The headline said it all: "Weak U.S. job growth boosts market." You see, when there's bad news on your street (the lack of new jobs), there's joy on Wall Street. One analyst explains it this way: Since the economy is not spinning out enough new jobs even to keep up with the increase in the number of new workers entering the job market, "there's not a lot of labor-cost pressure in the system."
When economists use the term "labor cost," they mean you -- or, more specifically, your wages. By holding down your wages, corporations fatten their profits, stock prices rise and Wall Street's high-rolling investors rejoice. Twisted as it is, this, in fact, is the goal of economic policy in the U.S. today. Another market analyst explained that January's lack of job growth has created the perfect economic environment: "It really is the sweet spot," he gushed.
Unless, of course, you need a job or are struggling to make ends meet on stagnant wages, which includes most people. Nearly 8 million Americans were officially unemployed in January, and on average they had been out of work for nearly 20 weeks. However, yet another market analyst said we shouldn't worry: "I'm not totally gloomy about the [job] outlook," he declared -- but, then ... he has one.
Meanwhile, on the same news day, we got word that while CEOs were being stingy with wages, they were going on a wild spending binge in another area: mergers. Billions of dollars are being thrown into shaky takeover deals, such as SBC swallowing AT & amp;T, Proctor & amp; Gamble grabbing Gillette and Verizon picking off Qwest. The report says that the return of merger mania "indicates executives are confident about spending cash again."
Bully for them. But before you dash out for champagne to toast their bulging confidence, you might note that every one of these mergers will result in thousands of jobs being cut, ensuring that "labor-cost pressure" will stay weak.
Publication date: 03/10/05