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From Horrid To Merely Dismal: Feeling Better About The New Reality

testosteronepit's picture





 

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

The inexplicable American consumer, the strongest creature out there that no one has been able to subdue yet, has come to grips with a new reality, euphemistically called “New Normal,” though it isn’t normal by any means, but dismal. Feeling more upbeat, they nudged up the Consumer Confidence Index to 73.7, a level not seen since February 2008—a level that caused people to tear their hair out at the time.

Along with other mixed data, it was cited as evidence that things were on an upswing, that the crisis has been brought behind us. But back in February 2008, we fretted about consumer confidence being that low, though it would go on to plunge to levels not thought possible until then.

It had been a long way down from the pre-recession level of around 110, and from the halcyon days of the late 1990s through 2001, during the excessively exuberant dotcom bubble, when consumer confidence ranged from 120 to over 140. What on earth were we smoking back then?

This historical perspective casts a pall over the encouraging tone that oozed from the Confidence Board’s press release: “Over the past few months, consumers have grown increasingly more upbeat about the current and expected state of the job market, and this turnaround in sentiment is helping to boost confidence.”

During each of the five recessions since the Board’s data series started in 1977, consumer confidence took a dramatic nosedive. But following the dotcom-bubble peak of over 140, where oxygen was thin, consumer confidence crashed over 80 points, more than ever before, reflecting the crash of stock portfolios that were supposed to lead to very early retirement and decades of watching one’s millions beget more millions on an annual basis. It punched consumers in the gut; confidence collapsed.

Then the Fed dumped cheap money on the land to create another asset bubble, in housing this time, which nurtured consumer confidence back to life—above the magic line of 100, the level of 1985—to peak at 110. When that bubble blew up as well, consumers gave up trying to be artificially confident.

The index dropped to a record low, so low that today’s awful number looks pretty good in comparison. That history of lower lows and lower highs since the peak of 2001 has been captured by one of Doug Short‘s excellent graphs:

 

Click for larger image

The confidence peak of 2001 coincided roughly with the real wage peak (wages adjusted for inflation). Since then, nominal wages have continued to rise in their hopscotch manner, but have risen less than the rate of inflation. And now, for most workers (except for the upper echelon), real wages are significantly lower than they’d been a decade ago.

During 2011 and 2012, real wages continued their tailspin. Only July this year, when inflation was exceptionally low, were they flat. But now, real wage declines are steepening again. The numbers may vary, depending on who is counting and what inflation measure is being applied. But the trend isn’t going to slow down: Fed governors have been crisscrossing the country, explaining to us nonbelievers that the US needs more inflation, not less. Hence, even lower real wages.

Anecdotal evidence sheds additional light on how people react to it. We all know people who lost their jobs during the Great Recession and have now found jobs—but at lower compensation levels than before. I know a few who got to keep their jobs, but were handed hefty pay cuts in 2009. And both groups have gotten used to their lower incomes and have adjusted. They have come to grips with their own new reality. Their confidence, smashed during the crisis, has been edging up again as well. Time heals many wounds.

But it won’t make up for pay cuts and inflation. Only borrowing can do that. And so, as confidence is creeping up from the horrid levels at the trough of the Great Recession to the merely dismal levels of today, the inexplicable American consumer—who is becoming more explicable by the minute—may pull out a wad of credit cards to fund serial spending sprees. The shopping season, as the holiday season should be called, may document that move. But if consumers think of their lower real incomes and remember to be prudent with their credit cards, we might have to fasten our seatbelts early next year.

Consumers face other challenges. We know President Obama will try to tax the rich, but many didn’t think he’d weasel in the carbon tax as quickly as he might. A Romney win would have been bullish for coal – but Romney lost, and so has coal. The big winner? Natural gas. The power behind it? Exxon. Read.... Is a Carbon Tax a Done Deal for the US?

