8.5% good or bad, you decide

The Bureau of Labor Statistics released its December jobless report last week and the good news is we added 200,000 jobs in the U.S. in December. Analysts were expecting a gain of 155,000. This dropped the unemployment from 8.7 in November to 8.5 for December. Jobs were added in transportation, warehousing, retail, manufacturing, health care and mining.

The bad news is that average hourly earnings were relatively unchanged. Also, 44% of the jobs added, according to Advisor One and ITG’s Chief Economist, Steve Blitz were comprised of low paying jobs, such as messengers, couriers, restaurant employees and retailers. This is not surprising considering the holiday season. There was no real increase in jobs in; information, financial activities and professional business services.

The long period of high unemployment will leave a scar. The longer a person is out of work, especially a person in a high paying position the less likely they are to find a job or at least find one that will pay them what they were making. This creates a class of underemployed and or unemployed (not counted—if they have been unemployed for an extended period). According to the Wall Street Journal, a person’s earning potential drops 1% per month for each month they are unemployed. This lost income could follow workers for years.

So, in this election year be skeptical of statistics when reported in the headlines. Yes, lowering unemployment is a good thing. Is it real, will it last, are they quality jobs? These are too much for a headline, so be mindful of a politician’s ability to “wink” at statistics, if you’ve forgotten, check out my August 26, 2011 blog, “when a wink can be partially blinding”. And make sure you vote in 2012, let your voice be heard.

Congressional approval drops lower than pornography and the BP oil spill

It’s been said that a person is a genius, while people are idiots. What is it about group dynamics that cause individual intelligent beings to act like lemmings when joined together? Why is it that we love our congressmen, but give such low approvals to our Congress? There are few things in American society as predictable as incumbent congressmen winning re-election.

Since 1964 re-election rates have not dropped below 85% for a member of the House and more often than not they exceed 90%, per OpenSecrets.org. Yet, the approval ratings for the Congress have never been lower. At the end of 2011, per a CBS/NY Times poll Congress had an approval rating of 9% and per a Gallup poll it’s 13%. According to the Huffington Post this is lower than Porn, Polygamy, the BP Oil Spill and the U.S. Going Communist. Some interesting comparative stats are: 30% of Americans approve of pornography, 23% approve of the banks, and the BP oil spill received 16% (unbelievable!) and lastly, President Richard Nixon’s approval rating during Watergate was 23%.

In summary 85% get re-elected, but they have a disapproval rating of 83%. So, back to the metaphor about lemmings, which by the way is inaccurate (see Snopes.com or Youtube.com), but we’ll use it anyway because we all understand the metaphor. Is it bad behavior for an entire group to jump off a cliff together? Would one lemming have been better off to just stay in bed that day? When President Obama asks Congress this week for the authority to borrow an additional $1.2 trillion, increasing the debt limit to $16.4 trillion, will our congressmen with a 9% approval rating be leading us off a cliff and will we send them back in November with an 85% return rate? Let your voice be heard—don’t stay in bed.

Wealth vs. Success...you decide

We have climbed out of the recession and the economy is growing, unemployment is declining and consumer holiday shopping is rising. All of this is good news considering the past three or four years. However, let’s not forget that good statistics don’t necessarily paint the full picture. I recently read an article at US News/MSN, which tells a different story. There are 97.3 million Americans that are in the low income category and 49.1 million who are below the poverty line. So, roughly 48% or 146.4 million Americans fall below what’s considered low income. Approximately, 50% of the people in the wealthiest nation on the planet are “poor”.

At a meeting in Maryland the other day I heard the President of the Montgomery County Council, Roger Berliner tell a group of local business leaders that Montgomery County, which is the 13th wealthiest county in the United States, has more students receiving free or subsidized lunches than the District of Columbia has students. He went on to say that if the county's subsidized students were a school district unto themselves they would be the 7th largest school district in the state.  The national statistics would show that Maryland, the 4th wealthiest state in the U.S., and its second wealthiest county, Montgomery are not alone in this disparity.

As the world’s wealthiest economy, can we say we say we are successful? Can we continue to support politicians who accept the status quo and or perhaps even helped create it? The question needs to be asked, is this a hangover from the recession or is the divide between rich and poor becoming more noticeable and perhaps more acceptable? I have no answers, but I wouldn’t define our wealthy status as a success—not yet.

A big shout-out...

The Joint Select Committee on Deficit Reduction, a.k.a. the “Supercommittee” was created by the Budget Control Act of 2011. The act was created to prevent sovereign default that was threatening to occur in the U.S. with our debt ceiling crisis last August. The Supercommittee was comprised of 12-members of Congress, six from each party and they were tasked with finding approximately $1.5 trillion in spending cuts over 10-years. On Monday, November 21st they conceded defeat—what a surprise! So, here’s a big shout-out to the committee from this citizen—I expected nothing less (wait a minute, is there anything less?).

Republicans                                         Democrats
Rep. Dave Camp, MI.                          Rep. Chris Van Hollen, MD.
Rep. Fred Upton, MI.                           Rep. Xavier Becerra, CA.
Rep. Jeb Hensarling, TX.                      Rep. Jim Clyburn, SC.
Sen. Pat Toomey, PA                           Sen. Max Baucus, MT.
Sen. Rob Portman, OH.                        Sen. John Kerry, MA.
Sen. Jon Kyl, AZ.                                 Sen. Patty Murray, WA.

