“All money is a matter of belief.”
– Adam Smith
Gold is taking a solid beating these days. It’s been slipping for a while, but when China revealed that it’s reserves were less than believed it really fell – quickly slipping below $1,100 per ounce when one mysterious trader dumped everything. It’s now more than a third off its 2010 peak and nearly everyone believes that it’s doomed to slip below $1,000 per ounce by the end of the year.
What happened? Isn’t gold the ultimate money in an unstable world? The short answer is no, and this has as much to do with the rise of the US Dollar as anything. But in the end gold is not as much a form of money as it is a barometer of fear – a commodity that appears to be in much shorter supply today than it was just a few years ago.
Where are the jobs? Job creation has been the hot economic topic since the big downturn in 2008. The sooner we have full employment the sooner demand for goods and services will turn around and there will be a net upward pressure on wages. But in 2015 the rate of increase in jobs has slowed somewhat, barely hitting 200k net every month from a solid run of 220k the year before. What happened?
The data is even more confounding when you look at the net good news on jobs – that initial claims for unemployment per week are at an all-time low as a percent of total jobs. We’re not creating jobs as fast as we should, but we also aren’t losing them. Along with a large backlog of unfilled job postings there is substantial evidence that something is wrong. Is it a skills gap? Or something else?
Last week the Bureau of Labor Statistics (BLS) announced labor productivity declined for the second straight quarter. It’s a worrisome figure for many reasons, the most important being that this is usually the signal of an upcoming recession. Headlines in the financial world were quick to fret that this is the first back-to-back decline since 2006, a strong signal in advance of the big recession in 2007.
Should we be worried? This is never a good sign, but the situation is very different. There are very good reasons why there is a decline in productivity and they all have the potential for signaling a recession ahead. But it also may be the last gasp of the bizarro economy where good news comes to us in the form of bad news, at least at first.
If you’re like most people living paycheck to paycheck, you have a simple problem at the end of the month – not enough cash. There’s nothing to be embarrassed about here – it’s a common problem that is faced by a large number of families as the economic recovery struggles on.
But if you’re an S&P 500 company, you may have a different problem – too much cash. Not precisely too much cash on hand, that is, since that’s never a problem. You may have something like cash sitting around somewhere in the world that you have trouble bringing home to make use of the way you want to.
Therein lies the problem with this economy – not that there isn’t enough to go around, but that it isn’t going around.
A generation or two ago, workers were able to count on companies large and small to take care of them. More than just their pay, the working people of America got something critical from their job – security, a promise that the material things in their life were something they could depend on. In return, there was loyalty – and after decades of work, a pension.
There is little doubt that the nature of work is changing. The exact nature of these changes and the magnitude is hard to pin down, but it’s clear that people don’t work the same way they used to. As we contemplate the next version of the economy forming around us as this Depression slowly comes to an end it is more and more clear that the nature of work – and the corresponding social arrangements that come from it – will continue to change.
This is why reform in policy, taxation, and many other fixed arrangements is essential.