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THE DON JONES INDEX… |
GAINS POSTED in GREEN LOSSES POSTED in RED |
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4/23/14… 15,107.84 |
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4/16/14… 15,107.09 |
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6/27/13… 15,000.00 |
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(THE DOW JONES INDEX: 4/16… 16,424.85; 4/9… 16,437.18; 11/19/12… 12,592.22)
LESSON for APRIL 16, 2014
Last week, we began
an inquiry into the relative status of labor costs (particularly in the area of
hourly wages, as measured for the year 2013) compared to the Consumer Price
Index. Of every dollar
that Don Jones earned in January, 2013 (at a rate of slightly over ten per
hour), buying power had dropped by about a penny one year later.
So – big
deal! It was only a penny. And, if we throw out the terrible month of
January, 2013 (when Don’s hourly wage dropped by six cents and consumer prices
jumped by nearly a whole percentage point) the buying power of his time
actually increased by a third of a
cent. So, where’s the fire? Isn’t this a recovery?
It is… but how
much of a recovery, and from when?
Unfortunately, the Bureau of Labor Statistics has only been tracking
Don’s hourly wages since April, 2006.
Fortunately, they have compiled what they call a Labor Costs index which
takes into account not only wages, but healthcare and retirement benefits (for
those who have them), paid vacations, sick leave, overtime, holidays and even
the perks that accrue to the Joneses of elevated stratus and status… the
corporate jet, the condo in Ibiza, the thousand-dollar meals with clients at
the world’s swankiest restaurants…
Using a baseline
of 2009, labor costs were pegged at 102.687 for the final quarter of 2013,
whereas the actual hourly wages of Don Joneses… from Wall Street lawyer to
Wal-Mart bag boy… were $10.29. In
January, 2007, hourly wages were $10.14 per hour; the labor cost index was
101.123. (For the nine short months of
2006 recorded by both, things start going weird, but we’ll get to that in a
moment.*) Broadly speaking, we can
consider the labor cost index to be ten times the hourly wage… a ratio borne
out by the fact that the differences never exceeded about a three per cent (or
thirty cent) advantage to labor costs (in the third quarter of 2008 and again
in the final quarter of 2012) or a fifty cent difference in favor of wages
(throughout most of 2009-10).
(* While wages
remained relatively constant through the three quarters measured in 2006, the
Labor Cost index was nearly four points lower than in the first quarter of
2007. We may never know if this
represented a trend as opposed to a quirk… but, for our purposes, the Labor
Cost index becomes the defining statute for Don Jones’ income as we track it
against unemployment, productivity and inflation, going back in time. And we are going back… almost all the way to
the end of World War II!)
January,
1948. Britain nationalized its
railways. Mahatma Gandhi was
assassinated, the first tape recorder was sold and Humphrey Bogart was starring
onscreen in “The Treasure of the Sierra Madre”.
And, the Bureau of Labor Statistics began monthly calibrations of postwar
unemployment, coming up with a figure of 3.4%.
Economically speaking, those were good times for Don Jones (or his
father, or grandfather). The industrial
capacities of Europe and Japan lay in ruins.
Americans… having deferred gratification for nearly two decades, due to
war and depression, were ready to bust loose and buy stuff. GI’s, returning from the war, quickly found
good jobs in factories converting from guns to plowshares (and cars, household
appliances and vanities) and earned money to buy the stuff that their families
craved. A grateful America offered Don
Jones cheap mortgages… spurring construction from coast to coast… and
educational benefits that would eventually create a workforce able to tackle
the high-paying knowledge industries in science, engineering, education and so
many other disciplines. Rosie the
Riveter either stayed on the job, birthing the two-parent household income, or
began birthing babies… which led to more public and private spending on
diapers, schools and Captain Kangaroo lunchboxes. Innovations arose… in-house toilets, a
national highway system to serve the new cars spewing out of Detroit,
television.
The can-do
spirit of the times also led to the beginnings of a go-go banking and financial
system which, inevitably, led to booms and busts… the greatest of which was a
spike in unemployment to nearly 8% in October, 1949, when the glut of returning
veterans flooded the market. But, on the
whole, unemployment remained below 5% through the 1950’s, with small exceptions
during the fiscal panics of 1954 and 1958.
