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Unemployment Claims Spike Again As We Get More Scientific Evidence The Middle Class Is Shrinking

Despair And Unemployment - Public DomainAs the U.S. economy slows down, we would expect to start to see evidence of this in the employment numbers, and that is precisely what has begun to happen.  During the week before last, initial claims for unemployment benefits jumped by 17,000, which was the largest increase that we had seen in over a year.  Well, last week we witnessed an even bigger spike.  Seasonally adjusted initial claims shot up 20,000 more to a total of 294,000.  Of course it makes perfect sense that more Americans are applying for unemployment benefits, because firms are laying people off at a much faster pace these days.  Just a couple days ago I reported that job cut announcements at major firms are running 24 percent higher this year compared to the first four months of last year.  So we should fully expect that the number of Americans seeking unemployment benefits will continue to accelerate.

Personally, I am a bit surprised by how quickly these numbers are getting worse.  The following comes directly from the Department of Labor

In the week ending May 7, the advance figure for seasonally adjusted initial claims was 294,000, an increase of 20,000 from the previous week’s unrevised level of 274,000. This is the highest level for initial claims since February 28, 2015 when it was 310,000. The 4-week moving average was 268,250, an increase of 10,250 from the previous week’s unrevised average of 258,000.

For a long time, initial claims for unemployment benefits were running quite low, and this was one of the few bright spots for the U.S. economy.

Unfortunately, that is now changing, and this is just more confirmation that a significant economic slowdown has already started.  For many more numbers that back up this claim, please see my previous article entitled “11 Signs That The U.S. Economy Is Rapidly Deteriorating Even As The Stock Market Soars“.

But whether the economy has been doing good or bad in recent years, the long-term trend of the decline of the middle class in America has continued unabated.

This week, we got even more evidence that the middle class is steadily disappearing from the Pew Research Center

The American middle class is losing ground in metropolitan areas across the country, affecting communities from Boston to Seattle and from Dallas to Milwaukee. From 2000 to 2014 the share of adults living in middle-income households fell in 203 of the 229 U.S. metropolitan areas examined in a new Pew Research Center analysis of government data. The decrease in the middle-class share was often substantial, measuring 6 percentage points or more in 53 metropolitan areas, compared with a 4-point drop nationally.

Do you understand what that is saying?

It says that the middle class got smaller in 203 out of 229 U.S. metropolitan areas between 2000 and 2014.  This means that the death of the middle class is very widespread and it is happening all over the country.

But it isn’t just the middle class that is suffering.  According to that same report, household incomes have been falling for Americans in all income brackets…

American households in all income tiers experienced a decline in their incomes from 1999 to 2014. Nationally, the median income of middle-income households decreased from $77,898 in 1999 to $72,919 in 2014, a loss of 6%. The median incomes of lower-income and upper-income households fell by 10% and 7%, respectively, over this period.

The systematic evisceration of the middle class has been a continuing theme that I have been writing about for many years.  And without a doubt, one of the biggest reasons for the decline of the middle class has been the disappearance of middle class jobs.

Thanks to “free trade agreements” that have been pushed by Bill Clinton, George W. Bush and Barack Obama, the U.S. economy has been steadily merged into the emerging one world economic system.  As a result, U.S. workers are now forced to directly compete for jobs with workers on the other side of the planet that live in countries where it is legal to pay slave labor wages.

It was inevitable that good paying jobs would leave areas where labor was expensive and go to places were labor was very cheap.  Over the past couple of decades, the U.S. has seen tens of thousands of manufacturing facilities shut down and we have lost millions of middle class jobs.

One of those middle class jobs was lost by a factory worker named Wendell Nolen

Wendell Nolen, 52, has experienced the slide from middle-class status first-hand. Eight years ago, he was earning $28 an hour as a factory worker for Detroit’s American Axle and Manufacturing Holdings, assembling axles for pickup trucks and SUVs.

But early in 2008, the good life unraveled. After a three-month strike, Nolen took a buyout rather than a pay cut. Less than a year later, the plant was closed and American Axle shipped much of its work to Mexico.

Now Nolen makes $17 an hour in the shipping department of a Detroit steel fabricator, about 40 percent less than he made at the axle plant.

America is losing jobs because of the free trade stuff,’ Nolen said. ‘They’re selling America out.’

I couldn’t have said it better myself.

If you step back and take a longer-term view of things, what has happened to our middle class is abolutely staggering.

For example, one study found that the middle class in America became a minority last year for the first time in our history.

And if you go back to 1970, the middle class took home close to 62 percent of all income, but today that number has dropped to just 43 percent.

This is a problem that has been crying out for a solution for a very long time, and yet our politicians have been sitting on their hands.

Now the next crisis is here, and the plight of the middle class is about to get a whole lot worse.

For months, my regular readers have been listening to me go on and on about how the U.S. economy is deteriorating, but now even the mainstream media is saying it.

For example, a Bloomberg article that just came out admits that “the next president will probably face a recession” no matter who wins the election…

Talk about a poisoned chalice. No matter who is elected to the White House in November, the next president will probably face a recession.

