“It’s the economy, stupid!” Part II

“The sky is falling, the sky is falling!” – attributed to Chicken Little.

The sky is not falling. The world is not coming to an end and the Apocalypse is not upon us. We are in the Great Recession, one that began in 2007 and the worst since the Depression, but we’ve been there before and we will probably be there again, at some point.

(Your not so humble columnist’s advice – drink coffee, now.)

Numbers:

The economy (GDP) grew at a rate of 3.7% for the first quarter of 2010, 2.4% for the second, for an aggregate of 3%.

Imports in the second quarter are up 28.8% from the first (we’re buying) and exports are up 17%.

GDP growth numbers for 2007 – 1.9%, 2008 – zip, 2009 – <2.6%.>

Investments in equipment and software – up 20.4% in the first quarter of 2010, 22% in the second.

Despite brutal unemployment numbers, the economy has clearly turned the corner under President Obama. Clearly, also, the previous administration drove the car off the cliff. For those not versed in the numbers, a 3% growth in the GDP is considered the minimum for a healthy economy.

Does the downturn in growth in the second quarter of 2010 mean that we are headed for a “Double Dip” recession?  Nope. It could happen if consumer buying and confidence continues to remain stagnant or even drop. And why is consumer confidence so shaky? One word:

Republicans.

In the middle of a mid-term election year, it behooves Republicans to downplay the signs of recovery, in an effort to regain control of the Congress and various state offices.

Fortunately, there are signs that their message is not being accepted readily by Americans. Democratic numbers are slightly up, Tea Party disapproval numbers are up, as well, and Congressional approval totals still are at rock bottom.

Consumer spending drives two-thirds of the American economy. If Americans draw back from spending due to fear, Democrats will have no choice but to belly up to the bar and order another drink. Given the current political climate, that would be political suicide, but it would be the right thing to do.

While we teeter on the brink, now is not the time to be timid or to play politics. TARP and Stimulus saved us from Depression – now we need to be vigilant in ensuring that the economy continues it’s fragile recovery.


William Stephenson Clark


44 Comments

Filed under Economics

44 responses to ““It’s the economy, stupid!” Part II

  1. GMC70

    “and the worst since the Depression, “

    Really? REALLY?

    You people clearly don’t remember the 70’s. (yes, throw in your favorite joke here).

    Worst economy since the depression? That’s political BS, not actual economic measurement.

    On to the rest: Why is consumer confidence so shaky? Why are business so reluctant to hire? Obama, and the “change” mantra.

    Businesses will not hire, and consumers will not stick their necks out to borrow, without some certainty as to what policies will be 2-3-4-5 years out. And Obama’s “change” mantra has brought massive waves of uncertainty.

    Would a business, not knowing what is coming with health care reform, for example, hire new workers right now? No. They need to be able to plan, and planning is the one thing that is not possible in the current environment.

    • indypendent

      But alot of those companies who are waiting to see what healthcare reform brings – are they even offering health care now to their employees?

      If not, then wouldn’t they be offered some incentives and help to provide it through Obamacare?

      And who knows, it might be cheaper if they got to actually control their healthcare costs.

      As it is, for-profit health insurance companies can pretty much do what they want and we either take it or leave it.

      They don’t care!

      • The GOP is blaming health care for much more than they should. Go back and remember they reacted to social security retirement in the same manner.

        Today, they yell to get government out of their social security. 😉

        Now, list ALL the legislative accomplishments of the GOP for say the last twenty years. Do we need to wonder why they are so angry?

  2. Here’s some interesting information on ‘hiring trends,’ and shows that improvements are in the works. Yes, it’s slow, but it is good news.

    http://employeeissues.com/blog/job-hiring-trends/

    And, of course, we’ve all seen the “bikini graph” which shows there hasn’t been a single month of the Obama presidency when as many jobs were lost as during the Bush presidency! Things are looking up since this great recession began in the fall of 2007!

  3. WSClark

    “Really? REALLY?”

    Really. Every major economist says that the meltdown of September 2008 was the worst financial disaster since the Depression and has caused the worst recession since then. I lived through the recessions of the 70’s and 80’s – this is much worse.

    “Why are business so reluctant to hire? Obama, and the “change” mantra.”