While congress has created joint committees in the past with some broad powers, such as, the Base Realignment and Closure Committee and the Joint Committee on Atomic Energy, it has never created something like the Supercommittee. Whatever recommendation this committee put forward would go directly to the congress for a yes/no vote. There could be no amendments added to it, no filibusters and no “majority of the majority” blocks. However, there were no committee recommendations and now that they have failed, there are automatic spending cuts in the amount of $1.3 trillion that begin in January of 2013.

Now, for those of you without a calendar don’t worry—I have one. The 112th Congress will be sworn in on January 3, 2013 and the automatic cuts don’t take effect until after the new congress takes over. Here’s where your knowledge of government comes in handy, one congress cannot bind another. So, on January 4, 2013, the 112th can ignore the automatic cuts imposed by the 111th. So, in effect what just happened? Nothing, unless the 112th agrees to man-up and begin to lead. And so it’s time for another big shout-out. This one goes to the entire 111th, nicely done!

An increasing GDP, is it good news?

On October 27th the Bureau of Economic Analysis, part of the Department of Commerce released some good news? GDP increased by 2.5% for the third quarter of this year. The expansion of the economy, while still small, is encouraging. It will help in part to allay the fear of a double dip recession. While the economy doesn’t appear as strong as it did in 2010 based on GDP growth, the trends are headed in the right direction. The reason behind the growth in GDP appears to be an increase in consumer spending.

The increase in prices we pay for goods and services slowed down in the third quarter from 3.3 to 2.0 percent. If you exclude food and energy, then you'll notice that prices increased by 1.8 percent for the third quarter compared 2.7 percent in the second quarter.

We have a decline in the rate at which prices are increasing and an increase in GDP, which is based upon an increase in consumer spending. However, personal income has declined (adjusted for inflation and taxes) by 1.7 percent in the third quarter after increasing 0.6 percent in the second quarter. So, if spending and GDP are up and personal income is down, where is the money coming from? It’s coming from our personal savings accounts. The personal savings rate has declined from 5.1 to 4.1 percent between the second and third quarters.

Our economy needs to grow, but not at the expense of our savings--it has to grow based on a decrease in unemployment, which will increase our personal income and create longer lasting consumer demand, stabilize Wall Street and increase residential real estate demand on Main Street. Our focus needs to be on job creation. The United States always climbs out of recessions on the backs of small business, for they hire and expand first, therefore access to credit is fundamental.

Which have you seen more of?

For the first time in two years personal income declined. August 2011 figures showed a 0.1% decline over the previous month and that hasn’t happened since October 2009. So, we tapped into our savings to cover the shortfall and that dropped the personal savings rate to its lowest point since December 2009.

It’s hard to save more when your income has declined by 0.1% and gasoline increased by 1.2% and food by 0.6% for the same period. When added to high unemployment, a volatile and downward trending equity market, a depressed real estate market, low consumer confidence and the threat of a double dip recession it’s hard to remain positive.

We need to focus on incentives (not penalties) to get business to reinvest their record profits in new labor, property, plant and equipment. The stock and the housing markets will stabilize and reverse their declines more quickly if unemployment begins to fall. Unemployment will decline more quickly if corporations begin investing more in the future and this will occur more quickly when confidence is restored.

Leadership restores confidence, not rhetoric, finger pointing or partisanship and if you watch the news, which of these have you seen more of?

When a wink can be partially blinding

When asked recently why I hadn’t written a blog in a few weeks I responded that the economic news has been so bad lately that I had nothing good to say. It’s been just over a month and it’s time to write again. I won’t focus on the $3 trillion lost in the recent market correction or the $1 trillion lost because of the S&P downgrade of U.S. bonds. Let’s talk about those people who profited due to the sharp increase in gold or that corporate profits are way up due to productivity gains made during the last couple of years. Let’s keep one eye closed and one eye focused on the good news.

I’ll avoid talking about the 28 states that saw jobless rates climb and I’ll only mention the 9 states where they fell. I’m beginning to feel better especially when considering that the employed youth between ages 16 and 24 increased by 1.7 million people. Let’s avoid talking about the percent of unemployed youth, which equals 49% of that age bracket. I could mention that the number of mass layoffs stabilized in July to equal that of June. That’s good news, isn’t it? Let’s not mention that there were 1,579 mass layoffs involving 145,000 workers in July. No peaking!

And as I continue to look at the glass as half-full I am reminded that overall unemployment remained at 9.1% and didn’t increase—another good sign? This means that 153.2 million Americans received a paycheck. Don’t think about the 13.9 million who didn’t—this is an awesome way to view statistics. Now that I’m on a roll, let’s keep it going. Let’s focus on the number of unemployed for less than five weeks--that statistic declined in July. Don’t think about the 387,000 people in this category. And lastly, just knowing that those considered long-term unemployed (greater than 27 weeks) didn’t increase is a lot easier to talk about than thinking that they accounted for 44.4% of the total unemployed and equaled more than 6 million Americans.

Now I know how politicians do it. They just close one eye…a lot. We might call it a wink, but it does partially blind a person from the bad news. I’m feeling a lot better about the economy and I’m ready to vote.