It has been said before but it bears repeating - by simply looking at job losses (unemployment claims) CR is missing the true source of the profound economic disquiet (and emerging political disquiet) in this country - the mostly unprecedented slow pace of job growth since 2001.
Look at actual # of employed and employed-to-population figures at BLS - and especially look at employed-to-population figures by age group.
You will find a shocking shift to older (55+) people remaining in the workforce much longer and younger people (55-) being cast out and locked out.
The criticism of jobless claims is that they only reflect firing, not hiring.
Today's consumer confidence # contained an indication of how hiring is going. Pessimists now outnumber optimists under the "how easy is it to find a job" question. I'm not sure how long its been since the two "crossed" -- maybe CR has an idea? In any case, the survey points to a weakening job market, especially when combined with jobless claims.
Trends in the job market are not surprising when you consider that "Proprietor's Income" has been stagnant the past nine months. Small businesses have provided the bulk of job creation in this recovery, and it seems they are no longer able to shoulder that burden.
Re the flat-to-slightly-negative durable goods, combined with falling employment in the manufacturing sector, it's kind of hard to see the benefit to the economy of the supposed big boost to exports. I think the big boost is so far fairly limited to exporters profit margins.
Actually the key numbers to look at in terms of unemployment is not the total number or the new claims, it is the number of long term unemployed (over 27 weeks is prob ably the best measure, but one can alow look at over 16 weeks). Short term unemployement has no bearing on the economy and is not a good indicator either leading, coincident or lagging. It is long term unemployement that spikes durring a recession and turns up just prior to the economy turning down. I dont think that I can paste a chart here, but the data can be charted easilly over at the St. Louis Fed (CR there is a chart of it in my strategy report, if you want to lift it and publish it, feel free to do so). Currently LT unemployment is up 21% yr/yr the biggest yr/yr increase in decades except for just before recessions. Yet aqnother indicator that the economy will slump in 08.
Workers continuing to collect unemployment benefits jumped by 75,000 to 2.713 million, the highest since November 2005, in the week ended Dec. 15, the Labor Department said in Washington.
350K is referred to as "the possible recession level" but the gray bars indicate that the recession ended before 2002 and yet unemployment stayed above that level for another couple of years. I am confused as to which is important - the amount or the change.
If my memory doesn't fails it was in june when you raised the red flag for a possible recession starting this year. The FWMA of Jobless claims has been raising significantly lately suggesting that the US may enter recession sooner than later.
I am impressed by your excellent forecasting records. If I was a RE guy I would surely subscribe to your newsletter.
--
"Labor related gauges are at best coincident indicators, and this indicator suggests the economy is close to recession."
"Labor related gauges are" LAGGING indicators. Actually, they are the laggiest of the lagging indicators if we believe David Rosenberg. And I do believe David Rosenberg more than any other Wall Street economist.
And "the economy is close to recession" as in already in recession for 1-3 months.
Economists are notorious for misleading the public about the beginning of recessions. It is a result of intellectual dishonesty more than anything else. For example, NAR and CAR econ-meisters. One guy put the recession probability next year at 49%!
A must watch video series to understand the American Propaganda Machine Happiness Machines:
Since I am a superstitious person - we could be on our way to the worst possible 2008 indicator on Saturday - when the Pats play the Giants. Remember the first - last - and only time an NFL team went undefeated?
You will find a shocking shift to older (55+) people remaining in the workforce much longer and younger people (55-) being cast out and locked out
This week I saw an example of this that surprised me. I ended up at a coworker's apartment. Three young men in their thirties living with one television, a few computers and sleeping bags. That's it. One had a Master's in EE and he's employed part-time on a help desk.
Asking 3 times a day "are we in recession? Will we go into recession?" reminds me of the scene in
"Knocked Up" where she bought every pregnancy test in the store. I don't know if we are or aren't in recession and frankly with every passing day I'm starting to care less and less. What difference does it make, really?
The analysis and information on CR make you the best one for serious viewers of the economy. Keep it up. Wish I could afford the RE newsletter, but I am out of work. Thanks
Re the flat-to-slightly-negative durable goods, combined with falling employment in the manufacturing sector, it's kind of hard to see the benefit to the economy of the supposed big boost to exports. I think the big boost is so far fairly limited to exporters profit margins.
Bob - it takes a loooong time to ramp this kind of production up. I'm quoting jobs now that launch in 2010... they will run & produce jobs for the better part of that decade. The reason they are being placed in NAFTA Zone as opposed to Asia is the belief that currency issues won't improve & that NAFTA Zone will be as or more competitive than it is now.
Export will not be a short term fix - anyone who thinks it will is delusional. However it is part of the long term solution - if you want to consume you also have to produce something more than IOUs.
Since total unemployment is steady, does that mean that long-term is being statistically checked by short-term gains?
No, it means that the true losses are being hidden by the decline in overall workforce participation. People go from unemployed, to discouraged, to dropping out, conveniently removing them from the publicized employment gauges and perpetuating the fiction of full employment within a goldilocks economy.
We're already in recession, CR. Our business is tied to the home decorating industry around NYC. It's been a very reliable recession indicator for 20+ years. Housing slump or no housing slump, this year was the best ever until 3rd quarter. December is deader than a doornail. Unless this is the 1st time our orders don't jive with the economy in general, which I highly doubt, we're in it, and it's a doozy.
