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2014's "Robust" Jobs Market Produced No Wages, And Now No Spending
Submitted by Jeffrey Snider via Alhambra Investment Partners,
For all the hype about jobs and the booming (GDP) economy, the major portion of the retailer calendar around Christmas was a total bust. In many ways it was worse than last year, which emphasizes simply how the business “cycle” as it was understood in textbook economics no longer applies. The US economy, indeed the global economy as there are no idiosyncrasies in the globally financialized world, remains stubbornly captured by attrition.
Retail sales (ex autos) were barely 3% in December, still about half of what should mark the floor for an actual economic expansion. Taken as a unified calendar event, the core of Christmas shopping (subtracting both food sales and autos) was the third worst of this century, meaning 2014’s holiday season was only better than the two recession years.
Even adding back food sales only raises the comparisons slightly, indicating a primary reason why expansion hasn’t been a true recovery these past few years. The disparity here between auto and food sales at the margins and all the rest is an artifact of artificiality. There is clearly a bifurcation in economic terms, as those who are doing well can afford to eat out at expensive places and buy big ticket autos, especially luxury, but for all the rest there is nothing but gut-wrenching attrition.
That is where the elongated cycle originates, as the economy performs far less uniformly than in the past where this type of misallocation was less apparent. Unfortunately for those monetary adherents that believe in asset bubbles as something of an ingredient within “aggregate demand”, this is pretty conclusive evidence that spending for the sake of spending does not lead to more homogenous expansion. Instead, with stratification intensifying, the segments of the economy unreached by asset inflation and redistribution efforts are left to pay the price for the socialization of “fill in the troughs without shaving off the peaks.”
As you can plainly see in the charts above, those doing well enough because of redistribution are not enough of an offset to the far, far greater numbers increasingly left behind. That is how you get even online shopping faltering when it was fully expected to perform the role of economic savior (in terms of consumerism and retailer profits).
This is all undoubtedly nothing surprising for credit and funding markets that are increasingly pricing higher probabilities of an end to the elongation (and that’s not good). In other words, the dichotomy between growing pessimism in credit/funding and economists is due to the continued failure of the economy to produce what economists expect. For their part, economists at least acknowledge somewhat of past failures in expectations, as even the FOMC was forced to admit a distinct and clear lack of wage growth, instead relying solely on a major difference this year with GDP and the unemployment rate being significant and valid.
As I said earlier this week, that means optimism about future wage growth is all that stands before an end to the recovery narrative.
But if you actually examine the pattern of major economic statistics against these spending figures there is even more reason to doubt future wage growth. As is completely well-known by now, the Establishment Survey has kicked into high gear in 2014, producing the best run in job growth since 1999. Yet, as you see plainly immediately above, what was once a relatively robust correlation between the Establishment Survey and actual spending no longer seems to apply. For the most part, the breakdown in the Establishment Survey against spending seems to have occurred sometime in 2013 (since jobs are a lagging indicator, the slowdown in 2012 should have shown up by Christmas 2013; instead the Establishment Survey simply parted company with retail sales and pretty much everything else).
So the one account upon which economists are placing the whole of the recovery, and to which they plead for “markets” to ignore everything else, doesn’t even make much sense in the manner it should most.
That can only mean that the jobs being created are so ridiculously low paying as to be essentially worthless in terms of economic and income circulation, or those jobs simply don’t exist. The behavior of the labor force itself, which amounts to a curiously high degree of economic apathy, concurs with probably more emphasis on the latter explanation (the jobs don’t exist).
If this dichotomy were limited to a much more condensed time period then it may not matter so much. However, I think, especially with December, that markets have simply given up waiting for the Establishment Survey to produce something other than glowing media reviews about an artificial or even imaginary economy that doesn’t exist anywhere else. The rest of the world has given up on the US “recovery” so it may just be a matter of time before the narrative falls apart in full and the revisions to the labor market are due.
In terms of future growth, this reductive holiday spending reality means more discounted goods into 2015 (“deflation” wholly apart from crude oil) and less robust ordering until laid up inventory clears. In other words, the winter is likely about to get much colder.
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Am a business owner with no desire to hire. Feeling rather John Galt-ish these days.
