GOOD AND BAD ECONOMIC NEWS YOU MAY NOT HAVE HEARD

The mainstream media continue to downplay extraordinarily positive economic news, not to mention the successes of the policies of the Biden Administration and congressional Democrats. In case you didn’t hear this, the number of Americans needing unemployment benefits fell to a 52-year low, i.e., the lowest number since March 1970. The unemployment rate is quite low at 4.0% and employers added 467,000 jobs in January. The estimates of job growth in November and December were revised upward by a combined 709,000 jobs. (Note: In the Boston Globe, this great economic news was not presented until page 6 of the second section and only warranted a short article, written by the Associated Press, that was about half of one column in length.) [1]

Employers added a record 6.4 million jobs in 2021, in good part due to actions of Democrats and the Biden Administration. Spending authorized by the American Rescue Plan Act (ARPA), which was passed in March, boosted economic activity. Vaccination programs and other steps to control Covid allowed businesses to reopen and workers to go back to work.

Economic growth for all of 2021 was 5.7%; the highest since 1984. This continues the historical pattern over the last 100 years of the economy performing better under Democratic Presidents than under Republican ones. (See this previous post for more details.)

There are two pieces of bad news from recent economic data. One is that consumer prices are increasing; more on that below. The other is that while unemployment is down overall, unemployment is higher and falling more slowly for non-White workers than for White workers. This is especially true for Black women. As-of the end of 2021, unemployment rates and their declines since October were as follows: [2]

·      White workers:                    3.2% unemployed (down 20%)

·      Asian American workers:    3.8% unemployed (down 11%)

·      Latino / Hispanic workers: 4.9% unemployed (down 14%)

·      Black workers:                     7.1% unemployed (down   9%)

Consumer prices have increased 7.5% over the last year; the highest rate since 1982. Although Covid-related supply chain problems and growing consumer demand are responsible in part, growing attention is focusing on price gouging by large corporations. The extreme capitalism that our policies have allowed to flourish over the last 40 years has resulted in a dramatic decrease in competition in many industries and markets. (See this previous post for more details.) The lack of competition and monopolistic control of markets has allowed huge corporations in many industries to raise prices and increase profits more than a competitive market would allow (i.e., to engage in price gouging [3]). This has been evident in the prices of gasoline, food, and many consumer products due to large, monopolistic corporations in everything from trans-oceanic shipping to oil and gasoline production to food production.

Analysis of car prices shows that dealers are engaging in price gouging in the face of growing demand and limited supply. Manufacturers’ prices to dealers for new cars are up only 2% over a year ago but consumers are paying 12% more than they did a year ago. Edmunds, a car-shopping research company, found that 82% of consumers paid more than the manufacturers’ suggested retail price (MSRP) in January 2022, compared with just 3% in 2021 and almost no one in 2020. Profits for large car dealer networks have, not surprisingly, skyrocketed. [4] Prices for used cars and trucks are up 40.5% from a year ago. This is another indication that car dealers are price gouging. [5]

The Federal Trade Commission is investigating the market behavior of the large oil and gas corporations. [6]Gasoline prices in January (i.e., before the Ukraine war) had jumped 40% over a year earlier to $3.49 a gallon from $2.49. Natural gas prices were almost four times what they were a year ago. Costs are not driving these price increases; the oil and gas corporations are taking advantage of the pandemic to increase profits by price gouging.

The Federal Maritime Commission is examining the large shipping corporations for price gouging. There are three alliances of nine trans-oceanic shippers that transport 80% of all seaborne cargo (up from 40% in 1998). The price of transporting a standard shipping container from China to the U.S. has increased from about $2,000 before the pandemic to $20,000 last August and roughly $14,000 in January. The shippers’ profits in 2020 were around $25 billion; it’s estimated that their profits were 12 times as much, $300 billion, in 2021. This is a clear indication that the increases in shipping prices are price gouging. [7]

As a final example, the handful of huge slaughterhouses and meatpackers that control the market for beef, poultry, and pork have tripled their profit margins during the pandemic. The Justice Department is investigating them for price fixing. The four biggest meatpacking corporations (Cargill, JBS, Tyson Foods, and National Beef Packing Co.) control over 70% of the market for beef. The price of beef is up 16% over the last year, significantly higher than the already high rate of increase of 7.5% for food in general. Cattle ranchers filed an anti-trust lawsuit against the four big meatpacking corporations in 2019; food retailers and wholesalers sued them in 2020. Ranchers now receive only 39% of the retail price of beef; down from 45% in 2017. JBS previously paid $52.5 million to settle a lawsuit over beef price fixing. [8] Again, these are clear signs that the increases in meat prices are price gouging.

[1]     Ott, M., 2/25/22, “Jobless aid numbers now lowest since 1970,” The Boston Globe from the Associated Press

[2]     Broady, K., & Barr, A., 2/11/22, “December’s jobs report reveals a growing racial employment gap, especially for Black women,” Brookings (https://www.brookings.edu/blog/the-avenue/2022/01/11/decembers-jobs-report-reveals-a-growing-racial-employment-gap-especially-for-black-women/

[3]     Price gouging refers to when businesses take advantage of spikes in demand or shortages of supply and charge exorbitant prices for necessities, often after a natural disaster or another type of emergency.

[4]     Elizalde, R., 2/23/22, “Car prices are above MSRP because of price gouging rather than inflation,” Forbes (https://www.forbes.com/sites/raulelizalde/2022/02/23/car-prices-above-msrp-reflect-price-gouging-rather-than-inflation/?sh=61d09cabb60a)

[5]     Shen, M., 2/13/22, “Used cars cost 40.5% more than last year as gas prices rise. New car prices also climbing,” USA Today

[6]     Tankersley, J., & Rappeport, A., 12/25/21, “As prices rise, President Biden turns to antitrust enforcers,” The Boston Globe from the New York Times

[7]     Khafagy, A., 2/2/22, “The hidden costs of containerization,” The American Prospect (https://prospect.org/economy/hidden-costs-of-containerization/)

[8]     Puzzanghera, J., 2/19/22, “Why are beef prices so high? Some ranchers and White House say it’s more than just inflation,” The Boston Globe