If you look at the BLS employed-to-population stats, you will see that the 55 and under crowd has been under-employed since 01 or 02 - that is, 5 or 6 years.
Can anybody think of a comparable period in modern US history (ie, since decent stats have been kept) when employment growth has been so poor for so long (and been so ignored)?
Let me answer my own question - no.
There are a multitude of causes:
1) The 90's were arguably an unsustainable period of job growth (so an extended plateau or even decline) is at least partially a regression-to-the-long-term mean
2) China is crushing us in terms of the goods based economy.
Circa 2000 we were importing about $50 billion per year from China - we might get close to $285 billion this year.
Anybody have any sense of what percentage that might be of wholesale US domestic goods consumption?
I think total US retail sales is about $3.5 trillion and let's posit a 100% retail mark-up - so total US wholesale goods sales are about $1.75 trillion.
So (using this very back of the envelope calculation) China (within a period of 5 or 6 years) is now supplying about 16% of all US consumed goods.
But but but...what about comparative advantage...
3) CA would (perhaps) be fine if we had a more reliable service based economy...but in major regards, we don't...
3) A) Anybody want to hazard a guess as to why illegal immigration (been around forever) is now a boiling point issue (to the extent that the populace actually bitch-slapped the DC elites down twice on legalization despite the fact that our gerrymandered political system is arguably less democratic all the time?)
Could it be that if the goods based economy is gutted (down three million jobs since 01-02) then having a third world workforce willing to undercut you on service sector salaries is most disconcerting....
3)B) Big chunks of the service sector are essentially government controlled (read, corrupt).
Think medicine - with its excessive entry requirements (medical knowledge is just information, folks, like any other - and it ain't freakin magic...people still die in case no one has noticed...) yet the government treats medical care (16% of the entire US economy because of government mandate, incompetence, and corruption) as if it were inviolate and pure.
It ain't - it's the stinking fish that's eating the economy.
Bottom line - there are (and have been, for years) major dislocations in the US economy.
But because the government only caters to the AARP crowd (who vote in the highest percentages) the rest of the country has suffered through a "silent depression" (masked only by the idiotic housing bubble).
I just gotta say you guys have a wonderful, high quality blog. I enjoy reading it daily (and catching up on the Ubernerd backlogs...). This is actually the first blog I ever started checking, and I'm hooked. Thanks for everything!
Weekly issue of Finance and Commerce (12/26/07) has 90, yes NINETY, pages of notice of foreclosures (5-7 notices per page) for the 5 county metro area (Minneapolis-St.Paul).
Those are some nice charts from Bespoke. It's one thing to say 3 of the 20 cities are still showing appreciation, but when you look at the charts of Seattle and Portland, it just shows the last grouping of cliff divers.
Charlotte, needless to say, looks great and always will, as Sebastian has detailed with raw data and wicked logic.
Interestingly, the beginning of the entitlement crisis will coincide with a greater offering of Roth 401(k)s across the country.
For us young workers, I can't help but think our taxes can't help but be higher by the time we 'retire.' Will a widespread use of Roth 401ks exacerbate the future tax burden as the quantity of workers covered increases and the pool of money to tax decreases? Hmm.
Shares fell $1.39, or 6.3 percent, to $20.74 in midday trading. Wall Street analysts, however, said the market is overreacting to the company's woes and that the largest U.S. student lender is likely to benefit from future consolidation in the industry.
Ya consolidation into the Dept. of Education after Jan 2009.
When the war ends, what should the returning soldiers be entitled to? Don't know and why should I care when I'm not entitled to anything.
Bush/Cheney 2004, Swift Boat Vets, Anti-Flip/Flop moms in Ohio, hawkish Cheney and Halliburton. I hope all of those who voted for the guy would get their well-deserved "entitlement".
Blue,
Congress recently changed the rules for the "Kiddie Tax", or tax on minor dependents. They changed a law designed some years ago to permit people to transfer money to their children for education. Now, dependents will continue to be taxed on most gains at their parent's rate until age 24, instead of 18.
So, who cares? You do.
This change of a set of tax regs designed to help people with LONG-TERM tax planning will set a precedent to enable Congress to change Roth IRA regulations in the future. It may start out with some means test, then they may end up imposing some tax on all Roth withdrawals.
On the other hand, maybe Congress will be honest and leave the Roth plans as they are.
On the other hand, maybe Congress will be honest and leave the Roth plans as they are.
lama | 12.27.07 - 1:35 pm | #
Money is fungible - there are plenty of ways to tax those income streams 'indirectly' without directly and openly taxing Roth disbursements. Consumption taxes aimed at that demographic are what I'd expect to see...
That will be the approach - same result but the pols won't have to face attack ads in the next election cycle.
Gee, maybe we will get to the point that Americans will deign to do the work that Americans won't do. Construction (roofing, drywalling, etc.) is paying about $20 per hour in my area.
OT - New York Realtors report November numbers. Ouch. Since its the realtors they are trying to spin it and saying we are "returning to pre boom levels".
