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It’s Official: The Consumer (And The Economy) Is Alive and Dead
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
Friday’s plunge in consumer sentiment—from 82.7 during the post-election glory days to 74.5—was hastily ascribed to the Fiscal Cliff which, much like Sandy, is recruited to explain everything that doesn’t go according to plan. And a lot hasn’t gone according to plan.
On Thursday, it was the Gallup/Wells Fargo survey of small-business owners that had thrown a monkey wrench into the hope machinery. Small-business owners are generally an optimistic bunch, and they’re key job creators. But they suddenly decimated their hiring plans to the record low set in November 2008, the catastrophic post-Lehman days. Back then, it was followed by massive and brutally rapid layoffs.
“An eye-opening drop in optimism,” mused Marc Bernstein, head of Small Business for Wells Fargo.
Consumers have been giving mixed signals. For example, the Restaurant Performance Index, released on November 30, fell in October for the second month in a row and hit 99.5, the lowest level in 14 months. It was the first time during that period that it dropped below 100, indicating contraction.
Then on Friday, Gallup’s consumer spending report was a bit lumpy. At $73 in self-reported daily spending, it was flat in November compared to the prior two months, and down from a post-crisis high of $77 in August. Still, it was up two bucks from last year. Ominous sign: those making more than $90,000 a year throttled back their spending to $113, the worst November since 2008. Spending by lower income Americans, who have to shell out just about everything they earn to keep their chin above water, remained stagnant. But, but... spending picked up around Black Friday and Cyber Monday and is tracking higher in early December.
Hours later, the Fed’s Consumer Credit report, a stalwart indicator of how much consumers are borrowing to prop up the economy, shed more light on our strung-out heroes. Not seasonally adjusted, consumer credit increased by $10.3 billion in October, the third month in a row of increases, raising hopes in some quarters that the unemployed, the underemployed, and those working for wages that haven’t kept up with inflation would somehow summersault over their income hole by borrowing from the future—a strategy that has been a key driver of economic growth in the US, and that has hit a wall during the Great Recession.
But credit cards and other forms of revolving credit edged up only $1.4 billion, after a swoon in September. What did jump was non-revolving credit. By $8.9 billion. Alas, almost $7 billion of it was student loan debt held by the government. Consumers aren’t splurging. They’re borrowing to pay for essentials. And for education.
But wasn’t there a shining example of the growing strength of the economy? Indeed: the jobs report’s soothing numbers. Unemployment dropped to 7.7% and 146,000 jobs were created, despite Sandy! It inspired the usual mix of derision and controversy. But its sausage-like innards and self-contradictions include the fairly reliable Employment-Population ratio that had deteriorated to 58.7%. It had dropped into that range in late 2009, for the first time since 1983, from a peak of 64.7% in April, 2000. The stagnating ratio confirms that barely enough jobs have been created since 2009 to keep up with the growth of the working-age population. And now, it has taken a turn for the worse [Has unemployment become a cultural thing? Read... Making Heroes of Those Who Slash Jobs].
The BLS headline numbers slammed into another vision of realty, released the day before. Gallup’s unemployment rate leapt from 7.4% to 8.3%—though it’s still lower than it was in November last year. Underemployment shot to 17.2% from October’s post-crisis low of 15.9%. A nasty reverse, after months of uneven improvements.
Gallup’s own Payroll-to-Population rate—the percentage of the adult population who are employed by an employer, not self-employed, for at least 30 hours per week—took the sharpest nosedive since the data series began in 2010, down two percentage points, hitting 43.7% in November.
Sandy’s fault? Not so fast, Gallup says. The Payroll to Population rate “declined across all regions, and the East had the smallest October to November decline, while the Midwest saw the biggest decline.”
More sobering still: The size of the workforce—those working plus those actively looking for a job—skidded in November to 67.2% from 68.3% in October and is now lower than it had been in November 2011 (67.7%). “When Americans drop out of the workforce, as happened in November, it masks a decline in jobs,” Gallup explained. Hence, also the BLS’s rosy unemployment number.
This is the background to the staged posturing, tragic-funny theatrics, and lurid special effects in Washington about the Fiscal Cliff—and whether to fall off, jump off, fly off, dive off, climb down, or somehow avoid it altogether. It has become an inescapable media zoo, much like Y2K once was. I remember well the worldwide letdown on January 1, 2000. Read.... The Majestic US Debt.
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Gasoline prices are creeping back up after the election. That is all the sheeple consider when taking these surveys.
Lies, damned lies, and the BLS.
Seriously, I don't have the slightest idea how the people at the BLS can actually go to work everyday and churn out shit that would make Goebbels blush, then go home and kiss their children goodnight.
Goebbels poisoned his six children before the Russians got to him in Berlin--aka, so much for the children.
the bls" workers"..does anyone other than a fellow seicu "worker" not understand..they get paid to do nothing, and they know it and they hate us all for paying them to do nothing all day. much like paradise doing nothing of value seems good but gets old very fast. many are insane after years at bls minds shrunk to walnuts, but still in the dead of night they get the shakes that someone will find out they live a lie.
Dude...
Poetic.
"in the dead of night they get the shakes that someone will find out they live a lie"
Pure alcoholic behavior.
in other words " How do get the taste of the condoms out of your mouth"
Maybe they kiss the kids then molest them... makes 'em feel better after that hard shitty day.
Well, I don't have no fancy Community Collage degree, but that looks bad to me.
STAGFLATION BABY!
There is ZERO money in the economy. No one carries Gold or Silver in their pockets anymore.
They keep it in vaults or under their bed.
We probably won't see people carry the metals in their pockets again for decades.
Any use of the term "economy" until then simply demonstrates ignorance or deception.
Bitchez