Apogee of a Ringmaster

By David Stockman  |  November 1, 2018

Today’s pop up at the open makes it three days of gains, and now the Dow Jones Industrial Average has rallied more than 1,000 points off its intra-Monday low…

October is, by the numbers, one of the market’s more treacherous months, and the one we just finished extends that historical record.

Halloween did bring relatively few frights. But this so-far-so-smooth passage into November is about to get a little more bumpy.

And that’s just Tuesday’s midterms, this year’s edition of “The Most Important Election of Our (or Any Other) Time.”

It won’t “read” that way on Bubblevision’s political outlets, but this vote too will, ultimately, reflect what’s happened to Main Street during the past two decades.

Folks like Alan Greenspan – the “Maestro,” also the “Father of Bubble Finance” – and his fellow travelers call this the greatest time they’ve seen for the working American.

Well, there’s “data,” and the federal government has a lot of that.

And there’s also a “marketplace,” with many guises, one of which, folks, we’ll see in full flower on Tuesday… and, probably, Wednesday… and, perhaps, Thursday… even Friday…

“Power” is at stake, and “politics” is nothing but how we decide who wields it in a democracy.

Right now, the Donald – erstwhile “Great Disruptor” now doing a lot of empire’s work – is at the center of it.

That means it’ll be particularly ugly.

And it may take some time to sort results… ease tensions… call in the guard…

On Monday, the U.S. Labor Department reported that wages and salaries were up 3.1% during the third quarter. That’s the biggest surge in 10 years.

And it’s an illusion.

So is the 3.7% unemployment rate.

We might be seeing signs of pressure in the labor market – and, wow, only 100-odd months into the “recovery”…

But it’s more about what’s not there.

I’m talking about 16.6 million workers gone missing…

Let’s talk about “employment” and “unemployment” in terms most of us will better understand, actual hours worked.

Of course, many factors drive whether potential labor hours are not “filled.” Some of them are “staying home to raise kids,” “going to school,” and “…on the dole.”

At the same time – all things equal under today’s demographic and fiscal circumstances – we need to see this “comprehensive” unemployment rate dropping.

That’s the only way Uncle Sam will find the tax receipts to keep the Warfare State warfaring and the Welfare State welfaring and, at the same time, prevent complete societal breakdown…

And it’s not happening.

In December 2000, the “official,” “headline” unemployment rate was 3.7%.

At the time, there were 175.5 million adults age 20 to 69. That’s an “implied potential labor force” of 351 billion labor-hours per year.

That same month, the Bureau of Labor Statistics measured, on an annualized basis, 229.5 billion hours actually employed in the non-farm economy.

So, “unemployment” amounted to 121.5 billion hours, or 34.6% of the potential available hours.

Today, the “official,” “headline” unemployment rate is 3.7%.

The population of adults age 20 to 69 is 211.6 million. The “implied potential labor force” is, therefore, 423.2 billion labor-hours per year.

The federal government’s most recent measure shows 254.2 billion hours actually employed, or 169 billion unemployed labor-hours.

That’s a comprehensive unemployment rate of 40%.

Between these two 3.7% “official,” “headline” unemployment anchor points, the level of unemployed American labor has grown by 48 billion hours on an annual basis.

Potential labor grew by 72 billion hours. That’s a rate of 1.05% per year.

Actual “employed” hours rose by only 25 billion. That’s 0.58% per year.

During the 1980 to 2000 peak-to-peak periods, the potential labor force grew by 2.2% per year.

And labor hours actually utilized rose at a way-more-than-close-enough-for-government-work 1.9% annualized rate.

Folks, Fed policy broke the Main Street economy.

It was the Fed that created the incentives for Corporate America to off-shore high-value production and jobs…

It was the Fed that made it “efficient” for CEOs and CFOs to turn C-suites dens of predatory financial engineering…

And it was the Fed that gave us the Donald, “MAGA”, and whatever comes after Tuesday.

If You Need Your Money in the Next 5 Years…

America is at a crossroads. The middle class is disappearing… government spending is out of control… and the implosion of Bubble Finance will cause the greatest market crash in history. So, if… Read More
David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR