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15 Years Of Stimulus - Nothing To Show

Tyler Durden's picture




 

Submitted by David Stockman via Contra Corner blog,

At this point 15 years ought to count for something. After all, we have now used up one-seventh of this century. So you can’t say its too early to tell what’s going on or to identify the underlying trends.

Indeed, during that span we have encompassed several business cycles, two financial crises/meltdowns and nearly a non-stop blitz of “extraordinary” policy interventions. To wit, a $700 billion TARP, an $800 billion fiscal stimulus, upwards of $4.0 trillion of money printing and 165 months out of 180 months in which interests rates were being cut or held at rock bottom levels.

You’d think with all that help from Washington that American capitalism would be booming with prosperity. No it’s not. On the measures which count when it comes to sustainable growth and real wealth creation, the trends are slipping backwards—– not leaping higher.

So here’s the tally after another “Jobs Friday”. The number of breadwinner jobs in the US economy is still 2 million below where it was when Bill Clinton still had his hands on matters in the Oval Office. Since then we have had two Presidents boasting about how many millions of jobs the have created and three Fed chairman taking bows for deftly guiding the US economy toward the nirvana of “full employment”.

Say what?


Breadwinner Economy Jobs – Click to enlarge

When you look under the hood its actually worse. These “breadwinner jobs” are important because its the only sector of the payroll employment report where jobs generate enough annual wage income—about $50k—- to actually support a family without public assistance.

Moreover, within the 70 million breadwinner jobs category, the highest paying jobs which add the most to national productivity and growth——goods production—-have slipped backwards even more dramatically. As shown below, there were actually 21% fewer payroll jobs in manufacturing, construction and mining/energy production reported last Friday than existed in early 2000.

Goods Producing Jobs - Click to enlarge

Goods Producing Jobs – Click to enlarge

Then take the matter of productivity growth. If you don’t have it, then incomes and living standard gains become a matter of brute labor hours thrown against the economy. In theory, of course, all the business cycle boosting and fine-tuning from fiscal and monetary policy, especially since the September 2008 crisis, should be lifting the actual GDP closer to its “potential” path, and thereby generating a robust rate of measured productivity growth.

Not so. Despite massive policy stimulus since the late 2007 peak, nonfinancial business productivity has grown at just 1.1% per annum. That is just half the 2.2% annual gain from 1953 until 2000.  So Washington engineered demand stimulus is self-evidently not pulling up productivity by its bootstraps.

Indeed, if you go back to the 1953-1973 peak-to-peak period, which also encompassed several business cycles, the annual productivity growth rate averaged 2.7% or two and one-half times the last 15 year outcome.

But here’s the thing. That sterling result occurred during those allegedly benighted times under Eisenhower, who believed in balance budgets, not Keynesian stimulus, and delivered several of them. It also encompassed the “new economics”  era of the Kennedy-Johnson Keynesians, who dismissed a calendar-bound balanced budget approach, but to their credit did believe in balanced budgets over the business cycle. And they made good on that theory by getting LBJ to raise taxes and cut spending when the guns and butter economy got over-heated in 1968.

And most importantly, it was also the time of the “light touch” monetary policies of William McChesney Martin who presided at the Fed during most of this period. Unlike the Bernanke/Yellen Fed that still can’t gets its hand off the stimulus button 70 months after the Great Recession ended, Martin once took the “bunch bowl” away only 4 months after a business recovery commenced because he believed his job was done. Growth was up to capitalism, not the FOMC.

The same picture occurs on real median household income. During the same 1953-1973 interval, real median family income grew at 3.0% annually, rising from $26k to $46k during the period.

By contrast, over the course of the next 27 years, and after Washington ended both the Bretton Woods gold standard anchor on money and the practice of balanced budgets, real median incomes grew by only 0.8% annually, rising to $57k by the year 2000.

Needless to say, its been all downhill since then. Real median income was $53k in 2014. That means median living standards of US households have been falling at a 0.5% annual rate since the turn of the century.  There is no prior 15 year period that bad, including the years after the 1929 crash.

122407_0123_TheRecessio1

The argument of the Keynesians is that capitalism is a chronic underperformer. Left to its own devices it is always leaving idle labor and capital resources on the table, and is even prone to bouts of depressionary collapse absent the counter-cyclical ministrations of the state and its central banking branch.

