MAINE LABOR UPDATE
September 18, 2007
 
Please Forward to Working Families
 

FROM THE PRESIDENT'S DESK
Ed Gorham
President
Maine AFL-CIO

 GRIM AUGUST JOB DECLINE SENDS ECONOMIC SHOCK WAVE 

AFL-CIO Calls Job Loss "Alarming"
Burst Housing Bubble Threatens More Job Loss

The number of American jobs declined by 4,000 last month and sent shock waves through the nation's economy - in part because this was the first monthly job decline in four years and in part because economists had forecast a growth of 110,000 new jobs for August - not a decline.

Economists put the blame on the bursting of the U.S. housing bubble, caused in part by the years of sub-prime predatory mortgages, and the related credit crunch. Over the last two years, many of the low "teaser" interest rates on new house mortgages have been expiring and the interest rates have risen sharply - driving up mortgage payments and causing foreclosures.

According to the Mortgage Bankers Association in the first quarter of 2007 almost 14 percent of adjustable rate subprime mortgage payers nationwide were delinquent in payments.

Maine also saw a big jump in delinquent payments on adjustable subprime mortgages from 9.5 percent delinquent in the first quarter of 2005 to 16.2 percent delinquent in the first quarter of 2007. Foreclosures on homes with this type of subprime mortage more than tripled from 1.1 percent to 3.5 percent in the same period.

Stock Prices Down
The burst housing bubble has caused stock prices to bounce around like ping pong balls and go into a general decline.

To make bad news worse the Labor Department slashed it previous estimates of job growth in June and July by 81,000 jobs - down from the 218,000 new jobs that had been previously reported.

While stocks in the last year or more have been on an upward track (along with multi-million dollar increases in executive pay) the number of new jobs has been flat. Our national population now is over 300,000 million persons and our nation needs about 150,000 new jobs every month to match the continuing growth in this population. This is seldom, if ever, made clear when the media reports monthly on job growth.

Total Job Growth Flat
The Bush Administration hides this basic fact by crowing each month about "job growth." Looking at the August report the Administration pushed it aside by stating that the American economy is strong and in the last 12 months "created 1.6 million new jobs." But, if one multiplies 150,000 by 12 months, it is clear that the American economy needed 1.8 million new jobs just to match population growth. We needed 1.8 million jobs just to stay in the same place and we fell 200,000 jobs short.

Since Bush first took office the U.S. Department of Labor reports that there has been an average of only 72,000 new jobs a month created. This is less than half the new jobs needed just to keep up with population growth - just to stay in the same place. This is the worst job creating record since President Herbert Hoover and the Great Depression.

While the Bush White House white washed the economic and jobs picture, impartial economists saw the decline of 4,000 jobs as the warning of a recession. One economist put the risk of recession at 50 percent - up from 25 percent as recently as last June.

White House Covers Up
To help in the cover up the White House noted that the rate of unemployment stands fairly steady at 4.6 percent in August. However, like the job growth figure this too is deceiving since hundreds of thousands of workers are so discouraged about the job market that they have stopped looking for work. The unemployment rate does not include this huge group of unemployed. Also it calls "a job a job" no matter the rate of pay or the number of hours. A mill worker that goes from $45,000 or more a year with full benefits to $8 an hour at WalMart with no benefits is still counted as "employed."

The rosy picture painted by President Bush didn't fool very many people. Working families know how hard it is to just get by and they know how hard it is to find a new job with good pay and benefits.

NAM Calls Job Loss "Grim"

And, while it only happens once in a Blue Moon, the AFL-CIO and the National Association of Manufacturers agreed that the August decline of 4,000 jobs was more than just a dark cloud on the economic horizon. The AFL-CIO called the decline "alarming" and the NAM labeled the news "grim" noting that 46,000 jobs were lost in August just in the manufacturing sector alone. While a few sectors gained jobs, the biggest August job losses were concentrated in construction, manufacturing and transportation.

And this is nothing new. According to the U.S. Department of Labor between January 2001 and July 2007 the nation lost 3.1 million manufacturing jobs. During the same period Maine lost 18,400 manufacturing jobs.

As the Dean Baker Director of the Center for Economic Policy and Research points out, "Healthy economies do not shed jobs."

During the core periods of the upturns in the eighties and nineties, there were three months in which the economy lost jobs. In two of these, the loss was attributable to major strikes. (The jobs of striking workers are not counted in the survey.) That leaves a grand total of one month in more than twelve years of recovery in which the economy lost jobs.

Housing Market "Convulsion"
Baker notes that not just sub-prime mortgages but actually some 40 percent of the total housing market has gone in a "convulsion" with the prices of all houses falling and an increasing number of homes coming on the market in a downward price spiral as more and more families are forced into foreclosure.

This collapsing housing market is also impacting the job market. The job loss will first show up in the housing-related sectors, he said. More than 50,000 layoffs have already been announced in the mortgage banking industry. This job loss has not shown up yet in the jobs data, since these workers were still employed when the August survey was taken.

Tip of the Iceberg
The housing sector is just the tip of the iceberg. The housing bubble created more than $7 trillion in housing wealth. Homeowners have used this bubble wealth to support a surge in consumption over the last five years, pushing the saving rate to near zero. They borrowed against their home equity to pay for vacations, new cars, or just to meet necessary expenses. As this bubble wealth disappears, consumption of all forms will be cut back, slowing growth and leading to more job losses.

Obviously Iraq dominates the media but, as we face an election year and begin to evaluate the candidates for president and Congress we need also to keep in mind the questions of working families focused on a few days ago by Jesse Jackson  who noted that another set of concerns dominate the discussions Americans are having around their kitchen tables. Can we keep the house? How do we pay these college bills? What are we going to retire on? What happens when the plant shuts down and my job gets shipped abroad? Can I afford the operation I need? How do we get on top of these credit card payments? What happens if Mom gets weak and needs assisted living?

GOP Agenda Hurts Workers
The Republican agenda of tax cuts for the wealthy, big military budgets, deregulation, privatization, trade policies favoring corporations, exporting jobs and slashing needed domestic programs (such as child health care) is what has put America’s working and poor families in what the AFL-CIO calls “the box.” It’s why wages aren’t going up, even when the economy is growing and unemployment is relatively low.

 

Corporations use the threat of competition abroad to bust unions and frustrate wage demands. Workers are forced to pay more and more for basic health insurance (if they have it at all) and for any retirement savings. Corporate trade policies make outsourcing more attractive. Public investment in education and training doesn’t keep up. Spending on affordable housing gets decimated. Perverse policies combined with vicious corporate campaigns virtually eliminate the ability of workers to organize in the workplace.

Record High Inequality
The result is that the wealthiest 10 percent of Americans capture all the gains of the increased profits and productivity. Corporate profits soar to record highs while workers’ share of the revenue they help to produce declines. We are now witnessing the greatest income inequality since the Gilded Age of robber barons at the beginning of the 20th century. The top 1 percent of Americans make about as much as the poorest 50 percent. This isn’t working.

In the months ahead we desperately need to focus on ways to change the system and elect those to office who will both recognize the need for change and fight to make it happen.