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The U.S. jobs report on Friday announced a staggering 252,000 new hires, dropping the unemployment rate to 5.6 percent. Yet, despite the growth in the economy, the average hourly earnings decreased by 5 cents.
Jim Cramer is astounded by the decrease and warned investors to forget what they learned in economics 101. Throw out your textbooks, because high job growth and low wages just doesn't make sense.
The U.S has been creating jobs like crazy, and Cramer anticipates that the country will continue to do so. After all, America is the fastest growing economy in the developed world.
So, with jobs galore, how the heck did the average hourly earnings decrease by 5 cents?
"You can throw out pretty much everything you leaned at Econ 101 with this number, as wages should be increasing by at least that much as the labor pool gets tighter," the "Mad Money" host said.
There are the several reasons that could have contributed to the decrease. The robust amount of college loan debt could be driving people to take lower paying jobs, or unaccounted-for immigrants may be creating a larger surplus of labor, or maybe even companies know that they could move offshore if they wanted to. Technically, it could be a combination of all of these factors.
But Cramer thinks it's something else—the Internet.
Retailers like JC Penney, Macy's and Pier 1 Imports all announced this week that they would be closing unproductive stores, thus giving the companies the opportunity reduce headcount and to hire fewer people to man the technology side of the business.
"Put simply, technology is taking away high paying jobs and replacing them with lower paying jobs," Cramer said.
This is especially applicable in the retail sector, because of the Amazon factor. Companies can no longer afford to compete on goods, so they compete on price, especially the price of human labor.
This is bad news for employees but good news for investors.
Sales are going up, but wages are not. That means companies will use the earnings to give back to shareholders in the form of dividends and buybacks.
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So now the U.S. has high growth with low inflation—the exact opposite of what you learned in economics.
"They need to rewrite the texts in this new technology driven world. They just don't make sense anymore."