San José, CA – Last week the U.S. economy showed more signs of weakness as retail sales in November fell for the second month in a row and new claims for regular state unemployment insurance and the federal Pandemic Unemployment Assistance rose for the second week in a row. These are more signs of a weaker economy that point to a ‘double-dip’ recession.

Retail sales, including online orders, fell 1.1% in November. The October figure was revised down from a 0.3% gain to a 0.1% loss. Sales over the Thanksgiving weekend, which included Cyber Monday, were down 14% as compared to a year earlier. The slide in sales is a result of both a sagging job market as well as the fact that much of the earlier boom was in durable goods, like appliances and electronics, which are one-time purchases.

New claims for regular state unemployment insurance rose by 23,000 to 885,000 in the week ending December 12, when most mainstream economists expected a drop. This was the first back-to-back rise in unemployment insurance claims since July. The federal PUA also saw an increase in new claims, up 40,000 to 455,000. Continuing claims for both programs as well as the federal Pandemic Emergency Unemployment Compensation or PEUC, and the state Extended Benefits or EB programs jumped by 1.6 million to rise back above 20 million in the week ending November 28.

In the last few months since the end of the extra $600 in weekly unemployment benefits, the poverty rate has gone up by 24%. With almost 8 million more people below the official poverty line, the poverty rate has risen to 11.7% of the entire population. This is the biggest increase in the 60 year history of counting poverty in the United States. Hand in hand with rising poverty is more people needing food aid and millions more renters at risk of eviction next year.

A major factor in the slowing economy has been the surging pandemic in the United States, which has been hitting new record daily highs in terms of number of new infections, hospitalizations and deaths. There was a new record high of more than 3600 deaths in one day, and more than 110,000 people in the hospital just this past week – and many doctors say the worst is yet to come. This has led to more and more businesses closing as shoppers and diners cut back out of caution or because of government restrictions.

But still politicians are undermining public health efforts. In San Bernardino County in California, one local hospital is at 300% of capacity with half their lobby turned into a COVID ward, people in the hallways, a field hospital set up outside, and ambulances lined up with patients. Still the county supervisors voted to sue the governor for his stay-at-home order. The governor himself, Democrat Gavin Newsom, doesn’t help by breaking his own rules, dining with people outside his household at an elite French restaurant with a three-star Michelin rating and $1200 per person luncheons.

The pandemic is also hitting another center of world capitalism, Europe, hard this winter. Many countries there have restored stay-at-home orders as infections and deaths surpass their spring surge when Europe was the hardest-hit area in the world. Even Japan, which has had a relatively low level of COVID infections, has seen rising rates of infections and deaths. Only China, which was the first country to see a large outbreak, has an economy that has recovered after suppressing the virus early this year. China saw a daily average of only 23 new infections in the last week for a total population of 1.4 billion.

With many federal relief programs passed with the CARES act back in March about to expire at the end of the year, Congress seems close to a compromise bill with another $900 billion in aid. Still, much of this aid will be too little, too late as Republicans in the Senate dragged their feet on a new aid package since August, when the additional $600 per week in unemployment expired. While they say that they are worried about the cost, they had no problems with Trump’s tax cut almost twice as large that benefitted big corporations. Amazon, which has seen booming business during the pandemic, has paid only $162 million in taxes over the last three years, while make almost $25 billion in profits. This works out to a 0.6% tax rate. In contrast, the average U.S. household has a federal income tax rate of about 15%, 25 times higher than what Amazon pays.

#SanJoseCA #PeoplesStruggles #economy #doubleDipRecession

The Labor Department report released on Thursday, October 1 showed that there was no letup in the pace of layoffs. While the number of regular state unemployment insurance claims for the week ending September 26 fell by 36,000 from a week earlier, the number of new applications for the federal Pandemic Unemployment Assistance or PUA program for the self-employed and gig workers rose by almost 35,000, leaving the total virtually unchanged.

Even worse, the broadest measure of unemployment insurance, which includes the number of people collecting benefits from the regular state unemployment insurance program, the federal PUA, as well as the Pandemic Emergency Unemployment Compensation or PEUC and the Extended Benefits program, rose by almost half a million in the week ending September 12. The PEUC and EB programs are for the long-term unemployed who have exhausted their regular UI claims. Their combined numbers rose by 180,000, showing the continued growth of the long-term unemployed.

