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Thursday, June 10, 2010

Claims Still High

It's hard to tell though. This is one of the periods in which seasonal adjustments become bigger, and sometimes can be distorted by the odd patterns in employment during times of rapid economic change. These figures will become more reliable at the end of June/beginning of July.

SA initial claims were 456,000, but NSA claims took a drop down below 400,000, after staying in a very narrow range in the low 400,000s for some weeks. The four-week moving average rose again to 463,000. If you want to look at the brighter side, actual claims were 188,000 LESS than the comparable week in 2009. So there is a much, much brighter side!

On another cheerful note, rail freight figures continue to show steady improvement. Last Friday's cumulative figures (YTD) showed carloads up 7.2% from 2009, and intermodal up 11.5 percent from 2009. And the growth trend continues; at the beginning of May YTD carloads were up 5.3%, and intermodal was up 9.8%. And that too was good gain from the first week of April, when YTD carloads were only up 2.2%, although YTD intermodal was up 8.4%.

My strong feeling is that in April we transitioned to a more stable economy that is slowly bootstrapping itself upwards, based on production increases. If the economy is moving, it's breathing.

Now I was concerned about margins, because profit margins for producers are a genuine concern. But I think the timing of the Euro sorrow (and most especially, Euro banking sorrow) knocked the spec piece out. And whatever economy we will have eventually - the only economy we can get - will have to pull the load of higher oil prices.

We can, of course, utterly destroy this with bad public policy. One of the things I have been watching is the CO2 endangerment nonsense. Regulations imposing more costs on producers, which must be paid by the debt-burdened, underemployed population, are likely to kill this recovery. Congress needs to pass a law taking CO2 out of the current regulatory framework, because the EPA really has no legal option currently.

And then there is the taxation issue. While we obviously need higher taxation, ratcheting up those higher tax brackets is just going to kill off small business expansion and job growth.

We now have a European-like structural 10% unemployment rate. The future of the economy depends on slowly chipping away at that.

International trade for April showed higher capital goods expenditures, which is a decent indication that manufacturers were beginning to invest again. The trade deficit increased slightly.

It's not obvious to me we need higher taxation, rate-wise. We may need increased revenue, but sometimes you gotta cut rates to increase revenue. There will probably be some sort of tariff/import tax but those have a way of backfiring.
"My strong feeling is that in April we transitioned to a more stable economy that is slowly bootstrapping itself upwards, based on production increases. If the economy is moving, it's breathing."

The thought of sliding immediately into another recession with unemployment so high makes me seriously cringe. Let's hope you are right.

Just noticed on CR a story about a big increase in rail waste haulage. We're allowing garbage to be dumped in fewer, larger places. As a plumber acquaintance of mine says, "Your shit is my bread and butter."
Charles - it is not just waste - although that appears to be a factor. Commodity tonnage is up overall and in the individual commodities.

Also, some waste is recyclables - like metal - which only gets hauled around when there is demand for primary commodities.

So I am not promising anything wonderful. And I wonder if we will survive our attempt to make things better. But all I can say is that here and now, under the current laws, we are managing to slowly bootstrap ourselves up despite debt, etc.
Charles - we must raise taxation to deal with retirements.

However, if we want to generate revenues, the bottom line is that people must pay for people - in other words, we cannot afford social benefits that the population can't pay for.

Ratcheting up taxation on businesses will inevitably backfire and reduce jobs, thus wages and salaries.

People just don't want to deal with reality, which is that our tax on businesses is making us less competitive globally. We have entered into the pay-for-play era.
We don't need to raise taxes to handle retirements. People should retire when they either a) can no longer sell their labor, or b) are financially secure enough they don't need to sell their labor.

Since a will likely happen before b, we set up a social security system. The retirement problem we have is based not on any inability to sell labor but on collective bargaining - hence all the public retirees who draw pensions while working as consultants and the associated defined benefits which expect near-impossible rates of return. It's the Greek problem.

