Contraction in production grinds away on workers

BY BRIAN WILLIAMS

“Robust Jobs Report All But Guarantees Fed Will Raise Rates,” headlined the New York Times, describing the Labor Department’s November report that official unemployment is holding at 5 percent. “November Jobs Report Points to U.S. Economy’s Health,” echoed the Atlantic.

But for the working class, the reality is grinding depression conditions. Factory production is contracting, real wages are stagnant, millions are unemployed, many working people can only get part-time or temporary work, and bosses are demanding two-tier wage deals in steel, auto and other basic industry. These conditions are rooted in the ongoing capitalist economic crisis marked by declining production and trade worldwide.

In November U.S. factory production fell to its lowest level since June 2009, the first month the economy began a “recovery” after a 16-month steep economic downturn. New factory orders dropped to their lowest level in three years and inventories contracted for the fifth straight month.

U.S. exports have declined for the last six months and in October they fell to the lowest level in three years. Orders for trucks designed to transport factory goods fell to a five-year low in November.

The crisis is worldwide. Manufacturing in China, the world’s second largest economy, fell to its lowest level in more than three years last month. In Brazil, the largest economy in Latin America, the gross domestic product fell by a record 4.5 percent in the third-quarter, “its worst recession since the Great Depression,” reported the Financial Times. Bourgeois commentators had ballyhooed Brazil as a model “emerging economy” success story just a year ago.

Workers in the U.S. mining sector have been hard hit, as coal, iron ore and other mining bosses have eliminated 123,000 jobs this year. With plummeting oil prices, Schlumberger, the biggest oil service company worldwide, has laid off more than 20,000 workers since January. Oil firm Baker Hughes has cut more than 16,000 jobs, and Halliburton some 18,000.

Big-box retailers are not immune. Macy’s plans to close 35 to 40 stores next year, joining J.C. Penney Co. and Abercrombie & Fitch Co., who announced cutbacks earlier this year.

Increasing numbers of new jobs are being filled by temporary workers hired through contract agencies at lower pay and with few benefits. In addition, millions of people government statisticians list as being employed are workers who have had to settle for part-time hours. The number of workers whose hours were cut back or couldn’t find a full-time job rose by 319,000 to 6.1 million last month.

The labor force participation rate —the portion of the working-age population that is employed or on the unemployed rolls “actively” looking for work — was 62.5 percent in November, stuck at a 38-year low. More than 2 million additional workers have been unceremoniously eliminated from being counted as part of the workforce over the last year.

Declining take-home pay

While average wages have risen 2.3 percent this year, the government’s core inflation rate eats most of this up, and it doesn’t even include food and fuel costs. In the real world, workers can buy less today.

One area where higher wages are being won is among fast-food, Walmart and other retail workers, contract workers at many airlines and others fighting for $15 an hour.

The bosses claim this will lead to higher prices. But wage increases instead cut into bosses’ profits. “Wages Up, Prices Low,” noted a Dec. 2 New York Times report on wage increases to workers at Shake Shack and other restaurants. “The behavior we’re seeing out of major restaurant chains,” the Times says, is a sign “that worker compensation will gain at the expense of corporate profits.”

Years of government “stimulus” measures and the slashing of interest rates to nearly zero since 2008 — something Federal Reserve Bank officials say may end in light of recent economic news — have proven incapable of reversing the capitalist crisis. Declining profit margins mean bosses aren’t investing in hiring workers and expanding productive capacity.

“Spending on mining and oil-field equipment fell 46% from a year earlier in the third quarter,” reported the Wall Street Journal. “Outlays on railroad equipment, to move the oil, fell even more sharply. Spending on farm tractors declined 42%.”

Companies instead either sit on their money or, if they’re less “risk averse,” speculate in paper “assets” — from stocks to derivatives to hedge funds to bonds in every corner of the world.

Speculators seeking higher profits have invested trillions in stocks, bonds and government enterprises throughout semicolonial countries in Asia, Latin America and Africa. Corporate debt in these countries has risen fivefold over the past decade, totaling $23.7 trillion in early 2015, much of which is unpayable. Defaults are threatened from Puerto Rico to Ukraine as almost $600 billion of debt comes due next year.

Speculators face problems. Junk bonds “are headed for their first annual loss” since 2008, reported the Journal. Investors have ploughed $1.3 trillion into these bonds, which yield high interest rates to offset the risky financial conditions of these companies. Energy junk bonds declined 14 percent this year and heavy industry by 15 percent, while buying these bonds in restaurants and gambling is up.

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