Quick side note. If we were still calculating GDP like we did back before the early 90s GDP would have been negative since 2004. Meaning that we would have been in a recession for 6 years straight ,which is probably pretty close to what main street has been feeling overall.

 

http://www.shadowstats.com/alternate_data/gross-domestic-product-charts

 

The 'shadowstats' chart shows discrepancies even before the early 90's. I'd be interested to understand better the 'distortions in government inflation usage' that the chart has been adjusted for.

 

My fault,

It was the unemployment stats that got altered in the mid 90s and GDP back in the 80s. Needless to say both were adjusted to have a 'happier' result.

Quick side note. If we were still calculating GDP like we did back before the early 90s GDP would have been negative since 2004. Meaning that we would have been in a recession for 6 years straight ,which is probably pretty close to what main street has been feeling overall.

 

http://www.shadowstats.com/alternate_data/gross-domestic-product-charts

 

This confuses me.  Regardless of how we calculate GDP, there still has to be a constant, no?  Meaning, if you define a recession in traditional terms, how can using a different calculation for GDP mean that we are in a recession now when GDP is still rising month over month (albeit veeeeery slowly).  Forgive my ignorance in economics.

 

Back in the 80s they decided to change that calculation.

 

From the Shadowstats site.

 

"The SGS-Alternate GDP reflects the inflation-adjusted, or real, year-to-year GDP change, adjusted for distortions in government inflation usage and methodological changes that have resulted in a built-in upside bias to official reporting."

Do they have an explanation in English?

If not mistaken, the government changed inflation measures by excluding many core products to make it appear much lower than it actually is. By ignoring inflation on many of the items Americans most commonly purchase, they argue inflation is much lower than it actually is.

If not mistaken, the government changed inflation measures by excluding many core products to make it appear much lower than it actually is. By ignoring inflation on many of the items Americans most commonly purchase, they argue inflation is much lower than it actually is.

 

Items not included in core inflation anymore are gas and food since they are such minor items to our society.

If not mistaken, the government changed inflation measures by excluding many core products to make it appear much lower than it actually is. By ignoring inflation on many of the items Americans most commonly purchase, they argue inflation is much lower than it actually is.

 

Items not included in core inflation anymore are gas and food since they are such minor items to our society.

 

The pretext was that the prices of those items are so volatile (seasonal, subject to speculation, etc.) that they were causing "inaccurate" measurements.

 

The problems, of course, are that (a) volatile prices or not, ordinary citizens actually need those things, so if volatility exists, you might as well measure it, and let people get used to the official readings jumping around a little bit--most people would understand that, since they'd be seeing the prices of gas and food jump around in real life, anyway, and (b) while the volatility is real, there is still a long-term upward trend line in both categories faster than "core" inflation.

^Not my field of expertise, but I don't think core inflation purports to track consumer costs- that's what CPI is for- so I don't know why those are really problems.  Core inflation is computed mainly to strip out some of the noise when monitoring monetary policy, no? 

 

The main critique of inflation measures I'm aware of is that they don't take changes in product quality into account.  I think color TVs were the stock example (showing how old the critique is): how should you compare the cost of a color TV against the cost of the black and white models available a few years earlier?

Add in the shipping data that has been coming out and its becoming clear a noticeable slowdown in the economy is taking shape. How deep this becomes or how long it will last is now becoming the question. The ISM is a major leading indicator gauge.

 

ISM manufacturing gauge falls to two-year low

 

"The Institute for Supply Management’s manufacturing gauge in July dropped 4.4 points to 50.9%, the worst reading since July 2009 and barely staying above the 50% no-change line."

 

"The new orders index fell into contractionary territory for the first time since June 2009, and indexes for prices and employment in particular saw big drops. The prices index has dropped a stunning 26.5 points over the past three months. The employment gauge fell 6.4 points to 53.5%."

 

"Similar gauges released across the globe pointed to deteriorating if not contracting conditions."

http://www.marketwatch.com/story/ism-manufacturing-gauge-falls-to-two-year-low-2011-08-01

 

China manufacturing activity shrinks in July: HSBC

 

"HONG KONG (MarketWatch) — China’s manufacturing activity contracted slightly in July, signaling a deterioration in the operating environment at the nation’s factories, as tighter monetary conditions weighed further on the sector, according to data released Monday by HSBC."

http://www.marketwatch.com/story/china-manufacturing-activity-shrinks-in-july-hsbc-2011-07-31

The EU doesn't have the resources to bail both of these out, if they end up needing it. Plus, I don't think the German's have the political will power to even try.