Well, then, given the monumental size and chronic intensity of policy stimulus during the last 15 years, that particular disability should have been eliminated long ago. The US economy should be surfing near its full potential.

In that regard, one measure of high resource utilization most surely would be the labor force participation rate. As shown below, however, after the one-time boost of increased female participation after 1980, the trend has been in a nose-dive. And its not due to the baby-boom getting old and repairing to the shuffleboard courts.

The data in the graph are for the prime labor force age 16-54. Since the year 2000——a time when the Fed’s balance sheet soared by 9X from $500 billion to $4.5 trillion—–the prime age labor force participation rate has plummeted by 10 percentage points.

Employment-16-54-040615

The exact same underutilization trend can be seen in the measures of aggregate labor hours. Even if productivity has turned punk, it might be thought that all this policy stimulus would flush labor hours into the economy. But despite an increase from 212 million to 250 million of the working age population since the year 2000, there has been virtually no gains in labor hours utilized by the private business economy.

Stated differently, the Jobs Friday revilers are operating on the duplicitous assumption that all headline jobs are created equal—-even though it is well known that the BLS counts a four hour window-washing gig and a 40-hour week in a steel mill the same. So the underlying truth is that actual apples-to-apples labor utilization has been going nowhere. In Q4 2014 the index of non-farm labor hours utilized by the business sector posted at 109.8——virtually the identical level recorded in early 2000.

That’s right. After growing at a 1.6% annual rate for a half-century running (1953 to 2000), labor resourced deployed have flat-lined for the past 15 years. Rather than contributing to higher utilization of resources, the massive, chronic stimulus policies of recent years have been associated with just the opposite.

The 15-year trend in the other important input to true growth and wealth creation—-real net business investment—displays the same dismal pattern. Real net investment in business fixed assets is still lower than it was in 1998.

So when it comes to the building blocks of prosperity, policy stimulus has not been stimulating much of anything—–except a slide downhill. And the reason is not hard to find.

The monetary politburo in the Eccles Building ignores all these fundamentals in order to focus on the short-run “incoming data”. It actually believes it is steering the business cycle as in times of yesteryear when the credit channel of monetary transmission still functioned effectively—even if destructively in the long-run.

But that was a one-time parlor trick. As we have consistently documented, households are at “peak debt” and on a net basis can no longer raise their leverage ratios to supplement wage and salary based income with more borrowings. Likewise, business borrows hand-over-fist in response the Fed’s dirt cheap cost of debt, but the proceeds go into financial engineering, not productive investment.

So the Fed blunders forward, oblivious to the fact that it is now 2015, not 1965, maintaining the lunacy of zero or soon near-zero interest rates. That maneuver creates floods of new credits, but in the form of gambling stakes which never leave the canyons of Wall Street. So doing, they inflate financial assets values until they reach such absurd heights that they collapse of their own weight.

The Fed has thus become little more than a serial bubble machine. Tracking the incoming data during the intervals between financial boom and bust, it mistakes unsustainable  short-run gains for real economic growth. But overwhelmingly, the in-coming data has been recording temporary GDP and born again jobs.

That too was on display in Friday jobs report.  For the second time this century we have had a boom in the part-time economy of jobs in bars, restaurants, retail, leisure and personal services. These jobs on average represent 26 hours of work per week and average wage rates of around $14/hour, thereby generating less than $20k on an annual basis.

Part Time Jobs - Click to enlarge

Part Time Jobs – Click to enlarge

Since the top 10% of households account for upwards of 40% of consumer spending it is not hard to see what will happen next. When this third and greatest financial bubble of this century finally collapses, the bread and circuses jobs will vanish in a heartbeat.

Bread and Circuses Jobs - Click to enlarge

Bread and Circuses Jobs – Click to enlarge

Then perhaps the truth will sink in. Fifteen years of policy stimulus and absolutely noting to show for it. On a net basis, the only jobs created during this entire century are in the HES Complex (health, education and social services).

Nonfarm Payrolls Les HES Complex Jobs - Click to enlarge

Nonfarm Payrolls Les HES Complex Jobs – Click to enlarge

The thing is these jobs have nothing to do with cheap interest rates and easy credit. They are a function of the entitlement state and the massive $200 billion per year of tax subsidies which support employer-funded health benefits.

