Wall Street Still Near Full-Employment: How Can That Be?

Unemployment rose to 9.5 percent of the workforce according to the BLS. But, the effective jobless rate is 18.7 percent, if we use more exacting data formulated by Leo Hindery, chair of the Smart Globalization Initiative at the New America Foundation, with more than 30 million of us out of work or forced into part time work because of the lack of jobs.

We got into this mess because of a gigantic failed experiment that began in the late 1970s. The idea was to deregulate the financial sector and cut taxes on the super-wealthy. The sales pitch in favor of these changes was that we'd create an investment boom and improve jobs and incomes for everyone. Part of the experiment worked: Money gushed to the top fraction of one percent and certain kinds of investing did increase. But average wages after inflation actually declined so that today they are 18 percent lower in buying power than in 1973.

Instead of creating more and more investments in the real economy--the kind of investments that actually promote improvements in living standards--the money accumulated by the super-rich flowed into Wall Street and fueled an enormous fantasy finance bubble. Wall Street created synthetic derivative securities, often based on junk debt, that sucked up the wealth and added little or nothing to the real economy. But the bubble made Wall Street filthy rich. When markets finally realized how hollow the bubble was, prices collapsed and the banking sector froze. The real economy was starved for credit and pushed into a free-fall unseen since the 1930s. (See The Looting of America).

Not only did all boats fail to rise on the way up, but all boats are not sinking as fast on the way down. Contrary to media portrayals, Wall Street is still doing quite well compared to other sectors. We all know about the million-dollar bonuses financial management is paying itself out of taxpayer bailouts, but also consider the unemployment situation. According to the latest BLS data, the unemployment rate for "Financial Activities" was only 5.5 percent--that's the kind of unemployment rate most of us associate with boom times, not deep recessions. Meanwhile, construction workers face a 17.4 percent unemployment rate (and this is the building season), while 12.6 percent of all manufacturing workers were out of jobs. Even the "information" sector is suffering with a 11.1 percent unemployment rate. (Table A-11, http://www.bls.gov/news.release/pdf/empsit.pdf)

So why hasn't the crash devastated employment in the financial sector? One big reason is that we put the entire sector on welfare. We pumped in several trillion dollars of cash and asset guarantees to keep the entire sector afloat. You would think Wall Street would be thanking us all for taking the hit while they roll along. Nope. Instead they are doing all they can to gut each and every regulation that might protect us against their fantasy finance schemes. They are even mounting a full scale attack (using our resources) against the proposed Financial Consumer Protection Agency. (See "Redefining Chutzpah: Wall Street Uses Bailout Money to Kill Financial Consumer Protection Agency" at http://www.huffingtonpost.com/les-leopold/redefining-chutzpah-wall_b_224493.html)

When you step back and look at the arc of this, it makes you wonder about what our nation has become. We give the financial sector the keys to our economy, and they literally crash it so badly that we start to slide into a depression. Our real economy collapses and nearly 30 million workers suffer joblessness to greater and lesser degrees. We then are forced to bail out the financial sector and they are spared not just the worst of the suffering, but almost any degree of suffering at all. Then they take our money and fight against regulations that might protect us.

And yet the biggest protests we've seen so far come from the tea-bagger's brigade, shrilly decrying miniscule tax increases on the very, very rich. What's wrong with this picture?

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.

Follow Les Leopold on Twitter: www.twitter.com/les_leopold

Comments

[TerrapinCB]

http://www.organicconsumers.org/articles/article_18394.cfm
Check full listing of lobbying for Q1 2009 at the link above:

Health Care, Health Insurance, & Pharma
3. Pharmaceutical Research and Manufacturers of America: $6,910,000
6. Pfizer, Inc: $6,140,000
12. American Medical Association: $4,240,000
18. American Hospital Association: $3,580,000
19. Eli Lilly and Company: $3,440,000
37. America's Health Insurance Plans, Inc: $2,030,000
39. CVS Caremark Inc: $2,005,000
47. Blue Cross and Blue Shield Association: $1,800,000
49. GlaxoSmithKline: $1,780,000
63. Merck & Co: $1,500,000
65. United Health Group, Inc: $1,500,000
69. Sanofi-Aventis U.S. Inc: $1,460,000
76. Novartis: $1,347,134
87. Abbott Laboratories: $1,260,000
89. Astrazeneca Pharmaceuticals, LP: $1,250,000
92. Medtronic, Inc: $1,238,000

Oil
2. Exxon Mobil: $9,320,000
4. Chevron U.S.A. Inc: $6,800,000
7. Conoco Phillips: $5,980,935
16. BP America, Inc: $3,610,000
20. Marathon Oil Corporation: $3,380,000
45. American Petroleum Institute: $1,810,000

Defense
5. Lockheed Martin Corporation: $6,380,000
11. General Electric Company: $4,540,000
28. Northrop Grumman Corporation: $2,570,000
30. Boeing Company: $2,410,00
51. Honeywell International: $1,760,000
73. Raytheon Company: $1,360,000

