Preparing Your Employees for a Default?

While we (and nearly everyone else) still believe the Debt Ceiling Show in Washington is just more political theatrics in anticipation of a new show rolling into town next year, there is always a chance one of the actors might accidentally slip off the stage and fall to his death inadvertently taking an audience member or two with him.

You, me and your employees are all in that audience, front row.

So what if we are wrong and egos won't let either side pull out of the tailspin? What if there is an actual default on U.S. sovereign debt?

I'm not sure what would happen, but if this goes on much longer, it would be a nice thing to know and educate your employees on the possibilities, all of which affect them.

Most likely a default on U.S. debt would result in a downgrade of that debt from AAA to something less which, in turn, would result in higher interest rates the government would have to pay to service its massive debt which now approaches 100% of GDP, making further defaults more likely as more bonds reset at those higher rates. (Watch your toilet flush and you'll get the idea.)

So what?

Well, here is so what: interest rates for everyone would likely move up in tandem. Corporations would find it more difficult to borrow, expand and hire, as if they are hiring anyway. Higher rates would result in higher interest being charged for mortgages, pushing the housing market off the edge on which it has been teetering ever since we were told "the recession is over." Credit card interest would likewise rise making it more difficult for the consumer to consume, putting more pressure on business that makes widgets for consumption. This all would lead to an even softer job market, more layoffs, and unfortunately that is where your employees might enter the picture.

Most employers will not broach the subject at all even if there is a default. They will either find it too political or not in their best interest to warn the audience, their employees, of the actor that just fell off the stage. A few will address the topic, educate their workforce, let them know what the contingency plans are for the company, and, if they can say it and mean it -- how the company is going to try to protect its employees and their jobs in the event we hear that dull thud all the actors are still professing to avoid even as they wander nearer to the edge of the stage.

Open First Thing Monday Morning: Great News For Those Whose Jobs Suck!

So, let's begin with the obvious - your job sucks.

Oh yes it does! Don't go into denial on me now. You saw the title of this blog and you opened it -- for a reason. And that reason is you hate your job, or if you don't hate it, at least we can agree you would be doing something else with your time than working for the man, if you had a choice. Right?

Right.

The good news (which may seem like bad news until you finish this article) is that you are probably going to lose your job soon. Indeed, more employees will be laid off and fewer hired says the US Chamber of Commerce survey of small businesses earlier this month -- 64% of the executives surveyed reported no plans to add workers, while 12% had plans to cut jobs. And, you have almost no chance of hooking up with a big U.S. company unless you are willing to learn Mandarin and move to Shanghai. Didn't think so.

So, about now you are saying to yourself, "Where's the Jack Daniels?" Good question but before shooting your fear and loathing through the whiskey prism, consider this conclusion from a recent study of people just like you . . .

". . . perceived job insecurity ranks as one of the most important factors in employees' well-being and can be even more harmful than actual job loss with subsequent unemployment."

In other words, it is worse right now, worrying about losing the very job you despire, than when you are actually fired (which should be soon.)

Now, let's fast forward. Picture yourself fired. No more crappy job. No more power-freaks telling you what to do. No more alarm clock. No more making crap that ends up in landfills. No more crunching numbers you could care less about. But, alas, no more paycheck either, which is, of course, what you are really worried about.

What happens to your psyche after you have lost the crappy job you are so desperately trying to keep, the one that has sucked the last bit of life out of you?

Still more good news, Lunchbucket . . .

"American workers who are emotionally disconnected from their work and workplace -- known as 'actively disengaged' workers -- rate their lives more poorly than do those who are unemployed. Forty-two percent of actively disengaged workers are thriving in their lives, compared with 48% of the unemployed," so says another study.

Wow! Things are looking up for you if only because you can't get any further down. Today is the worst day you will ever have on this crappy job until they pull the trigger and send you into the street with your "box 'o crap."

So, relax. It is all down hill from here.

Organized Labor's Best Argument - "The American Worker Is Getting Hosed"

"The American worker is underpaid."

That's it? That's all?

That is all it is going to take to organize a lot of employees if unions can get the message right, if only because there are compelling economics to support it.