And an article that was just published by CNBC is even more pessimistic about the economy…

We are in the midst of a deceleration in the economy, and the chain of dominoes leading to a recession has started to fall. First, it was a weak global economy. Then, multinationals and business-to-business companies were hit by the resulting decline in global trade and commodity prices. Now, consumers are starting to feel the repercussions as they draw down their growth in spending on discretionary goods and services, which we saw reflected in the first-quarter GDP report.

This is the foreshadowing of a recession. We saw similar indicators prior to recessions in 2001 and 2008. Although there is potential for economic indicators to flip, the current momentum and indicators suggest that the U.S. economy will get worse before it gets better.

This is precisely what I have been saying.  The exact same indicators that told us that recessions were coming in 2001 and 2008 have been flashing bright red, but most people don’t seem to understand what is happening.

It doesn’t matter how much faith you may have in Barack Obama, Hillary Clinton, Bernie Sanders or Donald Trump.  None of them can stop what is already in the process of happening.

Without a doubt, we truly are “in the midst of a deceleration in the economy”, and it is most certainly true that “the next president will probably face a recession”.

In fact, we would be exceedingly fortunate if it is just a recession that we will be dealing with.

The largest and most important economy on the planet is teetering on the brink, and it is not going to take much to push us into a full-blown disaster.

So let us hope for some sort of economic miracle to take place, because we could really use one right about now.

11 Signs That The U.S. Economy Is Rapidly Deteriorating Even As The Stock Market Soars

Dollar Bending - Public DomainWe have seen this story before, and it never ends well.  From mid-March until early May 2008, a vigorous stock market rally convinced many investors that the market turmoil of late 2007 and early 2008 was over and that happy days were ahead for the U.S. economy.  But of course we all know what happened.  It turned out that the market downturns of late 2007 and early 2008 were just “foreshocks” of a much greater crash in late 2008.  The market surge in the spring of 2008 was just a mirage, and it masked rapidly declining economic fundamentals.  Well, the exact same thing is happening right now.  The Dow rose another 222 points on Tuesday, but meanwhile virtually every number that we are getting is just screaming that the overall U.S. economy is steadily falling apart.  So don’t be fooled by a rising stock market.  Just like in the spring of 2008, all of the signs are pointing to an avalanche of bad economic news in the months ahead.  The following are 11 signs that the U.S. economy is rapidly deteriorating…

#1 Total business sales have been declining for nearly two years, and they are now about 15 percent lower than they were in late 2014.

#2 The inventory to sales ratio is now back to near where it was during the depths of the last recession.  This means that there is lots and lots of unsold stuff just sitting around out there, and that is a sign of a very unhealthy economy.

#3 Corporate earnings have declined for four consecutive quarters.  This never happens outside of a recession.

#4 Profits for companies listed on the S&P 500 were down 7.1 percent during the first quarter of 2016 when compared to the same time period a year ago.

#5 In April, commercial bankruptcies were up 32 percent on a year over year basis, and Chapter 11 filings were up 67 percent on a year over year basis.  This is exactly the kind of spike that we witnessed during the initial stages of the last major financial crisis as well.

#6 U.S. rail traffic was 11 percent lower last month than it was during the same month in 2015.  Right now there are 292 Union Pacific engines sitting idle in the middle of the Arizona desert because there is literally nothing for them to do.

#7 The U.S. economy has lost an astounding 191,000 mining jobs since September 2014.  For areas of the country that are heavily dependent on mining, this has been absolutely devastating.

#8 According to Challenger, Gray & Christmas, U.S. firms announced 35 percent more job cuts during April than they did in March.  This indicates that our employment problems are accelerating.

#9 So far this year, job cut announcements are running 24 percent above the exact same period in 2015.

#10 U.S. GDP grew at just a 0.5 percent annual rate during the first quarter of 2016.  This was the third time in a row that the GDP number has declined compared to the previous quarter, and let us not forget that the formula for calculating GDP was changed last year specifically to make the first quarter of each year look better.  Without that “adjustment”, it is quite possible that we would have had a negative number for the first quarter.

#11 Barack Obama is poised to become the first president in U.S. history to never have a single year during his time in office when the economy grew by more than 3 percent.

But you never hear Obama talk about that statistic, do you?

And the mainstream media loves to point the blame at just about anyone else.  In fact, the Washington Post just came out with an article that is claiming that the big problem with the economy is the fact that U.S. consumers are saving too much money…

The surge in saving is the real drag on the economy. It has many causes. “People got a cruel lesson about [the dangers] of debt,” says economist Matthew Shapiro of the University of Michigan. Households also save more to replace the losses suffered on homes and stocks. But much saving is precautionary: Having once assumed that a financial crisis of the 2008-2009 variety could never happen, people now save to protect themselves against the unknown. Research by economist Mark Zandi of Moody’s Analytics finds higher saving at all income levels.

So even though half the country is flat broke, I guess we are all supposed to do our patriotic duty by going out and running up huge balances on our credit cards.

What a joke.

Of course the U.S. economy is actually doing significantly better at the moment than almost everywhere else on the planet.  Many areas of South America have already plunged into an economic depression, major banks all over Europe are in the process of completely melting down, Japanese GDP has gone negative again despite all of their emergency measures, and Chinese stocks are down more than 40 percent since the peak of the market.

