depression of the 1930s.

More Republicans in the Congress and Senate have been threatening to hold up the budget to force cuts in Social Security and Medicare. They are trying to blame today’s inflation on the large federal government budget deficit. In fact, during the 2022 Fiscal year the federal government budget deficit fell by more than half, from almost $3 trillion in 2020 and 2021 to $1.4 trillion. But inflation continued to rise to 8% or more for the last eight months, despite the drop in the budget deficit.

Of course, Social Security and Medicare did not cause the large budget deficits; the cause was spending to fight off the effects of the pandemic. In fact, the Republicans have long wished to reward Wall Street – both the investment funds as well as private health insurance companies – by cutting Social Security and Medicare. These programs are the most help to working-class Americans, who have to depend on their benefits in old age. But this austerity will just make the recession worse, not mention the health and standard of living of our seniors.

#SanJoséCA #economy #inflation

San José, CA – Inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers or CPI-W has been rising this year at the fastest rate in 40 years. This high inflation continued in September, with prices measured by CPI-W up 8.5% over a year ago. Higher prices combined with fewer hours means that the purchasing power of average weekly earnings for workers fell 3.5% from a year earlier.

But many workers’ wages are buying even less than the 3.5% average drop in purchasing power. The difference in hourly pay gains between the highest-paid 25% of all workers, and the lowest paid 25% of workers is the widest on records going back 25 years. While the highest paid workers saw their wages rising on average 7.3% in the last year, the lowest paid workers only saw a 4.3% increase. This means that for lower-income workers, the purchasing power of their paychecks has fallen about 5% from 2021.

Inflation was led by rising energy costs, up almost 20% from a year ago, and food, up more than 11% from a year ago. More people are falling behind on their utility bills and most people are cutting back or trading down on their food purchases.

Prices not counting food and energy were up 6.6%. While this was less than the overall increase in prices, it was also the biggest increase in 40 years. Inflation fighters at the Federal Reserve, the country’s central bank, are more concerned as inflation excluding energy and food is much harder to push down. Most economists are expecting the Fed to raise interest rates by another three-quarters of a percent at both their November and December meetings. This would raise short-term interest rates from just over 3% now to more than 4.5% by next year.

Longer-term interest rates, such as on mortgages, have been increasing even faster as the standard 30-year mortgage interest rate is now 7% or more, the highest in 20 years. This makes buying a house that much more expensive. Credit card interest rates are also rising, adding the costs of household who carry credit card debt.

The only silver lining to the inflation cloud is that Social Security benefits will rise 8.7% in 2023. This is because Social Security benefits are “indexed” or automatically adjusted for inflation using the CPI-W. In addition, there will be a very small drop in the Medicare Part B monthly premium, instead of a usual increase.

But Social Security and Medicare will be under threat if the Republicans win in the November midterm elections, as many Republicans in Congress and candidates are calling for cuts or even ending these essential programs for seniors and the disabled.

#SanJoséCA #economy #inflation

The biggest drop in new jobs was in the government, which went from adding 40,000 jobs in August to a job loss of 25,000. Most of this job loss came from cuts at local schools, which had over 20,000 fewer workers than the month before. Another sign of job market weakness could be seen among retailers, which went from a gain of more than 40,000 jobs in August to a small loss in September. Last, there was a large increase in temporary jobs, often a sign that businesses are getting worried about a coming recession and don’t want to make permanent hires.

The unemployment rate for September did drop to 3.5% from 3.7% in August. But part of this drop in the number of unemployed was because more than 50,000 jobless stopped looking for work and thus were not counted. The number of jobless workers who wanted to work, but did not look for work, in September also grew. These workers do not show up in the official unemployment numbers.

Despite the relative weakness of the report, Wall Street was hoping for an even worse report with fewer jobs and a rising unemployment rate. Investors sold stocks, with the broad based S&P 500 index falling more than 100 points, or about 2.8%.

