The Obama Economy

By Peter S. Goodman of the New York Times

*  *  *

Not long ago, overtime was a regular feature at the Ludowici Roof Tile factory in eastern Ohio. Not anymore. With orders scarce and crates of unsold tiles piling up across the yard, the company has slowed production and cut working hours, sowing worry and thrift among its workers.

"We don't just hop in the car and go shopping or get something to eat," said Kim Baker, whose take-home pay at the plant has recently dropped to $450 a week, from more than $600. "You've got to watch everything. If we go to town now, it's for a reason."

Throughout the country, businesses grappling with declining fortunes are cutting hours for those on their payrolls.

Self-employed people are suffering a drop in demand for their services, like music lessons, catering and management consulting.

Growing numbers of people are settling for part-time work out of failure to secure a full-time position.

A stealth force

The erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline, which has already spread from housing and finance to other important areas of the economy.

Official unemployment has risen only modestly - to 5.1% - but the winnowing of wages and working hours for those still employed has become a primary cause of distress, pushing many more Americans into a downward spiral, economists say.

* PLUS... LET'S BE REAL... THE 5.1% NUMBER IS TOTALLY PHONY.

(*SPITTING ON THE GROUND*)

Moreover...the nation may well be on the verge of a recession, if not already in one.

* AMERICA HAS BEEN IN RECESSION SINCE 2007. NOT "TECHNICALLY" - BUT IN TERMS OF WHAT MOST OF US PERCEIVE.

Last month, the hours worked by those on American payrolls dropped, compared with six months earlier, according to an index maintained by the Labor Department. The last time the index moved into negative territory was February 2001, when the economy was on the doorstep of recession. A similar slide emerged in August 1990, one month into what proved an even more severe downturn.

From March 2007 to March of this year, the average workweek reported in the private sector slipped slightly to 33.8 hours, from 33.9 hours, while overtime for manufacturing workers fell by a larger margin.

At the end of last month, more than 4.9 million people were working part time either because they could not find full-time jobs or because their companies had cut hours in the face of slack business, according to a Labor Department survey. That represented an increase of 400,000 since November.

* ONE... MORE... TIME...

At the end of last month, more than 4.9 million people were working part time either because they could not find full-time jobs or because their companies had cut hours in the face of slack business, according to a Labor Department survey. That represented an increase of 400,000 since November.

* DO... YOU... PEOPLE... UNDERSTAND...?!?!

And on Wednesday, the government reported that average earnings slipped in March after accounting for the rising costs of food and fuel - the sixth consecutive month that pay failed to keep pace with inflation.

As people bring home paychecks that do not go as far, they are forced to economize, eliminating demand for goods and services that once captured their dollars, spreading pain to providers like auto dealers and lawn care providers. They, too, must trim their outlays on pay, shrinking working hours more and furthering the slowdown.

"It means spending slows going forward," said Robert Barbera, chief economist at the trading and research firm ITG.

Paychecks are diminishing just as millions of Americans are finding their access to credit constricted as well.

Borrowing against the value of real estate - a crucial artery of household finance in recent years - has been pared back as home prices have plummeted and as banks have tightened lending standards in the aftermath of the collapse of the housing bubble. "At this point, those avenues are blocked," said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. "Consumption going forward is going to be in large part a good old-fashioned function of paychecks and incomes."

Even before the rollback in working hours, pay was barely keeping up with the rising costs of gas and food. From February to September of last year, the average hourly earnings for workers in the private sector was still growing at a slightly faster clip than the pace of inflation, according to the Labor Department.

* ACCORDING TO THE LABOR DEPARTMENT... WHICH DOESN'T INCLUDE THE PRICE OF FUEL OR FOOD IN ITS INFLATION MEASURE.

(*SMIRK*)

But from November through March, as employers began to scale back in a variety of ways, wage growth fell below the pace of inflation, meaning that paychecks were effectively shrinking.

* SHRINKING EVEN FASTER AND FURTHER THAN THE FLAWED LABOR DEPARTMENT MODELS SHOW!

As the construction business deteriorated rapidly last fall, so did demand for the ceramic tiles produced in New Lexington, Ohio, at the Ludowici factory. In November, the company began drastically cutting overtime for many workers. The following month it fired several people. Last month, the factory resorted to layoffs, cutting the hourly workforce to 81, from 93. It idled the kiln on weekends. But even as sales fell, the company kept producing, building up stocks of tiles that it assumed it could sell eventually. "We thought that would be a smart way to do it in order to keep people working," said Derek Thomas, the plant manager. "The philosophy around here is we remain hopeful that things are going to pick up." But if fresh orders do not arrive soon, Thomas acknowledged that his hopes were likely to be dashed. In that case, he said, "the company was facing further head-count reductions."

* AND OBAMA WANTS ANOTHER "TRADE DEAL."

* FOLKS... IF OBAMA'S PLAN ISN'T TO DESTROY THE AMERICAN ECONOMY... AND AMERICA IN GENERAL...

(*SHRUG*)

With his overtime pay gone and faced with the ugly potential of a layoff from the job he has had for 14 years, Baker, the plant worker, is streamlining his spending every way he can. This time of year, he would usually be planning a trip through Ohio in his camper. But he does not expect to take to the road anytime soon. "Not with the money flowing the way it is," he said, "and the price of gas."

(*SIGH*)

To John Silvia, chief economist for Wachovia, the banking company based in Charlotte, N.C., Baker and his boss are representative of a national economy that is hunkered down and awaiting better while worrying about worse.

"You've got a lot of people sitting around now," he said, "waiting and hoping for orders."