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Is The Economic Recovery Only Statistical?
Submitted by Lance Roberts of STA Wealth Management,
Like the annual migratory patterns of snowbirds, each year brings the "hope" of a surge in economic activity. According to the most recent National Association Of Business Economics (NABE) survey:
"Real GDP grew 1.7% in 2012. Panelists anticipate real GDP growth to accelerate steadily from a 1.8% annual rate in the fourth quarter of 2013 to 3% in the fourth quarter of 2014. The medians of the five lowest and five highest individual forecasts for 2014 are 1.9% and 4.0%, respectively."
Unfortunately, each year has been a disappointment to economic forecasts with current annual real economic growth averaging only 1.2% since 2009. With the first quarter of 2014 already in the negative column, it will take quite a surge in economic activity in the remaining three quarters to meet expectations.
However, there is no arguing that there has indeed been economic recovery in the U.S. My good friend and colleague Doug Short tracks the "Big Four" economic indicators each month (his site is a daily must-read) as shown in the chart below:
There are two important points to take away from his analysis. First, the primary economic data that feeds into the economic calculation have been expanding. Secondly, the current economic expansion is now 59 months in length which makes it the 5th longest recovery in U.S. history. While the current economic cycle could certainly last longer, (post WWII expansions have averaged 63 months) the economic and business cycles have not been repealed. Notice the "flattening" of economic growth in the chart above.
However, as I look at a variety of economic data, a question emerges. Since economic recoveries should be a function of economic prosperity across the national spectrum, is the current recovery achieving that goal? In other words, while Wall Street and the top 20% of the population in terms of wealth have certainly enjoyed the surge in asset prices due to Federal Reserve interventions, has the other 80% of the population likewise seen an increase in prosperity?
In order for someone to be "better off" they need a job and wage growth that exceeds the rate of inflation, taxes, and cost of living. As I discussed this past Monday, since the beginning of 2009 there has been little increase in the number of full-time jobs relative to the working age population in the country.
Furthermore, real disposable personal income growth has continued to wane even as the official unemployment rate declines.
The problem that this presents for hopes of a stronger economic recovery is that nearly 70% of economic growth is driven by personal consumption. With households still heavily leveraged It should be no surprise that economic growth has primarily "muddled through" in recent years.
The real story lies hidden below the headlines. Despite signs of economic recovery on the surface, the underbelly of the economy remains vastly weak. As I stated above, an organic economic recovery should be one that provides a lift in prosperity across a wide swath of the population. However, the current recovery has not done that.
The rise of the “welfare state” over the past six years has been unprecedented. Social benefits as a percentage of real disposable income is at record levels as wages remain pressured due to a large and available labor competing for limited job openings. While incomes did uptick in the most recent quarter, it was not due to a significant rise in actual wages but rather increased social benefits.
There is an old adage that warns to"never count the consumer out." Consumers are creative in finding alternative sources of income in order to sustain their current standard of living but does not bode well for long term economic prosperity.
Student loans from the government have more than quadrupled as unemployment insurance has run out. Once private student loans are included the total amount of student loan debt has surged to more than $1 Trillion.I stated in August of 2012 that:
"The problem with the current levels of student loan debt which has likely been used for consumption rather than education is that eventually a large chunk of these loans will default. However, the difference now, as opposed to the 'sub-prime' housing loan debacle, it that there is no asset sitting behind the loan – just a promise to repay. If you thought sub-prime loans turned out badly – just wait."
At that time, the statement was readily dismissed. It was clearly evident that everyone was simply going back to school to gain further education. However, this past March the WSJ made a shocking revelation:
"Some Americans caught in the weak job market are lining up for federal student aid, not for education that boosts their employment prospects but for the chance to take out low-cost loans, sometimes with little intention of getting a degree."
Either the workplace has become extremely unsafe and reminiscent of Sinclair’s classic novel “The Jungle,” or there are a lot of people lying about being disabled.
While almost 2.6 million net new jobs have added since the beginnig of 2009, there have been more than 16.3 million individuals that are now getting support from food stamps and/or disability. Of course, with effectively 1 out of 3 individuals no longer counted as part of the work force this should not be surprising.
As I stated earlier, I am NOT disputing the "quantity" of economic recovery that has occurred over recent years. What I am questioning is the "quality" of the recovery.
It is clear that for the majority of Americans there has been little increase in economic prosperity. This is why recent polls find the approval rating for the current Administration near their lows. Furthermore, while claims of economic recovery abound in the financial press, the attitudes of small business owners surveyed nationwide remain at levels normally associated with recessions.
