Sometimes you have to wonder if Wall Street insiders are even aware of what is going on beyond Wall Street’s narrow perspective. The case in point is an article by Lawrence “Larry” Kudlow. (1)
In his written analysis, Kudlow admits the “‘fiscal cliff’ tax hike still hangs like the sword of Damocles over the economy.” But then he insists there is no double-dip recession looming.
Technically he is right, but so many of the old standards learned in school have been challenged by current events it seems he is merely reassuring investors and traders that things are progressing along, albeit slower than anticipated or projected. Kudlow also states: “It’s still an anemic 2% economy (growth rate)–the worst recovery in modern times dating back to 1947. But at least for the sake of the country, there is no recession in sight for now.”
Maybe not in Wall Street or Washington but that’s two isolated spots on America’s map.
July’s jobs report showed 163,000 jobs gains. But those numbers have a nasty habit of being revised and seemingly downward. The unemployment claims for last week also showed some minor declines but those are also subject to revision and, for 60 weeks in a row, the revisions have been upward every time.
What was particularly galling about Kudlow’s piece was “Finally, the Consumer-Price Index for July shows zero inflation for the second straight month. The CPI is actually rising only 1.4% during the past year. Energy prices have fallen 22% annually for the past three months while food prices are up only 1.1% during that period. The Midwestern drought could drive up the food-price component but it looks like it will be a manageable event–not a catastrophe.”
What world is this guy living in? Has he not visited a grocery store or a gas station in the past year? Those government figures he quotes are so much garbage and reflect the wishes of the Federal Reserve and other Administration people, not the living expense Americans face. I am spending more for food basics than I was a year ago without a doubt. In the past month I have seen corn prices more than double at the local venues, even on sale. Meat, produce, milk, ice cream, rice, cleaning solutions, soda, and juice prices have all risen.
Instead of the 1.1% rise in food prices cited I can show at least 10% increases, by weight measurement, on the same items year-over-year.
As for fuel prices, he conveniently missed the sudden surge in August. But even without the latest surge, gasoline prices had been inching up since mid-June.
The jobs report is also skewed in its raw numbers. The jobs gain doesn’t cover the increase in population. So the “workforce participation rate” takes another hit.
It is like the deficit figures the CBO throws out. In July America amassed less debt than it had in June, meaning there was revenues to cover a bit more of the expenses but expenses still were ahead of revenues so we added to this year’s deficit even in a good month.
This debt is similar to having a ball and chain on your ankle. Movement is still possible by the economy but it cannot get very far or very fast. What Kudlow and his ilk miss is the fact debt has put a ball and chain on both ankles and both wrists of the economy, that is why the recovery is so slow.
He didn’t talk about housing but the number of starts fell to an annual rate of 754,000 in July, under 60% of the number required for a healthy market sector in the
recent past. And while resale housing prices are going up, it is mostly from a new phenomenon of companies buying homes for rental properties, not individuals buying for home ownership. The realtor ads on TV are correct in stating home ownership aids community wealth. I’m not sure the corporate purchase of homes for rental equals the same thing.
Until America returns to the home-ownership mentality it had post-WWII through 1990, the housing sector figures are suspect when compared historically because of this paradigm shift. There needs to be some data on the influence of the single family rental property compared to multi-tenant housing to be sure the current measurements are valid. Because deterioration in rental properties is historically much faster than owned properties, the government cannot trumpet the increase in sales. As many inner city developments learned to their sorrow, pride in ownership is not part of the picture in leased properties.
Kudlow concluded his piece with “All I’m saying here is that the July economy does not show recession. For the sake of the country, that’s a good thing. But surely we can do better. A lot better.”
That sentiment is supported wholeheartedly.
“I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man.”–Thomas Jefferson
(1)–Moneynews, Aug. 17, 2012, “No July Recession, Just Worst Recovery in Modern Times”