What is wrong with the US economy?

[Astronuc]

They aren't fundamentally different from stocks (and much of that actually is just stocks). So really, it's about half of the population of the US who sees that profit.

Umm - there is a big difference. I imagine that few in the bottom 90% has any significant equity in oil/gas leases or rights. In much of the west, the mineral rights are owned by very few people. Most land owners west of the Mississippi do not own the mineral rights under their property. The why people in Texas, Oklahoma, Colorado and most, if not all western states, may find an oil right on their property or next door.

For example - http://www.lavetaforsale.com/Mineral-Rights.php

Meanwhile, the economy sheds jobs and some formerly hot companies are downsizing or not expanding.

ADP shows biggest job loss in nearly 6 years
Private-sector jobs decline by 79,000 in June

The ADP National Employment Report® is a measure of nonfarm private employment, based on a subset of aggregated and anonymous payroll data that represents approximately 392,000 of ADP's 500,000 U.S. business clients and roughly 24 million employees working in all 19 of the major North American Industrial Classification (NAICS) private industrial sectors.

http://www.adpemploymentreport.com/


Starbucks to close 600 U.S. stores, cut 12,000 jobs [not inlcuded in the 79,000 lost jobs above]

Blockbuster drops bid for Circuit City

But Yahoo shares are up after news (rumors) that MS is considering a new bid.

 

[Gokul43201]

Meanwhile, the economy sheds jobs and some formerly hot companies are downsizing or not expanding.

ADP shows biggest job loss in nearly 6 years
Private-sector jobs decline by 79,000 in June

http://www.adpemploymentreport.com/

I would wait for the Labor Department numbers that should come out tomorrow. ADP is known to have large error bars.

 

[russ_watters]

Umm - there is a big difference. I imagine that few in the bottom 90% has any significant equity in oil/gas leases or rights.

You imagine? Could you at least elaborate a little on what this "big difference" is?

The way I see it, it is pretty simple: If Exxon owns drilling rights to East Bumblefrick and I own .001% of Exxon, I own .001% of the drilling rights to East Bumblefrick.

In much of the west, the mineral rights are owned by very few people. Most land owners west of the Mississippi do not own the mineral rights under their property.

I didn't know that, but in any case, that has nothing to do with what I said.

 

[Gokul43201]

Labor Dept. says we dropped 62,000 jobs. Unemployment still at 5.5%. But the interesting news from the market is that financials are outperforming other sectors.

 

[Jimmy Snyder]

Unemployment still at 5.5%.

I made a wager that it would be at 5.2% this month. No one took me up on it so I won't be eating that steak dinner. Thus the downward economic spiral continues.

My wife was in Canada recently and she brought me a bottle of wine called "Peace", and yet is also called "Icewine". It's a 2006 Chardonnay from VQA of British Columbia. Perhaps you are familiar with it. I have never tasted such sweet wine except for the sacramental wine in the synagogue. It's not bad wine, but I really don't like it. The bottle will slowly drain though she will never see me drinking it. Someday the bottle will be empty and that will be the end of that.

 

[B. Elliott]

June 9, 2008
Rural U.S. Takes Worst Hit as Gas Tops $4 Average
http://www.nytimes.com/2008/06/09/business/09gas.html
By CLIFFORD KRAUSS
4% is no big deal, in fact the cost of gasoline is less than 2% of my income. But 13%?!

I didn't think to calculate mine till I read this, but mine is currently about 14%.

 

[edward]

It looks like problems in the housing market are far from being over. Indymac a subsidiary of Countrywide financial has just been seized. Fanny mae and Fredide mac stock is down.

http://ap.google.com/article/ALeqM5iWxtfjpQDpa7Wc4t3xQQf84g16XgD91S1G4O0

 

[Jimmy Snyder]

This story may support Russ Waters' thesis.

http://www.msnbc.msn.com/id/25657232"

 

[hagopbul]

the wrong in US economy is greed...

 

[Gokul43201]

What a June it's been! Inflation numbers just came out from the Labor Dept - 5.0%

But July has to be better. We've had a $10 drop in crude prices in less than 2 days, thanks to positive inventory numbers. What better news can the markets ask for?

I wonder what might happen to the argument of sound economic fundamentals if the Government has to intercede in the markets to unprecedented levels?

