Strong November Jobs And Earnings Report Gives Corporate Media Rooting For A Recession A Sad

Wall Street and corporate media are rooting for the Federal Reserve to cause a big spike in unemployment and even trigger a recession as the only means to tamping down inflation.

Corporate media rarely reports on how more than half the rate of inflation is due to corporate price gouging to increase profits, make stock buy backs, and pay dividends to the investor class aka the predator class.

Just look at today’s reporting decrying the fact that the economy continues to add jobs and workers’ wages continue to rise, trying to convince you that this somehow is a bad thing.

Breaking News: Hiring in the U.S. continued to exceed expectations in November as employers added 263,000 jobs and wages jumped.https://t.co/1sd5VZkGYJ

— The New York Times (@nytimes) December 2, 2022

Despite high inflation, the slowing but still-growing labor market remains one of the sturdiest pillars in an otherwise confounding economy, according to the latest data released Friday by the Bureau of Labor Statistics.https://t.co/cOrTafeUTO

— The Washington Post (@washingtonpost) December 2, 2022

CNBC reports, Payrolls and wages blow past expectations, flying in the face of Fed rate hikes:

Job growth was much better than expected in November despite the Federal Reserve’s aggressive efforts to slow the labor market and tackle inflation.

Nonfarm payrolls increased 263,000 for the month while the unemployment rate was 3.7%, the Labor Department reported Friday. Economists surveyed by Dow Jones had been looking for an increase of 200,000 on the payrolls number and 3.7% for the jobless rate.

The monthly gain was a slight decrease from October’s upwardly revised 284,000.

The numbers likely will do little to slow a Fed that has been raising interest rates steadily this year to bring down inflation still running near its highest level in more than 40 years.

In another blow to the Fed’s anti-inflation efforts, average hourly earnings jumped 0.6% for the month, double the Dow Jones estimate. Wages were up 5.1% on a year-over-year basis, also well above the 4.6% expectation.

Futures tied to the Dow Jones Industrial Average plunged following the report, falling more than 400 points as the hot jobs report could make the Fed even more aggressive.

Leisure and hospitality led the job gains, adding 88,000 positions.

Other sector gainers included health care (45,000), government (42,000) and other services, a category that includes personal and laundry services and which showed a total gain of 24,000. Social assistance saw a rise of 23,000, which the Labor Department said brings the sector back to where it was in February 2020 before the Covid pandemic.

Construction added 20,000 positions, while information was up 19,000 and manufacturing saw a gain of 14,000.

On the downside, retail establishments reported a loss of 30,000 positions heading into what is expected to be a busy holiday shopping season.[This number will be revised in future reports.] Transportation and warehousing also saw a decline, down 15,000.

This last number came mostly from one company, Amazon. Amazon plans to lay off more than 10,000 workers. Its CEO just defended the hiring spree that caused the cuts: “Amazon isn’t sorry about years of explosive growth and overhiring—even as it kicks off the largest job-cutting campaign in its history.” That would be “Rocket Man” Jeff Bezos, who also owns the Washington Post.

The House Committee on Oversight and Reform reported last month, Subcommittee Analysis Reveals Excessive Corporate Price Hikes Have Hurt Consumers and Fueled Inflation, While Enriching Certain Companies:

(Nov. 4, 2022)—Today, Rep. Raja Krishnamoorthi, Chairman of the Subcommittee on Economic and Consumer Policy, released a staff analysis entitled “Power and Profiteering:  How Certain Industries Hiked Prices and Drove Inflation,” which details how certain corporations have engaged in excessive price hikes, raking in record profits while U.S. consumers have faced high inflation.

“Today’s analysis reaffirms what an overwhelming 80% majority of Americans already recognize according to a recent poll:  under the guise of inflation, certain corporations excessively hiked prices far beyond what their costs necessitated, further driving inflation.  As American corporations report their highest profit margins the United States has seen in over seventy years, executives of leading companies are admitting on earnings calls that they’re taking advantage of inflation.  One executive argued that ‘a little bit of inflation is always good in our business’ while another admitted that his company’s prices wouldn’t fall with decreasing costs, stating ‘we don’t reduce prices on the back end of these increases.’  It is unacceptable that certain companies and industries are engaged in extreme price hikes under the cover of inflation.  Americans understand this is happening, and they want it to stop.  We have an obligation in Congress to shine light on this practice, which is exactly what today’s analysis does,”  said Chairman Krishnamoorthi.

On September 22, 2022, the Subcommittee held a hearing that examined evidence of the inflationary effects of corporate pricing decisions.  Recent economic studies and the Subcommittee’s analysis of corporate financial information demonstrate that certain corporate pricing decisions have played a key role in expanding corporate profit margins and driving inflation, which was already elevated due to supply chain disruptions caused by the pandemic, Russia’s unjustified and illegal war in Ukraine, and other factors.