This is a global economic slowdown, and just like in 2008 it is only a matter of time before the financial markets catch up with reality.  I really like how Andrew Lapthorne put it recently

On the more bearish slant is Andrew Lapthorne, head of quantitative strategy at Societe Generale. To him this profit downturn is a sign that stocks are far too overvalued and the economy is weaker than you think.

“MSCI World EPS is now declining at the fastest pace since 2009, losing 4% in the last couple of months alone (this despite stronger oil prices),” wrote Lapthorne in a note. For the S&P 500 specifically, the year on year drop in profit drop was the most since third quarter of 2009.

“Global earnings are now 14% off the peak set in August 2014 and back to where they stood five years ago. Equity prices on the other hand are 25% higher. Gravity beckons!”

I couldn’t have said it better myself.

Look, this is not a game.

So far in 2016, three members of my own extended family have lost their jobs.  Businesses are going under at a pace that we haven’t seen since 2008, and this means that more mass layoffs are on the way.

We can certainly be happy that U.S. stocks are doing okay for the moment.  May it stay that way for as long as possible.  But anyone that believes that this state of affairs can last indefinitely is just being delusional.

Gravity beckons, and the crash that is to come is going to be a great sight to behold.

The Next Employment Crisis Is Here: Job Cuts At U.S. Companies Jump 35 Percent In April

Layoffs - Public DomainShould we be alarmed that the number of job cuts announced by large U.S. companies was 35 percent higher in April than it was in March?  This is definitely a case where the trend is not our friend.  According to Challenger, Gray & Christmas, U.S. firms announced 65,141 job cuts during April, which represented a massive 35 percent increase over the previous month.  And so far this year overall, job cut announcements are running 24 percent higher than for the exact same period in 2015.  Meanwhile, on Thursday we learned that initial claims for unemployment benefits shot up dramatically last week.  In fact, the jump of 17,000 was the largest increase that we have seen in over a year.  Of course the U.S. economy has been slowing down for quite a while now, and many have been wondering when we would begin to see that slowdown reflected in the employment numbers.  Well, that day has now arrived.

At this point, U.S. firms are laying off people at a rate that we have not seen since the last financial crisis.  Here is what Zero Hedge had to say about these latest numbers…

While one can debate the veracity of the BLS’ seasonally adjusted data, one thing is certain: when a company announces it will layoff thousands, it will. So for all those who suggest that all is well with the US jobs picture based on initial claims reports, here is the latest report from Challenger according to which the pace of downsizing increased in April jumped by 35% to 65,141 during the month of April, from the 48,207 layoff announcements in March.

Looking further back, in the first four months of 2016, employers have announced a total of 250,061 planned job cuts, up 24% from the 201,796 job cuts tracked during the same period a year ago. This represents the highest January-April total since 2009, when the opening four months of the year saw 695,100 job cuts in the aftermath of the biggest financial crisis in modern history.

So what is causing this?

Why are firms laying off so many people all of a sudden?

My readers are very well aware of the pain that the energy industry is experiencing at the moment, but surprisingly it was not the energy industry that announced the most job cuts in April…

Computer firms announced 16,923 job cuts during the month; the highest total among all industries. That total includes 12,000 from chipmaker Intel, which is shifting away from the traditional desktop and laptop market and toward the mobile market. To date, computer firms have announced 33,925 job cuts, up 262 percent from a year ago, when job cuts in the sector totaled just 9,368 through the first four months of the year.

Yes, the U.S. energy industry has lost well over 100,000 good paying jobs since the beginning of last year, but the downturn is so much broader than that.  All over America corporate earnings are down, and when earnings fall it is inevitable that layoffs will follow.

As I have written about previously, earnings for companies listed on the S&P 500 have fallen a total of 18.5 percent from their peak in late 2014, and it was being projected that corporate earnings overall would be down 8.5 percent for the first quarter of 2016 compared to the same period a year ago.

And in the chart that I have posted below, you can see that corporate profits after tax have been falling precipitously since peaking in mid-2015…

corporate profits

As this new economic downturn intensifies, the layoffs will accelerate.

In plain English, that means that a whole lot more people will be losing their jobs.

Unfortunately, a very large percentage of Americans didn’t learn anything from the last crisis and are living on the financial edge.  In fact, the Federal Reserve says that 47 percent of all Americans cannot even pay an unexpected $400 emergency room bill without borrowing the money or selling something.

So just like back in 2008, we are going to see huge numbers of people unable to pay their bills when they lose their jobs.  Foreclosures are going to skyrocket, and lots and lots of families are going to be put out into the street.

This is why I have been preaching the importance of having an emergency fund for years.  It is absolutely imperative to have an emergency fund that can cover your bills for at least six months in the event that there is a job loss or some other sort of major disaster strikes.

If you have not done this already, you are probably already too late.

The cold, hard reality of the matter is that it would take most families quite a while to save up a six month emergency fund if they are starting from zero.

So if you are in this position and you lose your job, you may have to move in with family or friends when your money runs out.

I don’t mean to be cold, but this is the situation that we are facing.  The next employment crisis is already here, and it is going to get much, much worse.  No matter who becomes “the next president”, job cuts are going to accelerate and good jobs are going to become exceedingly difficult to find.

