The Jobs and the Jobless

Posted on August 24, 2011


The American population is divided into two classes. However, for the purpose of this article I’m not talking about the rich and the poor, although that division has been impacting the American economic and political scene since before the Declaration of Independence. The classes I am talking about are composed of those who have jobs and those who do not.

I am not going to start quoting statistics. However, the unemployment numbers for all demographics are considerably higher than those offered up by government agencies and private forecasting firms. The underemployed number is finally being recognized as the realistic figure we should all be looking at. When 17-20% of the available labor force is not earning income, the US economy, and by extension the global economy, faces a tremendously difficult uphill battle. Making things worse, it appears that at the moment, viable rebuilding solutions are either not known or cannot be agreed upon by the decision makers that oversee this Herculean task.

For many years the housing market was the foundation of the American job market. It contributed to construction, finance, home furnishings, home repairs etc. The list of linkage employment and dependency is just one example of how the slowdown of the US economy continues to take its toll on the American worker. Major corporations have not been hiring in any significant numbers. In fact, with new technology and high worker productivity, it is considered good news when announcements of layoffs seem to be lessening.

People with jobs have become more financially conservative, and with less disposable income are trying to save more and spend less. Their biggest concern is about holding onto their jobs, while their diminished contributions to the retail consumer markets continues to hinder the growth of small businesses and the overall ability to hire new workers. . Inflation also plays a role in the consumers’ ability to spend. As reported by Bloomberg on August 18th, “The cost of living in the U.S. rose in July by the most in four months, led by gains in food and fuel, the Labor Department also said. The consumer-price index increased 0.5 percent from June, while worker pay failed to keep pace. Adjusted for inflation, hourly wages dropped 0.1 percent in July and were down 1.3 percent from the same month a year ago.” Meanwhile, employers continue to exploit their positions of strength by offering less in raises.

Consumers without jobs have less confidence in the future, and as a result are very cautious about what they spend their money on. This limits their contributions to growth, and considering that the US is a 70% consumer driven economy, this interference results in a fragile expansion and a prolonged weakened job market.

How is this problem solved? Large corporations seem to have the ability, but not the will. They are holding trillions of dollars in reserve…yes, I said trillions. On the premise that we are in uncharted territory, they are unwilling to hire new employees, spend on capital investment, or provide the necessary retraining of the American worker. Ultimately in the short haul it may impact favorably on their bottom line. However, the problem is NO ONE charts long term strategies anymore. They have the firepower, but not the fire to show faith in the American worker and help rebuild our economy.

The administration wants to get back on point regarding the jobless (about time), but the partisan Congress won’t allow new programs that might add to the deficit. Without a partnership between the private sector and the government, the US economy will have a very slow and elongated recovery.

It used to be that large companies mapped out their long term proposals for steady and stable growth. Now they are only concerned about quarterly reports, and it would appear that the attention span of the Congress has become even shorter. To put America back to work, there needs to be less Congressional fighting about the past and more thought and commitment to plans for the future.

For questions /information, contact Joel Borshof: joel@imexfx.com

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