Monthly Archives: August 2012
The following statistics were released today on the state of the US economy:
The ISM Non-Manufacturing Index rose 0.5 to 52.6. New orders rose 1 point to 54.3, while business activity, jumped 5.5 points to 57.2.
A net 163,000 new jobs were added to the economy in July, while the unemployment rate rose to 8.3%. This marks the 41st consecutive month that unemployment has remained above 8%. The broadest measure of unemployment measured by the BLS, the U-6 unemployment rate, rose to 15.2%. The average workweek remained unchanged at 34.5 hours, while hourly earnings increased by only 0.1%, rising 2 cents to $23.52. The civilian non-institutional adult population rose by 199,000 persons in July, while 195,000 fewer people were listed as being employed. As a result, the employment-population ratio fell back to its historical low of 58.4%, and the labor force participation rate fell to 63.7%, also a historical low. Prior to the current recession, the last time those ratios were this low was in 1983. If the labor force participation rate were at the historical average of 66.2%, the current rate of unemployment would be 11.72%. Overall, the report was merely "fairly bad", rather than "completely disastrous", like the last two months have been.
Interesting, isn’t it? I really don’t have to put anything else up there to explain that number. Everyone in their brother will look at it and understand that the unemployment rate just rose from 8.2% to 8.3%. Its sort of like celebrities who are identifiable by only their first name. However, Obama and the Democrats certainly don’t want to grant that number that sort of status.
The U.S. economy closed out an otherwise weak second quarter by creating more jobs than expected, with 163,000 new positions added, but the unemployment rate rose to 8.3 percent.
Of course the job creation rate isn’t even at the break even point, even if up slightly.
But that doesn’t mean there aren’t those out there spinning the results:
"While the monthly gain is still relatively small by historical standards, it might help spark somewhat higher consumer optimism and spending," Kathy Bostjancic, director of macroeconomic analysis at The Conference Board, said in response to the report.
Yeah, “spark.” Like all the other “sparks” we’ve been told about. Like the 3 “recovery summers” we’ve been promised. Like the job saves/creation the stimulus was going to provide (Remember we’re supposed to be at around 5% unemployment right now. That’s what Obama promised if we gave him a trillion dollars to throw down the sewer. He claimed that without it unemployment would rise to … oh, wait, over 8%). And this month we’ve seen the official unemployment rate go a tenth higher.
As for the spin, let’s get real instead:
Despite the seemingly good news, the report’s household showed that the actual amount of Americans working dropped by 195,000, with the net job gain resulting primarily from seasonal adjustments in the establishment survey. The birth-death model, which approximates net job growth from newly added or closed businesses, added 52,000 to the total.
The household survey also showed 150,000 fewer Americans in the workforce.
Perking right along, aren’t we? Oh, and by the way:
June’s anemic 80,000 gain was revised down to just 64,000.
And does the 8.3% number really reflect the problem? Well, we’ve said for years that it understates it. And it does:
While the figures themselves have been gloomy enough, there is considerable debate over whether the Labor Department’s headline numbers present the true picture.
A measure that takes into account those who have stopped looking for jobs as well as those working part-time for economic reasons has hovered near 15 percent. The so-called "real" unemployment rate, or U-6 measure, is above 20 percent in Nevada and California.
On a national level, that more encompassing rate edged higher to 15.0 percent.
But if you listen to Obama he’ll tell you that what he’s done “worked”. Then he’ll try to convince you it would be much worse if it hadn’t “worked”. Really?
If you honestly believe that, then you have a convenient memory that has obviously forgotten all the promises made about the stimulus spending.
None of what he and his administration has done has worked, we’re in horrible economic shape, he’s had 3 plus years to do something that would help the situation (just one example is the oil and gas industry where approving Keystone and opening federal lands and the offshore to exploration would have crated thousands of jobs), and he’s failed.
Time to give someone else a shot.
And yes, it’s that simple.
