Mr. Sensitive

April 5, 2013

I’m Not Discouraged

Filed under: Uncategorized — lbej @ 10:39

This morning’s employment report was ugly, and the stock market reacted decisively and negatively to the news.  Only 88,000 jobs were created last month, well below expectations, and while the unemployment rate fell to 7.6%, that drop was due to labor-force participation falling to a 34-year low.   The unemployment rate calculation only counts as unemployed those individuals who say they’re looking for work in the Labor Department survey.  Individuals who aren’t employed but aren’t seeking employment are excluded from the calculation.  The financial news media tells us these workers are ‘discouraged’ and have ‘given up’ trying to find employment.  That’s what they say, and the public buys it.  So here’s my question: if the people who’ve quit looking for work with a traditional corporate employer are so discouraged, why hasn’t consumer spending suffered?  Consumer spending was supposed to tank over the last three months because reported incomes are flat to down and the re-imposition of the payroll tax in January summarily cut those incomes by 2%.  It didn’t happen.  Retail sales are strong and the housing market has stabilized.  Prior to the financial crisis in 2008, consumers were using their homes as ATMs, perpetually refinancing to cash out equity and spend the proceeds.  Those ATMs are broken now.  The meager recovery in home prices over the past year has still left more than 25% of homeowners underwater on their mortgages—not only do they not have equity to cash out, they owe more than their homes are worth.  In addition, the credit environment is drastically tighter; the fly-by-night consumer finance companies are out of business and the commercial banks have made borrowing more difficult than at any time since the S&L crisis in the early ‘90s.  Americans aren’t borrowing all this money they’re spending, so where is it coming from?

Non-traditional businesses, that’s where.  Individuals have access to distribution and sales networks they didn’t have access to in prior downturns; eBay, Amazon, Craigslist, Etsy, Angie’s List, and LinkedIn—to say nothing of Facebook, YouTube, Twitter and Pinterest—didn’t exist or didn’t have the scale and scope to make an economic impact.  Artisans and entrepreneurs can market products and services to consumers without relying on large companies, so not only do those people keep all the fruits of their labor (no executives and middle managers skimming off the top), but they aren’t subject to trial-by-quarterly-gross-margin anymore.  The big corporations are addicted to cost-cutting and margin expansion as the only path to profit growth; they can’t grow revenues because years of zero-to-no raises and rising health care costs have demoralized their employees and undermined those employees’ ability to purchase the very products and services the big corporations want to sell.  It’s a vicious cycle of job cuts and revenue declines that the corporations don’t know how to break—Wall Street’s quarterly reporting cycle makes it all but impossible—but more and more people are breaking the cycle for themselves.

Don’t expect CNBC or the Wall Street Journal to do anything other than gloss over this trend—it undermines the ability of corporations to take advantage of their employees, and the captive financial media outlets aren’t going to go out of the way to accelerate the process.  Bear in mind, I’m not suggesting that none of the former corporate employees who’ve ‘given up’ looking for similar employment are discouraged; I have no doubt that many are, and that they’d love to go back to what they were doing before their jobs were outsourced to China or India.  But I want to ask those folks one question: why?  You know these companies have no loyalty to you and that they’ll cut you loose in a heartbeat to add a penny to EPS—to have to depend on them should be frightening, not comforting.  No one wants to lose his or her job, and I don’t expect that will ever change.  But if you’ve lost your corporate job and you understand why, is the fact that you’re not exclusively looking for another corporate job because you’re discouraged…or is it because you’re enlightened?

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