Death of the Middle Class

As if the financial crisis of 2008–9 wasn’t bad enough… Americans saw the value of their homes get crushed, and some areas still haven’t fully recovered. Wages stagnated for nearly a decade… jobs were lost…

And now it’s happening all over again. Only this time around might prove to be the final nail in the coffin for many middle-class families. 

Of course I’m talking about the long-term fallout from the economic shutdown as a result of the coronavirus pandemic. Nearly 40 million Americans lost their jobs and are now dependent on unemployment benefits. How long will those benefits last? And more importantly, how many of those jobs are gone for good?

U.S. government debt is now $26 billion — more than one year’s GDP. Deficit spending is nearly $2 trillion already this year. And there are some in Congress who are urging the president to slow down the spending, much of which is going to help people who are out of work. Sure, it’s an election year, so it’s reasonable to think that maybe we’ll get another round of those $1,200 checks…

But is that really enough? Is a $1,200 check and unemployment money really going to let middle-class Americans live the life they once did? Seems unlikely. And even if families do make it through the next few months, what kinds of jobs will there be? What’s the job market going to look like? 

Golden Age… for Tech

The long-term fallout from the coronavirus is going to be bad for industries that employ lots of people to do the work — like restaurants, retail, and recreation. There are 660,000 restaurants in the U.S. After the U.S. government, restaurants are this country’s largest employer. Some estimate that we will lose 86% of those jobs. Think about that: Just over one in 10 people who lost a restaurant job might get it back. But the thing is… it’s not just that all those jobs will be gone; it’s that companies will be able to automate them.

There will be more ordering kiosks at fast-food restaurants. Drone and automated vehicle delivery is coming. 

Seventy-six percent of retail jobs and 59% of recreation jobs could suffer the same fate. 

MarketWatch says, “One nasty side effect of coronavirus: Robots will take our jobs at an even faster rate” and “wages of more than $1.5 trillion every year” could vanish in essential industries alone. And a study by McKinsey & Company says it’s even worse — the loss in wages due to automation could even amount to $2.7 trillion.

Why do you think tech stocks are doing so well right now? It’s because the coronavirus shutdown is accelerating trends that have been in play for years. It’s one big fast-forward for an economy that is going to leave many people outside looking in…

Have you seen Amazon’s share price recently? It’s over $3,000 a share, a 50% gain in less than six months. The company is now worth $1.5 trillion dollars. You know why? Obviously, more people are going online to buy what they need because they don’t want to risk face-to-face contact with other people. But the other reason is that Amazon pays its warehouse workers $15 an hour. That’s not even thirty grand. Its profit margins are launching while many Americans sink.

And it’s not just Amazon. Microsoft, Google, Apple — all these big tech stocks are rolling. And it’s because these are the companies that can do more with fewer workers. It’s a stark picture for the average American. 

Time for Action

Now, I’m not telling you all this to scare you. I’m simply spreading the word about the risks we all face right now. It’s not just jobs, either. We could be in for a nasty bout of inflation, as businesses have to charge more to make up for lost revenues. And we could even see tax hikes as cities and states are expected to have budget shortfalls well into next year. 

Talk about a perfect storm…

Tomorrow, I’m unveiling a presentation that includes three simple steps you can easily follow to avoid the majority of the wealth destruction that’s coming. I can’t promise anyone that they can completely avoid the changes that are well underway. But I can tell you that if you implement the three things I suggest, you’re gonna do a lot better than those who carry on like nothing’s going to change. So look for my email to you tomorrow…

Until next time,

Briton Ryle

@BritonRyle on Twitter

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.