I am certainly not advocating that anyone give up.  If you still have a good job for the moment, tighten your belt and use this time to feverishly prepare the very best that you can.

Sadly, tens of millions of Americans believed that this bubble of false prosperity would keep on rolling, and so they wasted immense amounts of precious time and resources.  Now the day of reckoning is here, and vast numbers of our fellow citizens are going to discover the horror of being unprepared.

Rail Traffic Depression: 292 Union Pacific Engines Are Sitting In The Arizona Desert Doing Nothing

Union Pacific Engines - Google EarthWe continue to get more evidence that the U.S. economy has entered a major downturn.  Just last week, I wrote about how U.S. GDP growth numbers have been declining for three quarters in a row, and previously I wrote about how corporate defaults have surged to their highest level since the last financial crisis.  Well, now we are getting some very depressing numbers from the rail industry.  As you will see below, U.S. rail traffic was down more than 11 percent from a year ago in April.  That is an absolutely catastrophic number, and the U.S. rail industry is feeling an enormous amount of pain right now.  This also tells us that “the real economy” is really slowing down, because less stuff is being shipped by rail all over the nation.

One of the economic commentators that I have really come to respect is Wolf Richter of WolfStreet.com.  He has a really sharp eye for what is really going on in the economy and in the financial world, and I find myself quoting him more and more as time goes by.  If you have not checked out his site yet, I very much encourage you to do so.

On Wednesday, he posted a very alarming article about what is happening to our rail industry.  The kinds of numbers that we have been seeing recently are the kinds of numbers that we would expect if an economic depression was starting.  The following is an excerpt from that article

Total US rail traffic in April plunged 11.8% from a year ago, the Association of American Railroads reported today. Carloads of bulk commodities such as coal, oil, grains, and chemicals plummeted 16.1% to 944,339 units.

The coal industry is in a horrible condition and cannot compete with US natural gas at current prices. Coal-fired power plants are being retired. Demand for steam coal is plunging. Major US coal miners – even the largest one – are now bankrupt. So in April, carloads of coal plummeted 40% from the already beaten-down levels a year ago.

Because rail traffic is down so dramatically, many operators have large numbers of engines that are just sitting around collecting dust.  In his article, Wolf Richter shared photographs from Google Earth that show some of the 292 Union Pacific engines that are sitting in the middle of the Arizona desert doing absolutely nothing.  The following is one of those photographs…

Union Pacific Engines - Google Earth

As Wolf Richter pointed out, it costs a lot of money for these engines to just sit there doing nothing…

These engines are expensive pieces of equipment. When they just sit there, not pulling trains, they become “overcapacity,” and they get very expensive. Then there are engineers and other personnel who suddenly become unproductive. Some of them have already been laid off or are getting laid off.

All over the world, similar numbers are coming in.  For example, the Baltic Dry Index fell 30 more points on Wednesday after falling 21 on Tuesday.  Global trade is really, really slowing down during the early portion of 2016.  What this means on a practical level is that a lot less stuff is being bought, sold and shipped around the planet.

It is becoming increasingly difficult for authorities to deny that a new global recession has begun, and at this moment we are only in the very early chapters of this new crisis.

Another thing that I watch very closely is the velocity of money.  When an economy is healthy, people feel pretty good about things and money tends to circulate fairly rapidly.  For example, I may buy something from you, then you may buy something from someone else, etc.

But when times get tough, people tend to hold on to their money more tightly, and that is why the velocity of money goes down when recessions hit.  In the chart below, the shaded areas represent recessions, and you can see that the velocity of money has declined during every single recession in the post-World War II era…

M2 Velocity Of Money

During the last recession, the velocity of money declined precipitously, and that makes perfect sense.  But then a funny thing happened.  There was a slight bump up once the recession was over, but then it turned down again and it has kept going down ever since.

In fact, the velocity of money has now dropped to an all-time low.  The velocity of M2 just recently dipped below 1.5 for the first time ever.

This is not a sign of an “economic recovery”.  What this tells us is that our economy is very, very sick.

And we can see evidence of this sickness all around us.  For instance, the Los Angeles Times is reporting that homelessness in Los Angeles increased by 11 percent last year, and this marked the fourth year in a row that homelessness in the city has increased…

Homelessness rose 11% in the city of Los Angeles and 5.7% in the county last year despite an intensive federal push that slashed the county ranks of homeless veterans by nearly a third, according to a report released Wednesday.

The increase marks the fourth consecutive year of rising homelessness in L.A., as local officials struggle to identify funding for billion-dollar plans they approved to solve the nation’s most intractable homeless problem.

Let us also not forget that about half the country is basically flat broke at this point.

Just recently, the Federal Reserve found that 47 percent of all Americans could not pay an unexpected $400 emergency room bill without selling something or borrowing the money from somewhere.

With numbers such as these being reported, how in the world can anyone possibly claim that the U.S. economy is in good shape?

It boggles the mind, and yet there are people out there that would actually have you believe that everything is just fine.

The current occupant of the White House is one of them.

With each passing month, the real economy is getting even worse.  We may not have slipped into a full-blown economic depression just yet, but it is coming.

For now, let us be thankful for whatever remains of our debt-fueled prosperity, because we don’t deserve the massively inflated standard of living that we have been enjoying.

