America's Looming Economic Disaster

When the September jobs report was a cataclysmic clunker, President Biden rolled out his teleprompter to read a prepared statement reassuring Americans the fragile economy is making headway.  "Jobs are up, wages up, unemployment down--that's progress," the nation's chief executive boasted.

While the economy has improved since the pandemic throttled growth, the distance from the current situation to the robust expansion of 2019 is a far, far galaxy away.  Any growth would beat 2020 when the economy contracted 3.5%, the largest decline in 74 years.  

Mr. Biden is right.  America is better off today than March of last year. However, before he took office, the economy had righted itself with 4.1% growth in the final quarter.  A steady recovery was underway, as American businesses were allowed to reopen. That rebound has continued at rocky pace.

Mr. Biden's view of the economy from the Oval Office is out of step with main street America.   Consumer confidence, a key predictor of spending, has plunged more than 19 points since its peak in June, according to the Conference Board.  Consumers are clearly not feeling Biden's optimism.  

Nagging supply chain bottlenecks, spiking inflation and millions of unfilled jobs are dragging down American businesses and hurting consumers.  Dismissing these as temporary is betting against trends that began in the first quarter of this year and have worsened.

Many U.S. businesses, both large and small, rely on parts, including microchips, as well as assembly for cars, appliances, cell phones and computers (to name a few) from overseas suppliers.  Foreign factories ship these items by planes, container ships and trucks to ports and warehouses in this country.

During the pandemic, major disruptions occurred in the supply chain as overseas factories and manufacturing plants for goods, such as clothing, textiles and furniture were shuttered.  Reopening these firms has been slower than expected while demand has skyrocketed.  

This imbalance between demand and supply is creating scarcity and driven up prices. Costs for these goods are passed on to consumers, which fuels inflation.  This supply chain turmoil is aggravated by the lack of workers in the U.S. to unload ships, stock warehouses and transport goods.

The September report highlighted this dilemma. Despite the president's upbeat economic assessment,  the economic added 194,000 jobs, 306,000 below expectations. American companies cannot find workers to fill these openings.  This labor shortage is strangling businesses' efforts to meet demand.     

At the end of June, job openings in America leaped to 10.1 million, the highest level ever recorded, according to the Department of Labor.  Job placement firm Indeed estimates there are now 10.5 million job openings, an indication scare labor is becoming a fixture of the U.S. economy.  

The mainstream media downplays the shortage as one that impacts only low-paying jobs in leisure, hospitality and restaurants exclusively.  This is untrue.  There are 1.6 million unfilled jobs in those industries, but there are also 1.5 million in the critical healthcare and social assistance segments. 

Every business has been hamstrung in hiring people, despite generous wage increases to lure workers.  Businesses in retail, wholesale trade, education, trucking and the information industry cannot find employees to fill their jobs. The trucking industry needs 68,000 drivers to fill jobs.   

Many out-of-work people have been receiving stimulus checks as well as extra federal and state unemployment benefits.  Some states are ending their programs, but continuing federal government benefits incentivize workers to remain on the sidelines, particularly impacting small firms.

A second issue is the vaccine mandate imposed by private and government entities, leading to firings and resignations. The mandate is exacerbating the critical job situation. A December 8 deadline looms for many businesses, including airlines. Already thousands of workers have been fired or resigned.

The Bureau of Labor Statistics and the Department of Labor do not track the number of jobs lost due to the vaccine mandate for political reasons.  However, the Bureau of Labor Statistics shows 10.3 million people left their jobs in September, a distressing signal for businesses.

Mr. Biden pointed out the labor shortage is boosting wages for workers.  However, wage growth in lagging behind increases in prices. Over the last 12 months, the  Consumer Price Index (CPI) has ballooned 5.4% while Americans' wages rose 4.6%.  The CPI does not include food and fuel. 

Food prices hit their highest level in a decade in September as prices surged 32.8% in the 12 months through September, according to the Food and Agricultural Organization of the United Nations.  An increase of this level has not been seen since 2011.  

The Labor Department's August inflation report, the latest one available, showed prices for meat, poultry, fish and eggs climbed 8% over last year, but that is a jump of 15.7% since August, 2019.  Beef prices have leaped 12.2% over the past  year and bacon soared 17%.  

Food is not a discretionary expenditure for consumers.  While Washington may view this as just a temporary blip, Americans are feeling the pain right now.  A rosy view of the future will not solve today's crisis, which is hardest on low-income households.

