What is wrong with the US economy?

[Jimmy Snyder]

Hopes that the US economy was in recession were dealt a setback today when the Commerce department issued a revision to the 1st quarter GDP numbers. Optimists were looking forward to the revised numbers to wipe the excreme?t-devouring grin off my ugly face. Too bad. Don't give up hope though.

http://www.reuters.com/article/busi...420080529?feedType=RSS&feedName=businessNews"

 

[Art]

That in general household income tracked over time is simply a misleading figure. I don't know that the BBC piece is wrong; perhaps hh size has stabilized in recent years. All I've seen here is two data point-years on mean hh size for the entire US; hard or at least risky to assume that holds in the lower income brackets. My point is hh income is just a lousy indicator; what we really want here is per capita income over time.

How would per capita income tell you what is happening with the lower wage earners?

 

[Art]

Hopes that the US economy was in recession were dealt a setback today when the Commerce department issued a revision to the 1st quarter GDP numbers. Optimists were looking forward to the revised numbers to wipe the excreme?t-devouring grin off my ugly face. Too bad. Don't give up hope though.

http://www.reuters.com/article/busi...420080529?feedType=RSS&feedName=businessNews"

Why on Earth were you hoping the US was in recession?

 

[Art]

Read the criticism again, Art (the corrected version). The criticism stands.
That's not what you said in your post and it isn't the claim made in the title of the article. You said: And that's the part I took issue with (though they didn't say poor, they said middle-wage earners) - the part that is flat wrong. The thesis of the article comes through in the first three paragraphs. It was wrong when they wrote it a year and a half ago and is even more wrong now. What recession? There has never been a recession that I know of where incomes didn't fall across the board. That includes the 2001 recession and it includes the incomes of the rich, but I didn't expect you to look at the data I linked anyway.

So to save you one mouse click, here is the average income for the top 5% of wage earners for the past few years:

2006--$297,405
2005--$290,373
2004--$281,686
2003--$277,616
2002--$281,317
2001--$296,628
2000--$295,515
http://www.census.gov/hhes/www/income/histinc/h03ar.html

To put that into words, the incomes of the rich dropped from 2001 to 2003 and didn't surpass their 2001 high until 2006. Had the BBC article chosen to cite this data in the same way they cited the data for the middle income, it would have looked like this: Cumbersome, but here's what the next sentence could have read if they had chosen to be consistent in their reporting:

By the way, you either misread or deliberately misstated my assertion about what happens to the incomes of the middle income bracket over time. You can try again if you wish. I'll give you a hint, though: I posted a graph.

Russ read the article again - slowly.

The one's who have seen the biggest drop in income are new entrants to the job market and the unskilled. The one's who haven't seen any drop in income are the CEO's of companies, which I specifically cited, who would largely be in the top 0.1% of income earners. The article also says the top 1% also did excessively well during the time period under question.

You arbitrarily choosing a 5% cut off point because it happens to suit your argument is irrelevant, disingenuous and misrepresentative of both the article and the points from it I was highlighting.

 

[Jimmy Snyder]

"It's basically like an airplane at stall speed, just skimming above the water,'' Jeffrey Frankel, an economist at Harvard University who is a member of the panel that dates U.S. economic cycles, said in a Bloomberg Radio interview. "I wouldn't rule out going into a recession'' later in the year.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6R9X7f8073o&refer=home"

Frankel is a member of the NBER Business Cycle Dating Committee. These are the people that meet after every recession to let you know that there had been one. One of the things they look for is two consecutive quarters of negative GDP growth. However, that is not the only criterion they look at, so keep your fingers crossed. On the down side, I doubt that they will declare one when we haven't even had one quarter of negative GDP growth. When they finally give into popular opinion they will have lost all purpose in life.

 

[russ_watters]

Hopes of recession dim as Q1 GDP revised up and economists project a non-negative Q2 and much faster growth the rest of the year: http://www.usatoday.com/money/economy/2008-05-29-gdp-jobless_N.htm

They really had me going, too - a few months ago, I believed there probably would be a recession. I'm a little annoyed that I let the pessimists influence me so much.

 

[russ_watters]

The one's who have seen the biggest drop in income are new entrants to the job market and the unskilled.

That's true, but it doesn't have anything to do with what I objected to in the article.

The one's who haven't seen any drop in income are the CEO's of companies, which I specifically cited, who would largely be in the top 0.1% of income earners.