 

Italy, Spain feel heat as debt crisis is reignited

Global growth worries put pressure on officials as turmoil increases

 

"A combination of growth worries and risk aversion sent Italian and Spanish bond yields soaring to euro-era highs on Tuesday, freshly reigniting fears the euro-zone’s debt crisis could engulf two of the major economies in Europe."

 

“The potential negative impact on U.S. growth resulting from the debt-ceiling accord built on signs of weakness across factories around the world and served as a catalyst to [focus] attention back on to the plight of peripheral euro-zone economies,” said Andrew Wilkinson, market strategist at Interactive Brokers in Greenwich, Conn."

http://www.marketwatch.com/story/italy-spain-feel-heat-as-debt-crisis-is-reignited-2011-08-02

QE3 where are you?

 

Rate of service-sector growth slows in July

New orders fall to lowest level in almost two years

 

"WASHINGTON (MarketWatch) — Growth in service-sector businesses in areas such as retail, health care and banking slowed in July, dovetailing with a spate of data showing a weaker U.S. economy, according to a survey of senior executives."

http://www.marketwatch.com/story/rate-of-service-sector-growth-slows-in-july-2011-08-03

 

Job cuts surge 60% to 16-month high

 

"WASHINGTON (MarketWatch) -- The number of announced job cuts surged 60% to a 16-month high of 66,414 in July, according to the consultancy Challenger, Gray & Christmas. Merck & Co., Borders, Cisco Systems, Lockheed Martin and Boston Scientific accounted for 57% of the total, or 38,100 positions. "What may be most worrisome about the July surge is that the heaviest layoffs occurred in industries that, until now, have enjoyed relatively low job-cut levels, including pharmaceuticals, computer and retail," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas."

http://www.marketwatch.com/story/job-cuts-surge-60-to-16-month-high-2011-08-03

^Good lord. :oops:

WHEN IS THIS GOING TO END!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I'd guess sometime near the end of the decade the vibe of the economy will change. We have come out of financial bust induced depressions before but it often takes a decade or more for the psychology to really turn around.

WHEN IS THIS GOING TO END!

 

Who ever said that it is going to end? There is no law that says it has to. You may want to get used to it.

I am not sure it will ever 'end'. This is the new reality, masked for a decade by irresponsibly loose fiscal and regulatory policies in many of the largest economies. It is possible for a few ambitious workers to out-produce many, many others, and too many workers are stuck in a mindset of mid-20th century education/compensation relationship where one person can guarantee a good job simply by being a fairly hard worker and not screwing up too badly. The government is asleep at the wheel, deadlocked by bitter divisions between too much deregulation and too much protectionism, and a political climate that is highly destructive and inefficient.

 

Free trade has any good features, but one that isn't so good is that human capital is inevitably going to become much, much cheaper as educated people from other countries take advantage of opportunities to produce, market, and sell products and services at much lower prices - and, eventually, similar quality. The question is where the 'new normal' will be - will wages in China rise so far that America can actually compete in basic manufacturing again? Will prices fall so much that a lower-paying job is no longer an impossible burden for an American family? Or will soaring health insurance and education costs wipe out all the gains in one fell swoop?

 

I'm not optimistic. Wealth is increasingly concentrated in the hands of the very rich. Even Henry Ford knew that his workers had to be able to afford his product if he was going to be able to market the Model T to the common man. Nowadays, the common man can't afford much of anything - and that dramatically retards economic growth over the long term.

The internet is killing our economy too. Book stores are closing down. Retail is closing down. We are just too lazy as a society and rather support an online outfit from California than your local shops.

We have come out of financial bust induced depressions before but it often takes a decade or more for the psychology to really turn around.

 

I think the "Panic of 1873" lasted pretty much through much of 1870s?  Or did you have another financial collapse in mind.  The 1870s saw complaints about the "army of tramps"...possibly the mass unemployed of that era on the road and rails looking for work.