Earlier this week, and after the reporting period in the Department of Labor report, big businesses announced tens of thousands of layoffs were coming this month. The single largest on was by the Disney corporation, which will cut 28,000 workers as their theme park and movie businesses continue to be crippled by the pandemic. Airlines announced a total of more than 30,000 more layoffs as government aid runs out at the end of September and passengers are down by more than two-thirds since before the pandemic hit. Insurance companies will cut thousands, while businesses ranging from banks to high-tech rolled out job cuts that had been postponed because of the pandemic.

Hopes for help from the federal government continue to look dim. While the Democrats in the House of Representatives are ready to pass a slimmed down $2.2 trillion aid package, Republicans in the Senate still cannot pass a counterproposal. The reason why can be seen in the latest vote to extend current spending, where ten Republicans voting against the measure. These ten are so intent on cutting spending for domestic programs that are willing to shut down the federal government to get their way and are dead set against any more aid to people hit by the recession.

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Republican presidential candidates have taken the free market view that the government is to blame for economic instability and have called for, for example, dismantling the Environmental Protection Agency (EPA) as a ‘job-killer.’ Unfortunately Democratic politicians from President Obama to California Governor Brown have also adopted this view of sacrificing the health and welfare of people in the interests of corporate profits.

These right-wing, free market views even go as far as trying to blame the boom and bust in housing prices on government-backed mortgage giants Fannie Mae and Freddie. In fact, the big boom in housing was driven by Wall Street and big banks that pushed risky and exotic mortgages from 2003 to 2007 while pushing Fannie and Freddie to the sidelines. The right wing also tries to put blame for the housing crisis on federal government efforts to increase homeownership among African Americans and other oppressed nationalities under the Democratic Clinton administration, when the big boom and bust came under Republican George Bush.

Backers of the free market view are calling for more austerity. Republican presidential candidates complain that the poor, working parents and seniors on Social Security often pay no income tax, while ignoring the payroll and sales taxes that lower income folks pay. Free marketers claim that extending unemployment insurance benefits causes unemployment by reducing people’s interest in finding a job, ignoring the fact that there are almost four people looking for a job for every job opening. They have also proposed at different times to do away with Social Security and Medicare and turning people’s retirement funds over to Wall Street and health care to private insurance companies.

Keynesian economists such as Nobel-prize winner Paul Krugman have argued that these policies of austerity are cruel and that the federal government should have spent even more, as the $800 billion economic stimulus under Obama barely offset the spending cuts and tax increases by state and local government, adding little stimulus to the economy. They correctly point out that the large U.S. government budget deficits have not increased interest rates, as the interest rate on long-term government bonds have dropped to the lowest levels in 70 years.

But the example of Japan shows that even massive government spending can fail to revive an economy. In the early 1990s the Japanese economy suffered a triple whammy of recession, a stock market crash and a bursting real estate bubble. The Japanese government borrowed and spent huge amounts, driving Japanese government debt from the lowest among the wealthier nations to the highest – it is now more than twice the size of the Japanese economy (in contrast, the U.S. government’s debt is still smaller than our economic production as measured by GDP). Nevertheless, the Japanese economy has remained in the doldrums, with only a strong export sector boosting the economy.

Marxist economics sees recession as neither caused by the government nor as curable by government spending. Rather, recessions are part and parcel of a capitalist economy where profit is the motive force. Businesses cut workers’ pay and benefits to increase their profits. But this limits their workers’ ability to buy back what they create. At the same time, these profits are reinvested in developing new technologies and expanding production. This clash – between limited ability to buy and growing ability to produce – leads to periodic crisis of overproduction, or what are called recessions.

Over the last 30 years a vast expansion of debt, especially credit cards and mortgages, has allowed workers to buy more and more despite having stagnant wages. At the same time it has been a profitable investment for capital that has had a hard time finding enough productive investments to turn a profit. But this pile of debt began to collapse with the financial crisis triggered by the collapse of the Wall Street investment bank three years ago.

Without more and more debt to stimulate the economy, it should be no surprise that the recovery from the last recession has been so weak. More than two years after the official end of the last recession, there are almost 7 million fewer jobs than before the recession started and many parts of the country are still mired in depression. More frequent recessions and quite likely worse ones are in the near future, as governments lose their will to bail out the economy and austerity measures cut spending.

The ultimate solution is that we need socialism, which includes an economy based on people’s needs, not profit. But in the meantime we also need to build a mass movement to defend the unions and social programs that have helped people raise their standard of living. Instead of cutting Medicare, we need a national health insurance program for all. Instead of cutting Social Security, we need to restore Social Security taxes on higher income individuals. Instead of closing schools and raising tuition at public colleges, the U.S. must get out of Iraq and Afghanistan.

