There were two rather interesting points worth repeating in Barron’s Up and Down Wall Street column this morning. The first will be familiar, the 2nd, perhaps less so.
As we noted the day before Election Day, It is Still the Economy, Stupid. Voter insecurity — about Jobs, rising costs of healthcare, education, housing, automobiles, food and energy — has much of the middle class on edge. This seems to have been lost on many people.
Alan Abelson addresses this very issue:
"SURVEYING THE SHAMBLES AFTER THE VOTERS had pretty much laid waste to his personal aspirations and political blueprints for the next two years, the president professed to be baffled as to why the economy, which he characterized as "strong," failed to play a more powerful role in shaping the outcome.
We can help Mr. Bush here: The economy, in point of fact, was a big factor in deciding the election. But for an awful lot of folks, not a few of whom voted, it has been anything but strong.
It has been for some time a favorite conceit of the administration, its economic shills and the bullish claque on Wall Street that we’re enjoying the best of all possible worlds: a buoyant economy unsullied by inflation. In truth, we’ve had the most lopsided expansion in memory (and ours, sigh, goes back a long way), with a fair number of people making out quite well, but a much larger number — make that a really huge number — of people treading water at best.
As to inflation, computers, as economists never tire of telling us, undeniably are cheaper than ever. The question is, though: Have you every tried eating a computer? Or living in a house made of computers? Or driving a computer to work? For, by contrast, the cost of shelter and food and fuel and lots of other stuff that is still quaintly considered by most of the citizenry as essential ingredients of the good life are awfully pricey and getting pricier.
Nor should we forget, in taking the measure of the economy, that it rests on a very tentative foundation, indeed: a giant but rapidly deflating housing bubble floating on a vast sea of debt."
None of this will be particularly unfamiliar to the regular readers of this blog. What you may be unfamiliar with, however, is how some of the employment data shakes out.
It turns out that there’s much less to new job creation than meets the eye:
"In his reflections, offered at his post-election press conference, the president singled out the bright job picture, echoing the sentiments he expressed on release of the October employment data a couple of Fridays ago. And, to be fair, he didn’t lack for company. Chorusing Mr. Bush’s upbeat view of the report were the usual suspect Wall Street cheerleaders, who couldn’t wait to pick up their megaphones and hail the big upward revisions of the previous two months’ employment data, and the drop in last month’s jobless rate.
Except to confuse civilians, journalists and kindred innocents, we were and remain a little mystified as to what all the hoorahing was about. While there was a sprinkling of glad tidings, notably the modestly longer workweek in September and October, and a nice 0.4% rise in hourly wages, the report struck us as pretty lame. Worse than that, actually, because of what it seemed to portend for both jobs and the economy.
The consensus — which has become a synonym for wrong guessers — was looking for upwards of 120,000 additions to the nation’s nonfarm payrolls. Instead, the gain was a considerably more subdued 92,000. And as those trusty stewards of the excellent Liscio Report, Philippa Dunne and Doug Henwood, noted in their astute dissection of the numbers, the supposedly large revisions to previous months were not especially outsized, but pretty much in line with similar revisions effected over the past 45 years.
Somewhat ominous, too, was the fact that the improvement, far from widespread or even decently pervasive, was quite spotty — and those spots were either not terribly encouraging as indicators of future employment trends, or a mite suspect.
For example, in this survey, which was more or less critical because it happened to take place immediately in advance of the elections, a full 39,000, or 42% of the total gain, came courtesy of local governments, mostly back-to-school hires. Another 27,000 of the additions were in bars and restaurants and 23,000 were in health care.
In contrast, manufacturing shed 39,000 jobs in October and construction employment declined 26,000, weighed down by a hefty 31,000 shrinkage in payrolls connected to residential construction. The drop in homebuilding employment, Philippa and Doug point out, was conspicuous among the workers who finish houses, likely a preview of things to come.
But the larger point of all these numerical details — and we apologize if you’re feeling a trifle numbed by numbers — is that the bulk of jobs being added are not big payers, and the bulk of the jobs being lost are." (emphasis added)
And that, in a nutshell, is the source of GOP woes. Sure, Iraq has become an ever larger morass, and voters know it. And we cannot overlook the high percentage of exit polls commentary regarding corruption.
