Tag: Recessions

A Recovery About Nothing

As you know, there are signs — tentative ones — that our economy is beginning to recover from Great Depression II. It’s about on schedule — I thought we would need about five years to crawl out of the hole we were in. But we had 5% growth in Q3 and unemployment continues to edge down (although the U6 remains high). Projections for 2015 are cautiously optimistic, barring a major war or something (which, with Obama, is always on the cards).

I have noted, however, that this recovery runs against the dogma we’ve been hearing from the Keynesians and pseudo-Keynesians on the Left Wing. According to them, the “austerity” of the last few years (i.e., flat spending) should have caused us to have a double-dip recession. David Harsanyi expands on this:

But if activist policies really have as big an impact on our economic fortunes as Washington operatives claim, I only have one question: What policy did Barack Obama enact to initiate this astonishing turnaround? We should definitely replicate it.

Because those who’ve been paying attention these past few years may have noticed that the predominant agenda of Washington has been to do nothing. It was only when the tinkering and superfluous stimulus spending wound down that fortunes began to turn around. So it’s perplexing how the same pundits who cautioned us about gridlock’s traumatizing effects now ignore its existence.

For instance, Paul Krugman wrote a column titled “The Obama Recovery.” The problem is that the author failed to justify his headline. It begins like this:

“Suppose that for some reason you decided to start hitting yourself in the head, repeatedly, with a baseball bat. You’d feel pretty bad. Correspondingly, you’d probably feel a lot better if and when you finally stopped. What would that improvement in your condition tell you?”

Suppose you tell us what the bat represents, because spending in current dollars has remained steady since 2010, and spending as a percentage of GDP has gone down. In 2009, 125 bills were enacted into law. In 2010, 258. After that, Congress, year by year, became one of the least productive in history. And the more unproductive Washington became the more the economy began to improve.

Krugman argues that the recession lingered because government hadn’t hired enough people to do taxpayer-funded busywork. The baseball bat. But then he undercuts this notion by pointing out that there was an explosion of public-sector hiring under George W. Bush—the man he claims caused the entire mess in the first place. Krugman also ignores the stimulus, because it screws up his imaginary “austerity” timeline. He then spends most of the column debunking austerity’s success in Britain.

Britain’s “austerity”, incidentally, was called austerity when the UK economy was stagnant. When it began to recover, the exact same budgets were described as having abandoned austerity. With the Keynesians, it’s always heads they win, tails we lose.

This recession was not about a lack of demand or a lack of spending. It was about the huge amount of debt that the American people had dug themselves into. That debt has declined — mortgage debt is down and consumer debt is down. Student and public debts have risen but not as sharply. In short, we’re finally getting out from under the 16,000 pound boulder that was the Housing Bubble. And, who knows? Maybe things would be better if we didn’t have the 10,000 pound boulder of federal debt and the 2,000 pound barbell of student loans.

OK, I’m letting that metaphor get away from me.

Anyway, our gridlocked do-nothing Congress has failed to pass a “jobs” bill, has failed to enact “temporary” stimulus and has cut programs to “build the economy”. And the result is the healthiest economic numbers in a decade.

Funny how well we can do when our government stops “helping” us. Now imagine if we could get them to stop giving us “free” healthcare and regulating our every move.

Obamanomics On the March

The economy contracted almost three percent in the first quarter, the worst quarter since the end of the Great Recession. Maybe it’s a blip, but that is a scary number. I’m sure the Obama defenders will blame it on the cold weather but I’m pretty sure we had cold weather in the past. Eventually, this will be Bush’s fault. Or “austerity”.

This is horrible news, whatever your politics. While I oppose Obama, I want the country to do well. But we may be staring down a double dip recession.

Update: Before the liberal spin master get in, keep in mind that we just remade a quarter of our economy with Obamacare. Seven million people changed insurance or bought insurance. The idea that this has nothing to do with the GDP strain credulity.

The Menace of a Double Dip

The initial numbers for 2012 Q4 show the economy shrank at 0.1%. Are we entering a double-dip recession? Ed Morrissey breaks the numbers down a bit:

In other words, much of this drop seems to be a lack of inventory expansion. Real final sales to end purchasers rose, even if it didn’t go up by much. That would indicate that inventory expansion in Q3 and prior periods was based on overly-optimistic views of the economy.

Government spending also fell dramatically by 15% in Q4, meaning that private spending was actually up. Of course, it was up in Q3, so if you average the two quarters out, we’ve got a slow economy, but not one in recession. Possibly.