 

We might have been in a long term slow recovery in the 1940s & early 1950s, too, if not for the stimulus of WWII.

I agree that outsourcing and offshoring have had a big play in destroying work.  There's enough evidence of that here in the Dayton area.  That's why all these Delphi plants shut down...the work was sent to Mexico or overseas.

 

The internet is killing our economy too. Book stores are closing down. Retail is closing down. We are just too lazy as a society and rather support an online outfit from California than your local shops.

 

...the shrinking of category killers was written about somewhere.  The disappearance of places like Borders and Circuit City, etc.  That sales are concentrating into just a handful of big retailers. 

 

I think local stuff sort of survives as boutique retail, specialty store things or specialty shopping where people conciously shop local as a choice or 'statement'.  Sort of an expansion of the "Localvore" foody thing, but into other types of products.  ...this is sort of an upper middle class or middle class lifestyle choice thing, though....

 

@@

 

But yeah it looks like we are heading into a second slowdown with these leading indicators that Ragerunner has posted.  It should also be noted that the jobs that are (were?) being created are fairly low-paying ones, so not much boost for the consumer economy or housing market that way...

 

 

 

The question is where the 'new normal' will be - will wages in China rise so far that America can actually compete in basic manufacturing again?

 

Supposedly the Germans are able to compete in this global marketplace somehow, with wages higher than Chinas.  Wonder how they do it?  Some form of protectionism or do they make high-end specialty stuff and export it?

 

 

Will prices fall so much that a lower-paying job is no longer an impossible burden for an American family?

 

...this is a good point.  Maybe housing and food prices will come down to Chinese/Asian levels for US workers?

 

BTW, the Chinese seem to have industrialized and urbanized without turning their cities into gigantic shantytowns like they have in Mexico.

 

 

^ The Chinese Government has gone out of their way and pulled out all the stops to build tens (hundreds?) of millions of apartment units.

The internet is killing our economy too. Book stores are closing down. Retail is closing down. We are just too lazy as a society and rather support an online outfit from California than your local shops.

 

This assumes that the Internet is somehow not part of our economy.  I see it as the economy shifting to the Internet, not the Internet killing it.  In fact, many of the largest online retailers in the world are American: Amazon, Dell, eBay, etc.  Amazon and eBay also offer the opportunity to local merchants to partner with them in order to take their sales global in a hurry--the equivalent of being able to instantly set up a kiosk inside a larger retailer in brick-and-mortar world.

I am not sure it will ever 'end'. This is the new reality, masked for a decade by irresponsibly loose fiscal and regulatory policies in many of the largest economies. It is possible for a few ambitious workers to out-produce many, many others, and too many workers are stuck in a mindset of mid-20th century education/compensation relationship where one person can guarantee a good job simply by being a fairly hard worker and not screwing up too badly. The government is asleep at the wheel, deadlocked by bitter divisions between too much deregulation and too much protectionism, and a political climate that is highly destructive and inefficient.

 

With you here.

 

Free trade has any good features, but one that isn't so good is that human capital is inevitably going to become much, much cheaper as educated people from other countries take advantage of opportunities to produce, market, and sell products and services at much lower prices - and, eventually, similar quality. The question is where the 'new normal' will be - will wages in China rise so far that America can actually compete in basic manufacturing again? Will prices fall so much that a lower-paying job is no longer an impossible burden for an American family? Or will soaring health insurance and education costs wipe out all the gains in one fell swoop?

 

The truth is probably somewhere in between.  I see this as one of the downsides to the American-exceptionalism mythos that pervades much of American culture--we tend to think that we still deserve more than those in other countries even when those others have modernized a great deal and are beginning to approach our productivity levels.  Protectionist measures can only paper over this reality; they cannot change it.

 

Wages in China have already begun to rise, to the point where manufacturers have begun to branch out once more, now looking at Southeast Asia (Vietnam, Indonesia, Thailand, etc.) for unskilled manufacturing labor as well.  In addition, while China is massive in terms of land, the best land for manufacturing operations, particularly for export-oriented companies (i.e., stable land nearest the coasts) is beginning to become harder to come by as well.

 

In addition, automation continues to become less and less expensive, and we may well reach the point where even Chinese labor cannot compete with the efficiency of technology in basic manufacturing.

