The Progress of the Economic Recovery in the United States

The United States economy is growing.  However, the United States economy is not growing very fast and the growth does not appear to be very deep.  

January figures for Industrial Production were released today and about all one can say about the numbers is that the rate of growth is positive but modest.  And, the rate of growth seems to be declining. 

Year-over-year, industrial production grew at a 3.4 percent annual rate in January 2012. 

However, this is down from a 3.9 per cent, year-over-year, rate of growth in the fourth quarter of 2011 and down from a 6.2 percent, year-over-year, rate of growth in the fourth quarter of 2010.  In the fourth quarter of 2009 the economy actually declined by 5.5 percent, year-over-year. 

The numbers for industrial production are not inconsistent with the pattern of growth, year-over-year, of real Gross Domestic Product.  In the fourth quarter of 2011, the year-over-year rate of increase in real GDP was 1.6 per cent.  In the fourth quarter of 2010, the similar measure stood at 3.1 percent.  For the fourth quarter of 2009, like the figure for industrial production, the economy actually declined by 0.5 per cent.

Looking at the numbers in this way does not give one the upbeat feeling one can often get from just looking at the month-to-month change in the numbers.

Furthermore, information on the capacity utilization of industry (also released today) and the under-employment of working age people still indicates that there is a massive problem in our use of physical capital and of human capital. 

Capacity utilization in manufacturing stands at 78.5 percent in January.  That is, more than 20.0 percent of our industrial capacity is standing idle!  The important thing to me here is that the capacity utilization in the United States has been on a downward path since the 1960s.  Please check the chart below. 

Reading the chart from the left to the right shows a dramatic downward trend with each subsequent peak in capacity utilization being lower than the one previous to it. 

The question that remains to be answered is whether or not the trend will be continued with the “peak” in capacity utilization we are going to reach this time around.

The United States has a growing mis-match in the industrial capacity it has built and the industrial capacity that is useful.  This mis-match must be worked off…there is not an over night solution to this problem.

The same situation exists in the labor markets.  The under-utilization of working age people has grown since the 1960s.  In the 1960s about one in eleven or twelve people in the United States were under-employed.  The measure of under-employment now stands somewhere between one in four or one in five people that are of working age. 

The United States has a major problem.  Jobs and industrial capacity are not matched with the present makeup of our human and physical capital.  These under-employed persons and this under-utilized plant and equipment are not going to be matched up any time soon.  Thus, under-employment of labor and under-utilization of industrial capital are going to be around for a long time.  And, the rates of economic growth we are experiencing will not do much to help the situation.

The Focus Should Be On Under-Employment Not Un-Employment

The president, the press, and the political pundits focus on the unemployment rate in November as it dropped to 8.6 percent of the workforce, a drop from 9.1 percent in October.

However, under-employment still remains in the 20.0 to 25.0 percent range as it has for the past several years.

Under-employment includes those people that are working part time but would like to work full-time.  This component did decline by more than 4.0 percent in November from a month earlier but was down by only about 5.0 percent year-over-year.

Under-employment also considers people that are not working but say that they would like to be.  This includes discouraged workers and those who cannot work for reasons like ill health.  The number included in this classification increased by about 6.0 percent over the last year.  Does this capture the movement from part-time employment to discouraged workers? 

These figures indicate that there are long-run factors at work in the labor market that cannot just be solved by short-run fixes or election-year accusations and verbal confrontations.

My argument is, and has been, that fifty years of credit inflation has left the United States with a substantial dislocation of economic resources, like labor, and a vast redistribution of income toward the wealthy.  These dislocations are not subject to the “quick fix”. 

The economy is recovering, but the economic recovery is not doing much…and cannot do much…to create the restructuring that is needed.  You cannot try and put an employee of the auto industry back to work in the same job he/she held for the last ten years when the industry has moved on technologically and that job no longer exists. 

Another significant indicator of this is that the share of the population in the labor force has dropped to 64.0 percent, the lowest level in decades. 

This drop in labor force share is being driven by people retiring early from the labor force.  We see this in a lead article in the New York Times this morning, “Many Workers in Public Sector Retiring Sooner.” (http://www.nytimes.com/2011/12/06/us/more-public-sector-workers-are-retiring-sooner.html?_r=1&hp)  This is a result of the budget problems being faced by state and local governments, but it is also a result of events taking place in the private sector as well.

Further supporting information comes from the data of the manufacturing sector.  Capacity utilization continues to be below the levels attained over the past fifty years. 

