America’s ongoing economic problems help put Australia’s problems in perspective.
Australia’s economic debate is all about trying to slow a hot economy and sharing the resources bonanza without wasting it; America’s central debate is the recessed economy with the consumer overstretched by falling real wages, job losses and plunging house prices.
Make no mistake, no matter how the “better than expected” loss of 20,000 US jobs last month is spun (a loss of 75,000 jobs were forecast) — the figures are bad news for the US economy.
First all there were job losses in April, not gains: it means over 260,000 people have not lost their jobs in the first four months of 2008. But for those still in work, the pressures are rising: thousands of people are losing their homes through foreclosures, paying higher interest rates, higher petrol prices or higher food costs. The lot of the ordinary American in work is worsening by the month.
The reality of the March quarter national accounts and the jobs figures for April tell a story of wage rises falling behind inflation, at a time when the US doesn’t need real wage cuts. The number of people working part time rose to 5.2 million in April from 4.9 million in March. In percentage terms, the number of involuntary part time employees was the most in 13 years.
The average weekly pay for US workers rose 3% over the last year, to $US602.56. But in inflation-adjusted terms, average weekly wages have fallen 1.3% percent since late 2006. Average hourly earnings in April rose a whole one US cent, according to Friday’s figures to $US17.88. When combined with the fall in the average number of hours worked average weekly earnings fell $US1.45.
Outside of the professional and business services segment, US manufacturing shed 46,000 jobs, as the construction sector lost a total of 61,000 jobs. And it’s going to worsen, no matter what Wall Street claims.
While the US economy grew at an annual rate of 0.6% in the March quarter, unchanged from the slump in the December three months, figures out late last week for April show US car sales slumping 14% in the month. It was the the lowest annual rate in a decade as weak consumer confidence and rising gas prices hit the industry’s most profitable vehicles: the pick-up trucks and sports utility vehicles.
General Motors, Ford Motor Co, Chrysler saw sales fall by more than forecast: GM sales fell 23%, Ford 19%, and Chrysler nearly 30% as buyers ignored gas guzzlers. But so deep is the malaise among US consumers that the makers of more fuel efficient cars also struck trouble: Toyota saw sales fall 5%, and Nissan 2%.
GM has already announced cuts of around 150,000 vehicles a month and the laying off of several thousand workers: Ford wants to cut 1300 employees by paying out their contracts.
Australia’s economic problems have a long way to go to the match the US.