But if the economy was throwing off more benfits to the folks below the top 10% of earners/asset holders, the election would not have been nearly so lopsided.
Yes, its still the economy — the bifurcated economy. I continue to be amazed how few people see the schism . . .
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Source:
Bushwhacked!
Alan Abelson
UP AND DOWN WALL STREET
MONDAY, NOVEMBER 13, 2006
http://online.barrons.com/article/SB116320566776520428.html
If people saw the schism, there would not be any schism!
The real schism and the marketing that papers it over. You cannot afford the reality that you cannot afford to be happy. So credit is issued so that you can afford damn near anything you please…atleast for awhile. Personally and corporately.
But you are still unhappy and now that you are looking like Ford or GM (and not Toyota) and deeper debt levels, may have real reasons to be unhappy.
Anybody else amazed this week that we didn’t have any recounts for control of the Senate?
Was it because;
a) They didn’t want media spotlight on dirty tricks and shenanigans? (VA)
b) The economy and marts are too fragile to endure?
c) The BBC doesn’t really matter because both sides are bought and paid for?
Barry-the voters feel the schism even if they don’t trade or post here. Wall street can skew one’s perception but a national election can reveal how folks are really feeling. I think morale is about to plunge in the US as the prospect of two more lame duck years sinks in with the fall in housing prices. It is going to feel like Nixon and Vietnam all over again. Gold anyone?
It appears the American middle class is finally starting to wake up…this is a great speech
This is the Fight of Our Lives
by Bill Moyers
Keynote speech
Inequality Matters Forum
New York University
June 3, 2004
http://www.commondreams.org/views04/0616-09.htm
“The middle class and working poor are told that what’s happening to them is the consequence of Adam Smith’s ‘Invisible Hand.’ This is a lie. What’s happening to them is the direct consequence of corporate activism, intellectual propaganda, the rise of a religious orthodoxy that in its hunger for government subsidies has made an idol of power, and a string of political decisions favoring the powerful and the privileged who bought the political system right out from under us.”
— Bill Moyers, Keynote speech, June 3, 2004
Excerpt:
You just can’t make this stuff up. You have to hear it to believe it. This may be the first class war in history where the victims will die laughing.
But what they are doing to middle class and working Americans — and to the workings of American democracy — is no laughing matter. Go online and read the transcripts of Enron traders in the energy crisis four years ago, discussing how they were manipulating the California power market in telephone calls in which they gloat about ripping off “those poor grandmothers.” Read how they talk about political contributions to politicians like “Kenny Boy” Lay’s best friend George W. Bush. Go on line and read how Citigroup has been fined $70 Million for abuses in loans to low-income, high risk borrowers – the largest penalty ever imposed by the Federal Reserve. A few clicks later, you can find the story of how a subsidiary of the corporate computer giant NEC has been fined over $20 million after pleading guilty to corruption in a federal plan to bring Internet access to poor schools and libraries. And this, the story says, is just one piece of a nationwide scheme to rip off the government and the poor.
Let’s face the reality: If ripping off the public trust; if distributing tax breaks to the wealthy at the expense of the poor; if driving the country into deficits deliberately to starve social benefits; if requiring states to balance their budgets on the backs of the poor; if squeezing the wages of workers until the labor force resembles a nation of serfs — if this isn’t class war, what is?
It’s un-American. It’s unpatriotic. And it’s wrong.
Regarding recounts…Allen ran such an incredibly bizarre campaign. He did just the worst foot in mouth trick (macaca comment—Welcome to America, Welcome to VA). This so-labeled young man (who was a political operative bandying a camera to catch some Allen misstep on the campaign trail) inadvertently hit the mother load! He also happened to be a native Virginian and graduate of UVA, so Allen’s welcoming messages were quite unnecessary, but impactful as we all witnessed. Then there was some oddity about Jewish heritage which he first denied and then…oh I’m not really sure what he did. And who can forget the accusations of his past, pentiful utterances of the dreaded “N” word. So that set him behind a wee bit. Now the stupidest campaign $hit I’ve ever seen was his denouncing his opponent Webb for writing salacious literature that inferred that his treatment of women was suspect and did VA want someone who wrote such graphic passages (I don’t know what was in them) being the caretaker of values of the state. So, to prevail in requesting a recount would only remind us further of his missteps.
