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Middle Class Becoming the New Poor as Job Losses Mount

Mac Slavo
February 23rd, 2010
SHTFplan.com
Comments (10)

The American dream is becoming a nightmare for millions across the country as job losses continue to mount, unemployment runs out and new job creation is simply not happening.

Millions are facing unemployment for years to come:

Twice, Ms. Eisen exhausted her unemployment benefits before her check was restored by a federal extension. Last week, her check ran out again. She and her husband now settle their bills with only his $1,595 monthly disability check. The rent on their apartment is $1,380.

“We’re looking at the very real possibility of being homeless,” she said.

Every downturn pushes some people out of the middle class before the economy resumes expanding. Most recover. Many prosper. But some economists worry that this time could be different. An unusual constellation of forces – some embedded in the modern-day economy, others unique to this wrenching recession – might make it especially difficult for those out of work to find their way back to their middle-class lives.

Labor experts say the economy needs 100,000 new jobs a month just to absorb entrants to the labor force. With more than 15 million people officially jobless, even a vigorous recovery is likely to leave an enormous number out of work for years.

Some labor experts note that severe economic downturns are generally followed by powerful expansions, suggesting that aggressive hiring will soon resume. But doubts remain about whether such hiring can last long enough to absorb anywhere close to the millions of unemployed.

Ms. Eisen is certainly not alone. While the government officially reports that unemployment is under 10%, the fuzzy math in this figure doesn’t take into account a host of factors including those that are working part-time but can’t find full time work, those that have given up looking, and those that have already exhausted their state and federal unemployment benefits. The real unemployment number is closer to 22%.

In the past, recessions have lead to job creation and aggressive growth because of technological innovation. The 1990’s and early 2000’s saw recessionary periods that were followed by booms, but those booms were caused by the internet revolution. Today we have no such technological advancements on the horizons.

In what sectors, save government, will new jobs be created going forward? Just about all of our manufacturing and even simple jobs like customer service have been exported outside of the United States. And because American-based businesses want to remain competitive, they simply cannot bring those jobs back to the USA for a number of reasons including labor costs, mandated health insurance (Medicaid, Medicare) payments, and retirement savings (Social Security) payments they must make for each employee.

Thus, unless we see a new technological revolution in the coming years, there will be no jobs to be had.

The economy must create 100,000 jobs per month just so our unemployment rate stays at current levels. Instead, we are losing hundreds of thousands of jobs per month.

We will continue to see more unemployed in America for years, perhaps decades to come.

We would not be at all surprised to see the “official” figures at 15% – 20% in the future, with the unofficial numbers closer to the 30% mark, with somewhere in the area of one in three Americans being unemployed.

It is not going to be pretty.

This is a depression, not a recession or recovery.

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Author: Mac Slavo
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Date: February 23rd, 2010
Website: www.SHTFplan.com

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10 Comments...

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  1. Chris C. says:

    You said it Mac.

    We need to add just 100,000 workers to the roll every month to keep up with population. Yet magically we can have the unemployment rate go down with still a net loss (can’t get into that here).

    The majority of our manufacturing base has been exported to cheaper labor markets (aka China, Vietnam, Thailand). These jobs are NEVER COMING BACK exactly for the reasons you cite. I’ll go out on a limb and forecast exactly when jobs will be coming back. When our labor is cheap enough to compete. What will we look like as a country by that time? Most you can imagine.

    As you correctly point out there is no next big thing to pull us out of this and put millions of people back to work. The 90’s had the internet revolution and computing. What do we have now? Iphones? LOL

    This is a story of death by a thousand cuts. The number of unemployed will continue to grow (but the official government statistics will continue to mask the enormity of the problem due to the way they calculate unemployment), those who still have unemployment will face steeper taxes, more fees, reduced credit, no pay raises and/or pay cuts, and higher food and energy prices.

