If you listen to Obama and his economic team, we've turned the corner on this recession. But, for most Americans that same feeling is probably far from a reality. Despite what the Administration keeps saying, the number of Americans who have completely given up looking for jobs has continued to rise. Unemployment did have a small drop after poking above 10 percent last fall but, the rate has remained steady for the last 3 months. Last Thursday, the number of workers filing for new unemployment benefits claims jumped unexpectedly by 18,000 new claims after having fallen for 3 weeks in a row. And, the number of temporary workers just keeps rising.
But, putting all those numbers aside, the best indicator as to whether Americans are really hurting or not, all comes down to what's in their paychecks. Sadly, the American worker lost 3.2% of their income last year from the year prior (Click to See Full Story: Income falls 3.2% during Obama's term) and there is every indication that they will continue to lose wages again this year. In dollar terms, that's about $1,028 that has been taken out of every man, woman or child's pocket. For an average of family of 4, that's a whopping $4,100 in lost wages last year. In Arizona, alone, the per capita income drop was actually 4.1% (Click to See Full Story: Income in Arizona falls faster than rest of nation) or by about $1,350.
The bottom line is that the loss of wages is an economy killer. It means that people have less money to buy stuff and if the losses continue this year, it's hard to believe this economy is actually on the mend.
Showing posts with label personal income. Show all posts
Showing posts with label personal income. Show all posts
Tuesday, April 13, 2010
Friday, October 30, 2009
What A Difference A Day Makes
Yesterday, there was mass euphoria over the first positive Gross Domestic Product in more than a year. The headlines said this showed that the recession was over. However, today's numbers on personal spending have somewhat put a dent in that excitement.
This morning the Personal Income and Spending Numbers were released and Personal Spending was down 1/2 of one percent. On a one month basis, that is huge (Click to See Full Story: "Income Flat, Spending Falls as Consumers Stay Wary").
The spending number is important because our economy is 70% driven by the consumer and his or her spending. Again, the drop in spending is being blamed on the fact that the Cash For Clunkers program ceased. But, don't forget, the Cash for Clunker program only benefited less than three tenths of one percent of the people of this country -- about 700,000 people out of a population of 300 million. So, to say that overall spending was impacted by the cessation of this program, clearly shows how that program had skewed the economic numbers and had little or no overall benefit to the general population.
Yesterday, I said that if you dug down into the details of the GDP report, you would have seen that business investment was negative. That means that businesses aren't buying things. This morning shows that personal spending, too, is missing. Put those two facts together and you can see that the "spending" that is needed to turn the economy around is not there. That's why I am not sure that yesterday's growth in terms of GDP is sustainable.
Update: This blog was written just before the stock market opened. When it was actually posted, the market was only down about 3 dozen points. As of now (12:30 Pm Eastern), the market is down nearly 200 points and has wiped out all of yesterday's euphoric gains. I think this shows that my concerns over spending are being validated by today's trading behavior in the stock market.
This morning the Personal Income and Spending Numbers were released and Personal Spending was down 1/2 of one percent. On a one month basis, that is huge (Click to See Full Story: "Income Flat, Spending Falls as Consumers Stay Wary").
The spending number is important because our economy is 70% driven by the consumer and his or her spending. Again, the drop in spending is being blamed on the fact that the Cash For Clunkers program ceased. But, don't forget, the Cash for Clunker program only benefited less than three tenths of one percent of the people of this country -- about 700,000 people out of a population of 300 million. So, to say that overall spending was impacted by the cessation of this program, clearly shows how that program had skewed the economic numbers and had little or no overall benefit to the general population.
Yesterday, I said that if you dug down into the details of the GDP report, you would have seen that business investment was negative. That means that businesses aren't buying things. This morning shows that personal spending, too, is missing. Put those two facts together and you can see that the "spending" that is needed to turn the economy around is not there. That's why I am not sure that yesterday's growth in terms of GDP is sustainable.
Update: This blog was written just before the stock market opened. When it was actually posted, the market was only down about 3 dozen points. As of now (12:30 Pm Eastern), the market is down nearly 200 points and has wiped out all of yesterday's euphoric gains. I think this shows that my concerns over spending are being validated by today's trading behavior in the stock market.