Below are key findings from the staff analysis:

• • • Consumer prices began to rise in early 2021 due in part to a strong pandemic recovery and supply chain disruptions.  Prices began to rise in the United States in early 2021 as the economy started to fully reopen due to the widespread availability of coronavirus vaccines and the lifting of pandemic restrictions.  Supply chain disruptions—especially following Vladimir Putin’s illegal invasion of Ukraine—account for further inflation, but these factors do not account for all recent price increases.
    • Certain corporations are using the cover of inflation to raise prices excessively, resulting in record profits and profit margins.  Beginning in 2021, certain corporations began enjoying record profits and profit margins—and continue to do so today.  The Subcommittee’s analysis of financial information from a sampling of the largest corporations in several industries shows massive increases in profits between 2019 and 2021:
    • Three of the five largest companies in the shipping industry saw profits rise by 29,965%;
    • The two largest public companies in the rental car industry enjoyed a profit increase of 597%;
    • Four of the largest public companies in the meat processing industry saw profits go up by 134%; and
    • Four of the ten largest public companies by market cap in the oil and gas industry had profits rise by 62%.

Over the same period, profit margins increased by 201% among the companies analyzed in the shipping industry, by 262% among the companies analyzed in the rental car industry, and by 53% among the companies analyzed in the meat processing industry.

• • • Corporate statements confirm that certain corporations are seeking record profits.  Statements from corporate executives in certain industries show they are exploiting news about inflation to raise prices even more than necessary to cover costs.  For example:
    • “[A] little bit of inflation is always good in our business.”  (Kroger, June 18, 2021)
    • “[W]e’re actually pricing to recover all of those inflationary impacts, just as we’ve done in the past.  So you’ve seen us move retail prices up.  As inflation has moved up mid-single digits, our pricing has moved. . . . And as I’ve said before, inflation has been a little bit of our friend in terms of what we see in terms of retail pricing.  [F]ollowing periods of higher inflation, our industry has historically not reduced pricing to reflect lower ultimate cost.”  (Autozone, May 25, 2022)
    • “[O]ur total pricing actions are forecasted to more than offset raw material and delivery cost increases.  We are closely monitoring supply costs and other inflation, and we’re prepared to implement further increases as necessary. . . . [W]e don’t reduce prices on the back end of these increases [in underlying costs].”  (HB Fuller, June 23, 2022)
    • Recent economic studies make clear that record corporate markups, profits, and profit margins contributed to—and continue to contribute to—ongoing inflation.  Studies by the Economic Policy Institute and Roosevelt Institute demonstrate that profits contributed more to price growth in the United States from mid-2020 through the end of 2021 than at any other point from 1979 to the present—and continue to contribute markedly today.  This is especially true in highly concentrated industries.
    • The American people—echoing the economic data and statements from corporate leaders—recognize that corporate pricing decisions are contributing to inflation.  A recent poll found that 80% of registered voters view corporations “raising prices to make record profits” as a cause of inflation.

Click here to read the staff analysis.

This followed the June study from the Roosevelt Institute, Prices, Profits, and Power: Corporate America and Inflation (intro):

Today, inflation is the key economic concern for most Americans. That’s especially true for lower-income households and communities of color, who spend a greater proportion of their budgets on basic necessities like rent, gas, and food. Economists have proposed and debated three explanations for why inflation has been so high—changes in demand, supply, and market power—yet how to understand and respond to inflation is still in question.

A new Roosevelt Institute brief, “Prices, Profits, and Power: An Analysis of 2021 Firm-Level Markups,” finds that markups (essentially the difference between sales and marginal costs) and profits, both before and after taxes, skyrocketed in 2021 to their highest recorded level since the 1950s. Further, firms in the US increased their markups in 2021 at the fastest annual pace since 1955, especially at the very top of the distribution.

Co-authored by Mike Konczal (director, macroeconomic analysis) and Niko Lusiani, (director, corporate power), the brief concludes that the evidence of this unusually and suddenly high jump in markups fits all of the three main stories of inflation being debated—that inflation is related to changes in demand, supply, and market power. This is because:

• • • the broad markup increases point to a demand side of the story;
    • a historically unique industry-specific movement of markups points to a supply story; and
    • pre-pandemic markups are associated with an increase in markups during 2021, an indication that market power is at play.

Insight from the authors

“We found that a 10 percent increase in size-adjusted pre-pandemic markups is associated with a 1.6 to 2.7 percent increase in 2021. Markups this high mean there is room for reversing them with little economic harm and likely societal benefit. To tackle inflation, we need an all-of-the-above administrative and legislative approach that includes demand, supply, and market power interventions,” said Konczal.

“How high companies can increase their sales up and above their costs also matters for the economy more generally because these markups distribute economic gains from workers and consumers to firms and shareholders. This is especially the case when almost 100 percent of these firms’ earnings derived from markups are distributed upward to shareholders rather than retained and reinvested,” said Lusiani. “Making corporations once again price-takers rather than price-makers will help bring down prices, and in time lead to a more equitable, innovative economy.”

The Roosevelt Institute report was presented to Congressional committees in September and October. Congresswoman Katie Porter (D-CA) used her trusty white board to explain how corporate greed is responsible for over half the rate of inflation.

Unfortunately too many voters saw fit to put the lickspittle lackeys of Wall Street and wealthy plutocrats in control of Congress, where nothing will be done about excessive market concentration, anti-competitive practices, and unlawful price gouging and price fixing by global corporations for the next two years.

We need another era of “trust busting” of monopolies to reduce the market concentration of global corporations, restore competition in the marketplace, and to strengthen and enforce existing antitrust laws against price gouging, price fixing, and unfair competitive practices. But this will now have to wait until 2014 when voters can wake up and elect more Democrats to Congress.