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I’m not an economist so this is a fairly easy prediction for me to make. I’m basing this prediction on how the weekly Initial Unemployment Claims have gone up this month (see here, here, and here plus tomorrow’s post when I write it). Or at least, the numbers have not dropped as much as anticipated. Either way, things are not improving.
Amazingly enough (economists claim to be surprised all the time, I get to claim actual surprise when something surprising really happens), there have been a few news articles from different outlets, pointing out some unpleasant economic truths. First up is this article from Monday’s (June 27) USA Today:
Whether the economic recovery in the U.S. can continue could depend on a single factor: consumer confidence. Confidence is important because consumers who are upbeat about prospects tend to spend more, driving corporate profits and job growth. Companies hire more employees, boosting spending, growth and confidence.
According to a monthly survey released last week by Consumer Reports, households that earn less than $50,000 have been extremely downbeat on the economy every month since the survey’s April 2008 launch. Such households make up half of the U.S. population. Meantime, affluent households — those that pull down $100,000 or more a year — have been feeling on average positive about the economy since February 2010.
The primary factor behind the disparity: jobs. Affluent households have seen little impact on job prospects overall. Meanwhile, low-income households have seen a net decline in jobs for 23 out of the past 24 months, according to the survey.
Please do click through and read the whole article as it offers a number of reasons besides those I’ve extracted to show how the affluent have benefited in this “recovery” while the rest of us have struggled.
The LA Times also covered the consumer confidence news this week here:
Consumer confidence fell in June to the worst level in eight months on concerns about employment and income, the Conference Board reported Tuesday.
The nonprofit organization said its consumer confidence index fell to 58.5 in June from an upwardly revised 61.7 in May. Economists surveyed by MarketWatch had expected a June reading of 60.5.
Generally when the economy is growing at a good clip, confidence readings are at 90 and above.
This LA Times article from Monday also hits on the consumer confidence in the economy:
Consumer spending failed to budge from April to May, evidence that high gasoline prices and unemployment are squeezing household budgets. When adjusted for inflation, spending dropped 0.1% last month, the Commerce Department reported Monday.
Consumer spending is important because it accounts for 70% of economic activity. The surge in gas prices has forced many consumers to cut back on discretionary purchases, such as furniture and vacations, which help boost growth.
Fewer jobs and high unemployment have left workers with little leverage to ask for raises. And slow wage growth hurts the broader economy because consumers have less money to spend.
Economists noted that the slowdown in spending was partly the result of temporary factors.
My bold. Of course, as I noted in this post, there are always “temporary factors” that are going to affect the economy. Just this year, those “temporary factors” have included blizzards, tornadoes, floods, earthquakes, tsunamis, nuclear meltdowns, and wild fires. A strong economy can absorb these problems. The US has not had that strong an economy for years.
This article from Reuters today though is the one that covers a lot of ground I have become way too familiar with:
Three years after the Great Recession ought to have challenged even the most basic assumptions made by economists, they have instead settled back into the costly habits of old.
The same experts who largely missed the onslaught of the worst recession since World War II have consistently overestimated the strength of the recovery in major Western economies.
An analysis of Reuters polls shows economists were too optimistic about 20 out of 27 major monthly indicators for April and May in the United States, euro zone and Britain — a list that includes industrial output, jobs, business and consumer sentiment data, and purchasing managers’ indexes.
All too often these indicators — the May U.S. non-farm payrolls and The Federal Reserve Bank of Philadelphia’s June business conditions index, to name just a couple — came in well below even the lowest forecasts provided by dozens of economists from banks and research institutions.
Once again, the entire article is worth reading. Unfortunately, I also predict that it will be read by few people who can make any positive changes to things.
Most likely we will continue to get opinion pieces like this one from Phil Angelides via the Washington Post:
They say that winners get to write history. Three years after the meltdown of our financial markets, it’s clear who is winning and who is losing. Wall Street — arms outstretched in triumph — is racing toward the finish-line tape while millions of American families are struggling to stay on their feet. With victory seemingly in hand, the historical rewrite is in full swing.
The contrast in fortunes between those on top of the economic heap and those buried in the rubble couldn’t be starker. The 10 biggest banks now control more than three-quarters of the country’s banking assets. Profits have bounced back, while compensation at publicly traded Wall Street firms hit a record $135 billion in 2010.
Meanwhile, more than 24 million Americans are out of work or can’t find full-time work, and nearly $9 trillion in household wealth has vanished. There seems to be no correlation between who drove the crisis and who is paying the price.
Unfortunately, Mr Angelides should have been saying this during the time he was the chair of the FCIC rather than six months after the commission issued its report.
Or we get continued pronouncements from someone like Michele Bachmann calling for the elimination of the minimum wage. Don’t you just love it when someone making $174K plus all the perks of life in Congress calls for the elimination of the minimum wage? Nothing like driving the income lower for folks who are already on the edge of disaster.
I think I’ll use my old sabre from high school in place of the pitchfork.
And because I can:
Cross posted from Just A Small Town Country Boy