A journalism professor of yours truly, Jon Sandberg, who also served in key positions for several Connecticut governors, had an interesting technique that he frequently deployed in seminars. A student would pose a question and Sandberg would say, "That's a good question. Is it acceptable and ethical to publish information that you know would show ethical and other lapses by the current president, if you know that information would also harm innocent individuals? That's a good question."Then Sandberg would grab his cup of coffee and walk to the window side of the classroom, and stare out the window, sipping his coffee, saying nothing, for an eternity. Eventually, a student or two would begin the discussion.
What's a good question for today? Maybe this: where have all the consumers gone in the U.S. economy? BloggingStocks had a chance to grill economist Peter Dawson on the matter, and he has a few theories.
The first concerns structural and technological factors, he said. The U.S. is in the midst of adjusting to globalization, which, as most investors know, has resulted in the transfer of millions of good-paying U.S. jobs overseas to lower-cost centers. "The U.S. has also gained some jobs from globalization, but the net is still a major loss of good-paying jobs in the United States," Dawson said. "Some economists argue that's at the root of declining consumption. We are net-negative in the good-paying jobs category, so far, in globalization, and there simply aren't enough citizens with incomes adequate to buy the products."
A second theory emphasizes the role of the business cycle, he said. Overconsumption, combined with more than 1.2 million job lay-offs since the recession's start, spell a cyclical period of low consumption. "The belt-tightening has been more pronounced so far during this business downturn because of the credit crunch, which both restricts access to credit, and signals to citizens that this downturn will not be a normal one . . . that it may be worse and longer," Dawson said. "Reduced credit and doubt about the future always causes consumers to decrease spending."
A third theory emphasizes the role of public policy, he said. Briefly, much more so than their European counterparts, U.S. corporations have the ability to deploy for-contract and 'permanent' temporary employees, among other classifications. "For-contract and temporary positions are great for lowering costs, but understand that if this is universally applied, it is problematic for growth because salaries are typically lower for these job categories than for full-time employees," Dawson said. "Some economists argue we are beginning to see the effects of universal use of the for-contract category. If that's the case, the consequences could be just as serious for the U.S. economy as the impact of the financial crisis."
Economic Analysis: Dawson says keep an eye on retail sales and consumer spending. If they don't rebound cyclically, by age group, then something else may be restricting consumer activity, he says. To be sure, no one wants to shift to Italy-style work rules, where the saying goes 'when you hire an employee, he or she is with you for five years, whether you like it or not.' Still, if sales do not rebound in a typical manner, structural factors have to be examined: a sustainable-growth economy implies a workforce capable of supporting that economy.
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