Sales of existing single-family homes in New York State slowed in November, which is typical for the seasonal market, to a level characteristic of the pre-boom market, according to preliminary single-family sales data accumulated by the New York State Association of REALTORS. The statewide median selling price, while holding steady from the previous month, fell compared to the same period in 2006.
The November 2007 sales total of 6,770 represents a 15.6-percent decrease compared to the November 2006 sales total of 8,021. The November 2007 sales total decreased 15.2 percent compared to the October 2007 sales total of 7,980.
The November 2007 statewide median sales price of $215,000 is unchanged from October 2007, and represents an 11.2-percent decrease compared to the November 2006 statewide median sales price of $242,100.
In other news, if you get REALTOR magazine (the NAR publication) they are saying not get down on the market because residential may be hurting but commercial is looking good!
Dry,
I don't think they'll face attack ads as they'll target high earners first, then the effect will trickly down as inflation brings more people into the taxable range. Alt-min has worked this way.
As far as dividing and conquering, I saw Obama used a good trick in one of his speaches where he said he'd raise the Social Security limits to include those making as much as $200k a year. Trouble is, the limit is now about $100k, so a father of 4 who works lots of OT or several jobs to make $120k a year will get hit as well. Then again, he must be extremely wealthy earning $120k.
"This change of a set of tax regs designed to help people with LONG-TERM tax planning will set a precedent to enable Congress to change Roth IRA regulations in the future. It may start out with some means test, then they may end up imposing some tax on all Roth withdrawals."
I agree that the Roth advantage may be lost to congressional panic, but they didn't need a change to the kiddie tax to pave the way as precedent. The tax code is chock full of precedents.
It's highly unlikely that Congress will pass a bill making Roth distributions taxable on a retroactive basis. Instead, distributions would probably be taxed on a pro-rata basis or perhaps LIFO. More tax prep headaches.
lama- One issue is that Social Security taxes are on wage income only. Those who get their income from interest, dividends, cap gains, Schedule E rents and profits pay no Social security tax. One option would be to broaden the base by taxing these over a certain limit (say $200,000) and lowering rates. This would put money in the pockets of moderate-income wage earners.
CR - Your charts are the best on the net! It certainly looks to me as though the trend in initial claims is pointing to a recession.
An interesting chart if you have the time, would be to compare quarterly GDP and GDP x/trade balance since 1990. The theory is that, while the economy as a whole might not be in a severe recession, the consumer is. For many years the consumer has "beat" the GDP thanks to imports. Today the opposite is true, I suspect.
With respect to job growth, it should grow more slowly over the next decade. Boomers are retiring and demand for immigrant labor in construction is in decline.
Looks like you & conjure are on the same track. I wouldn't be surprised to see the MoT manufacture a negative inflation rate in order to inflate that GDP a little longer, though!
Broward This week I saw an example of this that surprised me. I ended up at a coworker's apartment. Three young men in their thirties living with one television, a few computers and sleeping bags. That's it. One had a Master's in EE and he's employed part-time on a help desk.
Heh, brings back memories. I graduated from college in 1982. Sleeping bag? Check. TV? No! Computer? Yes! The cheapest way to live was to rent a house and share it, which is how a lot of the current inventory will end up. Shared houses. And you either lived home or you lived this way. Seriously. We all did, and we all saved money, because you had to.
All those happy yapping fools talking about the strong consumer are about to get a major pie in the face. Those bumptious, scrumptious CC trusts are about to get moldy in a big way.
winjr,
Can you name another precedent where a revocation was made on a tax preference for individuals with such long-term implications?
Maybe it's out there, but I can't think of it.
Aheadofthecurve, The basic problem with going after people who earn more than $200k is that there aren't that many of them. An additional problem is that they already pay loads of taxes. There's a misconception that high earners don't pay much in taxes. I've seen hundreds of individual returns in the millions. They do in fact pay taxes. The class-warfare used by both major parties is an old magicians' trick; to make you focus on rich people or welfare people instead of looking at spending.
CR,
do you feel we've seen the bulk of the Wall st layoffs? or more to come? if so how far along do you feel we are?
in my neck of the woods in NJ it seems building is still strong. Have we seen the bulk of the layoffs in the building sector? I feel NJ has yet to feel the pai
I agree with you about sharing house during college, but Broward was referring to 30-something under-worked adults.
Hell - the 80s in the Midwest was full of them. Its just now reaching the coast. Its the other side of the 'ownership society'... those under-employed thirty somethings now get to own (share) each others good company.
CR, I disagree with your opinion regarding initial claims.
When claims from 1967 to date are viewed through a Hodrick-Prescott filter, they predicted 8 of the last 6 recessions, making "false bottoms" in 1984 and 1994 due to mid-cycle slowdowns. Those signals were false positives. There weren't any false negatives. The lead has varied from 15 to 92 weeks for the true positives. Although claims aren't a foolproof indicator--in my experience none are--I nevertheless view them as an important tool when used in combination with other indicators.
lama, I don't think it is class warfare to treat income equally, regardless of how it is generated. The fact is that someone who makes a million dollars/year clipping coupons and earning capital gains pays 15 % income tax and no social security, while a working couple who make 150 K in salary will pay perhaps 12 % in income tax plus 7 % social security and medicare. Now, if someone risks their own money, there is some justification for favorable tax treatment, but in the case of the hedge funds, they are risking OPM, yet get cap gains treatment anyway. I don't see it as class warfare to point that out. By the way, I say this as someone who earns a considerable share of income from cap gains and dividends, and thus as someone who benefits from those tax breaks.
