Jobless Recovery and the Newest Normal

If you are fortunate enough to be employed, I encourage you to take a long look at your last paystub. While it may be less than it was a year ago, what you see is still noteworthy, as it likely represents the most compensation that you will receive for a very long time. Welcome to the New Normal.

I'm certain that you've heard that consumer spending is responsible for 70% of the US GDP, ad nauseam. This figure is mostly worthless, without delving into the components of the consumer spending and earning. Zero Hedge had an excellent post titled, A Detailed Look At The Stratified U.S. Consumer, in which the debt levels and consumption patterns of the social classes are examined in detail. What ZH determined was that upper 10% held a disproportionate amount of disposable income relative to the middle and lower classes, which is made abundantly clear by the following ZH graphic:
Source: ZeroHedge
Thus, it was determined that the richest 10% accounted for 42% of consumption, the middle class (40%-90% net worth) accounted for 48% of consumption and lower class (0-40% net worth) were only responsible for only 12% of consumer spending:
Source: ZeroHedgeRelatively speaking, the spending of the upper, middle, and lower class is 3.5:4:1, respectively. Thus, from the perspective of Wall Street, the lower class has few redeeming qualities and in fact poses more of a liability, due to the fact that consumers are also workers. Since the lower class can't add substantially to the left side of the balance sheet, it stands to reason that their right side influence should be reduced. Obviously, this can be accomplished via outsourcing, but this is rarely as profitable as advertised, due to shipping and complications that arise from operating in the third world.

So, how can the third world be brought here? Immigration laws can go unenforced to maintain wage floors that are unlivable for legal workers. The threat of outsourcing and the reduction of workers' rights can be used to defeat any attempt at worker organization. All of this has been done flawlessly. Real wages in this country have stagnated over the last decade, regardless of what part of the boom/bust cycle we were in. However, the perfection of this scenario requires stratified, permanently high unemployment. If high unemployment can be maintained amongst the working class and moderate unemployment in the middle class, the employer take backs will be tremendous. Can it be done? I have every confidence:

Source: BLS, Datasets LNS14027659, LNS14027660, LNS14027689, and LNS14027662.


  1. As you might imagine, my free market bias leads me to view a number of claims here with skepticism. Immigration laws that restrict mkts for labor, effects of labor organization on long term employment of the 'protected' group, etc.

    Also, you mentioned outsourcing synonomous with job loss. I noticed the same thing in my classrooms this term. To many students, outsourcing is another word for downsizing/layoffs. I 'get' the connection, but a relatively new trend in my b-school world nonetheless.

    Interesting consumption distribution data. Makes one wonder about unintended consequences of wealth re-distribution programs designed to 'encourage' consumption...

  2. Honestly, I'd likely support a free market ideology that was legitimate. What we have now is the exploitation of the poverty for the purpose of cost reduction. Perhaps, we should call it competitive slavery instead.

    How did we survive and prosper for 50 years without NAFTA? In 1993, was some unseen switch flipped by an unseen hand, that dictated that US manufacturing must die? I think not--Toyota and Honda bucked the trend by building in the US and they have profited handsomely. NAFTA was the first of many scams designed to rook the public into cutting their own throats.

    The wealth redistribution program that I'm most concerned with is the NYSE. The manipulation is brazen and the 401(k) participants are still clueless, which constitutes a piss poor combination.