#SanJoséCA #economy

This led to an outcry among Republicans, reinforced by many articles in the corporate media, that a recession had begun. Republican leaders immediately showed their lack of basic economic sense, saying that the American people were already feeling the pain of recession. In fact, the pain that American workers and small businesspeople are feeling is inflation, which is not a sign of a recession. Just look at the last recessions in 2020 – who was complaining about inflation?

Unfortunately, the corporate media sowed confusion by spreading the common, but wrong definition that six straight months of declining GDP means that there is a recession. Among the worst was the Washington Post, which found an economist to quote (or misquote) saying that the last time that there was a recession without six months of declining GDP was in 1947. In fact the 2001 recession did not have six straight months of GDP falling. In addition the recessions in 1960 and 1970 did not have six straight months of declining GDP.

One reason that two quarters of falling GDP is not used by economists is that most recessions since World War II (when GDP figures were available), have a “double-dip” where there is a bounce in economic activity during a recession. Because of this economists also do not conclude that a recession is over as soon as the economy begins to grow again – the growth needs to be sustained.

The official definition of a recession is a lasting slowdown in the economy as shown by employment, sales, income and industrial production. The most important measure is employment, or the number of new jobs created, which showed an increase of 372,000 in June – not a sign of a recession!

The main reason for the decline in GDP was a decline in business inventories, or the unsold goods on store shelves and warehouses. The decline in inventories was 2% of GDP, more than twice the overall decline. Falling inventories were also a major cause of the decrease in GDP in the first quarter of 2022. Both were an unwinding of the huge build-up in inventories in the last three months of 2021. This build-up was so big that it drove GDP to the highest rate of growth (6.9%) since World War II, except for the post-pandemic bounce in 2020.

But even leaving aside the drop in business inventories, the GDP report showed many signs of present and future weaknesses. Housing construction fell by three-quarters of one percent, showing that the Federal Reserve’s campaign to raise interest rates is have an effect as mortgage interest rates surged and housing sales have fallen. Government spending on goods and services fell by one-third of one percent, showing the ending of the few remaining COVID-19 programs. Business investment fell by three-quarters of one percent. While all of these figures were small, they together outweighed the three-quarters of one-percent increase in household spending on goods and services.

In fact the only strong increase in the report was in U.S. exports. But this is unlikely to continue. Not only do exports go up and down a lot, but the rise in the U.S. dollar is making U.S. goods and services more expensive for other countries to buy. A number of other countries’ economies are struggling, in particular Germany.

The report on Personal Income and Outlays for June by the Bureau of Economic Analysis on July 29 showed that the Federal Reserve’s favored inflation measure, the Personal Consumption Expenditure Price Index hit a new 40-year high, rising 6.8% over the year earlier. This means that according to the Fed, there is no break in rising inflation. This means that the Fed will continue to increase interest rates in big steps. Many economists see another three-quarters of a percent increase likely in September at the next meeting of the Federal Open Market Committee, which sets short-term interest rates.

The business cycle, or the cycle of recession and economic expansion, date back to before the Civil War in the United States. Recessions began long before there even was a Federal Reserve, or a large and active federal governments. While the government and the Fed do not cause recessions, they can influence the timing and depth of a recession. The fall in government spending and continuing increase in interest rates will move up the onset of a recession. With the Fed focused on fighting inflation and the renewed effort to cut the budget deficit in Washington DC, the next recession could last longer and cause more pain to working Americans than economists expect.

#SanJoséCA #recession #economy

San José, CA – On Friday, June 10, the Bureau of Labor Statistics reported that prices for workers’ families, the so-called Consumer Price Index-Wage or CPI-W rose by 9.3% as compared to prices a year ago. This rate of inflation is near a 40-year high, only exceeded by the 9.4% increase in March. The last time that prices rose so quickly was in November of 1981.

The headline number that the corporate media reported was a smaller 8.6%. This was the number for the CPI-Urban or CPI-U that includes households with managers and professionals as well as wage workers. The CPI-W inflation is higher than the CPI-U because the CPI-W puts more weight on the prices of food and transportation that have been bedeviling working families. Food prices are up more than 10% over the past year while gasoline is up almost 50%. On the other hand, recreation costs, which are given a more weight in the CPI-U, are up less than 5%, bringing down the CPI-U.

