Middle Class Destruction – Business Owners Take Heed

I’m forecasting a secular decline in the demand for goods and services in the U.S. based on the destruction of what once was a thriving middle class in America.  Recent evidence supports this including downward revisions to Q1 GDP from 2.5% to 1.8% and then finally 1.1%.  And those are the stated numbers provided by your government which are prone to optimism.  The reality is likely much worse as I’ve seen reports from respected economic analysts suggesting that we have been in a recession, i.e. no economic growth, since 2005.

The Federal Reserve in its Federal Open Market Committee statement earlier this week downgraded the strength of the economy by changing just one word in its 500 word statement from its last report.  The word ‘modest’ was used to describe the Fed’s view of economic growth replacing the prior term ‘moderate’.  Economic trends are worsening and business owners had better take heed!

The prominent middle class and economic engine of the U.S. has struggled to maintain its living standard since the 1960’s.  Where once the male was the sole bread winner and had the ability to buy a home, two cars, take a couple of nice vacations a year, send his kids to a Division 1 college and also save for retirement, that once reality has now become a fantasy.  Ravaged by the inflation of the 1970’s, wives entered the workforce and the dual family income was necessary just to keep pace.

Now faced with the full implementation of Obamacare, a massive and significant shift is taking place in the U.S. labor market which will finally break what remains of America’s economic backbone, the middle class.  Full time employment is giving way to Part time jobs.  Try and make ends meet on that.  In 2013, of the 953,000 jobs that have been created, only 23% or 222,000 have been full time jobs.  77%, or 731,000 have been part-time jobs.

Since President Obama, so called champion of the middle class, took office in January 2009 through the end of July 2013, Manufacturing jobs have fallen by 581,000 while lower paying Waiter and Bartender jobs have risen by 880,000.  The wrinkle here is that most of the Manufacturing jobs lost were full time position with benefits while the Waiter and Bartender jobs are part time and offer no benefits at all.  With the stock market at all-time highs, some rightfully ask if things are getting better?  For the year 2013, 24,000 Manufacturing jobs have indeed been added and 246,500 Waiters and Bartenders.  That remains a troubling 10:1 ratio of lower quality jobs.>

President Obama recently spoke at a new Amazon ‘Fulfillment Center’ opening in Tennessee where 5,000 jobs (low-paying) are being created.  What he did not detail is that the consequence of these new ‘warehouse’ jobs is the estimated loss of 25,000 retail jobs at traditional brick and mortar stores such as TJX, The Gap, Best Buy, Sears etc.

A record number, nearly 40%, of young adults 18 to 30 now live with their parents and the percentage is rising quickly.  A record number of Americans are on food stamps and welfare.  The largest employer in the U.S. is Wal-Mart.  The second largest employer in the U.S. is Kelly Services – a temporary employment agency.  One of every four American workers that do have full time employment has a job that pays $10 or less per hour.  One of every 10 jobs in America is a temporary job.  According to a recent survey, 76% of all Americans live from paycheck to paycheck with no savings.  Per statistics from Social Security, 40% of all workers in America make less than $20,000 a year.  Needless to say, many who are earning a paycheck are no longer receiving any form of medical and dental benefits and if they are, they find they share an ever greater share of the benefit expense, further compromising their discretionary income, if any.

The end result will be that those fewer fortunate folks with full time jobs and benefits will see tax increases and bear the burden of the expanding lower income America.  The middle class who once represented some 80% of American families will continue to decline and dare I say it, but growing frustrations and tensions may lead to an escalation in class warfare among Americans.  As a business owner, are you prepared?

If you’d like additional clarity into the future of our economy and how it impacts your business, your specific equity holdings, the financial or housing markets please contact me at Christine Meder’s Accounting Advisory Services mederchristine1526@gmail.com or tweet me at @christinemeder1.  I’m offering a free 30 minute consultation through the end of August.  #unrbrand

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About Christine Meder
Leveraging my insights and professional experience of 25 years in the accounting profession, I and my firm Christine Meder's Accounting Advisory Services provide our high net worth clients expert advice on their business activities and investments. In addition to performing traditional accounting functions in a confidential manner, I pride myself in giving clients a competitive edge whether it be in running their businesses or managing their investment portfolio. My studies leading up to completion of the EMBA program at the University of Nevada, Reno this August provide me with latest skills and techniques utilized across a broad spectrum of business functions. This breadth of education is complemented with experience as an accountant in the construction, mining, real estate and technology fields during my career. If you are looking for a trusted adviser or consultant in addition to someone you can rely on to properly keep your books, please contact me.

2 Responses to Middle Class Destruction – Business Owners Take Heed

  1. Pingback: The WalMartization of America Continues… | The Mind of Brosephus

    • Our views are woven from the same cloth. I agree with and support the opinion in your blog (http://mindofbrosephus.wordpress.com/2013/08/03/the-walmartization-of-america-continues/) wholeheartedly. When you say, “The problem with the service economy is that internet access, outsourcing, and automation has made it easy for companies to move good paying service jobs offshore.” you aer right on the mark. Much of what remains of employment for the <30 age group is what I call 'Proximity' jobs. These are low paying jobs every community needs to operate and serve the local residents i.e. restaurants and bars. Firms like Applebee's and Chili's etc would certainly prefer fewer centralized locations but consumers won't drive to the next largest city to eat. The U.S. middle class is dying.

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