Bill Dunkelberg, NFIB Chief Economist, summed this up well when he stated recently:
"Small business confidence rising is always a good thing, but it’s tough to be excited by meager growth in an otherwise tepid economy. Washington remains in a state of policy paralysis. From the small business perspective there continues to be no progress on their top problems: cost of health insurance, uncertainty about economic conditions, energy costs, uncertainty about government actions, unreasonable regulation and red tape, and the tax code.”
Has there been an economic recovery? The statistical data clearly shows that this has been the case. However, the 100 million Americans that currently depend on some sort of social assistance to "make ends meet" are likely to disagree with that view.
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You can make stats say anyting you want...
And if you are willing to go the extra mile and torture them with pliers and a blowtorch... you can make them absolutely scream "RECOVERY!!!"...
No (I like your post butt)....It's Recovery....with a small R....r
I'm still trying to rEcoVeR from 3 recoveries ago.
What King Obama is really mean when is say recovery, is more like "re-cover-y-our-ass".
Statistically speaking; it can be mathematically proved that every person has one testicle and one ovary. (I couldn't help it; the devil made me do it).
With a dental drill and no anesthesia, you can.
sure but lets say there is growth; where is it coming from? probably financial "products" using the feds funny money; can someone give the millenials a crystal ball; guess that might help them work out their own futures
Notice how the recoveries started taking a longer time after we got the Fed?
They never seem to mention the confidence interval or confidence level.
For the rest there is Disraeli and Mark Twain. Lies, damned lies, and statistics: http://en.wikipedia.org/wiki/Lies,_damned_lies,_and_statistics
"Detroit goes bankrupt." Nuff said. "Only the beginning" as by far the worst recovery post World War II "wanes."
Detroit always goes bankrupt during economic recoveries, doesn't it ? the nice man on TV said it was okay.
My economic recovery is purely statistical, and I have to turn the chart upside down.
How do I delete my account from ZH?
"How do I delete my account from ZH?"
Stop reading ZH and reviewing its articles.
ZH does not "stalk you"
You are full of s**t!
I want this account deleted -- I have 6 other usernames that I log in with and this one I want to remove.
Is the "red button" coming yet?
oh it's coming alright...
hello?
I hate ZH
does hating ZH make me more avantgarde?
Hey ranger go fuckyourself the go fuck your president or bitch or what ever you call him, her!
Avantgarde is just another word for bullshit - John Lennon -
delete
If anyone would take in to account the amount of businesses lost since 08 there'd be 0 recovery!
Gm sold 8 million cars in 07 and 4 million in 2013! Nuff said!
Well, it depends on whether you're an optimist or a pessimist, you see. If you're a pessimist you look at the glass, and say; "look it's only half full". But, if you're an optimiist you look at the glass and see it lying broken on the sidewalk and all the water has run away." Wait, something doesn't sound right here; just a second, I gotta check my reference material in my Economics Textbook.
No worries...your theory is still sound.
The glass is full you bozos! 50% water and 50% air.
Actually the optimist sees the bottle half full, albiet with green water, but the animals drinking it aren't dying, so all must still be ok. Could be there is a storm coming that fills it up and makes it less green at the same time.
To an optimist, the glass is half full. To a pessimist, the glass is half empty. To an engineer, the glass is twice as large as it needs to be.
and they have recalled like 50% MORE cars than they sold last year or some such.
heard that on the radio.
That's because if you spend $45,000 on a GM car, you actually have something. If you spend $15,000 on a GM car, you bought JUNK! Know several people who have them there $15,000 piss ass engineered POS and they swear by them, even though they've had them back to the dealer more than once within the first couple of years. The younger generation seems to admire and respect GM as a bulwark of American manufacturing. Seems they're going to find out which is which over a very short period of time. But you can't take pride away from people. They got a good deal! Boy did they ever. Fucknuts.
"See the USA, in your ..............", here you insert the division of GM.
I think it is funny that I got removed from the ZH chat room. Anarchist posers
ZH is so cool
This article is full of s**t!
If GDP was corrected for "true" inflation it would be negative since 2008.
Look at the employment chart A** H**E!
Full employment / population:
2007 about 53%
2010 "bottom" of recession about 47%
2014 about 48%
A 1% employment recovery!! Big F***ing Deal!
And that is with their B**L S**T numbers!
