If you had the opportunity to look at this Friday’s ‘jobs report’ it is only evidence that the current system continues to deteriorate in the United States.
The natural rate of unemployment – because there’s always a certain amount of unemployed due to growth – has for the last 60 years been averaging around 5.4%. Some time around the first week of October the percent of unemployed workers was almost 6%, which seemed very high at the time, but today the number is actually 6.5% (see official Bureau of Labor Statistics press release). This is the highest unemployment has been since 1994. To put this number into more perspective, at the height of the 2001 recession the unemployment rate peaked at 6.3%.
Pick up any newspaper and what you read is laughable. Part of the reason we are in a recession (as the evidence will show much, much later) is because consumers and businesses have lost confidence in the stability of the financial system, and so have banks. So nearly all the mainstream press articles talk about how the worst part of the recession has already passed, and how the forecast can only be uphill from now, in an effort to encourage more financial participation and mood-swinging to lift us out of the recession. The pictures of frowning stock investors on the front page of the New York Times are disappearing, but the number of frowning faces is actually increasing and is far from “over”. We should realize the perverse logic at work.
In a capitalist economy, bear market prophecies are self-fulfilling. What we are seeing now is an enormous amount of propaganda telling us just the opposite of the bear market narrative. NY Times: America needs to feel confident again; Motley Fool: everybody can win and even profit from the paranoia; Forbes: this is the best time to start living happily-ever-after in a posh, high-rise condo; CNNMoney: now is the best time to buy a new home; LA Times: time to start shopping for one of those foreclosed homes that unemployed families can no longer afford. Investor news everywhere else: bull market ahead, etc.
We know this is not the whole story. Two more federally-insured banks failed this week, bringing the total number of US banks gone under to nineteen. Pending home sales are falling rapidly. The banking industry needed a bail-out package (part nationalization), so too with the auto industry, the health-care industry, the airline industry, and now GM – the great emblem of American stability and triumphalism – says that it’s hitting rock-bottom and needs a bailout, too. $50 billion to be exact.
The chief executive of Microsoft, Steve Ballmer, said recently that we “have got to get out of the sense of pessimism and back into a sense of optimism”. The market psychology needs to change. Meaning: we should consume more of our own production, for the executives’ sake, for the banks’ sake, for the mortgages’ sake, for the children’s sake, for the sake of the entire enterprise. For fuck’s sake, Work! Commute! Sleep!
It should be pointed out that consumers can only finance payments for new goods and services – and this is certainly no big secret – by borrowing money. In order to cushion a crisis, consumers must be able to “smooth” their consumption along the same levels as before the crisis. Unsurprisingly, then, the latest data show that consumer borrowing increased during the month of September instead of decreasing as was predicted by pessimists. The demand for “non-revolving credit” – the kind of credit added to credit cards – jumped from negative numbers in August to positive numbers in September even as a major global credit crisis raged forward. Every sector of the economy has demanded a boost from the Treasury (now totaling $3 trillion altogether), unemployment is expected to increase to 8.0% by January, and we are still buying more goods and services than ever before. Contrary to the idea that the recession is now mostly over, is this not the most legendary contradiction in recent times you have heard?