Needless to say, if you spend enough public money in the HES Complex you will get some job growth. You will eventually get a fiscal calamity, too.

 

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Wed, 04/08/2015 - 15:53 | 5972477 NoDebt
NoDebt's picture

Obviously we didn't do enough of it.  There can be no other explanation.

Wed, 04/08/2015 - 15:57 | 5972495 negative rates
negative rates's picture

Are you certain we couldn't have been wrong about anything?

Wed, 04/08/2015 - 15:59 | 5972506 NoDebt
NoDebt's picture

Yes, quite certain.  Plan was flawless.  Zero mistakes.

Wed, 04/08/2015 - 16:00 | 5972512 KnuckleDragger-X
KnuckleDragger-X's picture

Awesomeness all the way to the iceberg...

Wed, 04/08/2015 - 16:04 | 5972534 Beam Me Up Scotty
Beam Me Up Scotty's picture

Wait.A.Minute.  Haven't I been hearing about how low unemployment is?  The nightly nooos keeps telling me its only 5.5%.  Isn't everyone werking?  Or are they just twerking?

Wed, 04/08/2015 - 16:02 | 5972516 TruthInSunshine
TruthInSunshine's picture

THE BORAT SONG

In my country there is problem
And that problem is the Jew
They take everybody money
And they never give it back

Throw the jew down the well (repeat line)
So my country can be free (repeat line)
You must grab him by his horns (repeat line)
Then we have a big party (repeat line)

If you see the Jew coming
You must be carefull of his teeth
You must grab him by his money
And deny him more forgery

Wed, 04/08/2015 - 16:01 | 5972518 Amish Hacker
Amish Hacker's picture

Is that you, Krugman?

Wed, 04/08/2015 - 16:14 | 5972565 junction
junction's picture

The statistic Stockman avoids is the number male job holders in the period 1977 to 2014. That number has plunged.  In 1977, as we all know, many middle class families still had one breadwinner.  That middle class salary could pay the bills.  Necessary family costs - cars, gasoline, rent, college tuition, interest rates (until 1978) - were pretty cheap.  Thanks to trickle-down economics, massive CIA drug smuggling in the 1980s under Reagan (remember Barry Seal and the Mena, Arkansas airfield), the looting of overfunded big corporation pension plans (which became underfunded after the 1987 stock mark crash) and massive tax cuts to the rich, the USA was on its way to a wrecked national economy.  The looters after Reagan just followed his golden rule, help out your friends and, while smiling, throw everyone else under the bus.  By the time the peasants realized they had been had, it was too late, their well-paying middle class jobs had been incinerated.  Reagan Budget Director Stockman later went to work at a hedge fund, where he probably used the "carried interest" tax dodge to cut his taxes to the bone.  Only little people pay taxes or listen to Stockman.

Wed, 04/08/2015 - 16:15 | 5972574 Beam Me Up Scotty
Beam Me Up Scotty's picture

While not losing sight of the presidents between Reagan and Obama, Obama singlehandedly increased the Federal Debt by more than every single president before him.  Oh, and lets not forget the Social Security trust fund is full of paper IOU's also.

Wed, 04/08/2015 - 16:33 | 5972657 Grinder74
Grinder74's picture

"Obama singlehandedly increased the Federal Debt by more than every single president [COMBINED] before him."

 

Key ommission there.

Wed, 04/08/2015 - 16:35 | 5972664 Beam Me Up Scotty
Beam Me Up Scotty's picture

Thats what I meant to say.  Thanks.

Thu, 04/09/2015 - 02:49 | 5974350 turnoffthewater
turnoffthewater's picture

Doesn't have anything to do with presidents. Voting is just a ploy to make one feel like they've done something. The real culprit (banks) and a lesser extent govt but govtis controlled by their handlers. Look here:

http://research.stlouisfed.org/fred2/graph/?id=PRS88003093

They've been skimming for a long time.

As some other poster here always says:

They owe us. LOL

Wed, 04/08/2015 - 21:22 | 5973669 SlowMoney
SlowMoney's picture

Remember the budget cuts that where agreed to but never happened after the tax cuts during the Reagan revolution? Who is the blame for that? 

