Today's jobs report was pretty solid. Not supergood, but miles from superbad. I went on "AirTalk" with Larry Mantle this morning to hash it all out with Christ Thornberg of Beacon Economics.
There were indications in the BLS data that consumer spending is weakening a bit, due to fewer jobs being added in the retail sector. Robert Reich thinks it's worse that, even as the rough pace of 245,000 jobs on averge persists:
[W]hether even that good rate continues depends largely on whether consumer demand can be revived. Spending by American consumers is 70 percent of U.S. economic activity. But so far, spending is anemic.
American consumers have replaced worn-out cars and appliances, but little else. They haven't had the dough. Their wages are still falling, adjusted for inflation. The value of their homes - most consumers' single biggest asset -- continues to drop.
Corporate profits are up but the money isn't flowing to American workers. The ratio of profits to wages is the highest on record -- since the government began keeping track in 1947. Not only has the median wage continued to drop, adjusted for inflation, but a far smaller share of working-age Americans is now employed (58.6 percent) than was employed five years ago (63.3 percent). Today's employment-to-population ratio isn't much higher than it was at its lowest point last summer, when it dropped to 58.2 percent.
He makes a good point about auto sales. The car business is on a pace to sell 15 million vehicles in the U.S. in 2012, which is an improvement of more than 2 million from 2011. Elsewhere, consumers are stretched. Obviously, if more people get jobs, more people can spend money.
So it's critical that, as Reich says, corporations use some of their profits to do some hiring. What will make this happen? Well, a corporate tax cut could do. President Obama has proposed just that, as have all the GOP candidates.
If that becomes a reality, or even if corporations think it could become a reality, we could see corporations use some of their cash hoard to increase employment, rather than simply defend themselves against disaster. At this point, it looks as if disaster may be farther away than we thought in the middle of last year.