Two articles in the Sept. 8, 2014, The Wall Street Journal are interesting when read together.
1. Grocery chains and food companies are struggling. Why? Walmart says consumers are concerned with “depressed wages and cuts in federal benefits.” Roundy’s (a mid-west grocery chain) says that the grocery and food businesses are suffering decreased profits because consumers have less food money. Campbell (soups) says “consumers are struggling with underemployment and rising costs.” Kraft says consumer demand is persistently weak in part because “more people are falling into the low-income status.”
But that is not bad news for everyone. Nothing ever is.
2. When the Labor Department’s most recent figures showed fewer new jobs than expected, the stock market hit a record. “The soft report was a relief to Wall Street,” the reporter wrote. The Chief Investment Officer at OakBrook Investments said “For stocks, it is probably good news.”
Why good news? Because strong job creation might encourage the Fed to increase rates, which would be bad for investors holding stocks and bonds.
I’m always happy to see the stock markets thrive (rising tides lift even my very small, leaky boat), but I can’t quite see sustained high unemployment and wage suppression as good news.