Archive for the ‘Job Creation’ Category

The Economic Recovery That No One Noticed

Friday, April 25th, 2014

The average recovery since the end of World War II has been 58 months.  The current “recovery” has just reached that milestone.

So maybe we should be celebrating.  But what’s to celebrate?econ_expansion25_405

If you were to define “recovery” as a period when gross domestic project (GDP) increases from one quarter to the next, yes, we’ve been in a recovery.  But a recovery is typically reflected by a period that also includes, among other things, low unemployment, strong consumer spending, increasing income, higher inflation and strong manufacturing.

Most of those signs of recovery have been either barely visible or missing, and GDP has been growing about as fast as a bonsai tree.

This has been, and will likely continue to be, the recovery that no one noticed.  It’s a recovery in name only, as for most Americans it doesn’t feel much different than a recession.  Consider what’s been happening:

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Goodbye, Middle Class

Friday, February 7th, 2014

With all of the talk in Washington about equality, you have to wonder how the gap between rich and poor has widened to the point where even The New York Times is questioning the future survival of the middle class.

Disposable Income

Some have, indeed, made the transition from middle class to upper class and are enjoying a more comfortable lifestyle.  They may not be part of the 1%, but they’ve broken away from the middle.

The New York Times noted that, “In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995 … Even more striking, the current recovery has been driven almost entirely by the upper crust … Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.”

Put aside your class envy for a minute, though, and recognize that consumer spending by the top 5 percent is keeping the economy out of a recession – albeit, the current recovery has been so weak we may as well be in a recession.

The Great Divide

And while some are moving up, many more are falling down, creating a greater divide than ever between rich and poor.  Consider a few statistics from a cheery blog called, The Economic Collapse (and republished on Zerohedge): (more…)

Another Record Smashed: More Than 100,000,000 Americans Not Working

Friday, October 25th, 2013

The Labor Force Participation Rate has fallen and it can’t get up.

The U.S. Bureau of Labor Statistics (BLS) reported this week that 90,609,000 Americans who are 16 or older are neither working nor looking for work.  Only 63.2% of Americans are working or looking for work.  Anyone who is unemployed who has looked for a job in the past four weeks is counted as participating in the labor force.

LFPRAdd in unemployed Americans who are looking for work and the total exceeds 101 million.  With a total population of about 313,914,040, nearly one American in three is 16 or older and is not working.

The Labor Force Participation Rate peaked at 67.3% in 2000 and it hovered around 66% in 2007 and 2008, when the financial crisis began.  Now, after five years of stimulus spending and quantitative easing, it has dropped about 3%.  In July, the number of nonparticipants climbed by more than half a million.

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The Off-On-Off Economy

Friday, August 9th, 2013

The economy recently has been full of stops and starts, ups and downs, good news and bad news.

Optimists will say that progress is being made, as we’ve moved beyond the all-bad-news days of 2007 and 2008.  Those of us who are less than optimistic would instead ask why it’s taken five years to get to the current dismal economic state.

Recovery always seems to be just around the next corner.  But the world is round and there is no next corner.

Zerohedge recently ran a series of 13 charts showing that any economic exuberance is irrational.  The charts compare the current “recovery” with four previous recoveries.  The trend lines in most cases are almost identical – except that the lines representing the current Keynesian-inspired recovery are well below the lines representing the previous four recoveries.  They show that:

  • Growth in gross domestic product is pitifully low.  If it were a patient, GDP would be signing up for hospice care.
  • The ISM Manufacturing Index has fallen significantly from two years ago.
  • Business inventories have risen significantly, signaling that new orders will likely drop.
  • Productivity is down, consumer spending is lackluster and housing starts, though improving, are nowhere near what they should be if the housing market were really recovering.

But cheer up … vehicle sales are up!  The recovery must be just around the next corner, wherever that is.

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The Unnoticed Recovery

Friday, July 26th, 2013

It seems that every day we hear about a stronger economy with real jobs, a recovered housing market and renewed manufacturing strength being just ahead.

We hear about it.  We just don’t see it.

The economy’s been growing for four years now, yet its growth has been so stunted, most of the country still thinks we’re in a recession.  The McClatchy-Marist Poll this week found that 54% of adult Americans think the U.S. in still in a recession, while only 38% think it’s not.

In an economy with a 7.6% unemployment rate (but really more than 14%), any sign of improvement is good news, so we can be thankful that the number of people who think we’re still in a recession is down from 63% in March and 75% in 2011.

Only 29% of those surveyed think their family finances will improve in the coming year, while 19% think they will worsen.  More than half think they will remain the same.

Lee M. Miringoff, Director of The Marist College Institute for Public Opinion, treats the poll results as good news and notes that “President Obama plans to refocus his second term agenda on the economy.”

Well, that should save the day.  Except that a separate poll finds that Americans have little faith in their political leaders.

