He even manages to point to the very Paul Krugman quote that I originally linked to critically on this topic, at the end of this post. Of course, he likes Krugman's comments.
Here is a quote McBride has from Kash Mansori:
Let's see. How about this:[T]his opens up an interesting line of reasoning, one that is certainly not new but which this data reminds us of. If a bad labor market means that workers get a smaller share of the productivity they bring to their employers, then the owners of companies will have a strong preference for a weak labor market. Firms don't like recessions, of course -- it's hard to make money when your sales are falling. But companies do enjoy the way that a very slow recovery in the job market can allow them to keep wages down, and thus keep a larger share of the output of their workers for themselves.
How about this:If recessions mean that firms don't have enough demand for their products, then consumers will have a strong preference for a weak economy. Consumers don't like recessions, of course -- it's hard to make money when you lose your job. But consumers do enjoy the way that a very slow recovery in GDP can allow them to keep prices down, and thus keep a larger share of the output for themselves.
If a supply shock means that consumers have a shortage of products and services to choose from, then workers will have a strong preference for natural disasters. Workers don't like natural disasters, of course -- it's hard to make money when your town is in disarray. But workers do enjoy the way that natural disasters create demand for labor at high wages, and thus they keep a larger share of the output for themselves.
Of course, that last version is sometimes stated favorably! In fact, replace "natural disasters" with "immigrant roundups" and many people consider it the explicit basis of public policy!
So, I just stated the same argument with the characters changed. Oddly these three paragraphs garner very different reactions:
1) Exactly! We need to counteract this terrible preference that corporations have!
2) That's stupid. Of course consumers don't want the economy to be sour.
3) Exactly! The destruction is terrible, but at least it will put people to work!
I would like to put a vote in that our reaction to version #2 is the correct reaction to all the versions.
By the way, here are US Total Compensation and US Domestic Corporate Profits, Indexed to the previous peak of profits in 2006 3Q. First, a close-up since 2006, then a graph all the way back to 1947.
And let's be clear about what these three gentlemen above are declaring: that corporations (the BLUE line) secretly like extended economic dislocations because it gives them an advantage in bidding down labor compensation (the RED line). Without further comment, here are the graphs of Wall Street's "Dirty Little Secret":
Well, OK, I will make one further comment, because I realized that this is another example in a running theme here at IW that interpretation trumps everything. Here is the article at "A Wealth of Common Sense" that triggered Bill's rumination. The article discusses how times of economic distress are good times to invest with risk. But, there is nothing in that article about corporations gaining at the expense of labor. The closing paragraph is:
Yet it’s still true that expectations matter with forward looking markets. This is why the best time to invest is when assets are beaten down in price with low future expectations as opposed to those times of sky high expectations and large price increases.This was an article about sentiment and contrarian mentality. If anything, the article runs along with the point I have been making - we're all in this together - capital recovers when labor recovers. Yet for Bill McBride, the article reinforced the exact opposite viewpoint - that corporations recover at your expense.
You know those little toys you can get where you can only read a secret code if you place a little red plastic lens over it that filters out some of the colors? In complex matters, most of the time we don't need the little plastic lenses - and I'm talking about all of us here, even though it's going to take someone else to point my filters out to me. That's the thing about filters.