What's Worse Than Joblessness? When it's Combined With Frozen and Shrinking Wages
We here at The Daily Reckoning are perhaps nearly as prone to talking about the lack of jobs growth as other sources. However, that’s mainly because there is very little… and it remains one of the essential ingredients needed in a real recovery. Unsurprisingly, it’s a good start, but it’s not even the only factor. Another useful measure to take into consideration is income growth… or well, the lack of that as well.
From Zero Hedge:
“…even the most rosy-eyed optimists know that the jobs situation in the US is if not openly reverting into a double dip yet, then certainly scraping the bottom…
“…the bottom line is that today’s BLS report was very much irrelevant. As David Rosenberg highlights, it is not the actual employment, it’s the income that this employment generates, that is important.”
Tyler Durden goes on to quote directly from Rosenberg:
“It was fascinating to see that in April, we supposedly created 290k net new jobs and yet consumer spending stagnated in the U.S. And, in May, apparently the government numbers show a further 431k in net new job creation, and the retailers missed their sales target.
“According to the ADP, this is an extremely weak recovery in private payroll growth, especially in the context of the savage declines during the recession. In addition, real organic income is still not growing and down nearly $500 billion from pre-recession levels.
“Let’s even assume for a moment that the government statistics on employment are accurate — wage and salary growth is slowing down nonetheless. Half of U.S. employers froze pay for at least part of their workforce in the past year and 13% made actual salary cuts (as per a WorldatWork survey cited in the Baltimore Sun). What a recovery! And, 1 in 3 of the companies that did freeze pay have no intention of departing from that strategy in the coming year.”
Yes, under these circumstances it would seem to follow that consumer spending drops. The US still hovers near record levels of unemployment and that doesn’t bode well when combined with about a half trillion less in income. To make matters worse, half of employers freeze pay where it stands and 13 percent slash wages? Geez. If only bloated government could tap into that belt-tightening zeitgeist.
You can visit the Zero Hedge coverage of why incomes are much more important than jobs for more details.