Today’s economic statistical releases:
The Commerce Department’s 3rd estimate of 3Q GDP was again revised downwards, to a 1.8% annualized rate.On a year over year basis, GDP was up 1.5% over 3Q 2010. The downward revision was led by a smaller decline in inventories and less growth in personal consumption.
Initial claims for unemployment fell for the 3rd consecutive week, down 4,000 to a much lower-than-expected level of 364,000. Continuing claims fell 79,000 to 3.546 million, the lowest level of the recovery.
The Chicago Fed National Activity Index fell to -0.37 in November from a revised -0.11 in October. Housing is still heavily negative in the report.
The Bloomberg Consumer Comfort Index climbed to -45 in the period ended December 18 from -49.9 the prior week.
Consumer sentiment continued to improve, to 69.9 in December from 64.1 in November.
The FHFA reported that house prices in October unexpectedly declined -0.2% after rising 0.4% in September. Analysts had expected a 0.3% rise in prices, not further downward price pressure.
The index of leading economic indicators rose 0.5% in November following October’s 0.9% increase. Positive elements include the treasury rate spread, building permits, consumer expectations, building permits, and falling unemployment claims.
I put the results of a lot of polls up. I also skip a lot of them. I usually skip those that I think are transitory and really don’t mean anything in the long run, such as candidate popularity polls a year out from an election with no settled nominee on one side of the political spectrum. At this point, they change like the wind.
But I also think there are “indicator” polls that are important regardless of when they’re taken in relation to the next national election. Direction of the country is one (satisfaction). Voter enthusiasm is another (most energized). And where the independents fall is a third (they decide elections).
Here’s a fourth “indicator” poll (by Gallup) that should disturb the incumbent president’s campaign greatly:
Throughout 2011, an average of 17% of Americans said they were satisfied with the way things are going in the United States. That is the second-lowest annual average in the more than 30-year history of the question, after the 15% from 2008. Satisfaction has averaged as high as 60% in 1986, 1998, and 2000.
Why is this important? Because politics is a game of perception and in the end, the only perception that matters is the one the voters have both in general and specifically about certain issues and candidates. But it is the general perception that colors voters views on both issues and candidates. And that’s why this poll indicates problems for the president. It is numbers like this that spell election loss to those who’ve been in charge for a term.
The obvious thing the Obama campaign is going to have to do is try to sell the idea that things could have been a lot worse if it weren’t for the “savior”. That’s a very difficult job. Because people tend to judge the condition of the country based on their situation and circumstances (or that of family and friends).
Here’s the bottom line for the President’s campaign that no amount of spin will be able to change:
Americans continue to express low levels of satisfaction with the way things are going in the United States, rivaling the lowest Gallup has measured in the past 30+ years. That dissatisfaction probably reflects Americans’ economic anguish, and the prospects for considerable improvement in satisfaction are not great unless the economy improves significantly.
Likely or unlikely in the next 11 months?
If I had to guess, and watching the developments around the world, such as Europe as well as the US, I’d say “not very likely”.
Today’s economic statistical releases are a bit conflicted:
MBA Purchase Applications fell -2.6% overall last week, with purchases dropping -4.9% and re-fis falling -1.6%. So the positive housing numbers we’ve seen so far this month haven’t affected actual sales. Interest rates are attractively low, but that is balanced by poor employment conditions, tight credit, and a lack of equity.
A sweeping revision to the data method has sharply lowered the last 5 years of existing home sales reports. But last month, sales rose 4%, anyway, well above expectations, and the rest of the report is pretty positive, too, with housing prices firming up, and supply falling. Also, the gains are concentrated in single-family dwellings, and well-distributed geographically.
Today’s economic statistical releases:
Housing starts jumped 9.3% to an annual rate of 685,000. But that jump is led by a 25.3% jump in multi-family dwellings, so don’t assume that individuals are getting ready to buy single-family homes again. Also, the surge is led by a 53.8% increase in the Northeast, balancing off an 18.2% decline in the Midwest.
ICSC-Goldman reports a big bump in retail sales, up 3.4% for the week, and 4.6% over last year. Redbook, however, shows a far more modest increase, with same store sales only up 0.5% from last week, at 3.4%, while the month-to-month number is actually down -2.7%. That doesn’t bode well for the government’s retail sales report for December.
Today’s single statistic is the National Association of Homebuilders’ Housing Market Index, which rose 2 points to 21 this month. On the basis of this report, we can probably increase expectations for the housing starts report tomorrow, as well as Friday’s new home sales report.
The only release today is the CPI, which shows that inflation eased last month. The overall CPI was unchanged for the month, and the core rate (ex-food and energy) rose only 0.2%. On a year-over-year basis, CPI fell from 3.6% last month to 3.4%, while the core rate only rose 2.2% from last month’s 2.1%.
Today’s economic statistical releases:
Initial jobless claims dropped sharply for the 2nd week in a row, falling 19,000 to 381,000. The four-week average is down 6,500 to 387,750, and has dropped for 10 of the past 12 weeks. One note of caution, however, is that the holiday period can make the numbers volatile, and there are lots of special factors that can affect the numbers. Still, the trend is positive, overall, and is looking better than it has at any time since the recovery—such as it is—began.