UPDATE: Zero Hedge chimes in – basically the numbers aren’t as good as they’re being spun:
We got the pre-spun job quantity data already, where we learned that nearly 3 times the headline print was due to seasonal and B/D adjustments and is thus nothing but noise. Now we get the quality. As can be seen below, courtesy of Table A9 from the Household Survey, in July the number of part-time jobs added was 31K, bringing the total to 27,925, just shy of the all time record of 28,038. Full time jobs? Down 228,000 to 114,345, lower than the February full-time jobs print of 114,408. Once again, more and more Americans are relinquishing any and all benefits associated with Full Time Jobs benefits, and instead are agreeing on a job. Any job. Even if it means working just 1 hour a week. For the BLS it doesn’t matter – 1 hour of work a week still qualifies you as a Part-Time worker.
UPDATE II: Meanwhile at the White House, unicorns and moon ponies continue to prance. Alan Kreuger:
While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression.
UPDATE III: In case you need a reminder of “The Promise and The Reality”:
Breitbart’s Mike Flynn reports:
President Barack Obama, along with many Democrats, likes to say that, while they may disagree with the GOP on many issues related to national security, they absolutely share their admiration and dedication to members of our armed forces. Obama, in particular, enjoys being seen visiting troops and having photos taken with members of our military. So, why is his campaign and the Democrat party suing to restrict their ability to vote in the upcoming election?
On July 17th, the Obama for America Campaign, the Democratic National Committee, and the Ohio Democratic Party filed suit in OH to strike down part of that state’s law governing voting by members of the military. Their suit said that part of the law is "arbitrary" with "no discernible rational basis."
Currently, Ohio allows the public to vote early in-person up until the Friday before the election. Members of the military are given three extra days to do so. While the Democrats may see this as "arbitrary" and having "no discernible rational basis," I think it is entirely reasonable given the demands on servicemen and women’s time and their obligations to their sworn duty.
Flynn cites the National Defense Committee which reports:
[f]or each of the last three years, the Department of Defense’s Federal Voting Assistance Program has reported to the President and the Congress that the number one reason for military voter disenfranchisement is inadequate time to successfully vote.
So here is a law actually trying to provide a little extra time to address the problem cited (btw, the members of the military would most likely have to show their military picture ID to be granted the opportunity to vote during that “extra time”). Why the resistance from the Obama campaign and Democrats? Why the intent to disenfranchise military voters?
If the polls are to be believed concerning how the military is likely to vote, it wouldn’t favor Obama or the Democrats. And, of course, Ohio is a swing state. So they want no extra time allowed for the military to vote (and don’t expect the DoJ to jump in here and take the side of the military either).
But hey, the military is still useful as props during photo ops and when they help burnish the C-i-C’s rep by killing bad guys like Osama. Voting? Yeah, not so much.
The following statistics were released today on the state of the US economy:
Factory orders dropped a disappointing -0.5% in June, with non-durable goods down -2.0%. Durable goods rose 1.3%, but only because of aircraft orders, with other durable components mainly negative.
Initial jobless claims rose 8,000 in the July 28 week to 365,000. The 4-week moving average dropped 1,750 to 365,500. Continuing claims fell 19,000 to 3.272 million. The 4-week average dropped 11,000 to 3.299 million, the lowest in six weeks.
The Bloomberg Consumer Comfort Index fell to -39.7, the lowest reading in five months.
The Challenger Job-Cut Report counts 36,855 layoffs for June, which is the lowest since April, 2011.
June chain-store sales reports are very positive so far today. A number of retail chains are raising guidance in reaction. Today’s results are the first increase since March for the ex-auto, ex-gas retail sector.
When government leaks sensitive national security information to the press, of course.
President Barack Obama has signed a secret order authorizing U.S. support for rebels seeking to depose Syrian President Bashar al-Assad and his government, U.S. sources familiar with the matter said.
Obama’s order, approved earlier this year and known as an intelligence "finding," broadly permits the CIA and other U.S. agencies to provide support that could help the rebels oust Assad.
What is it that occurs in early November? And who needs a little boost?
Perhaps you remember the “clever” accounting trick (also known as double counting) that the Democrats used to claim that ObamaCare would save money?
You know, it would cut Medicare by 500 billion (after the election, of course). You were supposed to believe that was a net cut in spending, remember? Of course it wasn’t. It was simply shifting the money to “pay” for other areas of ObamaCare. There was no “net” savings.
Well the newest projection by the CBO is that it will actually be 716 billion over 10 years (2013 to 2022) and it will essentially gut Medicare. Of course the old folks will have voted before it goes into effect.
The result of the shift of the funds? The Foundry has it:
- A $260 billion payment cut for hospital services.
