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.

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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.

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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.

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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.

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For the first time in almost two months, the total number of people receiving government unemployment benefits across all programs rose. For the last seven months, there has never been fewer than 20 million people getting aid, which is more than 12% of the those who are working, or who are not working and are looking for work.

More bad news on the economy also came in the report on October income and spending. Personal income sank 0.7% as compared to September. This was mainly due to less government unemployment aid, showing that many people who lost their jobs in April are losing their benefits, as opposed to getting jobs. Personal spending rose, but at less than half the rate of growth as September.

Weighing on the economy is the surging pandemic, with an average of more than 175,000 new infections a day for the last week. In the last day, more than 2300 Americans died of COVID-19, within striking distance of the all-time high set in April. A record 88,000 people are now hospitalized with the coronavirus, straining hospitals across the country. While many field hospitals are being built, the problem is lack of staff, especially those who are trained.

Despite a warning from the Centers for Disease Control not to travel, 4 million people have already taken to the air for the holidays. Many doctors and public health workers are worried about a spike in the middle of the surge that could overload the health care system and lead to a rising death rate at the end of the year.

On top of the growing health crisis, almost two-thirds of those collecting benefits, or more than 13 million people, face a financial cliff in a month. On December 26, the federal PUA and the federal Pandemic Emergency Unemployment Compensation, for people who have hit the six-month time limit for regular state benefits, will wind down. While the Democrats in the House of Representatives passed a bill to extend benefits back in May, the Republicans in the Senate have opposed this and still haven’t passed a bill to be able to negotiate with the House.

In addition, the moratorium on evictions, the extension of student loan payments, and the forbearance of home mortgages are also running out with the new year. According to a survey earlier in November, there are almost 30 million tenants behind on their rent, which could lead to millions of evictions in 2021. State and local governments also face hundreds of billions of dollars in budget deficits that have to be closed over the next 18 months. These will lead to even more cuts and job losses, especially in public schools and colleges.

The Trump administration is now cooperating with President-elect Biden in a transition. But the Trump team seems to be going out of its way to hurt the economy before the administration ends. Last week, Trump’s Treasury Secretary Stephen Mnuchin ordered the Federal Reserve to return billions of dollars to the Treasury. This money guarantees against any losses from three Federal Reserve lending programs. The Fed’s lending to large corporations, medium size businesses, and state and local governments backed by the Economic Stabilization fund will now have to wind down just as the economy turns down again and pandemic relief programs are coming to an end.

#SanJoséCA #recession #FederalPandemicUnemploymentCompensationFPUC

San José, CA – On Friday, November 5 the U.S. Department of Labor released its monthly employment report for October, as President Trump faced defeat in the presidential election. The number of long-term unemployed, who have been out of work for more than six months, jumped by more than a million to outpace those recently laid off for the first time. The number of people collecting long-term unemployment under the federal Pandemic Emergency Unemployment Compensation or PEUC, and the state Extended Benefits, rose by almost 500,000 in the week of the unemployment survey alone.

The official unemployment rate fell to 6.9% from 7.9% in September. But this is still double the February unemployment rate of 3.5%. The official report, based on a survey of households, is also far lower than the number of people who are collecting government aid. In the same week that the survey for the unemployment report was taken, October 12-17, there were more than 21.5 million people who collected government aid, almost double the 11.1 million who said that they were unemployed.

As expected, the number of new jobs created continued to slow, with 638,000 new jobs created, down from 672,000 in September. But despite the large number of new jobs, more than 10 million workers remain out of work after having lost their jobs during the economic crisis. The jobs report showed that state and local public colleges and K-12 schools shed almost 160,000 jobs as they continue to cut back because of budget crisis despite the increasing demands that the pandemic has put on schools.

This past three days the pandemic continued to set record highs for new infections. The United States had more than 100,000 new cases for the first time ever on Wednesday, more than 120,000 on Thursday, and then more than 130,000 on Friday. Hospitalizations are also on the rise as are deaths, which have been more than 1000 per day for the first time since August, when the United States was in the midst of its second wave.

More and more state and local governments are re-imposing restrictions to try to contain the virus or slowing or stopping relaxation of restrictions. The combination of COVID-19, the cold weather of winter and growing economic distress are a particular danger to the leisure and hospitality industries including travel, hotels and restaurants. These industries added more than 271,000 jobs in November, or more than 40% of the total job gain. More of the job gains in November were also temporary jobs, which can most easily be cut by businesses.

The end of the year is also the deadline for the federal Pandemic Unemployment Assistance for self-employed and gig workers. If Congress does not act, more than 13 million people could lose their assistance in the last week of December. Forbearance on student loans is also set to end at that time, and more and more tenants will be timed out of the Centers for Disease Control eviction moratorium over the next two months.

#SanJoséCA #PeoplesStruggles #recession #COVID19PandemicAid

San José, CA – On Thursday, October 15, the U.S. Department of Labor reported the biggest one week increase in new claims for unemployment insurance since late July. The latest report for the week ending October 10 saw 898,000 new claims for regular state unemployment insurance, up 53,000 from the week before.

