Super PACs have dolled out countless dollars to sway the few fence sitters in this endless presidential election. I have ceased to hear the PACs. Like Charlie Brown’s teacher’s voice, both parties have become the “mwah mwah mwah mwah” trombone.
Now and then, a financial story will ascend above the din. Usually, it’s a story about which everyone agrees. For instance, the job numbers.
They were bad – even worse than they looked.
Before we continue, allow me to give you some insight into my interest in security analysis and economics. I’m a math dork. I love math more than I love Republicans, Democrats, Independents, Green Parties, Libertarians, and other parties combined. I love the process of analysis, regardless of where it leads.
After decades of refining a macroeconomic risk model and investing and advising other about their investments, I have found three hypotheses to be very reliable
1. Don’t follow the crowd.
2. If something is said often enough, most people will believe it.
3. Follow the money.
We’ll start with 2 and 3, since it’s Super PAC money that is financing the current endless blather about the jobs report. In 2005, well into the recent housing bubble, Barney Frank insisted that there was no housing bubble. Lots and lots of people signed documents that indebted themselves at ten times their annual income to buy a home because there was no housing bubble. I often wonder whether these were the same people who bought internet stocks in the 1990s when there was no internet stock bubble. Now, big money says the jobs report is bad. Over and over and over again.
As to not following the crowd, you may have heard Warren Buffett say, in his predictably folksy fashion, “Be greedy when others are fearful; be fearful when others are greedy.” When everybody was buying and selling houses in the mid 2000s, that was a bad idea. When everybody was loading up on internet stocks, that was a bad idea. Now everyone agrees that the job numbers were bad I’m much happier with an overcast sky than a bright sunshine. As a personality type, it’s easy for me to go against the crowd. And this is one of those time that the data supports it.
What factors contributed to a lack of job growth in the U.S.?
2010
First Quarter GDP was +3.9%
Second Quarter GDP was +3.8% – Beginning of European Debt Crisis
Third Quarter GDP was +2.5%
Fourth Quarter GDP was +2.3%
2011
First Quarter GDP was +0.4% – Egyptian President steps down, Libyan conflict begins, President Obama ratchets up sanctions on Libya, Oil prices pass $90/barrel, Japanese earthquake/tsunami
Second Quarter GDP was +1.3% – Government shutdown narrowly diverted in Debt Limit debate, US Debt Rating lowered
Third Quarter GDP was +1.8% – Oil prices below $90/barrel, Debt Limit debate resolved
Fourth Quarter GDP was +3.0% – Oil prices again pass $90/barrel
2012
First Quarter GDP was +2.0%
Second Quarter GDP was 1.7%
The Debt Limit debate was a ridiculous example of Congress shooting the economy in the foot. Luckily, the Fed’s QE program has ensured that our borrowing costs for our national debt did not increase because our Congressional representatives are unable to do their job, so that effect did more to make us look foolish than add to our borrowing cost.
Assuming that the European Debt Crisis shaves 1% from GDP growth, and oil prices account for -.2%, the effect of these two crises on 2012 growth total about 1.2%. Adjusting for these issues, 2012 growth would have been just over 3%, which would keep job growth about even with population growth.
This is sub-par for after a recession, but definitely a better picture than the one we see.
Second, there is the ubiquitous argument that the decrease in the percentage of unemployed from 8.3% to 8.1% was due to a decline in the labor force. That statement is not consistent with the measure of labor I use, which is its broadest measure. The U-6, published by the Bureau of Labor Statistics, showed a decrease in the percentage of unemployed in August. Even the Economics Editor of “Barron’s Magazine” says he’s not so sure that there has been a decline in the labor force, saying, “Follow-ups on declines in the rate of joblessness accompanied by the decline in the labor force generally show that the labor force has a tendency to bounce back, while the fall in the unemployment rate has a tendency to confirm.”
8.1% unemployment is high. But to look at that number and assume that is it low because it doesn’t include people who have dropped out of the workforce, is not supported by the data.
Even if you don’t want to take the time to check out the accuracy of this article, think about the wisdom of following the crowd. That way, you’ll be protected from dogma, and come to some unexpected, and hopefully accurate conclusions.
As always, I appreciate and welcome your comments.
Loved your poem and will share with my yoga class tonight!
So, what I hear you saying is that this is unacceptable. Be clear and sure. You are not o.k. with this. If he wants this relationship (with you), he has to take down his profile and just be with you---it's always a risk on both sides. Thanks for fill
Marcia,
Thanks for your insightful comments. The only thing I would say is that I did not meet him on a dating site.