The article neither makes that claim, nor provides any evidence that would tell you that (though it may be true). Perhaps you should read the article again!

That also doesn't have anything to do with my point.

The article also says the top 1% also did excessively well during the time period under question.

Yes, that's true. That also has nothing to do with my objection to the article.

You arbitrarily choosing a 5% cut off point because it happens to suit your argument is irrelevant, disingenuous and misrepresentative of both the article and the points from it I was highlighting.

The article makes no comparison between the .1% bracket and any other bracket, so it doesn't have anything to do with my point or my objection to the article.

It's real simple, Art: the title of the article is "The end of the American dream?" and so the purpose of the article is to argue/imply that for average Americans, things are getting worse - and that it is a long-term thing. Their thesis is wrong, their analysis is flawed, and the other stuff they threw into the article that doesn't address their thesis is obfuscation and is irrelevant to my point.

 

[B. Elliott]

Looks like Newt Gingrich is pushing for the US to drill in ANWR and off the coasts. I'm going to have to do some more reading before I put my name on something like this.

http://www.americansolutions.com/actioncenter/petitions/?Guid=54ec6e43-75a8-445b-aa7b-346a1e096659

 

[drankin]

Looks like Newt Gingrich is pushing for the US to drill in ANWR and off the coasts. I'm going to have to do some more reading before I put my name on something like this.

http://www.americansolutions.com/actioncenter/petitions/?Guid=54ec6e43-75a8-445b-aa7b-346a1e096659

You should start a new thread with this, it's a good topic. I think drilling in ANWR is a win win for everyone.

 

[B. Elliott]

You should start a new thread with this, it's a good topic. I think drilling in ANWR is a win win for everyone.

Good idea. It being a petition, I hope it's within the guidelines of the forum. I think i'll ask first.

 

[mheslep]

How would per capita income tell you what is happening with the lower wage earners?

You can get per cap income by quintiles too if you want

 

[quadraphonics]

Anybody else receive their $600 economic stimulus checks from the government?

 

[Jimmy Snyder]

Anybody else receive their $600 economic stimulus checks from the government?

I got a letter (at taxpayer expense) a couple of days ago telling me that I would receive a check (at taxpayer expense) today. But it didn't come. I expect to get a letter tomorrow (at taxpayer expense) telling me that they are late in sending the check and yet another letter (at taxpayer expense) next week telling me when the check will really arrive.

 

[drankin]

Anybody else receive their $600 economic stimulus checks from the government?

Got mine.

Thank you to all hardworking americans! I'll be sure to support our American breweries, ammunition manufacturers, and cattle growers with my rebate!

 

[quadraphonics]

I got a letter (at taxpayer expense) a couple of days ago telling me that I would receive a check (at taxpayer expense) today. But it didn't come. I expect to get a letter tomorrow (at taxpayer expense) telling me that they are late in sending the check and yet another letter (at taxpayer expense) next week telling me when the check will really arrive.

You should double-check that they didn't just direct deposit it in your bank account.

 

[mheslep]

Got mine.

Thank you to all hardworking americans! I'll be sure to support our American breweries, ammunition manufacturers, and cattle growers with my rebate!

 

[turbo]

My wife and I got our $1200, too. It went right into the bank.

 

[Gokul43201]

Got mine.

Thank you to all hardworking americans! I'll be sure to support our American breweries, ammunition manufacturers, and cattle growers with my rebate!

If you'd picked tobacco growers instead of cattle growers, you could have kept all the damage within one Department.

 

[Jimmy Snyder]

The index of depressing anecdotes was down this morning on reports that even though some people lost jobs, other people got jobs. http://www.bloomberg.com/apps/news?pid=20601087&sid=aq0375wZcIM4&refer=home" . Meanwhile, among the chattering classes, the recession rages on. Why is it that optimists never claim to be realists?

 

[edward]

The index of depressing anecdotes was down this morning on reports that even though some people lost jobs, other people got jobs. http://www.bloomberg.com/apps/news?pid=20601087&sid=aq0375wZcIM4&refer=home" . Meanwhile, among the chattering classes, the recession rages on. Why is it that optimists never claim to be realists?

Did the ancedotes include this one? Somehow they make the articcle sound like good news?

http://www.azstarnet.com/sn/fromcomments/242085.php

 

[quadraphonics]

Actually, that's the best news I've heard out of GM in a long time. If only they'd wised up to the way the auto industry was heading, say, 10 years ago, they would be making profits instead of laying off workers by now. But at least now they're headed in the right direction...

