America's Pain Threshold
Two of America's three largest employers, Restaurants and Government(approximately 20% of the workforce) is facing serious financial headwinds. Many states, counties, and cities on the brink of insolvency(see previous post and Alabama County Prepares for Bankruptcy in Debt Crisis ). Restaurants shutting down accross the country.
In coming months, restaurants are expected to close more locations, build fewer new ones, offer more low-priced promotions and tighten worker scheduling to contain labor costs.
This summer's slow restaurant sales have hurt restaurant servers, who derive much of their income from tips. The restaurant industry employs 13.1 million people, making it the nation's third-largest employer, behind the U.S. government and the health-care industry, according to the National Restaurant Association.
Servers say their tips have been down, partly because some customers are leaving a smaller percentage gratuity than before, and also because waiters have fewer tables per night and lower total bills. Mr. Otis said Darden's restaurant managers are scheduling servers to work more hours to make up for the weaker tips.
Restaurant workers, almost 10% of our workforce, are facing job loss and/or income decrease while the expenses in their day to day lives exploding. Same with government workers.....the governator just fired over 20K and reduced pay to minimum wage for 200K more.
Add in construction workers, real estate agents, mortgage brokers, auto workers, and airlines workers and we are looking at another 5% of the work force who have seen their incomes and benefits evaporate over the past few years.
Any wonder why the data is sooooo distorted when presented to the nation.
Remember, Social Security and Medicare is unfunded.......we need these workers to contribute to pay current obligations for our current retirees. Most actuarial tables don't contemplate a substantial decline in contributions from current workers. Despite this, we are still running a $50 Trillion dollar deficit....now factor declining contributions and the game is just about over.
Now the pain facing the nation is being reflected in the earnings of our banks.
WASHINGTON (MarketWatch) -- Banks had the second worst earnings in the since 1991, the Federal Deposit Insurance Corporation said Tuesday. Earnings for the quarter totaled just $5.0 billion compared to $36.8 billion a year ago, a decline of 86.5%, the FDIC said in its second-quarter banking profile. Higher loss provisions were the main reason for the drop. "The results are pretty dismal," said FDIC chairman Sheila Bair at a press conference.
The above banks do not include Money Center Banks and Wall Street Investment Banks, if we included those the results would be much worse. To put things in a little perspective, back in 1991, the DOW was trading at about 3000 throughout the year. The difference back then was the trailing 12 month PE of the DOW was much better in 1991 than it is today.
Jobs evaporating by the millions. Banks and Businesses shutting down. Government on the brink of insolvency. Our retirees depending on workers that may not be able to support them. In sum, few look forward at what is around the corner.......soon we shall see.