The latest figure for capacity utilization was 77.8 percent.  This is above the level capacity utilization reached in the depths of the Great Recession, 67.3 percent in June 2009, but it is only slightly higher than the level at the trough of the 2001 recession.  And, the trend throughout the last fifty years has been down with capacity utilization being near 90 percent in the 1960s.

Over the past fifty years in the United States, under-employment has increased dramatically and capacity utilization has declined dramatically.  Note, that this is the time period that the income distribution skewed so dramatically toward the wealthy in the United States.

The economic policies of the United States government, both Republican and Democratic, have produced this outcome over this time period.  More of the same will not be helpful. 

Economic growth and economic recovery will not be robust unless and until people come to understand that the economic policies of the government must change.  And, these economic policies must deal with the structural dislocations that have evolved over the past fifty years as well as put the economy back on a more stable foundation with less reliance on debt and credit inflation. 

Credit inflation paints a very pretty picture while it is accelerating.  But, the consequences of this inflation is anything but pretty.  Just ask the less wealthy, the under-employed, and the manufacturers that cannot use their full capacity.   

The Economic Picture--No Steam Ahead!

The August unemployment rate was 9.1 percent.  Not much joy in Mudville.

About one in five Americans in the prime age for working range remain under-employed. 

We have the short-run problem related to economic growth and the fact that families, businesses, and governments need to get their balance sheets in order before they will really begin to spend again. (http://seekingalpha.com/article/290934-struggling-with-a-great-contraction) 

We have the long-run structural problems in the labor market related to the fact that the skills of many individuals of working age do not mesh with the jobs the economy is creating or is going to create.  For a dismal picture of this situation see the recent article in Bloomberg Businessweek (August 29—September 4, 2011) titled “The Slow Disappearance of the American Working Man.” 

And short-run growth seems to be going nowhere.  Just look at the year-over-year rate of change in industrial production.  Note that this series peaked in the second quarter of 2010.  The modest decline in this growth rate has now been going down-hill for more than 12 months.

Of course, the performance of industrial production is also captured in the year-over-year growth rate of real Gross Domestic Product.  Here the peak growth rate was achieved in the third quarter of 2010.  The growth rate has declined since.

If the economy fails to grow by 3.0 percent or more, jobs will not be added at a rate that will lower the unemployment rate.  And, growth at this rate will certainly not resolve the long run problem related to those that are holding part-time positions that would like to have full-time jobs and those people that have left the work force. 

Furthermore, this scenario is not one that is favorable to people making much headway in reducing the burden of their debts.  Thus, the “debt overhang” seems to be a part of the continuing saga of our economic malaise.  The environment for getting out of debt does not exist.

Given this picture, the questions that arise pertain to the concern that America may face a decade like Japan has faced or a decade like that in America in the 1930s.  Maybe this is the “payback” for the period of credit inflation we have experienced over the past fifty years.  Maybe the only way out of this situation, which is not a short-run solution, is to focus on the fundamentals, focus on the structural problems created over the past fifty years.

The Federal Reserve, so far, has acted so as to prevent another “shock” to the economy like the one they introduced in the 1937-38 period.  In this earlier period the Fed caused banks to become even more restrictive in their lending operations than they had been and this precipitated a second depression for the 1930s.  This time the Fed has flooded the banking system with liquidity and seems to be in no hurry to remove anything that appears excessive in terms of bank reserves even though bank lending remains modest, at best. (http://seekingalpha.com/article/290416-quantitative-easing-theory-need-not-apply)   

The short-run conflict that is going on right now is between the efforts of the Federal Reserve to stimulate bank lending and the financial system, and the efforts of families, businesses, and governments to reduce their debt loads.  At the present time, the latter interests seem to be winning.

The longer run question relates to whether or not the government stops focusing just on short-run solutions to the problems of the economy and begins to focus on the longer-term structural problems that exist.  The difficulty here is that it took a long time to get where we are now and it can be expected that it will take us a long time to get things back in order. 

The real dilemma is that we don’t create more problems for the future by implementing short-run solutions to our problems that will just exacerbate our longer-run problems.  In the long run we may all be dead, but we now seem to be dealing with the long-run problems left to us by earlier generations of policy makers that just focused on short-run solutions without any regard for the long run!

Why This Economic Expansion is Going Nowhere

This economic expansion is now in its twenty-fourth month.  It is one of the weakest expansions on record.  And, it seems to be going nowhere.

