Why the Jobs Situation Is Worse Than It Looks

[Scott_Lafrance]

Yeah…and to continue the economics lesson, what happens if no one wants to buy the vacumn cleaners at the posted price? The difference between what Walmart paid, and what the market (you and I) will pay is the profit margin for Walmart. Inventory, sitting on the shelves and not moving, means lost profit. So, what happens? A sale–the price is dropped until it meets what the market will pay.

Add to this that Walmart figured out a long time ago that inventory on the shelves equals lost profit. So, they figured out a ordering/shipping system that is ‘just in time’—replacement goods come in ‘just in time’ to replace goods sold. Now, to do this requires two things:

1. A market that isn’t volatile…prices going up or down rapidly. Inflation is already here, and hyperinflation is potentially (more than likely) on the horizon. and
2. Cheap fuel costs to move the products from wherever they arrive at to the Walmart stores. And fuel costs are going up! I read somewhere that if fuel prices were to reach the six to seven dollars a gallon range, Walmart would be toast.

Try this on as a thinking exercise: What happens if your local Walmarts go out of business? In so many places, Walmart took away so much business from the little local mom and pops stores that they had to close. So, if Walmart now goes under, where do you buy clothes? Groceries? Lawn mowers? Something to think about…

Online. Amazon.com, eBay, etc…

 

[loneviking]

Online. Amazon.com, eBay, etc…

Maybe, but if gas prices are high enough to wreck Wal-Mart (6 to 7 dollars a gallon) what do you think the shipping charges are going to be like for anything substantial—like a lawnmower or a window air-conditioner?

With fuel costs that high, how many trucking companies are going to still be in business? The railroads will still be moving, as that is the most efficient way to move goods. But how long will it take for the goods to get to you?

The model used to be that goods would come in on a train, be dropped off at one of several yards, and then small delivery trucks would deliver the goods to stores or customers throughout a town. Now, that model has been supplanted by the interstate hwy system and the trucking industry. If fuel costs go high enough, I’m betting we are going to go back to the rail based system out of necessity.

 

[Monte_RCMS]

Maybe, but if gas prices are high enough to wreck Wal-Mart (6 to 7 dollars a gallon) what do you think the shipping charges are going to be like for anything substantial—like a lawnmower or a window air-conditioner?

With fuel costs that high, how many trucking companies are going to still be in business? The railroads will still be moving, as that is the most efficient way to move goods. But how long will it take for the goods to get to you?

The model used to be that goods would come in on a train, be dropped off at one of several yards, and then small delivery trucks would deliver the goods to stores or customers throughout a town. Now, that model has been supplanted by the interstate hwy system and the trucking industry. If fuel costs go high enough, I’m betting we are going to go back to the rail based system out of necessity.

Well, if things get THAT bad, then the railroads won’t be as busy as they are … hauling from-China containers around.

So, then the railroads could return to break-bulk boxcars instead of flats with containers.

Of course hauling break-bulk is (partially) what bankrupted the New York Central Railroad and the PennCentral.

I was doing some reading about the railroads and how they got messed up … will see if I can refind those links. Interesting reading because it is directly related to the jobs situation. Pennsylvania Railroad alone [from memory] employed 250,000 people at its peak.

Of interest, Pennsylvania and North Dakota are having relatively low unemployment right now … owing solely to the high level of activity of the shale oil and shale natural gas industries. If we can really take advantage of that cheap natural gas, we could truly transform the U.S. economy … but in a good way.

Meanwhile EPA is working around the clock to shut down all energy users and providers.