As always in this spot, I am an amateur economist. That means that while I have many college hours of economic study, I am not paid for my economic prognostications. This entry is just questions...
If the economy is so good:
*Why are there so many empty store fronts? There is roughly a half billion square feet of empty space across America. Part of the reason for this is that large corporate stores have displaced many smaller ones. This makes the large chains more profitable, as competition declines. And large companies are merging. An example is Office Depot buying Office Max, why would you need 2 or 3 stores when one will suffice? Another example of a few years back is the Sprint Nextel merger. In the town I live in there were almost 20 stores pre-merger, now there are 10. The largest, like Walmart, will vacate stores to open one down the street. There is very little need of that size space.
*Why is McDonald's, or any fast food, now considered a "career" and requires "fair" or "living" wages? The sad fact is manufacturing has left much of America. In the 1960s, my grandfather was a union organizer for shoe factories. His territory was primarily in Missouri. At that time there were many small towns, with a small to medium size shoe factory. This manufacturing drove the local economy. Now I would ask you when the last time you bought shoes stamped "Made in USA". It's not that Chinese shoes are bad, but now Chinese towns are centering their local economies around a shoe factory, not American towns. Factories were what drove the middle class. Frankly, not everyone can be a CEO, not all can even be a manager. We need jobs that add to the economy, perhaps we need to consider the quality of jobs. Manufacturing is generally more profitable than retail, therefore wages tend to be better as well. A manufacturer can expect to get three times what the raw materials cost him, in other words, if the raw materials of that widget cost $1, then the company will sell widgets for $3. Retailers will buy that $3 widget, mark it up and sell it to the consumer. Most retailers would kill for a gross margin of 50%, or to be able to sell that widget for $6. Out of that $3 in profit comes wages of clerks, utilities in the store, rent of the building (most do not own their own building) and profit for their shareholders, partners or owners. Retail space is generally more expensive than manufacturing space, because of location. You can build a factory in rural areas for much less than urban or suburban areas, where retailers must be to be available to consumers. Retail space needs to be brighter and more appealing than a factory, meaning there is more expense in opening and upkeep of the facility.
*Why are so many people no longer in the job force? And why is there so much underemployment? Workforce participation is at historical lows. This means less people are looking for full time employment. While this number is never zero, the lower it is the better. Low numbers mean there is a smaller pool of qualified workers available for filling specific jobs, which drives up wages. It doesn't take any talent to say "do you want fries with that", it does to be able to use tools and build something. Underemployment is two things, first those working part time instead of full time, and second those working in jobs they are vastly overqualified for.
*Why is the stock market up? I remember seeing the stock market as an indicator of the broader economy. I no longer think that is the case. The stock market is more than ever just a gamble of money. The factors that push the market are seemingly unrelated to the broader economy, except possibly on a global basis. Classic liberals used to say "the rich get richer", the stock market now more than I ever can remember is the outcome of that saying. It is no longer about viability of a company, but how much can be gained and sent to financiers, cut the company up, sell the profit centers and kill off the core and our stock will rise. An example is a story I recently read about Yahoo, Their CEO spun off their stake in Alibaba, an up and coming company. Why, if Alibaba is doing so well, and Yahoo's core is not, would you do this? Would not the profits help you to build back the core? The one time infusion of cash is all that mattered to the people involved with Yahoo, sort of like take the money and run, and if Yahoo dies, so what.
*Why are low oil prices bad? While the margins may remain pretty constant, the gross dollars flowing to the investors drops. Again, it seems like screwed up priorities and short sightedness to me. Low oil can drive the economy, freeing up money to help fill those retail vacancies we talked about earlier. If a family doesn't have to pay at the pump, then perhaps better quality food is bought, or needed house repairs, or just savings. In my opinion, oil has been a primary driver for the sluggish economy in recent years. Now that prices are down, that money can be used for other endeavors, based on capitalism.
*Why is unregulated immigration good? We are a country of immigrants. My family came from Germany and Ireland. I would never want us to completely seal our borders to immigration. That being said, it is important to regulate the flow. It should not be about who gets the voting blocks, but how can our economic system absorb them. To come and be on the streets is not an improvement, where the improvement comes from is freedom to build a new life, and family with economic security. Immigration is not about lowering wages, or should not be. But large Corporations see it as such, that is why both sides favor it overall, because corporations provide them with money to win their next election. This is short sighted in that if wages decrease, so does the ability to buy the products.
*Why is quantitative easing good? Quantitative easing used to be more commonly known as "turning on the printing press". QE increases the money supply as if more banknotes were printed. This devalues our existing money, which causes inflation. The only reason at this point inflation is not going crazy is that wages are depressed, and companies cannot find a way to raise prices. If the economy does take off, watch the inflation rate. Inflation generally favors government, as tax brackets change, the percent take is higher. And without higher taxes, how can government buy votes and get rich? I think it set a record for proposal of new tax when the price of gas dropped precipitously, and I heard it from both sides of the aisle in less than a week.
So what can the common man do? A group of commoners started this country over 200 years ago, perhaps there will be a group to move it in the right direction. Thomas Jefferson said that a little revolution is a good thing. Revolution does not have to be war, but rather cleaning house (or Senate) of those that are not in it for the greater glory of our experiment. Maybe, just maybe the turmoil of late like Ferguson Missouri or New York City is just a much a symptom of our economic morass as anything real. After all the poor are the first to really feel our economic problems, followed by the middle class, and the rich is relatively protected. It should not be tax the rich, but rather shun those that are our modern robber barons. Pay attention to what we buy, where it was made. Reward those companies that help or local economies. Take back our manufacturing by buying stuff made here. If you find a quality American made product, send the company a thank you email. If we buy shoes made here in greater percentages to those made "there", more companies will manufacture here, to get the advantages. Who knows, maybe us commoners have more power than we realize.
Spend Wisely!
