The Mutilated Economy and Newt’s Revenge: Why Destitute US Labor Market Needs BIG Child Labor Law Revision (Liars Still Figuring/Figures Still Lying)

(Please consider making even a small contribution to the Welcome to  Pottersville2 Quarterly Fundraiser happening now ($5.00 is suggested for those on a tight budget) or at least sending a link to your friends if you think the subjects discussed here are worth publicizing. Thank you for your support. We are in a real tight spot financially right now and would sincerely appreciate any type of contribution. Anything you can do will make a huge difference in this blog's ability to survive in these difficult economic times.)


Firstly, for this week's BLS numbers from our friend R.J. Sigmund (pay close attention to the mysterious graph!):

. . . the seasonally adjusted extrapolation from this October survey of households indicated that 143,568,000 of us were employed, 735,000 less than were employed in September, while 11,272,000 of us were unemployed, an increase of 17,000 over September; as the working age population rose by 213,000 to 246,381,000 and the civilian labor force fell by 720,000 to 154,839,000...thus, those of us not in the labor force rose by 932,000 to a record 91,541,000, which was the third highest monthly increase of people dropping out of the labor force in US history...the results of this can be seen in the two major metrics computed from this survey that we watch; the labor force participation rate,  which is the percentage of us working or actively looking for work, fell from 63.2% in September to a 35 year low of 62.8% in October, which is shown in red on our adjacent FRED graph, while the employment to population ratio, aka the employment rate, shown in blue, fell from 58.6% in September to a 2 year low of 58.3% in October; which in part reflects that the furloughed government workers were not counted as employed . . .

so, with 720,000 less of us counted than were included in September, the headline unemployment rate rose from 7.2% to 7.3%; if the 448,000 furloughed employees had been counted as unemployed, it should have added 0.2% to that rate...the number working part time for economic reasons, ie, those who reported they wanted full time work but had their hours cut or could only find part time employment, rose by 124,000 from 7,926,000 in September to 8,050,000 in October, while those working part time voluntarily fell by 181,000 to 18,786,000; the alternate measure of unemployment, U-6, which includes those who wanted full time work, rose from 13.6% in September to 13.8% in October...among those not officially in the labor force and hence not counted, an additional 5,683,000 reported that they still want a job; of those, 2,283 000 were categorized as "marginally attached to the labor force" because they've  looked for work sometime during the last year, but not during the 30 day period covered by the October household survey...815,000 of those were further characterized as "discouraged workers, because they say that they havent looked for work because they believe there are no jobs available to them...the number of "discouraged workers" was virtually unchanged from October 2012 ...

finally, we want to look at the raw unadjusted numbers from this survey and compare the seasonal adjustment thereon to the seasonal adjustment made on non-farm payrolls in the establishment survey...before adjustment, the extrapolated number who reported they were employed in October was 144,144,000, down 507,000 from the 144,651,000 who reported they were employed in September; thus the seasonal adjustment subtracted 228,000 from the change in the employed to arrive at a seasonally adjusted 735,000 decrease in those employed...as we documented last month, the seasonal adjustment in August household survey added 489,000 to the count of the employed, while the September household survey added 9,000, which, when combined with the August adjustment, was a difference of 1,162,000 in the adjustments between the the two survey (ie, the CES seasonal adjustment subtracted 682,000 payroll jobs, while the CPS seasonal adjustment added 480,000 to the count of employed). . .

with October's data, we now see a seasonal subtraction of 1,358,000 jobs from the establishment survey over 3 months, but still a seasonal addition of 268,000 to the household survey over the same three months...the point of this exercise is to illustrate how different the two unemployment reports we and others have been covering as one are; so different, in fact, that they shouldn't even be released together...our FRED graph below shows the unadjusted count of those employed from the household survey in blue and the unadjusted count of payroll jobs from the establishment survey in red since 2000….the scale for the household employed count in thousands is on the right sidebar, and the scale for the establishment job count is on the left sidebar, allowing the surveys, which actually count a different population, to overlap; it’s fairly clear in just looking at this graph that there are times when the lines match, while there are also times when each survey runs as many as 2 million jobs ahead of the other….you can even see the action we’ve described over the last three months, wherein the unadjusted payroll job count went up by 1,963,000 while the true count of the employed went down by 967,000, only to have them brought into approximate alignment by the seasonal adjustments . . .

