At some point during any business expansion, dividends increase at a faster rate than corporate earnings. When that occurs, our know-nothing corporate heroes begin to cut jobs, reduce or hold steady employee compensation, or outsource jobs. They also curtail business-to-business transactions to save money and push earnings higher.
That’s why the demand for durable goods decreases prior to the beginning of every economic downturn. By the way, a durable good is any product that is expected to last a minimum three years, like cars, stereos, computers and copiers. As businesses that produce durable goods begin to fulfill their contracts, as consumer demand drops due to increasing lay-offs and stagnant compensation, as businesses cut back on business expenditures, the employees in the durable goods industries are the first to feel the effect. Their hours are reduced.
According the United States Bureau of Labor Statistics, the number of hours worked by employees in the durable goods industries have fallen from 40.9 in May 2011 to 40.7 in June and 40.6 in July. I should point out that the June and July figures are preliminary and could be revised upward. However, that is unlikely. Regardless, these figures are not a good sign, especially since they are following a contraction of corporate profits. This is a sign that we’re heading for an even greater recession than what we have experienced so far.
Now for the bad news. The largest redistribution of income from working people to the rich have occurred during the last thirty years. This has taken money out of the hands of working people and decreased the demand for goods and services. And that is why the current economic expansion is the weakest since the last one under President George W. Bush.
President Obama and good liberal politicians such as Senator Ron “Corporate Bitchboy” Wyden and Corporate Congressbitchboy Earl Blumenauer plan to vote for redistributing more income and wealth from working people to the rich via free trade pacts with South Korea, Columbia and Panama. I’ll begin a series on those redistributions tomorrow.