There's a lot of news (all bad) on the jobs front. But it's not just the jobs.
I've written before (and not alone) that one of the biggest problems facing the American economy today is household debt:
Americans are now larded up with debt. In 1982, profits came back, but wages stayed permanently depressed. People felt "prosperous," but only because the Dow was up and the rich were crowing about it. How could the rest of us participate?We won't have a real recovery until that debt is either paid off or destroyed (via bankruptcy, forgiveness, or some other form of debt-clearing).
At first, the "prosperity" of ordinary people was wife-driven. Second incomes were both necessary (thanks to St. Ron) and possible (thanks to dreaded bra-burners and women's lib types). You couldn't take part in the Gordon Gekko "boom" without a second income.
When that source petered out (when all the women who wanted jobs had gotten them), our "prosperity" became debt-driven. That period lasted until, oh, yesterday (ok, 2008). By my count, that's 20-plus years of debt intake. Clearing that debt is a job that has to be done. Starting now is a very good thing.
How long will it take to clear 20 years of debt? If it "only" takes ten years, we'll have gotten off lightly — and it will feel like forever.
So job growth is just the necessary first step to recovery of the consumer economy; debt reduction must also occur.
In this context I offer Paul Krugman's comments today on the dismal jobs picture. In a short post called "Falling Wages" he writes:
Ugh. That was a seriously ugly jobs report (pdf). Almost no job creation, with slow private-sector growth offset by falling public-sector employment; a falling employment-population ratio; and (I don’t know how many people have picked this up), an actual decline in wages, albeit a small one. ... [Y]ou can’t have a wage-price spiral if wages ain’t spiraling. And they aren’t, to say the least. ...Think of household debt as a hole that has to be filled (with money) before big-screen spending can resume. The ratio of "debt relative to income" is a key metric in recovery of the consumer economy. The point at which debt-burdened people "feel" unburdened enough to start spending — that's when their personal economy recovers.
[S]tagnant wages are NOT good for recovery; all they do is ensure that the burden of debt relative to income remains high, keeping demand and employment down.
Right now, Walmart is losing business to the dollar stores. Not many big screens there.
And not much recovery either.
A side note: it's an open question for me if the big boyz really need a U.S. consumer recovery any more. There's manufacturing in Asia, there's engineering in Asia, there are a great many soon-to-come-online consumers in emerging markets — and even the noble souls at Ad Age, the Mad Men industry trade mag, has declared that the age of U.S. "mass affluence is over":
[T]he accrual of wealth among the very few is of great consequence for marketers, since 10% of U.S. households "account for almost half of the consumer spending" and represent about one-third of total GDP, according to the American Affluence Research Council."Simply put," if "you" don't matter anymore, or matter much less, to the profits of consumer-driven companies, your recovery can comfortably go onto the back burner.
Simply put, a small plutocracy of wealthy elites drives a larger and larger share of total consumer spending and has outsize purchasing influence -- particularly in categories such as technology, financial services, travel, automotive, apparel and personal care.
Do you think that's part of what's driving the elite unconcern with the safety net (including in the White House hive mind)?
GP