 


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Wed, 11/28/2012 - 11:23 | Link to Comment TahoeBilly2012
TahoeBilly2012's picture

$1.5 trillion of the real ecomomy died replaced by $1.5 trillion in Gubmint spending. What "consumer" is confident? Why the Gubmint...they been borrowing and spending like no tomorrow! Besides, as the oligarchy descends into criminality, they be needing more Gubmint for protection.  A perfect plan used by castles and kings for centuries.

Wed, 11/28/2012 - 11:06 | Link to Comment Grand Supercycle
Grand Supercycle's picture

WILE E. COYOTE crash update:

SPX bearish consensus strengthens today.

The overdue Wile E Coyote sell off is inevitable and will occur once we get a suitable trigger imho.

http://trader618.com
http://tinyurl.com/ZH-Forum

Wed, 11/28/2012 - 10:35 | Link to Comment dexter_morgan
dexter_morgan's picture

Liberty and responsibility are hard. People really don't want that. Easier to let TPTB manage things for them so long as they have a bunch of toys to play with. Hence, consumer confidence rises as they think all is being taken care of for them.

Wed, 11/28/2012 - 10:18 | Link to Comment RunningMan
RunningMan's picture

My spending is finally going up since 2008. But I am spending on supplies preparing for the next disaster, whatever that may be. After seeing first hand what Sandy did to our infrastructure and how people treated one another during the afternmath (hint: everyone was left to fend for themselves), I've become an amateur prepper. How sad though, since I'm not confident at all anymore. Government spending of taxes has bifurcated to the poor and the government elite, and its harder for the private sector to make money. I was recently looking at history around the Roman empire decline, and examining the rise of feudal estates to escape the fiscal burden of the empire,  "bread and circuses", etc. - the parallels to today are shocking. Our emerging version of feudal estates are the financial and government elite - the former with large up front payouts, the latter with lifetime payouts. And the middle just trying to lay low to escape the scrutiny of the empire - describes perfectly how I feel. Maybe Ben Bernanke should stop researching the Depression, and look further back in history for some new learnings.

Wed, 11/28/2012 - 09:57 | Link to Comment ElvisDog
ElvisDog's picture

Consumer confidence is a bullshit metric. The only reason anyone follows it is because it ties in with the equally bullshit "animal spirits" concept central to Keynesian economic theory.

Wed, 11/28/2012 - 08:57 | Link to Comment BraveSirRobin
BraveSirRobin's picture

I've noticed the nicest buildings are built by the government for the government. We have built a new building for our school bureaucracy, and it is quite lavish. The superintendent has a 1,000 square foot office. This does not include the waiting, secretarial, or reception areas. It does include a work area, meeting area, private bathroom and litchen.

Price of the new facility came in at $87 million.

Rank and file teachers have not been given a pay raise in 3 years.

A new High School was also just opened. It cost $64 million. It has high ceilings, losts of glass, huge weight rooms, an indoor Olympic pool, and on and on and on.

As a local Democratic politician once told me, nothings too good for the taxpayer.

 

 

Wed, 11/28/2012 - 10:00 | Link to Comment ElvisDog
ElvisDog's picture

I live in western WA. Politicians and the media are always wailing that we're not spending enough on education. But then I look at the schools that are either being built or renovated and they're palaces. Everything about them - sports facilities, classrooms, concert halls (all high schools now have concert halls) are beautiful and must have cost a fortune.

Wed, 11/28/2012 - 13:26 | Link to Comment hidingfromhelis
hidingfromhelis's picture

When it comes to breaking ground on some high profile, government-funded building, taxpayer money is no object.  Hey!  Not every building has to be a monument to the clown in office when it's dedicated!  

Gotta love that Seattle Public Library, a mostly glass architectural monstrosity that costs ridiculous amounts to heat and cool and will be highly maintenance-intensive down the road.  As a bonus, I hear its layout is hard to navigate and inefficient for the hapless users.  Then we have our sports team palaces where even after public funding was voted down by the taxpayers for the baseball stadium, the legislators ponied up our money anyways; after all, they know better than us.

Wed, 11/28/2012 - 08:01 | Link to Comment Winston Churchill
Winston Churchill's picture

Shame we can't take an optimism index of turkeys in September,or lambs in July.

