End of the Service Economy

We read today that the U.S. Postal Service wants to cut a delivery day. We see a dark trend behind this story. People just don't have the money to pay other people to do stuff for them.

When you're cutting your budget, one of the first things to go usually is eating out, that is, paying someone to cook for you. Then there is cutting entertainment - not paying someone to sing or dance or tell jokes for you. Cutting travel means not paying someone to fly you somewhere and give you an exotic place to sleep. Pretty soon a lot of people are out of a job.

In 1986, an article was entitled Taking in Each Other's Laundry - the Service Economy. A critical expression was thereafter circulated - "We can't get rich doing each other's laundry." In the following years as more and more people earned their living catering to other people's inclinations - it seemed that just maybe everyone could get rich doing each other's laundry, nails, or pet-washing.

Now that the economy is contracting and have less to spend, people are deciding to do their own laundry. This is setting up a feedback cycle of job loss and spending cuts that has a very deep bottom. We expect to see the US economy (among others) de-servicing, if you will, in the years ahead just as it de-manufactured in the 1980s. This process will be very painful and disruptive for many, and a good deal more than most could now imagine.