More signposts on the road to non-recovery
Almost everyone has already forgotten Barack Obama’s State of the Union speech, so a quick refresher: he spent some time talking about an alternate reality in which zillions of jobs are being created and the economy is roaring. It sounds like a nice place, but back in the real world, the hard cold truth of Obamanomics is another demand for extended unemployment benefits.
The lazy political way to define a “recovery” is to say this year was better than last year. And 2013… wasn’t. GDP growth for 2013 was only 1.9 percent, a drop from 2.8 percent in 2012. 2.8 percent is “meh,” not “recovery.” That’s why the Obama unemployment “emergency” is rolling into its fifth year. A true recovery would reduce the government debt incurred to drag us through the last recession; our federal deficit is still much higher than it was when Barack Obama took office, his comical boasts of having slashed the deficit notwithstanding. We’re not paying down the debt from all those federal stimulus programs. We were $10 trillion in the hole when Obama arrived, and we’ll be at least $20 trillion in the hole when he leaves. There is no way to define that as “recovery.” Just ask the kids who grow up paying 70 percent effective tax rates on low-level jobs, if they’re lucky enough to find one.
A recovery would also bring healthy job creation, not an unemployment system that is inexorably transmuting into a welfare program. Job creation means enduring, sustainable jobs, not government stimulus programs that hire people for nonsense that evaporates as soon as the subsidies end. Healthy job creation also has nothing to do with the government hiring people. Paychecks written against confiscated tax dollars and imaginary deficit money are very different from voluntary employment that arises in response to the profitable exploitation of opportunity. In fact, it might be said that government hiring occurs specifically contrary to the pursuit of profit – there are things society needs done which are not lucrative opportunities for private industry. The list of those things is very short, but you wouldn’t know it from looking at today’s federal or state capitals.
Healthy job creation is also a vital part of preparing ourselves for the next inevitable economic downturn. When the bad times arrive, a robust workforce generating wealth through voluntary commerce is essential to holding off recession or depression. Full-employment nations will always weather the storm better, unless of course the government does something supremely stupid when it hears the first recessionary raindrops pattering against its windows.
2014 is supposed to be way better than 2013 was, just you wait. A true recovery demands sustained growth better than 3 percent, really more like 4, and the hole we’re in right now is so deep that we’d have to keep up 4 percent growth for decades to rebuild the workforce and close the deficit. The inevitability of the business cycle means a plan assuming decades of 4 percent growth is highly unrealistic. We really ought to be taking the kind of measures that would produce a huge growth surge and reduce debt quickly, but that would involve dismantling the Big Government machine Obama and his Party have worked so hard to build, so forget it.
And those projections of rosy 2014 growth are based on a spurt of 3.2 percent GDP increase in the fourth quarter… which is beginning to look an awful lot like a spending spree, not the beginning of a healthy trend. The first indicator was the sudden drop in durable goods orders, which suggests industry is frowning over its 2014 projections and deciding the inventory they built up during Q4 2013 is good enough to handle business for a while. That’s not a disaster, but it’s not exactly the sound of rocket engines blasting to life as the launch countdown begins, either.
Consumer demand is suddenly looking a lot weaker than projections based on the Christmas shopping spree anticipated. Econ blog ZeroHedge thinks that’s partially because consumers raided their savings accounts to buy those gifts, to the tune of $46 billion:
If there was any confusion where the funding for what little shopping spree Americans engaged in during December, it should all go away now. While the street was expecting a 0.2% increase in both personal income and personal spending in the month of December, what it got instead was a flat print in income (i.e. unchanged from November) while spending (mostly for non-durable goods) spiked by 0.4% meaning there was a 0.4% funding hold that had to be filled somehow. That somehow we now know is personal savings, which tumbled from a revised 4.3% to 3.9% – the lowest since January 2013, only back then incomes would rise for the rest of the year driven by the 30% increase in the S&P “wealth effect.” This time, with the Fed now tapering QE, the only way is down for both the “wealth effect” and Personal Incomes… and thus Personal spending, that majority component of US GDP.
