On June 3, 2015, John Crudele writes in the New York Post:
Anyone with even a quarter of a brain now understands that the US economy got off to a bad start this year.
There was an economic contraction in the first three months — when the nation’s gross domestic product fell at an annualized rate of 0.7 percent — that some quarter-brainers are still blaming on the cold weather, strikes at ports, the strong dollar, solar flares, Martian landings and (insert your own poor excuse here).
The truth: Most of these excuses are part of the problem, although I didn’t personally see or not see the Martians.
But the biggest part is that people don’t have enough money to spend. Interest from savings is down to zero, people don’t liquidate stock gains to make purchases, and job and income growth has been sketchy.
The economy isn’t doing much better in the current quarter either. The Federal Reserve Bank of Atlanta, an independent observer if ever there was one, measures growth so far in the second quarter at an annual rate of just 1.1 percent. That means growth — un-annualized — is a paltry 0.275 percent with less than four weeks left in the quarter.
It’s quite possible that we will eventually be told, after all revisions are made, that the economy met the official definition of a recession in the first half of 2015, which is two straight quarters of contractions.
But the quarter-brainers will probably get something to cheer about when Friday’s employment numbers come out. And, if they don’t strain their quarter-brains looking too deeply into the numbers, they could come away with a smile that can only happen because ignorance is bliss.
Wall Street expects the Labor Department to report that 235,000 new jobs were created in May. That would be higher than the 223,000 new jobs that — before any revisions are made — were created in April.
I’ve written before about the so-called birth/death model, which is the government’s fist-on-the-scale way of adding jobs they assume but can’t prove exist when new companies suddenly come into business in springtime.
The only problem is, entrepreneurs — especially those just starting out and risking their own capital — aren’t very daring when it’s clear to everyone that the economy isn’t doing well. So maybe, just maybe, there are more companies dying this spring than being born.
Labor must be having some second thoughts about the validity of that model since it guessed that only 213,000 phantom jobs were created by newly born companies in April. That’s way down from the 263,000-phantom-job guesstimate in April 2014.
The guesstimate for May should still be substantial. In May of 2014, Labor’s phantom jobs guesstimate added 204,000 jobs. Even if that’s been adjusted downward, this will still give a nice boost to the job growth that will be reported Friday.
There’s no guarantee, of course, that Friday’s number will be good. Any number of things could go wrong. Seasonal adjustments could hurt Friday’s number. And, of course, companies could have actually cut jobs in April. There were plenty of announcements of such cuts.
So, will Wall Street get the 235,000-job growth it expects? I say there’s a 60 percent chance Friday’s number meets or exceeds that guess.
But even if you guess right on Friday’s jobs figure, the prize could be elusive.
Most folks don’t know how Wall Street will react to a better-than-expected number.
If the figure is too strong, it’ll causes interest rates to rise and bond prices to fall in anticipation that the Federal Reserve’s interest rate hike is back on the table.
If the number is weaker than expected, even the quarter-brainers will start worrying the economy is tanking.
Want to gamble? Head to Belmont on Saturday, when American Pharoah is going to win the Triple Crown.
At least you’ll see some history and get fresh air.
The unemployment rate is expected to remain at 5.4 percent in May. This is such a nonsense indicator of the US economy that it isn’t even worth the two sentences I’m wasting on it now.
Ben Bernanke has it made.
The former Federal Reserve chief got the US involved in quantitative easing, or QE, which probably helped get the country out of the financial crisis in 2008 — which, incidentally, was caused by the Fed.
But QE has since caused very slow economic growth and allowed the rich to get much richer — and the rest of us to eat dirt.
Now, Bernanke is a distinguished fellow at the Brookings Institution, where he is paid a lot of money to defend his Fed policies. Bernanke’s basic message: I did a great job as Fed chief. (Here’s your paycheck, Mr. Bernanke. Keep up the self-serving good work.)
Why, then, has the economy been in the doldrums for seven years?
Give the guy credit for one thing: At least he’s now owning up to his QE legacy.
In his first postings after leaving the Fed, Bernanke completely ignored QE like I used to do when I did something wrong and hoped people would forget.
As readers of Dr. Harold G. Moulton’s 1935 classic The Formation of Capital should be aware, the demand for new capital investment is a “derived demand.” Derived from what? From consumer demand, or (as Brained put it), “weak consumer spending.”
And why aren’t consumers spending? Because they don’t have money. Why don’t they have money? Because they’re not paid enough? No, it’s because they don’t OWN enough.
If you want people to spend money, you need to make it possible for people to make money. And what is doing most of the production in the world today? Human labor? No, it’s technology. And the proportion of technology just gets bigger every time you make human labor more expensive. It means that technology just became less expensive. This is the reason that millions have no jobs or are willing to work as wage slaves in China earning just 12 percent of average U.S. wages (or about $3,000 annually based on the medium wage in the U.S.).
There is nothing new to the realization that advancing technology has always eliminated jobs. It’s the nature of technology to do so. Technology replaces human labor in the production process, or no rational producer would purchase the technology. It is simply untrue that “technology creates jobs,” but instead advancing technology eliminates jobs.
So what does create jobs? As Dr. Harold G. Moulton demonstrated in The Formation ofCapital, increases in consumer demand create jobs by increasing the demand for machinery that requires human operators. Not the same jobs that technology eliminates, of course, but different jobs. Thus, the norm is that far fewer new jobs are created relative to a far greater number that are eliminated––but the new jobs are not the same jobs as eliminated. They are always new, different jobs. Further, it is never due to the introduction of machinery per se, but because of an increase in consumer demand.
Because of this fact, increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
In America, as demands for increasing the minimum wage gain political favoritism, no one should be surprised that as a result raising the minimum wage will make robotic labor relatively less expensive and reduce consumer spending. All other things being equal, if you raise the price of something, people buy less of it. If you price something higher than a substitute, people will buy the substitute, especially when it turns out that the substitute does what you want done better and cheaper.
The only thing that’s going to increase consumer spending is empowering consumers to produce marketable products and services, either with labor or capital, the non-human factor of production. With labor jobs disappearing, that leaves capital, and ownership of capital is the only thing that gives someone the right to receive the income generated by productive capital assets. Thus, if we want to “strengthen” consumer spending, make people producers as well as consumers.