. . . the advance estimate of 3rd quarter Gross Domestic Product was surprisingly better than most forecasts, indicating that our seasonally adjusted output of goods and services grew at an annual rate of 2.8% over the three months through September vs. the previous three months...however, the internals were not as solid as the headline, as .83% of the 2.8% 3rd quarter growth increase came from increasing inventories, or gross production that's still sitting on the shelf; take that out, and the real final sales of our domestic product just increased 2.0% in the third quarter, down from the real sales increase of 2.1% in the second...on the plus side, every major component of the economy - consumers, investment, net exports, and government - contributed to growth in the quarter for the first time in a year....in current dollars, the value of all our national output of goods and services -- increased 4.8% or $196.6 billion, in the third quarter to an annualized level of $16,857.6 billion...in the inflation adjusted chained 2009 dollars upon which the change in real GDP is calculated, third quarter GDP increased by $110.4 billion, from an annualized $15,679.7 billion in the second quarter to an annualized $15,790.1 at the end of the third...generally, the dollars amounts we'll be looking at will be current dollars, while the percentage changes BEA gives us are adjusted for inflation based on chained 2009 dollars . . .

before we start with the specifics, we should make it clear that all national accounts data is given at a seasonally adjusted annual rate; thus, when it's said a component of GDP grew at a 2.8% rate, it's understood that it means that if the growth rate in the quarter were extrapolated over the entire year based on the rate the seasonally normalized 3rd quarter grew at, we'd see 2.8% growth over a year; that means that actual growth in the quarter was something close to a seasonally adjusted 0.7%...another important point the media and most analysts missed in their coverage of this report was the technical note accompanying this report (pdf), which notes that because of delayed reporting by government agencies, the source data was incomplete and subject to revision; namely that 3 months of source data were only available for consumer spending on goods; shipments of capital equipment; motor vehicle sales and inventories; durable and nondurable manufacturing inventories; federal government outlays; and consumer, producer, and international prices, while only two months of data were available for most other key data sources; the BEA’s "assumptions" for the third month are shown in a table included with the technical note (pdf); since the average change, either plus or minus, from the first to the second estimate is 0.5% even under the best conditions, it's a fair to say that this report is only a bit better than a wild guess at 3rd quarter GDP . . .

And the news doesn't get any better.

The Mutilated Economy

By Paul Krugman

Published: November 7, 2013

1226 Comments

Five years and eleven months have now passed since the U.S. economy entered recession. Officially, that recession ended in the middle of 2009, but nobody would argue that we’ve had anything like a full recovery. Official unemployment remains high, and it would be much higher if so many people hadn’t dropped out of the labor force. Long-term unemployment — the number of people who have been out of work for six months or more — is four times what it was before the recession.

These dry numbers translate into millions of human tragedies — homes lost, careers destroyed, young people who can’t get their lives started. And many people have pleaded all along for policies that put job creation front and center. Their pleas have, however, been drowned out by the voices of conventional prudence. We can’t spend more money on jobs, say these voices, because that would mean more debt. We can’t even hire unemployed workers and put idle savings to work building roads, tunnels, schools. Never mind the short run, we have to think about the future!

The bitter irony, then, is that it turns out that by failing to address unemployment, we have, in fact, been sacrificing the future, too. What passes these days for sound policy is in fact a form of economic self-mutilation, which will cripple America for many years to come. Or so say researchers from the Federal Reserve, and I’m sorry to say that I believe them.