The CPI-W was the original Consumer Price Index that the federal government began to report on in 1919. After the introduction of the CPI-U, which included more higher-income earners, in 1978 the Bureau of Labor Statistics reported data for both for many years. But in May of 2012, the Obama administration stopped publishing the data breaking down the CPI-W. At the same time the Bureau of Labor Statistics included more “attractive” data tables in the report. The government seems to have taken a page from corporate marketers who will often put a lesser product in a more attractive package.

In response to the high level of inflation, the Federal Reserve Bank, the U.S. central bank, has raised interest rates twice, the second time by one-half of one percent instead of the typical one-quarter percent increase. The Fed is expected to raise interest rates by a half a percent again in June and also July. This is one of the most aggressive rounds of interest rates increases that the Fed has ever done.

Interest rate increases will slow borrowing and spending on goods and services, thereby slowing increases in prices. But this also tends to raise the unemployment rate and in most cases is accompanied by a recession. Thus, more and more economists are talking about the growing likelihood of “stagflation” where the economy goes into a recession while inflation stays high.

The problem that the Fed faces is that many of factors that are spurring inflation are coming on the supply side, not the demand side. One trigger for many of the shortages was the pandemic, where globalized supply chains were subject to factory closures and shipping problems. Another factor is climate change, which has contributed to the worst drought in 50 years on the island of Taiwan, where most advantage chips are made, using processes that are very water intensive. These chip shortages have caused a slowdown in auto production, leading to higher car prices.

But the U.S. government’s policies to wage economic wars on first China, and now Russia are also a factor. About half of all the goods made in China that the U.S. buys have a 25% tariff, leading to higher prices. The tariffs and embargoes on solar panels in particular are slowing or even stopping solar energy projects, driving up prices for electricity. While the Biden administration is blaming Russia’s president Putin for high gas prices, the fact is that the Russian government has not limited the export of oil to the United States. It is the United States embargo on Russian oil and the U.S. economic war on Russia that is making it difficult for Russia to export its oil, driving up the price of oil and oil products like gasoline.

The Biden administration does have a point in placing some of the blame for high prices on big corporations that have been raking in profits, such as oil corporations and meat packers. When a few large corporations dominate an industry, it is very difficult for any new companies to break in. So when prices go up, instead of new firms coming in and adding to supply, the existing companies can just sit back and let the profits roll in. One thing that can be done in a capitalist economy is to place price controls on key industries like gasoline and meat production, to freeze or even lower prices while making sure that the companies don’t try to limit production.

#SanJoséCA #economy #inflation

Investors are facing up to the fact that the country’s central bank, the Federal Reserve, is more committed to slowing the economy to lower inflation than it is with propping up stock prices. Inflation has hit a 40-year high of more than 8% the last two months. The Fed has already raised short term interest rates twice, one time by half of a percent for the first time in 20 years.

The Fed has made public plans to begin to sell off its massive stash of bonds. During both the 2008 financial crisis and then the COVID recession in 2020, the Fed bought about $8 trillion in U.S. government and mortgage bonds, to lower short term interest rates to record lows and to reduce mortgage interest rates. The Fed plans to reduce its stash of bonds by almost $100 billion per month or more than $1 trillion per year. This will reduce the amount of money in circulation and in banks and will raise longer term interest rates. The standard 30-year fixed rate mortgage interest rate has gone from 3.11% at the beginning of the year, so 5.27%, a jump of more than 70%.

The Federal Reserve’s inflation fight is raising recession fears on Wall Street. Federal Reserve Chair Jerome Powell has been praising Paul Volker, who headed the Fed from 1979 to 1987. Under Volker, the Fed raised short-term interest rates, currently at 8/10ths of one percent, to a record high of 20% in 1981 to fight recession which had reached 13% just months before. While inflation did fall, the worst (at that time) recession since the Great Depression followed, with unemployment reaching 10.8%, even worse than the recession with the Great Financial Crisis in 2008.

