Monday, August 10, 2009

Zach Karabell Is a Good Read

My good friend Zachary Karabell has on op-ed piece in the Wall Street Journal today that raises the question: can the stock market do well, if the economy does badly? His answer: yes. The US faces "..the prospect of permanent change in the American economic landscape: high unemployment, moderate to weak growth and soaring corporate profits." Why? As Karabell notes, "...companies can grow by leaps and bounds - by double digits - and yet unemployment can skyrocket and remain high. There is nothing on the horizon that would lead one to expect a turnaround in the employment picture."

Karabell argues that the US is in a global economy and companies large and small can take advantage of cost-savings from using foreign sourcing and aiming their sales at foreign markets. What lies beneath this new "conundrum" is the increasing cost of US labor due to government (federal, state, and local) mandates providing various "benefits" to workers that ultimately make them far more expensive to employers. Unfortunately, the new administration is in a rush to add new mandates to the existing ones. This spells permanent stagnation and high levels of unemployment.