The Wageless Recovery May Bring Humbug to the Holidays
It's that special time of the year, when economic forecasters begin worrying about how much Americans are going to spend on holiday shopping.
It's become a holiday tradition, because depending on what sort of business a retailer is in, November and December can account for as much as 30 percent of annual sales. The overall U.S. retail economy is measured at $3.2 trillion, and the holidays account for about a fifth of it.
The National Retail Federation expects holiday sales to increase 4.1 percent this year, but notes that shoppers can be expected to be "extremely price sensitive."
Reason: All that income inequality and wage stagnation stuff you've heard about. Holiday shopping is a place where theory becomes reality. If people don't have money to spend, retailers suffer. If retailers suffer, the economy suffers. On Wednesday, the stock market went into a dive, in part because a report showed retail sales had slumped 0.3 percent in September. The Dow Jones Industrial average, which had soared to about 17,000 in July, dropped 460 points at one point Wednesday before recovering to close down 173 points at 16,141.
"The vast majority of the country is finding they need to buy less stuff or go down-market," Joseph Nathan Cotton, who studies household spending patterns at City University of New York, told the New York Times. "There's pressure to spend on the holidays, but so many people are still so tight on cash."
The economy is doing better, but not many people are noticing it. The Bureau of Labor Statistics reported this month that the economy had added 248,000 jobs in September. For the first time since mid-2008, the unemployment rate dropped below 6 percent, to 5.9 percent. That news, plus an upward revision in August's job numbers, means 2014 is on pace to be one of the best year for jobs since the late 1990s.
The White House chipped in with its own stat: In 55 straight months of job growth, the private sector economy has added 10.3 million jobs. Given the economic wreck that President Barack Obama inherited after the 2008 financial collapse, this would seem to bode well for Democrats on Nov. 4 and Christmas shopping thereafter.
That it hasn't speaks less about Mr. Obama's popularity or lack thereof than it does about what the 2008 economic collapse actually revealed. The sub-prime mortgage crisis showed that cheap credit built on a real estate bubble had disguised a fundamental structural change to the American economy.
Short version: The economic recovery is bypassing the middle class.
Mr. Obama understands that. He's said it over and over, most recently in an Oct. 2 speech at the Kellogg School of Management at Northwestern University in Evanston, Ill.
"When middle-class families can't afford to buy the goods or services our businesses sell, it actually makes it harder for our economy to grow," the president said. "Our economy cannot truly succeed if we're stuck in a winner-take-all system where a shrinking few do very well while a growing many are struggling to get by. Historically, our economic greatness rests on a simple principle: When the middle class thrives, and when people can work hard to get into the middle class, then America thrives. And when it doesn't, America doesn't."
But the next morning, even as the rosy economic numbers were coming in, he inadvertently illustrated part of the problem by flying from Chicago to Princeton, Ind. There, to tout the growth in manufacturing jobs, he visited Millennium Steel Service, a nonunion plant that produces rolled steel for the nonunion Toyota truck plant across the highway.
When the American middle class was thriving, auto workers belonged to the UAW. Steelworkers belonged to the United Steelworkers International. Globalization, automation and anti-union efforts contributed to the long decline in U.S. manufacturing jobs. America has added 700,000 manufacturing jobs since February 2010, but the overwhelming majority are nonunion jobs.
Americans — particularly those without college educations — are willing to work for less. They've been told that unions are bad, that if they organize, the plant will be closed and moved to Bangladesh or a right-to-work state where people are glad to have jobs.
This is part of the structural change that began in the 1980s under President Ronald Reagan and is now being codified by a conservative Supreme Court.
Another part: the $7.25 an hour minimum wage. When Mr. Reagan took office in January 1981, the minimum wage was worth about $10 in today's dollars. Maybe Mr. Obama and Democrats in Congress would have better luck with their $10.10 minimum-wage push if they pitched it as bringing back the Gipper Wage.
Raising the minimum wage would put upward pressure on wages and better redistribute the post-2008 economic gains. But Democrats haven't been able to make that case, and too many Americans still haven't figured out what's happened to them. Merry Christmas.
REPRINTED FROM THE ST. LOUIS POST-DISPATCH
DISTRIBUTED BY CREATORS.COM