Henry called yesterday as he does every Sunday, and reported a mood in the outside world that I can only characterize as “disquiet.” He said that people that he sees at public places such as shopping malls and in the workplace seem tired, angry, beaten-down, dispirited, overwhelmed. He said that many people appear to be holding on by a thread (if at all), attempting to extend an unsustainable way of life.
Despite what the talking heads are saying, the old economy isn’t doing so well. It is forever changed. In the most recent jobs report of the Bureau of Labor Statistics, there has been job growth as reported, but the two main sectors of growth were fast food and retail, accounting for a total of about 32.2% of jobs created in October.
Due in part to these low-paying jobs, many more people are resorting to using payday loans to get by. Payday loans are, of course, a practice that goes back to the Great Depression of getting credit against one’s next paycheck. With their exorbitant fees and interest rates, however, they are designed to entrap borrowers in a cycle of debt just a half-step above borrowing from Guido with the lead pipe. I recently read about one desperate borrower who got $800 within minutes from a website he found on his phone. When he called to check his balance a few weeks later, he was told he had electronically signed a contract to pay back $3,920 to a company owned by an American Indian tribe. This is apparently not unusual.
On the current Zero Hedge website, corporate executives are said to cite “softness in consumer spending,” a “challenging” climate, “fairly stagnant economy,” and “cautious” optimism. And that’s putting a good face on it.
Retailers are announcing new plans for Black Friday, the fake festival of consumption traditionally held the day after Thanksgiving. Some stores are adopting their own equivalents of payday loans by opening their doors as early as 6:00 pm on Thanksgiving itself, so that crazed shoppers can fight to get their hands on bargains, sometimes resorting to violence. This strategy will likely only shift sales a half-day earlier, with slower sales resulting on Christmas Eve. It is forestalling the inevitable let-down.
The fact remains that a massive, irreversible shift has occurred in the American economy. Adjusted for inflation and other factors such as length of the work week, the middle-class cohort earns $700 in average weekly earnings—well below its $827 peak back in the early 1970s. Note that this is a gross income number that doesn’t include any tax withholding or other deductions. Disposable income is therefore noticeably lower. If we multiply this weekly earnings figure by 50, we get an annual figure of $35,000. That’s a 15.4% decline from the similarly calculated real peak in October 1972.
The higher-paying jobs have been exported to China and India, and have become low-paying jobs forever. They won’t come back. Our factories have been dismantled and would be outmoded and uncompetitive anyway if they were somehow pressed into service. Much as we might hope that this is only a temporary thing, the “good old days” will never be again.
This situation is by no means unique to America. According to a report released in the UK, millions of people are less than a month away from the modern equivalent of the breadline. The average household is just 29 days away from this point, while others are much closer still, according to the “Deadline to the Breadline” report. Homeowners who have paid off their mortgages are in the best position, able to last for 426 days before exhausting their reserves, while those with a mortgage would have just 22 days before their money disappeared. And the typical household living in private rented accommodation is just two days away from the breadline.
It is time we turned the page and adopted new ways. The American love affair with unbridled consumption must end. “Good new days” are not possible unless we make this change, and get on with the business of living that will make us truly happy.
Groove of the Day