Meaningless, a little blip on the downward slide.

Wed, 11/28/2012 - 07:14 | Link to Comment negative rates
negative rates's picture

It is explainable, it's called the dumbing down of the American consumer. 

Wed, 11/28/2012 - 05:53 | Link to Comment Supernova Born
Supernova Born's picture

Nature created death to make room for a new crop of ignorant optimists.

If you were born the day after WWIII, you'd still have at least a few happy memories of your glowing pet rat and the wonderful smell of tasty roasted travelers your dear old dad had waylaid.

Wed, 11/28/2012 - 02:37 | Link to Comment otto skorzeny
otto skorzeny's picture

you know who's getting nice fat raises of 3,4,5%? the assholes that get a paycheck from the govt-people like firefighters and cops and teachers and various other AFSCME slugs. I've had 3 village cops put in $50K+ inground pools in our McMansion neighborhood this year-and my wife wonders why I'm always so pissed off. and please explain why NatGas has doubled and not dropped to $0.00 after a mild fall and no sign of a cold winter forthcoming-from $1.90 to spitting distance of $4??? is this just another backdoor govt bailout to keep NatGas industry from imploding?

Wed, 11/28/2012 - 14:45 | Link to Comment Moronicgenius
Moronicgenius's picture

You obviously don't live in Wisconsin!

Wed, 11/28/2012 - 03:00 | Link to Comment Setarcos
Setarcos's picture

So what do you do for a living?

Can't be too strenuous and demanding, else you wouldn't waste your time on the internet ... I've got the excuse of being 69 and retired.

At one time I was one of your "asshole/slugs" as both a firefighter and teacher, amongst other occupations which you might consider "more productive", e.g. building, farming and factory work.

Get back to me after your house catches fire.

Get back to me when you realize who helped you to be literate and numerate.

Not to sure about cops, but here you are bitching about folks not a LOT better off than you - assuming you work and earn enough to at least own a computer - whilst your real enemies are banksters and politicians, NOT some neighbour who happens to have a bigger house than you.

Divide and conquer eh!  No chance of your neighbourhood pulling to together when times get tough, because folks like you would still envy the guy down the road with a swimming pool (whether or not he could no longer afford it).

Wed, 11/28/2012 - 14:55 | Link to Comment Donutwarrior
Donutwarrior's picture

Out here in Arizona we have the Navajo Hopi dispute.  The dispute stems from the Navajo's nomadic life bringing them here in about 1400 or so.  The Hopis were already here and they have fought since then.  Now, after centuries, it is down to a land dispute.  Recently a "settlement" was proposed which would finally settle the disputes.  The "settlement" was to give other people's and other Federally managed lands to each side to settle the dispute.  Plus generous helpings of tax money too.  So you see Its really easy to settle any disputes with other people's money, isn't it?  Like Unions negotiating with Politicians.  When the tax payers (and bond holders/buyers) get to be in the negotiating team maybe I could agree with you.  Making unrealistic promises does not make them work, no matter how much you think you deserve it.  This is the problem.  Unions take and politicians give, and neither side "pays".  So of course I hate firefighters, right?

Wed, 11/28/2012 - 14:55 | Link to Comment Donutwarrior
Donutwarrior's picture

Out here in Arizona we have the Navajo Hopi dispute.  The dispute stems from the Navajo's nomadic life bringing them here in about 1400 or so.  The Hopis were already here and they have fought since then.  Now, after centuries, it is down to a land dispute.  Recently a "settlement" was proposed which would finally settle the disputes.  The "settlement" was to give other people's and other Federally managed lands to each side to settle the dispute.  Plus generous helpings of tax money too.  So you see Its really easy to settle any disputes with other people's money, isn't it?  Like Unions negotiating with Politicians.  When the tax payers (and bond holders/buyers) get to be in the negotiating team maybe I could agree with you.  Making unrealistic promises does not make them work, no matter how much you think you deserve it.  This is the problem.  Unions take and politicians give, and neither side "pays".  So of course I hate firefighters, right?