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Key Indicators Negative Across The Board

Friday, May 17th, 2013

The worst things get, the more they stay the same.

As the stock market continues to set records, the latest Philadelphia Fed Business Outlook Survey shows that the business outlook for manufacturing is weakening.  Of course, that could help continue to boost the market, since it gives The Fed an excuse to continue its quantitative easing.

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The Black Cloud in the Silver Lining

Friday, December 7th, 2012

All I want for Christmas is a new economy.  Ours is broken.

While there are a few positive signs that optimists can latch onto, it appears that either the country will go over the fiscal cliff or virtually no cuts will be made in the $3.8 trillion federal budget.  If nothing else, current spending should prove that Keynesian economics doesn’t work.  With a fourth consecutive deficit exceeding $1 trillion, optimists take as good news a drop in the unemployment rate from 7.9% to 7.7%.  Considering the federal spending that has taken place in recent years, wouldn’t the economy be booming now if Keynesian economics really worked?

In November, 146,000 new jobs were added, exceeding expectations of 85,000, according to the Bureau of Labor Statistics (BLS).  In spite of Sandy, according to the BLS, the unemployment rate declined to 7.7% from 7.9%.  However, these preliminary figures could be more BS from BLS.  Final BLS job figures for September and October were revised downward by 49,000 jobs.  You may recall that the BLS stats brought the jobless rate below 8% just in time for the election.  We’re betting that when final stats are released, the number of new jobs will not have to be revised upward.

Those cheered by the latest job figures can always find a black cloud in the silver lining by visiting Zerohedge.com, which correctly points out: “What is certain is that the broader mainstream media will continue to focus purely on the quantitative aspect of the report, while the real story over the past 3 years has been a qualitative one: a shift to lower paying jobs, a painfully slow (if any) rise in average hourly earnings, a transformation of the US labor pool to ‘Just In Time’ inventory as virtually all new hiring needs are met by temps, and finally a secular shift to an older labor force, as job creation in the 25-54 category since January 2009 is still negative!”

The biggest driver of the U.S. economy is consumer spending.  Over the past four years, income for the average consumer has dropped by about $4,000.  While the inflation rate has been relatively tame, prices for basics such as food and oil have increased significantly.  On top of this, going over the fiscal cliff would cost the average household nearly $3,500 in new taxes, according to BloombergBusinessWeek.

So consumers need to lift the economy while taking a $7,500 hit to their incomes and paying more for essentials.  The only way that will happen is if consumers use the federal government as a role model and spend more money than they earn.  Lots more.

Merry Christmas, indeed!

WOW! Manufacturing Index Up 0.2%!

Friday, November 2nd, 2012


“Been down so long, it looks like up to me.”

Furry Lewis

This is what passes as positive economic news these days: The Institute for Supply Management’s (ISM) reported Thursday that its index of purchasing managers edged up to 51.7% from 51.5% in September.

Wow!  A whole 0.2% gain!

Yet it was positive enough to send the Dow Jones Industrial Average up 1% (136.16 points) yesterday, in the last Thursday before the Presidential election.

It was the biggest gain since the latest round of quantitative easing (QE3) was announced on Sept. 13, 2012 – but it doesn’t erase the market drop that has taken place since then.

The gain in the ISM index is up from a three-year-low of 49.6% in August and it’s better than the 50.5% index projected by economists in a MarketWatch survey.

But put the figure in perspective.  Any number above 50% signals expansion, while a number below 50% means contraction.  Whether the number is 51.7%, 50.5% or 49.6%, it signals that the economy is standing still.  Statistics have a margin of error, which renders a gain or a loss of 0.2% meaningless.

Let’s assume, though, that the trend is upward.  After all, ISM’s new order index, which is based on future sales, moved up from 52.3% to 54.2%.  If the growth rate for September continues, after five months, the index could reach 51%!

That’s about as exciting as the 2.1% growth in gross domestic product (GDP) that we reported last week.

Economic Data Doesn’t Create Jobs

Speaking of meaningless statistical changes, the bigger news, reported today, is that the unemployment rate ticked back up to 7.9% from 7.8%.

Just last month, the U.S. Bureau of Labor Statistics, amid a great deal of skepticism, announced that the unemployment rate had fallen below 8% for the first time in nearly four years.  So much for positive trends.

Many even viewed the latest data as positive news, as 171,000 new jobs were added in October, which is higher than the expected 125,000 new jobs.  Regardless, there are not enough new jobs being created to make a dent in the unemployment rate.

As with the ISM index, it doesn’t matter much whether the jobless rate is 7.9%, 8.1% or 7.8% — especially given that it counts part-time workers as being fully employed and doesn’t include people who have given up looking for work.

The take away from this is that too many people have been out of work for a long, long time, and that stimulus programs, monetary policy and other government efforts have done little to change that.

