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Dean Baker On Recent Economic Data
This article is from Stone Street Advisors
So goes Dean Baker's comments on the most recent BLS jobs report.
While virtually every media outlet I follow (pretty much all of them
that matter, and then some) hailed the report as positive for the
economy, anyone who actually went through the numbers (Calculated Risk did this as well,
sans the colorful rhetoric) can see that all is not nearly as rosy as
politicians, the media, and the Fed would have us believe (emphasis
mine, as usual):
Those who know arithmetic were a bit more sceptical. If
the economy sustained March's rate of job growth, it will be more than
seven years before we get back to normal rates of unemployment.
Furthermore, some of this growth likely reflected a bounceback from
weaker growth the prior two months. The average rate of job growth over
the last three months has been just 160,000. At that pace, we won't
get back to normal rates of unemployment until after 2022.
That's a long time to make ordinary workers suffer because the folks who run the economy are not very good at their job.
Again, labor force participation (not to mention birth/death
adjustments) - the denominator in the unemployment rate - was
responsible for a not-insignificant part of the -0.1% change m/m in the
headline unemployment rate, to 8.8%, almost 1% decline from a year
prior. And this is only talking about one little report. When we look
around at some other numbers, things begin to look even less pleasant:
Remarkably, as the mixed basket of economic news in the
March employment report was being celebrated, a major piece of
unambiguously bad news was almost completely ignored. The commerce
department released data on construction spending for February (pdf).A decline of 1.4 % in spending in February, coupled with sharp
downward revisions to the data for the prior two months, left nominal
spending in February 6.2% below its November level. The slump in
construction is virtually certain to be a major drag on growth in the
first quarter. The big culprit this time is the non-residential sector –
as a result of the bursting of the bubble in this sector, coupled with
a fading out of stimulus spending on government projects.
Gasp! You mean to tell me ARRA/TIGER funds and projects are running-out?!?!
I'm shocked, SHOCKED! I mean, don't get me wrong, I appreciate that so
many local/county roads have been re-paved around New Jersey (and
elsewhere, it seems), but who the heck in their right mind thought
financial, productivity, etc gains from these intentionally-temporary
projects were sustainable???? Alas, it gets worse:
Other recent economic news also suggests that the
economy's momentum is more likely to slow than accelerate in the months
ahead. Nominal wage growth has been virtually flat the last two
months. With food and gas prices rising sharply, this means that real
wages are falling, leaving workers with less money to spend.House prices are again falling rapidly, having declined at the rate of 1.0% a month for the last three months. If
this pace of decline continues, by the end of the year, homeowners
will have lost more than $2tn in equity compared with peak hit in the
summer of 2010. This loss of housing wealth implies a reduction in annual consumption of $120bn.
Just today, home-builder KB Homes reported less-than-stellar results,
more than doubling its net loss from a year ago, leading the Company to
say: "there is still uncertainty as to when a sustained housing
recovery may occur.” But hey, at least the rest of the stock market is
generally up, right?
In short, there is little basis for last Friday's
celebrations about the economy. The February jobs report would have
been mediocre if the economy were already at normal rates of
unemployment. In the context of a badly depressed economy, it is
pathetic. We should be seeing jobs growth at two or three times this
rate.But the real bad news is that it is more likely to get worse than
better. Yet again, the business press is missing the story.
I don't really agree with Baker's normative language that we "should
be" seeing increased job growth, as it looks like the basis for that
statement is from previous recessions/depressions, all of which had
different characteristics than our most recent unpleasantness.
Regardless, I think attitudes are broadly too optimistic, regardless of
where one looks. Optimism may be human nature, but for a
trader/investor, a healthy dose of skepticism is often the
differentiating factor between riding a bull-market-rally and delivering
sustainable results in both up and down markets.
--The Analyst
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The Patriot Act was for us - what a waste. 911 was a Mossad Bush/Cheney neocon operation. For those of you who are too lazy to do the research and figure it out for yourself -screw you. Spare me your ignorant lectures and rantings.
By the way an eminent Reagan aide PC Roberts says that metal structures cannot 'pancake' without 'outside' help and that govt. opacity and reluctance to investigate helps feed the 'conspiracy' thread. This is a bonafide conservative exec. now a mutant and hostile to US policy since GWB days, who has openly questioned the 'official' 9/11 position; it adds consistency to the file..
Any 0911 conspiracy KOOKS get an automatic JUNK from me.
Why do you think Homeland security and all the intrusive technology and laws are on the books. It's because they know that the financial game is coming to an end and alot of people will be mad when they lose all their money and/or benefits. They are preparing for that day so when it happens they will be ready to lock up and get rid of people who are troublemakers.
The next President, if not the current Keynesian (or Kenyan) will be just another puppet, along with an enabling Congress. The only hope we have escape abject slavery by 2020 is have another Revolution. Unfortunately most of the protest talk these days is being ginned by the uber Left with an agenda no different than that of the Masters of the Universe; i.e a totalitarian world government.
The next elongated dip in housing will surely shake out the " should be " crowd. They will then convert to the " why didn't we see this coming " theme.
I think you're far more optimistic and/or less cynical than I, my friend...
You think Krugs or other pro-stimulus-at-any-cost Economists/politicians/hybrids are going to admit defeat and swallow their pride that easily? I don't.
Dean, like Krugman and others believe that without constant stimulus from monetary and fiscal policy we will not grow fast enough. They are right that without the "gas" we won't grow.
Without compounded real growth of at least 3% we have not one chance in hell of paying off on Social Security or Medicare. Dean and PK love these programs. So it is natural for them to support the "Growth at any Cost" plan of more debt/deficits/QE/Zirp.
Somethings gotta give....
I'm certainly no fan of Krugs & Co, at least for the reason you mentioned, but I don't think that takes-away from any of Baker's observations related here. Despite extraordinary stimulus (poorly-conceived, designed, and executed), this "recovery" is still lagging behind what People Who Should (Have) Know(n) Better expected. Heaven forbid any of them wonder why, and actually answer that question honestly...