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The U.S. economy continues to stagnate with almost no economic growth or job creation more than three years after the great financial crisis of 2008 and more than two years after the recession officially ended in 2009. The official unemployment rate is still over 9% nationally, and millions of workers who have stopped looking for work are not included in this count. Even worse, the Obama administration projects unemployment to stay above 8% for all of 2012, which would be four years of near double-digit unemployment.

The U.S. is not the first to face economic stagnation. In the 1980s, European unemployment rates were also near double-digit levels. U.S. economists blamed this on the European social-welfare state, with universal health insurance and unemployment insurance, early retirement and long paid maternity leaves. But here in the United States more than 50 million people have no health insurance at all, millions of unemployed have no benefits, the retirement age is rising and there is no mandatory paid maternity leave. Still, the U.S. economy stagnates.

In the 1990s, the Japanese economy entered what is now 20 years of stagnation, marked by deflation or falling prices. Deflation can poison an economy as prices and incomes fall, making it harder to pay off mortgages and other debts. As more and more loans go bad, the economy is dragged down even more. Again, U.S. economists blamed the Japanese Central Bank for not printing enough money to prevent deflation and stagnation. Here in the United States, the U.S. central bank, the Federal Reserve, has printed more than a trillion and a half dollars over the last three years, yet was able to stop the deflation in 2009. But still the U.S. economy stagnates.

The problem here in the United States (as well as Europe and Japan, which also have economies that are going from bad to worse) is not the limited social safety net or central bank policy. The problem is that our monopoly capitalist economy, dominated by a smaller and smaller number of gigantic corporation and Wall Street financial institutions, is dedicated to increasing profits at all costs. Over the last two years corporate profits have soared to record levels, while at the same time there are 7 million fewer people working than when the recession began in late 2007. These gigantic profits are not reinvested to create more jobs, but rather are flowing to the financial casino known as Wall Street for massive speculation.

Republicans are trying to use the continuing economic stagnation to try to eliminate what is left of the U.S. safety net. In Congress, Republicans have proposed to end Medicare and replace it with more expensive private health insurance. The leading Republican presidential candidate, Texas Governor Rick Perry, is attacking Social Security and wants retirees to depend on Wall Street. In states such as Wisconsin, Republicans have led the charge to chop pay, retirement, and collective bargaining rights of teachers and other government workers. They are also leading efforts in Arizona, Georgia and other states to scapegoat immigrants and pass racist laws targeting Chicanos and Latinos. These efforts are backed by the Koch oil billionaires and others who want corporations to be able to run amuck over working people and the environment.

The Democrats also have close ties with Wall Street, and spearheaded the bailout of big banks and corporations during the financial crisis. But to bring along their supporters among working people, African Americans, and other oppressed nationality communities, the Democrats have promoted programs that have been at best too little and too late and at worst crumbs compared to the hundreds of billions spent on corporate bailouts. While millions of home owners have been foreclosed and millions more have gone underwater – with their prices falling below their mortgages – the Obama Home Ownership Modification Program (HAMP) has only helped 63,000 severely underwater homeowners.

The latest Obama proposal for payroll tax cuts and extending unemployment insurance could add 2 million jobs if all of it is passed (there is almost zero chance of this happening with the Republican controlled Congress). With the labor force down by 7 million jobs since the recession started, this is still not enough to restore the economy to full employment.

Both the Republicans and the Democrats support continuing costly wars abroad. The wars in Iraq and Afghanistan have cost over a trillion dollars and counting, while the U.S. military is attacking Pakistan, Libya, and Yemen with bombs and drones. Trillions more have been spent on military bases, naval fleets and nuclear weapons so the United States is spending more than the rest of the world combined on the military. In the meantime college tuition is up, K-12 teachers are being laid off, roads and bridges are crumbling and even disaster relief is being questioned in Congress.

Both the Republicans and Democrats have committed themselves to cutting the federal budget deficit. But this is not going to help the economy; just look at what is happening in Europe where efforts by countries to cut spending and budget deficits are just leading to more and more unemployment and suffering by working people.

Neither the Republicans nor the Democrats will restore the economy to health. The Republican austerity proposals will only make the economy worse and deepen the suffering of working people. The Democratic practice of big bailouts for banks and corporate America combined with big announcements of programs to help working people that turn out to be little more than the status quo only serve to make the rich richer while trying to keep the poor and working people quiet.

