Bill Bonner

Last week, it looked as though a tide might have turned. The Dow fell another 97 points on Friday. And the 10-year US Treasury note rose to yield less than 3%.

What will happen next? We don’t know. But it wouldn’t be a bad thing if investors took a beating. At least, the rest of the country would probably like to watch.

Yes, dear reader, pity the proletariat!

While investors have recovered most of their ’08-’09 losses, the poor working stiff is still getting it in the chops. He doesn’t own stocks. He owns a house. And housing just keeps going down.

His earnings have been going down too.

He’d better get used to it. If we’re right, he won’t have to worry about just a ‘double-dip’ but about a triple-dip…a quadruple dip…and maybe even a quintuple-dip. Forget recovery. What we’re talking about is an on-again, off-again slump that will last for a decade or more. Heck, it’s already in its fifth year!

Why so?

Everything that has happened over the last 4 years confirms that our “Great Correction” hypothesis was right. This economy is going through major adaptations, adjustments and rehabilitation. And by the look of things, it’s going to be in an out of rehab for a long time.

The latest reports show:

1) No real growth
2) No real recovery
3) No end to the unemployment problem
4) No bottom in the real estate crisis
5) No benefit from QE2

The numbers that came out on Friday were just more bullets shot into a corpse. We knew the economic recovery was dead. But the non-farm payroll numbers killed it again anyway.

The Labor Department reported 54,000 new jobs in May. If this were a real recovery, the number would be over 150,000. Instead, this number shows that the actual number of people with jobs is increasing, not decreasing.

So, the people who live by the sweat of their brow are left idling on the seats of their pants. They have no jobs. And the hope of finding a decent job is receding.

Not only are there few jobs, real wages are going down too. And never before have American working classes taken home such a small portion of national income.

Here’s more from USA Today:

Squeezed on both sides by stagnant wages and rising prices, consumers believe the chances of bringing home more money one year from now are at their lowest in 25 years, according to analysis of survey data by Goldman Sachs.

Goldman’s economist Jan Hatzius looked at the University of Michigan and Thomson Reuters poll, which asks consumers whether they believe their family income will rise more than inflation in the next 12 months. Hatzius applied a six-month moving average to smooth out the data and found that wage pessimism is at its lowest in more than two decades.

“Households are already very pessimistic about future real income growth,” wrote Goldman’s economist to clients. “A slowdown in job growth would presumably translate into a further deterioration in (expected and actual) real income growth. This would heighten the downside risks to our current forecast that real consumer spending will grow 2.5 percent to 3 percent over the next year and might call for another downward revision to our forecast for US GDP growth in 2011 and 2012.”

Real hourly wages have dropped 2.1 percent on an annualized basis over the past six months, a rate of decline not seen in 20 years, according to Goldman. This analysis is backed up by the other most-watched consumer survey from the Conference Board, which indicated earlier this week that the proportion of consumers expecting their incomes to increase was below 15 percent in May.

“The crawl out of this economic ditch is going to be long and slow,” said Patty Edwards, chief investment officer at Trutina. “Even if they’re employed, many consumers aren’t earning what they were two years ago, either because they’re in lower-paying jobs or not getting as many hours.”

We’re not going to get carried away by envy and stuff-lust. Not here at The Daily Reckoning.

But what about other people? The base emotions are always present. Every once in a while they get the better of us.

Walking to our pick-up after work yesterday, we saw a bumper sticker on a parked car:

90% of the wealth is owned by 10% of the people
When will you get your share?

Who knows what it meant? We hoped the driver would show up so we could ask.

But the germs of jealousy and class hatred must be growing. And you can hardly blame the poor proles. They haven’t had a real pay raise since the Carter Administration. They’re getting a little tired of waiting. And now their earnings are going down rapidly.

And it’s not going to get better anytime soon. Because, if we’re right, we’re already in a double-dip recession. That is, properly adjusted for first quarter consumer price inflation, the economy is not growing at a 1.8% annual rate; it’s shrinking at 1.8%.

And if we’re right, this double-dip will be followed by a period of weak growth…followed by a triple dip. And then a quadruple dip. And then a quintuple dip.

Why all the dips?

Stay tuned.


