Thursday, September 16, 2010
So far this summer tax receipts on wages have continued to climb, so from my perspective, it's all good. Not very good, but good. We are getting very close to turning in YoY gains. Even if the current trend of slowing growth continues, we should get there before the end of the year.
Next year there will be another round of state and local cuts, but if we have started to grow the private wage base again we'll be better able to survive it.
The extension of the eligibility dates for unemployment benefits has kind of saved the rest of this year. So no double dip until next year. Christmas should be okay based on bank deposits. Not great, but okay.
That's the good news. The bad news is that September's NFIB is flat, flat, flat. 88.8.
The recovery this time is going to come from larger businesses.
If you look at domestic nonfinancial commercial paper outstanding, there is some reason for possible concern (this is from St. Louis Fed Fred):
I THINK this is mostly due to the auto slowdown, but I am not sure. We'll find out in a few months. The reason why I think this is that rail traffic continues to hold strong, with significant rebound in metals. You always see it in rail first.
cutting overhead mode. If they hire it will be overseas
to import goods or services back to here. This is a
stair step down trajectory. Demographics, trade, and
tax policies insure it.
We would need a fundamental change in policy to generate another outcome.
If we did not have the huge federal deficit problem hanging over our heads, we could pace through a very slow "bust" recovery for another 2-3 years, and after that the ability to spend would slowly resurge.
But we are facing those deficits, and with the huge dependence on government transfer payments for private incomes, it is hard to see how this can continue.
We still have a structural adjustment to accomplish. Either we address our trade imbalance, or we get poorer in aggregate.
One of our problems is that foreign interests are still buying tons of US debt. This is preventing the USD from declining.
"Christmas should be okay based on bank deposits."
Any thoughts on the distribution of those bank deposits?
I bring it up for 2 reasons.
1. I think Bernanke couldn't spot the housing bubble at least partly because he was looking at "averaged" data in the Flow of Funds. The averages can hide distribution problems. For example, if one person has all the savings and everyone else has all the debt then that's a huge problem.
2. My investments have *never* been so heavily weighted towards cash (sitting in FDIC bank deposits). I just don't see any investment bargains right now. I'm still very concerned about the future. I won't be spending much on Christmas. Maybe I'm not alone.
Just a thought.
of foreign oil. That will offset export gains.
Do you really think China, Japan, or the EU
want our manufactured goods ? They just want
our commodities. That's why I favor tariffs over
A cheaper dollar.
But there are two employment release tables I watch for clues.
65 and over employment/unemployment (note the rise, and the participation rate of 1 in 5). This means that oldsters are really hurting, but most do have some income.
And then there's the 16-19 employment category, which is improving a bit in recent months.
But note that over the year, both categories ended up weaker.
If it had not been for the unemployment extension, I think things would be looking considerably worse.
The unemployment rate of 16-19 year old African Americans has jumped to 45.1%.
What a depressing statistic that is. It does not ease my distribution and ongoing income inequality concerns.
I read an article recently that claimed a first job can set the tone for an entire career. I tend to believe that's true. College isn't cheap. Work experience is often needed to get work, especially these days no doubt.
Seriously, people with a lot of wealth have gotten hit quite hard. If you were earning significant interest, you may have lost much more in the way of income than the average income earner!
Unfortunately, most of the jump I pointed out occured in 2010. August 2010 was especially brutal. Up roughly 5% in just one month.
Most of August's rise in the unemployment rate was due to more people looking though. That was not true of the rest of 2010 though. Far fewer were employed. 2010 was an especially bad year for 16-19 year old African Americans.
I wish I knew what the Gini is right now.
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