Poverty Report Contradicts GDP Claims

Poverty Report Contradicts GDP Claims


It is amazing how the government manages to continue selling Brooklyn Bridges to a gullible public. Americans buy wars they don’t need and economic recoveries that do not exist.

The best investment in America is a highly leveraged fund that invests only in large cap companies that are buying back their own stocks. Many of the firms repurchasing their stocks are borrowing in order to push up their stock prices, executive “performance bonuses,” and shareholders’ capital gains. The debt incurred will have to be serviced by future earnings. This is not a picture of capitalism that is driving the economy by investment.

Neither is consumer spending driving the economy. The US Census Bureau’s 2013 Income and Poverty Report concludes that in 2013 real median household income was 8 percent below the amount in 2007, the year prior to the 2008 recession and has declined to the level in 1994, two decades ago! http://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf Even though real household income has not regained the pre-recession level and has declined to the level 20 years ago, the government and financial press claim that the economy has been in recovery since June 2009.

Neither is an increase in consumer debt driving the economy. The only growth in personal debt is in student loans.

Real retail sales (corrected with a non-rigged measure of inflation) remain at the level of the bottom of the recession in 2009. Macy’s , J.C. Penny’s, and Sears store closings are further evidence of the lack of retail sales growth, as is the fact that two of the three dollar store chains are in trouble. Walmart’s sales are declining.

The basis of auto sales hype is subprime loans and leases taken by those who cannot qualify for a loan to purchase.

Housing starts remain far below the pre-recession level, which is not surprising when available jobs are part-time with no benefits. Such jobs cannot support the formation of households and purchase of homes.

Where does the government’s second quarter 2014 real GDP growth rate of 4.6 percent come from? It comes from an understated inflation measure and jiggled numbers. It is not a correct figure. Nothing has occurred in the economy to turn it from a first quarter decline of more than 2 percent into a second quarter growth of 4.6 percent.

The 4.6 percent number is pulled out of a hat to set the stage for the November election.

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It is extraordinary that economists and the financial media permit the government to get away with its false economic reporting. Of course Wall Street likes good news . . . but fake news that misleads investors and covers up economic policy mistakes?

Clearly, something is wrong with the government’s economic reporting. It is not possible to have real GDP growth when real median family incomes are declining and business investment consists of corporations buying back their own shares. Either the government’s GDP estimate is incorrect or the Census Bureau’s Income and Poverty report is incorrect. Apparently Washington doesn’t understand that if it is going to rig the numbers, it must rig all the numbers.

The rigged inflation measures create illusionary real GDP growth. They also block cost-of-living adjustments to Social Security pensions. Indeed, the main purpose of the rigged inflation measures is to get rid of “socialistic” Social Security by allowing inflation to gradually erode away the real values of “entitlements.” Republicans always want to cut “entitlements” that people have paid for over their working lifetime with the payroll tax. But Republicans never want to cut the payroll tax. They need the revenues in order to bail out the big banks and to pay for never-ending wars.

Washington has been conducting needless wars abroad for 93 percent of the 21st century at a cost of trillions of dollars. More trillions have been wasted bailing out banks that deregulation permitted to become “too big to fail.” During the past seven years, millions of Americans have lost their jobs and their homes, and food stamp rolls have reached record numbers. These hurting Americans have been ignored by policy-makers in Washington.

Clearly, government in America is focused on something different from a healthy economy and the well being of citizens. We call it democracy, but it’s not.

More Bad News From The Jobs Front

The Bureau of Labor Statistics headline this morning reads: “Payroll employment increases by 248,000 in September; unemployment rate declines to 5.9%.”

How can this be? As I reported yesterday, US corporations are investing in buying back their own stocks, not in new business ventures that produce new jobs.
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http://www.paulcraigroberts.org/2014/10/02/poverty-report-contradicts-gdp-claims-paul-craig-roberts/

According to the Census Bureau’s Poverty Report, US real median family income has declined to the level of twenty years ago. http://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf

Consumer credit and real retail sales are not growing. Construction is limited to rental units. Construction shows 16,000 new jobs, half of which are “specialty trade contractors” or home remodelers.

The payroll jobs report lists 35,300 new jobs in retail trade. How is this possible when J.C. Penny’s, Macy’s, Sears, and the dollar store chains are in trouble and closing stores, and shopping centers are renting space by the day or hour?

At a time when there is a surfeit of office buildings and only 500 new jobs in “heavy and civil engineering construction,” the jobs report says 6,000 new jobs have been created in “architectural and engineering services.” What work are these architects and engineers doing?

The 4,900 computer systems jobs, if they exist, are likely short-term contracts from 6 to 18 months. Those who have the jobs are not employees but “independent contractors.”

The payroll jobs report gives an unusually high number–81,000–of “professional and business services” jobs of which 60,000 are “administrative and waste services,” primarily “temporary help services.”

“Health care and social assistance” accounts for 22,700 of the new jobs, of which 63 percent consist of “ambulatory health care services.”

“Performing arts and spectator sports” gave the economy 7,200 jobs, and 20,400 Americans found employment as waitresses and bartenders.

State governments hired 22,000 people.

Let’s overlook the contribution of the discredited “birth-death model” which overstates on average the monthly payroll jobs by at least 50,000, and let’s ignore the manipulation of seasonal adjustments. Instead, let’s assume the numbers are real. What kind of economy are we looking at?

We are looking at the workforce of a third world country with the vast bulk of the jobs in low-pay domestic service jobs. People working these                                                                      https://www.booster.com/acitizenagainsthunger02
part-time and independent contractor jobs cannot form a household or obtain a mortgage.

As John Titus, Dave Kranzler and I have shown, these jobs are filled by those aged 55 and over who take the low paying jobs in order to supplement meager retirement incomes. The baby boomers are the only part of the US labor force whose participation rate is rising. http://www.paulcraigroberts.org/2014/09/04/lie-serves-rich-roberts-titus-kranzler/ Of the claimed new jobs in September, 230,000 or 93 percent were jobs filled by those 55 and older. Employment of Americans of prime working age (25-54) declined by10,000 jobs in September from the August level. http://www.bls.gov/news.release/empsit.t09.htm

As the US labor force continues its transition from first world to third world, real median family income will continue to decline. Ladders of upward mobility will continue to be dismantled, and income and wealth will continue to concentrate in the pockets of the One Percent. America is truly a country run for the few.

By Paul Craig Roberts