 

[Gokul43201]

But July has to be better. We've had a $10 drop in crude prices in less than 2 days, thanks to positive inventory numbers. What better news can the markets ask for?

And on that note, what a day it's been! I imagine it's among the top 5 for this year.

 

[Bujingyun]

All due to over-borrowing.

 

[Jimmy Snyder]

Hopes for a recession were dealt a very hard blow today.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.9 percent in the second quarter of 2008 (that is, from the first quarter to the second quarter), according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.9 percent.

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm"
I don't know how these things work, but I doubt the NBER is going to declare a recession with a negative 1.9% decrease. Don't give up hope though, the previously reported 0.6% increase in the last quarter of 2007 has been revised to a positive 0.2% decrease.

 

[Gokul43201]

Hopes that May unemployment numbers were a statistical blip were dealt a very hard blow today.

http://news.bbc.co.uk/2/hi/business/7537463.stm

People hoping for 5.2% or better should not give up hope though. There's still many more months left in the future.

 

[russ_watters]

Not sure how the Q2 GDP numbers flew under the radar. I didn't even see them when they came out and I was looking for them! (I knew they were out this week).

WASHINGTON — The economy expanded less than expected this spring, and actually shrank in the final months of 2007, the Commerce Department said Thursday in a report raising concern the nation is headed toward, or is already in, a recession.
The gross domestic product, the broadest measure of U.S. goods and services, increased at a 1.9% annual rate in the April-to-June quarter, buoyed by $78 billion in federal tax rebate checks and the strongest exports in decades. Growth was slower than economists predicted, but was up from the 0.9% pace of the previous quarter. The economy contracted at a 0.2% rate in the final months of 2007 — its worst showing since the 2001 recession.

Still, the quarter ended June 30 may be the high point for the year. In a recent survey by USA TODAY, 54 top economists predicted growth will slow to a barely perceptible 0.2% annual rate by the end of 2008.

http://www.usatoday.com/money/economy/2008-07-31-gdp-jobless_N.htm?loc=interstitialskip

 

[Jimmy Snyder]

Hopes that May unemployment numbers were a statistical blip were dealt a very hard blow today.

http://news.bbc.co.uk/2/hi/business/7537463.stm

People hoping for 5.2% or better should not give up hope though. There's still many more months left in the future.

That would be me. What were you hoping for?

 

[Gokul43201]

That would be me. What were you hoping for?

I was hoping to land a post-doc. Thanks for inquiring.

 

[russ_watters]

Income stats for 2007 are out: http://www.census.gov/hhes/www/income/histinc/h03AR.html

Second table has inflation adjusted values. The USA Today article on it says the median rose 1.3%, from '06 to '07, but that must not be inflation adjusted: incomes actually rose for only two of the five fifths of the population they bracket (3/5 and 4/5 - the middle class). Incomes dropped about 1% for the lowest bracket and a big 2.9% for the top bracket - no doubt the drop at the top was due to the loss of investement income from the housing/finance funk. And the top 5% lost a whopping 7%.

This isn't what I expected - I expected small but across the board increases (though I didn't think about the effect of the sub-prime mess on the wealthy) and I'm a little confused about why we didn't see it: the GDP rose a healthy 3.2% in 2007. So where'd that money go?

 

[Gokul43201]

Population growth (that's only about 1%)? Foreign investors?

 

[quadraphonics]

Foreign investors?

It turns out it went to Canada

"Foreign direct investment capital inflows from Canada into the United States increased by 500 percent between 2006 and 2007, jumping from $6.6 billion to $39 billion.
Foreign direct investment from the United Kingdom into the United States more than doubled between 2006 and 2007, rising from $11 billion to $27 billion.
Switzerland, Singapore, Australia, and Belgium all substantially increased their investment in the United States between 2006 and 2007. "

www.ofii.org/docs/FDI_2007.doc[/URL]

 

[russ_watters]

Foreign investment is an inflow of capital, not an outflow.

Anyway, more news: the 2nd quarter GDP numbers were revised way up:

The Commerce Department's report that gross domestic product rose at an annual rate of 3.3% for the April-June period helped punctuate a week of generally upbeat economic readings that have left guarded investors somewhat optimistic. The weaker dollar helped boost U.S. exports, which pushed GDP growth beyond the government's initial estimate of 1.9% as well as economists' forecast of 2.7%.

http://www.usatoday.com/money/markets/2008-08-28-stocks-thursday_N.htm

1.9% was so-so. 3.3% is quite healthy.

