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The Bottom Line: The Economy

Last month’s economic news was as grim as it has been since the recession ended. Job growth last month lingered around 54,000, well short of the goal of 300,000 added jobs. As we enter into election season, there is once again a lot of blame being thrown around. The White House isn’t doing enough to “create jobs.” “Companies are sitting on crap-loads of money, but won’t spend out of greed.” “The Republicans only care about the rich, not the regular America” “Democrats are anti-business” We hear these things all the time, but the economy lives and dies on one thing, the consumer.

Here’s the bottom line; no one can fix the economy or create jobs except…the consumer. If you look at the numbers, 58% of Americans are working, which is down from 62% in 2007. That is less people contributing to the productivity of the economy, less people paying taxes and arguably most important, less people spending money. If companies don’t see a demand to grow, they will not hire. No hiring = no jobs, no jobs = no money, no money = no spending, no spending= no demand, no demand = no hiring. See the pattern there.

The companies are seeing profits at or beyond recession levels, so why aren’t they spending it? Simple: because they have seen this movie before… During the recession, many companies were faced with a cash shortage, and the number one job of a company is to ensure its own survival. So for now, the large companies are doing what a lot of families are doing. Saving. If another recession or depression hits, these companies want to be able to weather the storm and come out on top. They have not been given a reason to spend on hiring because of the lack of consumer spending. See the paragraph above.

Of course during an election season, we hear how the Republicans only care about the rich, and the Democrats are anti-business. The bottom line is: there is not much the government can do to create jobs. If the demand is there, companies will hire, if there is not profit in hiring, then why would a company do so? There is no magic formula to “create jobs” out of thin air. Instead of political posturing by both sides, we need to focus on what they can affect, and that is not short term growth. Even the term “job creation” is a non-starter because there are more jobs in this country than people to fill them. But to find a skills-match is getting harder and harder. The government can affect education, skill training programs, and incentives to hire Americans. These are things that the government can and should change. The more people working, the more money goes into the system, the more money in the system, the more spending…well…you know where I’m going with this.

Overall, the consumer has been beaten and crushed. The only way that the consumer is going to see any glimmer of hope, is by having hope. When consumer spending increase, that is when the real “Economic Recovery” will begin.

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About the Author

Brandon Byes, M&I Bank
1101 Walnut
Kansas City, MO 64106

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