Managing Despair

Once we get past the endlessly repeated and pained assertion by government that the economy is "on the mend," we run headlong into what we'll call the "facts," because that is what they are . . .

- January home prices fell for the sixth month in a row, edging closer to a double dip. The S&P/Case-Shiller home price index covering 20 major markets fell 3.1% year-over-year, hovering near the market's bottom set in April 2009. Sales of existing homes were off nearly 10% in February and new homes sales were at a record low. Because most employees have most of their "wealth" (to use the term loosely) tied up in their dwellings, this does not come as good news.

- The U.S. Conference Board Consumer Confidence Index declined in March to 63.4 (1985=100) from 72.0 in February. Why? The American employee has reached desperation level when it comes to expectations. Inflation expectations rose significantly in March and income expectations soured, "a combination that will likely impact spending decisions,” according to the Conference Board. The percentage of consumers expecting rising incomes declined to 15.3 from 17.4 per cent. Because household spending accounts for 70 per cent of U.S. gross domestic product, it matters.

- The real unemployment rate is something in the neighborhood of 22%. The 9.5% number promoted by the Fed is created from whole cloth. 22% reflects current unemployment reporting methodology adjusted for long-term discouraged workers who were defined out of official existence in 1994. The fact is they are with us.

- The Consumer Price Index is another number manipulated by government until it means nothing. True inflation in the US is currently something over 8%, taking into account both food and fuel which almost everyone uses.

Bottom line? If you add up inflation expectations, consumer confidence and unemployment, you get Misery. Indeed, the Misery Index (inflation plus unemployment), would now be at an all time high if the government were up to shooting straight with the numbers, which it is not. Perhaps the record food stamp usage month after month is the most telling statistic of how tough it really is out there.

Now, here's the punchline employers -- ready?

Employees know all this, they feel it, even if they might not be able to recite the statistics and even if they don't tell you. They are the ones having to buy cheaper, often less nutrition foods for their families, the ones who have a hard time putting enough gas in their cars to get to work everyday, the ones who make sacrifices they never believed were in the cards. They smile everyday but live in fear.

Answers? Not many. Most employers are not good at delivering bad news, having been trained to spin the bad into good, often raising expectations that are later shattered when the quarterly numbers crumble under the weight of a struggling economy. Better to present bad news as bad news, help them understand WHY things are happening they way are happening and, if true, share how YOU have shared the pain.

Under the heading of DON'T EVEN THINK ABOUT IT, please don't put lipstick on the pig. It makes you look silly, disingenuous and many will believe you are lying. Some in corporate America are so far out of touch with the suffering, they paint the problem as one of "employee attitude," and offer up such inanities as motivational talks to remedy their productivity problems. As one employee who was demoted and suffered a pay decrease aptly described it, "Putting up a motivational speaker up there in times like this is like offering a hand job to someone whose soul is dying." (Thanks to Barbara Ehrenreich for that descriptive bit of wisdom.)

Thought: Call if you need help in producing your next executive address. It may not be "motivational," but it will be effective, honest, straightforward, and provide realistic expectations for those who hang on your every word.

How About We Stop Playing With Ourselves?

All the smiley-faces drawn by government pointing to a recovering economy doesn't change reality which goes something like this:

Almost three-quarters of the U.S. economy comes from the American consumer. It follows that unless consumer shops, there can be no real growth.

And that's why there's no real growth -- adjusted for inflation, the wage of the average American employee is lower today than it was in 1973.

So, you may be wondering, "So, if wages didn't go up how did we buy all this crap?"

Good question and here is the answer: We borrowed the money. Indeed, total consumer debt has gone from about 150% of GDP to over 370%.

Until 2007, the feds overruled every correction by turning on the money faucet.

But, about 2008, that dog would no longer hunt. The private sector economy was saturated with debt. It could hold no more.

So, the government took over the position of resident deadbeat and has been borrowing and printing money like there is no tomorrow. The country supposedly in "recovery," can no longer even pay the interest on its debt. Rather, it's now borrowing the interest, too, and "paying" (to use that term loosely) interest on the interest by borrowing some more.

Joe Lunchbucket, on the other hand, can't borrow now and wouldn't even if he could. He took the butt-kicking of a lifetime the last time he tried borrowing and found out his home, which he confused for an ATM machine, ran out of cash.

What about the recent increase in consumer credit? Most of it is simply an increase in borrowing from the government in the form of student loans which themselves have a shocking default rate, not to even ask the question, "What are these young people doing exactly with these 'educations'?"

Bottom line? The average American employee, and some not so average American employees, are not going to drive the economic recovery promised by the federal government if only because they can't. The ones who have jobs are trying to keep them and pay off debt, while the ones who don't have jobs don't have credit. Both, however, do have houses that are falling in value like a sack of dead cats and they know it and they are buying (or better said "not buying") like they know it.

The only cheerleaders for this economy besides the government are those invested the stock market which not so miraculously has recovered much of its losses since 2008. Amazing what a few trillion dollars injected into an economy can do. And, we're about to see what happens when you jerk the whiskey nipple away from the alcoholic since QEII is supposed to end in June.

So, what's an employer to do? The same as always -- tell the truth. Don't paint a smiley face on a pig and call it a purse. Encourage employees to do what many of them are doing for the first time in their lives -- living within their means.

I Almost Killed My Computer Today . . .

After slogging through the mythology that is the government's reporting of inflation and unemployment, I pulled out a pistol with the distinct intent of killing my computer. As I took aim, I was reminded of the time I threw my Sprint cell phone into a lake due to what I called "non-performance." It gave me momentary pleasure but the endgame wasn't fun at all. So I holstered my pistol and reviewed the numbers again which went something like this . . .