We have been consuming far more than we produce for decades, but it won’t last for much longer.  And when those days are gone for good, we will mourn them bitterly.

The U.S. Economy Officially Joins The Global Economic Slowdown – 1st Quarter GDP Comes In At 0.5%

Slow Down - Public DomainEven the government is admitting that the U.S. economy is slowing down.  On Thursday, we learned that U.S. GDP grew at just a 0.5 percent annual rate during the first quarter of 2016.  This was lower than analysts were anticipating, and it marks the third time in a row that the GDP number has declined compared to the previous quarter.  In other words, GDP growth has been declining for close to a year now, and this lines up perfectly with what I have been saying about how the second half of last year was a turning point that plunged us into the early chapters of a brand new economic crisis.  And as you will see below, the official GDP number is highly manipulated, and the way that it is calculated has been changed numerous times over the years.  So the bad number that is being reported by the government is actually the best case scenario.

Of course many of the “experts” being quoted by the mainstream media are saying that this is just a temporary blip and that good times for the U.S. economy are right around the corner.  For instance, check out this quote from Reuters

“The economy essentially stalled in the first quarter, but that doesn’t mean it is faltering,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “Some of the restraints to growth are dissipating. Growth is likely to accelerate going forward.”

We have been told this same story for years, but the “acceleration” has never materialized.  In fact, Barack Obama is poised to become the only president in U.S. history to never have a single year when the economy grew by more than 3 percent during his presidency.

That is a statistic that is hard to believe, but it is true.

In addition, Louis Woodhill has pointed out that the average rate of U.S. economic growth during the Obama years will be the fourth worst in recorded history…

Assuming 2.67% RGDP growth for 2016, Obama will leave office having produced an average of 1.55% growth. This would place his presidency fourth from the bottom of the list of 39*, above only those of Herbert Hoover (-5.65%), Andrew Johnson (-0.70%) and Theodore Roosevelt (1.41%)

So does anyone out there still believe that there has been an “Obama recovery”?

We also need to add another layer to our analysis.  By now, everyone should realize that the official GDP number is highly manipulated, and the way that GDP is calculated has been changed many, many times over the years.

For example, here is Peter Schiff commenting on changes that were made in 2013

The latest example of this was revealed earlier this week when the Bureau of Economic Analysis (BEA) announced new methods of calculating Gross Domestic Product (GDP) that will immediately make the economy “bigger’ than it used to be. The changes focus heavily on how money spent on research and development (R&D) and the production of “intangible” assets like movies, music, and television programs will be accounted for. Declaring such expenditures to be “investments” will immediately increase U.S. GDP by about three percent. Such an upgrade would immediately increase the theoretic size of the U.S economy and may well lead to the perception of faster growth. In reality these smoke and mirror alterations are no different from changes made to the inflation and unemployment yardsticks that for years have convinced Americans that the economy is better than it actually is.

And the following originally comes from a Bloomberg article which discussed changes that were made in 2015

The way some parts of U.S. gross domestic product are calculated are about to change in the wake of the debate over persistently depressed first-quarter growth.

In a blog post published Friday, the Bureau of Economic Analysis listed a series of alterations it will make in seasonally adjusting data used to calculate economic growth. The changes will be implemented with the release of the initial second-quarter GDP estimate on July 30, the BEA said.

One of the changes that was made last year was intended to artificially boost GDP growth numbers for the first quarter of each year.

So without that artificial boost, what would the real number for the first quarter of 2016 look like?

John Williams of shadowstats.com tracks what the official government numbers would be if honest numbers were actually being used, and according to him U.S. GDP growth has been continuously negative since 2005.

But we certainly can’t have the press report those sorts of things.  If that were the case, then everyone would be talking about the “economic depression” that never seems to end.

Unfortunately, the truth is that we are in the midst of a long-term economic decline, and we can see evidence of this all around us.  For example, on Thursday we also learned that the rate of homeownership in the United States has fallen once again, and it is now hovering just 0.1 percent above the lowest level ever recorded in American history…

After gains in the second half of 2015, the homeownership rate fell to just 63.6 percent, seasonally adjusted, in the first quarter of this year, according to the U.S. Census Bureau. Homeownership hit a high of 69.4 percent in 2004, during one of the biggest housing booms in history. That was also when mortgage lending was arguably at its loosest level in history. The homeownership rate is now just one-tenth of 1 basis point higher than its all-time low in the second quarter of 2015.

For many more numbers that show that the U.S. economy has continued to decline, please see the following articles that I authored earlier this month…

#1 “Economy In Decline: Apple Reports Massive Revenue Decline As iPhone Sales Plummet Dramatically

#2 “In 1 Out Of Every 5 American Families, Nobody Has A Job

#3 “Stories Of Despair From The Forgotten People That The U.S. Economy Has Left Behind

#4 “47 Percent Of Americans Cannot Even Come Up With $400 To Cover An Emergency Room Visit

#5 “Corporations Are Defaulting On Their Debts Like It’s 2008 All Over Again

Now that U.S. GDP growth has been steadily dropping for three quarters in a row, hopefully people will wake up and begin to realize what is happening.

We are entering very hard times, so now is not the time to go out and buy fancy new toys or to go into lots of debt.

