by Bill McBride on 12/27/2013 09:55:00 AM
Friday, December 27, 2013
I'd like to repeat something I wrote 2 1/2 years ago:
[I]t really isn't much of a secret that Wall Street and corporate America like the unemployment rate to be a little high. But it is "dirty" in the sense that it is unspoken. Higher unemployment keeps wage growth down, and helps with margins and earnings - and higher unemployment also keeps the Fed on the sidelines. Yes, corporations like to see job growth, so people have enough confidence to spend (and they can have a few more customers). And they definitely don't want to see Depression era unemployment - but a slowly declining unemployment rate (even at 9%) with some job growth is considered OK.Not much has changed (the unemployment rate is still high at 7%). And I still think unemployment should be the #1 political issue.
For more, see Paul Krugman's The Plight of the Employed and Why Corporations Might Not Mind Moderate Depression and The Fear Economy
[M]ay I suggest that employers, although they’ll never say so in public, like this situation? That is, there’s a significant upside to them from the still-weak economy. I don’t think I’d go so far as to say that there’s a deliberate effort to keep the economy weak; but corporate America certainly isn’t feeling much pain, and the plight of workers is actually a plus from their point of view.A high unemployment rate keeps wages down for most working Americans - and the recent income growth has flowed mostly to the owners of corporations and not to labor. This is not an ideal economic situation for most Americans (but ideal for a few). Enough rant - and I hope I don't repeat this again in another 2 years.
best to all
Posted by Bill McBride on 12/27/2013 09:55:00 AM