The argument they can make, and probably will, was the subject of a Washington Post Opinion piece entitled, "Corporate America's Chokehold on Wages," by Harold Meyerson, executive editor of The American Prospect, a liberal magazine based in Washington. See: http://www.washingtonpost.com/opinions/corporate-americas-chokehold-on-wages/2011/07/19/gIQAL2ieOI_print.html

The economics are these - numbers not taken from some liberal think tank but from Michael Cembalest, the chief investment officer of J.P. Morgan Chase. In “Eye on the Market,” a report forwarded to its private banking clients, he concludes that “US labor compensation is now at a 50-year low relative to both company sales and US GDP.”

Specifically, "profit margins (the share of a company’s revenue that goes to profits) of the Standard & Poor’s 500 companies are at their highest levels since the mid-1960s, despite escalated health-care costs, environmental compliance and other regulations about which corporate American often complains."

He studied the rise in profit margins “from peak to peak” — that is, from their high point in 2000, just before the dot-com bust, to their high point in 2007, just before the financial crisis. In those seven years, profit margins rose from just under 11 percent of the S&P 500’s revenue to just over 12 percent. (Today, they’re near 13 percent.)

Why the increase? “There are a lot of moving parts in the margin equation,” Cembalest writes, but “reductions in wages and benefits explain the majority of the net improvement in margins.” This decline in wages and benefits, Cembalest calculates, is responsible for about 75 percent of the increase in our major corporations’ profit margins.

Or, according to the editorial, "to state this more simply, profits are up because wages are down. That’s not the only reason profits are up — innovation and offshoring factor in as well — but among the reasons, it’s a doozy."

Indeed it is a doozy and as inflation begins to take hold of the American worker at his dinner table, the American employee will reach for help anywhere he can get it.

It Is A Good Thing That Most Americans Are Bad At Math

It is a good thing that most Americans are bad at math. It is even better that they don't understand statistics, and perhaps the best thing is they are not curious about their history.

Because if they were, there would be a revolution -- about now.

They would know, for example, about a term economists use called "median wage stagnation," which is fancy language for a simple concept: the average American worker hasn't gotten an inflation-adjusted raise since 1973 -- almost 40 years ago. They would also know that the top 1% have tripled their income during the same period of time. 40 years ago, the heads of corporations were paid about 26 times the average employee's wage. Today, that multiplicand is over 300.

This is what revolutions are made of.

But in order to have a revolution one needs a population who is interested, informed and committed to righting the wrongs of history, hardly descriptors of the average American who is fat, uninterested in economics beyond the fantasy of the lottery, suffers from a disturbing lack of imagination, and isn't interested in righting the wrongs of history, mostly because he doesn't know any history and even if he did, seems only interested in being "rich and famous," as if those were vocations.

Admittedly, that is a pretty nasty evaluation of mankind, but it is also, well, accurate.

And, it is why the power elite in our country have no worries, not yet.

History will judge them harshly, no doubt, but Joe Lunchbucket and Mary Cubicle just want to make it to the weekend and have a few dollars to buy something, anything, if only because it eases the pain and fear for a moment.

In the words of a friend, "Their shit is broken."

Indeed it is.

And it is about to be smashed into unintelligible pieces since today in America an employee has a smaller chance of moving up to a higher income bracket than in almost any other developed economy. Good thing he doesn't know that, either. It's the new "Rags to Rags" story that replaces the American Dream which was mortgaged and foreclosed upon.

Now, without a home to use as an ATM, credit cards maxed out, student loans overdue for educations that won't buy living wage jobs, the average American is broke, dead broke. Most hate their jobs but, like a heroin addict hates the fact he is an addict, doesn't stop either from looking for their next fix.

It has taken nearly 40 years to get from there to here. Many a dream has been shattered. Most Americans couldn't last a month without their jobs. 40 million have already hit the wall and are on food assistance. The ones who still believe themselves "upwardly mobile" are mostly hopeless optimists, or are up the ladder in the banking system, or are lawyers ready to haggle over the ruins.

It didn't have to be this way. Jefferson said that the key to a successful democracy is an informed electorate which has slowly disintegrated into Cheeto-chomping TV zombies who substitute their strident volume for knowledge, credit for savings, and still believe it all works out for them in some undetermined future, if only because they have no usable knowledge of how they ended up in the discount aisle of the Dollar Store this Sunday afternoon.