One reason for this is that there is just too much debt still outstanding in the economy.  The economy is experiencing a debt deflation where more and more people and businesses feel over-burdened with the debt loads they are carrying on their balance sheets.

The government, especially the Federal Reserve, is trying to counter this by pushing hard on the credit inflation button to extend the fifty years or so of credit inflation we have already experienced.  The problem with this is that each new round of credit inflation puts more and more people and businesses into unsustainable positions so that expansions rely on a smaller and smaller proportion of the economy to drive further economic growth. (http://seekingalpha.com/article/279283-credit-inflation-or-debt-deflation)

 Debt takes time to work off or work out.  The bigger the debt-load the longer and harder it is for the people and businesses to climb out of their holes.  Repeated cycles of credit inflation not only end up with more people digging holes, it also contributes to some existing holes becoming deeper. 

Hence with every cycle recoveries become harder to achieve and the subsequent economic growth becomes less and less robust.

Another reason why economic growth is having trouble picking up momentum is because of the dislocations that exist within the economy.  Credit inflation causes many distortions beyond what it does to the balance sheets of people and businesses.

Most analysts concentrate on the unemployment rate.  Right now this figure rests just over 9.0 percent.  Analysts focus on this variable as the crucial one for the upcoming 2012 election. 

To me, a more important measure of the dislocation of human resources in the economy is the amount of under-employment we are experiencing.  This number includes those individuals that have left the workforce or are employed but are not fully employed.

The under-employment rate in the United States right now runs about 20.0 percent.  About one out of every five Americans is under-employed. 

This number was under 10.0 percent in the 1960s and has trended up ever since. 

The reason:  the number one goal of the economic policy of the United States government was to achieve high rates of employment…low rates of unemployment.  The best way to do this when unemployment arose was to stimulate the economy through the monetary and fiscal policies of the United States government to put people back to work in the jobs they have previously been laid off from.  This, of course, resulted in more and more of the human capital in the country being underutilized…a capacity utilization problem.

Adding to this was the shift in employment in the country with relatively more and more of the new jobs opening up being in finance and financial services and less and less in manufacturing.  Many “potential” workers find themselves limited in terms of opportunity either through geographic location or educational training.  Both of these results came from the governments attempt to achieve high levels of employment through credit inflation.

Finally, there is the problem of capacity utilization of physical capital.  As one can see in the accompanying chart, capacity utilization in American industry was in the 87.0 to 90.0 percent range in the 1960s.  As the proportion of human capital being used in this country trended downward from the1960s to the present, capacity utilization in manufacturing has also trended downward.  

One can observe very clearly in this chart the cycles of capacity utilization associated with each recession during this time period.  Also, one can not that with every cycle in capacity utilization that the “new” peak achieved is lower than the peak reached during the previous cycle…with the exception of the 1995-1997 experience.

Right now, United States manufacturing seems to be “peaking” out just below 77.0% of capacity, down from a previous peak of about 82.0 percent of capacity.  It has been stuck at this level for at least seven months now, through June.

My argument is that just as credit inflation is responsible for the growing under-employment in the United States work force, credit inflation is also responsible for the growing under-employment of the physical capital of the United States.  Credit inflation distorts business decisions and leads to a capital stock that is less and less productive over time.

So, here are three reasons why I place a low probability on the United States economy achieving a more robust economic recovery: the debt load on people and businesses; the dislocation existing in the labor market leading to high rates of under-employment; and the dislocation existing in the use of physical capital in the United States leading to low rates of capacity utilization. 

Note that credit inflation can only be a short run panacea for these problems.  Credit inflation leads to greater debt buildup adding to the unsustainability of the debt load being carried by people and businesses.  Credit inflation works to put people back into the jobs they recently lost but as the society changes, the old jobs go away.  And, credit inflation affects the productivity of the country’s physical capital making the existing capital stock less and less usable.  There are no good answers here.

What Can or Cannot Be Done About Economic Growth?

Over the past fifty years, the United States economy, as measured by real gross domestic product, has grown at a compound rate of growth of 3.1 per cent. 

Yes, there have been cycles in which economic growth substantially declined or expanded and in which unemployment rose and unemployment fell.

But, over this time period, the trend rate of economic growth remained relatively constant. 