Wed, 11/28/2012 - 14:55 | Link to Comment Donutwarrior
Donutwarrior's picture

Out here in Arizona we have the Navajo Hopi dispute.  The dispute stems from the Navajo's nomadic life bringing them here in about 1400 or so.  The Hopis were already here and they have fought since then.  Now, after centuries, it is down to a land dispute.  Recently a "settlement" was proposed which would finally settle the disputes.  The "settlement" was to give other people's and other Federally managed lands to each side to settle the dispute.  Plus generous helpings of tax money too.  So you see Its really easy to settle any disputes with other people's money, isn't it?  Like Unions negotiating with Politicians.  When the tax payers (and bond holders/buyers) get to be in the negotiating team maybe I could agree with you.  Making unrealistic promises does not make them work, no matter how much you think you deserve it.  This is the problem.  Unions take and politicians give, and neither side "pays".  So of course I hate firefighters, right?

Wed, 11/28/2012 - 14:55 | Link to Comment Donutwarrior
Donutwarrior's picture

Out here in Arizona we have the Navajo Hopi dispute.  The dispute stems from the Navajo's nomadic life bringing them here in about 1400 or so.  The Hopis were already here and they have fought since then.  Now, after centuries, it is down to a land dispute.  Recently a "settlement" was proposed which would finally settle the disputes.  The "settlement" was to give other people's and other Federally managed lands to each side to settle the dispute.  Plus generous helpings of tax money too.  So you see Its really easy to settle any disputes with other people's money, isn't it?  Like Unions negotiating with Politicians.  When the tax payers (and bond holders/buyers) get to be in the negotiating team maybe I could agree with you.  Making unrealistic promises does not make them work, no matter how much you think you deserve it.  This is the problem.  Unions take and politicians give, and neither side "pays".  So of course I hate firefighters, right?

Wed, 11/28/2012 - 14:56 | Link to Comment Donutwarrior
Donutwarrior's picture

OOPs

Wed, 11/28/2012 - 14:45 | Link to Comment Boozer
Boozer's picture

Years ago I played a ton of golf over the Connecticut summers.  My group

included several firefighters who played almost every single day and most had

a business on the side as well.  I remember a quote from one along the lines of -

"it sure beats working" referring to their "hero" jobs.  Please spare us....the house

is insured, let it burn but don,t hit me with property tax increases to fund your retired

ass at 52.

 

Wed, 11/28/2012 - 13:14 | Link to Comment cherokeepilot
cherokeepilot's picture

Similar to you, Setarcos, I had the "priviledge" of being a firefighter for most of my working life.  I spent 38 years on the Chicago Fire Department.  During that time I was in one of the worst ghettos.  I was shot twice by the local residents, just to show how much they valued our service.  I had the great experience of being awake while a surgeon removed my left eyeball in order to remove a large piece of glass that became inbedded due to a backdraft during a fire.  Thanks to his expertise, I kept the vision in that eye. I attended more than a few funerals of my fellow young firefighter who died of their injuries suffered at fires.  I was burned more times than I want to think about.  I don't even want to think about the nightmares I've had after picking up burned kids and watching them die in my arms.  I could go on but I'm sure you are very familiar with that side of the job.

Kudos to you for also being a teacher during that time.  It shows your dedication to society, unlike the whiners that gave you the down arrows.

Just for the edification of the naysayers, when I joined the fire department, in 1965 I took a pay cut of $1000.00 dollars.  Hell, the department had recruiting posters on the street cars trying to get people to take the job.  I took it because of the fact that members of my family were in the fire department from the early 1900s. I took the job to honor my father who died of his injuries suffered at a fire.  As far as his great pension, he received one pension check from his duty disability before he died.

I don't know how all pension systems work, but I payed 10% of my salary into our pension fund,  it is not a government fund.  It is run and maintained by firefighters.  The city is supposed to contribute an equal share, however, they rarely do and usually have to be forced to do so.