Bill Bonner
for The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success in numerous industries. His unique writing style, philanthropic undertakings and preservationist activities have been recognized by some of America's most respected authorities. With his friend and colleague Addison Wiggin, he co-founded The Daily Reckoning in 1999, and together they co-wrote the New York Times best-selling books Financial Reckoning Day and Empire of Debt. His other works include Mobs, Messiahs and Markets (with Lila Rajiva), Dice Have No Memory, and most recently, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. His most recent project is The Bill Bonner Letter.

  • David L

    The Labor Department reported 54,000 new jobs in May. If this were a real recovery, the number would be over 150,000. Instead, this number shows that the actual number of people with jobs is increasing, not decreasing.

    Isn’t that stated backwards? Actual number of people with jobs is decreasing, not increasing.

  • The InvestorsFriend

    I predict a bounceback in the June figures. We took a hit from Tornadoes and the Japan earthquake.

    Now with the clean-up under way, June will show better numbers.

  • Kenny the JMR

    Jealousy! Class hatred! Who is stupid enough to swallow that line? Let’s do remember that this is the continuing saga of thieves/liars vs. honest working people and honest people are not jealous of thieves. They may dress well, live in a big house, hold high political office, or even work for Agora Financial. But a thief is still scum who garners no jealousy and lots of hatred.

  • Kenny the JMR

    Why does this comment section not function?

  • Scott Walker & the stinky pachaderms

    “90% of the wealth is owned by 10% of the people
    When will you get your share?

    Who knows what it meant? We hoped the driver would show up so we could ask.”

    It means, you’re screwed.

  • Pizzo

    So, unemployment is back up over 9% .. and that’s just the official number that counts those applying for unemployment insurance over the last four months. The real number is closer to 20%, the highest since the last Great Depression.

    If Obama wants to get himself re-elected next year he damn well better get those number down, and fast. So far bailing out America’s financial sector hasn’t done the job. We could have told him it wouldn’t, and it didn’t. All it did was encourage the bastards.

  • Rick Scott & your wife’s uterus

    What the USA needs is a modern FDR national works program. A modern-day Works Progress Administration, WPA, is perfect.

    Here in Florida, we are going to do drug testing.

    And then we are going to regulate every female uterus in this state.

    That should put everyone back to work.

  • John Anthony Walker & the KGB orchestra

    I didn’t realize that there were any other kinds of uterus besides female ones.

  • merc

    Just a double dip. What about the size of the u.s debt, and the fact that qe 2 is about to end, and the european banking crisis I think your articles are running out of puff faster than the american economy, and that truly is scary

  • Bruce Walker

    Once we get to the skinny dip, I presume The Daily Reckoning will issue the all-clear signal. Meanwhile, I guess we all get to sit back and watch the economy do the rope-a-dope for a few rounds.

  • gman

    “‘90% of the wealth is owned by 10% of the people
    When will you get your share?’

    Who knows what it meant?”

    it means that those 10% of the people have reached 90% of their goal.

    when property rights become “everything is mine and you are all minimum-wage tenants” then property rights get rescinded.

  • The InvestorsFriend

    “90% of the wealth is owned by 10% of the people
    When will you get your share?’

    Sadly, maybe you already got your share. Maybe that’s it! Maybe that’s all you’re getting!

  • gman

    “Sadly, maybe you already got your share. Maybe that’s it! Maybe that’s all you’re getting!”

    make sure you have plenty of cake on-hand ….

  • R.U. Kidding

    “property rights get rescinded”

    Better not. In modern terms that’s usually a formula for very large craters where cities used to be…


  • Mizzle

    The bailouts had nothing to do with saving the economy. They had everything to do with saving the banks and the political class.
    None of it was ever about jobs or job creation. The USGov always says the same thing; it does just enough to stop the lynch mobs from forming.

  • Fred

    I get a kick of Goldman Sachs being quoted regarding the mess they played such a crucial role in creating.

  • M

    With the money Bushbama spent on the bailouts, every citizen could have been given a check directly. Then we could have used that money to pay off our debts…then the banks would have their money, the people would be in debt less and everyone would be better off. But no, all the money went to the banisters who now not only have our self-made debt, the titles to our homes, et., now they even own the money the government used to bail them out. What a racket!
    Far from helping, the stimulus only hurt the working classes by medicating us with poison.

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