Swiss UBI Pummeled at the Polls + The Left's Piss Poor Answer to Brexit + Recession Looms

Yesterday the Swiss overwhelming rejected a proposal to create a universal basic income. Raphael Minder reports in "Guaranteed Income for All? Switzerland’s Voters Say No Thanks" that 

About 77 percent of voters rejected a plan to give a basic monthly income of 2,500 Swiss francs, or about $2,560, to each adult, and 625 francs for each child under 18, regardless of employment status, to fight poverty and social inequality and guarantee a “dignified” life to everyone.

Switzerland was the first country to vote on such a universal basic income plan, but other countries and cities either have been considering the idea or have started trial programs.

Winning less than 25% in a public vote is about as bad as it gets. The good news, as Minder goes on to note, is that other countries in Europe are considering a UBI:

Finland is set to introduce a pilot program for a random sample of about 10,000 adults who will each receive a monthly handout of 550 euros, about $625. The intent is to turn the two-year trial into a national plan if it proves successful.

In the Netherlands, Utrecht is leading a group of municipalities that are experimenting with similar pilot projects.

One pro-UBI "man on the street" in Geneva who Minder quotes gets it right, I think:

“We’re losing all our values, creating countries that no longer need workers but still need consumers, but how can we expect people to buy anything if they can’t earn a salary tomorrow?” asked Olivier Duchene, a musician and street entertainer.

While the Swiss UBI went down in flames, referendums in Europe have delivered some stunning victories recently, as Minder helpfully catalogs:

Referendums are gaining ground in other European countries that normally rely on a system of parliamentary democracy. 

Last year, Greece held a referendum on a bailout plan, and the Netherlands introduced a referendum law under which voters rejected a European Union agreement with Ukraine in April. Britain is set to vote in a referendum this month on whether to leave the European Union a year after Scotland voted to stay in the United Kingdom.

Other than the Scottish vote to stay part of the UK, all those votes were big wins. I have no sense of how the June 23 Brexit vote is going to go down. The reporting I have read in The London Review of Books has been nuanced to the point of turgidity. Case in point is Jan-Werner Muller's "Europe's Sullen Child."

The problem for the anti-Brexit left is it is arguing to stay in the European Union based on a romantic ideal that has proven fictitious:

In many ways the EU is already incoherent. For the time being, it is in a situation where failing policies are neither reversed nor properly fixed. With the Eurozone, governments created a single currency; with Schengen, they created one border. But nobody has been willing fully to accept what has to follow from these major forms of integration: namely, one fiscal policy, with at least some modest redistribution to address imbalances across the Eurozone; and a shared asylum and border policy. This would not in itself create a federal state, but it could be a step in that direction.

***

. . . Brexit would make Germany even more powerful, and Germany’s continued attempts to keep Europe British without Britain would create even more conflict and resentment. A UK that remained and co-operated selectively with Berlin might just make the EU more stable, better able to project power, and less toxic. Eventually, after what is likely to go down in history as a lost decade for Europe, the EU might even become an area of hope again.

So that's what the "stay" argument boils down to after all those column inches: If the UK stays, maybe Britons will make the EU more stable and eventually "an area of hope again." That's some awfully thin soup.

Why the idea of a UBI is so timely is that it looks like the West is headed toward another recession. The May jobs report was dire (Patricia Cohen and Binyamin Appelbaum, "Sharp Fall in U.S. Hiring Saps Chance of Fed Rate Increase in June"). Even Dem cheerleader-in-chief Paul Krugman thinks so ("A Pause That Distresses"). Only 38,000 jobs were created in the month, and the jobs numbers for March and April were revised downward. As Wolf Richter notes in "What Makes This Jobs Report So Truly Ugly":

This is what was “expected”: 

The Labor Department was expected to report, according to Wall Street economists, a “moderate” gain of 158,000 jobs in May, “moderate” given that the Verizon strike kept 35,000 workers off their jobs. The “whisper number” was around 200,000 jobs. 