I’m actually writing this from the big research conference held each year by the International Monetary Fund. The theme of this year’s shindig is the causes and consequences of economic crises, and the presentations range in subject from the good (Latin America’s surprising stability in recent years) to the bad (the ongoing crisis in Europe). It’s pretty clear, however, that the blockbuster paper of the conference will be one that focuses on the truly ugly: the evidence that by tolerating high unemployment we have inflicted huge damage on our long-run prospects.

How so? According to the paper (with the unassuming title “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy”), our seemingly endless slump has done long-term damage through multiple channels. The long-term unemployed eventually come to be seen as unemployable; business investment lags thanks to weak sales; new businesses don’t get started; and existing businesses skimp on research and development.

What’s more, the authors — one of whom is the Federal Reserve Board’s director of research and statistics, so we’re not talking about obscure academics — put a number to these effects, and it’s terrifying. They suggest that economic weakness has already reduced America’s economic potential by around 7 percent, which means that it makes us poorer to the tune of more than $1 trillion a year. And we’re not talking about just one year’s losses, we’re talking about long-term damage: $1 trillion a year for multiple years.

That estimate is the end product of some complex data-crunching, and you can quibble with the details. Hey, maybe we’re only losing $800 billion a year. But the evidence is overwhelming that by failing to respond effectively to mass unemployment — by not even making unemployment a major policy priority — we’ve done ourselves immense long-term damage.

And it is, as I said, a bitter irony, because one main reason we’ve done so little about unemployment is the preaching of deficit scolds, who have wrapped themselves in the mantle of long-run responsibility — which they have managed to get identified in the public mind almost entirely with holding down government debt.

This never made sense even in its own terms. As some of us have tried to explain, debt, while it can pose problems, doesn’t make the nation poorer, because it’s money we owe to ourselves. Anyone who talks about how we’re borrowing from our children just hasn’t done the math.

True, debt can indirectly make us poorer if deficits drive up interest rates and thereby discourage productive investment. But that hasn’t been happening. Instead, investment is low because of the economy’s weakness. And one of the main things keeping the economy weak is the depressing effect of cutbacks in public spending — especially, by the way, cuts in public investment — all justified in the name of protecting the future from the wildly exaggerated threat of excessive debt.

Is there any chance of reversing this damage? The Fed researchers are pessimistic, and, once again, I fear that they’re probably right. America will probably spend decades paying for the mistaken priorities of the past few years.

It’s really a terrible story: a tale of self-inflicted harm, made all the worse because it was done in the name of responsibility. And the damage continues as we speak.

• Read All Comments (1226)

I've thought on too many occasions that every bad thing recently (meaning after the Reagan Government Is the Problem, Not the Solution propaganda moment) started with that greatly misreported Clinton/Gingrich rapprochement (where Clinton grabbed Newtie in a bear hug and essentially bought into every Gingrich fantasy about getting rid of all citizen protections and immeasurably increasing governmental control by the rich and powerful).

So, if like me, you are filled with revulsion every time you glimpse the Newt's visage on those Sunday morning gabfests . . . it's like childhood's dream of magic (deathly bad magic), when we read the following essay on his and his money boys' accrued power finally being displayed in all its finery for all to review:

Newt’s Revenge: Child Labor Makes A Comeback

In just two years, right-wing legislators weakened four states' child labor laws - and a raft of other protections

By Josh Eidelson

Months after the Tea Party’s 2010 election triumph, Wisconsin’s Scott Walker made international news when activists occupied the Capitol in opposition to his anti-union gambit. But a report being released Thursday suggests Americans dramatically underestimate the scope and ambition of Republicans’ post-2010 push to ratchet workplace laws to the right – involving over a dozen states, a tangled web of under-the-radar coordination, and a broad constellation of weakened protections, from unemployment benefits to child labor laws.

“People in any given place, if they’re dealing with a minimum wage repeal in New Hampshire or something, mostly experience that as if it comes from a particular legislator in their state, and it’s explained as a response to the conditions in their state,” report author Gordon Lafer told Salon.

