Finally, it seems, the economic burdens of America’s vast middle class may be catching up with the Street. The Dow lost 2.22 percent Thyrsdat; the Standard & Poor’s 500-stock index was down 2.28 percent. Both marked their worst declines since August 11, 2010. The Nasdaq composite index fell 2.33 percent.

We’re coming full circle: The stock market is dropping because corporate earnings are slowing. Corporate earnings are slowing because consumers are pulling back. Consumers are pulling back because they don’t have enough jobs or adequate wages.

The immediate cause of the sell-off was an announcement by ADP Employer Services, a payroll processing firm that estimates employment, that private employers added only 38,000 jobs in May. The economy needs 125,000 new jobs a month just to tread water, given that at least 125,000 people join the potential labor force every month. Simply put, if new hires are in the range of five digits, American consumers will not have enough purchasing power to buy what the private sector can produce.

The leaders of the Street and big business may now have to wake up to a reality they’ve tried to avoid — that the central economic problem of our time isn’t the long-term budget deficit but the immediate deficit in aggregate demand.

They may not yet see the necessity of a renewed social contract linking pay to per capita productivity, but they will understand something must be done to fuel jobs and wages.

Never underestimate the power of Wall Street and big business to set the terms of the economic debate in our nation’s capital. After all, Wall Street and big business pay the tab of politicians on both sides of the aisle. Even if the middle class can’t get the attention of our representatives in Washington, those who fund their campaigns can.

Robert Reich

Robert Reich’s Blog