Bankrupt job growth

New employment numbers are out today:

Nonfarm payroll employment increased by 262,000 in February and the unemployment rate edged up to 5.4 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job growth occurred in both goods-producing and service-providing industries.

In February, both the number of unemployed persons, 8.0 million, and the unemployment rate, 5.4 percent, returned to their December levels after dipping in January.

So even though 262k people found jobs last month, more people became unemployed as well. It's a confusing dichotomy.

But it's not just me that confused. Consumer sentiment is down, as well as the dollar, while the stock market is rejoicing at last check. But even investment directors don't seem long term pleased:

Paul Nolte, director of investments at Hinsdale Associates, said the latest numbers cap off a good week of data.

"Taken as a whole, the numbers this week confirm that the economy is still on pretty good footing and that growth in still in the three to three-and-a-half percent range, which is what a lot of people are looking for. We're not to the slow-down yet," Nolte said. (my emphasis)

That hardly seems encouraging, does it? Stirling Newberry at kos explains why:

The correct interpretation is that the economy is at equilibrium, and that rises in employment are bought by increased material prices. We aren't seeing a rise in real productivity, but the effects of falling wages and easy money.

What this means is that the continued accomodative stance of the fed - the are having to work their way to get down to neutral from accomodative- is driving a push of hiring. Where the jobs came from is equally interesting: most of the good producing jobs were in construction, 30K of 55K added. This says that the American economy this cycle is going through the same private residence construction boom that South Korea took to dig its way out of its post-financial crisis bust in the late 1990's and which England took starting in 1999.

This wave of private construction is, by definition, a finite cycle. It produces goods that will be in use for 30 to 50 years. One can get one of them in a generation. That borrowed money is driving the rest of the economy. As people drive farther to get to bigger homes farther from their jobs, and as building - which has not gotten more energy dense per GDP as fast as the rest of the economy - they burn more oil. Oil prices rise, and gasoline with it.

There are, and are going to be, thousands of partisan ways to spin this, but the raw fact: of a US private residence boom funded by borrowed money, should not be in doubt.

And if there is doubt Americans are borrowing at a record pace:

If consumers are the engine of America's economy, then debt is the fuel driving Americans into the red as never before. Consumers owe a whopping $9.9 trillion dollars. It is affecting all generations; from the newly-minted college grad - who owes an average of $20,000 in student loans - to the baby boomers contemplating retirement with jumbo mortgages.

"One of the implications of huge debt loads is that millions of Americans literally can not afford to retire," says bankruptcy expert and Harvard Law School professor Elizabeth Warren.

Warren calls this record-high debt "the dark underbelly of the American economy. This isn't about over-consuming, this is about the basics."

So credit companies should be relatively happy now that things are the way they are. They are loaning record amounts which means they should reap record returns.

But certainly this borrowing bubble will burst. People cannot continue to borrow more money to pay off more debt. And I would think everyone in the credit industry sees it coming. Which would explain massive lobbying for passage of the latest bankruptcy bill, wouldn't it?

The bill's central provision would require debtors to pass a "means test" to determine whether they had adequate assets to pay back at least some of their debts. Those with incomes below the median level in their state would be allowed to apply for debt forgiveness, but those making above the median would have to develop a repayment plan. The median annual household income in California is about $50,000.

Let me tell you this. I live in California, and my household makes more that $50,000. Even though it does, we are struggling to find a house we can afford. And that's with no kids. G-d forbid an unforeseen catastrophe occurs that causes us to incur a large amount of debt. Their would be no escaping under the bill currently in place.

I understand that those who can afford to pay should. And I agree with that if the debt is of their own causing. But illness, fraud, or catastrophe should not turn the American working class into slaves to the credit industry. Their dreams of an "ownership society" will be mailed off to any number of creditors every month.

Don't believe me? Ask the experts:

"Most of the credit cards that end up in bankruptcy proceedings have already made a profit for the companies that issued them," said Robert R. Weed, a Virginia bankruptcy lawyer and onetime aide to former Republican House Speaker Newt Gingrich.

"That's because people are paying so many fees that they've already paid more than was originally borrowed," he said.

In addition, some experts say, the changes proposed in the Senate bill would fundamentally alter long-standing American legal policy on debt. Under bankruptcy laws as they have existed for more than a century, creditors can seize almost all of a bankrupt debtor's assets, but they cannot lay claim to future earnings.

The proposed law, by preventing many debtors from seeking bankruptcy protection, would compel financially insolvent borrowers to continue trying to pay off the old debts almost indefinitely.

"Until now, the principle in this country has been that people's future human capital is their own," said David A. Moss, an economic historian at Harvard University. "If a person gets on a financial treadmill, they can declare bankruptcy and have what can't be paid discharged. But that would change with this bill."

Democrats have little hope of stopping this bill outside the filibuster. And if they do, Republicans will claim obstructionist Democrats are standing in the way of reform. On this issue, I say let them. Will Republicans really try and claim that Democrats oppose GOP reforms that would hamper the middle class? I think this is one moral fight that the Democrats could win. And it would show the people what we stand for, too.

At this point, however, I'm doubtful that filibuster will occur. I would encourage Senators across the country to vote no on this bill. The days of financial servitude should be long gone in America. Let's not pass a bill that will usher that era back in.