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Economy Still Down and People Don’t Have Money To Spend


I came across this little piece in the NYPost discussing the sluggish economy and the arbitrary numbers that come out of the Labor Department. It starts off discussing the 1st Quarter GDP contraction, which stumped many “economists”, and even went so far as to possibly blame the algorithms themselves by which the government analyzes 1st Quarter numbers. Because it certainly couldn’t be domestic policies, could it?

This writer posits that we could indeed be on the bring of a recession, the definition of which is 2 straight quarters of economic contraction, and points out something fairly obvious. People just don’t have a lot of money to spend. I concur this is a major part of assessing the health of an economy, although I would argue that investment spending spurs economic growth even more than consumptive spending, which is this writers argument. Putting that aside, however, he does a decent job pointing out the concerns about the economy that we should all be paying attention to. Here’s the article and food for thought below:

“Anyone with even a quarter of a brain now understands that the US economy got off to a bad start this year.

There was an economic contraction in the first three months — when the nation’s gross domestic product fell at an annualized rate of 0.7 percent — that some quarter-brainers are still blaming on the cold weather, strikes at ports, the strong dollar, solar flares, Martian landings and (insert your own poor excuse here).

The truth: Most of these excuses are part of the problem, although I didn’t personally see or not see the Martians.

But the biggest part is that people don’t have enough money to spend. Interest from savings is down to zero, people don’t liquidate stock gains to make purchases, and job and income growth has been sketchy.
The economy isn’t doing much better in the current quarter either. The Federal Reserve Bank of Atlanta, an independent observer if ever there was one, measures growth so far in the second quarter at an annual rate of just 1.1 percent. That means growth — un-annualized — is a paltry 0.275 percent with less than four weeks left in the quarter.

It’s quite possible that we will eventually be told, after all revisions are made, that the economy met the official definition of a recession in the first half of 2015, which is two straight quarters of contractions.

But the quarter-brainers will probably get something to cheer about when Friday’s employment numbers come out. And, if they don’t strain their quarter-brains looking too deeply into the numbers, they could come away with a smile that can only happen because ignorance is bliss.

Wall Street expects the Labor Department to report that 235,000 new jobs were created in May. That would be higher than the 223,000 new jobs that — before any revisions are made — were created in April.
I’ve written before about the so-called birth/death model, which is the government’s fist-on-the-scale way of adding jobs they assume but can’t prove exist when new companies suddenly come into business in springtime.

The only problem is, entrepreneurs — especially those just starting out and risking their own capital — aren’t very daring when it’s clear to everyone that the economy isn’t doing well. So maybe, just maybe, there are more companies dying this spring than being born.

Labor must be having some second thoughts about the validity of that model since it guessed that only 213,000 phantom jobs were created by newly born companies in April. That’s way down from the 263,000-phantom-job guesstimate in April 2014.

The guesstimate for May should still be substantial. In May of 2014, Labor’s phantom jobs guesstimate added 204,000 jobs. Even if that’s been adjusted downward, this will still give a nice boost to the job growth that will be reported Friday.

There’s no guarantee, of course, that Friday’s number will be good. Any number of things could go wrong. Seasonal adjustments could hurt Friday’s number. And, of course, companies could have actually cut jobs in April. There were plenty of announcements of such cuts.

So, will Wall Street get the 235,000-job growth it expects? I say there’s a 60 percent chance Friday’s number meets or exceeds that guess.

But even if you guess right on Friday’s jobs figure, the prize could be elusive. Most folks don’t know how Wall Street will react to a better-than-expected number. If the figure is too strong, it’ll causes interest rates to rise and bond prices to fall in anticipation that the Federal Reserve’s interest rate hike is back on the table. If the number is weaker than expected, even the quarter-brainers will start worrying the economy is tanking.”

Why the Whole “Shipping Jobs Overseas” Attack is Disingenuous


Businesses are constantly make decisions about where its people need to be do their jobs. They follow the incentives to be the best company, to manufacture their product in the strongest and least intrusive way. Oftentimes that means, at some point, part of their operation moves abroad.

Opening up new foreign markets doesn’t lose jobs. Relocating work overseas typically is a reaction to proximity to supply chains, developing interests in new consumer markets, and keeping costs low for customers here — much more than the mantra that “shipping jobs overseas” is about labor costs and profitability for the business owner.