Didn't mean to suggest the rail increase was due to garbage, just pointing out the story because I thought it was interesting.
A data point recovery but BB says "but it won't feel terrific." So we are fast approaching the new normal as even garbage disposal volume becomes another economic data point to be pushed by the financial media.
American auto's are not being offered for lease instead zero down financing is the preferred option as the resale value makes a lease expensive! FED flow of funds shows homeowners equity upside down vs mortgage debt further putting a spike into any chance that move up buyers (those with big down payments from selling their house) can contribute any meaningful volume to housing sales or begin to put a dent into the rising number of stranded sellers above 500K in the bubble states.
Sooner or later economist must venture beyond rear mirror data mining and begin the long process of coming to grip with America's structural problems which far exceed the worry that tax increases will dampen America's corporate international competitiveness.

The tax rates and tax structures that punish corporate domestic capital investment IS the big structural problem.

Were it not for that, we would not have hollowed out our economy nearly so badly.
Well concerning taxes, if you haven't already seen it here's 4 or 5 billion the treasury will never see.

But that's OK, we're gonna tax diabetics and make it up on volume.
So far the inflation bug has been dead due to NON of the new cash making its way to regular folks. I do not thin serious job creation will be forthcoming, but perhaps a low level may happen for a bit. The second move down in housing will be clear by the fall, we shall see how things stack up then.

From your last thread, I knew that Alphonse thing meant something:
"The tax rates and tax structures that punish corporate domestic capital investment IS the big structural problem."

For me the structural economic problem is that we have created an economy that is driven by high end consumption,auto,large houses,travel,eating out,entertainment and sport spectacular,technology driven consumer apps,urban sprawl, well you get the idea.
Structural change means less consumer consumption and greater attention to productive human endeavors on a national scale. The Amish could teach Obama and America much about how to conduct one's life without excessive consumer consumption and still have a wonderful productive life.

The tax structure,government regulations are excessive but they are also reflect a culture that lacks strong commitment to family, protection of the environment in its pursuit of power and money by the political and financial elite.
If structural change to you and others means a return to higher rates of auto sales, greater urban sprawl and the continued protection and expansion of the banking and financial engineering crowd then little will change.
That doesn't make sense to me. The reason the Amish don't have a consumer economy driven by luxury items is because they have lower productivity. If we all used horses, then we would all have jobs. Growing our food. As it stands, less than 5% of our population can grow all the food we need and then some, so the rest of us do things like work at restaurants and build really big homes. Those things are productive if you can have a very small portion of the population do the necessary things. Which we can.
So a better path, I think, would be to let all of the people who already have their food provided for them by our very productive farmers find other ways to fill their time. If all goes well, they will do something that the farmers will voluntarily trade their food for and we will all be better off.
I do not know what that "something" that people will do is, but from what I am hearing MOM and others think they will find it if we just leave them alone.
The one thing we could all learn from the Amish is a saying that they have passed down for the last 2000 years: "If a man will not work, neither shall he eat." Might motivate people to find something that the farmers are willing to trade for their food.

If structural change to you and others means a return to higher rates of auto sales, greater urban sprawl and the continued protection and expansion of the banking and financial engineering crowd...

Well, personally I'm a big fan of "sprawl"--I prefer a semi-rural life with urban earning power. Who are you to take that away from me?

But as far as the expansion of "financial engineering" as a driver of economic growth, a large part of that dynamic can be blamed on punitive taxation of productive capital. The taxes on production drive capital into tail-chasing leveraged paper profits.

Unfortunately, that probably won't change, as there are too many people who would rather get on their moral high horse about the "bankers" while continuing to believe that the most productive must be made to pay their "fair share".