So maybe I am the problem? If so, let the Venezuelan bus driver straighten me out.
But I thought EBT and SSDI were jobs...and good paying ones at that.
come on FSA, SPEND!
OH I forgot....it's FREE
Wheels be comin' off this K-car, JUMP!!!!
"which emphasizes simply how the business “cycle” as it was understood in textbook economics no longer applies "
The stable business models on the front side of the Hubbert curve are finding out now that operating on the backside of that curve is structurally challenging.
Pretty tight work, Snider. Particularly like your holding:
failure of the economy to produce what economists expect.
The economists "expect" what the TPTB want, and that shit ain't got no play.
Lace up. Gonna get interesting soon.
You are not the problem
You are the solution.
Not in Greece:
... the Greek experiment, eventually, turned out to be a failure in every aspect. The cruel neoliberal policies have left behind millions of devastated lives, but the economic indexes didn't improve at all. On the contrary, public debt rose, unemployment hit record high, as well as poverty and social exclusion.
Reduce the supply of labor to raise wages.
Give every American a $100,000 pre-paid debit card to increase demand.
Yeah, $31 trillion ought to do it.
For now.
Interesting story for those out here in insanely sane land. Was at the LCS today and noticed a sign that said due to shortages of physical metals because of FUTURES activity has forced us to raise premiums.
Anyone else seen this as of this new year? Love to hear about it.
I recommended that all the sheeple out there not spend this Christmas season to send a message to the bankers and government. You all listened, thank you, but now we have to send this message home this spring until they stop spending money they do not have and stop robbing the few of us that still work (off the books as much as possible and barter as much as possible).
edit - just my own way of going Galt that is practical for me in today's society.
Tyler for President
My goal is to be the best "burger flipper" 1/2 time "Walmart greeter" 1/2 time the world has ever known.
I guess that is between your humanitarian work on the beaches of cyclone torn Australia and your philanthropic endeavor at the soup kitchens in the ghettos.
Good article, Snider.
I don't drink soda so I can't help the big soft drink companies.
I don't eat out because the food available sucks or is not prepared to my liking therefore I,or rather my wife cooks for me ( a great cook at that ) so I'm not contributing to big restaurant or small eateries .
I refuse to go to the movie theaters because it's A: a waste of money and it's like walking into a Federal building with cops in every corner looking for trouble, and the food sucks and fuck the Hollywood hypocrites.
I drive much less because I prefer to walk and exercise
so screw big oil
I refuse to shop at big box stores IE: Wal mart because its nothing but throw way junk that is over priced, and the people who frequent said big box sites are nothing but ignorant born and bred dopes who I would rather avoid .
Bottom line I spend 80% less than I did a year or two ago and will continue to do so maybe even up to 100% less spending as long as we have the retards we have now at the helm .
Just doing my part to starve the beast that lies within.
The government has been warning us about the emerging threat of 'your' fiendish type of religious terrorism for years.
Threat Code: orange-red - shelter while consuming.
I am not afraid... Je suis un Wal*Martian!
NAFTA, GATT, and all of the other insidious "free trade" agreements that led to tens of thousands of factories moving overseas are to blame more than anything else. The "free traders" have killed the middle class, just like the classic story of the greedy farmer who killed the goose that laid the golden eggs. What used to produce plenty of gold for all is now just a dead goose, hardly fit for the stew pot; nice work, assholes.
You are right but a solution is to avoid buying any of that import crap including autos. A local economy is best and better yet if under the radar.
My wife let me go pick up dog poo today. I consider myself fully employed even though we don't own a dog.
Been trying to eat healthy the last year and finally stopped in at Burger King and got a dollar cheeseburger and the fukker was so small and tasted like cardboard. Unless you want to pay 6 bucks for a burger at BK this is the new economy. You get what you pay for and it is garbage.
Obama supporter must have the memory of a goldfish... According to President Obama's economic team the $823 billion dollar stimulus program was needed to generate 450,000 new jobs per month. Anything less than 450,000 jobs would result in the economy contracting.
So yes, TeamObama is running faster than ever. The problem remains that hamsters on a running wheel never actual go anyplace.