January 17, 2013

Wal-Mart To Save the Day and Fix U.S. Economy

Just read this article :  Wal-Mart to Hire Vets, Buy American which leads with the line "Why wait on Washington when there's Wal-Mart?"     You can read their press release at Walmart to Boost Sourcing of U.S. Products by $50 Billion Over Next 10 Years

Wal-Mart's plan is to hire 100,000 veterans and increase spending on U.S. made goods by $50B over the next 10 years.   Horray!  We're saved!    Our economy will turn around in no time thanks to private industry finally shoving government aside and taking charge of the situation!   No more waiting for government to do everything for us and it only took five years of economic stagnation for Wal-Mart to stop sitting on their thumbs and leap straight into action.

Now I'm not going to wish failure on Wal-Mart, but if unemployment isn't under 6% and GDP up +5% by 2014 then we know who to blame: Wal-Mart.

Wait... no, I guess thats not what we're being promised here?    To its credit the article later adds: "They sound impressive when you first hear the numbers but when you begin to look at them, it's a very tiny scale that doesn't add up to much," said Stacy Mitchell, senior researcher at the Institute for Local Self Reliance, a nonprofit national research organization"    Yes thanks, someone has clearly noticed that this is not a very large change at the national scale.
Hiring 100,000 veterans over 5 years equates to 20,000 veterans a year.   Wal-Mart employs 1.4 million people so thats a very insignificant 1.4% difference.   I'm sure Wal-Marts annual turn over rate is much much higher than 1.4% so they can simply achieve this by giving veterans hiring preference and not increase staffing in order to meet that goal.     Theres no indication that there will be a net increase of jobs or any impact to unemployment.   It may help veterans which is a good thing, but it may have no impact on the economy as a whole.

By comparison the White House issued Executive order 13518 a few years ago which then resuled in 34,000 veterans being hired by the federal government in just the first half of 2011 and  28% of federal government hiring going to veterans.

Buying another $50B in U.S. made goods over 10 years is a $5B annual impact.   The US has manufacturing of $1.8T so a $5B annual boost to US production would be a 0.27% increase.

Now don't get me wrong, this isn't a bad thing at all.  I think its a great initiative and I'm glad Wal-Mart is doing it.   But this certainly should not be positioned as private industry fixing things after the government failed.   "Fixing things" for our economy is a tall order and this is not going to do it.


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