- A $39 billion payment cut for skilled nursing services.
- A $17 billion payment cut for hospice services.
- A $66 billion payment cut for home health services.
- A $33 billion payment cut for all other services.
- A $156 billion cut in payment rates in Medicare Advantage (MA); $156 billion is before considering interactions with other provisions. The House Ways and Means Committee was able to include interactions with other provisions, estimating the cuts to MA to be even higher, coming in at $308 billion.
- $56 billion in cuts for disproportionate share hospital (DSH) payments.* DSH payments go to hospitals that serve a large number of low-income patients.
- $114 billion in other provisions pertaining to Medicare, Medicaid, and CHIP* (does not include coverage-related provisions).
*Subtract $25 billion total between DSH payments and other provisions for spending that was cut from Medicaid and CHIP.
The effect will be fairly substantial and should be obvious to even the most staunch ObamaCare supporter:
The impact of these cuts will be detrimental to seniors’ access to care. The Medicare trustees 2012 report concludes that these lower Medicare payment rates will cause an estimated 15 percent of hospitals, skilled nursing facilities, and home health agencies to operate at a loss by 2019, 25 percent to operate at a loss in 2030, and 40 percent by 2050. Operating at a loss means these facilities are likely to cut back their services to Medicare patients or close their doors, making it more difficult for seniors to access these services.
In addition, as MA deteriorates under Obamacare’s cuts, many of those who are enrolled in MA (27 percent of total Medicare beneficiaries) will lose their current health coverage and be forced back into traditional Medicare, where Medicare providers will be subject to further cuts. The Centers for Medicare and Medicaid Services chief actuary predicted in 2010 that enrollment in MA would decrease 50 percent by 2017, when Obamacare’s cuts were estimated at only $145 billion. Now that the cuts have been increased to $156 billion (or possibly $308 billion, as the Ways and Means Committee estimates), MA enrollment will surely decrease even further.
But Obamacare’s raid of Medicare doesn’t stop with cuts; it includes a redirection of tax revenue from the Medicare payroll tax hike in Obamacare. The payroll tax funds Medicare Part A, the trust fund that is projected to become insolvent as soon as 2024. Obamacare increases the tax from 2.9 percent to 3.8 percent, which is projected to cost taxpayers $318 billion from 2013 to 2022. However, for the very first time, Obamacare does not use the tax revenue from the increased Medicare payroll tax to pay for Medicare; the money is used to fund other parts of Obamacare, much like the $716 billion in cuts are.
That in addition to the fact that Medicare still has 37 trillion in unfunded mandates.
Also note the tax increase in the last paragraph (yes, that would be a middle class tax increase) and how the funds will not support the program with the 37 trillion problem.
Now we can argue all we want about the existence or non-existence of “death panels”, but here we have exactly what was predicted prior to this abortion of a law being passed. Rationed care (“… cut back services to Medicare patients or close their doors, making it more difficult for seniors to access these services.”) driven by these cost cuts are defacto “death panels”.
As the Foundry concludes:
With a raid on Medicare of this magnitude, President Obama’s assertion that his new law is protecting seniors and Medicare is astonishing. The truth is that Obamacare does the opposite.
But hey, this is the same President who claims his economic policy is working too. See previous post for the reality of that claim.
The reason this cut takes place in 2013 is obvious. If seniors were aware of its impact, you know how they’d vote.
Whether you do or don’t support Medicare isn’t the point, it’s the bald faced lies that have been put forward claiming something that isn’t at all true. And now the numbers are out that prove that.
Again, something which should be front and center as a major issue in this political season.
But it won’t be.
Market Watch writer Al Lewis opines:
The Great Depression that Federal Reserve Chairman Ben Bernanke claims to have averted has been part of the background radiation of our economy since at least 2008.
It’s just that like radiation — it’s invisible.
Uh, no. It’s no. It is simply a word, a description, that most of the media refuses to use.
Here, try it out. “Depression.” See, it’s not so hard.