 

I'm not optimistic. Wealth is increasingly concentrated in the hands of the very rich. Even Henry Ford knew that his workers had to be able to afford his product if he was going to be able to market the Model T to the common man. Nowadays, the common man can't afford much of anything - and that dramatically retards economic growth over the long term.

 

Seriously?  The "poor" in modern America <a href="http://www.nationalreview.com/corner/272081/modern-poverty-includes-ac-and-xbox-ken-mcintyre">can and do afford a lot more than is widely reported</a> (see also <a href="http://www.nationalreview.com/articles/272689/plugged-poverty-robert-rector"> here</a>), particularly by those whose primary agenda is increasing the percentage of national income controlled and directed by the government.  This is precisely because of the phenomenon that you noted above: prices, particularly relative to the quality of products, have fallen significantly for most consumer amenities.  The big middle-class expenses of health care and education are the exception, not the rule, and there is reason to believe that education might be in for something of a radical shock on that front in the next decade or two.  (At the moment, tuition buys you a credential more than it buys you an education.  That is an unstable situation ripe for some free market creative destruction at the right place and time.)

^one of the best posts I've ever read on this board

(At the moment, tuition buys you a credential more than it buys you an education.  That is an unstable situation ripe for some free market creative destruction at the right place and time.)

 

Really? How do you figure? Anecdote: I had to take an Anatomy and Physiology sequence last year. The private online college choice was $9,000. The private brick and mortar choice was $5,400. The public community college choice was $1,250.

 

Where is the pressure on that market? It's for the public to go up, as a consequence of government austerity. Not for the private to go down.

 

Extrapolating beyond that trend is impossible. What happens if the whole thing just collapses? Who knows. You really let your ideology lead you to strange places, man.

Since it would have been posted already if the numbers were gloomier....

 

Unemployment aid applications tick down to 400,000

 

WASHINGTON -- The number of people seeking unemployment benefits dipped last week, a sign the job market may be improving slowly.

 

The Labor Department says that applications for unemployment benefits edged down 1,000 to a seasonally adjusted 400,000. That's the lowest level in four months.

 

................................

 

Applications have been at or above 400,000 for 17 weeks. They fell in February to 375,000, a level that signals healthy job growth. They stayed below 400,000 for two months, but applications then surged to an eight-month high of 478,000 in April and have declined slowly since then.

 

http://www.cleveland.com/business/index.ssf/2011/08/unemployment_aid_applications_2.html

Since it would have been posted already if the numbers were gloomier....

 

Unemployment aid applications tick down to 400,000

 

WASHINGTON -- The number of people seeking unemployment benefits dipped last week, a sign the job market may be improving slowly.

 

The Labor Department says that applications for unemployment benefits edged down 1,000 to a seasonally adjusted 400,000. That's the lowest level in four months.

 

................................

 

Applications have been at or above 400,000 for 17 weeks. They fell in February to 375,000, a level that signals healthy job growth. They stayed below 400,000 for two months, but applications then surged to an eight-month high of 478,000 in April and have declined slowly since then.

 

http://www.cleveland.com/business/index.ssf/2011/08/unemployment_aid_applications_2.html

 

I think 400,000 people needing to apply for unemployment last week is gloomy enough.

But you didn't find it gloomy enough to post in your sky is falling / all is lost thread.  So, c'mon, it can't be THAT bad ;)

But you didn't find it gloomy enough to post in your sky is falling / all is lost thread.  So, c'mon, it can't be THAT bad ;)

 

Sorry I let you down. I live in the west and I am two hours behind you on the east coast. I usually don't post until around 11:00 your time or so. But thanks for posting the info about all the newly unemployed people in America. I am sure after they went to the unemployment office is was off to Disney World after they stopped for a new car to drive to Florida in. This should juice the economy so I have less 'gloomy' news to report in the future.

(At the moment, tuition buys you a credential more than it buys you an education.  That is an unstable situation ripe for some free market creative destruction at the right place and time.)

 

Really? How do you figure? Anecdote: I had to take an Anatomy and Physiology sequence last year. The private online college choice was $9,000. The private brick and mortar choice was $5,400. The public community college choice was $1,250.

 

Where is the pressure on that market? It's for the public to go up, as a consequence of government austerity. Not for the private to go down.