I'm over 40....and a damn good engineer...I call BS till I get a good job
I'm over 60, an independent tradesman, and the thoughts are the same. Used to be able to write my own ticket. Now, I write the estimates with a gajillion alternate addendums so the customer has more choices to spend less money to get a lower quality product. Boy, it looks good when I leave, but I make it clear that they're on there own as far as garantee is concerned. "You want to pay for junk, and have us install it, we garantee correct installation, and that's it. We come back to fix it, or fix somebody elses fix, your paying us triple to do it." The lowest bidder is sometimes not the correct choice. It costs us the same amount of time to install junk as it does to install permanent quality material. And the flippers drove me so nuts that I stopped doing work for them. Espescially the foriegn flippers who were taking all their liquor store cash and buying up foreclosures by the bundle. They want a silk purse from a sows' ear and then wanted to deal the agreed upon price down "AFTER" the work was completed. Caught on to that real quick.
And "just-my-opinion", look... ya know ya got a degree. There's a lot of guys out there in the same boat. You, me, a lotta people. We can do some pretty damn good work. Problem is no-one wants to pay for it. Not many want to engage a professional for the "Cost!" The schools are part of the problem, and our career targets as well, along with a retail base that's failing as a "place to get things". We can and do, do good work. But the incentive to pay for it just seems to be diminishing by the year, day and hour. I know a good deal of engineers, architects, accountants etc... who are literally out in the wind and performing or thinking seriously about career moves. This is some real shit that is going down in the economy that nobody talks about. Some of us have obligations that "have" to be made. Some of us have to "adjust". As long as I have been looking at the mess, it's the "Same as it ever was.", scenario. We are few for the many. But we are individual to ourselves as well.
40% of any government program is FRAUD.... disability, medicaid, medicare, obumbler care (probably higher than 40%) .... what are the fraudsters going to do when the donkey hops in the wagon... corps with a brain are gone or in the process of moving offshore.. wealthy are exiting and concealing their wealth.. the middle class is shrinking.. now the libtards can have the venezuela / cuban society they want.... cept no one left to pay for it ...no cotton pickin jobs will be left.. however there is one biz that is prospering and expanding .. the sinaloa cartel... apply at your local MS13 club ... folks wont have a pot to piss in ... unless sanity prevails in november... last chance folks..
10,996,447 on disability
23,052,388 households on food stamps in the average month of fiscal 2013
47,636,090 individusals on food stamps in the average month of fiscal 2013
14,266,000 Disabled, under age 65
7,186,000 Social Security beneficiaries who are neither aged nor disabled (for example, early retirees, young survivors).
92,594,000 Americans not in the labor force in April 2014
2,670,000 U.S. unemployment benefits
You forgot to add .gov employees at fed, state, and local levels to the list of those on the dole.
I have ears to the ground since I was reorged back in 08 at age 58, working 80 hours per week and just listening to customers in very basic needs--convenience store and glass. Used to work at JCP but quit that nonsense when i couldn't take managements total disdain for its working poor.
In general, the vast majority hasn't recovered. Most are barely getting by and can eek out that last drop of gasoline or buy the airplane shots to ease their burden rather than the half, the pint or the fifth in order to make the budget work. Of course you have those who were never affected and those who have recovered but most are much younger than me.
Customers have walmartized America, they think it's not important to buy quality and will buy just crap so they can make their budget. Our income has declined for the last five years at my shop as people delay making any purchase until it's absolutely mandatory to buy.
It's sad to watch as we decline to a 3rd world nation, both in demeanor and living standards.
Great comment. And a big, "No Shit!", to the article in general. If the ordinary middle class American can't see through the lies and deception the government is trying to pass off, they're well beyond being just fucked. The statistical manipulators are just that; so everything looks good for the "Government", just screw everyone else, it's business as usual so the party upstairs can go on and on. Wake up you dopes. This may be your last few years to hoard everything you can other than equities and government bonds.
The problem with articles like this is that they're based upon the assumption that government statistics are accurate and the only debate necessary is how to interpret them. This is wrong. Government stats are virtually all lies, lies and damn lies from head to foot. They are deliberately intended to deceive and mislead people.
I've said it previously, if GDP and CPI were actually measured correctly, it would reveal that there is no overall economic growth in most Western countries. The growth that does occur is in narrow market sectors. The gap between true GDP which is negative and peoples' expectations has been made up by debt. But people are now maxxed out on debt, hence no more economic growth.
