The Tale of Two Americas

Editor’s note: The US government reported that the unemployment rate fell to 9.1%, with non-farm payrolls at +117,000. That exceeds forecasts. However, the labor participation rate was down to 63.9, the lowest since 1983. People are still dropping out of the labor force.

By Global Macro Monitor

We were at Borders books today as they liquidate the last of their inventory. They’re literally selling the furniture, including the local store’s commercial espresso maker for $3,000. The place was fairly busy, which goes to show robust spending is out there if the price is right.

It did make us ponder the state of the U.S. labor market as 11,000 Borders employees have already lost or will lose their jobs when doors finally close. This is not because of cyclical forces but the powerful structural changes that are taking place due to rapid technological advances. The internet, the Kindle, and the iPad are rendering the traditional bookstore obsolete.

According to the BLS,

Retail salespersons and cashiers were the occupations with the highest employment in 2010. These two occupations combined made up nearly 6 percent of total U.S. employment.

Imagine the impact on the U.S. labor market as mobile payment technology really takes flight. Coupled with globalization, the past twenty years has seen the hollowing out of the U.S. middle class with finance and technology at the high end and retail and healthcare at the low end. What is the “New Economy” for some is the the “McJobs economy” for others.

The current state of the two Americas is best characterized in today’s FT,

Steven Burd, chief executive of Safeway, a grocery chain, last month characterised the wealthiest 25 per cent of his customers as “recession’s over with, times are good, spending as they always did”.

But the other 75 per cent were “really very cautious and very concerned”. That is no surprise as they are stalked by falling house values, rising petrol prices, personal debts and job losses.

The structural changes taking place in U.S. labor market may or may not show up in the employment data to be released in a few hours. But one thing is certain, structural problems cannot be addressed with cyclical solutions. Doing so may create temporary and illusive wealth, but the consequences, as we are currently experiencing are painful and lasting.