Economic Meltdown Deepens: Worst Since 1933

Two important economic reports today again make clear that, properly understood, current meltdown conditions are the worst since FDR took charge in March 1933.

The Federal Reserve reports today that industrial production (which includes utilities and mining as well as manufacturing) plunged another 1.8 percent in January and is now down 10.0 percent year over year. The production plunge in January means that total industrial production DECLINED over the past eight years for the first eight-year period since the eight years ending in 1938. And unlike that period—production soared by 18.6 percent from Jan. 1938 to Jan. 1939—every indication is that industrial production now will continue to plunge sharply over the next year.

Manufacturing output plunged by 2.5 percent in January, down 12.9 percent year over year, and is down 3.5 percent over the past eight years. This is the first eight-year decline in manufacturing production since the demobilization from World War II from 1944 to 1952. And manufacturing production rebounded in 1953, growing by 12.2 percent from Jan. 1952 to Jan. 1953, whereas every indication is that manufacturing production will continue to plunge over the next year.

Manufacturers had 32 percent of their existing productive capacity sitting expensively idle in January 2009, with a capacity utilization rate of just 68 percent - the lowest rate in records back to 1948. This enormous level of unused capacity not only raises unit costs, squeezing profits and wages, but indicates further sharp job cuts are ahead with little new private sector investment.

I’ve attached my graphics of the eight-year historical data [1] for production in total industry and for manufacturing. The file also contains my earlier graphics showing the first eight-year decline in total hours worked since early in the Depression, the worst eight-year loss of manufacturing jobs – perhaps ever! – and the worst eight-year record of total and private sector jobs – including private service sector jobs – since 1927-1935.

The unprecedented $5 trillion shortfall in global current accounts trade [2] over the past eight years not only made the U.S. dependent on foreign lenders but also destroyed U.S. production, companies and millions of jobs.

The Census Bureau also reported today that new starts and new permits [3] to build homes both plunged again in January to the worst levels on records that start in 1959 – when new permits and starts were three times today’s levels. New permits to build homes were down 4.8 percent in January, down 50.5 percent year over year and down 77.0 percent from their bubble peak in Sept. 2005. New home starts in January plunged 16.8 percent, are down 56.2 percent year/year and down 79.5 percent from their irresponsible bubble peak in January 2006.

At their worst in the deep Reagan recession, single-family home starts were 50.7 percent higher in October 1981 than they were in January 2009.

And still the major corporate media is full of the same anti-regulatory crooks and fools that misled the world into this catastrophe, now demanding more of the same.