A few reasons not to run for the hills just yet:

1) The numbers are preliminary and will be revised again and again over the next year and a half. Remember that the economy was actually in recovery when Bush was voted out in 1992 but it took a while for the numbers to become clear. By the same token, the economy was crashing badly in the final quarter of 2008 but that didn’t become clear until over a year later. The most dramatic revision is likely to occur at the end of February, but don’t be surprised if the numbers change a lot. That could mean the economy is better; but it could also mean it’s worse. It’s unlikely to be good.

2) A shrinking economy is at variance with a number of other economic indicators, notably falls in unemployment, jobless claims and job creation figures. Long-term unemployment is starting to fall for the first time in a while and housing is starting to recover. This may indicate the growth number is bad. Or may be a lagging indicator.

3) If the economy is slowing down, it means that the “Debt Truthers” like Paul Krugman and, alarming, Bruce Bartlett, are even more full of shit than they were a week ago. The idea that our budget is coming into balance is predicated on strong economic growth. If that isn’t happening, the debt is still a Big Fucking Deal.

4) Sniping about the media calling economic news “unexpected” is silly. Economic figures are very noisy and almost never come in at expectations. The news is always “unexpected”. That’s not media bias; that’s media ignorance of how economic figures work.

5) I suspect that the real reason Q4 was slow was because of the uncertainty created by the fiscal cliff combined with the impact of Hurricane Sandy. The last time we saw growth slow like this was … during the debt ceiling crisis. If Congress and the President would quit creating these self-induced economic crises, we might be in much better shape. And having a Katrina-level event — one that cause $60 billion in direct damage and God knows how much in lost productivity in the midst of this political mess was a huge blow. Sandy alone might have knocked a percentage point of our growth.

So we should be concerned, but I’m not ready to panic just yet. 2013 Q1 might also be a bit weak with the expiration of the payroll tax holiday and I do think this will get Congress to punt the debt ceiling and possibly the sequester just to keep the economy from any more shocks.

Update: More:

For one thing, most of the collapse was due to a stunning fall in military spending. That’s not good for GDP, but it doesn’t reflect the real underlying strength of the economy.

And it’s mostly due to war drawdown. That’s a good thing for everyone!

There was also a big decline due to a reversal of big inventory buildups.

What’s key is that the numbers that really reflect the strength of the economy were much better.

Personal consumption, fixed investment, and equipment/software all grew nicely. This is the real economy humming along.

I’m not quite that optimistic. We had a real problems last quarter with the fiscal cliff and Sandy — problems that have not magically gone away. I’m expecting Q1 to be mediocre if we’re lucky.

That’s because they get it!

Fro a while now we have had an orchestrated LSM attempt to pretend that the economy is not in the tank or heading that way yet again, so it comes as no surprise to me that 7 in 10 small business owners are not hiring, and blaming the economic policies of the last 3 years and the bad economy it has created for not doing so. Things are bad out there. Don’t let the LSM tools that shill for the collectivists tell you otherwise. And most small business owners put the blame squarely where it belongs despite USNews’s attempt to hide that:

The Obama economy is so bad that 77 percent of small business owners do not plan to hire any more workers despite all of Washington’s hype that the business climate is getting better. Worse: 64 percent of small business owners in a new survey provided to Whispers see the nation teetering on the verge of another recession.

Most shocking of all in the survey of small and medium sized business owners is that many would like to hire more workers but can’t, and new financing rules imposed by hurting banks have made getting loans sharply more difficult than in the past.

These small business owners are right: the current business climate is downright hostile to most business owners, and doubly so to small business owners, and unless your run a mega corp that gives big to one political party, you are threading water. Business owners are lambasted regularly by the collectivist, wealth redistribution, class warriors that totally owned government for 2 years, and still hold the executive and the Senate. We have had a slew of horrible anti-business laws passed during the left’s tenure, including some which have begun to show their negative impact but are going to inflict far more damage and pain down the road, like Obamacare. But even worse is how we now have rogue agencies like the EPA doing what the left couldn’t by law, and coming up with their own business crushing rules. Rules, I add, that a big government growing, tax and spend heavy collectivist wealth redistributionist, democrat controlled congress, with a clear majority that would allow them to override any veto, and that told us they had a mandate (no, not two guys on a date) to do things just like that, wanted desperately, but could not pass. And that was because these onerous rules were economically poisonous and deadly to anyone that voted for them. So yeah, being a small business owner these days is down right dangerous business.

Also, I need to correct the authors and point out that banks are not loaning because banks are now by law mandated to hold on to much larger cash reserves, and have far more onerous regulation related to risk that make any kind of loans to people that didn’t need it in the first place, dangerous to them.

“Despite positive job numbers for the month of October, it is clear that business owners have a differing view of the economy,” said Connie Certusi, executive vice president and general manager of Small Business Accounting Solutions, a division of Sage North America. Sage, a business management software supplier, conducted the survey among its 3.2 million customers.

