If good times end, big money prepares to blame the working class

Is it possible in America for people to get ahead without someone falling back?

We’ll find out again Friday when the jobs report is released and if it shows that working people are making wage gains, expect the stock market to panic again.

There’s no bigger threat to monied interests than the little people getting a piece of the pie.

That’s basically what Credit Suisse told its clients in its latest market strategy report, according to CNBC.

“While the public debate has shifted to trade disputes, we believe this Friday’s Jobs Report will be more relevant … The market’s focus will be on Average Hourly Earnings,” strategist Jonathan Golub wrote in a note to clients Thursday titled “Wage Inflation, Not Tariffs, the Greatest Risk.” “History shows that accelerating wages tend to squeeze margins, spook the Fed, and precede recessions.”

Golub tamped things down a bit in his outlook.

“While not yet problematic, an overheating labor market poses the greatest threat to profit margins and could force the Fed to become more engaged,” he wrote. “While wage inflation has picked up, other indicators point to limited recessionary risk. As a result, we remain comfortable with our S&P 500 target of 3000, and a healthy continuation of the business cycle.”

Meanwhile, the Wall St. Journal has gotten a look at a report out today from the National Federation of Independent Businesses that says wages are going up for employees of small businesses because they can’t find enough workers.

That’s the way things are supposed to work and, in fact, since the Great Recession, as wages stagnated and Wall St. investors made a fortune, economists said that wages would eventually have to rise.

Now, they finally are.

There’s no reason to clutch the pearls, according to Seattle Times economic commentator Jon Talton.

Despite high productivity through most of those years, most workers saw few benefits in their paychecks. Policies to favor the wealthy investor class and large corporations have brought labor’s share of national wealth to the lowest level since modern records began in the late 1940s. This is true even in prosperous metros. For example, the average weekly wages for Seattle-Tacoma-Bellevue rose only $483 in real terms from 1990 to the second quarter of 2017.

Meanwhile, growth of the consumer price index remains below similar timeframes in recent expansions. Of course, this doesn’t guarantee a sure-footed central bank. But if the party ends, don’t blame workers.

  • Jay T. Berken

    When did life’s basics needs of food, shelter and clothing move to business/shareholder profits.

  • jon

    Right now the markets are looking for any reason to crash.

    We’ve had some good growth the past few years, and everyone seems to suspect a crash is coming, and everyone is looking for the reason so hard that they are finding one every where they look.

    Tariffs might crash the economy.
    Wage inflation might crash the economy.
    Tesla might crash the economy.
    Automated cars might crash the economy.
    Solar panels might crash the economy.

    I don’t expect it to fall much below where it was at the end of 2017 honestly… Tariffs are the thing that scares me the most, but I suspect like much of what Trump has tried to do, the courts will put a stop to it… (congress has the power to levy tariffs, not the president, though they did cede that right to the executive branch when it’s for national security… which this is obviously not, as trump’s own words have demonstrated.)

  • wjc

    This is why the stock markets as a measure of the overall economy is somewhat goofy. It is understandable that higher employee wages might make profits shrink causing the company’s stock price to fall. That does not mean that rising wages are bad for the economy as a whole. The people with more money in their pockets might be willing to buy more, causing the overall economy to grow. Tax cuts that get plowed into more dividends may do more to damage the economy, but it does nice things for stock prices.

    It is all more than a bit bizarre.

    • // That does not mean that rising wages are bad for the economy as a whole

      Credit Suisse disagrees. Seems to claim it could cause a recession.

      • I wish they would explain the reasoning for that in more detail since I thought recessions were caused by people having less money to spend, not more?

        • I presume the theory is the increased labor expenses, and the occasional trade war force businesses to fold, and people are thrown out of work.

          • MikeB

            The same logic applies to fiscal policy. That deficits leading to higher rates and recession are caused by Social Security and Medicare, so they must be cut.

          • jon

            If more people are out of work labor prices drop and we are back to where we started… I think this is called a “correction”

            To really cause a recession we’d need a cascading failure, where business close and people are unemployed but other businesses need to close because unemployed people aren’t buying their products, etc.

            Were I to bet on it*, if bet on a correction, like we had last time, people realized that tax cuts weren’t all for the sick** market and they bright process back down to a level closer to where they were before the tax cuts happened…

            * I guess technically I am betting on it…
            **edit: I now refuse to correct the typo, stock market/sick market…

  • BJ

    >For example, the average weekly wages for Seattle-Tacoma-Bellevue rose only $483 in real terms from 1990 to the second quarter of 2017.

    And that’s with Seattle raising minimum wage to $13 in 2017 (it’s going to 15 in a couple of years), its $14 in 2018.

  • lusophone

    “But if the party ends, don’t blame workers.” What party?

    • Bridget L.

      I”m thinking it’s “party” meaning if there is a recession or a crash, don’t blame the workers. That’s how interpreted it.

  • Jim in RF

    Both Smoot and Hawley lost their seats in the next election, so there’s that…

  • Gordon near Two Harbors

    Modern economic theory, as a whole, is an unsustainable farce, promoted by folks who have ZERO education in the limits of the natural world and the mathematical impossibility of perpetual growth in a closed system.

  • Kellpa07

    Jobs up about 300,000. Stocks up about 190. Maybe that holds, maybe it doesn’t, but not much of a panic.

    • It’s not the number of jobs that’s at issue. It’s the wages. They were up only slightly. Wall St. is happy. Especially since the earlier 2.9% increase reported last month that caused the tailspin has been revised downward to 2.8%.

  • Credit Warrior

    When working class/average Americans have more money in their pay checks, historically they spend it which is good for the economy. When small business have more money they grow their businesses which is good for the economy. Corporate enterprises that have more money, i.e. profit often is the issue. If they pump that profit back into the stock market it does little for the economy. If the profit is used to grow their business with more hires, more production it is good for the economy. My daughter’s small business has hired 3 new full time employees in Minneapolis. First full time hires in 7 years. All 28 full time employees received a $300 bonus and a 2% raise. Stock market as an over indicator of the economy is a “paper tiger” It measures the confidence level of those that invest, then the financial well being of the economy.