If one will research the exorbitant pay that some firefighters receive, they will find that the average pay of firefighters simply kept up with the so-called cost of living, which averaged about 3% over the years.  There were years during my tenure on the department that we did not received an increase and there were years when we did, but averaged out it was 3%.  The problem in the private sector is that companies have not been able to even give the cost of living raises to their employees.  I'm not faulting them, it is an economic problem.

I don't know about you but I don't get one of those 6 figure pension people seem to talk about. I retired at age 63 and am now 72, so I've been on pension for 9 years,  that's pretty good seeing that the average firefighter who works maximum number of years will only live 3 to 5 years after retirement.  Maybe the newer firefighters will live longer since the have the use of self contained breathing apparatus, which we didn't get until the 1980s.

I used to be very proud of my service to society and still am, but I don't tell many people about that part of my life since the current attitude is that if you ever worked for government you are a scum sucking, tax eating slug.

Wed, 11/28/2012 - 09:24 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

setarcos just doing your job Huh?? much like brown shirts in hitlers time..to end up 69 and stupid is not the way to go thru life. you pepper your remarks with some common held truth, but it comes out in the end that public unions are not the evil force they are.

Wed, 11/28/2012 - 10:33 | Link to Comment tango
tango's picture

Absurd. What is this fascination with branding what were once considered normal, needed jobs as traitors or "brown shirts"? Societies need those who can protect our lives and properties. Every cop and firefighter I know works hard at their job and. Couldn't care less about Brownshirt tactics.

Wed, 11/28/2012 - 07:16 | Link to Comment AurorusBorealus
AurorusBorealus's picture

I have no problems with firefighters; they perform a legitimate and important public service.  Police, on the other hand, write traffic tickets and nothing more... a form of local government theft.  In most areas, police are nothing more than bandits.  In most parts of the world, the people understand this... only Americans are stupid enough to believe that police are anything more than government thugs.  When was the last time a police officer did anything to actually serve you?  Ask yourself this... because most likely, the answer is never... and writing your neighbor a ticket for some astronomical sum because a sticker expired on his car is not a public service for you.

Wed, 11/28/2012 - 10:03 | Link to Comment ElvisDog
ElvisDog's picture

I also have no problem with firefighters per se, but there are too many of them. In my area, there is literally fire stations within a mile of each other everywhere. Even if you account for the fact that modern firefighters spend most of their time on medical calls, still there has to be a lot of down time for them hanging out at the fire station.

Wed, 11/28/2012 - 10:28 | Link to Comment tango
tango's picture

I used to think that until our house nearly burned down. Our neighborhood dept worked like dogs and saved part of our house. Then again, our stations are also supported by local donations and a sub-crew of volunteers. (Like our schools with their army of volunteers - does it take a village?). Lol
.

Wed, 11/28/2012 - 03:32 | Link to Comment otto skorzeny
otto skorzeny's picture

you're right- I should just pay 100% of my income in taxes instead of the 65% plus of what I earn in private industry(if you count 5 figure real estate taxes,income taxes,sales tax, ad nauseum) so that cops(speeding ticket writers) and firefighters can retire at 50 Y.O. with pensions of 80% of their working day salaries(6 figures) and school administrators can pull down $300K a year and union teachers can work a whopping 180 days a year out of 360 so that the children in this country can be ranked even lower against other developed countries in most subjects. in fact-why don't we all just work for the govt-make $1million a year,pay 100% taxes so the next guy can make his $1million salary. also-today's building codes preclude most house fires so the local depts. pad their "emergency response #s" with trips to car fender benders to make it look like they do something instead of sitting and watching the big plasma flat-screen at the brand-new fire barns with granite countertops and work-out rooms(I know because I was the construction superintendent on a few of them). as far as the cops with the new pools-fuck 'em-I hope they drown in them.

Wed, 11/28/2012 - 14:07 | Link to Comment cherokeepilot
cherokeepilot's picture

Okay, Mr Construction superintendent, how much is your annual salary?  And as a superintendent, how hard  did you work putting in those $50,000.00 pools.  Why did you choose your profession instead of working for the government?

