This is a second of three posts we will do this week relative to the current economic and financial trends, statistics and expert opinions. Yesterday we learned again our dire our financial situation is in this country.
We are spending money faster than even the politicians expected to, adding considerably to our national debt, CEOs across the country are freaking out over the “fiscal cliff” by restricting their hiring and business expansion plans, an independent analysis by a branch of the Federal Reserve Board concludes that economic conditions are very bad, Americans filing for unemployment benefits continues to be a a very high weekly rate, etc.
But we could not get all of the economic distress into that single post:
1) According to the latest government labor statistics released last week, the unemployment rate rose last month from 7.8% to 7.9%. This was caused by 170,000 Americans losing their jobs in September, bringing the total number of unemployed Americans to a despicable 12.3 million people.
Now part of the reason why the unemployment rate went up is that more people signaled they were actively looking for a job. This could be a good sign as for as optimism. However, an additional statistics released last week, the percentage of Americans working or looking for work rose for a second straight month in October to 63.8%, just barely up from the 31 year low of 63.5% that was incurred the month before.
In addition, in another sign of the economy's persistent weakness, average hourly pay dipped a penny to $23.58. In the past year, average hourly pay for most workers rose only 1.15, the smallest annual gain on record since1965.
All in all, a pretty lousy jobs report…again this month.
2) A November 2, 2012 article in Moneynews talked about the opinion of Robert Shiller, considered the most insightful and knowledgeable expert about the U.S. housing industry. In an interview with CNBC, he predicted that it could take 50 years for the housing industry to get back to previous levels.
His opinion is in opposition to the latest government statistics. The Commerce Department recently reported that new-home sales jumped 5.7% in September from August to their highest level in more than two years. In addition, housing starts rose to their highest seasonally adjusted annual rate in the past four years Shiller’s own index of housing prices rose 2% in August over the same time in 2011. This was the biggest year over year gain since July, 2010.
But Shiller is not buying the growing optimism and that the housing industry is ready for a strong rebound anytime soon: "This may well be the bottom for housing for some years. But next week’s election, the Dec. 31 fiscal cliff and Europe’s debt crisis could throw housing for a loop.”
He also points out, probably correctly, that in the coming years home prices will be depressed by sales from retiring baby boomers moving to urban areas from the suburbs: "It can get big as it was again maybe in 50 years. This housing bubble was a once-in-a-lifetime thing, I imagine. Although, you know, the market might be more volatile, so the future is always unknown. My general idea is that we're not going into a nationwide boom and not many places will show booms in the next few years.”
Thus, not much hope from the foremost housing expert that housing will help jumpstart our bad economy.
3) In a November 1, 2012 Bloomberg News article, Bill Gross, who operates the world’s biggest mutual fund at Pacific Investment Management Co., asserted there is no evidence that investment is being spurred by the third phase of Federal Reserve’s quantitative easing program.
Recall that the first two phases of quantitative easing printed $2.3 TRILLION worth of fake money and pumped that into the economy via bond purchases, with no positive results: “All of the money being created and freed up is elevating asset prices, but those prices are not causing corporations to invest in future production. Lower interest rates are being used to consume as opposed to invest.”
Why anyone thought that the third phase would do any good, when the first $2.3 TRILLION did not good, is beyond reason or logic. And Gross is not too optimistic that the Washington political class will do any better than the failed policies of the Fed when it comes to viable economic policies: “Fact is they’re [politicians] all the same -- bought and paid for with the same money. Pulling a Democratic or Republican lever will deliver the same results every four years.”
Great, one of the best investors ever sees gloom and doom regardless of who in the Federal government he is looking at.
4) And finally, let’s look underneath some of the labor and employment data released by the government last week besides the fact that first time unemployment claims continued at sky high levels and the unemployment rate increased to 7.9%:
- If the size of the willing labor force had stayed the same since January, 2009 the unemployment rate would not be 7.9% but 10.6%. 10.6% is the same rate of unemployment as the month that Obama took office, indicating not a lot of real improvement since he was sworn in.
- Remember, the $830 billion economic stimulus program was supposed to have reduced the unemployment rate to about 5.2% by now. The administration's economic efforts and resultant ignorance have left us over 4 million jobs short of this stated goal despite the $830 billion, almost $3 TRILLION in Fed quantitative easing, and the wreckage of numerous failed economic programs, e.g. Cash For Clunkers.
- Hourly earnings have risen only 1.6% so far this year, less than the rate of inflation.
- Unemployment rate for blacks rose to 14.3%.
- The teenager unemployment rate is still about 25%.
- Long term unemployed (27 weeks or more) was little changed at 5.0 million (40.6 percent of the unemployed).
- The better and truer barometer of the economy, the U-6 unemployment rate, which includes marginally attached workers (those who are not actively looking for work but have indicated they want a job and have looked for a job in the past 12 months) and people who are looking for full time work but settle on part time work for economic reasons, also saw little change, moving from 14.7% after September to 14.6% today.
- This U-6 unemployment measure translates into about 23 million Americans who are not working to their desired level of employment.
- When Obama became President, the U-6 rate was 14.2% and just six months ago it was 14.5%. Thus, based on this truer measure of employment, unemployment, and under employment, this administration is taking us in the wrong direction.
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