Maybe we can’t do much about achieving greater trend economic growth in the United States.  Other countries are growing more rapidly over time than the United States but we used to talk about the convergence of growth rates.  Emerging or developing economies grew faster than the more developed countries, but as these countries matured their economic growth rates would converge to that of the more developed countries.

In this view there is not much that a “mature” country can do in order to achieve higher secular rates of growth.  Maybe the United States is “stuck” with a growth rate slightly in excess of three percent.

Another statistic that has caught my attention is the so-called under-employment rate.  Since the 1960s, this rate has grown dramatically to the point where one out of every four or one out of every five Americans of employment age (depending upon how you measure this condition) are either unemployed, employed part-time, or has dropped out of the labor force and is not looking for a job.

Of, course, the labor market has changed substantially.  For example, the participation rate in the work force has grown since the 1960s as more and more women have entered the work force, but even this number has dropped modestly.

These statistics came to mind this morning as I read (for the second day in a row) a very important article on the front page of the New York Times.  The article is “Companies Spend on Equipment, Not Workers.” (http://www.nytimes.com/2011/06/10/business/10capital.html?_r=1&hp=&adxnnl=1&adxnnlx=1307710996-gxrbDaAG3hw1i6zHqy/zcw)  “Workers are getting more expensive while equipment is getting heaper, and the combination is encouraging companies to spend on machines rather than people.”

But, this is not the whole story.  As one business owner is quoted in the article, “’People don’t seem to come in with the right skill sets to work in modern manufacturing,’ Mr. Mishek said, complaining that job applicants were often deficient in computer, mathematics, science and accounting skills. ‘It seems as if technology has evolved faster than people.’”

Another factor creating this divergence beyond just the evolution of technology, I believe, is the fact that the federal government has been spending lots and lots of dollars over the past fifty years to put people back into the jobs they lost either over the business cycle or as foreign competition grew.  Government spending to “keep the economy growing” or to protect US industries was good for the labor unions because it kept their base in tack, and it was good for the politicians because it kept the labor unions happy and kept the employees employed and happy.

But, it did nothing for the skills of the employment age people and it provided a promise to many joining the labor force that similar jobs would be available to them in the future and that their employability would be protected by this governmental policy.

Earlier this year, some test results of school age children around the world were released.  There was only one category that American students were first in the world in…”self-esteem.”  In almost everything else, the American student scored in the middle of the pack.  However, they believed they were the best.

Seems like we have a growing mis-match in the United States economy about what people expect about future employment opportunities and how young people are being educated to be prepared to work in the world of the twenty-first century. 

Stimulating the economy to put people back to work in the same jobs they lost is going to resolve only one problem…getting the politicians who proposed the stimulus re-elected.  As we have found out, this may be a “short-run solution” but it does not resolve the problem over time.  The attitudes in the society toward education must change and this is only a “long-term solution” that is not easily marketed in elections.

The same thing applies to “re-distribution” programs.  Housing and home ownership have been a major component of the economic policies devised by the federal government over the past fifty years.  Again, the justification for attempting to achieve these objectives…getting sitting politicians re-elected!

And, like the current disarray in the labor market, where is the housing market these days?

There are some things that can be achieved by economic policies and some things that cannot.  Over the past fifty years, the United States government has tried to force solutions on the United States economy that cannot be achieved. 

The effort to achieve higher rates of employment and home ownership over the last fifty years has resulted in a credit inflation that has produced the consequences we are now experiencing.  One of the reasons why this approach was taken was that there was not sufficient historical data or information available to provide insight into the problems and difficulties that such policies could produce.  This is one reason why Kenneth Rogoff and Carmen Reinhart conducted research over eight centuries to examine the “financial folly” that could lead to the justification for policies such as the ones that have been followed since the early ‘sixties.

One of the problems that come out of such “folly”, however, as Rogoff and Reinhart point out in their important book “This Time is Different,” is that a nation does not get out of such irresponsible behavior overnight.  

That is, a country cannot just “stimulate” itself out of the hole it has dug for itself. 

There are some things that a government cannot do with respect to generating more rapid economic growth.  Efforts to over-achieve in this area just result in longer-term misery.  Sometimes the prudent behavior is to stop digging the hole deeper.   

Debt Ultimately Leaves You With No Good Options

The economies of Europe are hurting, unemployment is too high, and the social nets are under attack.  The economy of the United States is hurting, unemployment is too high, and the social net is under attack.

Options for the governments in each area are decreasing and despair is growing. 

This is exactly what piling on the debt eventually does to you.