Rather, this is a time to tighten our belts, batten down the hatches and prepare for rough seas ahead.

Sadly, most people continue to have blind faith that our politicians and the central bankers will be able to perform some kind of miracle to save us from what is coming.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

In 1 Out Of Every 5 American Families, Nobody Has A Job

Family Silhouette - Public Domain 2If nobody is working in one out of every five U.S. families, then how in the world can the unemployment rate be close to 5 percent as the Obama administration keeps insisting? The truth, of course, is that the U.S. economy is in far worse condition than we are being told. Last week, I discussed the fact that the Federal Reserve has found that 47 percent of all Americans would not be able to come up with $400 for an unexpected visit to the emergency room without borrowing it or selling something. But Barack Obama and his minions never bring up that number. Nor do they ever bring up the fact that 20 percent of all families in America are completely unemployed. The following comes directly from the Bureau of Labor Statistics

In 2015, the share of families with an employed member was 80.3 percent, up by 0.2 percentage point from 2014. The likelihood of having an employed family member rose in 2015 for Black families (from 76.4 percent to 77.7 percent) and for Hispanic families (from 85.9 percent to 86.4 percent). The likelihood for White and Asian families showed little or no change (80.1 percent and 88.6 percent, respectively).

For purposes of this study, families “are classified either as married-couple families or as families maintained by women or men without spouses present” and they include households without children as well as children under the age of 18.

Digging into the numbers, we find that there were a total of 81,410,000 families in America during the 2015 calendar year.

Of that total, 16,060,000 families did not have a single member employed.

So that means that in 19.7 percent of all families in the United States, nobody has a job.

And of course there are lots more families that are “partially employed”. In other words, maybe the wife has a job but the husband does not.

So based on these numbers, it would appear to me that the true rate of unemployment in this country is vastly higher than 5 percent, and John Williams of shadowstats.com agrees with me. According to his calculations, the broadest measure of unemployment in the U.S. would actually be sitting at 22.9 percent if honest numbers were being used.

But let’s not just focus on where we are.

Let’s take a look at where we are going.

According to Challenger, Gray & Christmas, job cut announcements by big companies in the United States were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015, and it appears that the job losses are going to continue to mount as we roll into the second quarter. For instance, late last week Intel announced that it is going to be laying off 12,000 workers

As it navigates its path into the future, Intel, the 47-year-old corporation best known for making microprocessor chips that power personal computers, has announced significant changes to its business.

On Tuesday, Intel’s CEO Brian Krzanich said in a letter to employees that the company over the next year will cut its 107,300-person global workforce by 12,000 people, or 11 percent.

Those are good middle class jobs, and they are exactly the kind of jobs that we cannot afford to be losing.

Meanwhile, the “retail apocalypse” appears to be accelerating once again.

Bloomberg is reporting that teen clothing chain Aeropostale is preparing to file for bankruptcy.  Aeropostale currently operates more than 800 stores across the nation, and it is unclear if any of them will be able to stay open as this process plays out. But of course it isn’t just Aeropostale that has gone bankrupt lately. Here are a few more examples of major retailers that have recently filed for bankruptcy

April 16, 2016: Vestis Retail Group, the operator of sporting goods retailers Eastern Mountain Sports (camping, hiking, skiing, adventure sports), Bob’s Stores (family clothing and shoes), and Sport Chalet (general sporting goods), filed for Chapter 11 bankruptcy. It will close all 56 stores and stop online sales.

In the filing, it blamed the going-out-of-business sales at “certain Sports Authority locations,” plus the weather, which had been too warm, and trouble with switching to a new software platform. It’s owned by private equity firm Versa Capital Management LLC.

April 7, 2016: Pacific Sunwear of California, clothing retailer with nearly 600 stores and derailed ambitions of skate-and-surf cool, filed for Chapter 11 bankruptcy. PE firm Golden Gate Capital, a lender to the company, agreed to convert over 65% of its loan into equity of the reorganized company and add another $20 million in financing. Wells Fargo agreed to provide $100 million of debtor-in-possession financing.

March 2, 2016: Sports Authority filed for Chapter 11 bankruptcy. It said it would close 140 of its 450 stores, including all stores in Texas.

Just because the stock market has been doing well in recent weeks does not mean that the crisis has passed.

In fact, many experts believe that the crisis of 2016 is just getting started.  Albert Edwards of Societe Generale is one of them

But what I do know is when in the last few weeks I have heard that Janet Yellen sees no bubble in the US, when Ben Bernanke hones and restates his helicopter money speech, and when Mario Draghi says that the ECB’s policy of printing money and negative interest rates was working, I feel utterly depressed (I could also quote similar nonsense from Japan, the UK and China). I have not one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result. The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!

All over the world, the underlying economic fundamentals continue to deteriorate. Here in the U.S., retail sales have been extremely disappointing, total business sales have been steadily falling, corporate revenues and corporate profits continue to plunge, and corporate debt defaults have soared to their highest level since the last financial crisis.

