Bill Knight column for Thurs., Fri., or Sat., July 18, 19 or 20
The cost of living went up less than anticipated in May, held in check by then-declining fuel prices and the first drop in food prices in almost four years, but natural gas surged in price, a result of what some economists see as market manipulation by big corporations.
Many news media missed that story, concentrating instead on a misleading angle that an economy with some positives was helping Americans of all classes.
For the 12 months ending May 31, consumer prices increased 1.4% nationally, according to the Labor Department’s Bureau of Labor Statistics (BLS). However, the BLS shows that in Illinois, the Consumer Price Index rose 1.5%. Prices for food at home fell 1%, and motor fuel went up a modest 1.5% from 2012 (although it’s spiking this month).
However, natural gas (labeled “utility [piped] gas service” by BLS) increased a whopping 49.8% in Illinois.
“Advances in drilling technologies allowed energy producers to coax massive quantities of natural gas from shale fields, an oversupply steadily built up, contributing to severely depressed prices for the fuel,” wrote investment writer Arjun Sreekumar. “In response, virtually every major U.S. energy producer curtailed gas drilling in favor of producing oil.”
This winter, the industry, economists and financial advisers had promoted natural gas as the fuel with the lowest prices for the foreseeable future.
Now, energy corporations are curtailing production, curbing consumer enthusiasm and making exorbitant profits.
Chesapeake Energy (the country’s second-largest natural gas producer) slashed its activity 90% in two years. Devon Energy (once a leader in natural gas production) announced that it wasn’t drilling for gas this year. And EXCO Resources cut its production two-thirds in the last year.
“Prices are generally pretty stable,” wrote media critic Jim Naureckas of Fairness and Accuracy in Reporting (FAIR), “which is good news – but not really comparable to having your stock portfolio go up by 16% over five months.”
Indeed, real wages (adjusted for inflation) have fallen by 2.8% across the board between 2009 and 2012, according to a comprehensive study by the National Employment Law Project (NELP). Further, that erosion of pay especially hurt low- and middle-wage workers. According to BLS data, five of the 10 most common low-wage job categories – restaurant cooks, food preparation workers, home health aides, personal care aides and housekeepers – experienced a drop in pay of 5% or more.
Further, the decline in wages came at the same time that productivity increased by 4.5%.
“Corporations are reaping the financial benefits of an increasingly productive workforce, but the recent decline in wages shows that these gains are not being shared with the people actually doing the work,” said NELP executive director Christine Owens. “While persistent high unemployment likely explains some of the recent decline in real wages, recent losses are part of an alarming trend toward greater inequality and a shrinking share of economic pie going to those at the bottom.”
Nevertheless, the Washington Post in late May published a story that said wealthy, middle-class, and working-class Americans all are sharing in the low-inflation economy, citing the booming stock market (for the rich), higher housing prices (for the middle class) and falling fuel prices (for working families).
However, Naueckas wrote, “the implications that the benefits of the economy are being distributed across the board is, on the face of it, dubious. After all, the wealthy also live in homes and buy gas.”
AFL-CIO chief economist William E. Spriggs commented, “The U.S. public believes work should pay, and workers should be able to sustain themselves.”
And those “falling fuel prices” have faded as fast as hopes for a wage increase.