To each his own, I suppose.
MoM,I will bet on Stupidity.Which means if I win,I lose,and if I lose we all win.as far as a second leg down in housing it is clearly happening right now In Sonoma County.I loked at an open house last weekend listed by a broker with 10 years experience that was overpriced by 25% compared to another home listed by another broker in the same subdivision.I have been looking at a lot of homes the last few weeks and the listing price for reasonably comparable homes varies by 25-40% or more.It is brutally clear who has a clue and who is holding a flaming bag these days.Are you any better?
Just a data point on the freight issue: Last week I was driving from Minot, ND to Jamestown. On a very, very rural siding I saw a string of 35 lumber cars--fairly new ones--sitting idle.

It's normal to see grain cars parked like that in the spring/summer. I've never seen lumber cars parked like that.
I brought up the Amish to show that social stability and cooperative effort is an important part of economic prosperity. While the horse and buggy is not a model for modern American economy the Amish have a commitment to a way of life beyond just material wants, something America might be needing if Vockers concept of less consumption and more production will see the light of day.

Neil: I am the last person to want to take urban sprawl from you, I could care less, the question is it sustainable since it was built on the premise of cheap available oil and energy. Our national highway system and basic industrial post World War two infrastructure was built when a barrel of oil was less than $2. My father in law a world war two veteran has told me several times that our economy has never recovered from the oil shocks of the 70's.
I retired from my business at 58 and opened a small pottery studio which was a long term hobby but I need to start making work for the coming xmas and fall selling season so posting like this will be infrequent but I enjoy reading your posts and MOM and hope to have time in the future to add to the discussion.

Tom: Yeah the RE market here in Sonoma county is pretty wild and your area must be tense with the large number of property sellers above 500K. Here in Sonoma city its no different with lots of stranded homeowners looking for that one buyer who has the ability to buy at their wish price, inventory keeps climbing...

There is a world of abundant energy before us. The current crop of first-generation alternative energy technologies is not economical, but the the next-generation technologies will be adopted quickly and for the best of reasons. They will be cheaper and better.

For example: There's no physical reason you can't drive a 3-ton Hummer that gets 120mpg (for real, not the fake "mpg equivalent" that they use to pump up plug-in hybrids). I've done the math. If you built one now, it would cost at least $500K just for the parts and labor, but it's entirely possible to do so.

I apologize, I live at the lab bench with my head in the next generation. Sometimes I forget that not everyone has reason to be as optimistic as I am.
It would be great if the lesson we could take away from the Amish was stability and a life dedicated to more than material accumulation. I doubt, however, that Obama would take that lesson away from a trip to Amish country. By and large, Americans who would take that lesson from the Amish have already learned it from their parents. Americans who have not learned these lessons growing up would look at the Amish and learn lessons of communalism or rejection of technology in pursuit of a sustainable, carbon-neutral life. These lessons MAY have value, but will not add to economic advancement. My belief is that people will learn lessons that confirm what they already know. So while I agree with what you posted and confess I misinterpreted your intent, I still think that Obama would turn Amish living into an indictment of technological progress, free market economy, and the exploitation of the environment by corporate greed.
There are a lot of interesting aspects to the Amish. They are growing quite steadily; they now have communities in 35 states. Lots of kids, lots of growth.

Farming has turned out to be not as economically great, the way they do it. That's why there are so many side businesses nowadays; they're not just for furniture anymore. They sell a lot of specialty food.

They've also figured out that the tourist trade can be lucrative. More than one community has created attractions that bring in the visitors. Once there, they sell them stuff.

But I wouldn't want to do it. I was driving down a rural highway last January. The temperature was about 10F. I passed a couple of girls driving a buggy. They had rather grim looks on their faces, and those cheeks were quite rosy.
If Gordon is accurate, the Amish are moving toward a consumption economy, too (food and tourism).

Ultimately everything is for consumption. I find the common handwringing over “too much consumption” to be a mask for some other malaise.

All the factories and “productive goods” are aimed at satisfying more needs and wants. Humans are the end of economic activity, not the means to achieve some statistical ideal.

The only kind of “too much consumption” that makes any sense is when one/we consume more than we produce. Borrowing and debt are the danger, not the vacations and manses themselves. As long as we aren’t eating our seed corn, we can feast on all we grow.
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