Free Markets, Free People


Economic Statistics for 15 Mar 12

The following statistics were released today on the state of the US economy:

Initial jobless claims continued their decline in the latest week, down 14,000 to 351,000. The four-week moving average is steady at 355,750 which is the recovery low.

The overall Producer Price Index rose 0.4% last month. The core rate, ex-food and –energy, rose 0.2%.

While the components of the Empire State Mfg Survey are mixed, the overall index rose 20.21 this month, from 19.53 last month.

The Philadeplphia Fed survey mirrors the same mixed indicators as the NY survey, with noticeable weakness in key components, but an overall rise in the headline index to 12.5. Both surveys are showing weakness in new orders.

The Treasury International Capital report indicates strong foreign buying of US securities, leading to a net long-term flow of $101.0 billion in January.

The Bloomberg Consumer Comfort Index climbed another three points, to -33.7 in the March 11 week.

Dale Franks
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Obama is on the problem of high gas prices

Yes indeed, he’s focused like a laser beam. He has figured out how to proceed. You’ll be seeing relief soon. He’s … setting up a task force to look into speculation?!

Er, seems so.  Read this:

"I think the American people understand that we don’t have a silver bullet when it comes to gas prices. We’ve been talking about this for 30 years. The only way to stabilize gas prices is to reduce our dependency on fore oil and we just put out a report that over the last year or so, we’ve been able to reduce our dependence on foreign oil by a million barrels. That’s’ significant. In the meantime, cuz I know people are hurting right now and it feels like a tax out of their paychecks, what we’re doing is looking at every single area that can affect gas prices, from bottlenecks that are out there, we’ve set up a task force to look into speculation to make sure people are taking advantage of the situation on the global oil markets," President Obama told WKRC-TV.

Line by line:

I think the American people understand that we don’t have a silver bullet when it comes to gas prices. We’ve been talking about this for 30 years.

I think the American people understand something Barack Obama and the Democrats don’t understand – if we’d have been drilling everywhere for those 30 years instead of flapping our jaws about “silver bullets”, we’d be much better off today, in terms of oil supply and price, than we are now.

Oh, by the way, we’ve been talking about alternative energy for 30 years too and look where we are.

The only way to stabilize gas prices is to reduce our dependency on foreign oil and we just put out a report that over the last year or so, we’ve been able to reduce our dependence on foreign oil by a million barrels.

Well, two points.  One we’re in a deep recession, so oil consumption is down considerably because business and commerce are down significantly.  And two, another way to have an effect on oil prices is to what?  That’s right, increase supply.

That’s’ significant. In the meantime, cuz I know people are hurting right now and it feels like a tax out of their paychecks, what we’re doing is looking at every single area that can affect gas prices, from bottlenecks that are out there, we’ve set up a task force to look into speculation to make sure people are taking advantage of the situation on the global oil markets

Translation: I haven’t a clue so I’m setting up a task force which helps me kick the can down the road a bit.  And the task force will inevitably find that “speculators” are the problem (a hat tip to Nancy Pelosi for the idea), and I’ll be able to call for Congress to pass a law while I again try to pass the blame off to the 1%.

Now that’s leadership.


Twitter: @McQandO

Economic Statistics for 14 Mar 12

The following statistics were released today on the state of the US economy:

Export prices rose 0.4% in February, up 1.5% from last year. Import prices rose 0.4% for the month, up 5.5% for the year.

The Mortgage Bankers Assoc reports that overall mortgage applications fell -2.4%, with purchases up 4.4% and refinancing down -4.1%.

The nation’s 4Q 2011 current account deficit totaled $124.1 billion, up from a revised $107.6 billion in 3Q.

Dale Franks
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Are the recent employment gains real?

Over the last several months, we’ve seen moderate gains in non-farm payroll jobs, with the rate of job creation running at about 200,000 jobs a month. That’s seems good, as does the continuing drop in initial claims for unemployment to around the 350,000 level weekly.

The thing is, how real is this job creation, in an environment where the past year showed a rate of GDP growth of 1.8%, and the most optimistic forecasts for this year indicate a 2.5% rate of GDP growth? Those rates of growth are significantly below the long-term trend rate of growth for the US economy, which is between 3% and 3,5% per year. How is employment increasing when GDP growth is so slow?

Well, the answer is, it may not be.  Take a look at the charts below, They are taken from the historical A tables of the Bureau of Labor Statistics’ (BLS) household survey. This is the survey where households provide employment data.