And this is what we got:

The BLS reported that the economy had added 38,000 jobs, the lowest since September 2010. Furthermore, the April job gains of 160,000 were chopped down by 37,000 and the March job gains of 208,000 were chopped down by 22,000. Hence, with 59,000 jobs revised away, and with only 38,000 jobs “created” in May, the net total in today’s report was a net loss of 21,000 jobs. We haven’t seen that since the Financial Crisis. 

“Shockingly weak,” and “In one word, ‘Ouch’” is how MarketWatch put it so elegantly. 

It was ugly all around. A number of sectors, including manufacturing, shed jobs, and the labor participation rate dropped for the second month in a row, to 62.6%. Just about the only good number was the magic headline unemployment rate, which fell sharply, from 5% in April to 4.7%, the lowest since the Great Recession began, leaving some folks scratching their heads and searching for answers.

Richter sees the drop in temp hiring as the canary in the coal mine:

But here’s where the report really spread gloom:

The number of temporary jobs plunged by another 21,000. Temporary employment is a harbinger for future employment trends, on the way up and on the way down.

The temporary-help sector was a major – and much lamented – driver of jobs growth after the Financial Crisis. The sector began adding jobs in September 2009. It was an early sign that companies were starting to hire again but didn’t want to commit to more permanent jobs, even as the economy overall continued shedding jobs until February 2010.

From the low point in August 2009 at 1.75 million temporary jobs, the sector added 1.2 million jobs by December 2015, when it peaked at 2.94 million. But then it started shedding jobs. With May’s loss of 21,000 jobs, the sector is down 63,800 from December.

This also happened in 2007, when the temporary help sector started shedding jobs even as the overall economy was still adding jobs until right up to the official beginning of the Great Recession. And it happened in 2000, before the 2001 recession kicked it.

Staffing agencies are cutting back because companies no longer need that many workers. Total business sales in the US have been declining since mid-2014. Productivity has been crummy and getting worse. Earnings are down for the fourth quarter in a row. Companies see that demand for their products is faltering, so the expense-cutting has started. The first to go are the hapless temporary workers.

Some the reporting of the G-7 meeting in Japan a couple weeks back mentioned Abe's rebuffed call for a unified commitment to stimulus spending. Nothing much more was said about it. But I figured that something ominous must be in the formative stages. Can you imagine the impact of another recession when we have yet to dig our way out of the post-Lehman Long Recession?

Fergusonized America

A devastating unsigned editorial in the Gray Lady today. Appearing right below a truly despicable attack on Vladimir Putin in wake of the Ukrainian ceasefire announced yesterday ("A Cease-Fire in Ukraine"), "Jobs Stall and So Does the Economy" tells you everything you need to know about the dire straights of the U.S. homeland six-years after the Lehman Brothers meltdown:

The latest data also underscore how incremental improvements in labor conditions have failed to undo the damage from the recession and the prolonged slow recovery. For example, the share of adults in the labor force is no longer declining, as it did in 2013, but it remains at levels last seen in 1978. 

The recent unemployment rate, 6.1 percent, is down from the recession-era high of 10 percent in 2009, but it is still higher than at similar points in recoveries from other downturns going back to 1982. Worse, the unemployment rate today would be 9.6 percent if it included the estimated 5.9 million jobless people who would be working or looking for work if the job market were stronger. 

The generally bleak monthly data are broadly in line with other data on income and wealth released this week by the Federal Reserve. From 2010 to 2013, the Fed found that average incomes dropped by 8 percent for the bottom 20 percent of families and rose by 10 percent for the most affluent 10 percent. For everyone in between, incomes fell or stagnated. 

Wealth was also skewed. Overall it barely grew from 2010 to 2013. But it fell by 21 percent for the bottom 20 percent of families, to a mere $65,000 of net worth, and rose by 2 percent, to $3.3 million, for the top 10 percent. 