In fact anyone who takes an objective look at what we’ve been suffering has concluded that while our current condition may not fit the arbitrary definition of whatever is considered a depression today, our economy certainly isn’t in any condition to be called recovered or even “recovering”. In fact, it is a disaster:
In a new research note, JPMorgan points out that since 1970, Japan, Finland and Sweden have all gone through what the U.S. is currently going through. And all three of them had recoveries stronger than America’s. The above chart compares the economic recovery — as measured by real GDP per capita — of each nation at different points after the trough of their recessions. And the U.S. is in dead last after 12 quarters from the bottom.
Take a particular look at Japan. That is the economy during the “lost decade” that we’re currently underperforming. Says JP Morgan’s Michael Feroli:
The poster child for slow growth coming out of a debt-fuelled financial crisis has to be Japan, which ever since the early 1990s has had trouble getting a head of steam. The recession which kicked off Japan’s “lost decade” lasted from 1991 to 1993. Including the recovery experience from that recession is sobering: we are currently faring worse than Japan at the same point in their lost decade.
So what’s the plan? How are we going to work ourselves out of this position? What policies will we institute to begin the actual, not pseudo, recovery? Well, it’s an election year. Don’t expect to hear the hard truths from this administration. Instead, prepare to be reminded “its working”. That in spite of reality:
As the economy reels, the national debt approaches $16 trillion, and we hear fears of Congress jumping off a fiscal cliff by year-end. Many states and local governments are struggling with massive deficits, too. Three California cities have filed bankruptcies.
U.S. companies are warning of slower growth amid Europe’s meltdown, yet the Dow Jones Industrial Average has crossed the 13,000 mark, and some observers are predicting new highs for the index soon.
The rising stock market is as counterintuitive as interest rates falling to new lows after the U.S. lost its triple-A debt rating last year. It isn’t that investors aren’t wary. It’s just that every place else makes them more wary. This isn’t the definition of a recovery.
No, it’s not. But then Lewis doubles down with stupid:
The cure for our battered economy has been to allow our disasters to occur more slowly through taxpayer bailouts and extraordinary interventions from the Fed. So far, this strategy has worked. We have averted a sudden crash in favor of a depressingly slower one.
As we said from the very beginning, you can either let the economy takes its course and suffer the results quickly, get over it and recover, or you can find a way to extend it to where the effect may not be as dramatic but will linger and linger and linger.
We chose the latter path and it hasn’t at all worked out the way it was predicted (remember, at this point, unemployment was supposed to be in the 5% area if the stimulus was approved and 8% area if it wasn’t – so it’s hard to say “it worked”, isn’t it?).
The spin says the downturn was softened. But again, I point to the promises vs. the reality. We are no better off in terms of unemployment than it was claimed we’d be if we didn’t go an additional trillion dollars in debt.
And the economy isn’t recovering, it’s bouncing along the bottom of a trough with the possibility of going even lower if Europe implodes.
Yet the only plan I’ve seen or heard about is to repeat what failed previously with the Fed talking about a QE3 while we’re already awash in about 10 trillion dollars in funds it has already injected. I don’t know about you but I simply haven’t much confidence in Ben Bernanke’s assurances that he can wring all that cash out of the system without triggering another economic downturn or hyperinflation. History is not on his side.
I think Ace points to the truth of the matter that the media and politicians simply won’t touch:
This is the worst "recovery" by any nation since 1970, and it could be partly due to a category error: We’re not recovering from a recession, we’re still in the depths of a depression.
That’s right, it isn’t the “worst recovery”. There hasn’t been a recovery. There have been “bright spots” here and there which quickly faded, but overall, we’re in the same place economically we’ve been for months and years. And it isn’t an “invisible” depression to the unemployed and those who’ve given up hope and dropped out of the job market. It is very visible. And most likely they remember the promises and the results.
Of course, instead of facing this and holding politicians accountable, our media will continue to play to the distractions, the nonsense and the irrelevant instead of asking the hard questions, demanding answers and informing voters.
Unfortunately, such is life in America today.
There’s a lot of press being given the so-called “Tea Party win” of a candidate for the Texas Senate seat – Ted Cruz.
He, with the Tea Party’s help, overcame some pretty negative polling numbers to eventually win a Republican run-off convincingly last night.
Says the Washington Post:
Cruz, an emerging conservative star whose father emigrated to the United States from Cuba, has drawn comparisons to Sen. Marco Rubio (R-Fla.) and has been lauded by national conservative political pundits and groups for over a year. His victory is a major blow to the Republican establishment in Texas, which lined up squarely behind Dewhurst. It’s also a victory for the tea party and national conservatives who lined up behind Cruz even when a surprise win appeared unlikely.