 

[Jimmy Snyder]

The index of misleading anecdotes fell this morning on news:
http://www.bloomberg.com/apps/news?pid=20601087&sid=afs.Z9pMITmg&refer=home"

 

[Astronuc]

Continental said high oil prices have sparked a crisis in its industry and business models simply don't work at the current level of capacity. The airline said it will shed 3,000 jobs and reduce domestic mainline capacity in the fourth quarter by 11%.

U.S. stock-market futures point to modest gains

United Airlines will follow suit with American and lay off 1500 people and ground about 100 planes.

Meanwhile, the main economic data due Thursday are the weekly jobless claims, though investors will also be looking ahead to the nonfarm-payrolls figure due Friday. Economists polled by MarketWatch are expecting May nonfarm payrolls to fall by 50,000.

It would be interesting to see how the new jobs compare to jobs lost in terms of salary and benefits. I would expect salaries/wages and benefits decline for the most part, but certainly there are those who find better jobs.

http://marketplace.publicradio.org/display/web/2008/04/28/exempt_nonexempt/

LISA NAPOLI: It was just another workday for David Canizares, a network administrator for IBM. Then his boss called him and gave him the news.

David Canizares: They said they wanted to be more compliant with federal regulations, so they were going to take us from exempt status to non-exempt status.

That was a fancy way of telling Canizares he still had a full-time job with benefits, but he'd no longer be classified as a salaried worker. He would be paid by the hour. And that wasn't the biggest change.

Canizares: They had to cut our pay 15 percent.

IBM said the cut was necessary because the reclassified workers would now get to earn overtime. In fact, to make the same pay as before, those workers would have to put in extra hours. But for a third of the reclassified employees at IBM, working overtime isn't a possibility. So they're taking home less money.

It seems only part of the economy is in recession, while the rest limps along.

http://marketplace.publicradio.org/display/web/2008/06/04/williams_sonoma/

http://marketplace.publicradio.org/display/web/2008/06/05/federal_highway_funds/

 

[edward]

Actually, that's the best news I've heard out of GM in a long time. If only they'd wised up to the way the auto industry was heading, say, 10 years ago, they would be making profits instead of laying off workers by now. But at least now they're headed in the right direction...

In a way it is good news. On the other hand:

GM said it would idle pickup and SUV factories in Janesville, Wis.; Oshawa, Ontario; Moraine, Ohio; and Toluca, Mexico as it tries to deal with a shift to smaller vehicles brought on by $4-per-gallon gasoline. GM also took aim at the Hummer, one off the largest vehicles on U.S. highways, saying it would either be sold or get a remake.

 

[Jimmy Snyder]

Apparently, I'm just like everybody else. I want the politicians to clean up the environment without bothering me about it.

 

[mheslep]

Did the ancedotes include this one? Somehow they make the articcle sound like good news?

http://www.azstarnet.com/sn/fromcomments/242085.php

In a way it is good news. On the other hand:

GM said it would idle pickup and SUV factories in Janesville, Wis.; Oshawa, Ontario; Moraine, Ohio; and Toluca, Mexico as it tries to deal with a shift to smaller vehicles brought on by $4-per-gallon gasoline. GM also took aim at the Hummer, one off the largest vehicles on U.S. highways, saying it would either be sold or get a remake.

On the other, other hand:
http://www.time.com/time/business/article/0,8599,1811773,00.html?referer=sphere_related_content&referer=sphere_related_content

General Motors is adding a third shift at a two assembly plants to meet the rising demand for smaller cars...

The third shift addition is happening immediately, while the SUV plant idles will take place slowly.

 

[Jimmy Snyder]

Obviously, although there have been many stories of big layoffs, there must have been a lot of hiring that didn't make the news. That's why I am reluctant to pay attention to all of the gloomy anecdotes, while the averages continue to paint a less gloomy picture. I think that all the gloominess in this thread ultimately rests on the fact that people expect economic growth to be a linear function of time. It's funny to see that mistake on a physics forum. I was trained as a mathematician, so I'm supposed to think that physicists don't understand math, but I thought you guys could read a graph.