"This week I saw an example of this that surprised me. I ended up at a coworker's apartment. Three young men in their thirties living with one television, a few computers and sleeping bags. That's it. One had a Master's in EE and he's employed part-time on a help desk.
This is not good. Not at all.
Broward Horne"
What did the other 2 guys do to make a living? My housekeepers make about $15+/hour - and they are married to people who do things like yard work. They're far from rich - but they're not living like poor slobs either. Like when my husband and I were younger. I did clerical work - he worked as a bartender - etc. To get ourselves through school.
FWIW - at least where I live - one reason given by contractors for using illegal (mostly Mexican) immigrants to do things like construction jobs is the white guys don't show up on Friday (have to get stoned) or Monday (recovering from being stoned all weekend). I am sure that this is at least a little self-serving - but since a lot of the guys who did certain work on our house no longer had things like driver's licenses on account of multiple DUI's and the like - I don't think it's a complete lie either.
lama: How confident are you that you have seen a representative selection of returns? Maybe there is some systematic bias by which you saw mostly returns big in earned income (from activities that can still be characterized as labor), or income from unsheltered or unsubsidized investments.
Call me crazy.. but in my gut I feel like it's going to get pretty ugly for a long time. Because we dont have the same rebound options we used to have. Massive debts.. consumers maxed out credit etc.. jobs leaving.. and just as the boomers tip forward. We may look back at this and see it as the good ol days, just after the boom.
"Massive debts.. consumers maxed out credit etc.."
I keep hearing this, yet I have no debt, other than a low LTV mortgage which I could pay off today if I chose to. Not one person I know has "massive debt" either. I charge all my expenses to CCs to get cash back (several hundred $/year); that is counted in "debt" statistics, even though I pay the balance in full every month. CC defaults were very low for the past several years; now they are reverting to the historical mean, so y-o-y changes look bad. There are certainly economic problems, as there always are, but let's not exaggerate.
"Gee, maybe we will get to the point that Americans will deign to do the work that Americans won't do. Construction (roofing, drywalling, etc.) is paying about $20 per hour in my area."
Was talking with a middle-school shop teacher the other day. He's past retirement age but is staying on part time because when he goes they'll shut down the program because they won't be able to find a qualified shop teacher to teach part time. His take is that young men and women in this area don't know how to do the trades, and nobody's teaching them. He tells me that when the school district hires handymen, the new employers are almost always over 50.
It's not just the jobs that America won't do, it's the jobs that a lot of America doesn't know how to do. Time for another Civilian Conservation Corps?
It's not just the jobs that America won't do, it's the jobs that a lot of America doesn't know how to do.
When my plumber said he was leaving his father's business to pursue a law degree I thought he was nuts and told him so. This world doesn't need another atty, but try to find a plumber.
Ahead,
Sorry for the late reply. I'll type and eat my lunch.
I don't have a problem per se with Social Security being extended, so long as the benefits are extended likewise. Social Security is a trust fund, not a general fund. It is supposed to function at the individual level.
As far as hedge fund managers and LT capital gains, it has nothing at all to do with Social Security. It is just another example of Congress' ineptitude in writing tax regulations.
ice chart CR, thx for all the good work
It has been said before but it bears repeating - by simply looking at job losses (unemployment claims) CR is missing the true source of the profound economic disquiet (and emerging political disquiet) in this country - the mostly unprecedented slow pace of job growth since 2001.
Look at actual # of employed and employed-to-population figures at BLS - and especially look at employed-to-population figures by age group.
You will find a shocking shift to older (55+) people remaining in the workforce much longer and younger people (55-) being cast out and locked out.
Please check it out.
The criticism of jobless claims is that they only reflect firing, not hiring.
Today's consumer confidence # contained an indication of how hiring is going. Pessimists now outnumber optimists under the "how easy is it to find a job" question. I'm not sure how long its been since the two "crossed" -- maybe CR has an idea? In any case, the survey points to a weakening job market, especially when combined with jobless claims.
Trends in the job market are not surprising when you consider that "Proprietor's Income" has been stagnant the past nine months. Small businesses have provided the bulk of job creation in this recovery, and it seems they are no longer able to shoulder that burden.
U.S. Durable Goods Orders Gain Less Than Forecast (Update4) - Bloomberg.com
Orders for U.S. durable goods rose less than forecast in November, restrained by a drop in defense procurement and waning demand for machinery.
Is this the begining of the end of war??
Don't think so.
Re the flat-to-slightly-negative durable goods, combined with falling employment in the manufacturing sector, it's kind of hard to see the benefit to the economy of the supposed big boost to exports. I think the big boost is so far fairly limited to exporters profit margins.
"Is this the begining of the end of war??"
Probably the end of "The Coalition of the Willing".