Telecoms
10. AT&T Services, Inc: $5,134,873
14. Verizon (excluding Verizon Wireless): $3,760,000
21. National Cable and Telecommunications Association: $3,370,000
23. Comcast Corporation: $2,760,000
68. Motorola, Inc: $1,470,000

Financial
32. Financial Services Roundtable: $2,260,000
33. Prudential Financial, Inc: $2,180,000
41. American Bankers Association: $1,890,000
61. Visa, Inc: $1,540,000
74. Investment Company Institute: $1,359,917
75. Securities Industry and Financial Markets Association: $1,350,000
82. J.P. Morgan Chase Bank, N.A.: $1,310,000
90. Citigroup Management Corp: $1,250,000
90. Credit Union National Association: $1,250,000

[marinara]

Influence, Connections, and Greased Palms. Wall st. has accumulated power that it will never share. A story as old as sin.

[DiogenesOfAlaska]

The joint effect of trickle down and deregulation certainly was a major contribution to the ultimately toxic outcome. But the two are quite seperate things. The intention that brought them about was bundled - in Reagonomics and Thatcherism - but they needn't go together and need not be fought on the same footing. The tax regime and the philosophy on financial stability are quite different animals.

The losses of Wall Street in terms of confidence, influence, status and power are not to be measured on an instantaneous basis, in my opinion. The relevant culture has grown over decades and is entrenched in the life-choices of hundreds of thousands of individuals (or even millions). You may not like the idea of waiting, but to me it seems more than obvious that the model is broken when you look at it in terms of the respectability it has, measured against the rest of society. It simply doesn't ring the same bells as it used to, and fewer people are willing to buy the snake oil of the 'fancy' lifestyle any more. The change is slow, but it is certain. What's happening at this instant is a cramp, a fever, a sign of sickness. The culture itself is broken.

[sueinmn]

We should be taking to the streets as they did in Iran. Are we afraid or simply too lazy? The crooks on Wallstreet get away with it and Obama has given them his blessing. Why else has he done little for us and they still have what they sit out to take? Maddof is the only one in prison while the rest walk free. Obama either fell victim or he is the greatest lie in the history of this country. My hope for change is gone along with my job. No more koolaid. Proof is in the pudding. CHANGE? He has three years left to prove himself. Geithner and Summers will be his fall if he continues down the same road. Bush made no promises and was blinded elected and ruined this country. Obama made many promises he is not keeping. Are the Dems any better? A whole lot weaker and dont deserve to be a super majority if they cant act. I am a Dem fail to understand this CHANGE we see in O.

[therealredstateblues]

Geithner and Summers along with Greed span and others were part of the problem, how can they be the solution?

Obama 's handling of the finacial crisis is like the captain of the titanic, after hitting the iceberg, he backs up the ship and orders full steam ahead to ram it again

he will not enjoy the support of the midwest and labor that he did in '08 if he continues to not do anything to help the mfg sector

[bradymonster]

I recall a great Public radio program where two sides debated in an oxford format to determine "which group deserves more of the blame for the financial meltdown: the people in Washington or the people on Wallstreet­."
I forgot who won. but there's plenty of blame to spread around for both sides it seems.One analogy was the keystone cops. That is was Washington was less to to blame compared to the actual robbers they could not prevent and could not catch. Of course someone who plotted planned and pilfered the bank deserved the more of the blame than the cop who dozed through the alarm. At the time it made alot of sense.
Now I'm not sure, it is like a keystone cop said to the robbers you know my gun hasn't worked properly since 1970's so if you ever felt like robbing a bank you should rob this one over there. Wait there is more I can help with! I can also turn off the alarm system if you call the police station and tell me its a false alarm no on will worry giving you more time. Do you need a police scanne? Take mine ! oh then let me escort you to the bank and away back to the hideout because my sirens will get you there and back in a jiffy. What? no really its no problem at all ! just remember me for come November! and to Vote Casey keystone for sheriff!

[therealredstateblues]

main street is paying the price for wall streets greed and corruption

yet who is rewarded? the very criminals who got us into this

Obama is going about this bass akwards - we need to be supporting our productive sector - mfg - the wealth generating, prosperity sharing, innovation creating engine.

the economists of every political stripe are lining up to agree that we are not going to borrow and spend our way out, we need to produce our way our

helping the mfg sector would be a much lower cost to the taxpayer than propping up the crooks on wall street, and have amuch greater impact on creating jobs and turning the eocnomy around - more bang for the buck if you will

mfg in its mjuch diminished state still employs more than financial sector

[Rule Of Law]

We could put a whole bunch of Wall Street con artists out of work if we could convince the Obama administration to fire any one of his current employees who used to work for Goldman Sachs!

[hark]

My theory is that the 80% of the American people below the top 1% are reasonably comfortable, and will never revolt against the 1% who are robbing them blind. They just have too much to be bothered.

It's like "Brave New World." It's much easier to keep the people in line with a job, a home, food and clothing, an automobile, and that wonderful soporific, the television, than it is under an oppressive dictatorship like "1984."