“For, by contrast, the cost of shelter and food and fuel and lots of other stuff that is still quaintly considered by most of the citizenry as essential ingredients of the good life are awfully pricey and getting pricier.”
Abelson — I love this guy. He’s the only reason I’ll pick up an issue of Barron’s.
“quaintly considered” — LOL!
I find your comment “I continue to be amazed how few people see the schism . . .” to be very humorous. Just how many people make up the top 10% and who is it that you hang with regularly?
We here in the bottom half of the remaining 90%, who are experiencing the structural unemployment (and long since have ceased to be counted) voted this knowledge in the hope that the new crop of legislatures can get the message through before corporate money pollutes their life styles, memory, and ability to think.
The GOP woes are the result of a LOT of issues. You might call this ‘the issues presidency’ if it wasn’t the case that ‘the excuses presidency’ was more accurate.
The real question is what can the Democrats do about it, and maybe more importantly what are they willing to do about it?
Jobs in a global economy will diffuse from areas of high cost to areas of low cost unless the government interferes in the market. It’s the old “race to the bottom” phenomena. What form can government interference take to stabilize this phenomena? Taxes? Tarrifs? Nationalizing industries? Default on debt? Regulation? Welfare for the un and underemployed?
A forward thinker would also think about the impact of rising global standards of living on the environment and military parity. One should also ask what will happen if a $40,000 robotic butler comes on the market, or a self driving tractor-trailer? We haven’t even begun to see the impact of automation on labor and it already hurts.
Look, I have been screaming this for years now. Paul Craig Roberts has been saying it.
92,000 of any quality job and these types are worried about overheating the economy? Goldilocks? Are they crazy?
Bush the father averaged 52,000 jobs a month. Clinton’s first term, job growth was 242,000 a month. Clinton ‘s second term averaged 235,000 jobs a month.
I know that true because back then, I had one of the good jobs. Any of the defenders of the top 10% care to tell me how many times, after the revisions, has Bush exceeded Clinton’s AVERAGE?
Republicans took care of their people. The election was do you want to eliminate social security, lose medical insurance and not negotiate drug prices. Guess what? That is not what the majority wanted.
Iraq is there, but there is no draft. Does anyone know someone serving? That got drafted? No. So there is no personal sacrifice. People are mad about the war because we defeated Hilter faster than we have captured Iraq, but it is still pocket book issues.
The Bush administration loves to talk about job creation and generally the right loves to talk about the horrible economy under Jimmy Carter. So it is interesting to compare the data.
………………… TOTAL…………….….AVERAGE
…………..Carter …….Bush … Carter……..….Bush
Payroll………12.8%…….2.5%………3.2%………….0.5%
Household…10.9% …….5.6%……..2.7% ———-1.1%
So depending on exactly what comparison you make
employment growth under Jimmy carter was some 2 to 6 times that under Bush Jr.
It still comes down to the point that the Republicans are braging about having the weakest employment growth of any president but Hoover.
winjr: I love Alan too except one Monday morning when Carrington Labs opened 20 lower becasue of a hangup he had with Charlie Allen (god bless his soul). I almost had a heart attack, I know most of my crew did.
Anyway to get back on topic….. The election speaks for it’self… Democratic mayority in the House and Senate, everyone all smiles in a spirit of by-partisanship. How nice… :-) It just makes me feel so warm and fuzzy…. It almost brings tears to my eyes…. What many fail to see is that we have the makings of a perfect storm here, everything is falling into place as if some devine “secret hand” were at work. So far our friends, the Democrats have been able to sell themselves like Seinfeld, the show that’s about nothing. All smiles, Obama….? What kind of goods are they trying to sell us here? What Madison Ave. firm is packaging these goods, I’ll take Madona for president any day. As we have discussed in these posts, there are storm clouds in the horizon, you would have to be blind not to see them. I think that this is one of those storms who’s name should be “Takenoprisoners”. As ususal, our cultural heritage demands that we find a “Bad Guy” for everything that ails us. A person, or a group of persons that we can demonize. In short, I could go on forever, so let me put it this way.