    I worked in business management for 30+ years and was largely responsible during those times for forecasting sales and manpower requirement. Uncertainty was not part of the equation. Long range planning may be affected by “uncertainty” but that only extends to major capital investments such as “bricks and mortar” and major expansions.

    Hiring practices, on the other hand, are a short-term – one to two year – forecast, less for lower skilled jobs. Employment is a lagging indicator, but there are many factors that come into play. One of the major factors is that, after a lay off, companies find that they can work with smaller staffs.

    Consumer confidence is as fickle as the Stock Market. The DOW reacts to every pebble in the road, the Index does the same.

    By and large, as I have noted, most consumers don’t know how to read economic indicators. The fact that we have had a rebound in the GDP of 3% this year, after a negative performance last year of nearly the same should give consumers confidence that a corner has been turned.

    Unfortunately, it doesn’t work that way. Most consumers are more affected by a continual drum beat of “the sky is falling” than by any concrete statistics.

  4. You have to be looking for sadness and frustration to listen long to that drumbeat of woe is me, doom is our future…

  5. U.S. Companies Add 71,000 Jobs; Unemployment at 9.5%

    Companies in the U.S. added workers in July for a seventh straight month at a pace that suggests the labor-market recovery will be slow to take hold.

    Private payrolls that exclude government agencies rose by 71,000 after a June gain of 31,000 that was smaller than previously reported, Labor Department figures in Washington showed today. Economists projected a 90,000 July increase, according to the median estimate in a Bloomberg News survey. Overall employment fell 131,000 and unemployment held at 9.5 percent.

    http://www.bloomberg.com/news/2010-08-06/company-payrolls-rose-by-71-000-in-july-u-s-jobless-rate-9-5-.html

  6. indypendent

    The economy will only improve if and when people with the money stop playing this game of I am going to wait to see what political party is in power until I hire.

    Too much of our daily lives is involved in politics.

    Why can’t every company in America offer to hire just one more person? If that takes giving the company a tax break, then so be it.

    Take some of these millions spent on campaigns telling us how one is more pro-life, more pro-gun, more pro-God than the other guy is and set up companies that can compete in the free market.

    But let’s stop giving all the tax dollars in subsidies to the wealthiest corporations for a little while. These corporations have all made very good profits for many years – now is the time to show some gratitude and patriotism and forego that bigger-than-usual profit and hire at least one more person in each workplace. And if corporations are willing to hire at least one more person – then they get a tax break for that one additional worker – no unending subsidies.

    It all comes down to priorities – in my opinion.

    And the priorities we have today are two things – money and more money.

    Rampant unchecked greed is a cancer and our economy is full of cancer.

  7. indypendent

    Today, they yell to get government out of their social security

    ——–

    I would go for that IF I am allowed to get back all the money I put into it and I am the one that keeps the money – not the Republican-controlled government to gamble it on Wall Street.

    I don’t want it privatized by Republicans – I want it privatized by me!

    Now on to Medicare – let’s get rid of it entirely and then we’ll see how fast these for-profit health insurance companies sign up all these seniors with their medical needs.

    I suspect one reason why Republicans will never abolish Medicare or Social Security is because their senior base would eat them alive if they dared to touch their entitlements.

    But these same seniors don’t seem to care if Republicans take the other guy’s same Medicare and Social Security.

  8. tosmarttobegop

    I remember the seventies and thought tough it was nothing as tough as now. there were still base employments. You would not make much more then minim wage and more just minim.
    But still there were many of those jobs to be had, not so today and those out there are being contended for by not just the lowly trained or education. Workers of ever strip is contending for the few job out there.

    I would compare what is happening now to being afraid of the dark.
    There is nothing out in this darkness that is not out there in the daylight.
    There is no shortage of money, there is a demand but is being stifled out of fear of the dark.

    But how to stop that fear?

    The consumers still want to be consumers, they are in fear of losing their jobs since the catch 22 of the fear.
    Business is not making if any are left that do make anything for themselves because of the fear of the darkness.

    It really is nothing more then self fulfilling prophecy, if fearing it will happen and then make it happen!
    There is nothing in the health care reform that was not already the condition that business faced before the reform.

  9. tosmarttobegop

    OK a little criticism of the President now, he is on the TV. making a speech.
    But what he is saying is like he is praising the workers who made horse collars and buggy whips.
    And that it is their craft and skills that are the better hope for the future of the country.

    Are you getting where I am going with this?