Actually the key numbers to look at in terms of unemployment is not the total number or the new claims, it is the number of long term unemployed (over 27 weeks is prob ably the best measure, but one can alow look at over 16 weeks). Short term unemployement has no bearing on the economy and is not a good indicator either leading, coincident or lagging. It is long term unemployement that spikes durring a recession and turns up just prior to the economy turning down. I dont think that I can paste a chart here, but the data can be charted easilly over at the St. Louis Fed (CR there is a chart of it in my strategy report, if you want to lift it and publish it, feel free to do so). Currently LT unemployment is up 21% yr/yr the biggest yr/yr increase in decades except for just before recessions. Yet aqnother indicator that the economy will slump in 08.
Workers continuing to collect unemployment benefits jumped by 75,000 to 2.713 million, the highest since November 2005, in the week ended Dec. 15, the Labor Department said in Washington.
350K is referred to as "the possible recession level" but the gray bars indicate that the recession ended before 2002 and yet unemployment stayed above that level for another couple of years. I am confused as to which is important - the amount or the change.
If my memory doesn't fails it was in june when you raised the red flag for a possible recession starting this year. The FWMA of Jobless claims has been raising significantly lately suggesting that the US may enter recession sooner than later.
I am impressed by your excellent forecasting records. If I was a RE guy I would surely subscribe to your newsletter.
Best regards.
It seems to me looking at this chart that 400k is a better approximation of 350k for recession, no?
Dirk,
Since total unemployment is steady, does that mean that long-term is being statistically checked by short-term gains?
Thanks,
Dirk, thanks. I was going to plot that too.
Best Wishes.
--
"Labor related gauges are at best coincident indicators, and this indicator suggests the economy is close to recession."
"Labor related gauges are" LAGGING indicators. Actually, they are the laggiest of the lagging indicators if we believe David Rosenberg. And I do believe David Rosenberg more than any other Wall Street economist.
And "the economy is close to recession" as in already in recession for 1-3 months.
Economists are notorious for misleading the public about the beginning of recessions. It is a result of intellectual dishonesty more than anything else. For example, NAR and CAR econ-meisters. One guy put the recession probability next year at 49%!
A must watch video series to understand the American Propaganda Machine Happiness Machines:
Google Videos Error
Jas
Are unemployment numbers ever adjusted for population increases? (Similar to adjusting financial numbers for inflation.)
"Is this the begining of the end of war??
Take a look at Turkey and Northern Cambodia, I mean Iraq, the war is just moving from one area to another as the search for oil continues
Since I am a superstitious person - we could be on our way to the worst possible 2008 indicator on Saturday - when the Pats play the Giants. Remember the first - last - and only time an NFL team went undefeated?
You will find a shocking shift to older (55+) people remaining in the workforce much longer and younger people (55-) being cast out and locked out
This week I saw an example of this that surprised me. I ended up at a coworker's apartment. Three young men in their thirties living with one television, a few computers and sleeping bags. That's it. One had a Master's in EE and he's employed part-time on a help desk.
This is not good. Not at all.
Asking 3 times a day "are we in recession? Will we go into recession?" reminds me of the scene in
"Knocked Up" where she bought every pregnancy test in the store. I don't know if we are or aren't in recession and frankly with every passing day I'm starting to care less and less. What difference does it make, really?
The analysis and information on CR make you the best one for serious viewers of the economy. Keep it up. Wish I could afford the RE newsletter, but I am out of work. Thanks
Yen just dropped 60 bp.
I smell tankage.
Re the flat-to-slightly-negative durable goods, combined with falling employment in the manufacturing sector, it's kind of hard to see the benefit to the economy of the supposed big boost to exports. I think the big boost is so far fairly limited to exporters profit margins.
Bob - it takes a loooong time to ramp this kind of production up. I'm quoting jobs now that launch in 2010... they will run & produce jobs for the better part of that decade. The reason they are being placed in NAFTA Zone as opposed to Asia is the belief that currency issues won't improve & that NAFTA Zone will be as or more competitive than it is now.
Export will not be a short term fix - anyone who thinks it will is delusional. However it is part of the long term solution - if you want to consume you also have to produce something more than IOUs.
Oh my the bad news is just rolling in:
GS predicts that C may have 18B more to confess and will cut its dividend.
And now this little nugget:
SallieMae
Since total unemployment is steady, does that mean that long-term is being statistically checked by short-term gains?
No, it means that the true losses are being hidden by the decline in overall workforce participation. People go from unemployed, to discouraged, to dropping out, conveniently removing them from the publicized employment gauges and perpetuating the fiction of full employment within a goldilocks economy.
We're already in recession, CR. Our business is tied to the home decorating industry around NYC. It's been a very reliable recession indicator for 20+ years. Housing slump or no housing slump, this year was the best ever until 3rd quarter. December is deader than a doornail. Unless this is the 1st time our orders don't jive with the economy in general, which I highly doubt, we're in it, and it's a doozy.
Re: 3 men and a TV:
If you look at the BLS employed-to-population stats, you will see that the 55 and under crowd has been under-employed since 01 or 02 - that is, 5 or 6 years.
Can anybody think of a comparable period in modern US history (ie, since decent stats have been kept) when employment growth has been so poor for so long (and been so ignored)?
Let me answer my own question - no.