Remember the ridiculous "Free Trade agreements"? In the 50's and 60's we gave away the US electronic industry and in the 80's and 90's we gave away the American auto industry.

How stupid does someone have to be to think that an American worker can compete with foreign competition paying pennies on the dollar for a day of labor ? 

In the 60's - 70's if you stopped at a red light and looked around 8 of 10 cars were American made, after our "Brilliant" leaders gave away the American car industry - maybe 3 of 10 cars are American made. (and 1/2 of those have foreign parts)

The death of Detroit ! 

The death of high paying jobs !

 

 

Wed, 04/08/2015 - 17:19 | 5972826 angel_of_joy
angel_of_joy's picture

Could use exactly the same headline with NASDAQ instead of "stimulus"... Good as an argument to placate the BTFD and/or "techs are awesome" crowd.

Wed, 04/08/2015 - 23:20 | 5974009 blowing winter
blowing winter's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com

Wed, 04/08/2015 - 15:54 | 5972485 Took Red Pill
Took Red Pill's picture

Despite what the Fed said, the stimulus was never meant to create jobs or help the middle class

Wed, 04/08/2015 - 15:59 | 5972507 LawsofPhysics
LawsofPhysics's picture

Can't be long now before some real big players start cutting each other down.  Yes, it's a club, but membership does change from time to time...

Wed, 04/08/2015 - 16:02 | 5972526 KnuckleDragger-X
KnuckleDragger-X's picture

Yep, I expect cannibalism to be a coming attraction and its not like they haven't done it before.....

Wed, 04/08/2015 - 16:13 | 5972567 Son of Loki
Son of Loki's picture
Illinois employers plan for more than 2,800 layoffs

 

http://www.chicagotribune.com/business/breaking/ct-warn-layoffs-0407-biz...

 

Better then expected Robustness.

Wed, 04/08/2015 - 16:37 | 5972669 SDShack
SDShack's picture

I've always said when the sociopaths start feeding on each other, it's because they have stolen all the easy stuff from the masses and need a big play for their next power fix. Just like Mafia Dons. You know the top is in and the end is near when it starts happening. I think we still have a ways to go.

Wed, 04/08/2015 - 15:57 | 5972500 LawsofPhysics
LawsofPhysics's picture

And the same criminals in charge.

Massive fail, for the middle class.  Massive windfall for the 1%.

Time for a refund or retribution motherfuckers...

Wed, 04/08/2015 - 15:59 | 5972505 KnuckleDragger-X
KnuckleDragger-X's picture

Nonsense GS, JPM etal have a lot to show for it. Of course if your a sheep, you've been sheared regularly but it's for your own good don'cha know....

Wed, 04/08/2015 - 16:09 | 5972553 optimator
optimator's picture

And if short, skinned alive.

Wed, 04/08/2015 - 16:02 | 5972528 Rainman
Rainman's picture

Look at the bright side. Kleptocracy always collapses sooner or later under the weight of its insatiable greed. Sadly, in this case, it's getting later and later .

Wed, 04/08/2015 - 16:03 | 5972533 ebworthen
ebworthen's picture

Nothing to show?  http://www.usdebtclock.org/

Wow!  Look at it go!!!

Wed, 04/08/2015 - 16:14 | 5972575 davidalan1
davidalan1's picture

So at what point does it go exponential?

Wed, 04/08/2015 - 16:28 | 5972635 Beam Me Up Scotty
Beam Me Up Scotty's picture

"Wow!  Look at it go!!"

Kind of like how the "dollars" on the gas pump were going when gas was over $4 a gallon.  The gallons number didn't move nearly as fast as the dollars number did.

Wed, 04/08/2015 - 16:06 | 5972539 Smiley
Smiley's picture

Nothing to show, what are you talking about?  I think it showed pretty darn well that anybody who has faith in the FED and the US government are completely retarded.

Wed, 04/08/2015 - 16:06 | 5972540 davidalan1
davidalan1's picture

Sounds like my relationship with the wife.

Wed, 04/08/2015 - 16:06 | 5972541 pob
pob's picture
15 Years Of Stimulus - Nothing To Show

 what about Hookers and blow ?

Wed, 04/08/2015 - 16:11 | 5972557 papa song
papa song's picture

Nothing to show!?  Hardly!

