Meanwhile, back at the US ranch, the economy is still the biggest issue on the minds of voters, or so we think, anyway. If so, the middle class got some bad news yesterday from the Census Bureau — they earn a lower percentage of overall income than ever:
The middle class lost ground again last year, falling to an all-time low in their share of how much income they take in, new census data released Wednesday showed.
People with incomes between $20,263 and $62,434 collectively earned less than 24 percent of all income in 2011, even though they made up 40 percent of the population. The dip was part of a long, steady decline dating back to at least the 1960s, when the middle class shared 29 percent of all income.
In contrast, the census data shows, the bottom fifth held its own as the poverty level flattened out, while the top fifth increased its share to half of all income. The top 5 percent gained the most income, rising almost 5 percent in a single year.
“This is a huge drop,” said Tim Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin in Madison. “It’s the working class. Their pay rate has gone down, the number of hours that everyone in the house works has gone down, their homes have lost value. These are the people really ravaged by the recession.”
Now why might that be? Perhaps this comes from a reluctance of those holding capital to engage in risk-taking ventures, which produce growth and jobs. Instead of reinvesting their capital and taking losses with the hope that they will earn a significant return on their investment in the long term while they build demand, those holding capital are waiting until demand presents itself before engaging in any risk at all. That holds down the distribution of capital, retards economic growth, and leads to the decline of the middle class, which depends on risk takers to provide employment.
The only way to reverse this trend is to get capital back into risk-engagement ventures. However, the current regulatory and tax environment in the US is so opaque and ambiguous that there is no way to rationally estimate costs past the next year for such efforts — and perhaps not even that long as we approach Taxmageddon with no solution in sight. We need to eliminate the ambiguities, stop trying gimmicky short-term tax tricks, and accomplish real long-term tax and regulatory reform. Only then will investors be able to price the risk and put capital in play, generating demand rather than waiting for it to materialize, and restart the engines of real economic growth.
Otherwise, we will continue to see weekly jobless claims reports with “unexpected” small increases:
In the week ending September 8, the advance figure for seasonally adjusted initial claims was 382,000, an increase of 15,000 from the previous week’s revised figure of 367,000. The 4-week moving average was 375,000, an increase of 3,250 from the previous week’s revised average of 371,750.
The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending September 1, unchanged from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending September 1 was 3,283,000, a decrease of 49,000 from the preceding week’s revised level of 3,332,000. The 4-week moving average was 3,316,500, a decrease of 7,500 from the preceding week’s revised average of 3,324,000.
I expected to see a decline in the report, since Labor Day would have shortened the reporting week to four days. The jump upward may be hiding a slightly worse level of new unemployment, but it’s still all within the now-consistent 360-385K range we’ve seen for over a year. Still, it got the attention of economists, who were expecting something significantly less, as Reuters reports:
The number of Americans filing new claims for jobless benefits rose more than expected last week, with several states reporting an increase related to Tropical Storm Isaac.
In a separate report, a sharp rise in gasoline costs drove up wholesale prices last month by the most in more than three years. But outside energy and food, price gains were mild. …
A Labor Department official said Tropical Storm Isaac, which drenched parts of the country, accounted for about 9,000 of the claims filed last week. The number is unadjusted.
But even accounting for the storm, the report suggested little improvement in the labor market after job growth slowed sharply in August. The four-week moving average for new claims, a better measure of labor market trends, climbed 3,250 to 375,000, the highest since the middle of July.
The labor market isn’t improving. It hasn’t been improving at all since the recession ended. We have added an average of less than 85,000 jobs per month in the private sector for a population that requires 130,000 or more jobs a month just to keep up. We are falling behind, thanks to the stagnation economics of the Obama administration. We are literally worse off than we were four years ago, and three years ago at the beginning of the recovery, in both jobs and income. The middle class squeeze is the inevitable result.
Update: Investors Business Daily says this puts a fork in Obamanomics:
If President Obama had run in 2008 promising to cut family incomes, shove more people into poverty, create greater inequality and make people more dependent on the federal government — and that black Americans would fare worse than everyone else — would he have won that election?
Well, the latest Census Bureau report shows that these are precisely the results Obama has delivered since taking office. ….
You might try to blame these lousy numbers on the recession that started under Bush.
Except for the fact that the recession ended five months after Obama took office, and all these dire results occurred during Obama’s “recovery,” when his policies were in full effect.
Any wonder President Obama wants this to be a “choice” election, rather than a referendum on his record?