On top of that, the people believe in that fantasy, "the American dream," as much as they do God. They see the billionaires standing above them, and think anyone can achieve that, which is true in the sense that anyone can win the lottery. What they don't understand is that even though anyone can, almost nobody will, just as almost nobody will win the lottery. The American economy simply cannot produce that much. And for every billion stolen by the top, there is just that much less to spread around to the rest of us. For some reason, people are blind to that.

[super]

Excellent analysis!

[jason10006]

From the labour department release:

" In June, financial activities employment continued to decline
(-27,000). Since the start of the recession, this industry has lost
489,000 jobs. In June, employment declined in credit intermediation
and related activities (-10,000) and in securities, commodity contracts,
and investments (-6,000)."

487k jobs sounds like a a lot to me. That is 10 goldman sachs.

And the unemplyment rate for ALL with at least a bachelors degree? 4.7%. So lower than this particular catagory.

[therealredstateblues]

small change compared to the jobs lost in construction and manufacturing - the real economy if you will

Main street is clearly paying the highest price in this wall street created depression

thru lost jobs, reduced wages and benefits, reduced home values, reduced retirements AND our tax doillars propping up these crooks to continue their risky and reckless business as usual, perks, bonuses and obscene salaries

[jason10006]

Wall street unemployment is up...it was just much MUCH lower than overall unemployment, say, in 2007. That 5.5% figure TOP cites - its compared to, what? 2-3% at most in 2007? So unemployment has doubled. The high-jobless sectors he cited always had higher jobless rates.

If you look at unemployment rates by education levels, you would see that those with post-graduate education have sub-5.5% unemployment rates, while those with college degrees are around that level. I would hazard to guess that those in TOP's villified catagory almost all have college degrees or post-fraduate degrees.

[Les Leopold - Huffpost Blogger]

Jason. Thanks for your comments. I still think the financial sector caught a huge break that can't be entirely explained by educational levels. BLS Table A11 gives us June to June numbers. Financial activities, which has about 7.7 million employees, lost 176,000 jobs. Information services which is a much smaller sector (2.8 million workers) lost 190,000 jobs. Professional and Business Services (16.6 million employees) also has a large number of BAs. It lost 690,000 jobs. And of course manufacturing got clobbered. It has 16.6 million workers and lost 1,148,000 jobs over the last year. It still seems to me that the disparities have a good deal to do with TARP and the several trillion dollars worth of explicit and implicit federal guarantees of questionable assets. I hope you take a look at "The Looting of America." I'd appreciate your comments

[hoopesaz]

So, is your argument essentially that we would somehow be better off if the financial sector suffered the same job losses as all other sectors, effectively increasing the unemployment rate? I suspect that there are more people in the auto industry that have taxpayers to thank for still having a job.

I'm not a big fan of eithr bailout, but I think the financial sector is much more likely to repay government money than the auto industry ever will. My bet is that we'll never see the money dumped into auto's again...it­'s gone. When it's all said and done, we'll have paid $100 billion to improve fuel efficiency by 10 to 15 mpg.

[tbrnotb]

Well isn't this a surprise!

[Primadonna]

Bravo ... everything I've been saying and more. BTW, when are we having that revolution?

[mountainweb]

Sadly, the democratic party sold out to the bankers, so we have people making a cool million a year on "welfare" while the people that really need the money go without. not sure why obama was so quick to sell his soul....

[realitytrumpsbull]

This kind of raises the question of whether or not the traders um, 'jumped' from the skyscrapers during the Crash of 29, or whether maybe they got....'he­lp' getting out that window. How many disgruntled former investors does it take to technically constitute the makings of an angry mob?

Securitize THIS, I say, and don't send me any more of those credit card offers...

[blueken]

Truth of the matter is, only one stock broker jumped. The suicide rate in NYC was average. Even Winston Churchill ( a foreign corispondent at the time) perpetuated this myth, reporting that he witnessed the sound of bones crunching as a broker hit the pavement. Totaly untrue.

[GardenerNorCal]

Actually according to StraightDope they used other methods more commonly.

"In 1929: The Year of the Great Crash (1989) historian William K. Klingaman says asphyxiation by gas was the most common method of doing oneself in, although there was considerable variety. He writes:

The wife of a Long Island broker shot herself in the heart; a utilities executive in Rochester, New York, shut himself in his bathroom and opened a wall jet of illuminating gas; a St. Louis broker swallowed poison; a Philadelphia financier shot himself in his athletic club; a divorcee in Allentown, Pennsylvania, closed the doors and windows of her home and turned on a gas oven. In Milwaukee, one gentleman who took his own life left a note that read, 'My body should go to science, my soul to Andrew W. Mellon, and sympathy to my creditors.­' "

[cupcake65]

I think the government is still hiring. Anyone know how many federal government jobs have been lost?

[JBS]

No, but here's one federal agency that's hiring:

http://www.goarmy.com/#/?marquee=vw&channel=careers

[JBS]

http://www.goarmy.com/#/?marquee=vw&channel=careers