'You eat what you kill': Wall Street bonuses keep soaring as profits decline

http://www.theguardian.com/money/us-money-blog/2015/mar/15/wall-street-b...

Wed, 04/08/2015 - 16:11 | 5972563 Dr. Engali
Dr. Engali's picture

Sure we have something to shoe for it. The banks are bigger than ever and we have 18 trillion in debt and counting.

Wed, 04/08/2015 - 16:15 | 5972577 junction
junction's picture

What about the reported 2 quadrillion dollars in dervatives floating around?

Wed, 04/08/2015 - 16:15 | 5972579 Comte d'herblay
Comte d'herblay's picture

heh-heh...U said......" clinton had his hands on matters"......

oh, and there is likely no correlation between the fact that women---bored to death at home with their unwanted children---- decided to enter the work force by the tens of millions and the stagnation in standards of living for the middle classes. None. really.

Wed, 04/08/2015 - 16:26 | 5972627 taketheredpill
taketheredpill's picture

huh?

Thu, 04/09/2015 - 17:17 | 5976506 Comte d'herblay
Comte d'herblay's picture

Supply and demand.  Eco 101.

The more people who enter the workforce, the less they all make. If I have one hundred qualified applicants for a job, I can offer less money to those I hire.

The immigrant labor pool is the best example I can give you.

Don't think of women in a purely Gender scenario, but in the overall addition of tens of millions of them to the workforce/ labor pool.

 

Wed, 04/08/2015 - 16:16 | 5972587 Dr. Engali
Dr. Engali's picture

Just think of how horrible thing would have been if we hadn't added trillions in debt. I love you Paul Krugman, you big bearded potato you.

Wed, 04/08/2015 - 21:33 | 5973705 thecrud
thecrud's picture

But what would the hole have been if the banks were to have let go bust and stay that way.

It most certainly would have been uglier than the great depression.

As ugly as this is it is a far better fate.

Wed, 04/08/2015 - 16:28 | 5972633 Chuck Knoblauch
Chuck Knoblauch's picture

Isn't it time to release the bogus household wealth numbers?

Wed, 04/08/2015 - 17:11 | 5972806 SilvertonguedAngel
SilvertonguedAngel's picture

Nothing to show? What about the 12 trillion or so of debt added onto our ledger?

Wed, 04/08/2015 - 21:30 | 5973700 thecrud
thecrud's picture

Actually it has held for 21 days at 18,112,975,000,000.

Wed, 04/08/2015 - 21:52 | 5973752 thecrud
thecrud's picture

This is not enough debt for Republicans who want to build this. http://www.bbc.com/news/32227680

at least a trillion my guess.

Wed, 04/08/2015 - 18:02 | 5973034 thecrud
thecrud's picture

And where is it compared to when Bush left office.

Wed, 04/08/2015 - 19:16 | 5973255 Hohum
Hohum's picture

Perhaps not such a surprise since capital expenditures (world) on oil exploration since 2000 have skyrocketed while production has inched up.

Wed, 04/08/2015 - 21:27 | 5973684 thecrud
thecrud's picture

I could fix everything over night. Add two words to every bill Silver Certificate.

My work fixing America is done.

Wed, 04/08/2015 - 22:55 | 5973922 PADRAEG
PADRAEG's picture

Stockman does some great analysis. Seems to me the 2 greatest presidents in my lifetime are Ike & Reagan, both probably rank amongst the lowest for causing American casualties in 'wars.'

Ike ran a university, Reagan overturned 'settled' economic theory. They may not have been the brightest light in every room, like Clinton & Obama, but their belief in beliefs set a course for economic growth for at least one decade after they left office.  

Fri, 04/10/2015 - 16:52 | 5980308 Mister Delicious
Mister Delicious's picture

in fairness:

'he Bottom Line
The TARP program is estimated to cost taxpayers about $32 billion, much less than the OMB's report that estimated $63 billion. This is largely because the CBO projects a lower cost for the mortgage programs.

Although some of the funds will be lost or written off, the program comes at a much lower cost than previously expected and, while it is true that TARP provided an infusion of capital to banks (some would say they were "bailed out"), most of the banks have paid back the funds with interest.'

http://www.investopedia.com/articles/economics/12/tarp-4-years-later.asp

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