If this analysis is correct, the savings are gone, and the spending spree is over. As ZeroHedge mentioned, those easy money stimulus policies are tapering off, and there’s already troubling news from the housing sector, where new home sales fell to an “unexpected” low in December. As always, this was blamed primarily on the cold weather. Perhaps too many economists have been listening to the global-warming scam artists and assuming winter would no longer be cold. Bloomberg News notes that “December purchases dropped in three of four regions, led by a 36.4 percent plunge in the Northeast, the smallest market. The two largest areas, the South and West, also declined, while the Midwest jumped 17.6 percent.” Cold weather beat up the market in the relatively warm South and West, but sales in the snowy Midwest went up?
New home sales are regarded as an important indicator of economic health, the purchase of a big-ticket item that creates lots of jobs for the construction industry, and tends to indicate a growing degree of consumer confidence, since people worried about the future aren’t eager to sign off on big mortgages.
And there was more “unexpected” news as jobless claims “unexpectedly” surged last week, after rising steadily for the past month. Don’t worry, says Reuters, because “the underlying trend suggested the labor market continued to heal.” Sure it does. That’s why we need billions more in unemployment insurance, and the President of the United States went on national TV to lie right into the faces of the American public and cook up a phony statistic about how he’s created millions of jobs, which he got by conveniently omitting both the first two years of his presidency, plus all the jobs that have been lost.
We’re not slipping back into the darkest days of Obama malaise in the job market, but we’re not zooming into any great “recovery,” either. Everyone who forecasts recovery turns out to be “unexpectedly” wrong, month after month, year after year. These current news items are glum, not terrifying… except the clock is ticking, and the American people voted for four more years of glum.
That shrunken workforce is a long-term problem that gets worse with every passing month. It is, to borrow one of President Obama’s favorite words, “transformational.” At the risk of sounding harsh, I think it’s exactly the transformation he wanted. A smaller workforce with a weaker economy – a nation that has been conditioned to offer tepid applause when another 300,000 people give up looking for work, causing the official headline unemployment rate to tick down another tenth of a percent – is easier to control. Embracing this New Normal means Americans will be satisfied with less, setting lower standards for a government that takes ever more of their money and liberty. A growing body of unfortunate souls who are not just unemployed, but nearly unemployable in the current economy provides fertile ground for the politics of envy and resentment, plus reliable support for maternal government.
And worst of all, because we never really had the “recovery” this President keeps promising we are “poised” to enjoy, we live in perpetual fear of things getting worse again. We are trapped on a fragile bridge, creaking and groaning as it sways above a deep pit of imminent recession. That makes us less willing to take risks, less receptive to talk about opportunity, and the value of the freedom necessary to exploit it. Look at that State of the Union speech – Obama invested great effort, probably with a lot of last-minute rewrites, in swiping the Republicans’ “inequality of opportunity” narrative, but in his hands “opportunity” becomes something the government distributes to those it finds deserving. It’s something that Uncle Sam creates with billion-dollar stimulus programs, not a treasure free people discover far from Washington on their own. The appetite for such adventure diminishes when we’re nervous about the tumble into recession.
Can anyone honestly say the American people, at the beginning of 2014, are filled with the confidence to make investments, take risks, and boldly seize prosperity? No, they’re worried by all these troubling signs of a fragile recovery, so when President Obama tells them only government power can keep it from shattering, too many of them listen. They still think of prosperity as something that will be delivered to them while they shelter in place.
You know what the best sign of a real recovery would be? An irresistible public appetite for more freedom, a larger private sector, keeping more of the money they’re earning at real jobs they view as long-term careers. That’s the last thing Obama and his party want to hear, so don’t expect a true recovery, as long as they have anything to say about it.
Update: Another “meh” signpost of diminished consumer enthusiasm: Amazon.com had an okay Christmas. Just okay, not as great as they were hoping. They missed sales projections by over half a billion dollars. They still moved a ton of merchandise, sure… but Amazon is offered as the standard explanation for weakness in traditional retail sales. It sure doesn’t look like all the missing commerce is happening at America’s online retail giants.