Sunday, February 8, 2015

Are Happy Days Here Again?

I can understand a loyal fan cheering for their home team — even when they're losing a particular game, or if their team has the most losing team during any given season.

I can understand being a little optimistic and hopeful when hearing good news after just having had a lot of recent bad news.

I can even understand the reason for the propaganda that's put out by a government when attempting to keep the masses pacified (in their otherwise drab existence), and to keep them from rising up and revolting.

I can understand when an administration (be it Democrat or Republican) who only wants to highlight their better achievements, while playing down their short-comings.

I can understand why some economists might do the same thing, by building "consumer confidence" — in an otherwise drab economy — as a part of driving a positive economy.

But what I can NOT understand is why the media would want to deliberately use dismal facts (viewed through "rose-colored" glasses) and then present them to the American people as something they are not. Our media (in the U.S.) is supposed to be the "Fourth Estate" — to report news (not manufacture news), to keep our government in check, and to hold our politicos accountable to the people they govern. But even then, I can still understand why the media tends to lean either "left" or "right" when opining about the policies of either political party.

But in this recent puff piece in New York Times, they seem to be literally singing, "Happy Days are Here Again". The following is from an article titled "Amid Gains in Jobs and Pay, Americans Rejoin the Work Force". They appear to be pushing the last jobs report as rock-solid evidence that the economy is rebounding in a very spectacular way. (Excerpts below):

The economy cruised into the new year with a burst of fresh momentum, adding jobs at the fastest pace since the boom of the late 1990s and lifting employment and wage prospects for millions of Americans ... Since Nov. 1, employers have hired more than one million new workers, the best performance over a three-month period since 1997. More jobs were created in 2014 as a whole than in any year since 1999.

“This is the best employment report we’ve had in a long time,” said Guy Berger, United States economist at RBS. “The labor market looks like it’s in really good shape as we head into 2015.”

The key, say political experts from both parties, is how the bounty from renewed growth is shared and whether wages for middle-income workers rise more quickly.

In one paragraph, it almost shows a Republican agreeing, that the Democrats have been doing a spectacular job of creating jobs. They reported that Wayne Berman, who was once a senior adviser to the Romney and McCain campaigns (and is now at the Blackstone Group) had said, "Good statistics always favor incumbents or the incumbent party. The challenge for Republicans remains the same in the face of today’s numbers. We have to advocate policies that are relevant to middle-income Americans’ everyday lives.”

Then the New York Times piece goes on to say:

Average hourly earnings rebounded, increasing 2.2 percent for the last 12 months and suggesting that the benefits of a tighter job market could soon begin to spread more broadly to ordinary workers.

“Employment growth is astonishingly strong,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “With every indicator we follow screaming that payrolls will be very strong for the foreseeable future, wage pressures will intensify.”

Nevertheless, even the one seemingly negative note in the January jobs report — an increase in the unemployment rate to 5.7 percent from 5.6 percent in December — was actually an encouraging sign, analysts said, since it was mostly caused by more jobless Americans looking for work again as labor demand heats up.

Then, about halfway through the New York Times article, they make this small mention:

Although the unemployment rate has been steadily falling since peaking at 10 percent in October 2009, wage gains have been paltry, especially when inflation is taken into account ... The jobless rate is an imperfect guide because people who give up the search for work entirely are not counted as unemployed.

And then they immediately return to the praise:

Last month’s slight increase in the participation rate was encouraging, despite the resulting rise in the unemployment rate, because it suggested that more such people are being lured back to the job market, helping to heal the economy ... Along with the generally positive tenor of the headline numbers, economists were also heartened by job gains in a broad variety of industries, both white collar and blue collar.

Now, at the very end of the New York Times article, it says...

“The good news is that there was hiring across a wide range,” said Tara M. Sinclair, a professor of economics at George Washington University and chief economist at Indeed.Com, one of the nation’s largest job-posting sites. “People worry about having too many low-end jobs being created,” she said. “But we need those jobs too.”

Yes, we need lots of crappy jobs. Now, read this is from a recent Bloomberg article titled "Where the Job Growth Is"

It's been five years since payroll employment bottomed out in the U.S. in February 2010. Since then the economy has added 11.2 million civilian, non-farm jobs ... The fastest growing sector, in both percentage and absolute terms, is professional and business services. It added 2.9 million jobs for an 18 percent gain. The biggest single contributor to that was temporary help agencies, which added 888,000 jobs ... The not-very-surprising big message from the numbers is that services are where almost all the action is. That's where most jobs now are, and it's where most new jobs are created ... There's one big part of the service sector, though, that has seen no job growth at all during this recovery: Government.

The New York Times wasn't the only puff piece. Here's my rebuttal to an AP story at the Huffington Post: "U.S. Adds 257,000 Jobs In January; Unemployment Rate Rises To 5.7 Percent" (Their quotes followed by my comments).