There are a multitude of causes:
1) The 90's were arguably an unsustainable period of job growth (so an extended plateau or even decline) is at least partially a regression-to-the-long-term mean
2) China is crushing us in terms of the goods based economy.
Circa 2000 we were importing about $50 billion per year from China - we might get close to $285 billion this year.
Anybody have any sense of what percentage that might be of wholesale US domestic goods consumption?
I think total US retail sales is about $3.5 trillion and let's posit a 100% retail mark-up - so total US wholesale goods sales are about $1.75 trillion.
So (using this very back of the envelope calculation) China (within a period of 5 or 6 years) is now supplying about 16% of all US consumed goods.
But but but...what about comparative advantage...
3) CA would (perhaps) be fine if we had a more reliable service based economy...but in major regards, we don't...
3) A) Anybody want to hazard a guess as to why illegal immigration (been around forever) is now a boiling point issue (to the extent that the populace actually bitch-slapped the DC elites down twice on legalization despite the fact that our gerrymandered political system is arguably less democratic all the time?)
Could it be that if the goods based economy is gutted (down three million jobs since 01-02) then having a third world workforce willing to undercut you on service sector salaries is most disconcerting....
3)B) Big chunks of the service sector are essentially government controlled (read, corrupt).
Think medicine - with its excessive entry requirements (medical knowledge is just information, folks, like any other - and it ain't freakin magic...people still die in case no one has noticed...) yet the government treats medical care (16% of the entire US economy because of government mandate, incompetence, and corruption) as if it were inviolate and pure.
It ain't - it's the stinking fish that's eating the economy.
Bottom line - there are (and have been, for years) major dislocations in the US economy.
But because the government only caters to the AARP crowd (who vote in the highest percentages) the rest of the country has suffered through a "silent depression" (masked only by the idiotic housing bubble).
Wonder what will happen now.
More on 3 men and a TV:
"This is not good. Not at all."
What it is, is...
...a revolutionary army in waiting.
Just wait until the entitlement crisis starts...next week...
baby boom = 1946 to 1964
early retirement = 62
1946 + 62 = 2008
= beginning of the end of American government as we know it (for good and ill)
Hey CR and Tanta,
I just gotta say you guys have a wonderful, high quality blog. I enjoy reading it daily (and catching up on the Ubernerd backlogs...). This is actually the first blog I ever started checking, and I'm hooked. Thanks for everything!
this year was the best ever until 3rd quarter
Oops. I meant until 4th quarter. Duh.
this year was the best ever until 3rd quarter
Oops. I meant until 4th quarter.
Yup, same here. Used to have Starbucks in our office's espresso machine, now I'm just...
OT: From yesterdays housing, this has some nice graphs:
Bespoke Investment Group: Updated Case-Shiller Median Home Price Data
Sign of the times:
Weekly issue of Finance and Commerce (12/26/07) has 90, yes NINETY, pages of notice of foreclosures (5-7 notices per page) for the 5 county metro area (Minneapolis-St.Paul).
This is about 3 times as many as at mid-year.
"Sign of the times"
Wish we had something like that here in California. Even the abridged version would have Volume 1-90.
Those are some nice charts from Bespoke. It's one thing to say 3 of the 20 cities are still showing appreciation, but when you look at the charts of Seattle and Portland, it just shows the last grouping of cliff divers.
Charlotte, needless to say, looks great and always will, as Sebastian has detailed with raw data and wicked logic.
Re: CAS127
Interestingly, the beginning of the entitlement crisis will coincide with a greater offering of Roth 401(k)s across the country.
For us young workers, I can't help but think our taxes can't help but be higher by the time we 'retire.' Will a widespread use of Roth 401ks exacerbate the future tax burden as the quantity of workers covered increases and the pool of money to tax decreases? Hmm.
s this the begining of the end of war??
REBear | 12.27.07 - 11:20 am | #
Well you know, someday this war's gonna end.
From the Sallie Mae link squeezed posted...
Shares fell $1.39, or 6.3 percent, to $20.74 in midday trading. Wall Street analysts, however, said the market is overreacting to the company's woes and that the largest U.S. student lender is likely to benefit from future consolidation in the industry.
Ya consolidation into the Dept. of Education after Jan 2009.
Blue | 12.27.07 - 1:18 pm | #
wetzel | 12.27.07 - 1:18 pm | #
When the war ends, what should the returning soldiers be entitled to? Don't know and why should I care when I'm not entitled to anything.
Bush/Cheney 2004, Swift Boat Vets, Anti-Flip/Flop moms in Ohio, hawkish Cheney and Halliburton. I hope all of those who voted for the guy would get their well-deserved "entitlement".
Blue,
Congress recently changed the rules for the "Kiddie Tax", or tax on minor dependents. They changed a law designed some years ago to permit people to transfer money to their children for education. Now, dependents will continue to be taxed on most gains at their parent's rate until age 24, instead of 18.
So, who cares? You do.
This change of a set of tax regs designed to help people with LONG-TERM tax planning will set a precedent to enable Congress to change Roth IRA regulations in the future. It may start out with some means test, then they may end up imposing some tax on all Roth withdrawals.
On the other hand, maybe Congress will be honest and leave the Roth plans as they are.
