It shouldn't be.
And now CNBC is finally reporting the potential of a weak Q2. Again, this shouldn't shock anyone if you know what to look for. How can consumers spend more to increase demand and business growth if they are not employed or their disposable incomes are declining?
Remember the sectoral balance equation - this narrative has been playing out for months in the monthly statistics. Warren Mosler provides regular summaries and brief analysis of the data on his blog site, moslereconomics.com. A persistent pattern is emerging:
- Demand (i.e. purchases of goods & services) continues to "leak" - meaning people (those fortunate enough to have a good job) and businesses are saving more of their income. Saving means they are not spending ;-) ... and that leads to no economic growth unless something else makes up the difference. Examples of demand leakages include increased pension & 401k, corporate cash hoards, insurance accumulations, etc.
- Employment remains weak (much of the "unemployment" reduction is a result of people stopping looking for work or taking low wage menial jobs - i.e. there is no income growth to spur spending and increase demand/sales). Note the obvious link to point #1 above!
- Real wages (i.e. adjusted for inflation) are still declining (although there are some encouraging news reports from some businesses that recognize the value of increasing wages!) Without more disposable income in the hands of consumers, demand remains weak. Perhaps businesses should share some of their record profits with employees so they will have money to buy their goods, or they may find those profits short-lived!
- Fiscal automatic stabilizers (the automatic changes in government taxes and spending that occur as the economy goes up and down) are aggressive - i.e. they reduce the deficit spending materially, offsetting any meager gains made in other areas.
Without a material increase in deficit spending to increase demand, the economy will continue to limp along and may well be headed for further decline.
So why do we hesitate to use our monetary system to help ourselves? Fear of government is a weak excuse - it's like a farmer taking his family to harvest the crop with sickles because he doesn't trust the guy he hired to drive the combine. We punish ourselves and our children unnecessarily.
Rather, we should be aggressively increasing deficit spending through income tax cuts and targeted spending, and employing and training/investing in our friends and family who wish to work productively and provide for themselves and their families. A real and equitable prosperity is within our reach.
Will you join in or hold everyone back?
