Americans live a never-never-land existance. The politicians and
presstitutes make sure of that.
Consider
something as simple as the unemployment rate. The US is said to have full
employment with a January 2018 unemployment rate of 4.1 percent, down from 9.8
percent in January 2010.https://data.bls.gov/timeseries/LNS14000000
However,
the low rate of unemployment is contradicted by the long-term decline in the
labor force participation rate. After a long rise during the Reagan 1980s, the
labor force participation rate peaked in January 1990 at 66.8 percent, more or
less holding to that rate for another decade until 2001 when decline set in
accelerating in September 2008. https://fred.stlouisfed.org/series/CIVPART/
Today the
labor force participation rate is the lowest since February 1978, reversing all
of the gains of the Reagan years.
Allegedly,
the current unemployment rate of 4.1 percent is the result of the long recovery
that allegedly began in June 2009. However, normally, employment opportunities
created by economic recovery cause an increase in the labor force participation
rate as people join the work force to take advantage of employment
opportunities. A fall in the participation rate is associated with recession or
stagnation, not with economic recovery.
How can
this contradiction be reconciled? The answer lies in the measurement of
unemployment. If you have not looked for a job in the last four weeks, you are
not counted as being unemployed, because you are not counted as being part of
the work force. When there are no jobs to be found, job seekers become
discouraged and cease looking for jobs. In other words, the 4.1 percent
unemployment rate does not count discouraged workers who cannot find jobs.
The US
Bureau of Labor Statistics has a second measure of unemployment that includes
workers who have been discouraged and out of the labor force for less than one
year. This rate of unemployment is 8.2 percent, double the 4.1 percent reported
rate.https://data.bls.gov/timeseries/LNS13327709
The US
government no longer tracks unemployment among discouraged workers who have
been out of the work force for more than one year. However, John Williams of
shadowstats.com continues to estimate this rate and places it at 22 or 23
percent, a far cry from 4.1 percent.
In other
words, the 4.1 percent unemployment rate does not count the unemployed who do
show up in the declining labor force participation rate.
If the US
had a print and TV media instead of the propaganda ministry that it has, the
financial press would not tolerate the deception of the public about employment
in America.
Junk
economists, of which the US has an over-supply, claim that the decline in the
labor force participation rate merely reflects people who prefer to live on
welfare than to work for a living and the current generation of young people
who prefer life at home with parents paying the bills. This explanation from
junk economists does not explain why suddenly Americans discovered welfare and
became lazy in 2001 and turned their back on job opportunities. The junk
economists also do not explain why, if the economy is at full employment,
competition for workers is not driving up wages.
The
reason Americans cannot find jobs and have left the labor force is that US
corporations have offshored millions of American jobs in order to raise
profits, share prices, and executive bonuses by lowering labor costs. Many
American industrial and manufacturing cities have been devastated by the
relocation abroad of production for the American consumer market, by the
movement abroad of IT and software engineering jobs, and by importing lower
paid foreign workers on H1-B and other work visas to take the jobs of
Americans. In my book, The Failure of Laissez Faire Capitalism, I give examples
and document the devastating impact jobs offshoring has had on communities,
cities, pension funds, and consumer purchasing power. http://www.claritypress.com/RobertsCapitalism.htmland
https://www.amazon.com/Failure-Laissez-Faire-Capitalism/dp/0986036250/ref=sr_1_3?s=books&ie=UTF8&qid=1520531330&sr=1-3&keywords=Paul+Craig+Roberts&dpID=51HWdHsbtFL&preST=_SY291_BO1,204,203,200_QL40_&dpSrc=srch
https://www.amazon.com/Failure-Laissez-Faire-Capitalism/dp/0986036250/ref=sr_1_3?s=books&ie=UTF8&qid=1520531330&sr=1-3&keywords=Paul+Craig+Roberts&dpID=51HWdHsbtFL&preST=_SY291_BO1,204,203,200_QL40_&dpSrc=srch
John
Williams of shadowstats.com questions whether there has been any real growth in
the US economy since the 2008 crisis that resulted from the repeal of the
Glass-Steagall Act. Williams believes that the GDP growth rate is an illusion
resulting from the understatement of inflation. Just as unemployment is
under-counted, so is inflation.
Two
“reforms” were introduced that result in the under-measurement of inflation.
One is the substitution principle. When the price of an item in the basket of
goods used to measure inflation goes up, that item is thrown out and a cheaper
substitute is put in its place. The “reformers” argue that consumers themselves
behave in this way. Thus, they claim this practice is reasonable. However, the
old way of measuring inflation measured the cost of a constant standard of
living. The new way measures the cost of a falling standard of living.
The other
reform is to classify some price rises as quality improvements rather than as
inflation. The consumer has to pay the higher price, but he is said to be
getting a better product, and so it is not inflation. There is some truth to
this, but it appears it is over-used in order to report low inflation rates.
Both of these reforms are suspected of being motivated by holding down Social
Security costs by denying cost-of-living (COLA) adjustments to Social Security
recipients
.
If inflation is under-measured, the use of the measure to deflate nominal GDP in order to arrive at real GDP leaves some price rises in the GDP measure. Therefore, price rises or inflation are counted as increases in real goods and services. John Williams suspects that most of the GDP growth reported since the alleged recovery is simply price rises, not increases in real goods and services.
.
If inflation is under-measured, the use of the measure to deflate nominal GDP in order to arrive at real GDP leaves some price rises in the GDP measure. Therefore, price rises or inflation are counted as increases in real goods and services. John Williams suspects that most of the GDP growth reported since the alleged recovery is simply price rises, not increases in real goods and services.
The
historically high stock averages are another feature of make-believe America.
The high price/earnings ratios do not reflect strong fundamentals, such as high
rates of business investment, strong growth in real retail sales fueled by
strong growth in consumer incomes. The Federal Reserve has used an increase in
consumer debt to fill in for the missing growth in consumer income for so long
that consumers have no more room to take on more debt. Without growth in wages
and salaries or in consumer debt, consumer demand cannot drive the economy and
business profits.
What
explains the high stock prices? The answer is the trillions of dollars the
Federal Reserve has created in order to stabilize the large “banks too big to
fail” and bail out their extremely poor investment decisions. All of this
liquidity found its way into the financial sector where it drove up the prices
of stocks and bonds, enriching equity owners and denying retirees any interest
income on their savings. The values of financial instruments are supported by
money creation, not by underlying fundamentals. Yet, the stock averages are
treated as proof of economic recovery and America’s first place in the world.
As I
said, it is never-never-land in which we live.
My
website is committed to giving you the counter-narrative to the official BS you
get from the presstitutes and the junk economists. Truth is hard to come by and
is getting harder. If you support my website, I will continue to give you my
best effort. donate: https://www.paulcraigroberts.org/pages/donate/