All of these numbers are screaming that a major economic downturn is here, and with each passing week things look even more ominous for the second half of 2016.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

19 Facts That Prove Things In America Are Worse Than They Were Six Months Ago

American Flag Map - Public DomainHas the U.S. economy gotten better over the past six months or has it gotten worse?  In this article, you will find solid proof that the U.S. economy has continued to get worse over the past six months.  Unfortunately, most people seem to think that since the stock market has rebounded significantly in recent weeks that everything must be okay, but of course that is not true at all.  If you look at a chart of the Dow, a very ominous head and shoulders pattern is forming, and all of the economic fundamentals are screaming that big trouble is ahead.  When Donald Trump told the Washington Post that we are heading for a “very massive recession“, he wasn’t just making stuff up.  We are already seeing lots of things happen that never take place outside of a recession, and the U.S. economy has already been sliding downhill fairly rapidly over the past several months.  With all that being said, the following are 19 facts that prove things in America are worse than they were six months ago…

#1 U.S. factory orders have now declined on a year over year basis for 16 months in a row.  As Zero Hedge has noted, in the post-World War II era this has never happened outside of a recession…

In 60 years, the US economy has not suffered a 16-month continuous YoY drop in Factory orders without being in recession. Moments ago the Department of Commerce confirmed that this is precisely what the US economy did, when factory orders not only dropped for the 16th consecutive month Y/Y, after declining 1.7% from last month

#2 Factory orders have now reached the lowest level that we have seen since the summer of 2011.

#3 It is being projected that corporate earnings will be down 8.5 percent for the first quarter of 2016 compared to one year ago.  This will be the fourth quarter in a row that we have seen year over year declines, and the last time that happened was during the last recession.

#4 Total business sales have fallen 5 percent since the peak in mid-2014.

#5 S&P 500 earnings have now fallen a total of 18.5 percent from their peak in late 2014.

#6 Corporate debt defaults have soared to the highest level that we have seen since 2009.

#7 The average rating on U.S. corporate debt has fallen to “BB”, which is lower than it has been at any point since the last financial crisis.

#8 The U.S. oil rig count just hit a 41 year low.

#9 51 oil and gas drillers in North America have filed for bankruptcy since the beginning of last year, and according to CNN we could be on the verge of seeing the biggest one yet…

Shale oil driller SandRidge Energy (SD) warned there was “substantial doubt” it would survive the oil downturn. The Oklahoma City company said this week it is exploring a potential Chapter 11 bankruptcy filing.

Based on its $3.6 billion of debt, SandRidge would be the biggest North American oil-focused company to go bust during the current downturn, according to a CNNMoney analysis of stats compiled by law firm Haynes and Boone.

#10 According to Challenger, Gray & Christmas, job cut announcements by major firms in the United States were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015.

#11 Consumers in the United States accumulated more new credit card debt during the 4th quarter of 2015 than they did during the entire years of 2009, 2010 and 2011 combined.

#12 Existing home sales in the U.S. were down 7.1 percent during the month of February, and this was the biggest decline that we have witnessed in six years.

#13 Subprime auto loan delinquencies have hit their highest level since the last recession.

#14 The Restaurant Performance Index in the U.S. recently dropped to the lowest level that we have seen since 2008.

#15 Major retailers all over the country are shutting down hundreds of stores as the “retail apocalypse” accelerates.

#16 If you take the number of working age Americans that are officially unemployed (8.1 million) and add that number to the number of working age Americans that are considered to be “not in the labor force” (93.9 million), that gives us a grand total of 102 million working age Americans that do not have a job right now

#17 Since peaking during the 3rd quarter of 2014, U.S. exports of goods and services have been steadily declining.  This is something that we never see outside of a recession…

Exports Of Goods And Services - Public Domain

#18 The cost of everything related to medical care just continues to skyrocket even though our wages are stagnating.  According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year, and yet the cost of medical care just hit a brand new all-time high…

Medical Care Services

#19 Our government debt continues to spiral out of control.  At this point it is sitting at a staggering total of $19,218,516,838,306.52, but when Barack Obama first entered the White House it was only 10.6 trillion dollars.  That means that our government has been stealing an average of more than 100 million dollars an hour from future generations of Americans every single hour of every single day since Barack Obama was inaugurated…

Federal Debt

How in the world can anyone look at those numbers and suggest that everything is okay?

I simply do not understand how that could be possible.

Part of the problem is that Americans have been trained to be irrationally optimistic.  It is fine to have an optimistic outlook on life, but when it causes you to throw logic and reason out the window that is not good.

For example, you can be “optimistic” about your ability to fly all you want, but if you step off a 10 story building you are going to take a very hard fall to the ground.

Similarly, you can ignore all of the facts and pretend that our economic prosperity is sustainable all you want, but it won’t change the fundamental laws of economics.

On a personal note, I would like to thank everyone that has helped make my new book the #1 new release in Christian eschatology on Amazon.com.  I understand that a lot of my secular readers are not going to understand my fascination with Bible prophecy, and that is okay.  I felt that I needed to write this book to address some very serious errors that are being taught in churches all over America today, and I also wanted to inspire believers to face the great hardships and persecution that are coming.

Just because very difficult times are approaching does not mean that it will be time to run and hide.  My wife and I always live our lives with no fear, and when things get crazy we believe that it will be an opportunity to do even more good.  We believe that the greatest chapters of our lives are still ahead of us, and we want people to understand why they can look forward to the future even though great darkness is rising all around us.