Monday, August 10, 2009
It's the Underemployed, Stupid!
Last Friday, the Bureau of Labor and Statistics (BLS) reported an unemployment rate of 9.4%. This was a drop from the 9.5% rate of the previous month's report. This is despite the fact that the there was a net increase in the unemployment rolls by 247,000 newly unemployed workers.
The only way you can actually have "more" unemployed in any given month and, yet, have a lowered unemployment rate is to "play" with the total number of workers who are in the available workforce. So, in effect (and so illogically), the BLS is claiming, in last Friday's report, that the workforce grew by some amount of new workers and all those "new" workers "entered" this new, larger workforce pool; bringing their jobs with them. Therefore, the "unemployed" -- though higher in their amount -- actually represented a smaller portion of the total workforce and, consequently, the unemployment rate went down. That highly improbable fact was completely swallowed by our national media; without question.
What most people don't really understand is that an agency like the Bureau of Labor and Statistics doesn't really know what the "true" unemployment rate actually is. They don't actually interview the 300 million or more people in the country each month to determine who is "working"; or, who is retired from the workforce; and, who his employed versus looking for work. Instead, they use both "samples" and "assumptions" to come up with the unemployment rate. Any changes, in either the sample data or their assumptions, can have a big impact on their resulting calculations of the unemployment rate. And, that is what happened, conveniently for the Obama Administration, last Friday.
All you had to do is look at the weekly "Jobless Claims" number that was reported the day before the Unemployment Report was released on Friday to know that the unemployment situation isn't really getting any better. In that "jobless claims" report of Thursday, the number of people losing their jobs was surprising less than expected; but, the back-story of that report was that more people continued to claim unemployment benefits; showing that the job market is very tight and that people who are losing their jobs are still less likely to get rehired. In fact, the amount of people still claiming benefits jumped by 69,000 workers from the previous week (Click to See Full Story).
The problem with all these reports is that they "don't" include the accounting for what most economists call the "underemployed" (Click to See Full Story). While the Feds try to overcome this short sightedness by conducting what they call the "household survey", they are generally way off the mark.
A good example of the underemployed is my brother. He is a fine arts artist. His gallery sales are down to trickle, at best, and he is now living off of his savings. To the Federal government, he is not consider to be unemployed. The same is true with my brother-in-law. He and his wife have a plant rental and placement business. He lost his very last commercial account a couple of months ago. He has no income from his business and the Federal government still considers him to be employed. A farmer who has no income because of any complete crop damage is also "not" considered to be unemployed. In addition to those people who have small businesses that are, in essence, out of business, there are a number of people who have just given up it trying to find a job. These are the people who have exhausted their unemployment benefits and just can't find a job anywhere. Some of them are our new homeless that are now inhabitants of those "tent cities" that seem to be cropping up all over the country. Generally speaking, these are people who have both lost their jobs and lost their homes to foreclosure.
The fact is that the unemployment rate is a number that can be tweaked; politically, if necessary, and without actually being accused of lying. It's all about the assumptions; and, like many have said before this, just look at the first three letters of the word assumptions! Most economists, now, think that the true unemployment rate is upwards of 15%. In fact, the best source of information about what "might" be the true unemployment rate comes from this website of economist John Williams (Click to See Full Story). Note: Be sure to look at his "Disclaimer" statement that can be linked-to at the bottom of this report.
Politically, the headline that the unemployment rate fell was just what Team Obama needed to tout that their Stimulus Plan and all the other measures that they have taken are working. However, I believe this to be a political ruse. Other reports, like Personal Income and Spending (Click to View Charts) and Consumer Credit (Click to View Charts and Graphs), say just the opposite; and those numbers are falling off a cliff. To top that, Consumer Confidence, as reported by the independent and non-government Conference Board, has fallen over the last two months as people retreat from the optimism about this economy and increase their concerns over the ineffectiveness of Obama's Stimulus Program.