News You May Have Missed

Friday, October 26th, 2012

With the election season in full swing, dominating the airwaves, Internet and print media, you may have missed some of the other news from the past week.  Here are a few lowlights:

What Recession?  We recently reported that the unemployment rate miraculously improved to under 8% just before the election.  Now, according to a preliminary report, annual growth in gross domestic product (GDP) is miraculously above 2%.

An unemployment rate under 8% is none too impressive and neither is a growth rate of just above 2%, but we live in times of low expectations – and these benchmarks, if achieved honestly, would indicate that the economy is moving in the right direction.

But have they been achieved honestly?  And are they accurate?

According to zerohedge.com, over one third, or 0.71% of the growth was contributed by an increase in “Government Consumption:’

“This was the biggest rise in government spending in 3 years, and only the first contribution by Uncle Sam to its own GDP print since Q2 2010. So in much the same way as the September jobs print soared courtesy of government employee hiring, this same government is now juicing its own numbers to make itself look better.”

Recall that Q2 GDP was revised down from 1.7% to 1.25%.  Revisions to Q3 GDP will be released after the election.

As for the unemployment rate, none other than former GE CEO Jack Welch questioned the employment numbers in a Wall Street Journal op-ed.  Even if you accept the numbers from the U.S. Bureau of Labor Statistics, gains were in “involuntary part-time” help – meaning people who were looking for full-time work are now flipping burgers to make ends meet.

Because the unemployment rate excludes those who have stopped looking for work and includes those who are underemployed in part-time jobs, others put the real unemployment rate at 14.7%.  An analysis by The Wall Street Journal, which factors in historical shifts in the labor market, puts the rate at 9.3%.

Whatever analysis you accept, many Americans are still out of work and economic growth is well below what it should be.

Muni Massacre.  Moody’s Investors Service cut its credit ratings on more than $200 billion worth of municipal bonds through the first nine months of 2012, exceeding the total for 2011 – and “there’s no end in sight.”

Moody’s cites increased risk because of the “difficult economic and industry environments.”  And we thought the economy was improving!


Stimulus spending.  If government spending does, indeed, stimulate the economy, we should now be growing at a record pace.  U.S. debt has reached $16.6 trillion, while total GDP is $15.76 trillion.  In other words, debt exceeds GDP by 2.4%.

Lower Profits, Home Building.  The stock market’s performance continues to be erratic at best, reflecting economic data that one day sounds hopeful and the next day sounds hopeless.

Profits have been generally disappointing, as previously reported, but at least the housing market has been rebounding, as we announced last week.  However, anyone who jumped into homebuilders’ stocks to take advantage of the improving market would have to be disappointed by this week’s performance, as the SPDR S&P Homebuilders ETF dropped 1.2% this week.

The ETF dropped because the National Association of Realtors (NAR) reported that the speed of growth in housing sales decreased last month.

NAR Chief Economist Lawrence Yun said, “Home contract activity remains at an elevated level in contrast with recent years, but currently appears to be bouncing around in a narrow range. This means only minor movement is likely in near-term existing-home sales, but with positive underlying market fundamentals they should continue on an uptrend in 2013.”

Sorry for being such an optimist last week!

Unemployment Drops … Just In Time for the Election!

Friday, October 5th, 2012

The unemployment rate has finally dropped below 8% to 7.8%!  Or has it?  Really?

The latest numbers are a head scratcher.  The Bureau of Labor Statistics (that’s BLS, not BS) reported that only 114,000 non-farm payroll jobs were added in September.  That’s well below the 206,000 increase in the working age population.

As we’ve previously reported, the overall unemployment rate has been dropping not because new jobs are being created, but because many people have stopped looking for work or are underemployed in part-time jobs.

Yet the BLS reported that 418,000 people were added to the labor force in September.  So how can the unemployment rate fall when the number of people added to the labor force is nearly four times the number of new jobs created?

Have hundreds of thousands of people suddenly become farmers, in which case they wouldn’t be included in the stat?  That’s not it.

The BLS explains that, “The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.0 million in August to 8.6 million in September.  These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.”

In BLS-speak, people who are underemployed – i.e., all of those new involuntary part-timers — are counted as being fully employed and those who have given up looking are not counted as being unemployed.

Still, a sudden jump of 600,000 part-time jobs in a month is hard to believe, as it is inconsistent with previous months.

Is progress finally being made on the employment front?  Or is it just convenient to the Presidential election that the unemployment rate has finally fallen below 8%?

As one analysis put it, “how do you have a 600k jump in part-time employment in just one month before the beginning of retail season with nobody realizing it until the BLS published today’s report?”

Even if the unemployment rate has indeed dropped to 7.8%, as the BLS reports, keep in mind that the drop is to the commonly reported U3 rate.  The broader U6 rate, which includes those who had stopped looking for work is at 14.7%.