"350K" doesn't seem correct from the chart. After all, was there a recession in 1995?
I'd think 400K to confirm and 380K to be getting there.
Jas Jain, I followed your link, (12:03 pm)
I watched the video... chilling and an awesome and sobering message.
Did you ever get the chance to watch the Naomi Wolf interview i linked to several weeks ago...the two add together.
YouTube - Interview - Naomi Wolf - The End of America
look for her to report on the ten steps dictators use to close down democracies.
thank you
with hope for an uncertain future
MT
On the other hand, maybe Congress will be honest and leave the Roth plans as they are.
lama | 12.27.07 - 1:35 pm | #
Money is fungible - there are plenty of ways to tax those income streams 'indirectly' without directly and openly taxing Roth disbursements. Consumption taxes aimed at that demographic are what I'd expect to see...
That will be the approach - same result but the pols won't have to face attack ads in the next election cycle.
Gee, maybe we will get to the point that Americans will deign to do the work that Americans won't do. Construction (roofing, drywalling, etc.) is paying about $20 per hour in my area.
OT - New York Realtors report November numbers. Ouch. Since its the realtors they are trying to spin it and saying we are "returning to pre boom levels".
Sales of existing single-family homes in New York State slowed in November, which is typical for the seasonal market, to a level characteristic of the pre-boom market, according to preliminary single-family sales data accumulated by the New York State Association of REALTORS. The statewide median selling price, while holding steady from the previous month, fell compared to the same period in 2006.
The November 2007 sales total of 6,770 represents a 15.6-percent decrease compared to the November 2006 sales total of 8,021. The November 2007 sales total decreased 15.2 percent compared to the October 2007 sales total of 7,980.
The November 2007 statewide median sales price of $215,000 is unchanged from October 2007, and represents an 11.2-percent decrease compared to the November 2006 statewide median sales price of $242,100.
In other news, if you get REALTOR magazine (the NAR publication) they are saying not get down on the market because residential may be hurting but commercial is looking good!
Dry,
I don't think they'll face attack ads as they'll target high earners first, then the effect will trickly down as inflation brings more people into the taxable range. Alt-min has worked this way.
As far as dividing and conquering, I saw Obama used a good trick in one of his speaches where he said he'd raise the Social Security limits to include those making as much as $200k a year. Trouble is, the limit is now about $100k, so a father of 4 who works lots of OT or several jobs to make $120k a year will get hit as well. Then again, he must be extremely wealthy earning $120k.
"This change of a set of tax regs designed to help people with LONG-TERM tax planning will set a precedent to enable Congress to change Roth IRA regulations in the future. It may start out with some means test, then they may end up imposing some tax on all Roth withdrawals."
I agree that the Roth advantage may be lost to congressional panic, but they didn't need a change to the kiddie tax to pave the way as precedent. The tax code is chock full of precedents.
It's highly unlikely that Congress will pass a bill making Roth distributions taxable on a retroactive basis. Instead, distributions would probably be taxed on a pro-rata basis or perhaps LIFO. More tax prep headaches.
lama- One issue is that Social Security taxes are on wage income only. Those who get their income from interest, dividends, cap gains, Schedule E rents and profits pay no Social security tax. One option would be to broaden the base by taxing these over a certain limit (say $200,000) and lowering rates. This would put money in the pockets of moderate-income wage earners.
"Cooking ramen in my percolator"
Those notices are for one week.
Those notices are for one week.
90x5 foreclosures in a week. Ooh, now that's just nasty. Thanks for the clarification.
I've made my recession call few days ago:
The economy went into recession during the first week of December « The Theroxylandr in Flame
CR - Your charts are the best on the net! It certainly looks to me as though the trend in initial claims is pointing to a recession.
An interesting chart if you have the time, would be to compare quarterly GDP and GDP x/trade balance since 1990. The theory is that, while the economy as a whole might not be in a severe recession, the consumer is. For many years the consumer has "beat" the GDP thanks to imports. Today the opposite is true, I suspect.
With respect to job growth, it should grow more slowly over the next decade. Boomers are retiring and demand for immigrant labor in construction is in decline.
Roxy,
Looks like you & conjure are on the same track. I wouldn't be surprised to see the MoT manufacture a negative inflation rate in order to inflate that GDP a little longer, though!
Broward This week I saw an example of this that surprised me. I ended up at a coworker's apartment. Three young men in their thirties living with one television, a few computers and sleeping bags. That's it. One had a Master's in EE and he's employed part-time on a help desk.
Heh, brings back memories. I graduated from college in 1982. Sleeping bag? Check. TV? No! Computer? Yes! The cheapest way to live was to rent a house and share it, which is how a lot of the current inventory will end up. Shared houses. And you either lived home or you lived this way. Seriously. We all did, and we all saved money, because you had to.
All those happy yapping fools talking about the strong consumer are about to get a major pie in the face. Those bumptious, scrumptious CC trusts are about to get moldy in a big way.
MaxedOutMama,
I agree with you about sharing house during college, but Broward was referring to 30-something under-worked adults.
But you're right on about those "yapping fools". Kudlow et al sounds too much like NAR to me.
winjr,
Can you name another precedent where a revocation was made on a tax preference for individuals with such long-term implications?