It is increasingly obvious that inequality of income and wealth are weighing on economic growth — especially on job creation and pay raises — by concentrating income and assets in the hands of a few who already have more than they can spend. 

The situation is not self-correcting. In fact, in the absence of government policies to foster balance, it is self-reinforcing. The Fed should continue to try to stimulate the economy with loose monetary policy. But only Congress can put in place the broad new policies on taxes, labor standards and immigration that will give all Americans a shot at a rising standard of living.

And we know, what with Democrats headed for almost-certain losses in both the House and Senate (not that they were any help anyway; they can't even get a vote on raising the minimum wage to the floor of the House), that there is no chance for any sort of stimulative, pro-growth legislation coming out of Congress anytime soon.

Things are going to get worse. We're all Ferguson now. Those armored personnel carriers and assault rifles likely will be used in your town before long as jobs continue to evaporate and misery spreads. The Haves are doing fine, and they'll be sure to protect it.

Hippies vs. Punks: Generic Flipper

After work I have to pick up a packet for a race I'm running Sunday morning. It involves a trip up to the Green Lake neighborhood. I don't know what time I will get home. So I am posting the weekly installment of Hippies vs. Punks this morning instead of tonight.

I mentioned in a Monday post on the SST Tour that my Hardcore bonafides boiled down to a love of the Minutemen. To add to that I would be remiss if I did not mention Album – Generic Flipper.

In the 1980s entertaining in the university city of Berkeley usually involved having friends over for beers, sometimes a meal, and then out into the night to go to a bar or a party. Sometimes we would stay all night in the apartment I shared with my girlfriend (who became my wife, and then my ex-wife) and just drink, talk and listen to music. At a certain point in the evening, after all the records had been played, usually sometime around midnight, one album would be placed on the turntable, an album irrefutable and dense, inky black, dark and deep, an album that said, "It is over." That album was Generic Flipper.

Listening to a song like "Life is Cheap" before trundling off to bed to sleep off the alcohol reminded one that the world is ruled by brute force wielded by alien forces -- an important lesson to imbibe along with one's liberal education.

Flipper was formed out of the wreckage of Negative Trend. It combined Negative Trend bassist Will Shatter and drummer Steve DePace with vocalist/bassist Bruce Loose and guitarist Ted Falconi. (A college buddy of mine lived next door to Ted.) The band was controversial in that their slow, bass-driven droning sound went against the speedy grain that dominated California Hardcore.

Generic Flipper -- recorded in 1980 and 1981, released in 1982 -- overlaps with and provides perfect sonic documentation of the "Reagan Recession." 

Nineteen-eighty-two was the first time I was living on my own as an adult. Nationwide unemployment hit 10.8% in November and December, higher than any time -- including the Great Recession of 2008 -- since the Great Depression. Attempting to cut inflation Federal Reserve chairman Paul Volcker took a meat ax to the economy, the prime interest rate hitting 21.5% in June of '82.

Though I was safely ensconced in the protective arms of the university, I remember the vibe of that time of high unemployment. I remember it was a cold fall and winter. Living in an urban environment for the first time I became aware of the shit and piss and broken beer bottle alleyways and the hatred, vomit, rage, junk, dread, squalor, hopelessness of life that Generic Flipper so accurately records.

Reaganism was definitely the end of the line for any Hippies who were still holding out in the early 1980s. Flower Power had been rendered juiceless. The Punks, who first appeared in the avant-garde at the same time as the stagflation of the 1970s, painted a picture of a future we are presently living.

Post-Meltdown Economy Creates Lousy Part-Time Jobs

Catherine Rampell had an excellent story yesterday, "Part-Time Work Becomes Full-Time Wait for Better Job," about the growth of an underemployed underclass in the United States:

In March, 7.6 million Americans who want more hours were stuck in part-time jobs, about the same as a year earlier and three million more than there were when the recession began at the end of 2007. 