Bernanke Makes Me Want to Wet My Pants

John Mauldin in a recent CNBC interview observed, ". . . if the market knew what Bernanke and the leadership of the central banks talked about after their third glass of wine, the market would wet its pants."

He took a lot of heat over that remark but he was right. If you take a look at the cold (very cold) and hard (very hard) facts about the employment situation which is tied ever so directly at the hip to the consumer spending situation upon which the manufacturing and services sectors rely, bringing us full circle back to jobs, or better said, the almost complete absence of new jobs, I wouldn't be surprised if Bernanke isn't wetting his pants these days.

If you're Helicopter Ben (or President Obama) these are the facts you can't deny just before shooting your latest "solution" to these "situations" through your whiskey prism:

- there were only 18,000 jobs created in June, the lowest since September 2010. (May was revised down by 29,000 jobs and April down another 15,000.) Let me summarize it for you -- there are no new jobs.

- Total employment fell by 445,000.

- Full-time employment is down by 0.5% in the last year, while part-time is up 3% and that's not because most of these 3% want to work part-time.

- The total number of unemployed rose to over 14 million. If you count discouraged workers who, according to government are no longer unemployed even though they would beg to differ, the total number rises to 20.6 million, up 483,000 last month.

- The average duration of unemployment rose to an all-time high.

- 44% of the unemployed have been looking for work for at least 6 months.

And, “[E]ven if you buy the White House’s argument that the $800 billion package created 3 million jobs, that works out to $266,000 per job. Taxing or borrowing $266,000 from the private sector to create a single job is simply not a cost effective way of putting America back to work. The long-term debt burden of that $266,000 swamps any benefit that the single job created might provide." (Larry Lindsey)

This is the kind of reality that will drive men to the bottle and based on the "solutions" provided thus far, they must be hitting it pretty hard, probably hiding half-pints of Old Crow in executive lavatories and bottom desk drawers.

Bernanke and Obama know they don't have any answers as evidenced by the fact that the same answers continue to hit the wall like Mr. Magoo playing Jai-Alai.

The real question is how long can they keep kicking the proverbial can down the road before the market wets its pants and brings down the whole house of cards?

I can visualize Bernanke putting the Old Crow to his lips, tilting his head back and sucking hard enough that his eyes roll back in his head until he gets his next big idea, which we'll call "QE 3" because that is what it will be.

And, like the market, knowing that makes me want to wet my pants, too.

Just Plain Frightening

There are not enough expletives to describe the jobs number today . . .

Plus 18,000 when it takes 250,000 a month just to take care of new entries into the workforce.

Not surprising that the jobless rate ticked to 9.2% -- which in plain English terms means about 17% if only because the unemployed don't just disappear after their benefits run out as assumed by the federal government -- or 25% if you count all the people are unemployed or employed part-time only because they are looking for a full-time job.

Fact: Fewer people are employed in the U.S. now than at anytime during the recession, which is supposedly over.

What is worse is a big picture look at the situation compared to other recessions vis a vis number of jobs lost and how quickly they were recovered.

Take a look here -- one of the most frightening charts you'll ever see: http://www.businessinsider.com/chart-of-the-day-percent-jobs-losses-in-post-wwii-recessions-2011-7

Not sure a comment is necessary here. Look at the chart and fill in the blank.

-Karger

Do Good Jobs Make Happy Employees Or Are Happy People Just Happy Regardless of Their Work?

Great question and we get the scientific answer courtesy of http://www.bakadesuyo.com

"The current meta-analysis examined the relationship between job satisfaction and subjective well-being (SWB). Consistent with the spillover hypothesis, we found positive relationships between job satisfaction and life satisfaction, happiness, positive affect, and the absence of negative affect. In addition, an examination of longitudinal studies suggested that the causal relationship from SWB to job satisfaction was stronger than the causal relationship from job satisfaction to SWB."

In English, this means it is more likely someone is happy and finds something to like in their job or work than it is to find someone whose work actually changed their level of happiness.

It doesn't mean the quality of the job or the work doesn't matter. It does mean that looking for happy people to hire will pay dividends, all else equal. No surprises there, I hope.

Source: "A meta-analytic examination of the relationship between job satisfaction and subjective well-being" from Journal of Occupational and Organizational Psychology

Want Your Employees To Be Happier? Here's a simple exercise that works . . .

