Profitable Unemployment

One idea for why the labor market hasn’t come back in nearly the same way as the goods economy or “aggregate demand” has each spurred on by Uncle Sam’s repeated use of his TGA-fueled helicopter, is that yet another of the federal government’s rescue efforts has hindered the employment rebound – from the worker side. Businesses, many say, really, desperately want to scale back up but are unable, prevented from reaching recovery potential by what’s become a purported labor shortage.

With unemployment bonuses and benefits, for many, there’s more money in not working than working.

While true, the question is how widespread; for how many does this comparison apply? Some seem to be saying it can and does account for all or nearly all the still-Great “Recession” sized shortfall in employment. Time seems to be a factor, at least in how it has been a whole year suffering at this level, therefore artificiality must be the only way reason for this drastic difference.

Hardly anyone, outside the bond market, anyway, seems prepared to accept that instead the economy of 2020 really might have suffered more than a temporary if tremendous shock. What if all those jobs haven’t been refilled because there aren’t those jobs left to be refilled?

Unemployment bonuses fall under different light; rather than keeping the unemployed home banking an unearned difference in their favor, state generosity has been keeping them (minimally) afloat with few alternatives.

Labor market struggles such as this latter version are nothing new to the US economy. For every shock suffered under the heavy burden of whichever GFC and recession or comparably less dollar shortage and near recession, the labor market comes out of them unrecoverable.

Like now, Economists and those expecting inflation have tried to explain this away as exogenous deficiencies unrelated to macro factors; previously, it was alleged Americans had become too lazy, too old, and too drug-addicted. Now, too much vacationing at the taxpayers’ expense.

The contrary argument has been far simpler and with direct evidence. Basically, companies can’t and haven’t made more money because the economy remains depressed, meaning they then overmanage and focus too much on costs rather than risk-taking, running entirely too lean payrolls, chronic underemployment which then further reinforces the lack of economic robustness which prevents companies from making more money.

Corporate profits.

Since last year’s recession, Uncle Sam has shown up in company bottom lines, too. There’s been all sorts of things, only starting with the PPP that in GDP (really GDI) is accounted for as subsidies. Enormous subsidies. According to the revised GDP/GDI estimates for Q1 2021 released today, these had totaled $405 billion (SAAR), still a huge boost to what must still be hurting businesses.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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