Inflation has been eating at the purchasing power of workers’ wages. Even though hourly pay is up over 5%, with inflation over 8%, the purchasing power of workers’ wages has dropped by 3% over the last year. It is no wonder that there is growing dissatisfaction despite rising wages.

Supply side shortages have played a role in the rise of inflation. The COVID pandemic led to a severe drop in spending on services such as travel. People turned to goods, causing a spike in demand that U.S. factories, many still troubled by COVID, were unable to meet. The demand for imports rose, overwhelming ports and truckers. Then there were shortages of computer chips that restricted new car sales, which are off 20% from the current peak, while prices rise at double-digit levels. The lack of new cars increases the demand for used cars, while supply drops as people keep their cars when they can’t get new one.

The U.S. sanctions on Russia have pushed up oil and gasoline prices. The Biden administration has escalated the U.S. economic sanctions on China, causing shortages of solar panels. These shortages continue to crop up one after another helping to drive prices higher. Another supply side shortage is the drop in the number of new immigrants, which started under the Trump administration.

Demand has played a secondary role. When inflation started to take off a year ago, unemployment was still at 6%. While the massive government spending to prop up the economy played some role, it basically ended at the time inflation started to take off.

Inflation is rising in countries around the world, particularly in Europe, where sanctions on Russia have a greater impact. The U.S. and Europe’s economic war on Russia is pushing up grain and food oil prices, causing hardship in poor and middle-income countries dependent on trade with Russia for their basic foodstuffs.

One country much less affected by inflation is China. While China’s socialist economy no longer has extensive price controls like those in the Soviet Union, inflation has been much less than here, running around 1.5%. China was able to clamp down on COVID and limit deaths to about 15,000 as compared to the 3 million deaths there would have been if China had the same death rate at the United Sates. This meant fewer supply-chain disruptions and no need for the massive financial spending that the U.S. government needed to keep the economy alive. While producer prices are rising at almost the same rate as in the United States, the government can directly (through government-owned enterprises) and indirectly (through influence from state-owned banks and Communist Party committees in enterprises) keep businesses from passing on all the price increases. China also maintains a year or more supplies of raw materials such as metals and grains that can be released to curb production and food costs.

#SanJoséCA #economy #stockMarket

In 1944 the United States hosted a meeting at Bretton Woods, New Hampshire, to set out a post-World War II economic agreement. At the meeting, the United States’ plan dominated over a British plan crafted by famous economist John Maynard Keynes. This was the end of British imperial financial leadership and the beginning of U.S. financial supremacy. Instead of the fixed exchange rate of the Gold Standard of the late 1800s and early 1900s led by Great Britain, there was now a new system of fixed exchange rates, based on both gold and the U.S. dollar.

This so-called Bretton Woods agreement established fixed exchange rate system that facilitated international trade and investment dominated by the United States. Since the other major capitalist economies – Britain, France, Germany and Japan – were focused on rebuilding after World War II, and because of the socialist Soviet Union, United States saw little economic competition. The United States was the economic power in the world and held most of the world’s gold.

But the recovery of Germany, Japan and other capitalist nations in the 1950s and 1960s put pressure on the U.S.-dollar centered economic system. With other countries holding U.S. dollars to back their own currencies, the United States was supposed to hold gold to back the U.S. dollar. But as doubts about continued U.S. economic supremacy mounted, gold began draining away and finally Nixon had to give up on backing the U.S. dollar with gold in 1971.

This began the modern flexible exchange rate system, where the prices, or exchange rates, of most currencies move up and down in the foreign exchange market. After a period economic instability in the 1970s, the United States was able to stabilize its economy through deregulation and increased exploitation of the working class under President Reagan in the 1980s. But with the Great Financial Crisis of 2008, a new period of relative economic decline for the United States began. In the last 20 years China has grown to be the major economic competitor of the United States. With a socialist economy, China’s gains are also stoking doubts about U.S. capitalism.

