Monday, February 07, 2011
Back In Blogging Action Tomorrow, Probably
In the interim:
Gackede from Mark at Illusion of Prosperity.
Note that the graph shows per capita, inflation-adjusted income. And this is only a subset of income. Most states have raised many other fees and taxes. Part of the problem is that the federal government is passing ever greater spending initiatives, which the states can not afford (such as health care reform). A big part of the problem are state and local retirement benefits. Something's got to give. I think public sector workers who are receiving disproportionate retirement benefits should be very worried indeed.
What makes it even better is that almost everyone in the US passes through an income arc, and the arc starts its fall in their mid 50s. So now you have states raising per capita taxes on a population with falling real incomes. And the per capita incomes of the younger cohort are also falling. Something about jobs, or the lack of them....
But not to worry, President Obama is going to address the Chamber of Commerce. A little hope, a little change, and all will be well. Or will it? If only he had ever taken even ONE accounting course; imposing ever higher costs, especially energy costs, isn't going to make the US the best place to do business.
Reports of positive earnings trends fell 4 points in December, registering a net negative 34%. Still, far more owners report that earnings are deteriorating quarter on quarter than rising. Part of this is due to price cutting, which is fading in frequency as the economy continues to grow. Not seasonally adjusted, 14% reported profits higher (down 1 point), but 47% reported profits falling, a 4-point increase. For those reporting lower earnings compared to the previous 3 months, 55% cited weaker sales, 4% blamed rising labor costs, 6% higher materials costs, 2% higher insurance costs, 2% higher financing costs, and 4% blamed lower selling prices. 6% blamed higher taxes and regulatory costs. Large firms may be posting great profits, but the trend on Main Street is not supportive of solid hiring and capital spending. Labor cost, materials costs, interest rates –- not the problem. It is still weak sales.NFIB jobs statement February (full report released tomorrow):
It appears that more firms are terminating operations than new firms are being formed. In the long run, it is the net formation of new firms that produces job growth. A static population doesn’t produce net new jobs, just different jobs, as technology and spending patterns change.There are signs of slow peripheral improvement, but the bottom line is that businesses will expand and hire when they can make money by doing so. Right now larger retail chains seem to be investing money into mechanisms and software that will cut their inventory carrying costs or that will cut employment. As I noted before, services like telecommunications/internet are under some margin pressure. C&S warehouses (A&P BK). Shrink systems (has nothing to do with psychology). Another. Look at the store brand focus among young and old in this article. Groceries are pushing store brands because they can get a better profit margin, so there is far more marketing and shelf space devoted to store brands. But acceptance is up among consumers who are shopping very carefully, not among those who are less stressed.
Asked about changes in total employment over the last three months, 11 percent of owners reported increasing employment at their firms by an average of 2.8 workers while 15 percent reported reducing total employment, an average of 2.9 workers per firm. Clearly, there has been no surge in hiring in the last few months. This produced a reduction of -0.15 workers per firm. In normal times, this measure would be in the range of 0.1 to 0.2 workers per firm and in a strong recovery, much larger, as was the case in 1983.
And in factories, it's all about automation. Robotics is huge.
I have joined the "Draft Mitch Daniels" movement.
For a joyous exercise in irony, read "Their Real Agenda" at the NY Times. Opening:
As states groan and stumble through the recession, some politicians are trying to exploit their financial crises for ideological purposes.I know what you're thinking. You're thinking that now is an odd time to take on Emanuel's "You never want a serious crisis to go to waste". (Watch the video - Emanuel is more reasonable than portrayed.)
But see, this is why you have to read the article. THAT was good public policy. THIS is the attack of the terrifying Rethuglican Menace. And Sarah Palin. Who shoots people, or moose, but whose fecund, gun-toting body is a dire threat to the Body Politic, aka Landru. Who only uses blowguns, and is thus not even remotely like Palin.
Krugman has crossed the line into insanity. It is clear that he could not survive for six months as a Wall Street trader.
Whatever you may think of Ronald Reagan, the man had a sense of proportion. And because he did, I think he would be rather repelled by the exercise in hagiography.
Oh, and progressives scare me sometimes. The video at this link is hard to believe.
And the graph doesn't even show the static or slightly falling income levels over the last couple decades.
Why isn't my patriotic color scheme cheering anyone up?
Is it because the greenback ground is being covered up?
Oops. I meant green background. Freudian slip!
"If you look at the comments at the Krugman column..."
If I was one to believe in reincarnation then surely I would suspect you of being a knight in a past life. It would take exceptional courage to do what you have done.
It does not end there though. You would also need the mental conditioning and discipline of a Shaolin monk just to retain your sanity, lol. Sigh.
I especially love how global warming now encompasses cold weather. who knew?
For what it is worth...
The Amazingly Twisted Logic of Paul Krugman
Here's a summary of his opinions as seen above.
1. Quantitative easing will create inflation.
2. Quantitative easing does not lead to higher commodity prices.
I especially love how global warming now encompasses cold weather. who knew?
Global farming is definitely the problem. Everyone knows it.
Oops. I meant warming. Freudian slip!
(I'm caught in a deja vu machine today, probably thanks to recent advances in automation.)
zero, good luck getting over the hump by saving
The Household survey is good at calling turns/accelerations in trends, presumably because it captures changes in net new business formation. The question is, how does the NFIB employment component do in that regard? There seems to be a disagreement between the latest Household survey employment numbers and what the NFIB is tell us. Maybe it doesn't account for there being lots of new businesses? But then again, why would lots of new businesses form if the existing ones are telling us weak sales are still a problem?
But I have been watching job postings, and IT type jobs are rebounding. Engineering is iffy. Freight is very strong. The ISM, NACM and Chicago PMI indicators are all saying the same thing.
The expensing provisions for business investment are really funding a lot of businesses to invest in efficiency, which in many cases equates to less net jobs. The NFIB commentary is worth reading. Jobs in construction/
retail are not going to rebound to the previous peak.
My guess is that we are in a longer restructuring based on declining real incomes for a large portion of households plus changing spending patterns due to higher expenditures on medical/retirement needs. Due to the demographics, I do not expect that trend to reverse over the next two decades, although there should be humps and slumps along the way.
If you look at the first decade of the century, we only really obscured that declining trend by massive consumer borrowing. Well, that is not going to return. Attempts to create new bubbles will fail over time, and will make the situation even worse. There is also a contribution from higher energy costs.
So I have three main vectors. The first, a long slow decline in real incomes for the bottom 75% of households. (When I adjust for needed changes in government compensation, my bottom 60% goes to the lower 3/4s.) Causation: demographics and higher real energy costs. Those energy costs are made worse by ill-planned attempts to mitigate the energy problem.
The second, the hangover from the bubble economy. And we just slurped up some hair of the dog, so that's not helping. This is currently exaggerating the income decline.
These two would be enough to shift us into an economy closer to the post WWII era through Eisenhower.
The third trend is positive; we are slowly turning and beginning to confront our current imbalances. It will take over a decade to fully address them politically. The long term outcome will depend on whether we can collectively face the truth or whether we decide to bonk our heads against the wall of reality a la Greece. We seem to be cutting that very close.
The US economy remains remarkably dynamic, but our current governmental and economic philosophy over the last 15 years has served to prevent adaptation rather than foster it.
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