Only a grassroots movement to fight back against austerity and for real relief for working people can protect our livelihoods and communities. We need a real government jobs programs that can put millions of unemployed to work like the WPA in the 1930s. We need to allow homeowners to reduce their mortgages and keep their homes through bankruptcy courts. We need to defend and expand Medicare, to provide universal health insurance for all and eliminate costly private health insurance. We need to defend Social Security and pensions so that working people can retire with peace of mind. Neither the Republicans nor Democrats will do the job if left in the clutches of Wall Street and billionaires. Only a massive fight back can force Congress and the administration to provide the jobs, education and services that working people need.

#UnitedStates #recession #doubleDipRecession

Even worse, the average number of hours worked decreased by one-tenth of an hour. While this is a small number, multiplied by millions of workers, it means of loss of wages equivalent to losing some 300,000 jobs.

The unemployment rate stayed the same in August as compared to July; at 9.1%. One reason for this was that there was a large increase in the numbers of part-time workers who could not find full-time work because of the bad economy. The number of part-time workers has almost doubled since the start of the recession, from 4.5 million in December 2007 to 8.7 million in August. A broader measure of unemployment, that includes these part-time workers as well as discouraged workers who have given up looking for work, actually ticked up from 16.1% in July to 16.2% in August.

There was also a big increase in the unemployment rate for African Americans of almost a whole percentage point. The African American unemployment now stands at 16.7%, more than twice as high as the rate for non-Hispanic whites, which is 7.2%.

The official unemployment rate only counts those who are out of work and looking. Over the last four years the broadest measure of employment, the percentage of adults that are working, dropped from 62.7% to 58.2% in August. This measure usually falls during a recession, but has continued to fall since the official end of the recession two years ago.

The job market is caught in a vise between businesses that are not hiring and government spending cuts that are leading to job losses. Over the last two years businesses have cranked up production to where it is almost back to pre-recession levels. They have done this will seven million fewer workers. With their labor costs down, profits are way up and corporations are sitting more than a trillion dollars in cash that they are not spending.

But businesses are not going to hire more unless there is a pickup in spending. Consumers are not spending more because of high unemployment that limits income. The most widespread type of household wealth, housing, has been hit hard by the fall in home prices because of rising forced sales. With the number of home buyers who are behind on the payments rising in the April to June period, it is likely that home prices still have a way to fall with more forced sales in the future.

Exports of goods and services to other countries had been a bright spot in the economy, as the falling value of the U.S. dollar makes U.S. exports cheaper. But the economic slowdown and growing financial crisis in Europe have cut into exports, with exports falling in June, the latest month for which data is available. Job in manufacturing, an industry that has a large export market, fell for the first time in almost a year in August, with a loss of 3,000 jobs.

At the same time governments are cutting jobs. There have been almost 300,000 government jobs lost so far this year. State and local governments, especially schools, have been hardest hit by the bust in the housing market, which has cut into property tax revenues. With the end of the federal stimulus moneys going to state and local governments, they have had to cut even more. The recent ‘deficit reduction’ agreement promises to cut federal spending and jobs even more.

Both the Federal Reserve and the Obama administration are likely to try to stimulate the economy. But the most likely result is more of the easy money and piecemeal federal programs which haven’t been enough to get the economy back on track. More dramatic measures, such as a federal jobs program and allowing home buyers to reduce the mortgages through bankruptcy are needed to create more jobs, reduce foreclosures and create the income and spending needed to get the economy growing again.

#SanJoséCA #recession #jobs #doubleDipRecession

Recently, a number of weak economic reports, including ones showing that production of goods and services and job creation had slowed this year have raised the chances that the economy would go into another downturn, or what is called a double-dip recession. Mainstream corporate economists, who are usually optimistic about the U.S. economy, have said that the chances of a double-dip are as high as 40%.

If the economy did go into another downturn, it could be much worse than the last downturn that bottomed out in 2009. While there is no financial bubble in the housing market and trillions of dollars of bad mortgages, there is a brewing financial crisis in Europe as country after country is losing its ability to borrow from wealthy investors. First Greece, then Ireland and Portugal, and now Spain and Italy, have had to turn to other European governments and the European Central Bank (ECB) to get help in borrowing more.