Only in May, 1975… after Watergate, and during the days of “stagflation”
and “Whip Inflation Now” buttons… did joblessness crawl back to 9% (and with
inflation rates of 11 and 9% for 1974 and 1975(a), the “Misery
Index” hovered around 20 - ensuring Gerald Ford’s defeat at the polls a year
later). Again, at the end of 1982,
unemployment reached 10.8%... its highest point since the Great Depression…
but, with a smile and a quip, President Reagan crushed Walter Mondale in the
election of 1984 after it had fallen back to a still-lofty 7.4%.
Most economists
cite the Misery Index as reflecting the status of Don Jones – and it may do
just that. However, such status can also
be noted by dividing the hourly wage (or, prior to 2006, the Labor Cost) by the
(official) unemployment rate. The 2013
table from last week’s DJI now looks like this…
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DJI WAGE/PRICE INDEX 2014 FEBRUARY TBA JANUARY 98.92 2013 DECEMBER 98.91 NOVEMBER 99.19 OCTOBER 98.79 SEPTEMBER 98.35 AUGUST 98.56 JULY 98.58 JUNE 98.72 MAY 99.05 APRIL 99.55 MARCH 98.64 FEBRUARY 98.61 JANUARY 100.00
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WAGE/HR. $ 10.34 $ 10.31 $ 10.30 $ 10.33 $ 10.31 $ 10.29 $ 10.30 $ 10.29 $ 10.30 $ 10.31 $ 10.32 $ 10.26 $ 10.23 $ 10.29 |
CPI (all) TBA 233.916 233.049 233.069 233.546 234.149 233.877 233.596 233.504 232.945 232.531 232.773 232.166 230.280 |
UNEMPMT. 6.7% 6.6% 6.7% 7.0% 7.2% 7.2% 7.2% 7.3% 7.5% 7.5% 7.5% 7.5% 7.7% 7.9% |
WAGE/UNEMP
INDEX TBD 1.562 1.537 1.475 1.432 1.429 1.431 1.410 1.373 1.375 1.376 1.368 1.329 1.303 |
Here, then, we see
the effects of the year’s recovery
on Don Jones… and it is
creditable (a gain of nearly twelve percent on the wage/unemployment index – or WUI for the year 2013).
Most of this is attributable to a drop of 1.2% in unemployment… Don Jones received only a two-cent
hourly wage increase for the year. Then, too, only the official
unemployment rate is counted despite the fact being that real unemployment, as measured by Debtclock,
has consistently been almost double the reported rate. Not to mention the devolution of full-time to
part time work or loss of benefits.
Still and all, the big picture shows
that a recovery is under way,
no matter how modest.
A fuller picture
of Don’s status cannot be drawn without factoring in inflation (as measured by
the CPI) and extending these findings back into time. Here… for the duration of the BLS listings of
hourly wages… are Don’s wage, labor cost and unemployment indices, coupled with
productivity (which the BLS defines as “the real value of output produced by a unit
of labor during a certain time”
and sets a baseline of 100.0 for the year 2009) and the CPI.
The business sector will take a grim solace
in noting that American productivity has risen by less than ten points on the
BLS index over a five year period from 2009-13; a meager gain which supports
(somewhat) the contention that Don Jones is lazy and overpaid and, therefore,
his replacement by eager Chinese is somewhat deserved. Of course there are wide productivity
variations from industry to industry, and… since the BLS makes no distinction between
productive, neutral and degenerate enterprises… their definition of “real
value” may be questioned. (Does a steep
increase in the productivity sphere owing to a rise in the value of certain
computer games like “Angry Birds” or “Candy Crush” mitigate an equal decline
among industries like steel, textiles or agriculture?) What about traffic tickets? – as the High Sheriff, State of Alabam!
decreed in this week’s syndicated serial installment
of “Entropy and Renaissance”… "We
have to do evaluations and the only way for evaluation of troopers is what kind
of product he puts out," said State Public Safety Director, Jim
Alexander.
Serious
persons will make serious arguments that a new standard has to be imposed but,
for the present, the Don Jones Index treats all enterprises, like all persons,
as equal.