    And you know what my favorite thing in all of this is? The TARP money gives the banks financial incentive to kick folks out of their homes since they can not only repossess the home but also:

    1) make a firesale purchase at foreclosure (since they are usually the only ones bidding on these properties) but ALSO
    2) claim the difference in foreclosure sale price and original loan amount as insurance loss to the TARP (thereby getting reimbursed for that amount) AND THEN
    3) sell the house again at a much lower price than the original loan amount, but still higher than their foreclosure bid, making the entire process one gigantic

    PONZI SCHEME

    All this on top of taking these people’s money for years and then leaving them with nothing after foreclosing on them. Question, if interest is paid on a loan as insurance against possible debt default, why pay it at all if the Federal Government is going to backstop that loss with its own insurance? See how the banks can’t lose? WTF does anyone pay PMI for?

    My heart really goes out to the elderly and those on fixed incomes. I fear many of you will die in the next 5 years.

    The only thing that stops me from cutting myself now is I can’t give those bastards the satisfaction that they’ve won.

  2. Great comment Chris!

    iPhones….LOL…. made in China!

    As you mentioned, the only way we are going to compete is if we can compete on wages, and until people are willing to work for today’s equivalent of $2 a day, that’s not going to happen.

    I can see great things happening in alternative energy (zero point type stuff, or something else we haven’t figured out how to harness efficiently yet) and medicine (stem cells, regeneration tech) but the big problem, as always, is that government is sticking their nose into these sectors — which means more taxes and more regulation, which means no real free market, which means that is probably dead in the water unless something changes.

    It is truly sad to envision what is going to happen to those on fixed income or those close to retirement who had hoped their 401K’s and IRA’s would be there…. I couldn’t imagine working 40 years only to find out I am essentially broke because the money I  saved was wiped out in a market crash or has lost 80% of its buying power.

    The very people who claim to be saving us are the ones destroying us. It’s a sad state of affairs.

  3. BleakoEcobamics says:

    Chris, I agree — good observations.  The only point I would make is that we actually DO manufacture a lot, believe it or not.  We account for the largest manufacturing output in the world at $1.8T.  But most are not things that you see as a consumer, which is what leads I think to the perception we don’t “make stuff” anymore.  The big problem is that technology has displaced more jobs, we’ve gone from 20% to 10% of our workforce in manufacturing in a matter of decades.  Even if we did bring back all the poison junk the Chinese make, it still wouldn’t get us back to 20%. 

    But I agree on the rest.  What a mess. 

    Thanks Mac & Chris for your insights.

  4. Tony says:

    The difference between now and the Great Depression of the 1930’/40’s is that there will be no manufacturing boom to save us. World War II brought about the largest manufacturing boom in our country’s history which created jobs galore. This time around we are already involved in several war fronts. An even larger scale war than we are in now wouldnt even impact manufacturing that much given the modern day technologies we have in manufacturing. I just dont know how this is going to play out. I honestly see know a crash or “start over” as the only option.

  5. Scott says:

    Yes we have lost manufacturing jobs and no they will not come back by us competing worldwide for them, we can not compete cost/ labor wise,  Americans will not lower there standard of living to that degree.

    Now what we can do is change the 2 things that got us in this mess in the first place.  #1 is that we as Americans need to quit cutting our own throats bu buying the cheapest crap made, Buy American for starters.  #2 Tariff, Tariff, Tariff, we are killing ourselves here when we make it law that an American company can’t compete with another Country, Americans should be first.

    I understand why companies outsource, because if you don’t you go out of business it is that simple, in this country we have regulations, laws and rules that we have to follow, The rest of the world done not, now how is that fair. Until we tariff imports or hold these imported products to the same standard that our own products have to endure we will continue to bleed jobs and our manufacturing base.

  6. Burrow Owl says:

    Tariffs are not the answer- they simply add one more roadblock to free trade while raising the price of goods here at home.
    The real answer is to remove all of those regulations, rules, bureaucracies, and taxes that are currently handicapping our ability to compete with the rest of the world.
    You want to see growth?
    Scrap our current tax code in its entirety, replace it with a simple sales tax permanently capped at no more than 5%, and abolish every government agency which is not specifically mentioned in the Constitution.

