Why Alstry Focus on Unemployment.....and declining income
May 06, 2009
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About 2/3 of the American Economy is consumer based.
Consumer Spending is the lubricant which drives revenues, profits, and taxes for government.
Without Consumer Spending, there would be no revenues, without revenues there would be no profits, without profits there would be little in tax revenues.
In essence....a strong consumer base is necessary for a strong economy.
A key propellent for Consumer Spending is income....and a positve outlook for future income. Without income, spending is curtailed substantially... and if spending cuts back enough....our entire economy comes to a grinding halt.
Over the past 10 years, borrowing money was a key reason consumers were able to spend. Consumer Spending is what drove our economy and flooded government with tax revenues. In addition, creating debt was the key reason banks and other financial institutions were profitable.
Now, by and large, the consumer is tapped out........the consumers over borrowed and the banks over lent.....as a result spending is slowing, businesses are shutting down, and workers are getting fired by the millions as evidenced by the parabolic rise in first time unemployment claims in recent months.
No matter what anyone in Washington says, banks are now reluctant to lend and are increasingly tightening the noose around consumers. In addition to losing their jobs, millions of consumers are losing access to credit further exacerabating the most severe slowdown since The Great Depression.
The difference was back then, consumers didn't have nearly as much debt as they do today. So far we have only really seen the brunt of sub prime defaults......now we are begining to see Prime loans defaulting at ever increasing rates. At this point we are probably in the second or third inning of a nine inning baseball game.
Back to jobs.....almost every company in America is either cutting workers, cutting wages, or instituted hiring freezes. In the past, slowdowns were generally limited to one sector or one region.....not this time.....no sector or region is immune.
As a result, when a worker gets fired, it is much more difficult to get rehired....even if the person gets retrained as fewer and fewer companies are hiring.
The joke today is that our government tells us the unemployment rate is limited to only those workers collecting unemployment benefits....a small fraction of the modern workforce. The widely reported statistic does NOT include workers who have been unemployed so long as to not be eligible for unemployment benefits, independent contractors like real estate agents or other self employed professionals not working, or service workers or commission based workers(ie salespeople and waitstaff) who have seen their incomes drop by 50% or more due to a slowing of business.
These silent suffering were injecting HUGE revenues into our economy a few years ago and responsible for billions in tax revenues. Alstrynomics estimates that at least 10% of the workforce fits into this catagory and currently functionally unemployed (unable to meet their fixed monthly expenses) but not counted in the Department of Labor U3 stats.
If they were counted, reported unemployment rates would likely be closer to 18-19% and not the 8.5% reported by the mainstream media. Alstrynomics is unaware of anytime in history that so many people, who were dependent on commissions have seen their incomes evaporate to the degree that so many have experienced in the past 12 months......and conditions are continuting to deteriorate.
Without a strong consumer....America can't have a strong economy. Right now millions of consumers are infected or on the brink of contracting the FU virus.....once infected....the chance for recovery is slim as there is a decreasing chance of finding replacement employment or accessing credit.
When enough consumers are infected....our economy dies. And right now....the virus has been elevated to a pandemic. Prepare.
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