CPI,
also, has come under fire from some quarters as being too cautious and not reflecting
the true risks of inflation and deflation.
But this is what we have to work with, and the DJI has used the primary
index as well as three sub-indices considered of major importance… food,
gasoline and medical care. For the
remaining lifespan of the Hourly Wage Index, then, the numbers (computed
quarterly by the BLS except for the CPI subcategories, computed yearly) are
these…
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DATE 2014 FEBRUARY JANUARY 2013 OCT/NOV JUL/AUG APR/MAY JAN/FEB 2012 OCT/NOV JUL/AUG APR/MAY JAN/FEB 2011 OCT/NOV JUL/AUG APR/MAY JAN/FEB 2010 OCT/NOV JUL/AUG APR/MAY JAN/FEB 2009 OCT/NOV JUL/AUG APR/MAY JAN/FEB 2008 OCT/NOV JUL/AUG APR/MAY JAN/FEB 2007 OCT/NOV JUL/AUG APR/MAY JAN/FEB 2006 OCT/NOV JUL/AUG APR/MAY JAN/FEB |
Hourly Wage $
10.34 $ 10.31 $ 10.29 $ 10.32 $ 10.29 $ 10.31 $ 10.18 $ 10.28 $ 10.21 $ 10.20 $ 10.24 $ 10.26 $ 10.25 $ 10.35 $ 10.39 $ 10.39 $
10.37 $ 10.33 $ 10.34 $ 10.36 $ 10.41 $ 10.39 $ 10.08 $
9.88 $ 10.02 $ 10.01 $ 10.09 $ 10.15 $ 10.13 $ 10.14 $ 10.12 11 $ 10.02 1 $ 10.05 XX X |
Labor cost TBA TBA 102.687 102.673 102.841 102.743 104.051 101.091 101.419 101.265 99.477 101.463 100.777 101.362 98.981 98.947 98.965 98.203 100.258 100.856 99.681 99.226 103.493 101.853 101.286 102.202 100.405 99.972 100.704 101.123 98.761 97.633 96.894 96.876 |
Productivity TBA TBA 106.922 106.594 105.718 105.194 105.059 105.587 105.044 104.747 104.365 103.517 103.545 103.133 104.004 103.569 102.919 102.527 102.182 100.991 99.416 97.501 96.786 97.359 97.093 96.087 96.825 96.471 95.389 94.634 94.699 94.168 94.763 94.866 |
CPI
- all TBA 233.916 233.546 233.596 232.531 230.380 231.317 229.104 230.085 226.665 226.421
225.922 224.906
220.223 218.711
218.011 218.009 216.687 216.177 215.351 213.240 211.143 216.573 219.964 214.823 211.080 208.936 208.299 206.686 202.416 201.800 203.500 201.500 198.300 |
CPI
– food 237.976 236.986 234.563 230.624 220.062 216.679 218.155 205.855 196.100 |
CPI-gas 287.827 283.805 286.748 281.852 256.443 225.223 146.644 257.792 198.800 |
CPI-medcare 432.765 430.057 421.774 407.909 393.616 380.302 367.301 357.745 340.000 |
Unemp. (off.) 6.6 6.7 7.2 7.6 7.6 7.8 7.8 8.2 8.2 8.2 8.8 9.0 9.1 9.1 9.5 9.5 9.9 9.7 10.0 9.5 9.0 7.8 6.5 5.8 5.8 5.0 4.7 4.7 4.5 4.6 4.4 4.7 4.7 4.7 |
Now,
that we can… with only a 3-5% loss of verisimilitude… we bid adieu to the
hourly wage indices and turn to the BLS “Labor Cost” stats. With these figures, we can reach back in time
to the aforementioned January 1, 1948 (although CPI records do not begin until
1950, and productivity stats until 1960.
Still and all, we have a half century of economic progress or regress to
consider – giving rise to trends that are likely to continue well on into the
21st century unless obstructed by some implacable force (like
government regulation).
The
Don Jones Index has assessed these figures on a yearly basis, back to Y2K, and
then every five years (with significant anomalies, such as the stagflation of
the 70’s and mass unemployment of the first Reagan administration noted). We have plotted the U.S. Labor Costs (USL)
against both productivity… to determine if Don Jones, employer, is paying Don
Jones, employee either too much or too little for what he produces… and against
the CPI, to determine the buying power of wage-earning Joneses.