Remember, happier employees are more productive employees.

And, how about you? Could you use little boost in your worldview?

We all could.

This from the excellent blog at: http://www.bakadesuyo.com/whats-an-easy-way-to-be-much-happier

"Jeremy Dean's amazing Psyblog provides us with three studies that show a consistent theme: take the time to write down the things you are thankful for on a regular basis and you can improve your level of happiness:

"Emmons and McCullough (2003) were surprised to find that happiness could be increased by a simple gratitude exercise. Participants took the time to write down 5 things they were grateful for each week, for 10 weeks. At the end of the study this group were 25% happier than a comparison group who simply listed five events from the week.

"Lyubomirsky et al. (2005) compared practising gratitude three times a week with once a week. They found that only those who carried out the exercise once a week were happier. This suggests overdoing the gratitude is not beneficial - perhaps because of habituation.

"Seligman, Steen, Park and Peterson (2005) carried out a randomised, placebo-controlled study. They followed participants up 6 months after they had begun carrying out a simple gratitude exercise and found they were happier and less depressed than a control group. In this study, though, participants initially wrote about what they were grateful for every day for a week."

Sound like so much of that "soft-skills" stuff in a hard, tough, and getter tougher by the day business world?

It is and at this point in time, it is easy to fall into a cynical despair. But, look around. Count your blessings. 30% percent of the world will go hungry tonight.

For me, today, the need to look around and be grateful is more important than ever. One of my former law partners, Hershell Barnes, from whom I learned much and whom I respected highly died of a heart attack this morning in Dallas, Texas. I am grateful he was in my life. I am thankful I still have a life.

And, mostly, I am thankful for the people who make it rich, rewarding, and yes, occasionally even exciting.

Why Unions Are About To Make A Resurgence

I know what you're thinking. You are thinking this is going to be another of the thousand or so commentaries on the recently proposed "quickie election" regulations by the National Labor Relations Board (NLRB).

But you would be wrong.

What has been said about Craig Becker and AmeriKa's new NLRB are true, except the allegations that Becker and his buddies are "socialists." They are not. Real socialists would take offense to the moniker. Rather, they are more aptly described as fascists, meaning they view their role much as President Obama views his -- government and business in a grand partnership, with the first directing the grand plan to the second.

Ignoring a clear and unequivocal rejection of eliminating democratic elections in the workplace by Congress, the NLRB did the next worst thing -- take the right of one party, i.e., the employer, to respond to the representations and promises of the other, i.e., the union, vis a vis an election period so short that there is no time to prepare an intelligent response.

Making matters even more bizarre, the NLRB has given employers four (4) days to offer themselves up to testify, or forever hold their tongues. The proposed comment period more or less mirrors the proposed election period. No problem, they say, we're the government and we know what is best for you.

Today I want to focus not on regulation but on basic economics and my assumptions about the economy going forward which plays into the hands of organized labor, to-wit:

First, wages are likely stuck in neutral for the foreseeable future. (In May, annual real wages fell 0.6% over the year, having decelerated for 5 of the 7 months since November 2010. Real wages may pick up, but it takes time and jobs growth much faster than the 0.67% annual pace in May 2011.) It is unlikely this will happen anytime soon.

Second, wealth effects caused by a rebound in the stock market are slowing - the trajectory of the S&P has decelerated and housing prices continue to fall.

Third, inflation in commodities are being felt by those whose grocery prices matter. The government can cook the books on inflation all it wants but the average American family knows better when they buy, well, anything, other than a house, that it cost more than last month.

All totaled this means the American worker is feeling poorer, mostly because, with real inflation he is poorer and he is finding his obligations harder to meet.

Enter someone, anyone, who can make a credible claim to get him/her more money. Enter organized labor.

Are their claims credible? Not really, although there are a lot of businesses out there sitting on a mountain of cash that will be hard to explain away in a union campaign not to mention executive compensation which in some cases has become obscene. This will especially be tough on employers if the NLRB has its way, because the opportunity for an employer to address the issues with its employers will end just about the time it begins.

Advice? Explaining economic reality (sometimes referred to as "campaigning") should no longer be viewed as something that is done when a union shows up.

Success will be defined by effective preemption.

More as this unfolds . . .