The broadest measure of unemployment insurance – which includes those actually being paid under the regular state UI, the Federal Pandemic Unemployment Assistance, the state Extended Benefits and the federal Pandemic Emergency Unemployment Compensation (PEUC) – fell by 215,000 for the week ending September 26. But the Extended Benefits and PEUC, both of which provide benefits for those whose regular unemployment insurance has run out after 13 weeks, was up by more than 820,000 the same week, showing the growing numbers of long-term unemployed.

The most recent jump in UI claims reflects the growing wave of layoffs being announced by major corporations. There is also a small but growing number of smaller businesses being done in by the long-feared third wave of the pandemic. There were more than 60,000 new cases of COVID-19 infections, the highest since August. Forty-four states (and the District of Columbia) reported higher rates of new infections.

The recession and the petering out of federal government aid, including the additional $600 a week in unemployment insurance benefits, has pushed 8 million more Americans into poverty, according to a report released by Columbia University. Almost a third of this group are children. African Americans, Chicanos and Latinos are being forced into poverty at twice the rate of white Americans as lower-paid workers are hit the hardest.

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Even worse, almost 90% of the people dropping out of the unemployment rolls were women, and only 10% were men. This recession is different from earlier recessions, where the unemployment rate for men climbed higher and faster than for women, as layoffs hit construction and manufacturing. This time the COVID-19 pandemic hit service industries such as travel, lodging and food service, affecting women workers harder. Thus, the official unemployment rate for women last month was higher than for men.

With many schools and childcare centers closed, women often are expected to sacrifice their work for domestic roles. The fact that women earn only 60-70% as much as men with similar education also makes an economic case for staying at home.

Black women were the hardest hit, being twice as likely as white women to have been forced out the labor force. This recession has been increasing inequality in many ways, from greater job losses for low-paid workers (while higher-paid workers were more likely to be able to keep working from home), to the jobs which are coming back the fastest for white men.

Job growth weakened even more in September. 661,000 new jobs were created, less than half the 1.5 million in August and fewer than economists had estimated. Governments were the biggest losers, with almost 300,000 jobs cut. Tax revenues have fallen with the recession, leading local and state governments to cut their budgets and lay off workers.

The economy is still down 11 million jobs as of September, having made up about half of the 22 million lost in March and April. But month after month the return of jobs has slowed, and may end altogether in October as Disney, the airlines, and other large corporations announce tens of thousands of layoffs to come. The economy has lost more jobs at this point than during the last recession and financial crisis between 2007 and 2009.

While the hospitalization of President Trump because of COVID-19 reminds us of the ongoing pandemic in the United States, the increase in job losses are becoming more like a typical recession. Job losses in industries not directly affected by the pandemic are now approaching those of the last recession. This can be seen in the large layoff announcements by oil and gas giant Shell Oil, and the military and weapons corporation Raytheon.

In the meantime, the latest report by the U.S. government on personal income shows that it fell 3.5% in August after adjusting for taxes and inflation. Almost the entire drop was caused by the end of the $600 per week in additional unemployment insurance benefits, which led total UI benefit payments to fall by more than half.

With this comes the growing need for more federal aid for the unemployed, for state and local governments, and for school districts that are struggling to get by. The Democrats in the House of Representatives have cut their original $3.5 trillion aid bill by more than a trillion dollars to $2.2 trillion in efforts to come to a compromise agreement with the Republican Senate and the White House. But the Republicans have shown no effort to compromise, cutting their original $1 trillion package to only $350 billion.

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The report also showed a continued rise in the Pandemic Emergency Unemployment Compensation or PEUC as well as the Extended Benefits or EB programs. Both of these programs provide an additional three months of benefits to jobless workers whose regular unemployment benefits have run out. This shows the continuing rise of the long term unemployed who are at greatest economic risks.

The dismal drumbeat of corporate announcements of mass layoffs continued in the past week. American Airlines confirmed that it was going to lay off more than 19,000 workers on top of the thousands who have taken furloughs, retired, or otherwise left the company. United Airlines has a standing announcement of 30,000 layoffs as the passenger traffic is down by more than two thirds as the pandemic continues to burn through the United States.

There are growing signs that households are coming under increasing stress with the continuing recession, made worse by the end of the additional $600 a week in unemployment benefits. The Consumer Confidence Index for August fell for the second month in a row, to 84.8, down 36% since the recession began in February. Food sales also fell in the first two weeks of August.

While President Trump signed an executive order calling on federal agencies “examine” steps that they could take to prevent evictions and foreclosures, a tidal wave of evictions is building from coast to coast. The end of the CARES Act federal eviction and foreclosure moratoriums, combined with the end of state and local moratoriums, could put 20 to 30 million tenants at risk of evictions.

President Trump’s executive order on unemployment insurance is off to slow start, with only a handful of states starting the addition $300 a week. While about two-thirds of states have said they would participate, they typically would not start paying until September. Even then, the initial federal commitment is only for three weeks, with only about five weeks of money available in the FEMA or Federal Emergency Management Agency.