First… productivity. And
surprise, surprise, surprise! (as Gomer Pyle was wont
to say)… the best of all times for workers (if one considers American workers
lazy and overpaid) began with the election of Ronald Reagan in 1980! Reagan… the workingman’s friend (if, of
course, he’d had a job)!
That’s
right! Throughout the 1960’s and 70’s,
paycheck increases for the labor force fell further and further behind their
measured productivity, bottoming out in the summer of 1965, when they received
only sixty cents’ return for every dollar produced. Thereafter, a crawling back towards parity
took place, but once Reagan and his supply-side policies came into office, Don
Jones’ paychecks swelled compared to what he produced – reaching their high point
under the first Bush administration.
Thereafter, a rough leveling of wages and productivity has taken place,
with the latter gaining ascendency since the recession beginning in 2008-9.
But
no such parity exists when Don Jones’ wages (or labor costs) are matched
against the CPI. Don’s dollars began
losing their buying power during the Nixon administration, and have been in
free fall ever since. Back in 1970, the
dawn of disco, the U.S. Labor index stood at nearly eighty percent of the CPI
index. Twenty years later, it was down
to about 60% and five years after that it dropped below half. This decline in purchasing power has been all
the more startling due to the rapid fall in costs of some high-tech and electronic
gadgets, and reflects an overweening inflation in the basics… food, gas and
medical care. Since the BLS and CPI
statistics were compiled without regard to social class, it is likely that the
99% are even worse off.
Here’s
the data… yearly statistics begin for January and CPI increases are for five
years (hence, divided by five) prior to Y2K.
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U.S. Labor Costs (USL) Base 8/15/2007(1) (with comparisons
to Productivity and CPI) |
Productivity (base 2009) |
CPI w. increase Unemployment (base 82-4) |
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USL index(2) USL v/ Prod. USL v/ CPI |
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2014 - 2013 -
102.743 97.67 44.59 2012 -
101.265 96.68 44.67 2011 -
101.362 98.28 46.03 2010 -
98.203 95.74 45.32 2009 - 99.226 101.77 47.00 2008 -
102.222 106.38 48.42 2007 -
101.123 106.86 49.96 2006 -
96.876 102.10 48.85 2005 -
93.798 100.11 48.98 2004 - 96.786 106.10 52.26 2003 -
91.684 105.82 50.46 2002 - 92.284 109.21 52.11 2001 - 92.456 115.40 52.80 2000 - 95.857 123.21 56.79 1995 - 83.747
123.01 55.72 1990 - 76.811 121.88 60.29 1985 - 66.436 115.00 62.97 1980 - 52.652 98.96 67.68 1975 - 37.702 78.25 72.36 1970 - 28.963 66.59 76.62 1965 - 23.599 61.35 74.92 1960 - 23.139 70.29 78.17 1955 - 20.278 75.66 1950 - 18.261 75.77 1948 (1) baseline of Jan. 1st (2)
see, also, hourly wages after 2006 |
105.194 104.747 103.133 102.527 97.501 96.087 94.634 94.866 93.671 91.225 86.641 84.497 80.115 77.800 68.083 63.020 57.771 53.208 48.184 43.495 38.466 32.919 |
6.7% 230.4
(+1.63%) 7.8% 226.7
(+2.95%) 8.3% 220.2
(+1.62%) 9.2% 216.7
(+2.65%) 9.7% 211.1 ( 0 ) 7.8% 211.1
(+4.25%) 4.9% 202.4
(+2.07%) 4.6% 198.3
(+3.99%) 4.7% 190.7
(+2.97%) 5.3% 185.2
(+1.93%) 5.7% 181.7
(+2.60%) 5.8% 177.1
(+1.14%) 5.7% 175.1
(+3.73%) 4.2% 168.8
(+2.24%) 4.0% 150.3
(+2.35%)* 5.6% 127.4
(+2.41%)* 7.3% 105.5
(+2.71%)* 6.3%
77.8 (+2.99%)* 6.3%(1)
52.1 (+2.76%)* 8.1%(2)
37.8 (+2.40%)* 3.9%
31.5 (+2.13%)* 4.9%
29.6 (+2.21%) * 5.2%
26.8 (+2.22%)* 4.9%
24.1
6.5% 3.4%
(3) * 5 year average (1) anomalous: 1982-3 (2) anomalous: 1975 (3) anomalous: Oct. 1949 |
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We’ll delve a little deeper next lesson. Meanwhile, Don had a so-so week (except if he
resided in the April snowbound upper Midwest)… finding a few more jobs, but
going deeper and deeper into debt. Just
like America.
