In hopes of spurring economic growth, the Federal Reserve by the end of 2008 slashed interest rates to zero to make it cheaper for companies to borrow funds to boost production and hire workers. But under conditions of an economic slowdown it has not been profitable for the great majority of bosses to invest in production. Instead, they’ve accumulated hoards of cash reserves or sought higher returns through investing in stocks or other forms of speculative bets on values of commercial paper. Stock prices, for example, have reached new heights, but they’re “near record levels of overvaluation,” Richard Russell wrote in Dow Theory Letters July 7.
The government has also tried unsuccessfully to stimulate the economy through “quantitative easing,” where the Fed began buying billions of dollars of mortgage-backed securities from banks and $85 billion of government bonds monthly. This giant money-printing operation has in real terms lowered federal interests rates to near negative 3 percent, Matthew Kerkhoff wrote in the July 9 issue of the Letters, having the biggest impact on workers with the lowest wages and through inflation whittling away at any savings accounts they’ve been able to accumulate.
“Negative real rates amounts to the Fed imposing a regressive tax on the poor although it lacks the authority to collect taxes,” writes financial analyst Charles Gave July 8. This is compounded by rising prices of rent, food and energy on which increasing amounts of workers’ wages are spent. Gave created what he calls a “Walmart CPI,” which measures the increase in these three categories, which official Consumer Price Index figures ignore. Since 2000 there has been more than a 15 percent increase in the Walmart CPI compared to standard U.S. CPI, he notes.
Facing massive government and corporate debt balloons, the Fed through its quantitative easing scheme has transferred to its coffers $3 trillion of these “assets” over the past five years. The capitalist rulers hope that given enough time, they can deleverage and eliminate this debt, eventually laying the basis for a new period of growth. But their hopes rest on the assumption that the working class will not resist stepped-up attacks by the bosses and their government.
Since the beginning of the year the Federal Reserve has gradually been reducing its monthly government bond purchases and announced July 9 that it will halt the quantitative easing program in October. But it has no plans to raise the interest rates, Federal Reserve Chairwoman Janet Yellen said in her semiannual report to Congress July 15.
Shrinking workforceWhile official unemployment has steadily declined over the past several years from 10 percent to 6.1 percent last month, these figures are the result of government statisticians continually shrinking the pool of people considered “part of the workforce.” Over the past six and a half years more than 13 million workers have been eliminated from the workforce count.
The percentage of the population with a job dropped from 63.3 percent in January 2007 to below 59 percent by September 2009, and it has hovered around this figure for the past five years. In June it was 59 percent.
The government reported that 288,000 jobs were created last month, but 275,000 of them were part time, raising to 7.5 million those wanting full-time jobs who are forced to accept reduced hours.
Some spokespersons for the U.S. rulers admit that this lack of recovery in jobs following the 2008-2009 recession is unlike any that occurred after previous recessions. Former U.S. Treasury Secretary Lawrence Summers in a speech last November referred to this economic crisis as “secular stagnation,” noting that it will last over a long drawn-out period. Some describe this as “the new normal.” One aspect of this is the drive by the bosses to increase production with fewer workers through imposing faster line speeds and cutting corners, sharply eroding safety on the job. It took nearly six years before industrial production reached pre-recession levels last October — since then it has risen by a total of 4 percent through June — with 1.6 million fewer manufacturing jobs since the recession.
While these figures underline the success the bosses have had in driving down the living standards of working people, they also point to the ability of employers to do some hiring and openings for workers to press for higher wages.
The bosses seek to promote divisions among workers born in the U.S. and immigrant workers in order to lower wage levels for all workers. A recent survey by the Center for Immigration Studies reports that from 2000 to the first quarter of 2014 employment of immigrants accounted for the net growth in U.S. jobs. The number of U.S.-born workers with jobs remained virtually unchanged over these years — 114.8 million in 2000 and 114.7 million in 2014 — while the working-age population in this period grew by 17 million.
The employment rate of working-age immigrants has increased since 2000, rising by 43 percent since 2010, the report said. But most of these jobs are at lowest pay. Over the past year such jobs in food services, retail and temporary help accounted for more than 40 percent of new jobs.
Front page (for this issue) | Home | Text-version home