No economic recovery for the working class

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No economic recovery for the working class
7 April 2010

Last Friday’s US unemployment report, which showed a net payroll gain
of 162,000 jobs in March, has been seized on by the Obama
administration and much of the media as confirmation of official
claims that the recession is over and a recovery in the jobs market
has begun.

Calling the Labor Department report for March “the best news we’ve
seen on the jobs front in more than two years,” President Obama said,
“We are beginning to turn the corner.” The New York Times began its
report on the jobs data with the words, “The clouds have parted.”

A closer look at the figures, however, leads to far less sanguine
conclusions. The net gain in non-farm payrolls was far less than the
200,000 to 300,000 that had been predicted by most economists.
Moreover, 88,000 of the new hires were temporary—including 48,000
brought on to conduct the US census survey.

The so-called underemployment rate, which includes those involuntarily
working part-time and those who have given up looking for work, rose
to 16.9 percent, the third straight monthly increase. The ranks of
people seeking full-time employment but forced to work part-time
increased to the staggering level of 9.1 million.

Perhaps most ominous, the number of long-term unemployed—those laid
off at least 27 weeks—shot up by 414,000 to reach 6.5 million. This
category accounts for more than 40 percent of jobless workers, a far
higher percentage than in the deep recession of 1981-82. The average
length of unemployment in March rose to 31 weeks, the highest level on
record going back more than six decades.

Average hourly wages continued their protracted decline.

In the 27th month of a recession that has wiped out over 8 million
jobs, the US economy produced fewer new full-time jobs than are needed
to keep pace with the normal monthly growth in the labor market.
Despite a slight uptick in manufacturing and construction—following
months of contraction—the report reflects an economy mired in slump
with no prospect of bringing unemployment down to pre-crisis levels
for years to come.

To the extent that a slight increase in production in the real economy
has occurred, it has been bound up with a massive assault on the jobs,
wages, benefits and living standards of the working class. The ruling
elite, spearheaded by the Obama administration, is using the economic
crisis to effect a permanent reduction in the conditions of workers.

New and lower benchmarks for wages and working conditions are being
set that will remain in place. They are not temporary. On this basis,
corporate profits have soared despite near double-digit unemployment
and depressed consumer spending.

The deterioration in the social position of the working class is
reflected particularly sharply in productivity figures. In the fourth
quarter of 2009, when the US gross domestic product (GDP) surged by
5.6 percent, productivity—the amount of production squeezed from each
worker—rose at an annual rate of 6.9 percent. Unit labor costs fell
sharply, by 5.9 percent. Inflation-adjusted hourly wages fell by 2.8
percent from the prior quarter.

These figures document a sharp rise in the intensity of the
exploitation of the labor force.

Another indication of the class character of the so-called recovery is
the divergence between GDP and a measure of national income—gross
domestic income (GDI). In the third quarter of 2009, the GDI was still
contracting even as the GDP rose 2.2 percent. The current gap between
GDP and GDI is the biggest on record.

This statistical divergence reflects the fact that the present
recovery is largely a rebound in corporate profits and the wealth of
the financial elite, while the living standards of the vast majority
of Americans are continuing to fall. This is a recovery in which class
divisions and social inequality are widening.

This can be seen further in a list published Sunday by the New York
Times of the 30 highest-paid US corporate CEOs. Fully 10 of the 30
preside over firms that registered declines in revenue and net income
in 2009, yet recorded gains in total return—a measure linked to the
change in the company’s stock price. All but three of these CEOs saw
their compensation increase over 2008.

The “success” of these corporations, and of their chief executives,
was due overwhelmingly to cost-cutting measures that, even in the face
of reduced revenues and income, drove up the firms’ share value. This
provides a snapshot of the degree to which the “recovery” has been
based on ruthless downsizing, wage-cutting and speedup.

To give a few examples:

* The third highest-paid CEO, Ray R. Irani of Occidental Petroleum,
received $31.4 million, an increase of 39 percent. His firm suffered a
37 percent decline in revenue, a 57 percent decline in net income, but
a 38 percent increase in total return.

* Susan M. Ivey, number 27 on the list, got an 84 percent increase in
pay to $16.2 million. Her company, Reynolds American, recorded
declines in revenue and net income of 5 and 28 percent, respectively,
while its total return soared by 40 percent.

* Andrew N. Liveris of Dow Chemical, number 28 on the list, received
$15.7 million, a pay hike of 23 percent. His company’s revenue fell 22
percent, its net income fell 61 percent, but its total return jumped
87 percent.

Alongside cost-cutting and increased exploitation of labor, the
recovery has been sustained by government bailouts of the banks and a
virtually unlimited supply of cheap credit by central banks in the US
and around the world. This has driven up stock prices all out of
proportion to the state of the real economy and fueled even greater
speculative excesses than those which precipitated the 2008 financial
crash. Recent weeks, for example, have seen an explosive growth in the
junk bond market.

Far from resolving the underlying contradictions of world capitalism,
this plundering of public resources has intensified them. Massive,
structural imbalances in the global economy—particularly between
deficit countries, led by the US, and exporting, surplus countries,
led by China and Germany—have grown more pronounced.

Facing record levels of state debt and budget deficits, the US is
seeking to increase its exports at the expense of its rivals, but so
are all of the other major deficit countries, while surplus nations
such as China and Germany fiercely defend their export markets. At the
same time, the emptying of state treasuries to rescue the financial
elite has increased the pressure for draconian austerity measures to
reduce government outlays. This, in turn, can only further depress
consumption, making the competition between countries for export
markets all the more ferocious and increasing the likelihood of
outright trade and currency wars.

The Obama administration, which has pledged to double US exports in
five years, appears to be basing its economic strategy on driving down
American labor costs to the point where US manufacturing can be at
least partially revived as a cheap labor center for export abroad.

Under conditions of long-term mass unemployment, declining wages,
growing poverty, record personal bankruptcies and soaring home
foreclosures, the entire economy increasingly resembles a house of
cards. The revival of the housing market, which is key to any genuine
recovery, appears highly problematic with home foreclosures expected
to rise from 1.7 million in 2009 to 2.2 million this year.

For the working class, there is no real recovery within the framework
of the capitalist system. To avert ever more brutal conditions of
exploitation and poverty, it must organize its resistance on the basis
of a socialist, revolutionary and internationalist perspective.

Barry Grey

http://wsws.org/articles/2010/apr2010/pers-a07.shtml

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