Ask the man with the molotov cocktails.
This statistical data clearly stinks.
WHERE’S THERE A CRASH? WORLD ECONOMY COLLAPSING!!! - HEADLINES MAY TILL TODAY! http://forum.prisonplanet.com/index.php?board=198.0
U.S.
- Industrial Production Plunges By Most In 5 Years (Biggest Miss In 3 Years)
- First-Quarter U.S. Economic Slump Looking Uglier by the Day
- Q1 GDP Cut To -0.6% At Goldman, -0.8% At JPMorgan
- Q1 GDP Takes Another Hit As Factory Orders Miss
- Growth Freezes Up as U.S. Business Spending Slumps
- Freddie Mac earnings down 12% - Level of Earnings Not Sustainable
- Barclays to cut 19,000 jobs as it scales back investment bank business
- Barclays' FICC Slaughtered: Revenue Plummets 41% In Q1
- AIG Profit Declines 27% on Property-Casualty Claims Costs
- U.S. Lost $11.2 Billion in GM Bailout, TARP Report Says
U.S. INCOME
- No Raises For Anyone: Real Hourly Wages Decline For The First Time Since 2012
- The Meat Crisis Is Here: Price Of Shrimp Up 61% – Beef At All-Time High
- Inflation is evident to everyone but the government
- 94% Of March Consumer Credit Was For Student And Car Loans
- Early Tap of 401(k) Replaces Homes as American Piggy Bank
- US Savings Rate Plummets To Second Lowest Since 2008
U.S. JOBS
- U.S. UNEMPLOYMENT 23.2% (SHADOW STATS)
- Labor Force Participation Rate Crashed to 62.8% from 63.2%
- Jobless Claims in U.S. Unexpectedly Climb to Nine-Week High
U.S. HOMES
- Apartment Projects Fuel 13% Jump in U.S. Housing Starts
- Home Prices Climbed in Fewer U.S. Cities as Demand Cools
- 30-year yield marks largest weekly rise since March
- Freddie Mac Eases Mortgage Rules to Limit Putbacks
- Cash U.S. Home Purchases Surging as Rates Rise: Mortgages
- Americans Shut Out of Housing as FHA Fees Jump: Mortgages
- DoubleLine’s Gundlach Recommends Betting Against Housing
- Realogy Falls Most on Record as U.S. Home Sales Decline
- Freddie Mac Starts Trailer Loans That Buffett Criticized
- Fannie Mae Would Need New Bailout in Downturn, FHFA Says
- Easier Homeowner Credit Compelling Wells Fargo: Mortgages
U.S. RETAIL
- Retail shares tank in premarket on disappointing profit, sales
- American Eagle profit slides, to close 150 stores
- Caterpillar Global Retail Sales Decline For 15th Consecutive Month
- Deere Cuts Sales Forecast After Decline in Equipment Volumes
- Consumer Confidence in U.S. Unexpectedly Declined in May
- Retail Sales Miss Across The Board
- Wholesale March Inventories Rose 1.1% - Smashing Expectations 3rd Month In a Row
- GM’s China April Sales Rise at Slowest Pace in 14 Months
More Headllines: http://forum.prisonplanet.com/index.php?topic=247239.msg1471637#msg1471637
How is that housing market doing for RE non-investors? I'm sure it's great in WEALTHY areas since the rich are getting richer, but nobody is buying around here in middle america. Houses on market for months, most wind up being taken off market and where are all those new homes? RE taxes so high it disqualifies many buyers or put's them in 'dumpy, TLC' category. I dunno, I suppose there is a bit of recovery, but it is more like a trickle down than a gusher.
We may soon be forced to face our economic Armageddon. The forces that have driven stock markets ever-higher and upward may be beginning to wane. Many markets became distorted years ago when QE and super low interest rates hit the economy in an effort to lessen many of the missteps of recent years.
This has been more helpful in holding up the underlying value of assets and derivatives it now appears than helping to repair a wounded economy. QE has up to now stopped an implosion of derivatives including the resulting contagion and shock that would have spread throughout the financial system. Unfortunately the economy has not fared as well as these asset prices and in many ways these policies have harmed Main Street. More on this subject in the article below.
http://brucewilds.blogspot.com/2014/05/facing-our-economic-armageddon.ht...
If you inflated asset prices, as was the plan, of course people with assets get far richer... and people without assets get farther behind.
Good thing most Americans go to government run schools, or the ruling class would have never been able to pull this off.