The U.S. unemployment rate is still over 9%, about twice the unemployment rate when the recession began in December 2007. Short-term interest rates have been cut to almost zero, leaving the U.S. Federal Reserve unable to lower interest rates to boost the economy through monetary policy. There is also almost no chance of more government spending, or stimulation through fiscal policy, with the Tea Party/Republican control of the House of Representatives and the Democratic leadership’s commitment to more spending cuts. Without government aid, the next downturn is more likely to follow the path of Great Depression of the 1930s, with a vicious cycle of job cuts leading to less spending leading to even more job cuts.

Another downturn in the economy would also be bad for corporate profits, which is why there was a drop the stock market on Aug. 8. Stocks around the world fell Aug. 8, with the broadest measure of the U.S. stock market, the S&P 500, falling almost 7%. Early in the morning of Aug. 9, in Asia, stock markets continued to fall, with the worst hit the South Korean stock exchange, down 8%.

The stock market fall is likely to speed up the trend of corporate layoffs. A number of large corporations, including banks such as HSBC, high-tech firms such as Cisco and Research In Motion (makers of the Blackberry), bankrupt retailers like Borders, and drug company Merck have already announced thousands of layoffs. More corporate layoffs will come as businesses try to maintain or even increase their profits in a slowing economy.

While the corporate-dominated mainstream media is full of headlines about the fall in the stock market, there are few headlines about the millions of Americans who have been out of work. Unless and until the federal government turns away from its current path of austerity and increasing the insecurity of working Americans, and starts to spend more to create jobs, the economy can continue to weaken.

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San José, CA – On July 29, the Commerce Department released its report on Gross Domestic Product or GDP for the Second Quarter (April to June) of 2011. GDP, which measures the value of goods and services produced in the United States, rose at only a 1.3% annual rate, much slower than most mainstream economists expected. Even worse, the First Quarter (January to March) economic growth was cut from an earlier estimate of 1.9% to just 0.4%.

Slow economic growth of less than a 1% annual rate in the first half of the year shows that the economy is on the edge of going into another downturn. Household or consumer spending all but stalled in the second quarter, growing at a 0.07% rate. This is not surprising given the high and rising unemployment rate, which reached 9.2% in June. There was also almost no increase in the sales of new homes in the first half of the year, as high unemployment and a huge overhang of foreclosed homes cut into new home sales.

U.S. net exports (exports minus imports) were also almost flat, increasing at less than two-tenths of one percent (0.2%) annual rate. The ongoing financial crisis in Europe slowed economic growth there, while rising inflation in Asian nations led governments to raise interest rates, slowing their economies. The Japanese economy suffered from a tsunami and melt-downs of nuclear power plants. These economic problems abroad cut into their purchases of exports of U.S.-made goods.

Spending by U.S. businesses on new plant, equipment and inventories of finished goods also slowed sharply as compared to a year ago. This was mainly due to a drop in the buildup of inventories, as spending on new plant and equipment has remained low except for a spurt of equipment purchases in the first half of 2010. Corporations are sitting on record amounts of cash (nearly $2 trillion), but are not spending it on new plant and equipment or hiring back workers.

Last, but not least, there were actually drops in government spending in both the first and second quarters of this year. The biggest drop was in federal government spending, especially in the first quarter (January to March). In the first half of the year, federal government spending on goods and services fell at about a 0.64% annual rate, the biggest drop in ten years. In both quarters, state and local governments also cut spending. Almost all state and local governments have to balance their budgets, and the loss of federal stimulus moneys is leading to spending cuts.

In addition to the dismal GDP report for the first and second quarters, the Commerce Department also revised their reports for previous years. Estimates of GDP were revised down for both 2008 and 2009, showing the recession to be worse (as measured by GDP) than was previously reported. This downward revision pulled the estimate of the most recent GDP below the previous high in GDP, meaning that it is too soon to say that the recession is officially over.

While GDP or production was revised down, the report also said that corporate profits were revised up, by 8.3% in 2009, and 10.8% in 2010. While the labor market is still down almost seven million jobs since the recession began, and production (measured by GDP) is almost, but not quite back, corporate profits are up almost 14% from their pre-recession peak, after adjusting for inflation.

With economic growth so weak, there is a growing chance of a so-called “double-dip” where the economy starts to fall again before it reaches its previous high point. The biggest danger comes from the bipartisan effort in Washington, D.C. to cut federal government spending. With the economy already on the edge of another downturn and the other engines of economic growth (consumers, businesses, the rest of the world, and state and local governments), sputtering at best and going down at worst, this effort to cut the federal government deficit by cutting spending will make the economy even worse than it is today and could lead to another disastrous downturn.

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