So yes, I definitely carry a message of warning.

But I also bring a message of hope.

As we look toward the future, there is much to be concerned about, but there are also things happening that are worth getting extremely excited about.

It is when times are the darkest that the light is needed the most, and very soon light will be greatly, greatly needed in the United States of America.

We Are Being Killed On Trade – Rapidly Declining Exports Signal A Death Blow For The U.S. Economy

Abandoned Packard Automobile Factory - Photo by Albert DuceExports fell precipitously during the last two recessions, and now it is happening again.  So how in the world can anyone make the claim that the U.S. economy is in good shape?  On my website I have been repeatedly pointing out the parallels between the last two major economic downturns and the current crisis, and I am going to discuss another one today.  Since peaking in late 2014, U.S. exports have been steadily declining, and this is something that we never see outside of a major recession.  On the chart that I have shared below, the shaded gray bars represent the last two recessions, and you can see that exports of goods and services plunged dramatically in both instances…

Exports Of Goods And Services - Public Domain

And this chart does not even show the latest numbers that we have.  During the month of January, U.S. exports fell to a five and a half year low

The U.S. trade deficit widened more than expected in January as a strong dollar and weak global demand helped to push exports to a more than 5-1/2-year low, suggesting trade will continue to weigh on economic growth in the first quarter.

The Commerce Department said on Friday the trade gap increased 2.2 percent to $45.7 billion. December’s trade deficit was revised up to $44.7 billion from the previously reported $43.4 billion. Exports have declined for four straight months.

Because our exports are falling faster than our imports, our trade deficit is blowing out once again.  Every year we buy hundreds of billions of dollars more from the rest of the world than they buy from us, and this is systematically wrecking our economy.  Over the past several decades, we have lost tens of thousands of manufacturing facilities, millions of good paying manufacturing jobs, and major exporting nations such as China have become exceedingly wealthy at our expense.

We are being absolutely killed on trade, and yet very few of our politicians ever want to talk about this.

A brand new study that was recently discussed in the New York Times is bringing some renewed attention to these problems.  It turns out that the promised “benefits” of merging the U.S. economy into the global economic system simply have not materialized…

In a recent study, three economists — David Autor at the Massachusetts Institute of Technology, David Dorn at the University of Zurich and Gordon Hanson at the University of California, San Diego — raised a profound challenge to all of us brought up to believe that economies quickly recover from trade shocks. In theory, a developed industrial country like the United States adjusts to import competition by moving workers into more advanced industries that can successfully compete in global markets.

They examined the experience of American workers after China erupted onto world markets some two decades ago. The presumed adjustment, they concluded, never happened. Or at least hasn’t happened yet. Wages remain low and unemployment high in the most affected local job markets. Nationally, there is no sign of offsetting job gains elsewhere in the economy. What’s more, they found that sagging wages in local labor markets exposed to Chinese competition reduced earnings by $213 per adult per year.

Another study conducted by some of the same researchers discovered that 2.4 million American jobs were lost between 1999 and 2011 due to rising Chinese imports.

When are we going to finally wake up?

The middle class in America is being absolutely shredded, and yet only a few of us seem to care.

Meanwhile, global trade as a whole continues to slow down at a very frightening pace.  We just learned that the China Containerized Freight Index has now dropped to the lowest level ever recorded.  The following comes from Wolf Richter

The China Containerized Freight Index (CCFI), published weekly, tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. Unlike most Chinese government data, this index reflects the unvarnished reality of the shipping industry in a languishing global economy. For the latest reporting week, the index dropped 4.1% to 705.6, its lowest level ever.

How many numbers like this do we have to get before we will all finally admit that we are in the midst of a major global economic meltdown?

Here in the United States, the recent rally in the stock market has most people feeling pretty good about things these days.  But the truth is that there are ups and downs during any financial crisis, and this recent rally is putting the finishing touches on a very dangerous leaning “W” pattern that could signal a big dive ahead.

Harry Dent, the author of “The Demographic Cliff: How to Survive and Prosper During the Great Deflation Ahead“, has shown that this leaning “W” pattern is part of a huge “rounded top” for the S&P 500.  The following is a brief excerpt from one of his recent articles

The bull market from early 2009 into May 2015 looks just like every bubble in history, and I’m getting one sign after the next that we did indeed peak last May. The dominant pattern in the stock market is the “rounded top” pattern:

S&P 500 Rounded Top

After trading in a steep, bubble-like channel from late 2011 into late 2014, with only 10% maximum volatility top to bottom, the market finally lost its momentum… just as the Fed finished tapering its QE. That’s because the Fed was the primary driver in this stock bubble in the first place!

Now is not the time to relax at all.

In fact, now is the time to sound the alarm louder than ever.

That is one reason why my wife and I have started up a new television program.  It will be airing on Christian television, but it will also be available on YouTube as well…

As I have said before, 2016 is the year when everything changes.

So don’t be fooled just because the stock market had a couple of good weeks.  The truth is that global economic activity is slowing down significantly, geopolitical instability continues to get even worse, and this political season has caused very deep, simmering tensions in the United States to rise to the surface.

Let us hope that we have a few more weeks of relative stability like we are currently experiencing so that we can have more time to get prepared, but I certainly wouldn’t count on it.

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