Maybe it's out there, but I can't think of it.
Aheadofthecurve, The basic problem with going after people who earn more than $200k is that there aren't that many of them. An additional problem is that they already pay loads of taxes. There's a misconception that high earners don't pay much in taxes. I've seen hundreds of individual returns in the millions. They do in fact pay taxes. The class-warfare used by both major parties is an old magicians' trick; to make you focus on rich people or welfare people instead of looking at spending.
CR,
do you feel we've seen the bulk of the Wall st layoffs? or more to come? if so how far along do you feel we are?
in my neck of the woods in NJ it seems building is still strong. Have we seen the bulk of the layoffs in the building sector? I feel NJ has yet to feel the pai
I agree with you about sharing house during college, but Broward was referring to 30-something under-worked adults.
Hell - the 80s in the Midwest was full of them. Its just now reaching the coast. Its the other side of the 'ownership society'... those under-employed thirty somethings now get to own (share) each others good company.
CR, I disagree with your opinion regarding initial claims.
When claims from 1967 to date are viewed through a Hodrick-Prescott filter, they predicted 8 of the last 6 recessions, making "false bottoms" in 1984 and 1994 due to mid-cycle slowdowns. Those signals were false positives. There weren't any false negatives. The lead has varied from 15 to 92 weeks for the true positives. Although claims aren't a foolproof indicator--in my experience none are--I nevertheless view them as an important tool when used in combination with other indicators.
Conjure says, "Recession Q1-08."
lama, I don't think it is class warfare to treat income equally, regardless of how it is generated. The fact is that someone who makes a million dollars/year clipping coupons and earning capital gains pays 15 % income tax and no social security, while a working couple who make 150 K in salary will pay perhaps 12 % in income tax plus 7 % social security and medicare. Now, if someone risks their own money, there is some justification for favorable tax treatment, but in the case of the hedge funds, they are risking OPM, yet get cap gains treatment anyway. I don't see it as class warfare to point that out. By the way, I say this as someone who earns a considerable share of income from cap gains and dividends, and thus as someone who benefits from those tax breaks.
"This week I saw an example of this that surprised me. I ended up at a coworker's apartment. Three young men in their thirties living with one television, a few computers and sleeping bags. That's it. One had a Master's in EE and he's employed part-time on a help desk.
This is not good. Not at all.
Broward Horne"
What did the other 2 guys do to make a living? My housekeepers make about $15+/hour - and they are married to people who do things like yard work. They're far from rich - but they're not living like poor slobs either. Like when my husband and I were younger. I did clerical work - he worked as a bartender - etc. To get ourselves through school.
FWIW - at least where I live - one reason given by contractors for using illegal (mostly Mexican) immigrants to do things like construction jobs is the white guys don't show up on Friday (have to get stoned) or Monday (recovering from being stoned all weekend). I am sure that this is at least a little self-serving - but since a lot of the guys who did certain work on our house no longer had things like driver's licenses on account of multiple DUI's and the like - I don't think it's a complete lie either.
lama: How confident are you that you have seen a representative selection of returns? Maybe there is some systematic bias by which you saw mostly returns big in earned income (from activities that can still be characterized as labor), or income from unsheltered or unsubsidized investments.
Call me crazy.. but in my gut I feel like it's going to get pretty ugly for a long time. Because we dont have the same rebound options we used to have. Massive debts.. consumers maxed out credit etc.. jobs leaving.. and just as the boomers tip forward. We may look back at this and see it as the good ol days, just after the boom.
"Massive debts.. consumers maxed out credit etc.."
I keep hearing this, yet I have no debt, other than a low LTV mortgage which I could pay off today if I chose to. Not one person I know has "massive debt" either. I charge all my expenses to CCs to get cash back (several hundred $/year); that is counted in "debt" statistics, even though I pay the balance in full every month. CC defaults were very low for the past several years; now they are reverting to the historical mean, so y-o-y changes look bad. There are certainly economic problems, as there always are, but let's not exaggerate.
"Gee, maybe we will get to the point that Americans will deign to do the work that Americans won't do. Construction (roofing, drywalling, etc.) is paying about $20 per hour in my area."
Was talking with a middle-school shop teacher the other day. He's past retirement age but is staying on part time because when he goes they'll shut down the program because they won't be able to find a qualified shop teacher to teach part time. His take is that young men and women in this area don't know how to do the trades, and nobody's teaching them. He tells me that when the school district hires handymen, the new employers are almost always over 50.
It's not just the jobs that America won't do, it's the jobs that a lot of America doesn't know how to do. Time for another Civilian Conservation Corps?
It's not just the jobs that America won't do, it's the jobs that a lot of America doesn't know how to do.
When my plumber said he was leaving his father's business to pursue a law degree I thought he was nuts and told him so. This world doesn't need another atty, but try to find a plumber.
Ahead,
Sorry for the late reply. I'll type and eat my lunch.
I don't have a problem per se with Social Security being extended, so long as the benefits are extended likewise. Social Security is a trust fund, not a general fund. It is supposed to function at the individual level.
As far as hedge fund managers and LT capital gains, it has nothing at all to do with Social Security. It is just another example of Congress' ineptitude in writing tax regulations.