The first chart shows the number of people in the Household survey who’ve declared themselves to be employed since January of 2002.


That does indeed indicate a moderate rate of employment growth since January of 2010. So far, so good.

The next chart, however, shows those who are employed as a percentage of the civilian, non-institutional, adult population.


This provides a far more negative picture of employment. Essentially, the percentage of the population that is employed has crashed, and the percentage of employed was lower in 2011 than it was in 2010. As a percentage of the adult population, peak employment has declined every year since 2007.

Essentially, a additional 4% of the adult population is now jobless, compared to 2007, and that jobless percentage has been increasing, not decreasing, over the last two years, despite mild declines in the official unemployment rate.

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Economic Statistics for 13 Mar 12

The following statistics were released today on the state of the US economy:

The NFIB Small Business Optimism Index rose to 94.3, the sixth straight month of increases for the index.

Retail sales rose 1.1% in February. Less autos, sales were up 0.9%, and ex-autos and gas, sales rose 0.6%.

Business inventories rose 0.7% in January, keeping the stock-to-sales ratio unchanged at 1.27.

The Ceridian-UCLA Pulse of Commerce Index rose 0.7% in February, following a drop of -1.7% in January. Even with the February increase, the PCI is indicating that the economy is still weaker than other indicators seem to show.

In weekly retail sales, Redbook reports same store sales were up by 3.3% over last year. Meanwhile, ICSC-Goldman reports weekly sales rose 0.7% for the week, and were up 2.3% over last year.

Dale Franks
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Rising gas prices can be directly attributed to Obama’s failed energy policy

The stated plan of the Obama administration, or at least their stated goal, was to see gas prices rise “to the level of Europe” so alternative energy sources would be more feasible, affordable and attractive.  Or that’s how I remember it.  

So here we are, headed that way.  But while the administration may find that to be a good thing, most Americans watching gas prices rise … don’t.

And who do they blame?  Well they blame the same person they always blame – the president.  Right or wrong, the reason is irrelevant.  That’s politics in America.  So the best thing to do is implement policies that will ensure this potential political landmine is kept disarmed.  Of course, this administration, despite its strident claims and outright falsehoods to the contrary, has done anything but that.

The so-called “experts” are trying to rise to the defense of Obama on this:

“This notion that a politician can wave a magic wand and impact the 90-million-barrel-a-day global oil market is preposterous,” said Paul Bledsoe, strategic adviser to the Bipartisan Policy Center and a former Clinton administration official.

Well a straw-man statement like that really does make one wonder about his expertise, doesn’t it? And one wonders if this expert from the “Bipartisan Policy Center” remembers the last time politicians laid blame for gas prices on a president.

Of course no one is talking about a magic wand (although it could be argued that George W. Bush used one by announcing his intent to lift the offshore moratorium that saw the price of oil plunge in its wake) except Democrats (“tap the Strategic Petroleum Reserve!”).

This isn’t about “magic wands” or immediate actions to stem adverse political results.   This is about the sum of a policy of 3 plus years that has seen us end up moving toward the administration’s stated goals.  The only thing that has kept it from being worse is the rather large increase in production of oil and gas on state and private land which has offset the overall decline in production on federal lands.

As political calculations go, though, this administration forgot one important thing about their goal of making gasoline more expensive in order to make alternative fuels more attractive.  The one thing they forgot was to get the people’s buy in (same problem with ObamaCare).  And, as you might imagine, the people aren’t buying in.  Add in the tsunami of negative stories about “green energy” companies and the cost of alternative fuels and you have a situation that is entirely predictable – Obama continues to try to sell his goals and the American people continue to refuse to buy into his pitch:

Monday’s efforts were just the latest in an aggressive messaging blitz that has included three recent swing-state speeches touting Obama’s backing for oil drilling, federal investments in green energy and his administration’s tougher fuel economy rules.

But a Washington Post/ABC News poll released Monday suggested the effort is falling flat with voters upset about prices at the pump, which according to AAA are now averaging $3.80 per gallon — a 30-cent increase in the last month alone.

The poll found that 65 percent of U.S. adults surveyed disapproved of Obama’s performance on gas prices, while 26 percent approved and 9 percent had no opinion.

As mentioned, this isn’t just about gas prices alone.  This is also about Obama’s energy policy goals, well documented, that want to see fossil fuels eliminated as the predominant fuel for our economy. 

