Vol. 79/No. 16 May 4, 2015
U.S. industrial production fell in the first three months of the year, the first quarterly decrease since the last recession ended in June 2009.
Some economists had pointed to the post-recession increase in manufacturing output as an indication that the U.S. economy was on the road to recovery. Yet it wasn’t until October 2013 that industrial production reached pre-recession levels. Since then it has risen by an additional 5 percent, but with 1.4 million fewer manufacturing jobs today than in December 2007. In other words, the bosses increased output with fewer workers, largely by imposing speedup that eroded safety on the job.
The Federal Reserve Bank reported April 15 that industrial production dropped 0.6 percent in March, the biggest single monthly decline in more than two and a half years. The drilling of new oil and gas wells declined 17.7 percent. Automobile production rose 3 percent, but that didn’t compensate for the general downward trend.
One reflection of the slowdown is the drop in the utilization of industrial capacity to 78.4 percent last month, compared to the 80.1 percent average since 1972.
The massive expansion of fracking in North Dakota and elsewhere nearly doubled U.S. oil production from 2008 to 2014, to 9.3 million barrels a day. But over the past year oil prices have declined 50 percent. As a result, the oil barons are cutting back. Rigs actively drilling new oil wells fell to 760 in mid-April, less than half the number in October. Output in North Dakota declined in February for the second month in a row.
Schlumberger Ltd., the world’s largest oil fields service company, has cut 20,000 jobs since the end of last year.
China’s economy is also losing steam, dashing the illusions of layers of capitalist rulers in the U.S. and other imperialist countries that an eternal “Chinese miracle” would prop up world trade and production. Beijing’s economy still grew in the first quarter of 2015, but at the lowest rate since the beginning of 2009.
Capitalists have no answer to crisis
The capitalist rulers have no answer to the economic crisis except fiddling with monetary “stimulus” measures, which have little effect. Since the end of 2008 the Federal Reserve has kept interest rates near zero. For nearly six years through last October it bought up a total of $3 trillion in government bonds and worthless mortgage-backed securities from banks — essentially a massive money-printing operation.Similar stimulus measures were recently launched in the 19-country eurozone, with the European Central Bank set to purchase more than $1.1 trillion in government bonds by September 2016.
Central government banks claim these steps encourage companies to hire more workers and increase production. But that’s not what’s happening.
Nonetheless, U.S. stock prices have tripled over the last six years.
Time magazine notes in its April 6 issue what it calls a “troubling truth,” that “sales growth is trailing well behind earnings growth.” Companies have higher profits and stock prices “not because the economy is booming and they are selling more stuff but because they have cut costs, kept salaries flat and not invested in new factories or research and development.”
Instead, they’re sitting on hoards of cash or seeking higher returns through speculation in stocks, bonds and derivatives, which creates no new wealth, just increases paper values. CNN reported March 20 that U.S. corporations are holding onto a record-high of $1.4 trillion in cash, unwilling to invest it in production or hiring.
In his Feb. 9 newsletter to investors, financial analyst John Hussman referred to the huge jump in stock prices over the last half decade as “the excruciating tendency for the market to advance despite overvalued, overbought, overbullish syndromes.”
The capitalists are “periodically seized by fits of giddiness in which they try to accomplish the money-making without the mediation of the production process,” Frederick Engels wrote more than 100 years ago, in a note in Karl Marx’s Capital. Sooner or later the bubble will burst.
The percentage of the population with a job was 59.3 percent in March for the third consecutive month, little changed since 2009. Prior to the recession it was 63.3 percent. Some 6.7 million people with jobs want to work full time, but can only get part-time work.
According to the Bureau of Labor Statistics, 126,000 jobs were created in March. While hiring in manufacturing is down, jobs in food services, hospitality and retail are up. Pay for these jobs hovers around minimum wage, and many are part-time. The combination of more jobs at low wages has the contradictory effect of giving workers more confidence as well as helping to fuel the fight for a $15 an hour minimum wage and a union, which is expanding and winning increasing support among other workers.
Front page (for this issue) | Home | Text-version home