The most recent inflation numbers (according to the federal government) ahow prices rose 0.5% in February or 6% annualized. Doesn't sound good, does it?

No worries. We are cautioned by government to pay no attention to this number, but rather to look at what they call "core" inflation, which means the cost of buying things except the things that are going up in price, namely food and energy. Indeed, because housing is apparently taking its second dip, we're told that's "good news" because when housing is factored in, we have very little inflation to be worried about. The fact that most Americans are underwater on their mortgages is irrelevant, at least to the Fed.

Same with unemployment. Don't pay any attention to the fact that half your block is out of work, but rather, look at the government's "seasonally adjusted" number which means a number that means nothing -- absolutely nothing -- except that fewer people get up and go to a job each day even as unemployment, according to government, is dropping.

So, you may be asking, "What is the truth?" Great question.

The truth is what you see with your own eyes everyday: inflation is skyrocketing, the US dollar is plummeting, unemployment is going up, and the government finds it all plausibly deniable.

More On Happiness . . . Are You Listening Corporate America?

"Social Animal," a new book by David Brooks is scheduled to be published soon. In the meantime, a small piece was published in "The New Yorker" under "Annals of Psychology," and the excerpt is interesting.

Mixed in the story are a number of fascinating statistics and studies about happiness and satisfaction, including this:

"There's a debate in our culture about what really makes us happy, which is summarized by, on the one hand, the book "On The Road" and, on the other, the move "It's a Wonderful Life." The former celebrates the life of freedom and adventure. The latter celebrates roots and connections. Research over the past thirty years makes it clear that what the inner mind really wants is connection. "It's a Wonderful Life" was right.

"Joining a group that meets just once a month produces the same increase in happiness as doubling your income. According to research by Daniel Kahneman, Alan B. Krueger, and others, the daily activities most closely associated with happiness are social -- having sex, socializing after work, and having dinner with friends. Many of the professions that correlate most closely with happiness are also social -- a corporate manager, a hairdresser."

So, what does this information offer corporate America?

Only that increasing meaningful connections in the workplace will result in a happier workforce, and as we have known for at least 50 years, happier people are, in general, more productive.

As yet, most of corporate America has turned a deaf ear to the importance of connections, i.e., relationships with others, in their workplaces. It has and will continue to be everyone's loss.

Here's One Thought Why There Is A Nascent Sense of Dissatisfaction Among Employees

Not that most employees, or even many, could articulate the following, but my sense in working with managers over the last few years is employees know something is desperately wrong. Government statistics guru John Williams explains the economic circumstance as follows:

"If you look at the government’s latest statistics - the poverty survey of 2009, which is the most recent release, with average and median household income adjusted for inflation (and they use a really gimmick low inflation rate with that one) - it shows that not only has household income been falling the last year or two, but it’s below its near-term peak before the 2001 recession. Household income has not recovered above that, and if you use the CPI-U (the usual inflation rate to deflate that by instead of the gimmick one) it shows that household income today is below where it was in 1973. Again, the average household has not been able to keep up here. If income growth is not keeping ahead of inflation, very simply you can’t have consumption growing faster than inflation on a sustainable basis." - John Williams

P.S. If Williams is right (and I believe he is) this should be saying something to business, too.

So, If Employees Are As Unhappy As Studies Show, Why Don't They Do Something About It?

Here’s a question: If employees are as unhappy as studies show, why aren't more of them turning to unions?

Clearly they are not. The Bureau of Labor Statistics finds the following:

In 2010, 11.9% of wage and salary workers were members of a union, down from 12.3% a year earlier. This is a long fall from 1983, not ancient history, when the union membership rate was 20.1%.

Today, union membership looks like this:

Union membership of public sector workers at 36.2% is five times the rate for private sector workers (6.9%)
Workers in education, training, and library occupations had the highest unionization rate: 37.1%
Black workers were more likely to be union members than were white, Asian, or Hispanic workers, and
Emnployees in northern States have a much higher unionization rate than those in the southern States.

Which leads to the question: Why are employees not organizing in larger numbers?

Two explanations often heard are:

Employees are afraid -- make waves and lose your job; and/or

The image of unions is tainted, either as being ineffective or corrupt.

Is it one of these or is it something else? I believe the issue goes deeper, but I'm interested in what you have offer.

Please post your comments by using the link provided.

(Thanks to HR Morning for the query.)

Numbers and Preposterous Lies From the Federal Government - But I Repeat Myself . . .

In a brief but interesting article entitled, "US Department Of Truth Goes Full Retard After ISM Employment Index Prints At Highest Since 1973," Zero Hedge observes that the federal government actually wants those of us who follow the employment numbers to believe that everything is great. Indeed their Employment Index just printed at 64.5, the highest since 1973, ignoring the fact that real unemployment rate is somewhere above 17% when you ignore fantasies such as when someone's unemployment insurance runs out that they are no longer looking for a job. Really? What are they doing then? According to the federal government, nothing, because they don't exist anymore.

Reality is there is no reality upon which we can judge the employment picture, or the economy for that matter. Just as the employment numbers are insults to intelligence, the financial numbers are cut from whole cloth as are the "balancing the budget" numbers, projections of future growth (which have proven to be a bad, bad joke), and, of course, the inflation statistics which tell us that in spite of $3.50 gas and groceries that are up 30% or more, there is no inflation -- none.

So, neither I nor anyone else should really comment on "the numbers," because there are no numbers, none that are real anyway. So, I'll stop here. Right here.

The article mentioned above can be found at: http://www.zerohedge.com/article/us-department-truth-goes-full-retard-after-ism-employment-index-prints-highest-1973