Those positive numbers they talk about is only “positive” if you are desperate to pretend that the general actions of the collectivists have done anything but harm to the economy. Otherwise the numbers are still showing an anemic economic condition and a desperate and moribund jobs market. Business owners get this. They are not fooled because they see the bottom line at the end of the month.

“The Sage SMB Perspective on Economic Recovery survey found that 64 percent of business owners who participated in the survey believe that we are either already in a recession or are headed for one in the next six months,” said Certusi. “Not surprisingly, 65 percent of respondents in the Sage SMB Perspective on Economic Recovery said that the negative economy has had an impact on their own business.” And, “The most telling statistic,” she added, “is that 48 percent of business owners would like to hire additional employees but cannot due to issues related to the bad economy.”

Like I said: these guys get it. They are not fooled by the propaganda media and the WH are shoveling out. I personally know people that told me a while back they would not hire with these clowns running the show, because they were not going to work to feed the beast instead of their family.

The survey will provide fodder to those in Washington worried most about the economic impact on small businesses, the sector Democrats and Republicans agree is key to creating jobs.

Hah! What it will do is make republicans say “I told you so” and democrats and the LSM get more desperate in their lies about the economic situation and what is hurting it. The one constant is that the job market will stay shitty, and that’s because the people that create wealth have had enough, if I can take a line from Joe Biden, of the raping coming from people that think the money belongs to the government. Job prospects remain bleak and we can expect this to last until the WH is vacated and the democrats are reduced to an insignificant minority and their wealth redistribution scams are terminated.

The Slow Emergence


The U.S. labor market continues to make progress and once again shows, without a shadow of a doubt, that the U.S. economy is not in recession. Including upward revisions for August and September, nonfarm payrolls increased 182,000, almost doubling the consensus expected gain of 95,000. Civilian employment, an alternative measure of jobs that factors in small business start-ups, increased 277,000. This gain helped push down the unemployment rate to 9 percent.

A year ago the unemployment rate was 9.7 percent. During this time, nonfarm jobs have grown at an average monthly rate of 152,000 while civilian employment has grown at a rate of 140,000 per month. In other words, we don’t need 150,000 jobs per month just to keep the unemployment rate steady. Because of the aging of the labor force, 150,000 jobs per month is more than enough to push down the jobless rate.

Very quietly, without fanfare, private-sector payrolls have grown by 1.8 million in the past year, while the work week has lengthened and hourly cash wages are up 1.8 percent. Total hours worked are up 1.7 percent in the past year.

9% is not good by any means, but it is about as good as I expected a year ago. What’s really interesting is that this rise in civilian employment has matched and slightly exceeded a supposedly catastrophic decline in government employment. We’re supposed to believe that this “austerity” — which is austerity in these sense that ordering a diet coke with your triple bacon cheeseburger is a diet — hurts employment. According to standard economic multipliers, civilian jobs should grow far less than government jobs decline. Not happening. All the big spenders have left is a frail argument that if we had only maintained our high levels of spending, unemployment would be even lower. It’s this year’s “jobs created or saved”.

What I think is spurring this … well, we can hardly call it growth yet … is partially the gridlock in Washington. It would probably be better if we had serious efforts on tax reform and deficit reduction. But even the extremely modest step of taking out foot off the gas has helped. But a bigger part is that we are deleveraging in the private sector, reducing our credit card and mortgage debt and increasing our savings rate. It may not make for nice numbers in the short run, but it’s a better long-term strategy.

The Long Hard Slog

GDP went up at a 2.5% annual pace last quarter, which is pretty decent — wasn’t “austerity” supposed to kill us? We’re now back to GDP level we were at … almost four years ago. Yes, it’s time to party like it’s Q4 2007. An important point, jumped out at me, however:

real GDP is finally back to its pre-recession peak, and it’s taken us an historically very long time to get here. The figure (hat tip, BH) shows the number of quarters it has taken in the past for real GDP growth to regain its prior peak before the recession knocked it down (the top date on the x-axis is the quarter that GDP regained the peak; the bottom date is the prior peak). The average is 5.2 quarters…this go round, it took 15. That, my friends, is a long slog.

It was, is and is going to be. We are still too leveraged and our national finances have a biohazard sign on them. We are slowly unravelling the mess we were in — housing prices have fallen, as has debt. Maybe we can see some light. But we’re nowhere near the end; not with so many unemployed.

Was the WH behind the S&P and Moody credit rating hit job?