 

Extrapolating beyond that trend is impossible. What happens if the whole thing just collapses? Who knows. You really let your ideology lead you to strange places, man.

 

Oh, I don't know, maybe because <a href="http://www.eschoolnews.com/2010/08/10/bill-gates-technology-can-lower-college-tuition-to-2000/">Bill Gates was talking about it last year</a>.

 

Also, I can't link to it from where I am, but there is a very interesting TED talk by Sugata Mitra (focused on younger children, not college age kids) that I would recommend regarding the use of technology to help children self-teach.

Since it would have been posted already if the numbers were gloomier....

 

400,000 is bad, particularly in this many consecutive weeks. There is nothing healthy about those numbers. Dammit, you just added to the gloom!  :oops:

The currency war is really starting to heat up. US intervenes to keep its currency rates low, then Japan responses, then the Euro responses, China refuses to let their currency be valued correctly, now the Swiss Franc is in play. With the noticeable international slowdown in the manufacturing sectors, there is less and less demand for goods to be sold, which is increasing the need to keep a currency low, to make your country's goods competitive on shrinking world market.

 

Yen, euro plunge on Japan intervention, ECB

Spanish and Italian debt back under scrutiny, adding to worries

 

"NEW YORK (MarketWatch) — The U.S. dollar surged the most since September against Japan’s yen Thursday, rallying after Tokyo authorities intervened and the nation’s central bank stepped up its monetary easing.

 

The euro also fell further against the dollar in early U.S. trading after European Central Bank chief Jean-Claude Trichet said it would conduct more cash operations to provide liquidity to banks."

http://www.marketwatch.com/story/yen-slides-after-japan-intervenes-to-curb-its-rise-2011-08-03

 

Swiss central bank battles to halt franc’s rise

‘Massively overvalued’ franc hurts economy, SNB says; euro surges

 

“Effective immediately, the [swiss National Bank] is aiming for a three-month Libor as close to zero as possible,” the central bank said in a statement."

http://www.marketwatch.com/story/swiss-central-bank-battles-to-halt-francs-rise-2011-08-03

 

Can they go lower than zero? If not then what is next for everyone. Protectism, higher tariffs?

The Dow is down 350.

(At the moment, tuition buys you a credential more than it buys you an education.  That is an unstable situation ripe for some free market creative destruction at the right place and time.)

 

Really? How do you figure? Anecdote: I had to take an Anatomy and Physiology sequence last year. The private online college choice was $9,000. The private brick and mortar choice was $5,400. The public community college choice was $1,250.

 

Where is the pressure on that market? It's for the public to go up, as a consequence of government austerity. Not for the private to go down.

 

Extrapolating beyond that trend is impossible. What happens if the whole thing just collapses? Who knows. You really let your ideology lead you to strange places, man.

 

Oh, I don't know, maybe because <a href="http://www.eschoolnews.com/2010/08/10/bill-gates-technology-can-lower-college-tuition-to-2000/">Bill Gates was talking about it last year</a>.

 

Also, I can't link to it from where I am, but there is a very interesting TED talk by Sugata Mitra (focused on younger children, not college age kids) that I would recommend regarding the use of technology to help children self-teach.

 

Bill Gates' wife also was quoted by Terry Gross saying that she thinks every American should get a Bachelor's degree.

 

Right.

The Dow is down 350.

 

While some of this is about our ugly economic data, there is plenty of concern coming out of Europe right now.

 

- Spain just canceled their Aug 18th auction.

- Italy may remove itself for all auctions for the rest of the year.

- Italian prosecutor just seized Moody and S&P documents (as if it is their fault they have to much debt and can't pay it off).

- Italian and Portugese bonds are in a sell off right now.

 

Basically Italy and Spain are closing in on being the next Greece or Ireland. These actions may help kick the can down the road but it will not change the underlining issues, to much debt, not enough growth and in Spain's case the mother of all housing bubbles that have busted.

 

The Dow is down 350.

 

I know.  The past 7-10 days have been some of the worst I've seen since 2009.  I had just hit a major financial milestone I'd set for myself, too; looks like I'll have to reach it a second time.

The internet is killing our economy too. Book stores are closing down. Retail is closing down. We are just too lazy as a society and rather support an online outfit from California than your local shops.

