In a recent (November 21) article, the Los Angeles Times reported “Trump Rides Strong Economy” citing low unemployment and a bullish market. This view completely overlooks several other factors that bode ill for the economy’s future.
First, the low unemployment figures fail to take into account the “not-employed” which is at a record high and the “under-employed” who are not working a full 40 hour week.
Second, the record employment overlooks the increasing population, the large number of part time jobs and the large number of people at the lower end of the economic ladder that are holding down multiple jobs, some as many as 4. Since employment figures include part time jobs and many people hold multiple jobs, the number of jobs filled is substantially greater than the number of people employed.
Third, the vast pool of people not employed keeps the demand for labor low particularly among the unskilled. This keeps wages, purchasing power and consumption low. The high demand for highly skilled labor in some markets, e.g., IT, is not being met because there aren’t enough people with the desired skills and corporations don’t want to pay for the training and relocation of unemployed, low skilled workers in depressed regions of the country. And because those unemployed, low skilled people lack the money to pay for their own retraining and relocation, the demand for high skilled labor will remain unmet indefinitely.
Regarding the stock market, the rapidly rising prices, particularly in the high tech area, are driven by speculation that profits will continue to soar as they have been lately. But why? There is no sign that consumption will rise, except for military spending. Thus, except for military goods, production, employment and profits should remain stagnant and may fall as the purchasing power of the public continues to fall. So if production and profits rise, it will be due entirely to military spending, the money for which the government has to borrow all 100%. Continued borrowing by the government is not a good omen for the economy’s future.
The other mechanisms that produce rising profits are automation (which eliminates jobs), mergers and acquisitions which reduce competition (and eliminate jobs), outsourcing to countries with cheap labor (which eliminates jobs) and relaxed regulations which cut production costs (and eliminates jobs). There is also the prospect of freeing up natural resources that are reserved in public lands and coastal waters which creates jobs, but destroys the environment. All of these may be good for short term profits, but bode ill for the future.
The the low unemployment and rising stock market may look good on the surface, but there is no reason to believe the trend will continue. In fact, the handwriting on the wall suggests we’re in for a fall.