What the WaPo doesn’t say is the demise of the Tea Party seems to have been quite exaggerated. And that’s irritating to both Democrats and, “the Republican establishment”. Or as the Tea Party likes to refer to that establishment – RINOs.
Regardless of where you come down on the Tea Party, it seems to be in anything but in decline.
Another example that, which will get little if any publicity, occurred here in Georgia. It was a referendum on TSPLOST. The TSPLOST referendum was a state-wide vote on funding transportation infrastructure improvements in the state. Boring but expensive stuff, right? Approval would add a penny to sales tax for a period of 10 years. It was touted as an absolute necessity by all of the state’s political leaders, from the Republican governor to the Democratic mayor of Atlanta. Jobs were promised, improved economy was cited, etc.
But why was it necessary? Well let Republican Senator Saxby Chambliss explain why, after decades upon decades of sending GA taxpayer money to Washington DC for redistribution, we now have to self-fund maintaining our roads:
We just passed a highway bill two weeks ago. The president signed it last week. In that highway bill, we did not change the funding mechanism on how roads and bridges and infrastructure in this country are built and maintained.
“We don’t have the money in the highway trust fund now to build new roads. We don’t have the money in the highway trust fund to build rail lines that will take some of the pressure off the transportation issues that we have in this country. We’ve got to develop a different way of funding those projects. And until we do that, the mechanism that we have in place is it. It’s the only mechanism.
“So when folks go to the polls to decide whether or not they want to vote for TSPLOST, if they don’t have a better idea of how we’re going to fund the infrastructure and the transportation needs for Georgia, then this is the best route to go right now. Now that’s the general picture. I am looking at it from a Georgian standpoint. This is not a federal issue, this is a Georgia issue.
The hell it’s not a federal issue – where’s the money? Why don’t you have the funds necessary to improve infrastructure after the taxpayers of GA have been forking it over to the Federal government for years?
Simple answer? They overspent or spent it on other things. That’s why we have trillion dollar deficits.
Anyway, as you might imagine, the state’s campaign for passage was relentless and well funded. But the citizens of GA weren’t about to buy into these pie-in-the-sky promises without some careful examination. Enter the Tea Party in a true David and Goliath match up. It didn’t have the funding, but apparently it did have the will (and tons of volunteers) to take on the power structure and give it a run for our money.
The tea party and other T-SPLOST opponents didn’t need much money, though, to defeat the one-penny sales tax. According to the most recent campaign finance reports, they had raised only about $15,000. That was a pittance compared to the $8 million in the hands of the proponents, which included Deal, Atlanta Mayor Kasim Reed and the Metro Atlanta Chamber.
But the opponents made their punches count. As supporters hit the airwaves with TV commercials, opponents hit the roadways, relying on carloads of volunteers to plant yard signs, distribute fliers, make phone calls and, in the days leading up to the vote, stand on street corners hawking their message.
Grafstein said those local neighborhoods are where the tea party may see its greatest impact. Already, many members have been watchdogging city and county commissions and school boards.
"Officials on the local level are more likely to be more fearful of the threats the tea party can make," he said. "They have lower-turnout elections."
Tuesday night’s results, he said, "make [the tea party] look like people protecting the average citizen from the rapacious government."
Additionally, it should be noted that the Tea Party wasn’t tied to the traditional structure of politics (or, said another way, those they’re accused of being tied too):
Tuesday’s outcome, Dooley said, also shot down many misconceptions about the group. Opposing Deal and the business establishment showed that the tea party is not just a wing of the Republican Party; forming alliances with the NAACP and Sierra Club showed a willingness to work across ideological lines; and winning showed that it’s not out on some fringe, she said.
And the Tea Party in GA scored a bonus victory as well:
In fact, the tea party scored a double victory Tuesday with the overwhelming popularity of a measure to restrict lobbyists’ gifts to state lawmakers. It was a cause the tea party championed during the last legislative session, and it positioned the group to push it with even greater vigor in the one to come.
Of course there are those who deny the Tea Party had any impact and in fact are claiming victory for something they had little impact upon. But the results are the results aren’t they?
