Also, for when the president or his fans decide to tell you how well the country will do under their policies, recall this chart. For those who don't remember, this chart is from the president. It was released when his economic team lobbied for the stimulus. The red dots show what actually happened. The green dot is relevant too ...
The job situation today poses an interesting question for those on both the left and the right. Why is it or how can it be that companies in the standard and poors five hundred are seeing their earnings soar while at the same we are seeing such animic job creation by the private sector. The answer technology. Labor saving technology and also the increasing ability of many companies to move not just physical production overseas but also white collar jobs overseas. What we have here is a very serious dilemma on the one hand increasing productivty can keep prices down their by keeping inflation in check. But theirs a problem in our economic system. If a company is profitable and productive they could use their increasing productivity to improve both wages and benefits of their employees and they could also use their increasing productivity to lower prices or at least not raise prices. On the other hand they could use their growing excess profits which are directly related to their increasing efficiency and productivity to buy back their stock pay a larger dividend and do acquisitions or just hold the cash on their balance sheet. Rather than increase and improve the wages and benefits of their empolyees and lower or hold prices of their products and services steady. I believe the vast majority of the businesses in the united states have chosen to do the latter. In order to expect companies to pass on their excess profits in the form of lower prices or stable prices we must see increased competition among firms in the same business. This is often absent. Look at the huge money center banks that have a hold on huge regions of the country. With fewer competitors these companies can keep much of their excess profits instead of being forced to pass them along to consumers.. Another factor that is at work here is the tremendous amount of competition for jobs in the labor market as long as unempolyment remains high many companies are not inclined to increase wages and improve benefits. In the end we have a growing mismatch between the ability of the average consumer to afford the products and services being provided to the consumer by business.
ReplyDeleteCompanies are seeing profits ... So they do have money available to hire people. Why aren't they hiring as much? Obviously they don't think the next workers they hire will bring in revenue (or save costs) that are enough to justify their hiring.
ReplyDeletePart of the problem is this administration-companies have no idea how to plan for the next two years. It's tough to hire people when that's the case. Another case of a president creating uncertainty was FDR in the Great Depression and he was probably the worst president of the 20th century. Hopefully the uncertainty created by Obamacare, threatened tax increases, etc. goes away soon.