The view from the People's Republic is good. The Philadelphia area was not so hard hit by the credit crisis as other parts of the country. But the big news, and I admit it's an anecdote, is that the nomadic tribe known as Americans, who would ordinarily head for expensive vacations on the French Riviera, Costa del Sol, the Islands, and Peoria, are headed this year for cheapo vacations in the armpit of the east coast, if not the west. In the past, I have recommended New Jersey as the ideal vacation destination because it is so close to the attractions in NY, PA, and DE. Well it turns out that it is also close to the Jersey shore and business there is expected to experience climate change this summer, local warming if you will. If you want to see a bubble burst, you have to puncture it. Simply squeezing it will make it shrink in one place, but bulge out in another.

 

[Astronuc]

But did those new jobs come with increasing or decreasing wages/salaries and benefits.

More people (perhaps locals in state and nearby states) may go to the Jersey shore, because they can't afford to go further, e.g. Disney, FL, CA, or wherever.

It's great that gasoline demand is down, which means price of gasoline and oil should decrease. But the price of oil doesn't seem to be following the traditional supply/demand theory, mainly because speculators are bidding up the price on the commodities exchanges.


Here's an interesting perspective from someone from the conservative Cato Institute.
http://marketplace.publicradio.org/display/web/2008/06/04/wilkinson_complaining/

Scott Jagow: As much bad economic news as I have to give out every morning, we are not in a recession. At least not by one common definition -- that's two straight quarters of negative GDP. The economy grew at a rate of almost a percent last quarter. But commentator Will Wilkinson says don't let that stop you from complaining.

--------------------------------------------------------------------------------

Will Wilkinson: Come on! Will we ever get a recession? Sure, gas and food prices are inspiring new expeditions into couch cushions across the nation. But without full-on recession, without a declaration that the economy's officially hosed, it seems like we have to accept that it's not that bad.

With a real recession, we could blame somebody -- President Bush, the Federal Reserve, the Democratic Congress, greedy investment bankers -- take your pick! And the upside of pain is complaining about it; a bona fide recession is a license to let slip the dogs of kvetch. But the economy keeps stumbling along like a drunk who never quite falls down. If it's going to be so lousy anyway, you almost want to say: "Just fall, damn it."

Economic growth is neither constant nor predictable. It speeds up and it slows down, sometimes so much the economy starts to shrink -- the dreaded recession.
. . . .

Unemployment is up . . . to 5 percent, which used to be considered really, really low. The inflation rate, including energy and food, is up to almost 4 percent. But in 1981, the last time gas was anywhere near this expensive in real terms, inflation was over 11 percent. Despite everything, the American economy appears annoyingly resilient.

Perhaps the economy (as a whole) is resilient because the growth is financed on borrowing money. The Bush adiminstration is on a binge of deficient spending with the current federal expenditures about $400 billion above revenue - not including nearly $200 billion in supplemental spending for military action overseas.

The Bush administration sent its final budget request to Congress last week, projecting that the deficit for all of 2008 will total $410 billion, very close to the all-time high in dollar terms of $413 billion in 2004.

So far this year, federal spending is 8.3 percent ahead of last year's pace, at $949.1 billion. That is far ahead of the 3.2 percent increase in revenues, which have totaled $861.4 billion in the current budget year.

For 2007, the budget deficit totaled $162 billion, a five-year low. However, the slowing economy is expected to stunt the growth of tax revenues while the $168 billion economic stimulus plan passed by Congress last week will swell the deficit.

http://www.cbsnews.com/stories/2008/02/12/national/main3822385.shtml?source=RSSattr=HOME_3822385

Again obviously some folks are doing really well, but many are not. And onne thing that is wrong with the US economy is that it is based upon economic disparity, and always has been.

A different perspective from a response to Wilkinson's commentary -

Locally, food prices are up 12 percent, fuel over 26% (and that's a conservative estimate), power bills 15%, insurance and utilities closer to 10%. My pay went up 5% last year. This year, because of less work, we'll be lucky to get 3%. These CATO guys live in a well-subsidized dream world.

Locally, our gasoline prices are up about 30% from last year, and food and utilities are about 10% higher.

and

http://marketplace.publicradio.org/display/web/2008/06/05/foreclosures/

The Mortgage Bankers Association reports today that the number of homes now in foreclosure is now more than a million. It's the highest rate ever recorded: 2.5 percent of all loans being serviced by members of the industry group are in foreclosure and the association is warning that the number is still rising.