 

This assumes that the Internet is somehow not part of our economy.  I see it as the economy shifting to the Internet, not the Internet killing it.  In fact, many of the largest online retailers in the world are American: Amazon, Dell, eBay, etc.  Amazon and eBay also offer the opportunity to local merchants to partner with them in order to take their sales global in a hurry--the equivalent of being able to instantly set up a kiosk inside a larger retailer in brick-and-mortar world.

 

Think of the internet as directly comparable to millions of robots. Selling stuff to overseas buyers (even Canadians) online is a gigantic hassle for a small operation due to customs and scams.

 

edit: more problems with auto spell check

Unemployment rose in nearly all US cities

Christopher S. Rugaber, AP Economics Writer, On Wednesday August 3, 2011, 1:50 pm EDT

 

WASHINGTON (AP) -- Unemployment rates rose in more than 90 percent of U.S. cities in June, mirroring a national slowdown in hiring.

 

The Labor Department said Wednesday that unemployment rates rose in 345 large metro areas. They dropped in 20 cities and were unchanged in seven. That's worse than May, when rates rose in only 210 cities. And it is a sharp reversal from April, when unemployment rates fell in nearly all metro areas.

 

http://finance.yahoo.com/news/Unemployment-rose-in-nearly-apf-3394283988.html?x=0

It looks like either we're in a recession right now or we're entering another one:

 

Dow Jones industrial average closes down 513 points, worst drop since October 2008

AP – 10 mins ago

 

NEW YORK (AP) — The stock market is finishing its worst day since the financial crisis.

 

The Dow Jones industrial average plunged more than 500 points Thursday. Investors are concerned that the U.S. economy will enter another recession and that Europe's debt problems are not closed to being solved. Major stock indexes fell more than 4 percent.

 

The Dow is closing with a loss of 513 points, or 4.3 percent, to 11,384. It was the worst day for the Dow since October 22, 2008. The S&P 500 is down 60, or 4.8 percent, to 1,200. The Nasdaq is down 137, or 5.1 percent, to 2,556. Twenty stocks fell for every one that rose on the New York Stock Exchange. Volume was very heavy at 7.5 billion shares.

 

http://news.yahoo.com/dow-average-plunges-513-worst-drop-since-2008-201031115.html

"Dow Jones industrial average closes down 513 points..."

 

No real surprise here (would have been down a couple of hundred points yesterday except for some late-day rally that was suspicious in its timing).  So basically, down 200 yesterday and another 300 today.

 

The Dow has been way over bought for some time, and was due for a nice corection.  Everyone knew the US economy was slowing down.  However, major US companies get a lot, if not the majority of, their profit from overseas.  With Spain and Italy having troubles, that just high-lights that the global economy is not as strong as people thought.  A lot of the US companies' profits came from exchange rate profits from a falling US dollar.  Looks like the dollar may not continue to fall so much.  So there goes a lot of the US profit that was baked into future earnings.

 

Another thing that Wall street was counting on is that the excess liquidity being pumped into the US economy will go into stocks.  Basically, it will be parked in a real asset (real in the sense that it is revenue producing and can be sold in the future).  So I have to wonder if Wall Street knows something we don't?  The economic slow-down certainly calls for Q3.  However, maybe Wall Street insiders have learned there will be no Q3? If not, that would take some of the air out of the stock market as well.  Just a thought.

 

I've said several times that I think there is a floor to how low the US economy can go.  People need basic stuff to keep living.  I am thinking that floor may be around the zero growth stage of the US economy.  Just my thinking this week.

 

 

I think there is a bit of a hangover that comes from all the debt limit attention of the last couple months. A lot of folks were sitting on their hands, they just looked up and it looks like Euro is going to hell in 10 Euro basket.

Every time I hear today about the rising dollar hurting corporate earnings I chortle just a bit.  If I hadn't paid this thread any attention I wouldn't have this laughter in my life, so thank you.

I think we are going to see a complete downshift in the average american lifestyle. It's going to look more like the Depression than the Reagan era. More people in apartmetns, more houses going back to a single family income, going down to 1 car, or in some cases, no car, and a lot less junk.

