No Recovery: Longest Sustained Fall In UK Real Wages In Recorded History

Why is there no sustainable recovery?

Because of the policy errors of the West to save the corrupt financial system, but abandon the people whom 'the system' is intended to serve.

You may read the story about why the Bank of England is likely to keep interest rates low, which accompanies this graph, in the Financial Times.

Today's Non-Farm Payrolls Report - The Good News, Bad News - Unadjusted Unemployment at 13%

Today's Non-Farm Payrolls report was encouraging despite the downward revision from last month's headline grabbing number, which in part helped make up today's headline grabbing number.

The seasonality adjustment used in this number was out of the normal bounds from past seasonality adjustments. And as one might have anticipated, the Birth Death model added its customary large number of estimated (imaginary) jobs into the mix.

As you know I prefer to look at the trends, rather than the month to month numbers which can be used to manage perception in the market and the public.

The overall trend shows that the US is not faring as badly as if it might have, at least in the short term, under an austerity regime such as that being followed in Europe.

The most encouraging statistics are the steady although somewhat anemic jobs growth, and the upturn, finally, in average pay. I could not find current median pay numbers in a chart, and this is what is most interesting to me as you know.

The Labor Participation Rate continues its decline.  It is a much more significant number than the 'headline' unemployment rate which fluctuates in whom it decides to count as employment-seeking.  

According to Bloomberg if the Labor Participation Rate was maintained as steady from before the financial collapse, and 'discouraged workers were not eliminated, the current unemployment rate in the US would be a little north of 13%.  But as workers get discouraged the government stops counting them as employment seeking, and the Labor Participation Rate falls.

And finally there is Real Disposable Personal Income Per Capita, which is as close to median as I could get.  And just for comparison, a chart showing Total Personal Disposable Income from 1921 to 1939, including the secondary recession of 1937 which was due to a policy error in premature Fed tightening from a fear of inflation. 

I think we learned in the 1930's that austerity after a credit bubble induced financial collapse is a destabilizing influence on civil governments.  Or at least that was the case in much of the world back then.  We seem to have forgotten quite a few lessons from history about regulation, reform, and the consequences of extremes in wealth inequality.

There is little doubt that if the nascent recovery falters, the 'sequester' will be blamed, and not the lack of reform and safeguards in the financial sector which caused the most recent financial crisis in the first place, although it was most certainly a key player in the tech bubble and collapse as well. 

One can only speculate that if genuine reform, including restraints on rampant deregulation, had been enacted after the stock market excess of the Tech Bubble, would the people and the world have been spared the Financial Collapse of 2008?  And what is yet to come, most likely out of Europe or China?

Peak Employment

The Labor Participation Rate is the total number of people employed expressed as a percentage of the total non-institutionalized working force over the age of 16.

It is a good number to watch, because it is harder to play games with it, as the government tends to do with the unemployment rate, making people disappear when their benefits expire.

Granted, it is not perfect, because it does not account for those who are underemployed, working part time or at a minimum wage job far below their aspirations and capabilities.

Nevertheless, we are seeing a flatness in the employment figures that is pronounced.



This might not necessarily be a bad thing, if the average real wage was rising sufficiently so that one might put forward the hypothesis that people are not working because they do not need to work, and their disposable income is sufficient for their needs.

But this is not the case in the USA.

A painful adjustment to free trade and globalization? Sending your working class against nations that are executing aggressive industrial policies is like sending troops marching upright in ordered ranks into heavily entrenched machine gun fire.

Most would feel better if that pain were more equally and equitably distributed. The wealthy elite often like to use a crisis to send a nation to war at times such as these, to create work and control the population. In WWI there was also a vigorous pandemic to help cull the herd as the eugenicists used to say. Good for employment, perception control, and of course profits.

And so it is, that the generals, besotted with the favors of industrialists, and the institutionalized thinking of craven staff, are fighting the last war once again, and losing badly.