These almost invisible underemployed workers do not count toward the standard jobless rate of 7.6 percent. A broader measure, which includes the involuntary part-timers as well as people who want to work but have stopped looking, stands at 13.8 percent.

Rampell's Saturday unemployment stories are becoming a regular feature, and I hope the New York Times keeps running them. I think Rampell has accomplished a couple things in her unemployment reporting. First, she always draws attention to the broader measure of unemployment, what's known as U6, in contradistinction to U3, the standard unemployment rate. Second, she consistently points out that the jobs being created in this post-meltdown economy are bottom-of-the-barrel, low-wage positions:

Even for those who have been able to take advantage of the better job market, the opportunities have not been good. Since the economy began to recover almost four years ago, hiring has been concentrated in relatively low-wage service sectors, like retailing, home health care, and food preparation, and in contingent jobs at temporary-hiring companies. For example, nearly one out of every 13 jobs is at a restaurant, bar or other food-service establishment, a record high. 

Household incomes have been stagnant throughout the recovery, and actually fell in the latest report, according to Sentier Research. As a result, economists and policy makers have been expressing concerns about not only the pace of hiring but the quality of new jobs as well. 

“It’s important to look at the types of jobs that are being created,” Sarah Bloom Raskin, a member of the Federal Reserve Board, said in a recent speech. “Those jobs will directly affect the fortunes and challenges of households and neighborhoods as well as the course of the recovery.”

Obamacare is likely a factor in the growth of part-timers. Next year as part of the Affordable Care Act any employer who has 50 or more full-time workers will have to provide health insurance:

Paul Dales, senior United States economist for Capital Economics, said, “There is another reason to believe that part-time employment will stay higher for longer, namely the incentives to employ part-time workers created by Obama’s health care reforms.” 

Starting in 2014, employers that had an average of at least 50 full-time employees in the previous calendar year will have to provide health insurance or face penalties. Some companies and franchise locations, like Darden Restaurants, which operates brands like Red Lobster and Olive Garden, suggested last year that they might seek to limit full-time staff to avoid activating this mandate.

Jobs Being Added Low Wage, Low Skill

Catherine Rampell's frontpage story from yesterday, A Sharp Drop In Job Growth Sows Concern, is worth reading:

American employers added an estimated 88,000 jobs to their payrolls last month, compared with 268,000 in February, according to a Labor Department report released Friday. It was the slowest pace of growth since last June, and less than half of what economists had expected. 

It also was the start of a third consecutive spring in which employers tapered off their hiring after a healthy start to the year. Slowdowns in the previous two years could be attributed to flare-ups in the European debt crisis, but this time the cause is less obvious. The recent payroll tax increase or other fiscal tightening in Washington could be partly to blame for the sudden retreat in hiring, but neither seems to be showing up much yet in other relevant economic data.

The employment news is pretty much all gloomy:

The unemployment rate, which comes from a different survey, ticked down to 7.6 percent in March, from 7.7 percent, but for the wrong reason: because more people reported dropping out of the labor force (meaning they are neither working nor looking for work), not because more people were hired. 

The labor force participation rate has not been this low — 63.3 percent — since 1979, a time when women were less likely to be working. 

Baby boomer retirements may account for part of the slide, but pessimism about job prospects in a mediocre economy still seems to be playing a large role, economists say. 

“The drop in the participation rate has been centered on younger workers,” said Mr. Shapiro, “many of whom have given up hope of finding a decent job and are instead continuing in school and racking up enormous amounts of student debt, which has contributed to the recent surge in consumer credit outstanding.”

The jobs being added are low-wage, low-skill positions, often times temporary:

The latest report should quiet speculation that the Federal Reserve will take its foot off the monetary accelerator anytime soon, as some had suggested after a spike in hiring in February. Even before Friday’s numbers came out, though, Fed officials had expressed concerns about not only the pace of job growth, but the quality of hiring as well. 