Here’s the point in all of this – the Tea Party movement is concentrating in areas and races that don’t get much national press or coverage, but as they amass victories, will have a profound effect later in national politics. They’re winning at the state and local level. Where do you suppose the next challenge to the likes of a Saxby Chambliss in GA will come from? Certainly not a Democrat, not in red, red GA.
Instead, look for a Ted Cruz like candidate to eventually emerge.
This is what keeps the Republican establishment up at night, and rightfully so.
It is also a reason to be somewhat optimistic about the future of politics, if we can survive our current crop of pols long enough to turn this all around.
Citizens are, in effect, revolting. One of the things we’ve said on our podcasts that might happen is states will say ‘no’ to impositions and mandates by the federal government, and that may start a new revolution of sorts. Well that’s something that’s possible but I can’t think of anything more likely to spark that than outcomes like this. The citizenry of GA is saying “no”. They’ve lost trust in their government to use their tax dollars wisely. They’ve put their state (or are in the process of putting their state) in the position to say “no” to the Fed.
We live in interesting times.
The following statistics were released today on the state of the US economy:
US motor vehicle sales: Chrysler reports a 12% sales increase, with 126,089 vehicles sold. GM sales were down -6% at 201,237, while Ford dropped -4% to 173,966. Volkswagen sales for June rose 27.3% to 37,014. Toyota sales rose 26% to 164,898. Nissan was up 16.2% to 53,744. Overall, auto sales so far this year remain on track for 14.4 million units sold, which would be more than a 12% increase over 2011.
The Federal Open Markets Committee meeting has announced that monetary policy will remain unchanged for now. Their assessment of the economy is that growth has slowed since the last meeting.
The ISM Manufacturing Index remains little changed this month, at a slightly contractionary 49.8. New orders are also weak, at 48.0.
Construction spending rose 0.4% in June, and was up 7.0% over June 2011, another indication of a modest uptrend in construction and housing.
The ADP Employment Report predicts that non-farm payrolls will rise 163,000 in July, indicating continued weakness can be expected in Friday’s Employment Situation report.
Markit Economics’ final PMI Manufacturing Index for July dropped to 51.4 from the preliminary estimate of 52.5.
An interesting bit in today’s Treasury Refunding announcement is that the Treasury is studying the possibility of negative rates at bond auctions. This would allow you to pay the Treasury for the privilege of lending it money.
For the third straight week, MBA Purchase Applications declined, falling -2.0%. The overall index rose 0.2%, though, as re-fi apps rose 0.8%. The drop in purchase apps raises questions about how solid the recent moderate rise in the housing sector really is.
Are you watching the Olympics? Did you enjoy the gold medal performances of the US women’s gymnastics team?
It was nice to see them bask in the glory of the fruition of all those years of hard work and sacrifice. They reached the peak of accomplishment. They took the gold. The stories of the athletes were as interesting as the victory. Years of monetary sacrifice, hard work, dedication and practice. Families, who moved to avail their daughter of coaching, who lived from paycheck to paycheck to ensure money was available for their daughter’s training, the hundreds of meets and competitions, etc.
But hey, we all know they “didn’t build that” themselves. They traveled on roads to their practice sites and meets, used other common infrastructure improvements and now they get to pay the piper.
It’s time for them to pay up for winning those gold medals, and the IRS will ensure they do.
At today’s commodity prices, the value of a gold medal is about $675 according to Americans for Tax Reform. And the gold medal brings with it $25,000 in prize money. The IRS will tax them at 35%.
So for all those years of hard work, sacrifice and performance, our gold medalists will pay the IRS $8,986 for each gold medal they win. The silver will cost them $5,385 ($15,000 prize money, and $385 for the medal) and bronze $3,502 ($10,000 prize money, $5 for the medal).
Of course they’ll be about the only athletes in the world so treated because you see, the US is one of the few countries in the world that takes it upon itself to tax the world wide earnings of its citizens.
Because, you know, that infrastructure is everywhere and it’s expensive. </sarc>
But I’m sure we’ll hear from our usual apologists for intrusive government trying to spin these taxes as something both necessary and proper.
Just a note to them – most Americans don’t at all agree with the sentiment that they didn’t build what they now have. But you have to hope the Democrats keep trying to sell that. Our Olympians and their tax experience make as good a case against that as any I can imagine.