08/16/09 Corolla, North Carolina
53 economists surveyed by Bloomberg this week said that ‘the worst is over’ for the economy…clearly, the stimulus is working. Hmmm…let’s take a closer look.
The Reuters/University of Michigan index showed that consumer sentiment declined in early August to 63.2 from 66.0 in July. It is the lowest reading since March, and is significantly worse than the 69.0 reading that economists surveyed by MarketWatch had expected.
“From a consumer finance position, people are still struggling,” said Scott Hoyt, senior director of consumer economics for Moody’s Economy.com. “Wages have fallen from the previous year and consumers [still] don’t have alternative sources of cash.”
Keep reading to see what Bill has to say about this so-called ‘recovery’…
Guess how many jobs the US private sector has added over the last 10 years? Almost none. Private sector employment is back to levels of 1999. There are more jobs in restaurants and health care…but many fewer in manufacturing. Net gain: zero.
The only job gains have been in the parasite sector – government. On the evidence, this trend is going to continue. Now, the feds have a new post called “pay czar.” As near as we can tell this is a busybody who undertakes to control salaries in the industries that the feds have bailed out. There will be a lot more jobs running the regulatory/bailout apparatus. Then, too, there are all the make-work jobs of the shovel ready boondoggles the feds began in an effort to replace private spending.
Back in the private sector, 72 banks have failed so far this year. And a record 34 million Americans are getting food stamps.
Naturally, incomes are falling. Now, imagine the consumer…he’s already paying 15% of his disposable income to debt service…and then his income is cut in half! This means that 30% of his remaining income must be used just to service the debt. Impossible to do without big cuts in spending…
The poor consumer hit the wall in 2007. He was spending all he earned…and paying more of his income in debt service than at any time in the last 60 years. He couldn’t continue to living on future earnings – there just weren’t enough of them. That is why the finance industry has topped out. It loaded Americans up with enough debt already.
And it’s why the credit cycle has turned. All of a sudden savings rates are back up to 7%. Consumers are cutting back…raising chickens in their back yards…driving less…planting gardens and squeezing their nickels. The private sector is de-leveraging. And there won’t be any durable economic boom or lasting bull market on Wall Street until this process is finished.
The above is just an excerpt from Bill’s standout essay from this week. You can read it in its entirety here.
That’s it for us this today. Enjoy the rest of your weekend,
Kate Incontrera
The Daily Reckoning
Kate Incontrera
Kate "Short Fuse" Incontrera is a regular contributor to The Daily Reckoning. Ms. Incontrera was also an associate producer and writer on the critically-acclaimed documentary film, I.O.U.S.A. Before joining Agora Financial in 2004, Ms. Incontrera studied writing at The University of Cambridge and at Towson University in Baltimore, Maryland.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
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Maybe it is time for Obama to confidently announce that “this is the worst economic recovery since the Great Depression!”
“From a consumer finance position, people are still struggling,” said Scott Hoyt, senior director of consumer economics for Moody’s Economy.com.
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I flashed to the scene where the guy is up to his neck in quicksand, a worried knit shadows his brow, a poisonous adder coiled just outside the pit, a lion waiting in the bushes–a lion that had not eaten in nearly a week, puzzling through the odds of pulling him out whilst avoiding the adder and not getting trapped alongside.
Yep, like John sez: the worst recovery since the great depression…made me laugh out loud.