I sympathize with the unemployed.  I sympathize with the under-employed.  I sympathize with the labor unions…public sector and private sector…that are losing members and popular support.  I wish there were more for everyone.

Taking on debt, in the beginning, looks like it frees one up…provides opportunities to do more things…own more things…live a better life. 

Eventually, debt does exactly the opposite…limiting your options…constraining your life style…and exerting pressures that are unwelcome.

I sound like a preacher from the early part of the twentieth century…don’t I?  This is exactly what they used to say. 

Except this is just what we are seeing. 

Taking on debt in the early stages of financial leveraging does allow you to do some things that you cannot do without debt.  And, in these early stages, more debt can seemingly “buy” you out of difficulties. 

As we have seen, more debt then becomes the solution to the problems created by debt.  And, it works for a time.

The thing that people don’t see in continually using debt as a panacea for their problems is that the more and more debt they add to their balance sheets, the fewer and fewer options they have. 

Finally, the obligations created by the debt result in a reduction in the options leaving the debtor with very few choices…and, with most of the choices undesirable ones.

So, the government of Greece is faced with selling assets, and tightening up its budget even further, reducing government employment, and cutting social services. 

Portugal is now under the knife although it believed for a long time that it would escape the “cure”.

And, who are becoming the hard-nosed critics that are pushing these governments to take on more radical solutions?

Spain…and Italy…and Belgium….

Why?  Well, because these latter countries are now feeling the potential for the “contagion” to spread in the European continent. 

Spain, who seemed to be getting its house in order, observed a massive shift in voting on Sunday as the long ruling socialist party was basically removed from office.  There is great fear that the accounting in regional governments has been understating the debt of the country and this will have to be recognized and dealt with by the incoming governments.  Whoops!

Italy has a national debt equal to 120 percent of its gross domestic product and is experiencing sufficient economic dislocations that its future was called into question by a bond rating agency.

Belgium is now also coming up on the radar screens of the investment community.  The interest spread on 10-year Belgium debt over 10-year German debt jumped to a near term high on Monday.  Belgium, too, is looking anxiously at what Greece…and Portugal…do to avoid becoming one of the falling dominoes.

Yet there are still calls for these countries to increase their spending and create more debt to solve the employment and social services problems for the countries experiencing such suffering.

Foremost among those calling for more spending and more debt is the fundamentalist preacher Paul Krugman.  To him more debt seems to be the solution to any problem an economy faces. 

Yes, people are hurting, but, as he seeks to achieve a reduction in the “official” unemployment rate, some of us see the increase in the under-employment of our workforce throughout the past fifty years, the period of credit inflation, as the consequence of those, like Krugman, who profess the gospel of governmental deficit spending as the way to put people back to work in their legacy jobs.

Krugman criticizes those concerned with the massive debt levels achieved by  European governments…and by the United States government…and claims that those worrying about these debt levels are like some that are claiming that the end of the world is near.

Yet, Krugman, himself, sounds like a profit of doom, when he claims that the world as we know it will end if governments don’t increase spending and create more debt!

The problem we now face is one in which there seems to be very few choices left for us.  The amount of debt that people and nations have created is acting like a noose around our neck that is getting ever tighter.  We can do as Krugman suggests, and goose up stimulus spending some more creating more debt, but, as we have seen, the outcome of this would be to provide us with even fewer choices in the future.  The noose will just get tighter.

Eventually, the options will run out, leaving us no choices.

It seems to me that we must deal with the choices that are now available to us, even though they may not be very pleasant ones, and act in a way that will allow us more and better choices in the future.  If reducing the debt outstanding at this stage is the only way we to increase our options, then it seems as if this is the way we must go. 

Given the limited choices that are available to us at this time…I would hate to see our options become even more constricted.         

The Merger Binge and the Economy

We wondered what Microsoft was up to when it started issuing long-term debt last year, something that it had never done all the rest of the time it has been a public company. 

This money was not going to go to expand operations.  It already had tons of cash to do that!

The best bet was that Microsoft was going to go acquiring…but, what.

Now we have a partial view…Microsoft…and Steve Ballmer…is buying Skype!  The estimated cost?  More than $8 billion.

What about all the other money Microsoft raised in the bond market?  My best guess is that we will see more acquisitions in the future!

But, Microsoft is not alone in this.  Hertz is going after Dollar Thrifty and outbidding Avis.  Southwest Airlines acquired AirTran Holdings to get into the Atlanta airport, the world’s busiest. 