Naturally, because of the obvious negative political results, the Obama administration has embarked on a campaign to shift the blame about gas prices elsewhere – leopard/spots. 

In this President’s view, only the good things that happen during his watch are his responsibility, the bad things belong to someone or something else.  Bush was the blame for high gas prices (and just about everything else) when Obama was running for President – speculators, however, are the bad guys in this particular gas price crisis.  Never mind the “permatorium” and reduced drilling on federal lands during his 3 plus years have also had a detrimental effect.  Forget the promise of the Keystone XL pipeline and the immediate effect its approval might have had on gas prices.  Oh, and approval to expand Gulf Coast refineries?  Who needs that?   Nothing to see here citizen, move along.  Its those damn speculators.

Politics is about perception, and the perception is that Obama is an enemy of the oil business (and he’s done nothing to dissuade that perception) and those chickens are coming home to roost, to quote his favorite pastor:

“Anything that is perceived by people as a problem in the immediate advance of the election has a chance to impact the election,” said Paul Beck, a political science professor at Ohio State University.

The threat to Obama from rising fuel prices is likely to become more grave if the economic recovery stalls.

“It depends in part on what happens with gas prices, and it depends to some degree on the state of the economy as well,” Beck said.

Among other things.  Bottom line, as much as the Obama spin-meisters try to lay this off on others, it just isn’t working.  Its that record of statements damning the oil industry and those statistics that show that this administration has done everything in its power to slow the production of oil in this country where it could that counts.

Much to Obama’s chagrin he’s being judged on his actions, not his words.


Twitter: @McQandO

Deficit watch: The trillion dollar beat goes on

In case all this contraception talk has distracted you (as it surely was intended to do), you need to know that the deficit continues to grow and is on pace to go over a trillion dollars for the 4th year in a row:

The federal government set a new monthly record deficit of $232 billion in February and has notched a total of $581 billion in the first five months of the fiscal year, according to the Treasury Department’s official count released Monday.

February’s record is $8 billion more than the previous monthly record, set in February 2011, and came chiefly because of a drop in individual income tax receipts.

The overall deficit remains on pace to top $1 trillion this year for the fourth year in a row — but is down slightly from its pace last year …

Sorry to intrude with such boring reality.

Now back to “slutgate”.


Twitter: @McQandO

So, is America “back” economically?

Two good jobs reports back to back has got the Obama campaign trying out some new campaign rhetoric about how what they’ve done has worked and that America is “back”.

Is it?  Or is it premature to make that claim?  Well, on the one side, most economists will tell you that job growth is usually a lagging indicator and good job growth usually means the other underlying numbers for positive growth are good too.

But are they? 

Well, not necessarily.  In fact, one of the other leading indicators of a strong economy, GDP growth, isn’t going to be so hot according to many economists.  David Leonhardt reports:

But the jobs report isn’t the only measure of economic activity, and another major measure — of gross domestic product — doesn’t look quite so cheerful. The most likely situation is that job growth will slow in coming months, economists say, which will make President Obama’s economic narrative a bit more complicated than it now is.

On Friday, Macroeconomic Advisers, one of the most closely watched forecasting firms, reduced its estimate of economic growth in the current quarter to an annual rate of 1.8 percent, from 2 percent. And 1.8 percent growth does not generally lead to very strong job growth. In the fourth quarter of last year, by comparison, the economy grew 3 percent.

Beyond the current quarter, forecasters expect the economy will grow at an annual rate of 2 to 2.5 percent for the rest of the year, according to Bloomberg.

Based solely on the gross domestic product numbers, the obvious conclusion is that job growth will slow in coming months. Over the last six months, the average monthly gain in nonfarm employment has been 201,000; over the last three months, the average gain has been 245,000.

Sure enough, most forecasters do expect job growth to slow. Barclays Capital expects 200,000 jobs a month for the rest of the year. IHS Global Insight forecasts a slowdown to 180,000 jobs a month. Macroeconomic Advisers says it will slow to 140,000 jobs a month in the final three quarters of this year.

So what’s the drag on the GDP?  What is it that is causing this less than optimistic forecast for job growth?

A combination of things:

Why do economists expect growth to slow? The warm winter has probably pulled some spending forward into the last few months and will reduce spending in coming months, says Joshua Shapiro, an economist at MFR Inc. in New York. Rising oil prices also play a role. So does the continuing debt overhang, which makes a sustained recovery difficult.