Never forget this old saying about statistics: "There are lies; damn lies; and, then, there are statistics!" I would be careful of any government agency, like the Bureau of Labor and Statistics, that proudly bears the word "statistics" in its name. After all, it reports up through and to the President, President Obama; who desperately needs some good news about the economy to stop his falling in the polls and to ram through his Health Care Reform and Cap and Trade Bills.
The only way you can actually have "more" unemployed in any given month and, yet, have a lowered unemployment rate is to "play" with the total number of workers who are in the available workforce. So, in effect (and so illogically), the BLS is claiming, in last Friday's report, that the workforce grew by some amount of new workers and all those "new" workers "entered" this new, larger workforce pool; bringing their jobs with them. Therefore, the "unemployed" -- though higher in their amount -- actually represented a smaller portion of the total workforce and, consequently, the unemployment rate went down. That highly improbable fact was completely swallowed by our national media; without question.
What most people don't really understand is that an agency like the Bureau of Labor and Statistics doesn't really know what the "true" unemployment rate actually is. They don't actually interview the 300 million or more people in the country each month to determine who is "working"; or, who is retired from the workforce; and, who his employed versus looking for work. Instead, they use both "samples" and "assumptions" to come up with the unemployment rate. Any changes, in either the sample data or their assumptions, can have a big impact on their resulting calculations of the unemployment rate. And, that is what happened, conveniently for the Obama Administration, last Friday.
All you had to do is look at the weekly "Jobless Claims" number that was reported the day before the Unemployment Report was released on Friday to know that the unemployment situation isn't really getting any better. In that "jobless claims" report of Thursday, the number of people losing their jobs was surprising less than expected; but, the back-story of that report was that more people continued to claim unemployment benefits; showing that the job market is very tight and that people who are losing their jobs are still less likely to get rehired. In fact, the amount of people still claiming benefits jumped by 69,000 workers from the previous week (Click to See Full Story).
The problem with all these reports is that they "don't" include the accounting for what most economists call the "underemployed" (Click to See Full Story). While the Feds try to overcome this short sightedness by conducting what they call the "household survey", they are generally way off the mark.
A good example of the underemployed is my brother. He is a fine arts artist. His gallery sales are down to trickle, at best, and he is now living off of his savings. To the Federal government, he is not consider to be unemployed. The same is true with my brother-in-law. He and his wife have a plant rental and placement business. He lost his very last commercial account a couple of months ago. He has no income from his business and the Federal government still considers him to be employed. A farmer who has no income because of any complete crop damage is also "not" considered to be unemployed. In addition to those people who have small businesses that are, in essence, out of business, there are a number of people who have just given up it trying to find a job. These are the people who have exhausted their unemployment benefits and just can't find a job anywhere. Some of them are our new homeless that are now inhabitants of those "tent cities" that seem to be cropping up all over the country. Generally speaking, these are people who have both lost their jobs and lost their homes to foreclosure.
The fact is that the unemployment rate is a number that can be tweaked; politically, if necessary, and without actually being accused of lying. It's all about the assumptions; and, like many have said before this, just look at the first three letters of the word assumptions! Most economists, now, think that the true unemployment rate is upwards of 15%. In fact, the best source of information about what "might" be the true unemployment rate comes from this website of economist John Williams (Click to See Full Story). Note: Be sure to look at his "Disclaimer" statement that can be linked-to at the bottom of this report.
Politically, the headline that the unemployment rate fell was just what Team Obama needed to tout that their Stimulus Plan and all the other measures that they have taken are working. However, I believe this to be a political ruse. Other reports, like Personal Income and Spending (Click to View Charts) and Consumer Credit (Click to View Charts and Graphs), say just the opposite; and those numbers are falling off a cliff. To top that, Consumer Confidence, as reported by the independent and non-government Conference Board, has fallen over the last two months as people retreat from the optimism about this economy and increase their concerns over the ineffectiveness of Obama's Stimulus Program.
Never forget this old saying about statistics: "There are lies; damn lies; and, then, there are statistics!" I would be careful of any government agency, like the Bureau of Labor and Statistics, that proudly bears the word "statistics" in its name. After all, it reports up through and to the President, President Obama; who desperately needs some good news about the economy to stop his falling in the polls and to ram through his Health Care Reform and Cap and Trade Bills.
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