Well, at least the jobs data was "good". It wasn't enough to make a real dent, but it was better than June. Unemployment dropped a little due to people leaving the labor force (which has been happening for two years now). The bigger news is that the private sector is now doing all the hiring. This proves that as government cuts, the private sector grows. Public sector payrolls are now falling. The private sector is picking up the slack. Could this be a seismic shift in the United States economy? Are we finally getting off our addiction to the public sector?

 

July payrolls rise soothes recession fears

On Friday August 5, 2011, 9:50 am

By Lucia Mutikani

 

WASHINGTON (Reuters) - U.S. job growth accelerated more than expected in July as private employers stepped up hiring, easing fears the economy was sliding into a fresh recession.

 

Nonfarm payrolls increased 117,000, the Labor Department said on Friday, above market expectations for an 85,000 gain. In the same report, the count for May and June was revised to show 56,000 more jobs added than previously reported.

 

The unemployment rate dipped to 9.1 percent from 9.2 percent in June, but that was because discouraged job-seekers gave up the hunt.

 

...All the gains in non-farm employment in July came from the private sector, where payrolls rose 154,000 -- an acceleration from June's 80,000 increase and more than the 115,000 expected by economists.

 

FULL ARTICLE

http://finance.yahoo.com/news/July-payrolls-rise-may-soothe-rb-2527080977.html?x=0&.v=4

^Mildly impressive, especially considering the losses in the public sector last month.

The general consensus I'm getting is that things aren't good, but aren't as bad as people fear either. The 'experts' think if we go into recession its not going to be a repeat of 2008-09. Remember then banks were on the verge of callapse where as now they're sitting on trillions. Also big businesses were out of cash to. This time they sould be able to ride out a slowdown with out the employment carnage of fall and winter 08-09. But then there's still the question of what's going to happen to the millions still out of work from 2008 as well as the various Federal, state and local governments workers being let go.

While its better than last month I think these two points show the amount of unemployed people went up in July not down. We need 125,000 just to absord new incoming workforce, so there is a negative 8,000 and then 200,000 more unemployed people gave up or no long can collect unemployment. This makes a lot of since once you realize we are running abut 400,000 new people a week going onto the unemployment list. In a normal economy were there is a balance between all these numbers the report would be more valuable, but during these economic times it captures a distorted picture of what is actually going on, at least on Main Street.

 

U.S. economy gains 117,000 jobs in July

Private sector adds 154,000; unemployment rate falls to 9.1%

 

"The rate of hiring in July wasn’t even enough to absorb the natural increase in the labor force, which requires about 125,000 new jobs a month."

 

"With jobs in scarce supply, nearly 200,000 workers dropped out of the labor force last month. The percentage of people considered part of the labor force who actually have jobs fell to 58.1%, the lowest level in 28 years."

http://www.marketwatch.com/story/us-economy-gains-117000-jobs-in-july-2011-08-05?pagenumber=1

 

This growing unemployment is show in the BLS data.

In June there were 22.312 million people unemployed in the US.

In July there were 22.408 million people unemployed in the US and increase of almost 100,000 new unemployed people.

http://www.bls.gov/news.release/empsit.t12.htm

The general consensus I'm getting is that things aren't good, but aren't as bad as people fear *hope* either.

 

That's more like it.

But then there's still the question of what's going to happen to the millions still out of work from 2008 as well as the various Federal, state and local governments workers being let go.

 

They'll have to compete in the private sector.

I think we are going to see a complete downshift in the average american lifestyle. It's going to look more like the Depression than the Reagan era. More people in apartmetns, more houses going back to a single family income, going down to 1 car, or in some cases, no car, and a lot less junk.

 

While that might represent a decrease in standard of living as we currently measure it, that was not what the Depression looked like.  The Depression involved significant migrant, homeless populations and shortages of food, clothing, and shelter.  The iconic image of the Depression isn't people living in apartments, it's people living in "<a href="http://en.wikipedia.org/wiki/Hooverville">Hoovervilles</a>" (well, that and the NSFW final scene from the Grapes of Wrath).  Much as I'm frustrated by the Democrats and Obama's allegiance to corrupted Keynesian thinking, there are not going to be "Obamavilles."

 

As noted in the links I posted above (and the links in those links), the poor may have less junk than the rich, but the vast majority have many of the same modern amenities that we associate (or at least used to associate) with a middle-class standard of living.

