Tuesday, August 10, 2010
Tuesday, August 10, 2010 No comments
The Commerce Department says that productivity is down almost 1% overall and while the that sounds like bad news for corporations, for main street it could be good news if it’s true. This would mean that wages are up or at least there could be more hiring going on and this is reflected as more payroll for the amount of goods and services produced hence lower productivity. That is if this isn’t just a glitch in the numbers as the Commerce Department tries to revise all the inaccurate numbers left behind by the Bush Administration.
Retail sales are off as the overall savings rate has been going up and you might assume it’s the people with disposable income that aren’t spending it, the poor don‘t have much choice. The top 5% of American income earners account for 37% of consumer outlays and the bottom 80% of earners account for just 39%. Get that? The top 5% spend almost as much as the bottom 80%. Indeed the top tier has the money with the top 10% capturing 50% of all the income in the country. That ratio is from 2007 and it likely getting worse as incomes for the working poor decline.
But the really bad news is that in an economy that is 70% consumer spending (remember we don’t make anything, we order fries with that) this new American Plutonomy (or economy of the rich) that the rich have in fact been spending their savings. Their saving rate (rich people’s) is down from 26% in 2008 to a negative 7% in the first quarter of this year and there are signs they are cutting back sharply and that‘s a problem.
If the productivity numbers are really down and income for the great unwashed masses is really going up this would offset the problem. But this is probably just a glitch in the numbers since unemployment is so high, wages continue to be driven down. It’s true some better paying jobs in the auto industry and stimulus created jobs in construction are on the increase. The emergency funding the Republicans failed to defeat in Congress will maintain 180,000 teachers as well as 180,000 police and fire department jobs but most of these people earning good pay are already currently working.
We need some good old fashioned wage inflation like Alan Greenspan spent his entire career fighting so that we aren’t dependent on the Plutonomy to provide the spending. Of course this isn’t going to work without jobs making something of value. It doesn’t really work any better to have the bottom 80% spending more on imports from China than it does having the top 2% buying more imports from China. The so-called service economy of giving each other haircuts does not make up for it in the end. www.prairie2.com