Benson's Economic & Market Trends
"Americans: Too Rich and Sophisticated to Work"
April 7, 2003
The latest unemployment report shows the psychologically important unemployment rate holding a "rock solid" 5.8%, even though over 450,000 workers left employment over the last two months. The number of able- bodied but unemployed workers who bother to look for something to do to feed their families is only 8.4 million. If you dig deeply into the government's own data put together by the Bureau of Labor Statistics ("BLS"), it strongly suggests that many Americans must be far too rich to work. For example, there are 4.8 million slackers who claim they would like a job but haven't bothered to look for one in the past four weeks (if you don't look for work, you are not in the labor force). If these same Americans had only looked, the unemployment rate would have been 8.8%. Obviously, they aren't looking for work because they are rich Americans who don't really need the money to pay the bills.
In addition, there are 4.7 million Americans who have a part-time job who claim they would like a full-time job. These workers must not require a full-time job or they would go get one! Because they are working, the BLS counts them as employed. If a person works for one hour during the week, they are considered fully employed by the BLS when calculating the only number the press ever reports - the monthly unemployment rate. Just imagine if Americans weren't so rich and started to tell the truth. What if those who have dropped out of the labor force claimed to want a job, and those who clamed to want a full-time job really needed a job, the unemployment rate would clock in at 11.9%. We are led to believe we should trust the government and their statistics, and not what everyone is telling you. Besides, the concept of needing a job is not under the BLS mandate, so the issue of needing a job is not relevant to the calculation of the Official Unemployment Rate.
There are more clear signs of our wealth. The number of part-time workers who only want to work part-time is 19 million; the number of self-employed is 9 million. If Americans only want to work part-time, they must have a lot of money. If Americans are self-employed, you know they are raking it in, because they don't want one of those old- fashioned traditional jobs with health benefits for the whole family, and a big fat pension for retirement. When you're self-employed you can do whatever you want, and make as much money as you want! Right?
Also, in industries such as the steel or airline industry, workers are so embarrassed by their high wages and fat pensions that they are freely giving back 30% of their wages and up to half of their pensions in return for the joy of getting out of the house every day, and feeling better about themselves. Even the working American is rich enough to work for less. Who wants to look like a greedy corporate executive anyway?
The BLS statistics tells us that there are 137 million Americans working. However, if you take out all of the part-timers and self-employed, the number working is actually only 105 million. Moreover, if you total up the unemployed, those who stopped looking, part-timers and self-employed, the total is 46 million. If a sizeable percentage of these 46 million want a real job, then at least the Federal Reserve doesn't have to worry about "wage push" inflation. But that's another story.
Isn't it good to know that we only need 62.3% of the population working for our economy and prosperity to be the envy of the world. This percentage of Americans working is at a nine-year low! With the massive increases in productivity that Fed Chairman Greenspan is so proud of, we just don't need as many Americans working. Thank God Americans are so rich!
The major reason Americans are so rich is that the Federal Reserve has created a New Economic Model. They have determined that we don't need income, because we have wealth created in the stock, bond and housing markets. While wealth in stocks is down from the top, the wealth is still double what it would be without the Fed pumping up the market. With housing prices rising smartly every year, Americans can continue to borrow more against their homes. Savers might complain that interest rates are at a 40-year low, but that means that bond prices are at a 40-year high! These high bond prices represent a big pile of "seed corn" that Americans can still eat up before they have to actually look for work.
Most importantly, of course, are rising housing prices guaranteed by Greenspan not to be another bubble. Moreover, the Fed Chairman has proudly stated in his Congressional Testimony that Americans have become "sophisticated" when it comes to finance. They can keep on spending (even if they don't work much) simply by taking out the increased equity in their homes.
The Federal Reserve has created a system where interest rate cuts will keep the value of stocks and bonds propped up so Americans can always live off the profits from their paper investments. If an American doesn't have these financial assets to cash in on, they have a house. Americans can take cash out on refinancing, or get an easy home equity line of credit. Good patriotic Americans added a full $700 billion mortgage debt in 2002, and all that money got spent. Then again, if an American doesn't have a house, he can always use a credit card. Every auto dealer and department store in America will practically beg anyone who walks in to take anything they want out the front door. On the way out, all you have to do is just sign a little piece of paper that says you hope to pay some day. This is called debt, and it's nothing you have to worry about today.
Americans have discovered debt and the riches it offers. Americans have become very sophisticated. Debt makes Americans rich - what a novel idea! Even the Koreans are trying it.
Businesses are now catching on. Companies know deep down that Americans don't want to work; they just want to spend money. So, these companies have not only stopped hiring but are giving Americans more time to spend their money by shifting jobs to workers overseas. Evidence of this appears in a 40-year low in Help-Wanted advertising.
More companies are pitching in and getting with the program. Look at Goodyear which, like most companies, had a terrible year. Last year Goodyear imported 4 million tires; this year, they plan to close plants and import 10 million tires. In September, the auto industry will try and help. Several years ago, the US auto manufactures had signed contracts with the auto unions that promised workers 90% of their wages, whether they worked or not. After the contracts expire in September, there are 17 US auto plants scheduled to permanently close. The auto unions can look to the steel workers and airline workers for guidance. Why should the rich Americans have the jobs, when the Asians are hungry, hard working and poor (besides, they make better cars at lower prices)? The US is so rich and generous. What better way to show our kindness and true American spirit than by giving our jobs to people who really need them!
America has found that its competitive advantage in the world isn't producing goods. America's competitive advantage is in knowing how to borrow and buy things which explains why our Fed Chairman is so upbeat about our economy. We don't have to worry about unemployment like we used to in the "Old Economy". In the "New Economy" when Americans lose their jobs they are deleted from the labor force, so the politically sensitive unemployment rate doesn't have to go up. In the New Economy, the American consumer has become sophisticated about credit and liability management. The consumer, even one without a job, can still exercise his comparative advantage, and borrow and buy. Americans have learned how to promise to pay Paul today, by borrowing more from Peter tomorrow, and spending the difference.
Consumers have learned so much by watching how our major corporations operate. They have learned that the ability to borrow is more important than the ability to generate cash revenues, or earn income. As long as a company or individual can borrow, they can pay their bills. If you can borrow enough, you never have to work again and you can buy anything. Long live Enron and off-balance sheet finance! In America, as long as you can borrow, you're rich! We have all become little Donald Trumps; we realize if you owe enough, the banks will treat you like royalty.
Following WWII, the values of America were: hard work, sacrifice, saving for the future, and investing prudently. That was for the old economy and old generation. The new generation and the Fed's New Economic Model don't require savings. If Americans saved, it would mean we aren't spending enough to keep all those foreign workers busy. Thank God that our Federal Reserve Chairman is wise beyond his 77 years. Chairman Greenspan isn't held back by those old stale ideas of thrift, savings and investment. Who needs savings, when Americans can borrow, and the Fed can create credit and instant wealth! The world, except for Japan, of course, hasn't seen sophistication like this since the late 1920's and early 1930's. Our Fed Chairman has taught Americans how to be sophisticated borrowers. We wonder who has been teaching the sophisticated lenders.