The Trump administration’s program also excludes many jobless workers even in the states that adopt the plan. Low-wage and workers in states with stingy benefits who get less than $100 a week won’t qualify. Further, workers have to certify that their job loss was COVID-19 related, which was not a condition to get the original $600 in additional benefits under the CARES Act. Further, the Trump program allows state governments to reinstate the job search requirement which had also be waived under the CARES act.

As for Trump’s pet program of deferring the payroll taxes that fund Social Security and Medicare, major capitalist organizations such as the U.S. Chamber of Commerce have recommended that their members not defer taxes as they could be stuck with paying the bill later on.

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Recession fears were also fed by a gloomy report from the World Trade Organization, which predicted that world trade growth would fall to only 1.2% in the coming year, one of the lowest rates since the last recession. The WTO estimate is made every six months and is the third drop in a row. While still expanding, world trade has been weighed down by economic weakness in Japan and Germany, the second and third largest capitalist economies after the United States.

Trade and manufacturing have also been hit by Trump’s trade war with China. His tariffs on imported parts and materials have made it more expensive to make goods in the United States, and China has also retaliated by placing tariffs on U.S. exports of goods.

On October 2, the stock market slide deepened, with losses of almost 2% as the Dow Jones Industrial Average fell almost 500 points. Recession fears mounted as another sign of economic weakness came with the ADP report on private employment in September. The ADP report saw only 145,000 new private sector jobs, much lower than the 215,000 monthly increase a year ago.

U.S. stocks followed even steeper declines in Europe, where stock indices in Germany, France, Italy and the U.K. fell about 3%. European economies have been even weaker than the U.S. economy, and there are concerns about what happens as the BREXIT deadline of October 31 approaches. The United States has also been a major export market, and a recession in the United States would hurt Europe.

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San José, CA – The New Year is starting off much the way 2018 ended: with U.S. stocks being hammered again. On Thursday, January 3, the Dow Jones Industrial Average (DJIA) fell more than 600 points, the technology heavy NASDAQ fell more than 200, and the broad S&P 500 fell more than 60 points. All the averages fell more than 2% to put the year into the red.

Apple Corporation, which just a few months ago was the first company to rise above $1 trillion in stock market value, fell more than 8% after reporting that sales and profits were down for the last three months of the year. Delta Airlines also cut back on their estimated sales in the fourth quarter, dragging down other airlines with it. The Institute for Supply Management released their report on December manufacturing, which fell 8 points from November, the biggest one month drop since the financial crisis in 2008.

These reports add to the growing view that the almost ten year economic expansion is coming to an end. These cycles of boom and bust are a regular feature of capitalism. Businesses make a profit by paying workers less than the value of what their labor produces, so they are not able to buy everything they make. At the same time, companies reinvest their profits to be able to produce more and more. This leads to what Marx called a “crisis of overproduction” or what is commonly called a recession.

Recessions cut deeply into corporate profits, which are the foundation of stock prices. As more signs of a coming recession are revealed, investors are selling stocks and forcing prices down.

#SanJoséCA #PeoplesStruggles #recession #stockMarket

San José, CA – Casting a shadow on the stock market are the growing number of economic statistics that point to a recession in 2019. Almost all mainstream economic forecasters expect economic growth to slow down in 2019 as the impact of the 2018 tax cuts wear off; the forecast is for 2.4% growth, about the same as in 2017. But few predict a recession.

The most commonly looked at economic statistic is the official unemployment rate. Today the nationwide official unemployment rate stands at 3.7%, the lowest rate in a generation. But while the official definition of when a recession starts depends heavily on a measure of net new job creation, employment and unemployment are not useful to predict the start of another recession. But by the time employment starts to fall and the unemployment rate rises a recession has already begun.

The best predictor of a recession is a large and continuing decline in what economists call “fixed investment spending.” This is not the investments that most individuals make (stocks, bonds, mutual funds, etc.), but rather business investment in new plant and equipment, and the construction of new homes. And these sectors are looking very weak right now, despite a boost early in the year from the tax cut.

Looking at the latest report on the Gross Domestic Product (GDP) for the third quarter (July to September), fixed investment only increased by one-fifth of one percent (0.2%). More recent monthly reports on business spending on so-called “non-defense capital spending (without transportation)” showed new orders fell 0.6% in November, the third drop in the last four months.

Spending on the construction of new homes has also been weak, with the amount dropping in the July to September quarter, for the third in a row. While the declines have been small, no relief is in sight as the market is squeezed by rising mortgage interest rates and more and more unaffordable homes. Completion of new homes in October and November are running about 8% lower than in the third quarter (July to September).

Another sign of near-term economic weakness was the large buildup of unsold goods in the July to September period. The increase in inventories made up 2.33% of the total 3.4% gain in production, or GDP during this period. This meant that the increase in actual sales of American-made goods and services was an anemic 1.1%. The large buildup in inventories could lead to less production in the next three to six months.

Part of the reason for this was the big jump in imports and slump in exports. Ironically, the Trump administration tariffs seemed to hurt U.S. exports, because of retaliation from other countries, than it did to slow the growth in purchases of goods and services from other countries. Another factor is weakness in the world economy: the economies of both Japan and Germany both shrank in the third quarter, and many developing countries are having a hard time economically.

One of the reasons that mainstream economists do not see a recession coming is that t