“It’s important to look at the types of jobs that are being created because those jobs will directly affect the fortunes and challenges of households and neighborhoods as well as the course of the recovery,” Sarah Bloom Raskin, a member of the Federal Reserve Board, said in a recent speech. 

She noted that relatively low-wage sectors like food services and retail businesses had accounted for a large share of the job growth in the last few years; a report in August from the National Employment Law Project, a liberal advocacy group, found that a majority of jobs lost during the recent recession were in the middle range of wages, while a majority of those added during the recovery had been low-paying. 

In March, in fact, jobs in food services and drinking places accounted for the largest share of total American employment on record. Today nearly one in 13 American jobs is in this industry.

Ms. Raskin also expressed concern about temporary jobs, which account for a growing share of total employment. 

“Temporary help is rapidly approaching a new record,” said Diane Swonk, chief economist at Mesirow Financial, who noted that there was also a rapid increase in temp hiring during the boom years of the 1990s. “That of course means more flexibility for employers, and less job security for workers.” 

Perhaps more distressingly, 7.6 million workers who want full-time work can find only part-time work, and their missing work hours do not count toward the official unemployment rate. The number of such workers fell slightly from February, but is still about where it was a year ago. 

A broader measure of underemployment, which includes those reluctantly working part time as well as those who want jobs but have stopped looking, stands at 13.8 percent.

To add to this nasty list -- poor job creation; low labor force participation; and the jobs that are being created are temporary, part-time, low-wage positions -- is what should be considered, now that were four-plus years from the Lehman meltdown, structural long-term unemployment:

At the same time, long-term unemployment — joblessness lasting more than six months — has been a persistent problem ever since the recession ended in the middle of 2009. And it may be partly driven by the fact that many of the jobs available do not pay well enough to be worth taking. 

“This seems to be a long-term sleeper crisis too, as we think about long-term unemployed workers who are in midlife and older workers who are likely dipping into retirement savings in order to stay afloat,” said Christine L. Owens, executive director of the National Employment Law Project. “We’re setting ourselves up for somewhere, 10 years down the road, when a lot of retirees who didn’t expect to live in poverty are going to be in poverty.”

Then to truly disabuse yourself of any optimism regarding membership in the working class read Fred Magdoff and John Bellamy Foster's "Class War and Labor's Declining Share" in the March issue of Monthly Review. Whether measured by total compensation or wages, the share paid to workers as a percentage of GDP has been declining since the 1970's. This is illustrated by several charts Magdoff and Foster include in their article, one of which is below:

Chart 2. Wages and Salaries as a Percent of GDP

Sources: Salary and wages for all employees and private sector employees from Table 1.12, NIPA, BEA; GDP, FRED Database.

Regardless of the whether government was Republican or Democrat labor's share of wealth has declined. We did enjoy a period of full employment at the end of Cintontime which saw an uptick in earnings. Then another brief bubble-induced moment in 2006. But -- outside of the end of Clintontime -- it has been steadily downhill for working-class wages since the early 1970's.

Any Courage in Cyprus?

Cyprus, as it turns out, has the ability to block the bailout deal with the troika. This from a story today by Liz Alderman and James Kanter about the resignation of finance minister Michalis Sarris, "Cyprus Chief of Finance Quits Post":

But the Cypriot Parliament must still vote on a memorandum of understanding with the so-called troika of international organizations — the European Central Bank, the European Commission and the International Monetary Fund — that agreed to the bailout. 

That memorandum, still being drafted, will outline the budget cuts and other conditions Cyprus will have to meet to receive its allotments of money. A parliamentary vote is expected in coming weeks. The governments of Germany and Finland, under their national rules on bailout loans, are also expected to seek the approval of their Parliaments. 

The memorandum will probably be the subject of heated debate in Nicosia. Many lawmakers, already unhappy with the tough capital controls that have been slapped on bank accounts for the better part of a month, are dismayed by what they see as harsh terms that will tip Cyprus’s already enfeebled economy over the edge. 

