Good new everyone! Federal Reserve Chairman Ben Bernanke has publicly declared that the recession is “very likely over!” That’s interesting because just today, the checkout lady at the grocery store was telling me she’s broke because the store has cut back her hours.
I continually get a pulse of whether the recession is over by talking with people who are actually in the trenches trying to make ends meet. From the guy who sells toner cartridges to small businesses that have cut back to bare necessities to the guy who is trying to get government contracts for his firm whose bids now have to include government mandated paid apprenticeships that cut into the owners profits, and in between, the recession is far from over.
All Is Well, Or Is It?
What’s really happening folks is government is doing all they can to make it look like the recession is over with programs like the “cash for clunkers” which resulted in most of the higher Core Retail Sales for August (expect no follow through for September for the pour auto industry).
So as far as GDP goes, Government Spending is all that is running the show right now. The question that investors need to ask themselves is, “How long can this last?” Of course the key to everything is the purchasing power of those things we get paid in called dollars.
Globalization To the Rescue?
In this push towards globalization with agreements like NAFTA and CAFTA and their enforcer the WTO, just who in the U.S. is benefiting? Well, you as a consumer are benefiting when you purchase goods at a store like Walmart. But you as an employee might be in competition with lower cost labor from abroad and thus you’re either out of a job replaced by one of these overseas workers or are forced to take a pay-cut so your employer can still stick around for a little longer.
The U.S. employee cannot compete with the world employee whose wages are 50% to 75% or more lower? The minimum wage in the Philippines is $5 a day while in the U.S. it’s more than $7 an hour. Who is answering the phones when you call customer service at your credit card company, bank or pretty much any company these days? Most of the time for me, it’s either someone from the Philippines or India.
Why is it that the rest of the world benefits from lower cost items and the U.S. has to pay more? This isn’t true of just illegal DVD’s or watches, but the simple fact is that the labor of these nations produce products that are sold in the U.S. at a lower cost than what U.S. labor produces. Something’s got to give.
Globalization has lowered the cost of certain items, but it hasn’t improved the quality of life for most who didn’t and don’t know how to take advantage of it, especially here in America.
Unions Are Guilty
I remember a few years ago there was a grocery chain here in California that had a prolonged strike. There were a few union strike breakers who had to work to feed their families, but the lights were turned off in the stores as the managers were just trying to keep the business going and costs down. The picketers outside were demanding a pay raise for new employees from $15 to $17 an hour and come medical benefits.
I was thinking to myself at that time, these pour souls will be lucky to have a job in a few years when Walmart puts in a Superstore and pays their employees $8 an hour with limited benefits. Today, many are happy just to have a job that pays $8 an hour. Things will get worse.
Is the Union really doing the employee a favor? Or is it a last ditch effort to make sure their coffers are stuffed while the employer drives itself off the bankruptcy cliff taking its employees and the Union with it?
The Engineer’s Aren’t Immune, Is Your Industry or Job Next?
A few years back I did a study on the wages of a Pakistan engineer and that of a U.S. engineer right out of college. The income at that time was about $54,000 starting out for the U.S. engineer and $7,500 for the engineer who went back to Pakistan to work.
If you’re a U.S. company in need of bright engineers, where do you go for labor? Thank you NAFTA, CAFTA and the WTO! Our products are cheaper now but we have no labor to produce anything! In fact, the U.S. is primarily a service based economy. So is the Philippines. Perhaps we should start learning Chinese today so we can service their economy just as the Filipinos have serviced ours to improve their quality of life.
Unless of course we start producing something of value to the world again.
If You Lost Your Job, What Would You Do?
This is what you need to start answering for yourself now, before you lose your job. Nothing is guaranteed. Yesterday’s star industry is today’s bankrupt loser. GM, AIG, Citigroup were all part of the DOW Jones Industrial Average in the last five years. Things change. Are you set up for any potential change that comes your way? Have you set up a side business that provides income? Have you learned a new trade that will be in demand as the economy falters? What passion do you have that you can turn into a business? What can you teach your children that will help them be self sufficient in a world of low cost competitors?
The answers are there. Start doing your homework now.
Whether or not the recession is over you’ll benefit from it. Of course, green shoots aside, if you have read any of what I have written, the recession is far from over. Adding debt to debt, long term, doesn’t solve anything. What does adding trillions of debt to trillions of debt do?