Anecdotal evidence and raw data suggests to me that we are in for a “very severe recession”. Let’s just say that if I were the benficiary or facilitator of an options back dating event, if I were a high profile player in oil, media, K St., finance, defense, conspicuously rich or powerful. I would talk to my landscaper or housekeeper and kinda start inquiring about, well you know, forged documents. I just wouldn’t hang around if my hands were dirty. Things could get pretty nasty… And your not going to have a lot of people in the Beltway standing up for you…
Now mind you, I’m not directing this to anyone who reads these posts. I’m just defining a cultural and political scenario which I believe will materialize into 2008…
Best regards,
Econolicious
With profits high and real wages low, I would place the economy at the transition from recovery to expansion. Profits must decline and real wages rise to make the transition or the next recession will soon be upon us. As most are workers, the economy never feels good until expansion comes along.
Barry, S&P put out a couple of pretty interesting research reports on credit quality trends. In short, today there are nearly as many companies in S&P’s ratings universe that are investment grade as there are junk (!). S&P refers to the trend as “The 25-Year March To Junk” (or something). If anyone cares to play alone at home, take a guess what the percent was in 1992, post Bushie I’s recession? Drumroll pleeeeeeeeeease: 28%. Tada! Sure, corporate balance sheets look grrrrrreat. Suuuuure. Take the financials out of S&P’s universe, and 61% of companies are junk. That’s JUNK, biatches – capital J.
Now, Calculated Risk has an interesting tie in. In Barron’s this week there’s an article by some NY Fed econodudes detaling what defualt rates do when GDP growth slows below 2%. Guess what? Defaults go from 3+% to 9+%. I’m guessing that’s for the entire US credit universe. Hat tip to CR — thanks CR.
So let’s fast forward the housing nightmare and overlay the negative (NEGATIVE) 18% savings rate for folks in the US under the age of 42. And mortgage credit as a percent of all bank credit is….off the charts. And we think GDP in 3Q was most certainly below 1.6%, right? I mean, 26% or whatever increase in auto production sounds a bit far fetched. And the deflator was, uh, a little aggressive. But that doesn’t matter!
So maybe the tidal wave of mispriced credit will cease to avail itself to anyone with a pulse. Sooner or later the banks are gonna spook.
Finally, it’s not really fair IMO for folks to bandy jobs numbers about like they seem to. The jobs numbers from Reagan to Bushie I to Clinton to to Bushie II are apples to oranges to bananas to whatever. THAT’S A FACT. Clinton added ficticious jobs to the jobs data like crazy. I am sure the others perverted the methodology as well. It’s D.C.’s dirty secret on both sides of the aisle. Just ask John Williams. Now of course perception is reality, so I’m not wailing too hard about the recipe changing drastically over the years. But it might be good for some folks to keep that in mind.
Great post, Barry, thanks much.
It is special interest groups and corporate welfare economy.
Bush / Republican Congress borrow & spend, but American middle class pays for it.
(They borrow and spend, and we pay for it.)
Spending during the Bush Presidency has posted an average annual growth rate of 6.6% (and 7.4% since 9/11), led by a surge in defense spending! (look at defense stock valuations and 72% jump in defense outlays since 9/11)
A recurring Silicon Valley theme is how a large percentage of what few jobs are being created arrive as CHARGE jobs (Construction, Healthcare, Restaurant, Government & Education). The last couple snaphots of the data were:
June 1, 2006:
http://www.viewfromsiliconvalley.com/id228.html
October 25, 2006:
http://www.viewfromsiliconvalley.com/id274.html
Please check out our site to see, “What’s Really Happening,” in Silicon Valley.
Thanks!
http://www.viewfromsiliconvalley.com