Dear Mr. & Mrs. America,

The problem with lies is that the truth exists.  Somewhere anyway.  Not necessarily from who told it to you.  Family, friend, boss, the Government?

And when you see the truth… well, it makes the lie obvious.

The lie we’re discussing today: The US economy is rocking and rolling and the envy of the world.

The truth: Domino’s carryout pizza business is booming.

Seems like an odd non-sequitur…

But the path from lie to truth isn’t very hard to follow.

We start with a couple of numbers…

Domino’s Q2 carryout sales grew 7.9% on a comparable basis, year over year. Delivery sales rose just 2.7%. As Domino’s CEO noted of the results: “This is something we didn’t even contemplate [as possible] years ago.”

When you stop and think about it, you begin to see how these figures from Domino’s expose the lie that the US economy is a beast…

Two types of people order pizza from Domino’s:

1. The Convenience Seeker: These pizza eaters just don’t feel like cooking, nor do they feel like hopping in their car to go in hunt of sustenance. Instead, they call Domino’s and gladly pay the added cost for delivery and a tip. Money is not an issue. They only care about the convenience.
2. The Financially Strapped: For these folks, money is entirely the issue. The inconvenience of driving to Domino’s to pick up a carryout pizza is offset by the fact that they don’t have to pay delivery fees or proffer a tip to the driver—money that is very often plenty enough to afford another pizza later.

Thus, the fact that Domino’s is seeing a surge in its carryout business that the king of pizza delivery never even contemplated says a lot about the financial straits middle America finds itself in.

So much wealth has been extracted from the middle class over the last 40-plus years that the new American Dream is the ability to one day afford a pizza delivery again.

The elites in the financial media and the bureaucrats running the country tell us that the US economy is a stallion—and yet the middle class increasingly shuns delivery for carryout as a way to save a few bucks…

That math – don’t math.

Why is this the way it is in America today?

Well, lots of culprits come to mind…

• A legislative and judicial agenda since the Clinton years that has systematically destroyed the working class and given voice to the corporate class instead.

• Presidents on both sides who have passed tax reforms that benefit the wealthy by sticking it to the middle class.

• Technology that has made workers redundant.

• Government debt that pulls money out of the productive economy to fund government spending, which increasingly is nothing more useful than repaying interest on old debt, a complete waste of a nation’s treasure.

Little wonder a New York Times headline earlier this year spoke of “The Income Gap Jeopardizing Retirement for Millions.”

What I found particularly interesting in that piece was this:

Drawing on data from the national Health and Retirement Study between 1994 and 2018, the researchers found “a bifurcation” among Americans in their mid-50s…

In effect, they now divide into two middle classes: the more secure upper tier (which, in 2018, had on average more than $90,000 per person in annual resources, including income and the annualized value of home equity, retirement savings and pensions); and the increasingly precarious lower middle class. In 2018, people in that group had average annual resources of less than $32,000.

In the early 1990s, by contrast, “our lower-middle-class group had pretty comparable outcomes to the upper middle class” in measures of health and economic well-being, [study author] Mr. Chapel said.

No more. In two dozen years, the gap between them widened. Homeownership, for instance, declined by 5 percent in the upper middle class but declined by 31 percent in the lower middle class, only 54 percent of whom owned homes in 2018.

In short: America’s much-vaunted middle class is hollowing out. Some are progressing toward the “mass affluent” while the rest are sinking toward poverty. Even though they have jobs, the NYT reports, they are still hitting up food banks regularly.

Or ordering carryout pizza instead of delivery…

This does not, even remotely, speak to a robust economy.

It speaks to an economy that only works for certain Americans. And there’s no way such an economy is healthy.

Elitist financial writers like to point to the low jobless numbers and supposedly strong employment as proof that the American economy is rock solid. But they fail to acknowledge that a great number of the American workforce are juggling two or even three jobs to make ends meet… and that the greatest job growth is generally happening in lower-wage industries.

A report this past spring from the Center for Economic Policy and Research noted that healthcare, private education, and social services accounted for more than a quarter of all post-pandemic job growth.

Those are generally not high-dollar jobs.

Indeed, though healthcare is insanely pricey in America, it pays dirt unless you’re a doctor or specialist or in the C-suite. The healthcare jobs growth is happening with aides, and home-health workers, and such—positions that often pay minimally.

What I’m ultimately getting at is this: America is a nation in decline, despite the reported numbers.

I could tell you that the economy is robust, that there are plenty of jobs for everyone, that salaries are on the rise, that unemployment is near record lows, that the sun will come tomorrow, and that you can bet your bottom dollar that tomorrow there’ll be sun.

But when a basic-foods company like Domino’s tells you that the carryout business is booming, well, that tells you that the core of the economy—the middle class—is struggling mightily.

And a struggling middle class does not speak to a healthy economy.

It speaks to an economy filled with rot and that cannot easily be repaired. After all, reaching this point took us 40-plus years. Fixing the problem will require a severe reckoning and years of reconstructing.

As I say all too often: This is not going to end well.

A crisis cometh.

Prepare now.

Lance Mays
Lance@WCIBrokerage.com