Manual Workaround

The new permanent underclass is great for businesses, and not so great for actual workers.

The 6.8 million Americans out of work for 27 weeks or longer -- a record 46 percent of all the unemployed -- are providing U.S. companies with an eager, skilled and cheap labor pool. This is allowing businesses to retool their workforces, boosting efficiency and profits following the deepest recession since the 1930s, and contributing to a 61 percent rise in the Standard & Poor’s 500 Index since March 2009.

“Companies are getting higher-productivity employees for the same or lower wage rate they were paying a marginal employee,” said James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “Not only are employees higher skilled, you have a better skill match. You have a more productive and more adaptive labor force.” 

Translation:  "People are so desperate they're taking entry level jobs. for a 70% pay cut, and the competition for those jobs is so fierce we can take whomever we want and pay them at temp worker wages.  As far as the younger workers trying to get into the market right now?  I understand Mom and Dad's basement is nice this time of year."

The Boomers have been squeezing out Gen X for years now, but times were good enough that there were jobs for all.  That's dead and gone for good now.  The new normal?  Now Gen X is squeezing out Gen Y taking both middle management AND entry positions, and the Millennials still in school now?  Forget it.  They are the underclass.  How do you compete when there's six applicants for every job and every one of them has years of real world experience and is willing to work for pocket change?

Wage pressure is heading downwards, wages are shrinking as people lose overtime and bonuses, and that's leading to increased deflation risk as trillions of dollars vanish from the economy as real estate and wages crash.  Even better, the Serious People in charge are saying we need to cut spending, cut spending, cut spending or we're doomed...even though 10-year T-Notes are down to 2.93% and falling.

The lost decade may be a lot longer than a decade at this rate.