WASHINGTON, February 1, 2013 – Employment numbers are out this morning and they paint a dismal picture. According to numbers from the U.S. Bureau of Labor Statistics (BLS), January’s job numbers painted a portrait of a limp-wristed economy that’s still resistant to creating anything near the number of jobs that would significantly reduce the official unemployment rate, which ticked up to 7.9% in January. Right around where it was last Groundhog Day, 2012. Hope and change. Déjà vu all over again.
The real unemployment rate, which counts the underemployed and those who’ve dropped off the unemployment rolls because they’ve lost unemployment benefits, is probably in excess of 15%. According to Newsbusters, which supplies additional facts the government and media don’t want us to hear, “lost in these headline numbers was another rise in the number of people not in the labor force. This number now stands at a staggering 89 million, up from 80.5 million when President Obama took office. This means that there are currently 8.5 million more Americans not in the labor force than just four years ago.”
Hope and change. It’s what we’ll be getting more of unless low-information voters stop treating presidential elections like they were the current season finale of “American Idol.”
With this dismal employment news hitting the tape before the market opened this morning, you’d have been fully justified donning your flak jackets and diving into your underground bunkers before stocks were pounded into oblivion, right? Nope. Wrong answer. The market’s cruising to a much higher altitude as of 10 a.m. EST this morning, not taking a swan dive into the latrine. (UPDATE: As of 11 a.m., the Dow was up an astonishing 140 points this morning.)
Perverse? Not this market. The horrible numbers, plus politicians’ collective inaction on budgetary and monetary solutions to this ongoing jobs disaster guarantee that Fed Chairman “Helicopter Ben” Bernanke will continue to drop daisy-cutter sized packages of Benjamins on Wall Street. Since government bonds now, by and large, carry negative interest rates and since quality corporates and munis also sport anemic yields, the only realistic place for that money to go is into stocks, particularly high-yielders, which is exactly the Fed’s intent.
Pumping up stocks helps relentlessly inflate asset prices toward what they were worth before the Great Depression II began in December 2007. And, so the logic goes, when investors large and small begin to see a healthy dose of net worth returning to their balance sheets, they’ll start spending and hiring again. And voilà! Job growth. Spending. Happiness. And Democrat-controlled government for decades yet to come.
Problem is, this story is just too simple. But the media, which has been in the tank for America’s socialist party for years, is simply not interested in looking under the rocks to see what kinds of loathsome creatures are wriggling around beneath them.
The dirty little secret behind the market’s slow, seemingly relentless rise since the spring of 2009 is this: corporate profits, while subject to occasional nasty patches, have been impressive for close to four years now, and this profitability is unlikely to abate in the near future. This phenomenon is largely due to the fact that an increasing number of American corporations have become collective geniuses at decreasing employment while increasing the efficiency of those workers who remain.
In other words, a great many American companies are squeezing greater profitability out of less and less revenue. This enables them to increase bonuses for management and increase dividends and/or share buybacks for the benefit of investors, all while keeping wages for Joe Sixpack mostly flat—because Joe is worried that if he makes any noise, he’ll lose his job and never find another.
And Joe’s observation is right on the money, at least to the extent that he has any left. Because the truth of the matter is, most of the jobs that American has lost over the last four or five years are never, ever coming back. Business has learned how to be massively productive without them, either by massively automating repetitive tasks, keeping wages flat or down over here, or outsourcing to child- and slave-labor camps overseas run by the enterprising Chicoms. Or by some or all of the above.
The benefits of all this legal chicanery are these: American companies whose stocks are doing better than ever because they’ve learned they don’t need workers; a rising stock market that’s the primary beneficiary of a tsunami of free money from the Fed, not to mention permanent corporate downsizing; and increasingly cynical unemployed voters who’ve learned to vote for their oppressors every time, thus maintaining the current status quo that leaves them out of the picture, save as individuals who are now totally dependent on the Federal government for their survival.
The undercurrent of all this—again rarely reported—is the unknown liability that lurks just beneath the surface of Obamacare, which kicks into official action on January 1 of next year. (We’ll actually begin to see the effects this fall when it’s time to start choosing Obamacare plans through insurance exchanges, most of which still do not exist.) This liability is the key reason why companies will never bring laid-off employees back. The cost to them of implementing Obamacare can only be estimated and can’t be entirely known.
It’s like buying a slightly run-down house built, say, in 1910. You figure, well, sure, it’s a little run down. That’s because it’s old. The inspector may have told you it needs a new roof but everything else is okay. Except maybe for a few old galvanized pipes you might want to replace if you get the chance. But the electrical works: in fact, the house was completely rewired in the 1970s. The outlets work. The windows are old, but the previous owner slapped on storm windows, so what the heck? Routine stuff, right? And the house is such a deal.
So you buy the house. And then you discover that the plaster walls have asbestos fibers in the plaster. All the paint, underneath the top layer, is lead paint. That new wiring was all aluminum. The house actually has no insulation, and the storm windows were improperly installed. The basement leaks during big downpours (not evident during the cursory inspection by the realtor-picked inspector) and there’s no sump-pump. And on and on. Suddenly, your good deal on the old house is one costly surprise after the other.
That’s why you have to be careful buying an old house, even if you’ve had an inspection: you never quite know what it will really cost you to get the place in working, modern, up-to-current-code order. So unless you have some experience, and/or the resources to deal with the nasty surprises that will inevitably occur, it’s probably just to pass on the house.
And that’s the ultimate problem American businesses are confronting. Each employee on the roles next January 1 becomes just like that 1910 house. You can estimate what he or she will cost you, Obamacare-wise. You know about the wage and inflation costs already. But you simply have no way to accurately guess the real cost to your company of Obamacare. So when it comes to hiring, you’ve been avoiding it like the plague since 2008 or so, and will likely avoid hiring for years to come. Or, in fact, if you’re small enough, you might just downsize to less than 50 employees. Or even turn many of your existing employees into independent contractors who then will not count toward the employment cap.
It’s a huge mess, and it promises to get worse. We won’t re-hash the details, but we’ve been warning about this endgame for years and now it’s nearly here, courtesy of too many voters who don’t pay much attention to the things that really matter.
And so, with businesses walling themselves off against the need to make too many hires over the next however many years, we’re likely to see the phenomenon of a buoyant stock market that produces astonishing profits for those who can still afford to invest—and all this without much of an increase in hiring.
We’d say we sound like a broken record on this issue, but we’re afraid that anyone much under 40 would ask us what we even mean by that term. Suffice it to say that—appropriately—business and political news these days is intertwined into an endless do-loop that reads like the screenplay for that famous Bill Murray movie “Groundhog Day.” Over and over and over again, we’re seeing the same thing. We begin to wonder if we can ever stop it. But we wake up every morning to another instant replay. It’s really quite astonishing.
But that’s what we’re seeing again today. Bad news is good. Good news is bad. But, since we got bad news this morning, the market begins February with (at least at the moment) another up day.
Funny thing: it really is Groundhog Day tomorrow. A hat tip to Punxsutawney Phil. And we’ll see you back here on Monday.
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