Expect inflation to make a big, big noise
over the next few months. Sticker shock
is already beginning to show up in the lagging CPI statistics and, although
they claim gas prices are still down, a rude awakening will arrive, and
probably soon (see footnote (b) below. Bad weather (cold and drought) has meant
higher prices for fruits, vegetables and beef, and this trend will only
continue.
THE DON JONES INDEX
CHART of
CATEGORIES w/ VALUE ADDED to EQUAL BASELINE of 15,000.00
(REFLECTING…
approximately… DOW JONES INDEX of
June 27, 2013)
The sum of good things, less the sum of bad things,
equals the gain (or loss) to Don Jones.
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DON JONES’ PERSONAL ECONOMIC
INDEX (45% of total Index points) |
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DON 4/16/14 |
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1518.37 |
1518.37 |
http://www.tradingeconomics.com/united-states/wages 10.34 nd |
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http://stats.oecd.org/Index.aspx?DataSetCode=IDD .038 nd
(2010) |
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Official # |
http://www.usdebtclock.org/ 10282 10251 |
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http://www.usdebtclock.org/ 19329 19279 |
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Dow Jones index 16424.85 |
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http://www.realtor.org/topics/existing-home-sales -0.4 nd
http://www.realtor.org/research-and-statistics 189 nd |
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http://www.newyorkfed.org/research/data
indicators/household index.html
and http://www.usdebtclock.org/ 51670 51682 51696 |
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http://www.bls.gov/news.release/cpi.nr0.htm +0.1 (feb) nd +0.2 |
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http://www.bls.gov/news.release/cpi.nr0.htm +0.4 nd +0.4 |
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153.83 |
153.83 |
http://www.census.gov/foreign- trade/statistics/highlights/congressional.html 190.4F |
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2327F |
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141.55 |
141.55 |
http://www.census.gov/foreign-trade/statistics/highlights/congressional.html 423F |
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http://www.usdebtclock.org/ 5894 5901 5908 |
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It’s supposed to be spring. Taxes are supposed to have been paid. So why is it still snowing? |
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Much as we’d like to blame God, schoolbus crashes, sinking Korean ferries and more school
shootings are acts of man. |
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The school knifers and Ft. Hood snipers may be homegrown, but it’s
still terror. Ask the survivors &
victims’ families. |
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No reports, yet, of Crimean pogroms. On the other hand, see below. |
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Don Jones
is probably going to react to the political hit pieces beginning to surface,
but they haven’t
hit bottom yet. |
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Russian jets buzzing American
warships in the Black Sea? Sounds
enough like a prelude to WW3 |
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Spring took the week off and
gloomy wintery weather hung over even more gloomy
world affairs. |
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The Don Jones Index for the week of
March 12th through March 18th was UP .75 points.
Comments, complaints, donations (especially SUPERPAC
donations): feedme@generisis.com
(b) From the Bureau
of Labor Statistics: “The food index rose 0.4
percent in March, the same increase as in February. Four of the six major grocery
store food groups increased in March, three of them sharply. The index for
meats, poultry, fish, and eggs posted the largest increase, rising 1.2 percent,
the same increase as in February. The index for dairy and
related products rose 1.0 percent in March, its fifth consecutive increase.
The index for fruits and vegetables, which rose 1.1 percent in February, rose
0.9 percent in March. The index for fresh fruits rose 3.1 percent, while the
index for fresh vegetables declined 1.6 percent. The index for cereals and
bakery products rose 0.2 percent in March, while the indexes for nonalcoholic
beverages and for other food at home both declined. The food at home index has
risen 1.4 percent over the last year, its largest 12-month increase since
August 2012.”