Consumers are also feeling the pinch at the gas pump. In 2019, the average price of regular gasoline was $2.25 a gallon, according to the American Automobile Association.  In some states, prices were below $2.  The average price today is $3.28 and rising.  A year ago the price was $2.18.

For perspective, the cost of filling a 15-gallon tank has spiked from $33.75 in 2019 to $49.29 today.  In a month, the average driver is paying nearly $200 for gasoline.  The Bureau of Labor Statistics calculates energy prices have soared 24.8% over the past 12 months, while gasoline jumped 42.1%.  

Crude prices are fueling the increase in the price at the pump. Prices for a barrel of crude oil passed $80 at the end of September.  Bank of America predicted a cold winter could push the price of crude to more than $100 a barrel, the highest level since 2014. 

Unfortunately, energy prices may deliver another gut-punch this winter.  Natural gas used to heat millions of American homes is ratcheting up to new highs.  Natural gas prices have risen 47% just since the beginning of August.  Demand at home and globally is outstripping supply.  

Much of America's economic pain is self-inflicted.  Continuing stimulus payments, increased unemployment benefits and child care government checks have made work look less attractive by comparison.  The government has played a large role in the labor shortage.

Fuel costs are a direct result of the administration's pledge to eliminate fossil fuel.  The government cancelled a major oil pipeline, halted drilling on government lands and all but ended fracking.  The result is less investment in domestic oil exploration and drilling and more dependence on foreign oil.

Food prices too are effected by hikes in gasoline, diesel and jet fuel which are used in the transportation of  produce and other grocery items to stores across the U.S.  Farmers are also paying more for fuel. All those costs are passed on to consumers in the form of higher prices.  

Politicians and markets are adopting a cheerful view that things will gradually return to normal as supply and demand are perfectly aligned. Early predictions were that would happen before the end of the year.  Now economists and even the administration are forecasting early next year.

Meanwhile, American consumers don't have the luxury of waiting until 2022.  They are suffering under an inflationary bomb that is destroying their purchasing power. Runaway inflation will shove the economy over the cliff, crushing growth. Ignoring the evidence is a recipe for economic disaster.  

American Jobs: A Dystopian Future

Just as President Obama was taking his latest victory lap for America's economic rebound, the Bureau of Labor Statistics (BLS) ruined his self-congratulatory parade.  The agency reported the country's lowest monthly job growth in nearly six years.  A puny 38,000 jobs were created in May.

The really "smart" people--economists, bankers, fund managers and stock analysts--dismissed the lousy report as an anomaly.  Politicians did what they always do, pointing fingers and blaming the other party.  No one provided perspective on an ominous trend undermining employment.  

In times of economic growth, America has generated an average of more than 300,000 jobs every month.  Those days may never been seen again. Robotics, automation and artificial intelligence are hollowing out the job market, reducing the need for people in a range of professions.

Since 2000, America has lost a stunning 11,833,000 jobs.  During that period, private and public employers produced 12,994,000 jobs.  That number sounds impressive, but 24,827,000 jobs were eliminated over the same timeframe, according to the Bureau of Labor Statistics.

Those figures likely are shocking to most Americans because the issue has received little attention. The media certainly has not highlighted the problem and most Washington policy makers are too worried about sustaining their power to consider an American future without job growth.  

However, it is The Issue of this century.  Since the 1940's, America has rung up more than 10 million new job additions each decade.  In the 1990's, the nation tallied 21.7 million jobs. Manufacturing is the face of the new employment reality, having shed five million jobs since 2000.

Automobile manufacturing jobs have been hardest hit.  In 2004, the nation's car plants employed more than one million workers.  Today, the number has tumbled to 202,000, according to the BLS. Robots have assumed many of the jobs, including welding and painting.

A recent report by the BLS projects dwindling opportunities in industries such as agriculture, information technology, utilities, textile, computer operators, sales and promotion. Often, the proliferation of data computing, technological improvements and automation are the culprits.

Information processing and automated translations services, are reducing the demand for nearly every class of worker.  Thousands of clerical, retail, administrative and telemarketing jobs have disappeared. Professions, such as law, financial services and medicine, have suffered job losses, too.

Robots may soon be displacing humans in warehouses.  Taxis, buses and trucks will be driven by computers, not humans.  Computer kiosks are replacing retail clerks. A CEO of one of the fast-food chains envisions a future of automated food preparation and service.

Digital versions of human intelligence are being employed in ways once unthinkable, affecting nearly every profession without consideration for workers. White collar professions are no longer safe either.  The medical profession is on the cusp of a technological revolution.

