The Labor Department reported last Friday that consumer prices increased 0.3 percent in March. More importantly, however, when adjusting for the increase in prices, worker earnings fell 0.4 percent during the month. What this means is that wage earners are losing ground at an annualized rate of 4.8 percent.
These days most workers are just grateful for having a job. They look around and see plenty of intelligent and able people who’ve received the dreaded pink slip. Still, when rising at the crack of dawn Monday morning to embark on another week of drudgery, some may find it discouraging to know their efforts are moving them backwards at an annual rate of nearly 5 percent.
The combination of rising prices and a soft labor market are a reflection of the economy’s anemic recovery in the face of mass money creation. Last we checked the unemployment rate had dropped to 8.2 percent. On the surface things appear to be improving…the unemployment rate’s going down, not up. But, unfortunately, a small scratch below the surface reveals a less sanguine picture.
Most apparent, the labor participation rate’s collapsing. As people stop looking for work, the Bureau of Labor Statistics conveniently removes them from the unemployment rate. Thus, while the unemployment rate may be dropping, actual unemployment is not. In other words, the unemployment rate’s a bogus number.
What’s going on?
What Does All This Really Mean?
According to the National Bureau of Economic Research, the Great Recession ended in June 2009. That’s nearly three years ago. But, for many, things seem just as bad – or worse – as they did in 2009.
Typically, after an economic recession, there’s an economic expansion. Business investment increases, corporate profits improve, and, most importantly, businesses begin hiring. Last month the U.S. economy added just 120,000 jobs…the fewest in five months. Clearly, the economy is having a tough time getting and maintaining momentum.
Wall Street, as indicated last week, is finally beginning to realize that all is not well. After a six month rally that propelled the S&P 500 nearly 30 percent higher, the S&P 500 lost 2 percent…its worst week of the year.
Obviously, borrowing cost increases in European credit markets and the report from China that first quarter growth decreased to its slowest rate in nearly three years brought concerns to Wall Street. More ominous, however, was the University of Michigan report released Friday showing a decline in consumer confidence.
In summary, Europe’s a basket case, China’s economy is cooling, and a weak job market coupled with a frothy stock market and rising consumer prices have consumers rethinking their financial position. But what does all this really mean…
The Consequences of Lard
Here at the Economic Prism we look at all the latest economic reports, and local anecdotes we garner at the barber shop, and then we look past them. For it’s not the actual economic reports we’re interested in understanding; rather it’s what’s acting to propel these economic reports that we want to know. The weak job market, frothy stock market, rising consumer prices, and waning consumer confidence, have nothing to do with what’s wrong with the economy…they are consequences of what’s wrong.
From our perspective, what seems to be ailing the economy is the simple observation that there’s too much lard. We don’t mean pig fat, of course. We mean debt. There’s too darned much of it…and there’s nothing that can be done about it.
The economy needs more government debt to grow. Yet governments are broke. The economy needs more consumer debt to grow. Yet consumers are broke. The economy needs the Fed to create money from nothing to buy government debt. Yet gas prices are at $4 per gallon.
Alas, there’s no turning back. More lard is needed to keep things going. Yet more lard will ultimately make things worse. Without more lard the whole economic shebang will grind to a halt. Yet applying a fresh layer of lard will only grease up the economic highway already paved to hell.
Such are the consequences of relying on central planners and their repeated applications of lard to make the world a better place. Such are the consequences of a world where a planned economy tramples upon ideas of limited government, private property rights, and individual liberties…where those who work hard, save their money, and pay their way are punished for their perseverance, prudence, and independence.
These are the consequences of lard.
for Economic Prism