But Mr. Sarris’s resignation should “help the Cypriot government win approval for the bailout program in the Cypriot Parliament,” said Mr. Rahman, the analyst.

The Cypriot Parliament has all the evidence it needs to scrap the deal. This is from today's story by David Jolly, "Unemployment in Euro Zone Reaches 12%":

The jobless crisis is hitting hardest in the south of Europe. Eurostat said Greece, with its economy in free fall, had the euro zone’s highest unemployment rate ,at 26.4 percent in December, the latest month for which data are available. Among Greek youth, the jobless rate has hit a staggering level, 58.4 percent. 

Spain, where the economy has contracted sharply after the collapse of the global credit bubble, posted the second-highest unemployment rate in the euro zone in February, at 26.3 percent. 

Cyprus’s jobless rate, at 14.0 percent, is almost certain to rise because the country’s recently negotiated bailout deal will crimp the economy for years to come, said Mr. Cliffe, of ING. “We’ve already seen how this story plays out in Greece,” he said. “We’re about to see it play out again in Cyprus.”

The question is do the elected leaders of Cyprus have the courage to leave the eurozone and go their own way. In the short term such a move would likely cause a drop in the markets, but in the long run Cyprus would be doing all of us an enormous favor by driving a stake through the zombie brain that can think only of bigger being better and that austerity somehow magically generates growth. Sadly, politicians, whether east or west or north or south, have a consistent track record of cowardice and plutocratic capture; so to expect emancipatory leadership is naive. But there is always hope. Hope is the anchor.

Ben Judah has an article on the Opinion page, "Did Putin Sink Cyprus?," that argues that Putin's failed promise to bring law and order to Russia along with the cultivation of his cult of personality has led to billions in capital flight. Judah concludes the piece by casting some blame the EU's way:

Whatever remains of the Russian fortunes in Nicosia seems sure to flee again — but not back to Russia. It may go to other European havens, like the Dutch Antilles and the British Virgin Islands. Malta and Luxembourg are possibilities, but analysts have both on bailout watch. 

Meanwhile, Brussels is not impotent. The European Union must clamp down on offshore havens, insist on transparent banking and toughen up on money laundering. This is austerity Europe — and bloated tax havens not only put Europe at risk but also make its financial system complicit with offshore corruption. 

But it cannot erase the truths exposed by the Nicosia bust. Europe, it turns out, is studded with vulnerable, contagious tax islands, and their availability only compounds Russia’s deeper problem: it is both too corrupt and too paranoid to keep its billions at home.

"Federal Reserve Has Done a Good Job Lifting the Market"

Read Nelson Schwartz's frontpage article today, "Recovery in U.S. Is Lifting Profits, but Not Adding Jobs." After quoting a Bank of America Merrill Lynch executive who dismisses the likely impact of the sequester on corporate profits by saying, "the market wants more austerity," Schwartz outlines our new, post-meltdown economy:

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays. 

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation. 

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

Businesses are socking away productivity gains as profit. Workers are laid off rather than seeing a wage bump. Check out this naked capitalism post from Saturday, a Real News Network interview with Dr. Heiner Flassbeck of Hamburg University. Flassbeck is talking about the negative impact of the sequester on employment and wages. But what really struck me were the graphs accompanying the interview showing the huge productivity gains over the years with an almost complete stagnation in wages. The promise of twentieth century capitalism was that workers would share in productivity gains. This promise has been repeatedly broken for the last three decades. Capitalism is a failure for the 99%.

The last three paragraphs of his story Schwartz explains the phenomenon of the skyrocketing stock market:

The Federal Reserve has also played a crucial role in propelling the stock market higher, economists and strategists say, even if that was not the intent of policy makers. The Fed has made reducing unemployment a top priority, but in practice its policy of keeping rates very low and buying up the safest assets to stimulate the economy means investors are willing to take on more risk in search of better returns, hence the buoyancy on Wall Street amid the austerity in Washington and gloom on Main Street. 