Food prices pushed the Producer Price Index higher, up 0.3% for the month and 5.7% for the year. The core rate, which ignores food and energy prices, was up 0.1% last month, and 2.9% over the last year.
Industrial production fell -0.2% last month, well below expectations for a 0.2% increase. Manufacturing was down across the board, but auto manufacturing particularly declined. Capacity utilization also dropped slightly to 77.8%. In contrast to this morning’s industrial production numbers, the Empire State Manufacturing Survey rose well above expectations to 9.53. Especially heartening is new orders which rose to 5.1 versus -2.07 last month. In addition, the Philly Fed’s general activity index rose to 10.3 from November’s 3.6, as manufacturing in the Philly Fed district grew at a faster rate.
The nation’s current account deficit narrowed to $110.3 billion in the third quarter, the smallest gap since Q4 2009.
Inflow of investment income into the US slowed sharply in October, to a net $4.8 billion compared to $68.3 billion in September.
The Bloomberg Consumer Comfort Index rose to the highest level in two months, to -49.9. Of course, -49.9 still isn’t good.
Brian Dimitrovic, writing in Forbes, is another who takes a shot at Obama’s speech in Kansas (this is almost becoming a series considering the number of people ripping the speech on its economic ignorance) and posits that it is an example of abysmally incorrect economic history. The most obvious reason for the rewriting of that history by President Obama is centered in his ideology. If the history doesn’t prove what he says, President Obama doesn’t have a case. Dimitrovic, using the actual history of the periods Obama cites, shows Obama’s grasp of the history of those eras is as poor as the ideology he touts. Here’s the passage from the speech that Dimitrovic cites. We’ve cited it in previous posts, but Dimitrovic’s demolition of the premise is important:
[T]oday, we are a richer nation and a stronger democracy because of what [Teddy Roosevelt] fought for in his last campaign [of 1912]: [including] political reform and a progressive income tax.
Now, just as there was in Teddy Roosevelt’s time, there is a certain crowd in Washington who, for the last few decades, have said, let’s respond to this economic challenge with the same old tune….If we just cut more regulations and cut more taxes – especially for the wealthy – our economy will grow stronger….
Now, it’s a simple theory. And we have to admit, it’s one that speaks to our rugged individualism and our healthy skepticism of too much government….And that theory fits well on a bumper sticker. But here’s the problem: It doesn’t work. It has never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible postwar booms of the ’50s and ’60s. And it didn’t work when we tried it during the last decade. I mean, understand, it’s not as if we haven’t tried this theory.
Now there are lots of opinions about economics, but like it or not, facts are facts. Those facts are readily available to those who seek them. By the way, Dimitrovic is a Harvard PhD and an economic historian, so this is right in his wheelhouse.
First is his contention that Roosevelt’s “progressive” ideas are what essentially saved the nation. That the intrusion it represented was necessary. Dimitrovic pretty much says that’s nonsense. In fact, he says, what happened then may be the reason we’re suffering now.
Let’s look at the past as it actually was.
There is one major inflection point in U.S. economic history. Before this point, growth was high, at about 4% per year for a century. Also in this period, there was remarkable price stability and so little unemployment that the nation had to import tens of millions of workers from abroad.
After this point, growth was moderate, at about 3% per year for the long term, with variations in the form of major depressions and recessions and a 23-fold inflation which had no like in the previous epoch.
This inflection point was 1913 – the very year which the reforms TR plumped for in his last campaign, the income tax and the Federal Reserve, came into being. 1913 marks the one secular shift in American economic history toward lower growth and more economic unpleasantness in the form of unemployment, inflation, and serial recession.
Had this nation grown at the 4%-rate achieved in the pre-1913 period, we would be twice as well-off today. As for inequality, unemployment and inflation are scourges to the working class, but not so much to the rich, and these are 20th– and 21st– century innovations.
That’s the actual history coupled with the economy’s real performance. The economy here worked pretty darn well before 1913 and we saw consistent growth that continued to lift all boats. After 1913, not as much. An entire percentage point of growth was, on average, was lost. The only real and significant difference – income tax and the Federal Reserve. What does economic history show happened after this inflection point where government intruded significantly?
As Dimitrovic points out, “lower growth and more economic unpleasantness in the form of unemployment, inflation, and serial recession.” And again, this isn’t a claim that government has no role in the economy as Mr. Black and White would like to claim. This is to point out that what he is attempting to sell with his rhetoric and in support of his premise that it is capitalism that has failed (and thus government is the answer) has no basis in fact. In fact, it appears the opposite is probably true.
Dimitrovic then turns to the 20th and 21st centuries and their history:
Now about that 20th-century, the only reason its record came in even respectably is that at certain junctures, decided efforts were taken to withdraw the impress of the institutions of 1913, the Federal Reserve and the income tax.