    It has been pointed out several time on this blog that those jobs just are not coming back!

    I am not disputing his contentions as to the American workers, just that all that praise does not good unless there are other changes.

    • indypendent

      I understand what you’re saying and I agree.

      Maybe a better way of expressing what I think he is trying to say is – Americans have always been the ones that have had the know-how and skills to create their own successes.

      But even with that – if the workers are not producing what is being sought in the marketplace, then all the ingenuity in the the world is for nothing.

      Besides – our economy is too unbalanced to the service-oriented economy. We just do not produce that much anymore in the USA.

      But here is a factor that was not so prominent in the 70’s – illegal immigration.

      With all the cheap labor exploitation – what has that done to the economy – rather than make a few wealthy corporations wealthier?

    • I see this as cheer leading. I think that is one function of the president. I agree much more is needed, but praise and optimism are needed among the doom and gloom.

      • indypendent

        You’re right – the president does need to be optimistic and cheer leading us on.

        Sometimes when I listen to Obama make a speech or just explaining something, I can imagine him being that law professor.

        You know what I mean? Professors have that certain way of talking and, although they are very bright, intelligent and smart, their words can seem to be off the topic at times.

        I also see Obama as a solid sausage-making Democrat.

        I think that is what is so maddening to the more liberal Obama supporters. They see Obama as dragging his feet. I see Obama as being that traditional sausage-maker going through the process to get legislation passed.

        That was the way Obama was in the Senate (and also the Illinois legislature). He was always the one trying to get both sides to compromise to get something passed.

  10. indypendent

    Now, list ALL the legislative accomplishments of the GOP for say the last twenty years. Do we need to wonder why they are so angry

    ——-

    By accomplishments – do you mean

    1) Reagan’s trickle-down economics – which was later aptly described as voodoo economics?

    2) Reagan giving weapons to Iran?

    3) Two for-profit wars under G.W. Bush?

    4) Numerous executive powers signed by Bush and the most dangerous of all to us was giving him the power to label anyone an enemy combatant?

    5) Reagan emptying out the mental hospitals to save on social programs? Alot of those patients wound up in nursing homes, jails, prisons or homeless.

    And my personal favorite –

    5) Reagan trying to get ketchup classified as a vegetable for school lunches.

    I know – that last ketchup thing never passed – but it is my favorite Reagan story.

  11. I know a young couple who live on the east coast and they are looking to buy a place to live. They’ve neither one ever owned so are first time buyers. One is a college professor, the other a medical doctor and they have a combined annual income of around 1/2 million dollars. They have about $200,000 cash for a down payment, and his credit score is 850 (I don’t know hers). They have an excellent debt to income ratio as they just don’t owe on much of anything.

    They quickly learn the place to start is a pre-approval letter. That’s how it’s done today. The real estate agents take you serious and give you their time if you are ‘pre-approved.’ If you find something the owners take your offer seriously if you are ‘pre-approved.’ So, this young couple waltzes into a neighborhood branch of a BIG bank. They are being quite modest in asking for pre-approval of $750,000 — I know that sounds outrageous but in their market you don’t get much for that amount.

    Guess what? This bank wasn’t willing to give them the pre-approval. Nope. It didn’t take a lot to get it elsewhere, but this bank they stopped at first was one of those great big huge banks that we taxpayers helped save.

    Banks should be more careful, and we can’t return to the days of making risky loans, but when banks aren’t letting go of money for good loans, we can see why we have too little money moving around. Didn’t PrairiePond call this velocity? And, didn’t she give us an excellent lesson on why we need our money moving?

    • indypendent

      I think this goes to what I was trying to say before – some of these corporations that we have bailed out have been making very good profits for many years.

      Now it is time for them to step up and be good citizens and show their gratitude by helping rather than hoarding their money until they see which way the political winds blow.

    • itolduso

      I don’t understand this…

      Loan request 1.5 x income
      20 % down
      credit score of 850.

      Disapproved.

      I don’t know, There seems to part of the story missing.

      • itolduso

        Maybe the bank is going broke?

        Under any underwriting rules I have ever seen (not that I’ve seen that many, but I have a friend in the business) this would seem to be a perfect loan. I just don’t get it.

      • Neither did we or the next bank they went to.

  12. indypendent

    One major industry that needs to be cultivated is alternative energy. When we have millions of people out of work – why not delve into the new frontier of alternative energy?