When I saw the news yesterday that Moodys put the US rating on a downgrade watch and that was also followed immediately by Standard & Poor’s pushing the same narrative, I immediately became suspicious of the timing and this idiotic warning. Remember that Moody and S&P where the people that kept telling us that all those mortgage security packages, replete with bad loans almost guaranteed to go south, repackaged through Freddie and Fannie, where great investments up until the whole house of cards came crashing down. I smell a rat here, and think this whole concerted attempt by these two to push us into giving the democrats what they want – more debt – isn’t a coincidence at all.

I am still surprised at the fact congress has not subpoenaed the management of S&P and Moodys to figure out what they knew. At a minimum it would prove – if they are going to make the claim they just didn’t know better – they have no fucking clue what they are talking about, or worse, and this is what I suspect happened, they would have to come clean on why they continued to pretend the buckets of shit where being lauded as a buckets of gold. Whether it was done so the fat cats could keep getting bigger houses, faster cars, and nicer fortunes by selling that junk off to everyone, or simply because they figured that nobody would ever catch on, if they knew and let it go on, it was criminal.

Enter Tim Geithner, whom I remind you was the Chairman of the New York Fed when everything was collapsing back in 2008, and for not catching on that the world was melting down around him, got rewarded for his that and his lack of concern about paying taxes like the rest of us by Obama, to the post of Secretary of the Treasury. Let me also point out that Tim has some real cozy relations with both the heads of Standard & Poors and Moodys. So, you can see how I am now immediately suspicious about this concerted effort by these two to convince people that allowing the democrats to force us to rack up trillions more in debt is better for our rating than putting an end to their insane fiscal policies.

What I suspect we have here is Obama telling Timmy to call his buddies and then telling them to help these collectivist tax-and-spend-command-economy nutjobs push their agenda, by making this ludicrous announcement in the hopes it forces the republicans to break down and give in to the Obama/democrat bullshit promise of cuts in the far away future – which guarantees they won’t happen ever – and tax increases that will hit the economy even harder, and that’s just plain wrong. But will the media figure this out and report this or just go right along and continue to shill for Obama and the democrats? I know, rhetorical question. For all their talk about the evil capitalists and the evils of capitalism, these collectivists sure seem to be in bed with the biggest and baddest of them all, and these bastards sure seem willing to say whatever lies it takes to help keep them in business.

UPDATE: More details about the real reason that our rating will be hammered and confirmation that what I was thinking was the reason behind S&P and Moddy doing their announcements come from this WSJ article. Some prime quotes:

So the credit-rating agencies that helped to create the financial crisis that led to a deep recession are now warning that the U.S. could lose the AAA rating it has had since 1917. As painfully ironic as this is, there’s no benefit in shooting the messengers. The real culprit is the U.S. political class, especially the President who has presided over this historic collapse of fiscal credibility.

Moody’s and the boys are citing the risk of a default on August 2 as the proximate reason for their warning. But Americans should understand that the debt ceiling is merely the trigger. The gun is the spending boom of the last three years and the prospect that Washington lacks the political will to reduce it in the years to come.

On spending, it is important to recall how extraordinary the blowout of the last three years has been. We’ve seen nothing like it since World War II. Nothing close. The nearby chart tracks federal outlays as a share of GDP since 1960. The early peaks coincide with the rise of the Great Society, the recession of 1974-75, and then a high of 23.5% with the recession of 1982 and the Reagan defense buildup.

From there, spending declines, most rapidly during the 1990s as defense outlays fell to 3% of GDP in 2000 from its Reagan peak of 6.2% in 1986. The early George W. Bush years saw spending bounce up to a plateau of roughly 20% of GDP, but no more than 20.7% as recently as 2008.

Then came the Obama blowout, in league with Nancy Pelosi’s Congress. With the recession as a rationale, Democrats consciously blew up the national balance sheet, lifting federal outlays to 25% in 2009, the highest level since 1945. (Even in 1946, with millions still in the military, spending was only 24.8% of GDP. In 1947 it fell to 14.8%.) Though the recession ended in June 2009, spending in 2010 stayed high at nearly 24%, and this year it is heading back toward 25%.

This is the main reason that federal debt held by the public as a share of GDP has climbed from 40.3% in 2008, to 53.5% in 2009, 62.2% in 2010 and an estimated 72% this year, and is expected to keep rising in the future. These are heights not seen since the Korean War, and many analysts think U.S. debt will soon hit 90% or 100% of GDP.

The problem is G-O-V-E-R-M-N-T S-P-E-N-D-I-N-G, which has gone up by an insane factor since democrats took the levers of government over after making the ridiculous promise that they would be more fiscal disciplined than their predecessors, not the fact that government, now run by command economy collectivists completely detached from reality and spending at record numbers that make the people they replaced look like pikers, isn’t stealing even more money from the productive sector to buy votes. That’s why we can not let them win this fight. Cuts now, no taxes. The big government gravy train must go the way of the Dodo bird.