05/31/11 Baltimore, Maryland – While we were traveling around the globe, the data continued to come in. It offered no surprises. Instead, it was more of the same. Housing is in a bitter slump, with prices down more than 30% nationwide and now falling at about 1% per month.
Unemployment remains a problem area. Officially, the unemployment rate is around 9%. But the real rate of joblessness, according to Yale professor Robert Shiller, is closer to 16%. New jobs are being created. But there are not enough of them to keep up with population growth and allow the unemployed to get back to work.
Another problem is that the jobs being created tend to be in government, government-sponsored businesses, or other low-productivity, low-wage activities.
You can earn money parking cars, for example. But not very much. Nor does parking a car contribute much to standards of living. So real wages go down. Wages increased by 1.9% over the last year; that was exactly equal to the official estimate of price increases. But prices are rising faster than the official CPI, as we’ll explain in a moment.
Meanwhile, the feds have completely failed. The figures we reported last week showed that the ‘recovery’ efforts had totally washed up. Each job ‘created’ by quantitative easing, for example, cost more than $800,000. Assuming the average wage is about $40,000, this means the program destroyed the equivalent of 20 jobs for every one it created.
Instead of creating jobs, the Fed’s QE program created inflation – especially in the price of energy. Family budgets suffer. Here’s an AP report:
NEW YORK (AP) – There’s less money this summer for hotel rooms, surfboards and bathing suits. It’s all going into the gas tank.
High prices at the pump are putting a squeeze on the family budget as the traditional summer driving season begins. For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal.
Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Families now spend more filling up than they spend on cars, clothes or recreation. Last year, they spent less on gasoline than each of those things.
The ramifications are far-reaching for an economy still struggling to gain momentum two years into a recovery. Economists say the gas squeeze makes people feel poorer than they actually are.
They’re showing it by limiting spending far beyond the gas station. Wal-Mart recently blamed high gas prices for an eighth straight quarter of lower sales in the US. Target said gas prices were hurting sales of clothes.
Every 50-cent jump in the cost of gasoline takes $70 billion out of the US economy over the course of a year, Hamilton says. That’s about one half of one percent of gross domestic product.
The latest GDP numbers show ‘growth’ happening at the rate of 1.8% per year. But, like everything else the feds report, the figures are probably little more than wishful thinking and bald-faced lies. In order to come up with a GDP growth number, the feds take the raw figures and then subtract inflation to come up with ‘real’ GDP growth.
The number they use to ‘deflate’ GDP is their annual CPI-U figure 1.9%. But the first quarter of this year showed prices rising much faster, with a CPI-U figure annualized to 5.7%. We won’t even mention the higher figure provided by the Billion Prices Project. In other words, if they applied their own inflation number for the first quarter, to their own GDP number for the first quarter, US GDP would not be going up at all. It would be going down at a 1.8% rate.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Here come the Walkers…
Hi everyone!
More people more unsolvable problems. What a rat race.
The standard of living for most people in the United States remains at or near a record high. Orders of magnitude better than things were for our (mostly) European ancestors a mere 5 or so generations ago. And yet so many people whine. 50 generations ago our ancestors lived truly short and nasty lives. I doubt they whined as much as we do.
Speaking of bad math…,, At the aleged expenditure of $369 a month, the average family buying gas at $4 a gallon and driving a gas guzzler that only gets 20mpg, would still be able to drive 22,140 miles a year. That’s WAY more miles than most people drive. Maybe for someone living in Wyoming that would be typical…,, I don’t think the average family in the rest of the United State consumes anything close to that much gas a month. The real sting from rising gas prices comes in the form of everything else becoming more expensive to ship, hence higher grocery prices in particular. The actual increase in what is paid at the pump is actually quite nominal. And in fact even with the huge increase in gasoline prices so far this year, most families are paying a far greater year over year increase in health care expenditures thanks to the misguided healthcare reform that was passed, requiring every worker who already has healthcare insurance to subsidize the 26 year-old deadbeat childrern of their coworkers.
Sure thing TIF, well said. The problem is, after you spoil a brat, un-spoiling is almost impossible…and never without much pain. That’s why good parents don’t spoil their kids. But Uncle Sam can be anything but a good parent…