Unemployed...or just doing their part to boost profits?
Unemployed...or just doing their part to boost profits?

"Job Cuts Avert Catastrophic Quarter as Profits Excel" screamed a headline I read today at the Bloomberg website. In a nutshell, because companies across the world are eliminating jobs in bucket loads, they are lowering their labor costs. That's boosting their profits. Of course, the disaster these companies have averted isn't averted at all. It becomes a blizzard of catastrophes, one for each household which loses a wage earner to job cuts. That's 5.1 million catastrophes in the United States alone since 2007.

I suppose it is a matter of person's catastrophe is another's windfall.

Here was another great Bloomberg headline: "Smallest U.S. Wage Gain on Record Is ‘Upside for Profits." It's in the same vein...for those folks who still have jobs, wages went up at the lowest rate on record. Wages are a big part of the operating expense of any business, so keeping the lid on wages helps the bottom line.

The quick and ugly recap: Companies are beating profit expectations by beating up their employees. It's a curious act of self-cannibalism, as the very people losing their jobs or having their wages cut or frozen are the single most important piece of the modern American economy: The Consumer.

So let's have a quick review for the business and Gubbermint folks (who are increasingly one and the same entity in modern America):

  • Consumers who don't have jobs tend to spend less money.
  • Consumers fearful of losing their jobs and who see their wages frozen or falling spend less as well.

This, of course, pressures companies to cut even more jobs and lower their wage expenses to "boost profits."

And so the dog chases his own tail all the harder.

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