And the beat goes on.

AT&T is intent on acquiring T-Mobile for around $39 billion; Johnson & Johnson has a $21.5 billion deal in the works for Synthes; Duke Energy plans to merge with Progress energy, the deal totaling a little less than $14 billion; and there is the bid for NYSE Euronext for more than $11 billion.

I have been arguing for at least a year now that much of the cash being built up at many large corporations was going to contribute to a major acquisition binge…worldwide. 

And, this binge would include companies from more and more nations.  The Chinese are looking to put $200 billion into corporate acquisitions globally.

Roger Altman, Chairman of Evercore Partners, Inc., argues that the deal making will be at an all time high in 2011, surpassing the $4 trillion record total that was achieved in 2007. (http://www.bloomberg.com/news/2011-05-06/altman-sees-dealmaking-recovery-surpassing-record-4-trillion-of-2007-boom.html)

Some analysts argue that the growing stability of the economy is contributing to this.  Others attribute this movement to the strength in the stock market. 

Whereas these support the cumulative rise in the amount of M & A activity taking place, I still believe that this record-breaking rise in acquisition activity is being subsidized by the monetary policy of the Federal Reserve System. 

The first to benefit from this subsidy are those companies that came through the Great Recession with little or no debt on their balance sheets. 

The second group to benefit have been those that have been able to use leveraged loans and junk bond issues to refinance billions of dollars of debt borrowed during the credit inflation of the past decade or so. 

These companies are now buying other companies and strategically positioning themselves for the future.  And, in a real sense, the big are getting bigger…and more complex.  Industry is following the banks on this as the larger firms are getting greater market share and expanded market space. 

And, in my experience, there is only one way to really make acquisitions work.  The acquirers, after the deal is made, must become the biggest “bastards” in the world.  That is, the acquirers must become ruthless in rationalizing their purchase…otherwise…the acquisition just won’t pay off.

The effect on the economy?  In the longer-run…good…very good!  In the short run…continued pain.  Jobs must be cut, un-economic facilities must be disposed of, and, in general, spending must be reduced. 

“In AT&T’s pending deal for T-Mobile USA, the companies estimate cost savings of $40 billion over time, including expected layoffs, starting from the third year after the merger is completed.” (http://professional.wsj.com/article/SB10001424052748704810504576305363524537424.html?mod=ITP_moneyandinvesting_0&mg=reno-wsj)

But, this gets into another point I have been trying to make for the past two to three years.  During this time I have argued that about one-in-four to one-in-five people of working age are under-employed.  Forget the unemployment rate as it is measured…there are a lot of individuals that have either left the labor market or are not fully employed but would like to be.  And, this has been a growing problem over the past half-century. 

The merger and acquisition binge is not going to help this situation…one bit!

David Brooks in his New York Times column this morning emphasis this problem. (http://www.nytimes.com/2011/05/10/opinion/10brooks.html?_r=1&hp)  Brooks reports that 80 percent of “all men in their prime working ages are not getting up and going to work…there are probably more idle men now than at any time since the Great Depression and this time the problem is mostly structural, not cyclical.”

And, the primary factor that distinguishes the unemployed?  Not sufficient educational training.  “According to the Bureau of Labor Statistics, 35 percent of those without a high school degree are out of the labor force.”  Not unemployed…but, “out of the labor force”!  And, while this number goes down the more education one has, there is still a close correlation between the number of individuals “out of the labor force” and the amount of education that an individual has.   

And, as the mergers and acquisitions take place, the trend will just worsen.  For too long a time, when unemployment arose, we have tried to put people back into the jobs they had formerly held, even though those jobs became less and less economically justified.  The expectation was that the government would stimulate the economy and people would get their old jobs back.

Now we are going through a transition in which those “old jobs” are no longer there. 

And, the monetary stimulation coming from the Federal Reserve System is now resulting in a continued reduction in the less productive jobs through the merger and acquisition banquet going on and is doing very little toward helping these people get back into the work force.

This is consistent with the argument that I have continuously made in these posts that the credit inflation created by the monetary and fiscal policy of the United States government over the past fifty years has done a very good job in splitting the labor force into two segments, the less educated and the more educated, and the society into a much more highly skewed income distribution than earlier.

The acquirers have the cash, they can still borrow at ridiculously low interest rates, and these conditions are expected to stay in place for “an extended period.”  Continue to watch all the M&A activity taking place.  I think this will be a time to remember.