A business owner has to do what is best for his company. His competitor is doing the same thing — what he needs to do to survive. If the business policies in the United States are making it difficult to succeed and compete, that’s not the fault of the business owner. Those who wish to level this attack at business owners would do well to first take a critical eye to the policies that affect businesses here.

Businesses “ship jobs overseas” only if it needs to be done. Rarely does it have to do with the fact that labor is cheaper abroad. Blame can be placed squarely in the government imposed obligations and regulations and the pervasive anti-business climate. Businesses do not go into business to comply with government dictates — but to make things, provide a product, a service. If some of the processes to stay in business are found better abroad, the owner will follow suit in order to survive and thrive.

Obama Tries to Claim the Economy


Obama biz pic
Suddenly, Obama is everywhere talking about economic policies again. He is the mastermind behind the growth in corporate profits. He is the reason for the current stock market highs. He has single-handedly reduced unemployment to its lowest rate since 2008. He is Obama!

And yet, the middle class is repeatedly telling Obama that they feel left behind.

Why such disparity? The Administration can try to attribute these recent “successes” to Obama, but it only shows that they have a laughable cluelessness about what is really happening as a result of his economic policies.

Major corporations are doing well because they have enough size and stability to weather the storm created by Obama’s terrible business policies. This has included minimizing employment and trying to be as lean and efficient as possible. Mom-and-pops, on the other hand, have not the luxury to be as resilient.

The stock market is high only because major corporations have continued to persevere by changing the way they do business. Because of the government policies — including over-regulation and excessive taxation — companies have been forced to operate on the skinny just to survive. By doing so, profits are able to be maintained and the stock market reactive to that.

As a result of efficiency, therefore, unemployment is at its lowest percentage because there are no jobs to be attained anymore and people are just simply leaving the workforce altogether. Obama refuses to acknowledge the fact that labor participation is at its lowest rate since 1962. That is the major contributing factor to his “low” unemployment number — not because of job creation as he claims. Americans have stopped looking for work.

Thus, the middle class has the correct assessment because they have been the most devastated by Obama’s policies. Job growth and small business sustainability have been decimated by government regulation, taxation, fines, and lawsuits meddling in normal business practices. The middle class can’t get good jobs anymore, businesses have failed, growth is tepid, and everyday Americans are rightfully discouraged.

Related: “AP’s ‘Fact Check’ of Obama’s ‘Stronger Economy’ Claims Limited to ‘A Few’ Items: Two”

Lou Dobbs Refutes Obama’s Claim that the Economy Has Improved by Every Economic Measure

Are You Better Off Today? Here are the True Facts & Figures From the Obama Economy

Food Stamps Growth Soars; Jobs Stagnant


The Weekly Standard does a great analysis of the growth of food stamps in comparison to the growth of jobs during the Obama Administration. Using FNS, BLS and USDA data, they calculated that food stamp enrollment was 75 times faster than job creation. This visual puts it into perspective:

I have written on this trend before in the last few months; as unemployment has remained high, we recently passed the point where more people have been added to the dependency rolls than payrolls. This has a high impact on our crushing deficit and is directly attributable to Obama’s legacy. The article sums it up:

Welfare spending is projected to remain permanently elevated; for instance, at no point in the next 10 years will fewer than 1 in 9 Americans be on food stamps. In fact, the Administration has actively sought to boost food stamp spending and enrollment, including through a partnership with the Mexican government to advertise benefits to foreign nationals, as well as materials that teach outreach workers how to “overcome the word ‘No.’” USDA even goes so far as to argue that the program is “the most direct stimulus you can get.”

Overall, in the last four years, the United States’ gross federal debt has increased 53 percent, food stamp enrollment has increased 46 percent, and the number of employed persons has increased just 0.15 percent. This picture, however, is even more ominous than it looks. While only 194,000 net jobs have been created since 2009, the working age population has increased by approximately 5 million—almost 25 times that amount. In other words, a shrinking share of working age adults have or are even looking for a job. The real unemployment number (U-6), therefore, is 14.6 percent.

To put this month’s job creation in historical perspective, in October of 1984, 286,000 jobs were created—67 percent more—at a time when the U.S. working age population was 26 percent smaller than it is today.

Over time, these trends, if not reversed, spell economic disaster for the United States and its citizens.

Be sure to read the article in its entirety.