Posted on 07/07/2010 7:09:51 AM PDT by SeekAndFind
Want to be invited to A-list parties? Want people to think you are smart? Then don't smile and don't say anything positive--especially about the economy. Pessimism has become so pervasive that people will believe just about anything, as long as it is negative.
Over the July 4 weekend, after a jobs report that showed 83,000 new private-sector jobs were created in June, the Drudge Report had not one but two headlines that compared the U.S. economy of 2010 to that of 1932. In other words, the U.S. is back in Depression. This is a complete overreaction and is indicative of the severe case of economic hypochondria that seems to have gripped the nation and the world.
One symptom of this disease is that common sense is suspended. The simple explanation is tossed aside and data releases are dredged and sifted to find the most dire possible explanation for any economic information.
For example, every 10 years the United States Government conducts a census, and every 10 years the government hires hundreds of thousands of very temporary workers to help in the effort. Some time between April and June total employment goes up and down by an amount that often swamps the underlying trends of employment.
In May total payrolls increased 433,000, but then fell by 125,000 in June. So rather than explain this to people, the Pouting Pundits of Pessimism said things like, "All the jobs in May were government jobs." And then last Friday, after the June jobs report, they said, "Jobs fell for the first time in seven months." Both of these reactions were misleading.
They could have said, "Once we adjust for the Census, private-sector payrolls increased by 33,000 in May, and then accelerated in June to 83,000."
(Excerpt) Read more at forbes.com ...
In a few years we will wish that it was 1922.
... make that 1932.
Authors contend :
While both months were disappointing when compared with previous recoveries, the data shows six consecutive months of private-sector job creation.
The authors then attempt to tackle the under counting of those unemployed argument :
When 805,000 more people said they were looking for a job in April, the pessimists said, “See how many people had been discouraged ... the unemployment rate will never fall as they start looking again.” And in June, when the labor force fell by 652,000, they said, “This is the only reason that the unemployment rate fell.”
This is crazy. It defies common sense. Economic data is volatile, so quarterly data might be better. And in the second quarter the U.S. added 357,000 private-sector jobs—more than 50% greater than the 236,000 added during the first quarter.
Authors then point towards other indicators ....
* New orders for durable goods, a leading indicator, are up 10% at an annual rate in the past three months. Excluding transportation, they are up 25%. If we look at just machinery orders, they are up 63% in the past three months and 23% in the past 12 months. This is not a depression.
* Fears of a repeat of 1932 are based on a faulty comparison with history. In 1932 the M2 measure of the money supply fell by 16.5%—the third of four consecutive yearly declines between 1929 and 1933. Meanwhile Herbert Hoover pushed through the largest tax hike in American history. The lowest tax rate rose from 1.5% to 4% (at $1 dollar of taxable income), the 6% rate (which kicked in at $10,000) rose to 10%, and the top rate more than doubled from 25% to 63%. WE ARE NOWHERE NEAR THAT RATE.
* Today the M2 measure of money is growing, and tax rates, while scheduled to go higher in 2011, are nowhere near the levels of the 1930s. And there is no Smoot-Hawley Tariff Act.
* Productivity is so strong that the economy is growing despite massive increases in the size of government.
* The U.S. is creating jobs, even if the rate of growth is less than previous recoveries. Profits are still rising. In fact, analysts are still raising earnings estimates.
* The Stock market has so much negativity priced in that it is cheap on just about any basis. Based on forward earnings, the PE ratio for the S&P 500 is under 12. And our capitalized profits model shows that stocks are severely undervalued.
Authors contend :
While both months were disappointing when compared with previous recoveries, the data shows six consecutive months of private-sector job creation.
The authors then attempt to tackle the under counting of those unemployed argument :
When 805,000 more people said they were looking for a job in April, the pessimists said, “See how many people had been discouraged ... the unemployment rate will never fall as they start looking again.” And in June, when the labor force fell by 652,000, they said, “This is the only reason that the unemployment rate fell.”
This is crazy. It defies common sense. Economic data is volatile, so quarterly data might be better. And in the second quarter the U.S. added 357,000 private-sector jobs—more than 50% greater than the 236,000 added during the first quarter.
Authors then point towards other indicators ....
* New orders for durable goods, a leading indicator, are up 10% at an annual rate in the past three months. Excluding transportation, they are up 25%. If we look at just machinery orders, they are up 63% in the past three months and 23% in the past 12 months. This is not a depression.
* Fears of a repeat of 1932 are based on a faulty comparison with history. In 1932 the M2 measure of the money supply fell by 16.5%—the third of four consecutive yearly declines between 1929 and 1933. Meanwhile Herbert Hoover pushed through the largest tax hike in American history. The lowest tax rate rose from 1.5% to 4% (at $1 dollar of taxable income), the 6% rate (which kicked in at $10,000) rose to 10%, and the top rate more than doubled from 25% to 63%. WE ARE NOWHERE NEAR THAT RATE.
* Today the M2 measure of money is growing, and tax rates, while scheduled to go higher in 2011, are nowhere near the levels of the 1930s. And there is no Smoot-Hawley Tariff Act.
* Productivity is so strong that the economy is growing despite massive increases in the size of government.
* The U.S. is creating jobs, even if the rate of growth is less than previous recoveries. Profits are still rising. In fact, analysts are still raising earnings estimates.
* The Stock market has so much negativity priced in that it is cheap on just about any basis. Based on forward earnings, the PE ratio for the S&P 500 is under 12. And our capitalized profits model shows that stocks are severely undervalued.
The problem is good news don’t sell $100 newsletters. :)
Forbes magazine helped elect Obama. They helped make one of their money manager columnists rich. He became one of Obama’s closest advisors and earliest funders. Thanks Forbes.
I agree that we are not headed toward another 1932. However, our nation is not as resilient as it was in 1932, so I’m afraid if we even have a third of what we had in 1932, we might not withstand it. IMO.
It's 1930.
There are some incredibly dangerous people out there eager to convince investors that debt doesn't matter; it never has to be paid back, government can print money and expand credit without any negative consequence, as long as everyone joins the party and throws all their money back in the stock market. When you hear people talk like that: do yourself a favor: turn off the TV and read The Road to Serfdom instead.
No the problem is an usurper islamo-marxist is still in control and the US public are fools brainwashed by TV.
I think that this year they are spending a lot more than usual on the census, hiring more people, and making sure that more are part timers because three people working 15 hours a week helped Obama's unemployment numbers much more than one 40 hour a week full timer.
Now we have a $1.3T deficit, 10% unemployment, and DJIA flirting with 10,000. And it's not 1932?
Journalism needs to grow up. If you use hyperbole when a Republican is in the White House, then be prepared for hyperbole when a Democrat is in the White House.
I wasn't one of them because I know elections have consequences.
It’s 1775 & 1860.
Smoke and mirrors. Lies, damnable lies, statistics...slice and analyze anyway you want. Bottom line: I can’t sell my house or retire. Indications are that I’ll soon lose the house. At this point, I’ve grown weary of people urinating on my shoes and telling me it’s raining. No. Happy days are not here again. Yet.
Not quite. At least in 1930 U.S currency was still backed by gold. Now it's simply fiat money. Might as well start printing it with Obama's portrait on every denomination.
The reason I feel certain about the coming yearning for 1932, or even 1922, is not economic. We’ve thrown our nation in the garbage, and this will be revealed slowly but certainly in the unhappy years to come.
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