"Average hourly wages jumped 12 cents to $24.75" — Jumped? 12 cents is laughable. And the 'average' for wages is very skewed by top earners. Look at 'median' wages --- 50% of all wage earners take home $28,023 or less a year. Most households rely on two or more incomes --- so the median wage also reflects the median household income.

"More Americans began looking for jobs, though not all found work" -- Most did not.

"Their job hunting suggests they are more confident about their prospects." These are only assumptions. Maybe they are more desperate? Maybe their jobless benefits expired and they were forced to look for lower-paying positions with skill qualifications far below their own?

"Wages typically increase at a 3.5 percent pace in a fully healthy economy" -- Another assumption. Compared to when and who? Union manufacturing workers in the 1970s, or fast-food servers today?

"Strong hiring pushes up wages as employers compete for fewer workers." -- If that were the case. But the labor market is over-saturated and depressing wages. The unemployment rate dropped because millions are no longer in the labor force.

"The best three-month pace in 17 years!!!!" Hurray! This is a puff-piece, through and through.

"The Fed has kept rates at record lows for more than six years to help stimulate growth." -- But QE did very little to do that. Bankers profited off of treasuries, when Americans workers would have better benefited from helicopter drops (which would have better stimulated the economy).

"The economy expanded at a 4.8 percent annual rate during spring and summer, the fastest six-month pace in a decade." To put this into complete perspective: For all of 2014, the U.S. economy grew at a 2.4 percent pace -- meanwhile, China is dealing with a slowdown, as its economy last year grew 7.4 percent, its lowest rate since 1990.

"There are now 3.2 million more Americans earning paychecks than there were 12 months ago." -- that's about what we have for high school graduates every year -- not counting college grads or dropouts or immigrants or guestworkers here on visas.

"Americans increased their spending during the final three months of last year at the fastest pace in nearly nine years." -- WHAT!?!?! Please link to data for this claim please.

Below is edited and excerpted from another recent New York Times article titled "The Great American Dream, Still Deferred":

* In 1994 Bill Clinton pushed an effort to lift the homeownership rate, which then stood at just above 64 percent.
* In 2004 during the Bush administration homeownership peaked at a little above 69 percent.
* By the end of 2014 the homeownership rate dropped all the way to 63.9 percent.

A national consumer survey conducted for Fannie Mae last December asked whether people would buy or rent if it were time to move. The share who said they would buy fell to 61 percent — a record low. Those who said they would rent rose to 34 percent.

The Fed’s current policy to tighten monetary conditions mean mortgage rates are likely to rise. That does not bode well for the housing market. History suggests a rise in mortgage rates causes a decline in housing demand. Unless the incomes of working people rise sharply, which virtually no one predicts, homeownership may decline further.

Together, Fannie and Freddie are currently backstopping more than $5 trillion in loans. Without that backing and Fed purchases, the housing market would be in much worse shape. At the same time, the American Enterprise Institute suggest that risky housing loans are again becoming more common — and most of these loans are being guaranteed by the F.H.A., Fannie and Freddie.

Now some are saying the federal housing agencies were competing to become the nation’s biggest subprime lender. "We’re not in a crisis at the moment, but the trend is troubling. We’re heading in the wrong direction.”

So, how good are we REALLY doing? Are happy days here again? Have a look and see.


  1. From '45 to approx '79, manufacturing was the force behind the great growth of the american middle class... for proof you need look no farther than china which now has a greater middle class (in numbers) than america...all based on manufacturing (formerly performed in the good ol USA)

    Us corporations are growing fat and happy off this new influx of millions to the "foreign middle class" ... none of this new found prosperity has found it's way down to the american working class...all has gone to the 1%...

    neither party has a solution and i can only hope for serious social unrest to awake the 1% to the damage their ownership of political policy making has wrought.

    thank you Bud.

  2. Even as US job market picks up, unemployed face frustration

    Unions may not back Hillary

  3. Prime Age Non-Workers

    Mark Thoma:

    The number of young Americans living with their parents has grown over the last 15 years. Some have returned home after striking out on their own (earning the nickname "the boomerang generation"), while others never left at all.

    A new Federal Reserve Bank of New York staff report suggests the most important factor is the rising student debt of college graduates, which "appears to be driving young people home and keeping them there."

    In 1999, approximately 30 percent of 25-year-olds lived with their parents — but by 2013 the percentage had risen to nearly 50 percent.

    In addition, home ownership for 25-year-olds has fallen from approximately 23 percent in 2003 to just over 10 percent in 2013.

    It has become more difficult for the young to get an education, strike out on their own, and not have to rely on their parents for support. And there's little reason to suspect this trend will end any time soon.

    * 65 percent of college graduates are showing up on their parents' doorsteps looking for free room and board while they're looking for work.

  4. “The labor market is shifting into overdrive with jobs out there for nearly everyone,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

    “Between the solid growth in labor demand and what we view as little remaining labor market slack, we expect that a modest pickup in wage growth,” said Jesse Hurwitz, an economist at Barclays in New York.

    (* We'll see. Come back this time next year.)

  5. Job-Hopping and Temps the New Norm?