“So when you put all the pieces together over the 50 states, one of the things you see is how concerted an effort it is, and how cookie-cutter the legislation is – and how much it’s not being driven by individual legislators, but by a national corporate lobby.”

Lafer, a University of Oregon political economist who’s served as a policy adviser in the U.S. House, wrote the paper for the Economic Policy Institute, a D.C.-based progressive think tank whose funders have included foundations and unions.

According to Lafer’s report, “The Legislative Attack on American Wages and Labor Standards, 2011-2012,” within those two years 15 states passed new restrictions on union collective bargaining or paycheck deductions; 16 passed new restrictions on unemployment benefits; four passed new restrictions on state minimum wage laws; and four reduced limitations on child labor.

The child labor changes range from a Wisconsin law ending limits on 16- and 17-year-olds’ work hours to an Idaho law letting 12-year-olds be hired for manual labor at their school for 10 hours a week.

Lafer notes that a Idaho school district spokesperson said that would both cut down on labor costs and teach kids “you have to be on time” and “do what you’re asked …”

Lafer highlights a slew of other laws passed in the two years following the 2010 right-wing electoral romp. Among them: Michigan banned safety regulations covering repetitive motion. Florida banned local paid sick leave mandates. Wisconsin banned compensatory and punitive damage suits over employment discrimination.

New Hampshire made it easier for companies to classify workers as “independent contractors” lacking the legal rights of employees. Maine allowed employers to apply for employees to be considered disabled, and to determine what fraction of the minimum wage to pay employees classified as such.

The report also tallies a number of business-backed bills that were pushed in the same period but fell short of becoming law, including 17 “right to work” bills (along with the ones that passed in Michigan and Indiana); a Montana bill excluding tips from workers’ compensation calculations; an Oklahoma bill requiring those receiving unemployment to do 20 hours of weekly unpaid community service; and a Florida bill prohibiting municipalities from passing any rules to address “wage theft” – companies’ failure to pay employees’ their legally owed wages.

Lafer’s report emphasizes the role of a number of national right-wing groups in pushing such legislation, especially the American Legislative Exchange Council. “Ultimately,” writes Lafer, “the key ‘exchange’ that ALEC facilitates is between corporate donors and state legislators.

The corporations pay ALEC’s expenses, contribute to legislators’ campaigns, and fund the state-level think tanks that promote legislation; in return, legislators carry the corporate agenda into their statehouses.”

ALEC’s website states that its “Commerce, Insurance and Economic Development Task Force’s model policies on labor preserve freedom of association for employees while protecting worker choice and taxpayer dollars.”

Lafer challenges a number of rationales offered for the raft of policies, noting that Republicans went after public workers in states with comparatively small deficits, and passed right-wing education reforms in states with comparatively high test scores.

He points out that ALEC warns against raising the minimum wage on the grounds that it “lures high school students into the full-time work force” and thus out of school, but the National Restaurant Association argued for ALEC-backed bills weakening child labor restrictions on the grounds that “employment teaches teenagers skills …”

“Running through what on the surface are contradictions is an agenda at every turn lowering wages and lowering the bargaining power of working people,” Lafer told Salon.

He contended that agenda was designed not just to cut labor costs, but to reduce workers’ leverage, from growing the ranks of teenagers available to compete with adults for jobs, to strengthening managers’ authority to deny unemployment benefits, to denying or diluting the right to form a union.

While Gov. Walker has decried “a society where the public employees are the haves and taxpayers who foot the bills are the have-nots,” Lafer argued that the right-wing workplace policies of the past few years “primarily affect exactly those people who are supposedly the beneficiaries of cutting wages and benefits in the public sector.”

“Basically,” Lafer told Salon, “the most powerful lobbies in the country are in a concerted attack across the country, and also across a wide range of issues, acting in such a way that is going to make it harder for people in the country to make a decent living.”

More Josh Eidelson