Economic Catch-22: Prices Stagnant and So Is Income

By | September 17, 2010

The failed sales pitch on the “Recovery Summer” not withstanding .. the U.S. economy is still in dire straights.  We are making less money, food and energy are costing more, and manufacturers are struggling to increase the prices on goods which would allow them to hire more people or pay employees more.  Are we seeing disinflation or the beginnings of deflation?  Neither is good.

Yesterday, I took a look at the Department of Labor statistics going all the way back to March to show that there has been zero improvement in the jobless situation as far back as the first quarter.

Jobless Situation Unchanged Since March – Real Analysis on the Unemployment Numbers

Today the Wall Street Journal published an article demonstrating that deflationary pressure has ben in play for over a decade.

Report: U.S. Family Income Has Tumbled Steeply In The Past ‘Lost’ Decade

Over at a terrifying combination of retail stagflation while energy and food prices rise:

U.S. Consumer Prices Rose 0.3% in August, Core Rate Flat

If businesses cannot ask a higher price for their products, they simply cannot hire more people or increase the wages of those who already work for them.  If employees cannot bring in more money, but their necessities – energy and food – get more expensive .. there will be even less money in the economy left to buy goods and services.

Eventually people will get even more conservative with their food and energy spending which could trigger heavy deflation in even those sectors.

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