    The US is already behind China in this arena.

    And with the recent BP oil spill in the Gulf, this would be an excellent time to give the alternative energy industry the boost it needs.

    But what have we heard for 108 (?) days regarding the BP oil spill – a bunch of politics. Just a bunch of hot air being blown around 24/7 with the net result of nothing – nada – zilch -zero.

    And the US is still dependent on foreign oil and we are still behind China in the race for energy sources.

    We should take that know-how and ingenuity of the American workers and start building our own country back up instead of tearing it down with all this political B.S.

    • indypendent

      I know this will take years to accomplish – but the longer we wait, the worse off we are on dependency for energy.

      And the country that is dependent for energy and a weak economy is not going to be the leader of the free world for very long – in my opinion.

    • WSClark

      As a confirmed gearhead addict (My 12 step group tells me I am hopeless – “Hi, I am Will and I am a gearhead!”) I KNOW that America has the engineering capabilities to surpass anything that the Chinese have to offer.

      China makes stuff – we develop and invent stuff.

      One example – I try to make it gearhead free:

      Variable valve timing………..

      Until very recently, the valve timing on your automobile was strictly mechanical. The cam lifted the valves, the engine went “boom, boom, boom.”

      Now, many cars have variable valve timing – Fnord has one in her garage – and the timing is electronic over mechanical.* Now, the engine goes “boom, boom…………………. boom, boom………………. boom, boom” when the electronics tell it to.

      *(The electronics control the mechanical.)

      This concept was UNHEARD of years ago, but Corvette engineers perfected it, along with a host of Japanese and European companies.

      There’s more, but it’s time for my GA meeting.

      • indypendent

        I was told by an engineer several years ago that whenever a USA made product is put on the market – the Chinese would go to work immediately to make the exact same product cheaper.

        So is it any wonder we end up having to purchase several of these Made in China products when it used to be we could purchase one Made in USA product and have it work for years?

        And the fact the US government is giving subsidies to American companies to outsource American jobs just adds to the problem.

        But, I’m sure Walmart and their Chinese manufacturers are happy and isn’t that what we all really want in the end? I know I care deeply how much more money Walmart can make. It keeps me up at night worrying how that corporation will ever make ends meet.

        heavy, heavy sarcasm/

        We slit our own throats for the profit of a few.

  13. itolduso

    “Neither did we or the next bank they went to.”

    Maybe the loan officer had gas that day?

    Just weird

    • Yeah. The next bank wanted to know why they only wanted to be pre-approved for that amount, why not more.

      • 6176746f6c6c65

        fnord,

        Although you didn’t identify the bank, I can guess that it may be the one recently the subject of various media (traditional and interwebs) reports on its lending practices, which, it was reported, included the following (paraphrased):

        If a newly married couple (or recently married couple without issue) who were both employed at good jobs and the wife was within childbearing years, any loan application which, in whole or in part, relied upon the incomes of both spouses, same was to be denied unless the income of the husband was sufficient, in and of itself, to support the loan. The apparent (but unstated) rationale therefor was the potential of the wife to become pregnant, have the child, and then determine she would not return to work, preferring to be a “stay at home” mom, thereby reducing the couple’s income over the next X years while more children might be born of the union, extending the period of “one income only” thereby putting the loan at further risk, due to expanding expenses, etc.

        Thus, unless the male could shoulder the burden alone, and, if he was the professor, had tenure and salary without research grants, etc., sufficient to meet the existing guidelines for the loan, that particular institution will decline to issue a pre-approval letter, or to even make the loan. The various reports attributed this disclosure of this (and other) policy to an unnamed bank official, who, of course, cited the recently passed “financial reform” legislation and regulations to be propounded thereunder as the basis therefor.

      • And that’s legal?

        Boy, we’ve come a long ways, haven’t we. Why does it seem we’ve traveled backwards?

  14. indypendent

    Maybe the bank is not going broke but going greedy?

    I think if taxpayers bailed out these banks and then they are shown to be not lending to credit-worthy people, then the bank should be made to repay all their bailout funds they received plus a penalty.

    Maybe that would shake some of that taxpayer money out of their tree.

  15. indypendent

    I have a friend who works in a mega bank downtown. They are now yelling because ‘Obama is after them’ and they are nickel and diming everyone but not the few good ol’ boys downtown.