The relative stabilization of the U.S. economy in the 1980s and the fall of the U.S.S.R. in 1991 emboldened the United States to be more aggressive militarily, leading the invasions and occupations of Afghanistan and Iraq. But now the United States is trying to reduce its military commitments in the Middle East and pivot to Asia in preparation for a war with China. The Afghan government built and financed to the tune of almost $1 trillion by the United States after the 2001 invasion has collapsed.

The United States economy managed to weather the first wave of the COVID-19 pandemic through massive government borrowing and spending. The total government debt, as compared to size of the economy, is now as large as during World War II. The U.S. central bank, or Federal Reserve, has not only created trillions of dollars to buy U.S. government bonds, but expanded its bond buying to mortgage-backed bonds and other bonds.

But despite the vaccinations of 60% of Americans who are twelve or older, the U.S. economy is again coming under stress with the fourth wave of the COVID-19 pandemic fueled by the Delta variant. One sign of this is the re-emergence of inflation for the first time since before the financial crisis. The looming cut-off of government unemployment aid and eviction moratorium over the next two months will increase hunger and homelessness at a time when economic inequality has increased with the pandemic. While another economic crisis does not appear to be around the corner, the declining strength of the United States around the world points to another period of economic turbulence.

#SanJoseCA #PeoplesStruggles #economy #goldStandard

But this is unlikely, given all the shortages showing up in the economy. Shortages of computer chips have slowed car production. Shortages of lumber are crimping housing construction and driving up prices.

One thing that is not rising rapidly are wages, with a gain of 2% over the last year. This is less than half the overall inflation rate for consumers reported in April of 4.2%. This means that the actual purchasing power of workers’ wages are going down on average.

Nevertheless, businesses across the country are complaining about a shortage of labor, even as they drag their feet on increasing wages, in an effort to further fatten their bottom line. The big corporations and the richest 1% made out like bandits during the recession, and now they are doing the same.

Businesses are showing their control of both political parties, as 25 Republican-led states are ending the $300 a week supplement to unemployment benefits and also the Pandemic Unemployment Assistance or PUA for the self-employed and gig workers. President Joe Biden defended their “right” to end the aid and emphasized that they are temporary programs.

But the PUA in particular is needed as a permanent program, as a growing number of businesses like Uber and Lyft convert their workforce to “independent contractors” to save on taxes and benefits. These workers are not covered by traditional unemployment insurance, and the PUA actually is paying benefits to more jobless workers than the regular state unemployment program.

Last month, when the job creation number was only about one-quarter of what economists predicted, businesses launched a campaign to blame unemployment benefits. This month, with twice as many jobs created, they are still singing the same tune. What they really want is to reduce unemployment benefits as much as possible to force the jobless to work for lower wages. Another sign of the businesses chasing lower wages is that the unemployment rate for teenagers fell to a historic low in records going back to 1953.

The same jobs report also said that the official national unemployment rate fell in May to 5.8%, from 6.1% in April. While most of this improvement came from the unemployed finding jobs, almost one-third came from people leaving the labor force by giving up their search for a job. Over the last three months the unemployment rate has only dropped by 0.2%. At this rate is would take almost three years to get the rate down to the pre-recession level of 3.5% last seen in February 2020.

The official unemployment rate understates the economic hardship workers have faced. Counting all the people who have given up looking for working or working, the unemployment rate would be closer to 7.6%, more than twice the level before the recession. The rising tide of job creation, as usual, is very unequal, with Latinos and African Americans having unemployment rates 50 to 100% more than that of whites.

Another challenge for jobless workers is that the federal eviction moratorium is ending on June 30. More than 10 million tenants are behind on their rent and could face evictions once this protection is dropped. The federal government is spending billions to try to aid tenants and landlords. But not only is the amount too little; only part of the money has been spent. A handful of states have enacted their own moratoriums but many more will need to do this.