Of the broader market’s 13 percent rise in 2012, about half was a result of the Fed’s actions, Mr. Harris of Bank of America Merrill Lynch estimates.

“The Federal Reserve has done a good job stimulating financial conditions and lifting the market,” he said. “It’s been less successful in stimulating job growth.”

For a dire prediction of what will happen in the next couple of months check out Chris Martenson's post on the Counterpunch web site this past weekend, "Warning: Stocks Likely to Crater from Here":

The summary here is that if stocks do indeed retreat from here, a triple-top failure will deliver quite a punishing blow to the current efforts to repair the public’s trust in the stock market as a place to send their hard-earned savings to grow. It would be quite difficult to engineer a run at a fourth top, given the importance of retail participation in providing fuel for the rise of stocks – especially given that the boomers are retiring at the rate of 10,000 per day and drawing upon their investments instead of adding to them.

The younger generation(s) have been the main victims of the high unemployment and general wage stagnation that have been the hallmarks of the Great Recession. It is not likely that they will be able to save and invest at a rate equal to the boomer’s withdrawals, creating one more equity headwind for the Fed to overcome.

I think this is right. I think if there is a significant drop in the market then due to structural issues of our new economy -- unemployment, massive student debt, boomers leaving the workforce -- it will be difficult to mount another quick run to the top. I think that a significant drop in the market will be sparked when a large nation, like Italy, leaves the eurozone. If you read Liz Alderman and Elisabetta Povoledo's frontpage article on Beppe Grillo and his Five Star Movement, I think you'll come away, as I did, thinking that Grillo is a formidable politician. The question is does he really want Italy to scrap the euro. I think he does; I think he sees that it's the only way out of the widening gyre of Brussels-Berlin mandated austerity.

December Jobs Report

There is a frontpage story today by Catherine Rampell detailing yesterday's job report.  One-hundred-fifty-five-thousand jobs were added in December which kept the unemployment rate steady at 7.8%. "But it was not enough to reduce the backlog of 12.2 million jobless workers, underscoring the challenge facing Washington politicians as they continue to wrestle over how to address the budget deficit."

It has been over four years since the bankruptcy of Lehman Brothers pushed the Dow into freefall, and still high unemployment persists. I'm a reader of the Monthly Review, a small socialist magazine, and to me their perspective is persuasive. Advanced capitalist economies like the United States, Western Europe and Japan have difficulty posting high annual GDP growth.  This leads to financialization or casino capitalism -- the resort to legerdemain in the form of complex investment devices like derivatives to juke the growth numbers.  This paradigm is bust and another bubble has yet to come along to replace it.  The class war raging in D.C. between Republicans and Democrats is in many ways about the nature of the next bubble. Democrats like Obama are meekly, tepidly pointing the way to a green economy. Republicans are energetically -- look at all the money super PACs raised during the election -- attempting to re-inflate the go-go days of the Wall Street through the repeal of Dodd-Frank, slashing the top tax brackets, voucherizing Medicare, privatizing Social Security. What is so bizarre about the Republican point of view is how anti-majoritarian it is; it clearly benefits only a tiny elite -- the 1% -- yet it dominates one (if not both) of the major political parties.  It speaks to the power of capital and the electronic forms of communication at its command.

One-hundred-fifty-five-thousand jobs for the month absorbs those entering the work force due to population increase but not much more.  At the current rate of job creation it will take, according to Rampell, "seven years to reduce the unemployment rate to its prerecession level."

Given the uncertainty over what Congress will do, estimates of the unemployment rate’s path this year vary wildly. The more optimistic forecasts for the end of 2013 predict that unemployment will fall to just above 7 percent, which would be considerably below its most recent peak of 10 percent in October 2009, but still higher than its prerecession level of 5 percent.

Rampell, who from watching her on New York Times webcasts has a slightly arrogant manner, ends her story with a description of what the extension of emergency unemployment benefits (as part of the fiscal cliff deal) actually means for laid off workers.  It's compelling.