I met him on a holiday - face to face - in the company of friends. We spent two full weeks together all day every day, travelli
That’s interesting Kitty. I may be a former compensation consultant, but i never took macro economics (or micro for that matter, haha). All I can respond with is a perception I have. First of all, as someone who works at a major employer I know that our job openings and our turnover is up a bit. We are growing slowly and cautiously, others in our industry are as well, and voila….we are starting to see the effects of same.
Also the DMN had an iinteresting article this am about individuals who had lost their corporate like jobs in the last 2 years and who decided to be more independent, start new professional lives in different industries and/or as self employed. All didn’t replace their preious income, a couple exceeded it….but all spoke of being more satisfied with their lives.
I think unemployment is still too high, I think the recovery is still too slow….but things are not as bleak as being painted–and if someone is willing to think differently about their professional lives, the options also grow.
Hi Dallas Lady, and thanks for your invaluable anecdotal observation. It’s remarkable to me that so much in the financial press is repeated without verification. We are, after all, a business that is based in numbers.
I appreciate your story and hope that others in different locations share theirs, as well.
The aging of boomers will effect the number of workers in a very natural way. No president can not stop the large number of boomers who reach an age that work is no longer possible. There are so many of us. That is really a good thing. Fewer workers brings better wages and great inventions to make things with fewer people.
In my local area thing are getting better. We have had some investments from China and Germany that have really boosted employment. But this is a poor area so it will never look like full employment or even close.
A lot of the job losses here in SC have been from government job cuts and those directly effected by those people being out of work. Such as contractors or suppliers for the government as well places the former government spent their earnings. We have lost a lot of the industry to Mexico. But even some of that has started to come back.
The debt and needed spending cuts will cause more government job loss.
Did you see this op-ed?
http://campaignstops.blogs.nytimes.com/2012/09/09/edsall-the-ryan-sinkhole/?nl=todaysheadlines&emc=edit_th_20120910
Hi, idosew, and thanks for your observation about the aging boomers. I did see that article, and have similar concerns that I expressed after the RNC in this article http://www.vibrantnation.com/other-topics/lets-pretend/, where your comments were again invaluable.
As it turns out, neither party provided enough information about their fiscal plans, but the Ryan Plan is particularly egregious in this regard. Thanks again for your comment.
Kitty,
This past weekend I was with a group of 65 to 70 year olds. They were all talking about that they are now on or will be very soon SS. All were on medicare. All could afford their own medical coverage if they had to. And all are wealthy enough to support themselves without SS until there death.
They all were fearful that long term care would wipe them out so they choose to let the tax payer pay the bills instead of themselves. Assuming they don’t need the care they will leave it to their kids.
With this attitude I don’t know how we could change anything.
Thanks for a very insightful comment, idosew. You bring up a valid point about “means testing” for benefits. It’s a difficult subject. Should those who pay into the system (Social Security and Medicare) and achieve great financial success be asked to forgo their benefits to fortify its long term health? And, as to long term care, your observation is more startling. Since your acquaintances chose not to buy it, should taxpayers be “on the hook” for their care?
A couple of somber subjects, on which I’d be most interested to hear your thoughts.
Thanks again for your comments.
The idea that there aren’t any jobs is a lie. People just aren’t being directed into the career areas that are abundant in available jobs. Those jobs are in vocational trades. For every three persons that retire in the trades such as welding, plumbing, electrician, air conditioning, mechanics, and similar trades only one person is going into the trades. This has resulted in the federal government employing Chinese Companies to build the bridges in our country because we aren’t turning out enough trained welders. Vocational education needs to be emphasized in our high schools again like it was in the past to meet the need. Julia Pavlicek author of the upcoming book “Putting Sexy Back in Votech, Careers in Vocational Education and Trades.”
Oh how much I agree. I heard Mitt Romney say this weekend that he wants every child to get an education so they can get a good job. What nobody ever says is that a good job may not be had from a university degree. We have told too many that being the manager or boss is the good job making real good job seem like “low” end ones. The wages are often better for trade jobs. Somehow we think doing something with your hands is less need for brains, far from truth! OJT is also a good thing.
Hi Ms. Pavlicek, and thank you for your comment and book recommendation. Perhaps you would be interested in Fareed Zakaria’s newest GPS special titled “Putting America Back to Work.” http://globalpublicsquare.blogs.cnn.com/2012/09/23/gps-job-special-putting-america-to-work/
In it, he posits that the US could benefit from an apprenticeship program similar to that of Germany’s, a cooperative of business, education and government. Perhaps the fact that only one person currently enters trade for every three retirees may be a result of job availability, i.e., many trade jobs have been exported and therefore job entry is low. A chicken-and-the-egg discussion.
In any event, I shall definitely pick up your book, and recommend that you watch Zakaria’s special report. I’d love to continue this discussion with you, and any other participants from this very bright group of women.