U.S. beats Russia in Olympic hockey.
On Wednesday, we posted “10 Good Things about Today’s Economy” to prove to ourselves that, yes, good economic indicators actually do exist. This proved to be almost as challenging a task as the Russians had trying to beat the U.S. Olympic Hockey team. Sorry, Vlad.
Negative news sells, so we weren’t surprised that we had to dig deep into the Internet vortex to find good news. Negativity spreads and many disregard our moderately positive assessment of the U.S. economy being on a slow, but bumpy road to recovery. Granted the road feels as smooth as a road repaired by a “shovel ready job“, but we still believe it to be true. So, like taking medicine with a sugar chaser, this week we’ll start with the hair-raising news and wrap up with the sweet news.
The paradox exists that food costs have increased 6.4% since 2011, while median incomes increased only 1% annually. Like Alanis sings, it’s a jagged little pill to swallow when companies such as Pepsi produce positive earnings reports because they cut “expenses”. This is business-speak for “cut employees” with the remaining employees working harder and longer for the same pay.
Giving a triple-punch to middle-America was the news that their hamburgers and TV shows will soon be more expensive while they sit in their under water homes in a housing market getting weaker. This supports our argument that the best boost to the U.S. economy is for businesses to take their record profits and increase wages, hiring and capital spending because average wages are keeping up with nothing.
The Federal Reserve Bank of New York reported on Tuesday that its Empire State Manufacturing Index dropped to 4.5% in February from 12.5% in January. Markit Economic preliminary Index of U.S. manufacturing rose to 56.7 in February from 53.7 in January, it’s fastest pace in almost four years. Any report above 50 suggests expansion. This suggests there may be pockets of trouble in manufacturing across the U.S., but broadly speaking manufacturing is a bright spot in the U.S. economy. Parents and college grads, take note!
There are currently 600,000 open manufacturing positions in America. The gap is the lack of STEM expertise, “STEM” being Science, Technology, Engineering and Math. Ugh, more math! Over the last decade the increase in STEM jobs was 12% and the current average annual salary for STEM positions is $82,000. The only better numbers being reported is from the Dixon Landing Chevron in Milpitas.
We lie. As much as Leo Dicaprio will hate us like The Academy on March 3rd, we must share that oil and natural gas production, i.e., shale, is a major U.S. job creator both directly and indirectly. Direct global warming jobs alone are up 40% since 2007. That’s a figure that makes Washington “pea green with envy”, as Scarlet O’Hara would say, because nothing they’ve done since 2008 has produced such good results.
There were fewer applications for jobless benefits in January, which was one of the positive leading indicators for The Conference Board to include in its index of leading indicators that was up 0.3% in January 2014. This follows a flat report from December 2013 and a positive report of 0.9% from November 2013. While none of this is as exciting as watching the Jamaican bobsled team, it’s still good news.
Some people are smarter than others.
Smarter talking heads than us agree that the underpinnings of the economy are positive. The Fed, therefore, has committed to rehab the stock market from its heroin-like bond buying program.
U.S. household debt grew $241 billion, or 2.1%, in the fourth quarter of 2013. This debt includes mortgages and car loans, as banks are becoming more liberal with lending, and increased credit card usage and student loans. Auto makers are seeing spring in the forecast already. While this could be irrational spending from pent up demand, retail investors (a.k.a. the general public) have proven in the past to have cooler heads than the so called “smart money”.
The American Dream
What’s America up to these days? While teens and college grads aren’t working, but living in their parent’s basements, mom and dad are cheating on each other and a record number of citizens are quitting America. 1%ers are mad that no one likes them, but really we shouldn’t care. In all likelihood, you are just like your neighbor and spending way too much, anyway.
Our advice is to move to a cheaper place (or here) and give yourself the gift that keeps on giving . . . time, for as Benjamin Franklin said, “Lost time is never found again.” Just don’t buy a home in China, don’t raid your 401(k) and be aware that the entire world wants you to pay more taxes because they think your money is better in their hands.
Of course, we disagree with the world and agree with Gore Vidal who said, “The genius of our ruling class is that it has kept a majority of the people from ever questioning the inequity of a system where most people drudge along, paying heavy taxes for which they get nothing in return.” But we have faith and believe it will be middle America that will turn this economy around.