Unemployment drags on

A bank run in 1931, probably after the failure of the Austrian Creditanstalt bank in Europe lead to bank failures worldwide. That’s what turned a nasty stock market turndown in 1929 into the Great Depression. Also note that the bank was paying a cool 4% on savings–about eight times what people are getting now. From Wikipedia.

A pair of articles recently in the Huffington Post about unemployment. The first was about Ben Bernanke’s Federal Reserve, and its prediction that unemployment will stay above 6.5% for the next two years at least. The Fed thus sees no good reason to raise interest rates. Parenthetically, the lousy returns on savings and CD’s are driving people into the stock market (which is probably the plan). Real inflation is bubbling along at something like 10% year over year per John Williams’ shadowstats website. Go ahead–pull out a grocery receipt from 2010 and one from yesterday, and look at the difference in critical staple items. Between high fuel costs and bad weather, food is far more expensive now than it was then.

And then there’s this from Huffington Post, highlighting 12 job fields that have less employment now than they did at the ‘end’ of the recession (officially it ended in 2009). My question to HP’s writers and editors–when did the recession end in any substantial way for those of us who aren’t stockholders? Most of the movement on unemployment has been people falling out of UI and unable to rejoin. The unemployment rate has been hopelessly gamed over a generation (it no longer counts involuntary part-timers and ‘discouraged’ workers as unemployed, for example). If you drill down in the BLS numbers, you find other indicators. The BLS number that counts is employment-to-population ratio (EPOP). These are people of working age who are interested in working fulltime (it leaves out voluntary at-home parents and people getting disability).  In 2007 before the beginning of the recession, it was at 63%. Since 2008, it has bottomed out at roughly 58.5% percent (give or take a tenth of a point). That means that roughly 10% of the people who would normally be employed or looking for employment are out there looking at mail about foreclosures and bankruptcy.

Someone on the HP discussion boards pointed out that over 100% of the gains in the economy since 2009 have gone to the 1%. In other words, they got an EVEN BIGGER SLICE OF THE PIE than they had at the Lehman meltdown. As any economist can tell you, the wealthy aren’t good at spending–the CEO of Ford, Alan Mulally, made about 500 times what his line workers make, but he doesn’t buy 500 cars, pay property taxes on 500 houses, or buy 500 times as much in the way of groceries. And he sure as hell doesn’t pay 500 times as much in FICA. In fact, much of his ‘salary’ is in cap gains from taxes, which are taxed at a lower rate than his employees’ take home.

There’s a great article by Dean Baker here. He essentially argues for ZERO JOB GROWTH this year owing to the Sequester taking out a big chunk of GDP. Not good news to those of us hitting the bricks. And that’s assuming there are no big repercussions from the haircut savers are taking in Cyprus as  a result of ‘austerity’ plans imposed by the EU. Imagine what would happen to US banks if the Congress, as a way around the problems being caused by sequester, were to suddenly announce a ‘penalty’ on big savings accounts. Cyprus was the test case. If it works there, bankers will try it elsewhere.


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