    When the bulk of their business – the everyday and the not-so-well-connected people got wind of what they are doing – they are losing customers hand over fist. People are paying off their loans and pulling all their money out.

    And the lesser known banks around here are all too anxious to get the new business.

    So if this bank goes broke – is it Obama’s fault or the bank president’s for being stupid when it comes to customer service?

    BTW – the profit for this bank is in the very high millions – that is not the problem.

    • indypendent

      If this bank drops in value and/or closes , isn’t that just the free market at work.

      And isn’t that what Republicans claim to promote?

  16. indypendent

    But yet Republicans under Bush rammed through the first bailouts on Wall Street.

    In fact, these fat cats did not even have to wait until Monday – they called in their request on a weekend and got the money over the phone.

    When was the last time the average Joe got service like that from their bank?

  17. itolduso

    But yet Republicans under Bush rammed through the first bailouts on Wall Street

    Sorry, the Democrats were in charge of Congress. Both Houses.

    • indypendent

      But Bush was there ramming – wasn’t he?

      • indypendent

        Kinda like the way Bush and fellow lockstepping Republicans rammed through that CAFTA bill (Central American Free Trade Agreement) in 2005 by a 2-vote margin – Democrats voted against that bill.

        Do some research on that bill and then we’ll discuss why Boeing lost that air tanker deal.

      • itolduso

        Ya know, only Congress can spend money.
        Bush could ram all he wanted. Congress could have “just said no”. The Blame is squarely on the Democrats.

        House vote:

        Democrats voted 140 to 95 in favor of the legislation, while Republicans voted 133 to 65 against it

        Senate vote 75 to 24.

        And as far as CAFTA, I opposed it as well as NAFTA. There were both Bullschift, I don;t care who was in charge. BS is BS.

      • WSClark

        They shouldn’t have said no. As distasteful as it is, doing nothing would have been far, far worse.

        Just consider the pensioners that had their retirement locked into AIG. At the time AIG was considered to be one of the safest investments possible.

        Without TARP, AIG would have failed, in a manner that would make the failure of Enron look like losing your change in your couch.

        Would you really want to see a 92 year old great-grandmother applying for a job at McDonald’s?

        Well, if AIG had been allowed to fail, that would have happened all over the country.

  18. indypendent

    6176 and fnord – I did not know that in this day and age that a woman’s childbearing years would have that kind of effect on things.

    I remember in the late 70’s when I was first married, I got some of those looks when I applied for work. One guy even asked me if I was planning to have kids.

    I thought our society had evolved past that primitive thinking.

    How amazing to think that a woman’s uterus comes into play in so many policies and politics of this country.

    • indypendent

      Looks like several Republicans voted for the bailout

      If I remember correctly, it was for the same thinking that WS pointed out – something had to be done.

      So that square block of blame is not only on Democrats. All the Republicans had to do was to
      “Just Say NO”

      but they didn’t

  19. Didn’t a report come out recently that showed both TARP and the stimulus bill were necessary and did indeed save us from depression. Didn’t that same report say TARP was more beneficial than the stimulus?

    I remember when reading it, I wondered if given a bit more time (all the stimulus funds haven’t been spent) maybe the stimulus spending with catch up with the impact of TARP.

    How much of TARP monies have been repaid? Most?

  20. itoldsuso

    “But yet Republicans under Bush rammed through the first bailouts on Wall Street”

    “Looks like several Republicans voted for the bailout

    If I remember correctly, it was for the same thinking that WS pointed out – something had to be done.

    So that square block of blame is not only on Democrats. All the Republicans had to do was to
    “Just Say NO”

    but they didn’t

    So are you now saying that the Republicans, which more voted against it as a percentage, didn;t rally ram it thru, but could have stopped it by just saying no, but something had to be done, so those who voted yes with the Democratic party voted responsibly? Or are you saying Democrats rammed it thru Congress? And the Republicans should have stopped them?

  21. itoldsuso

    WSClark-

    I have heard the argument, and there is probably SOME truth to it. However, where do we draw the line? My 401k, invested in stock of the company i workfor, , has lost 80% of it’s value. Should the government bail me out?

    The guy down the street has nearly lost his entire business due to the housing bust, should he be bailed out?

    I am not speaking retorically, it is a real problem, I understand, but the government cannot pick winners and losers.