Historically delayed revisions to official job market data demonstrate that the U.S. economy began shedding jobs in the spring of 2024. It’s no wonder that so many Americans voted for change in the presidential election. Since then, though, erratic policies have paralyzed decision-making across Corporate America, staying investment across big and small companies alike. Cutting the sole cost that can be controlled — labor — remains the go-to solution.
Aside from the increasingly leveraged promises of Artificial Intelligence, flagrant financial engineering by investment bankers, and a stock market that benefits from both phenomena, there is very little left in the way of economic dynamism. The top 10% of earners now account for half of U.S. consumption; the masses are told to eat a modern version of cake.
There are very real economic consequences of today’s income inequality that continue to widen due to an increasingly lax regulatory apparatus. We can pretend that “This time is different.” History suggests we not.
If there was uncertainty before, it’s been replaced by by proof that the Federal Reserve was too low for too long. The violence with which it had to reverse policy last year has now come to roost in a banking crisis that claimed the second and third largest bank failures in U.S. history. Banks are still under pressure and the U.S. household is now buckling under the strains of increased borrowing costs with no fresh stimulus assured until the spring of 2025 at the earliest.
What’s to come is even less certain. Unemployment claims are rising nationwide as companies switch from labor hoarding to cost cutting against a backdrop of high funding costs. And we are only just now seeing the fallout from the Fed’s Higher for Longer campaign. The so-called 'lagged effects’ have thus far manifested in the worst bankruptcy cycle since the Great Financial Crisis. Will Jerome Powell give in as was the case with his three predecessors? That’s certainly the hottest question inside and outside the Beltway.
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