Friday, following the Democratic convention's finale on Thursday night, the latest jobs numbers were released, showing modest, but disappointing overall job growth (96,000 jobs created in August). While the U.S. continues to add jobs, and has done so for a while now, they're not coming as fast as anyone would like and the ongoing recovery remains weak.
Naturally the numbers will provoke analysis and spin. But what seems to be the inescapable truth is that consumer demand remains weak. And while demand is weak, there isn't going to be a lot of hiring.
Where there is demand, there is investment, expansion, and hiring, and we've published a number of stories over the last several months about various processors in the plastics industry who are investing and expanding. And it passes the logic test, for example, that an expanded base of insured people will be likely to increase demand for medical goods and services. Indeed, healthcare remains an industry with positive short- and long-term prospects on Wall Street.
The companies expanding are obviously seeing increased demand and opportunity.
But in other segments of the economy, the pressed American consumer has more discretion when it comes to spending, and when the future is uncertain and unemployment and underemployment remain stubbornly persistent, it's not hard to understand that people are being as careful with their money as they are.
Many analysts believe, and I tend to agree, that the housing market is a key factor. When the housing bubble burst, the average American consumer lost access to one of the major means of offsetting stagnating wages, and the overall economy consequently lost a lot of jobs when new housing construction stalled.
And I think it's important to remember that in real terms, American wages haven't gone up much in the last several years. High unemployment only reinforces that lack of spending power. Yet, efforts to do something about underwater mortages and loan modifications run into a buzzsaw of free-market ideals, moral hazard, and banks who don't want to write down the loans. Should they be forced?
From a business perspective, what have we learned that we didn't already know? Not much. Neither party, or candidate, is advocating anything terribly different than we've come to expect.
The question is what to do about it. Perhaps more accurately, the question is what can be done about it, especially in the short to middle term.
Are taxes going to rise, go down, or stay the same for the middle class (the largest number of consumers)? What about the tax cuts contained in the stimulus bill? Will government austerity work any better in the U.S. than it has in Europe?
If politicians are saying they're concerned about the debt, yet plan on cutting taxes, that means a whole lot of as-yet unspecified cuts in government spending. And we've seen the effects of that at the state level. It hasn't led to increased demand. Far from it. Defense spending, a huge component of the budget, is slated for automatic cuts, and business folks are now worried about what that decrease in federal spending will mean.
Cash For Clunkers and the auto bailout have been derided, but I know first-hand from leaders at plastics tooling and processing suppliers that they had a positive effect on them and the various tier suppliers who are their customers.
A few years ago, "deficits don't matter" was the reigning wisdom. Now, suddenly, deficits seem to matter very much. Soaring healthcare costs were a huge concern of businesses. Now that a largely and originally conservative plan has been put in place to expand coverage and control costs, lots of folks are unhappy, even if the CBO scores the plan well, and everyone is going to have to take more responsibility.
But again, the question is what can be done? Will President Obama get more cooperation from Congress in a second term, or less? Would Mitt Romney's tax cuts do more than President Bush's? Would the decreased revenue be offset and how?
Is it really regulation that's the problem? Or is the problem simply the fact that over the last 20-30 years low-cost labor elsewhere in the world (never mind much less regulation, worker and environmental safety) has undercut the American worker, and that while American manufacturing has been holding its own, ongoing competitiveness will depend a lot on increased automation?
Manufacturing may survive, but the jobs lost aren't going to be replaced on any great scale, and near-shoring, while it makes supply-chain sense, and might make money for American manufacturers producing in Mexico, again, doesn't add that many jobs in the U.S. While U.S.-based manufacturers wonder where the next-generation of skilled labor will come from, one has to ask how many jobs will there be for them? These used to be jobs you could build a middle-class life on, but not so much anymore.
So…I'd like to put it to you, and hear your prescriptions. What's the formula for creating more demand, and more jobs, here in the U.S.? Email us your thoughts at firstname.lastname@example.org.