Spending slowdowns, rising oil prices and the debt overhang all combine to slow growth.  Of course there are other things too that will effect it – increased regulation, for instance. 

Annie Lowrey reports on other concerns:

First, economists say that temporary trends increased growth in the fourth quarter and may not continue into next year. Second, the economy faces significant headwinds in 2012: some from Europe’s long-lingering sovereign debt crisis, and some from domestic cutbacks beyond the control of President Obama, whose campaign would like to point to a brightening economic picture, not a darkening one. Even the Federal Reserve is predicting that the unemployment rate will remain around 8.6 percent by the time voters go to the polls in November.

The fourth quarter benefited, for instance, from wholesalers restocking inventories of goods like petroleum, paper and cars, giving a jolt to growth.

“We had lean inventories, so those required additional production to satisfy demand,” said Gregory Daco of IHS Global Insight. “But once inventories are restocked, there is no need to restock them anymore. That means there’s going to be less production,” he said.

Inventories have been restocked and oh yeah, there’s the European sovereign debt crisis to contend with.  As well as:

Consumers also pulled back on their savings, helping to finance a recent spurt in spending. a trend that forecasters doubt will continue. Other short-lived factors include falling gasoline and commodity prices, and an increase in orders from Japanese companies returning to business after the devastating spring tsunami.

And finally we have the Chairman of the Federal Reserve:

He acknowledged that rising oil prices were “likely to push up inflation temporarily while reducing consumers’ purchasing power.” But the Fed expects the overall pace of increases in prices and wages to remain “subdued,” Mr. Bernanke said …

Bernanke also mentioned the continued depression of the housing market as a factor and he believes growth this year will be between 2.2 to 2.7 percent.  Such growth would indeed put a damper on employment growth.

Whether or not the forecasts will prove true obviously remains to be seen.  However the elements that should slow growth seem to be in place.  Consequently, the forecasts are less optimistic than Obama’s political campaign would have you believe.

After many “false dawns” (remember “green shoots”?) the possibility of another one looms large.  Sure, the economy is making progress. And yes, that’s good.  But overhyping that progress and then seeing the numbers go south again could be very damaging to an incumbent president’s reelection hopes.  Not that I expect that possibility to slow him down a bit from claiming to have saved the country from the abyss when in fact we’re simply crawling out from the one he helped create.


Twitter: @McQandO

GM buys into Peugeot, sucks up $400 mil in “junk bonds”

Ed Morrissey sums up the “new” GM:

Americans sunk tens of billions of dollars into General Motors in 2008 and 2009, money which they won’t see any time soon, if at all.  The Obama administration strongarmed senior creditors in an unprecedented politically-engineered bankruptcy to get taxpayers to eat the costs of old pension obligations and boost the UAW.  All of this was done in the name of making GM a stronger company so that they could eventually pay back the bailout and make better decisions in the future. [emphasis mine]

Remember the other day when I talked about corporate cultures and how it was important to change them when a company is going down the tubes because of their present one?  And how bankruptcy – real bankruptcy – has a tendency to help make that corporate culture change a reality.

Yeah, well that didn’t happen at GM with predictable results:

Attention U.S. taxpayers:  You now own a piece of a French car company that is drowning in red ink.

That’s right.  In a move little noticed outside of the business pages, General Motors last week bought more than $400 million in shares of PSA Peugeot Citroen – a 7 percent stake in the company. …

Peugeot can undoubtedly use the cash.  Last year, Peugeot’s auto making division lost $123 million.  And on March 1 – just a day after the deal with GM was announced – Moody’s downgraded Peugeot’s credit rating to junk status with a negative outlook, citing “severe deterioration” of its finances.

In other words, General Motors essentially just dumped more than $400 million of taxpayer assets on junk bonds.


An analysis by auto industry consultants IHS said it is “somewhat baffling that GM is willing to get involved in an alliance that it frankly does not need for size or complexity, while still avoiding any public plan to rationalise its European production, cut costs, or deal with labour rates.”

Well, the investment in Solyndra was “somewhat baffling” to most analysts, but it didn’t stop the Department of Energy from guaranteeing it, did it?

GM needs a 7% stake in Peugeot like it needs the Chevy Volt.  Don’t forget, it loses money every year in Europe.  And now it owns 7% of another car company posting huge losses.

It hasn’t yet been able to pay the tax payers back for the “investment” they were forced to make in the company although they have found the time to pay bonuses to employees and executives, some of whose accomplishments apparently include this decision.


Twitter: @McQandO