As I said in yesterday's post I occasionally meander off topic or out of context here. For me to be discussing the state of the US economy on our site may seem odd, yet if we in the creative business world are not paying attention to the country's economy then we fall into the "more fool you" trap. In other words I'm suggesting this post is apropos.
We all know that the economy is struggling. The stock market may be up, which is just dandy for those of us who invest there, but US consumer spending stagnated in June.
Where's the disconnect? Well first, companies that have made deep layoffs of workers have made huge profits - case in point Harley Davidson. And second, the country should now brace itself for the "long-term" unemployed - because our political leaders are setting the stage for this as inevitable.
Companies such as Harley Davidson are banking their profits and are not re-hiring workers, nor are they investing in infrastructure for future growth. Meanwhile politicians on both sides are unwilling to support the unemployed with benefit extensions. What we have here is a stalemate. And a lack of will. Companies profit and hang on to their cash, politicians throw the unemployed under the bus.
As Paul Krugman, the Nobel prize-winning economist puts it in his latest Op-Ed piece Defining prosperity down "..growth is slowing, and the odds are that unemployment will rise, not fall, in the months ahead. That’s bad. But what’s worse is the growing evidence that our governing elite just doesn’t care — that a once-unthinkable level of economic distress is in the process of becoming the new normal."
With the June economic numbers as flat as a pancake, it is but.."the latest indication that the economy would continue to struggle in the second half of the year."[Link] The result then is that “..consumers are not feeling good enough to start spending on things that count, such as durables and houses, because the unemployment level is basically so high”
Whatever the markets may suggest or whatever we may hear from the politicians and the pundits, one has only to look around at how our personal situation looks for the real story. That's why June's numbers stagnated.
If you care to you should read Paul Krugman's blog. You will be disappointed but for all the right reasons.
And for a great overview of what's happening to, and crippling the middle class, you should read Edward Luce's article on FT.com
Sorry for the bleak outlook but welcome to The New Normal.
[Update - 8/4/10] I wish I'd seen this ultra-rosey view of the crisis from Timothy F. Geithner, the secretary of the Treasury. So off the mark it begs belief. It also begs the question - does he really think he can pull the wool over our eyes?