#SanJoséCA #US #PeoplesStruggles #IndigenousPeoples #MasaoSuzuki #economy #PandemicUnemploymentBenefitsPUA

San José, CA – On Friday, February 5 the U.S. Department of Labor released their monthly jobs report showing a very small gain of 49,000 net new jobs. This was only half of what economists had predicted, and the job loss in December was revised up by 87,000, so there were still 178,000 fewer jobs in January than in November.

In December, more than 82% of the job losses were concentrated in one industry, leisure and hospitality, which includes hotels, restaurants and other live entertainment. These losses were almost entirely caused by the surge in the COVID-19 pandemic during the winter and especially over the holidays. In fact, 62% of industries gained jobs, although this was swamped by the losses in hospitality and leisure.

But in January, the job losses spread to health care and social assistance, transportation and warehousing, retail trade, and manufacturing of durable goods (cars, appliances, etc.). In fact almost 52% of industries lost jobs in January, not just ones directly impacted by the pandemic. This shows that even the most welcomed retreat of the pandemic will not guarantee a strong job recovery.

In the same report, the official unemployment rate fell from 6.7% in December to 6.3% in January. But because of the annual revision to the previous year’s data, it is difficult to compare the two months. The percentage of the unemployed who have been out of work for a long period of time, which is not affected by the adjustment, continued to rise to a record high. In January, almost 40% (39.5%) of the unemployed had been out of work for six months or more. This means that even with the extension of the federal Pandemic Emergency Unemployment Compensation, or PEUC for those out of work more than six months, more and more people will be running out of unemployment assistance.

Overall, the economy is continuing to show more and more inequality. The stock market, which is mostly owned by top 1%, continues to set new record highs, making the billionaires richer and richer. Housing prices continue to rise, boosting the wealth of home owners, while more and more tenants are falling behind on their rents, putting themselves at risk of eviction, even with the current government moratorium. Well-paid professionals who can work from home have far lower rates of unemployment, estimated at under 5%, while the lowest paid workers have unemployment rates at or above 25%.

#SanJoseCA #PeoplesStruggles #economy

San José, CA – The broadest measure of unemployment insurance, which includes the regular state unemployment insurance or UI, the federal Pandemic Unemployment Assistance or PUA, the federal Pandemic Emergency Unemployment Compensation or PEUC, as well as the state Extended Benefits or EB rose in the first week of January by 2.3 million people to a total of 18.3 million people. While down from its peak in April, it is still nine times as high as it was a year ago before the recession began, according to the weekly report by the U.S. Department of Labor released on Thursday, January 28.

Part of the bounce in unemployment insurance benefits was because of the temporary end to the federal PUA and PEUC at the end of 2020 as Republicans in the Senate dragged their feet on passing more badly needed aid. The other is the renewed weakness in the economy, as seen in the 140,000 jobs lost in December, the first job loss since April.

This weakness in the economy at the end of the year could also be seen in the first report on the Gross Domestic Product, or GDP, for the fourth quarter, or last three months of the year, which was also released January 28 by the Bureau of Economic Analysis or BEA, which is part of the U.S. Department of Commerce. In the October to December period of 2020, the U.S. economy grew by 1%, which was less than what economists expected.

This meant that the U.S. economy shrank by 3.5% in 2020, the worst showing since 1946 when the economy fell with the end of World War II. While most sectors of the economy grew, although at a much slower pace than in the third quarter or July to September period, state and local government spending fell for the third quarter in the row, the only sector not have a rebound in the second half of the year.

The economic damage of the recession and the pandemic was actually worse in almost all other major capitalist economies, with the United Kingdom the worst with an estimated 8.5% drop in their GDP in 2020. The only exception was South Korea, whose better control of the COVID-19 pandemic and large economic ties with China reduced their economy’s fall to only 1%.

In contrast, the Chinese economy actually grew 2.3%, despite being the first country with a major COVID-19 outbreak. China’s socialist system and its “zero tolerance” policy toward the virus allowed it to suppress the pandemic and have an economy rebound. Socialist Vietnam, which was able to prevent the virus from getting a foothold, did even better, with a 2.9% rate of growth in 2020.

#SanJoséCA #Capitalism #economy #EconomicReport