 

[Gokul43201]

3.3% is much more than just "quite healthy" given the circumstances and the speculation.

But I don't think that'll help consumer sentiment very much until housing values start getting back up (probably still a couple months or so away in most parts of the country), or unemployment makes a big dip in the third quarter and fuel prices stay flat for a while.

 

[mathwonk]

well, basically, my salary is going up much slower than the price of good wine.

 

[mheslep]

3.3% is much more than just "quite healthy" given the circumstances and the speculation. ...

Agreed, its amazing to me. Thats likely to start making a big correction to the Federal deficit spike.

 

[wildman]

well, basically, my salary is going up much slower than the price of good wine.

That is the catch-22. A weak dollar creates new jobs, but makes everything more expensive.

 

[agentyumi]

Profits are up, but the wages and incomes of average Americans are down.

 

[mheslep]

Profits are up, but the wages and incomes of average Americans are down.

Wrong

 

[WarPhalange]

Either of you care to give sources?

 

[turbo]

My state may be a special case, but a large paper mill in Millinocket is scheduled to shut down next month because the cost of fuel for their power-boilers and steam-generation exceeds their profits. Another smaller paper mill that produces specialty papers is shutting down in Jay for the same reason with the loss of another 150 jobs.

More job-losses to come, and it's really tough on workers in Maine because we are a rural state with (typically) long commutes to get to work and tough winters that require 4-wheel-drive vehicles to get to work. Add in the high cost of home heating oil, and our state is getting clobbered. Last year, lots of people budgeted and pre-paid for their heating oil, and as the long winter wore on and oil prices skyrocketed, several large fuel oil businesses failed to meet their obligations, leaving homes, businesses, and school districts without heating oil that they had already paid for - and finding that they had to come up with some money quick to buy even more heating oil to keep their buildings livable.

 

[mheslep]

Either of you care to give sources?

The census information has already been posted by Russ Waters in this thread, recently.
https://www.physicsforums.com/showpost.php?p=1848804&postcount=718
Agentyumi is exactly wrong. Income for the wealthy dropped but increased for the average earner.

 

[russ_watters]

Either of you care to give sources?

I posted the income stats two days ago in post 718. Parse them as you see fit. Wages are up from 2006-2007, but not enough to overcome inflation, and not evenly across all income brackets. In absolute terms, however, only the rich got poorer last year (that's the top 20% bracket).

 

[Gokul43201]

Wrong

Wrong over what time scale? The median income in 2007 is definitely lower than it was in the 1999 or 2000 ... probably not the mean income though, since the top 20% seem to have higher incomes now.

 

[mheslep]

? Russ's post that revived this thread shows census mean income, which though taking a dip in ~2001 is higher now for average earners ( 2nd,3rd,4th quantiles) than ever before, certainly increasing every year from 2002 on.

 

[russ_watters]

Note, though, that's still inflation adjusted, not current dollars. In any case, Gokul, the data is easy to read and glean whatever particlar data you want out of it. Why not just look at it instead of saying thing sthat are factually wrong and easily checked?

The median income in 2007 is definitely lower than it was in the 1999 or 2000 ... probably not the mean income though, since the top 20% seem to have higher incomes now.

At least one of those three statements you just made is wrong. Which one depends on whether you look at current or 2007 (inflation adjusted) numbers. Go have a look at the data and pick where you want to be wrong.

Lemme help, though: if you look at current dollars, everyone is up since the previous peak (which happened in 2000). If you look at 2007 dollars, everyone is below the 2000 peak.

 

[Gokul43201]

Lemme help, though: if you look at current dollars, everyone is up since the previous peak (which happened in 2000). If you look at 2007 dollars, everyone is below the 2000 peak.

One of those two statements you just made is wrong. Go have a look at the data and figure out which one it is.

Let me help, though: Look at the http://www.census.gov/hhes/www/income/histinc/h01AR.html (adjusted for inflation, naturally) for the top of the fourth quintile.

PS: While you're at it, also check out the (adj) http://www.census.gov/hhes/www/income/histinc/h03AR.html for the fourth fifth.