One of the significant new trends: There's been a sharp increase in delinquencies of prime fixed-rate loans, the kind that had been considered very low risk.

 

[Jimmy Snyder]

More people (perhaps locals in state and nearby states) may go to the Jersey shore, because they can't afford to go further, e.g. Disney, FL, CA, or wherever.

Hey, if you're going to quote me, at least attribute.

 

[Astronuc]

The people "who would ordinarily head for expensive vacations on the French Riviera, Costa del Sol, the Islands," can still afford to go to FL, CA, which will make up for those going to the Jersey Shore. But this is good. The money will stay within the US!

Maybe we will see an influx of foreigners spending their vacation (and money) in the US.


The other good news about the economy - the US is available at a 20% discount - or so I heard. I wonder if purchasers will have to assume the debt.

 

[mheslep]

...The Bush adiminstration is on a binge of deficient spending with the current federal expenditures about $400 billion above revenue - not including nearly $200 billion in supplemental spending for military action overseas...

Why do you attribute that to the Bush administration and not Rep Pelosi, Sen Reid, etc, especially in light of several Presidential spending vetos?

 

[Astronuc]

Why do you attribute that to the Bush administration and not Rep Pelosi, Sen Reid, etc, especially in light of several Presidential spending vetos?

The Budget of the United States Government is a federal document that the President submits to the U.S. Congress. The President's budget submission outlines funding recommendations for the next fiscal year, . . . .

http://en.wikipedia.org/wiki/United_States_federal_budget

http://en.wikipedia.org/wiki/United_States_budget_process

 

[quadraphonics]

It's great that gasoline demand is down, which means price of gasoline and oil should decrease. But the price of oil doesn't seem to be following the traditional supply/demand theory, mainly because speculators are bidding up the price on the commodities exchanges.

It's only US demand that's down: China and India are still putting cars onto the road at a staggering pace. Oil being a fungible commodity, then, a dip in US demand is not guaranteed to translate into a dip in price. But prices are surely lower than they would have been.

Maybe we will see an influx of foreigners spending their vacation (and money) in the US.

That's been happening for over a year, as it is driven by the low dollar. And, yeah, they tend to not only vacation here, but go on shopping sprees. It's as if the entire country were having a half-off sale for Europeans. And then there's the reports of Canadian car dealerships going out of business because everyone is crossing the border to buy cars at a steep discount.

 

[quadraphonics]

Obviously, although there have been many stories of big layoffs, there must have been a lot of hiring that didn't make the news. That's why I am reluctant to pay attention to all of the gloomy anecdotes, while the averages continue to paint a less gloomy picture.

Would that be these averages?

http://www.nytimes.com/2008/06/07/business/07jobs.html?hp

"The unemployment rate surged to 5.5 percent in May from 5 percent, the largest monthly spike in more than two decades, as the economy shed 49,000 jobs for a fifth month of decline, the Labor Department reported on Friday.

[...]

“It’s unambiguously ugly,” said Robert Barbera, chief economist at the research and trading firm ITG. “The average American already knows that gas prices are up a ton and its really hard to find a job. Sally and Sam on Main Street are already well aware of this, and that’s why sentiment surveys are lower than they were in each of the last two recessions.”"

 

[loseyourname]

I lost my own job two months ago and had almost no luck at all finding something else until last week. Something like 30,000 people in the mortgage industry were laid off in the last year here in Orange County and it's flooded the labor market with people seeking middle-class work, which has made it damn near impossible to get a decent job if you don't already have one or you don't specialize in an obscure field most people are not qualified to work in. I was finally able to get two teaching jobs, one as a math teacher, and one as a GRE teacher, that both pay high hourly rates, but I was only able to get those because they require 95th percentile or higher test scores, which eliminates most of the competition. If you're not a great test taker and you don't have arcane skills, I don't what you'd be doing right now as someone unemployed. Real estate was probably one of the biggest sectors of employment in both Orange and Los Angeles Counties and it's just contracted like crazy.

Even if you were a laborer, there were always good construction and residential maintenance jobs available, and those are disappearing now, too. The good news is that the weakening dollar is creating a huge boost in the export industry, and with the western hemisphere's busiest port right here in Long Beach, that industry should absorb some of the people lost from others, but it'll take a while for all of these people to learn new skills. There's a huge demand for rentals now, too, as everyone loses their homes, and you figure that sector of the real estate industry will start picking up at some point, but right now, the financing just isn't there.