For instance, in many cases computers can have a more accurate diagnosis rate for certain cancers than humans.  A recently approved medical device will soon deliver low-level anesthesia to patients. Robotic systems could potentially remove tumors from tissue with more precision than humans.

In the investment industry, automated services are eliminating the need for personal financial managers, financial planners and even stockbrokers.  Computer systems are performing tasks once assigned to low-level lawyers and paralegals, including research and writing legal briefs.      

University of Oxford researchers Carl Benedikt Frey and Michael Osborne, who have done pioneering studies on the displacement of workers, estimate that 47 percent of the current jobs in the U.S. could be automated and handled by computers by 2033.

What is driving automation?  There is no single answer, but here's a laundry list of reasons: $15 minimum wage, Obamacare mandates, escalating benefits costs, technological advances, safety concerns, worker turnover, speed imperatives, increased productivity, improved efficiency and profits.

America, in fact the entire world, is facing a Dystopian future where jobs are sparse, incomes are stagnant and inequality becomes more acute. Despite the dire outlook, no policy makers, educators, economists or technologists are offering solutions to help Americans cope with cataclysmic change.  

In the new economy, America will need to retool its educational system, cultivate new managerial disciplines, reform career decision-making to reflect the new environment, design new technological training for workers and equip the current workforce with advanced computer skills.

The task ahead will require vision and creativity, two assets that have shaped this great nation. Will America once again rise to the task of coaxing growth from a shifting economy?  That question will not be answered until the country first comes to grip with the problem of job evaporation.      

Part-Time America: The New Workforce Normal

This Labor Day millions of American workers have nothing to celebrate.  Their hours have been sliced, their wages have been chopped and their full time jobs have vanished.  They are the victims of the nation's weakest recovery from a recession in U.S. history.

At the end of July, more than 18.1 million Americans were saddled with part-time jobs, representing an estimated 16.5 percent of the work force.  Many of these workers have been forced to accept part-time employment while they pursue full-time opportunities.

President Obama has tried to sweep the issue under the Oval Office rug by focusing the media's attention on the low unemployment figures. But the problem has been on the radar of Federal Reserve Chair Janet Yellen, an Obama appointee as the nation's top banker.

"The unemployment rate is down, but not included in the rate are more than 7 million people who are working part-time but want a full-time job," Yellen pointed out at a news conference in March.  She lamented that some workers may be "stuck" in part-time jobs for the foreseeable future.

For some perspective, individuals working part-time comprised about 17 percent of total work force in 2007.  That figure ticked up to 20 percent in 2009 and remained near that level through the middle of last year before trickling downward to the current level of 16.5 percent.  

Some economists suggest the expansion in part-time employment may just be an echo caused by the recession.  Indeed, part-time job growth spiked during the economic downturn, but it has remained stubbornly high, raising the specter of a new normal in the labor market.

That hypothesis was pooh-poohed last year by the Federal Reserve Bank of San Francisco.  In a lengthly report, the fed flatly declared the high incidence of part-time employment "does not portend permanent changes" in the economy.

However, recent Labor Department household surveys call into question the Fed's assumption.  In June, for example, the department estimated the economy lost 523,000 full-time jobs.  That same month it reported part-time jobs skyrocketed by 799,000.  It was the largest monthly spike in two decades.

At the end of July, there were 7.6 million Americans employed part-time for what the Labor Department euphemistically calls "economic" or "involuntary"reasons.  That means workers' hours were reduced or they were unable to find full-time jobs.  Part-timers work less than 35 hours per week.

Although the White House and its economists dispute it, there is a growing suspicion that Obamacare's implementation may be at least partly to blame for the part-time job growth.  The law requires all but the smallest businesses provide health insurance for full-time employees next year.  

Recent surveys by the Federal Reserve Banks in Philadelphia, New York and Atlanta documented evidence of the impact of the president's health care plan on employment.  Their research found manufacturers and businesses projected increases in the portion of part-timers in their workforces.

For example 19.3 percent of manufacturers in New York said they were raising the number of part-time workers, while in the Atlanta region, 34 percent of businesses plan to hire more time-time employees than in the past.  In Philadelphia, 13.7 percent of firms intend to outsource jobs because of Obamacare.

Up to now, the changing characteristics of America's workforce have escaped national attention, especially in the nation's capitol.  Unless the issue is addressed soon, high-paying full-time jobs will continue to disappear along with the American dream.

Labor Day may soon become a date of mourning for American workers.