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.

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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.

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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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