He lists a number of facts that contradict Obama’s contentions about the market. In fact, as Dimitrovic says, it was decidedly anti-progressive ideas which saved the 20th Century, for example:
The President says, “It didn’t work when it was tried in the decade before the Great Depression.” These would be the years 1921-1929, when on account of a tax cut put together in 1921, the economy boomed at 4.8% per year as unemployment and inflation (the latter recently on a 100% run) both collapsed. How does a president, in a major, prepared speech make such an indefensible factual error?
Next: “It’s not what led to the incredible postwar booms of the ’50s and ’60s.” No? The trough of the recession at the end of World War II was 1947, when the Republican majority in Congress conspired to win a tax cut over President Truman’s veto. Result: a 6-year run of 4.8% growth.
Note the question Dimitrovic asks in the last sentence off the first example. This isn’t something that would be difficult to find for a research staff. These numbers and facts exist and are out there. But they don’t fit the ideology. You either have to assume they didn’t research the claims or that they rejected the facts because the were inconvenient to the premise. It is hard to believe the didn’t research the claims, isn’t it? They’re pretty definitive claims. One would assume, listening to a President of the United States, they’re anchored in fact. Obviously they’re not. The question is whether this is true economic historical ignorance or willful economic historical revisionism?
Dimitrovic also includes an example of where tax cuts were resisted, and the result, and where they were instituted afterward and that result. Again, the facts seem to refute the President’s premise:
In 1953, when recession came, President Eisenhower resisted calls for another tax cut, and recessions came again and again such that Eisenhower left office in 1960 with a record of 2.4% annual growth on his watch. John F. Kennedy followed, as every schoolchild should know, with another big tax cut. The great 1960s boom ensued, with 4.9% growth from 1961 to 1969.
Also interesting are the parties of the presidents. The numbers, however, aren’t controversial at all. This has been a fact with which almost all of those who’ve followed politics for any length of time and have been interested in the effect of tax cuts on our economy are familiar. These aren’t obscure, little known facts. But they certainly have been facts that one side of the ideological spectrum have tended to ignore when trying to spin more government and not less. That is precisely what President Obama’s object was in his Kansas speech.
The reason for Dimitrovic’s rebuttal of the contentions and claims made in the speech is fairly easy to discern:
Two years ago, I happened to publish a book, Econoclasts, canvassing all this history. I also happen to know that the White House library has a copy.
It also explains his disbelief in what was said:
I have to wonder what historical scholarship the president and his speechwriters are consulting as they come up with their strange counter-narrative of American economic history. I truly don’t know what the books could be.
After all, when the major library bibliographical service, Choice, reviewed Econoclasts, it said the book “fills a gaping hole in the literature.” Has there been some new revisionist history of the effects of tax cuts since 1913 that validates the president’s new narrative? If so, no one’s ever heard of it.
Then again, you can find the stuff the President reiterated in Kansas here and there in left wing redoubts, Berkeley, California and the like – on bumper stickers.
But not in the history of the actual eras in question. In fact, precisely the opposite of the claims made by the President seem to be true. Government intrusion is what has dampened our economic growth. You can see the percentage amounts for yourself. The cycles of recession, unemployment and inflation are a result of more government, not the failure of the market. In fact, per Dimitrovic’s examples, every contention made by the President, which Dimitrovic highlighted, are demonstrably wrong.
The reason for the claims is obvious, however. The ideology of market failure and the demand for more government requires that history, whether it is accurate or not.
We have an old word for that – propaganda. The dishonesty being employed ought to make the current purveyor of that propaganda ashamed of himself. But there is certainly no sign of that being the case.
Today’s economic statistical releases:
Mortgage applications rose 4.1% last week, with purchases dropping -8.2% and re-finance applications up 9.3%. The 30-year mortgage rate averaged 4.12%., the lowest rate of the year.
Import prices rose 0.7% last month—9.9% for the year—due to spikes in petroleum prices. Ex-Petroleum, prices fell -0.2%, following a 0.3 percent ex-petroleum decline in the prior month. Export prices rose 0.1% for the month and 4.7% over last year.
Today’s economic statistical releases:
November retail sales weren’t as strong as expected, rising 0.2% both overall, and ex-autos. On a year-over-year basis, retail sales were up 6.6%. Despite the rather disappointing November sales, both September and October sales were revised upwards.
The post-Black Friday sales slump continued last week. Redbook reports that the year-on-year same-store sales rate slowed by -0.3% to 2.9% this week. Similarly, ICSC-Goldman Store Sales are slowing, just like Redbook, with sales down -2.3% last week, and up only 2.8% year-over year.
Business inventories continue to build at a moderate rate, up 0.8% last month. The stock-to-sales ratio is unchanged at 1.27, as inventory build-up continues to match the rate of sales.
The NFIB Small Business Optimism Index indicates easing pessimism among businesses, with the index up 1.8 points to 92.0.
The Ceridian-UCLA Pulse of Commerce Index rose only 0.1% in November, to 94.84. The index is only up 0.9% over last November.