fall in non-farm productivity, falling industrial production, gulf between payrolls and hours, jump in labour costs, rising personal consumption expenditures, the Bureau of Labour Statistics, understating retail inflation
RETAIL SALES & EMPLOYMENT: digging below the headline figures
One of the current contradictions in the [global] economy, is the contraction in industrial production versus the expansion of [personal] consumption. The same applies to employment. This is an issue bound to arise at the historical materialism session on Sunday.
It appears to be a prima facie impossibility for retail sales or personal consumption expenditures to be rising when the source of this consumption, industrial production is falling. Even if we take production of investment goods out of the picture this [dichotomy] continues to exist. Graph 1, relates retail sales to the production of consumer goods. Retail sales have been adjusted to take into account changes to inventories and that element of sales provided by overseas production. All these [adjustments] will be found in the attached spreadsheet “Retail Sales 2016+”. When using personal consumption expenditures on goods, a more comprehensive survey, the results are similar. At the end of the period the index for retail sales is 115.3 for PCEs and 116.4 for retail sales.
While US industrial production of consumer goods has barely increased, the sales of these goods has shot up. The difference between the two series is plotted in Graph 2 below. From this data it appears that the retail series is inflated even if we were to consider a rise in retail margins which is ruled out because of the time period,and,which is not supported by the data.
It may very well be the case that the Census Bureau is understating retail inflation particularly in the light of the additional [tariffs] imposed by the “China Trade War”.Of particular note is the accelerated gap in 2019. In 2018 the gap [remains] constant but in 2019, with additional tariffs in play, it has gone up by nearly 5 points. A truly remarkable jump. This jump has occurred at a time of economic slowdown resulting in personal consumption accounting for most of the growth in US GDP.
Employment & hours.
Two of the four main indicators propping up the stock markets are personal consumption and the employment data. We have already shown that the personal consumption data is suspect, even though the comparison between production and retail is not a mechanical one. The same can be said for employment data. The release of the headline figures for October last week surprised on the upside as did the revisions. Seems the economy was in good health, or was it? Graph  below tells a somewhat different story.
(Source: spreadsheet “workers vs hours”https: //www.bls.gov/ces/#tables)
This data is taken from the Bureau of Labour Statistics TABLE 6. Over-the-month and over-the-year changes in aggregate weekly hours and payrolls of all employees, seasonally adjusted (in thousands). It can be accessed via the link below graph . What the spreadsheet shows is that while payrolls have allegedly increased by 4.1% over the year to October, total hours have only increased 0.88%.
Despite this gulf between payrolls and hours, the average work week has declined by 0.1 hours over the same period. Unbelievable. (BLS Table B-2). And yet as the final Graph below shows, the average hours worked per worker has decreased in every industry. All data in Graph 4 is negative showing that hours worked per worker fell. In the case of mining and logging by 7%. This is inconsistent with a constant workweek. What would bring congruity to this incongruity would be a reduction in payrolls or a rise in hours. The bet is on payrolls needing to be restated but this would spook the algorithms.
From Marx’s Das Kapital to today, critics of capitalist economics have always placed industrial production, that is the actual production of the bulk of commodities, at the heart of our analysis. In the information age this focus seems to have been eclipsed by a host of charlatans many claiming to adhere to Marxist methodologies. Industry remains at the heart of capitalism as its primary source of value and surplus value. In an earlier posting, it was shown that two thirds of the profits enjoyed by S&P 500 corporations and by default, all the other corporations,emanated from the goods producing sector. That figure would even be higher if we included the transferred value and surplus value from the goods producing sector,to say,the advertising sector which finances those titans like Google, Facebook and Twitter. https://theplanningmotivedotcom.files.wordpress.com/2019/10/s-and-p-500-profits-by-sector-pdf.pdf
One indication of the scale of the industrial crisis is today’s release by the Bureau of Labour Statistics of its productivity and costs report which shows a 0.3% fall in non-farm productivity for the third quarter, which leaves manufacturing in negative territory for the year as a whole. A bad omen for profits given the 3.6% jump in labour costs. https://www.bls.gov/news.release/prod2.nr0.htm
(This is the last paper written in the context of the session at Historical Materialism.)
Brian Green 6th November 2019.