Showing posts with label Consumer Confidence. Show all posts
Showing posts with label Consumer Confidence. Show all posts

Saturday, November 05, 2011

They Don't Have Any

We saw some good economic news this week as GDP grew 2.5 percent in the third quarter of 2011 and around 100,000 jobs were added bringing the unemployment rate down to 9.0 percent. Certainly, neither number is thrilling. The reason?

Ideally, those trends could signal stronger growth, followed by more hiring. Yet until consumers consistently spend more, businesses are unlikely to hire enough to drive down unemployment.

What's that again, you say?

Many employers are hesitant to step up hiring until they see steady demand from consumers.

So it's not some phantom uncertainty that's being caused by President Obama's policies but the simple fact that consumer spending (70 percent of our economy) isn't where it should be for any real improvement. Why aren't they spending money?

They don't have any.

Thursday, October 27, 2011

Good News and Bad News

Today brings a mixed bag of news, good and bad.

The good news is that the economy grew at a rate of 2.5 percent in the third quarter. This quarter of growth marks the ninth straight quarter of growth since July of 2009 when the president's policies began to take serious effect. The main reason for this growth is consumer spending and confidence which may give us an indicator that things are getting better.

The other reason cited made me laugh out loud.

A measure of business investment plans rose in September for the second straight month and by the most in six months, according to a government report Wednesday on orders for longer-lasting manufactured goods.

Wait...what? I thought there was all this uncertainty. Ah well, folks who were saying this will probably admit they were wrong and just be happy, right? :)

I'm happy to be somewhat wrong about consumer spending. I say "somewhat" because my initial glee at seeing that consumer spending was up was tampered by this:

Economists believe that growth in consumer spending, which accounts for 70 percent of economic activity, will be restrained until incomes start growing at healthier levels, which is unlikely until hiring picks up.

This brings us to the bad news. The CBO just released a report titled, "TRENDS IN THE DISTRIBUTION OF HOUSEHOLD INCOME BETWEEN 1979 AND 2007." It is yet another example of the detrimental inequality in this country. Here are some of the bullet points.
  • 275 percent for the top 1 percent of households,
  • 65 percent for the next 19 percent,
  • Just under 40 percent for the next 60 percent, and
  • 18 percent for the bottom 20 percent.
275 percent? With 70 percent of this economy consumer spending, this is simply ridiculous.
  • The top fifth of the population saw a 10-percentage-point increase in their share of after-tax income.
  • Most of that growth went to the top 1 percent of the population.
  • All other groups saw their shares decline by 2 to 3 percentage points.
Again, with consumer spending making up 70 percent of this economy, these facts present a very clear picture as to why our economy is still not growing as it should. The IMF agrees..

Somewhat surprisingly, income inequality stood out for the strength and robustness of its relationship with the duration of growth spells: a 10 percentile decrease in inequality (represented by a change in the Gini coefficient from 40 to 37) increases the expected length of a growth spell by 50 percent.

My enormous frustration lies in the fact that as soon as something like this is pointed out, screams of "Socialism!" are usually not far behind. This, from the very same people who claim to want to make more money and have more efficient economies. Defining the principle units of an economy (consumer spending being the main one) and working to improve those units functionality should be the goal towards which all of us strive, right?

We no longer have time to manage theological fantasies. If we want to fan the flames of this recent good news of growth, we need to tackle the issue of inequality. Now. Me being me thinks that this should fall to our elected representatives on a local, state and federal level. If you ask an Occupier, though, the government isn't going to help.

It's going to be up to us.