Left Side of the Aisle #103 - Part 3

What's good about 7.6% unemployment?

One of the reasons I wanted to do the Outrage of the Week now is because I wanted to talk some about the economy, which I haven't done in a while.

Of course, one of the big bits of economic news over the past couple of weeks was the unemployment figures, as it always is when the monthly figures come out. According to the Labor Department, the unemployment rate in March was only 7.6% - that's a full 0.1% drop from February. If you think you detect some sarcasm there, I'd only say what do you mean "some?"

It's amazing to me, it's intolerable to me, that this is supposed to be acceptable, that we're supposed to go "isn't this just great news, aren't things just fine." We're all supposed to play Pollyanna's "glad game" and go "We're glad that it's not 10% like it was in the summer of 2010!" Which, yes, is something to be glad about, it's good that unemployment has come down a couple of percentage points, but it's rather like being glad you have skin cancer because it's not lung cancer or being glad  you have six months to live because at least it's not three months.

Well, yeah, but at least we can be glad unemployment is creeping down, right? At least it didn't go up!

Except it probably should have. There were a measly 88,000 new jobs created in March, considerably less than half the 190,000 predicted, when it takes about 150,000 a month just to absorb new workers entering the job market. So why did the rate go down? Because nearly 500,000 workers left the labor force. Now, some of those people were new retirees and some may have been people returning to school, but the fact is a lot of them, quite possibly most of them, are people who had been out of work so long that they just gave up looking because work had been so hard to find - and who, quite possibly, found themselves, whether or not they were aware of it, targets of the unemployment discrimination I mentioned a couple of minutes ago.

As a result of the growing number of discouraged workers, the labor participation rate, the percentage of the civilian working-age population that is in the labor force, that is, either working or looking for work, dropped to its lowest level in over 30 years.

But don't worry, it's all good, nothing to see here, move along, don't worry be happy and even the dismal number of new jobs doesn't faze the happy-talkers, as we have Rachel Maddow merrily chirping that such numbers always get revised. Which is true - and sometimes they get revised downward.

So look, 7.6% unemployment. It could be worse, it has been worse and not that long ago. But that doesn't mean it's good. It doesn't mean things are going well, it doesn't mean "prosperity is right around the corner" - especially not when first-time unemployment claims for the week ending March 30 went up 28,000, much more than expected.

So to sum up that rant: 7.6% unemployment. It's been worse. But the idea that this is some kind of new normal, the unemployment of 7-something percent is a level we're supposed to take for granted, to be satisfied with, is obscene.

And it's not going to get a whole lot better any time soon: The Federal Reserve predicts that the unemployment rate will stay above 6.5% for at least two more years. They predict unemployment will still be nearly 7.5% at the end of this year and no less than 6.7% to 7% at the end of 2014.

The jobs simply aren't there. Corporations simply are not hiring. Oh, they're posting the jobs: Job postings went up 11% last year to the highest rate in 5 years. But they're not filling the jobs. They're not hiring. It's not because they can't, it's not because they can't afford it. Corporate profits are at an all-time high and are going up at nearly 20% per year. Those profits represent the largest share of total national income in over 60 years while the portion that's going to salaries and wages is at its lowest level in nearly 50 years. Wages now account for the smallest portion of the Gross Domestic Product since the end of World War 2, which is when they started keeping records. That's nearly 70 years.

And even as corporate profits rise, corporate taxes drop: The tax burden, if you can call it that, on corporations is now equivalent to just 1.5% of the GDP. Another way to measure that is to note that in 1952, the corporate income tax accounted for about one third of of all federal tax revenue. Now it's less than 9 percent.

The fact is, we are hurting and we continue to hurt. And it's not just the unemployed, of course, it's also the employed - or at least those of us who are not part of the elite.

We often hear about income inequality in the US, but not a lot of us know just how extreme it is. Let me show you something.

A couple of years ago, researchers at Duke University and the Harvard Business School did a survey of Americans in which they asked people what they thought was the distribution of wealth among people in the US. The the middle bar in the chart to the left. It indicates that people think that the richest 20% of the population owns about 55% of the wealth. Something notable about the results is that people across all three of the survey's income categories (less than $50,000 per year, $50,000-$100,000 per year, and over $100,000 per year) were very similar in their estimates.

The researchers also asked those same people what they thought would be the best, the fairest, distribution of wealth.The bottom bar in the graph shows what they said. It's much more equitable than what they think the actual distribution is; the wealthiest fifth get about a third of the total wealth, with the poorest fifth holding about 10 percent of the total. Again, all three income groups offered much the same answer: Although there was some variation across income groups, with the portion the wealthiest should have rising with income, the differences were just not that large, with the proposed portion for the richest ranging only from 30 to 40 percent.

The top bar is the actual distribution.

The richest fifth of our population possesses nearly 85% of our total national wealth. Note that the bottom two categories, the bottom two-fifths of the population, barely register on that graph.

This is not new. This has been going on for decades, going on since the 1970s. The average American worker, the average American family, has lost ground since the late 1970s. The average American family is worse off that it was 35 years ago. Thirty-five years of work has gotten you precisely nowhere.

And not only has it been getting worse, it's even accelerating. During the Clinton-era economic recovery, 45% of the gain in national income went to the richest 1% of the population.

During the Bush-era recovery, 63% of the gain in national income went to the richest 1% of the population.

During the Obama-era recovery, an eye-popping 121% of the gain in national income went to the richest 1% of the population.

How is that even possible? It comes from research done by University of California economist Emmanuel Saez, who found that not only did all of the income gains from 2009 to 2011 go to the top 1%, the incomes of the bottom 99% fell by 0.4%. It's no longer even that the top 20% are gaining or the top 10% or even the top 5%, it's the top 1% who are sucking up all the gains and leaving the rest of us further and further behind.

That is the economic reality we are facing. And what the politicos and pundits across both parties are proposing to do about it is exactly the wrong thing. I'll talk about that next week.

Sources:
http://www.bls.gov/news.release/empsit.a.htm
http://jobsanger.blogspot.com/2013/04/unemployment-rate-drops-but-its-not.html
http://www.youtube.com/watch?v=7bhyKS_SWPM&feature=youtube_gdata
http://www.marketwatch.com/story/us-jobs-gain-in-march-lowest-in-10-months-2013-04-05
http://www.huffingtonpost.com/mark-gongloff/labor-force-participation-rate_b_1865027.html
http://historymatters.gmu.edu/d/5063
http://www.huffingtonpost.com/2013/03/20/unemployment-fed-forecast_n_2916986.html
http://www.ydr.com/business/ci_22986440/us-companies-post-more-job-but-fill-them
http://thinkprogress.org/economy/2013/03/04/1665281/corporate-profits-worker-income/
http://thinkprogress.org/economy/2012/12/03/1270541/corporate-profits-wages-record/
http://thinkprogress.org/economy/2012/12/10/1308981/chart-corporate-profits-skyrocket-while-corporate-taxes-plummet/
http://articles.latimes.com/2013/mar/06/business/la-fi-hiltzik-20130306
http://www.epi.org/publication/economy-built-profits-not-prosperity/
http://www.nakedcapitalism.com/2013/02/yes-virginia-the-rich-continue-to-get-richer-the-1-got-121-of-income-gains-since-2009.html
http://www.scribd.com/doc/125269359/Getting-Richer-Edmund-Saez