I have no problem with yours relative to $300K school administrators.  Teachers have worked a shorter number of days than average for as long as I remember.  That is one reason some people become teachers, why didn't you? Average number of days worked per year by most employess in 244 days, not 360. That means that teachers work about 64 days per year less than other people. I believe the summer season off is the reason for that, it has been that way since I was a kid and I'm older than dirt according to my grandkids.

Wow!! A 5 figure real estate tax, you must be doing something right to be in that category.  Don't get me wrong, I think real estate taxes are criminal and affect retired people and those that have lost their job very negatively.

Retire at 50 years of age at 80% of salary, boy I picked the wrong time to have been employed.  Our retirement was 50 years of age with 20 years service and 50% of the highest of the last four years salary. after the 20 year mark, an additional percentage was added until 75% was reached. I worked until age 63, had 38 years service and my pension is only in the 5 figures, not 6 figures and I was at command level when I retired.  If that is true about age 50 and 80% then I agree with you that it is not only excessive but also not sustainable with the average return that funds get today.

Local building codes are minumum requirements and they do help prevent some fires, but most fires in homes are do to human error or Construction shortcuts.  I built houses on my day off.  I could have easily afforded the equivalent of your $50k swimming pool when I was a firefighter but not on my firefighter salary. I made more in construction than on the fire department.  By the way, my wife is a nurse and she also worked. Ah! more income for the evil civil servant.

Fire equipment is dispatched to so-called fender benders as a precaution in case the incident is more serious than reported and for medical treatment if needed. it is not done to "pad" the response numbers.

No arguement about the flat screen TVs or the fire barns with granite counter tops and work-out rooms. most fire house I worked in were built in the early 1900s, some in the 1930s. None had any of the stuff you describe.  As some of these houses are being replaced they do fit into your category and I find them to be rediculous but that is what the city planners or architects decided to build.  Neither the firefighters nor the union had a say in that.  At command level, we were given some latitude but not much.

Now having said the above, do you have any suggestion on how to really change all this.  I would be interested in your advice.

Thu, 11/29/2012 - 09:45 | Link to Comment overmedicatedun...
overmedicatedundersexed's picture

chero, one of the most delusional posts ever written on zh..on just one point..open flames for light and heat are not being used anymore per 1860's. what amount of time did you sit in the fire house and nothing was called in? 80-90%+ my guess. private co providing fire protection is the ans to change this system..no need for fire ins plates on each building as we are now in the electronic age. police and fire could stand to be privatized, as the wealthy do in the gated community.

Wed, 11/28/2012 - 14:55 | Link to Comment otto skorzeny
otto skorzeny's picture

you don't pay taxes to support my salary so fuck off as far what my salary is. I never took a dime from anybody and worked my way up through the ranks in the building trades, busted my ass in a tough industry and bought a fucking mansion on my own dime. that's another thing that pisses me off is firefighters that make a good buck and undercut tradesman for construction jobs(my favorite is when the FF gets hurt on the side job and then tries to claim workman's comp with the FF job-happens alot-I know guys that have done it). and yes-you come across as a typical "you peon citizens fucking owe me a living beacause i am a civil servant". what did the world do before we had all of these high-paid socialist govt employees to babysit us.

Wed, 11/28/2012 - 03:52 | Link to Comment Setarcos
Setarcos's picture

Putting it that way, you are not that wrong and I was for not taking account of changes since I worked in those fields and when fire stations were basic.

Wed, 11/28/2012 - 07:15 | Link to Comment notadouche
notadouche's picture

You sir, at 69 no less, show an incredibly affable and maliable mind.  I congratulate you on your abilities to make allowances how times have changed from back in your heyday and you show yourself to be a credit to the human race.  Not being right or wrong but being able to consider long held beliefs and truths that how you once knew them may have changed.  Many folks much younger than you running this country do not share the same intellectual stratoshphere as you sir.

Wed, 11/28/2012 - 02:24 | Link to Comment Curt W
Curt W's picture

Consumers are muppets, when the public confidence is high, its time to pull back.

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