A few news cycles ago we were inundated with the phrase “Job Creators”. We needed to cater to this group’s every demand because they created jobs. And jobs are what makes the economy grow and continue running smoothly.
Except its not. Not when the jobs pay abysmally low salaries so that those job creators create an even fatter bottom line for themselves. For some reason this line of thinking persists. However, we are getting more and more evidence to the contrary.
The economy is not spurred by jobs alone. The economy is grown and continues running when people spend money, purchase things, consume. But they cannot consume when they barely make enough to live.
This post was influenced by the NY Times article today “The Middle Class is Steadily Eroding. Just Ask the Business World.” The just is that businesses aren’t selling to a middle class anymore. They have to specialize in either the super premium market catering to the wealthy or be in the bargain basement budget market. There is no middle ground.
“As a retailer or restaurant chain, if you’re not at the really high level or the low level, that’s a tough place to be,” Mr. Maxwell said. “You don’t want to be stuck in the middle.”
“It’s going to be hard to maintain strong economic growth with such a large proportion of the population falling behind,” he said. “We might be able to muddle along — but can we really recover?”
Mr. Fazzari also said that depending on a relatively small but affluent slice of the population to drive demand makes the economy more volatile, because this group does more discretionary spending that can rise and fall with the stock market, or track seesawing housing prices. The run-up on Wall Street in recent years has only heightened these trends, said Guy Berger, an economist at RBS, who estimates that 50 percent of Americans have no effective participation in the surging stock market, even counting retirement accounts.
You want further evidence? Today, on the very day that report came out, the Dow Jones dropped a massive 30 points. Why? Because reports from American Industry show that they aren’t making anything. Why? Because no one
is buying can afford to buy anything.
“The ISM for manufacturing was among the weaker numbers we’ve seen for quite some time, versus expectations. What was also concerning was among the components, the new orders number was weak,” said Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds. Unlike other components, the one for new orders can’t be explained away by the severe winter weather, he said.