  7. Steve says:

    If I could change one thing it would be a 300% tariff on goods imported into the country.  Even by American companies.  If it isn’t made here it gets a large tariff.  The Companies don’t care about this country one bit, so I won’t cry for them.  We are the largest consumer market in the world.  Perhaps we ought to act like it.

    If a bully try’s to take your food, why give him more?  Smack him and don’t give him any.

  8. Manos says:

    Hi guys
    My name is Manos and i”m writing from the collapsing Greece.
    When i was studying at the University of Maryland 10 years ago, most of my business teachers were fond of the “miracle” of outsourcing. Most companies were closing down facilities and transfering jobs to India or Malaysia or wherever.
    My main question back then was, what would happen to the thousands of middle aged unemployed Americans.
    Nobody answered though because there was no answer actually.
    No brilliant mind had predicted what was about to follow.
    As Steve says, pile up taxes to imported goods. It’s the only way to protect local industry. Hire people again.
    Above all: Freeze or eliminate loans. If the average American has the house security, he will be able to survive by any means. Unless the new order WANTS us homeless for their own reason.
    My country is f….up.  Don’t let them do it to your country.

  9. Smack MacDougal says:

    The clearest way to explain employment is to focus on the ratio of those working full-time to those between the ages of 18 and 62.5 and giving this a name, say “the workforce”
    If say, the defined ratio above calculates to 38%, then it’s far easier for Americans to see that only 38% of the workforce is working.
    Trying to figure out the unemployed by crying over part-time vs no-time workers is futile and amounts to politics, not economics.
     
     
     
     

  10. Aristides says:

    The rest of you may find it hard to believe, but a mere four decades ago, your fellow Americans made virtually all the products you bought. Our televisions, sound reproduction equipment, toasters, irons, clothes, bed sheets, clothes, hand and power tools, washing machines and clothes dryers, dish washers, motor vehicles, even our tooth brushes, were all made in America. Of course, consumer goods cost more back in those days.

    When I put a true HiFi stereo system together in 1967, I had to save up from a summer job between college semesters to do so. Even though I bought the cheapest amplifier, which was still true HiFi and which I had to assemble from a kit to get the lowest price, it would cost over $1,100 in today’s dollars. Why would anyone want to pay that much for a kit they have to assemble, when they can get an amplifier made by Chinese slaves for less than $200?

    People may have had to save up for the things they wanted back then, but they never wanted for work. Finding work back in those days was easy. You just scanned the newspaper job ads, or went to the state run job bank, or went door to door and filled out an application. I was never out of work for more a few weeks before I was hired again.

    The free trade sycophants repeat over and over that “the consumer benefits” from the cheap prices from having wage slaves build our consumer goods. But how good a bargain is that when your fellow Americans lose their exported jobs and those of us who continue to earn income must pony up to support those who are jobless? In addition, some things, like health care, cannot be imported, so the cost of those services will remain high by comparison to imported consumer goods. No one has figured out how to manufacture a home in China and plop it down in a lot in America, so the cost of housing will remain high by comparison to imported consumer goods. How will Americans be able to afford housing and health care when the mass of unemployed depresses wages for all of us?

    Americans can have cheap consumer goods by having slaves build them, or they can have good paying jobs, but they can’t have both. American workers are being sold into slavery by the ruling class of America, who are recouping all the concessions they have had to make to American workers over the decades. America is in the process of transforming into a kind of feudal society in which a few filthy rich will rule over a vast, wretched poor.

    Most pathetic of all is that Americans have cooperated in cutting their own throat by rejoicing in all the cheap consumer goods foreign slaves make for them so they can indulge themselves in more of them, much in the way a drug addict can’t wait for his next “fix”. It is high time to reconsider the “T” word, unless Americans really want to put that slave collar around their neck!