Monday, February 7, 2011

Who's Your Daddy

- Just days after I blogged that the employment situation was much better than the experts believe, the January report showed the unemployment rate dropping to 9.0%. While I still believe the raw numbers can’t be trusted because there is too much “noise” in the data, the drop absolutely confirms my observations. In 60 days the unemployment rate has fallen 0.8 percentage points. This is the largest two month drop in over 50 years! Who’s your economic blog daddy now?

Yes I realize that the current employment situation remains tough. The number of people with jobs is still down 5.6% (7.7 million jobs) from pre-recession levels (Calculated Risk). And in a recent survey only 11% of respondents believe the job situation is improving significantly.

- When the Cash for Clunkers program was being debated, one side said it would result in increased overall sales and the other side said it would just pull ahead sales that would have happened anyways. We now can see by looking at the monthly chart of U.S. Light Vehicle sales that C-F-C was a colossal waste of money. It basically paid people to buy cars one to three months ahead of time. Also it disrupted auto production schedules (and supplier schedules) and car dealership operations. And don’t forget the needless destruction of all those functional used vehicles. Call it Cash for Cluster****s (You can fill in the *s).

- Two recent reader surveys (open participation) on MSN Money show that business/consumer confidence remains shaky. Only 17% of respondents think that better economic conditions are right around the corner and 24% even expect another recession. Only around 20% of respondents to the second survey (because of the nature of these surveys, many of the respondents are the same people) said they have increased spending since the recession. And about an equal number said they are still spending less. While this news is disappointing it does support my contention that there is tremendous pent-up demand in the economy. And once people believe that the economy is getting better, they will spend more money and this upturn will “get legs”. That is why I forecast a strong 2012.

- The GDP for Q4, 2010 is now estimated to be 3.2%, but my expert economic panel forecast was only 2.1%. Why? Professional economists tend to be too optimistic going into an economic downturn and too pessimistic coming out. It’s just plain human nature and it is compounded by the fact that some economic indicators aren’t functioning well right now (see unemployment observation above). The panel forecasts 2.5% for the current quarter. Let’s add the 1.1% difference in forecast from Q4, and call it 3.6% for Q1. The panel is forecasting 3.3% growth for Q2 and 3.2% for Q3.

- Something happened to consumer spending in the June-July period of last year. Sales decreased in many industries and that’s when some economists were worried about a double dip (the Model T did not decline during this time). I hope some professional economists analyze this to find out the cause. But I read this week that sales of one product began a strong sales gain in late July and has remained strong since. Of course I am referring to our favorite economic indicator: Men’s underwear sales. For all you people who cowboy-upped last July and August, I salute you for leading this economic recovery.

- President Obama has introduced “Win-The-Future” as the slogan that is going to solve our economic problems. If you are old enough, you remember Gerald Ford’s “Whip Inflation Now” which of course did nothing to stop inflation. If fact, inflation went on to whip our backsides.

But of course “Win the Future” is best represented by the letters WTF. This is ironic because Obama has finally succeeded in uniting people. His supporters are now chanting WTF and his opponents have been shouting WTF for the past two years. WTF indeed.

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