 

We may end up seeing the advent of new cultural norms to save money that are currently not particularly widespread.  For example, it may become more common for those who own a residence (particularly a larger one) to have a boarder; that could easily be a consequence of having (a) large houses, (b) small households in those large households (meaning that there are a good number of spare bedrooms out there), and © financial pressure on those homeowners.  So?  This would be a nuisance to homeowners who would prefer the complete privacy of their own space, and so it would be something of a reduction in living standards, but it would hardly be the end of the world.

 

For another example, more people may carpool or rideshare.  (This effectively turns the spare seats in one's car into an income-producing asset somewhat like having a boarder turns one of the spare bedrooms in one's house into an income-producing asset.)  Also not the end of the world.

 

The list goes on.

 

Another one that's somewhat more controversial that hasn't gotten the level of attention that healthcare and education have is child care expenses.  At a somewhat less controversial level, some people leaving the workforce to take care of children may not hurt their family's standard of living as much as the loss of gross income might imply because of the "imputed income" factor, i.e., the different expenses that can be reduced or eliminated by having someone at home.  At a more controversial level, even with respect to two-income households in which the income of both parties is simply reduced, people may be able to save more on childcare than popular wisdom (and marketing) suggest (economist Byran Caplan recently released <a href="http://www.amazon.com/Selfish-Reasons-Have-More-Kids/dp/046501867X/ref=sr_1_1?ie=UTF8&qid=1312559392&sr=8-1">a book tangentially touching on this subject</a> by noting the comparatively minor effects that a lot of helicopter parenting has on long-term success).

 

Bottom line: If we have to give up a little bit of space or time in order to make ends meet, that still doesn't put us in the world of the Depression.  If we have to shop at Aldi instead of Whole Foods, that still doesn't put us in the world of the Depression.  Even if we have to give up expensive child care and private schools and such, that still doesn't put us in the world of the Depression.  Even if we can't afford tens or hundreds of thousands or millions per person in cutting edge medical treatments that didn't even exist in the '90s, much less the '30s, we're still not in the world of the Depression.

^The renting out of empty bedrooms has been the norm for quite some time in healthy housing markets like San Francisco. No matter how rich, most of the rich people who own single-family homes rent out bedrooms to people unrelated to them.

 

The reason you aren't seeing "Hoovervilles" popping up in dire places like Detroit and Toledo this time around is because they have thousands upon thousands of abandoned homes. Entering the Great Depression, Detroit and Toledo had a housing shortage. It was a completely different housing situation. That's the silver lining in having endless abandoned housing stock. It keeps some of the homeless off the streets. We just have to figure out a way to stop the arsonists from burning them all down.

 

Much as I'm frustrated by the Democrats and Obama's allegiance to corrupted Keynesian thinking, there are not going to be "Obamavilles."

 

Again, the reason for this is due to the fact that the hardest-hit cities (Detroit, Toledo, Flint, Youngstown, etc.) have tons of abandoned housing stock left over from their previous economic collapses. If the economy ever crashes in New York City like it did in Detroit and Toledo, there will be Obamavilles. That's the thing about this economic collapse. It mainly hit hard in areas that already were already hit the hardest. The housing glut is localized to the Rust Belt and Sun Belt (though at least the Sun Belt still has population growth). No doubt homeless have moved into some of these properties. There is not much empty stock available in healthier urban markets. If they do end up getting hit Detroit-level, you might be eating your own words. While I seriously doubt New York City could ever end up with an economy like Detroit or Toledo, I never say never. The auto collapse probably won't be the only collapse on that level. Americans tend to have a naive "Detroit can't happen to us" attitude. A lot of people outside the Rust Belt have their blinders on and are pretty shocked the first time they visit and see the devastation in person. Personally, I think what happened to the auto industry is just a preview of what's to come.

 

Maybe Wall Street finally collapses (and doesn't get bailed out again)? New York's strength is that it caters to the rich, which is the only target market where sales are increasing, but what if the rich leave America?

 

Edit: when talking Sun Belt, I'm talking the worst markets (Vegas, Fresno, etc.), not the region as a whole. A lot of the strongest job markets are still in the Sun Belt (most of Texas). There are plenty of Sun Belt cities that are doing much better than the core of the Rust Belt.