Consumers Fear
Parting With Money In Hand
Just when things can't be any worse the government comes along and proves
it can make things worse. The way to do this is lie about the economic
numbers.
Americans are already jittery about household budgets. It is tough finding
a living-wage job as so many employed people stuck in part-time positions will
attest. People who do have jobs are beginning to count not only the pennies but
the half pennies and percentage of pennies as well.
This real public consciousness of budgets and formerly thoughtless
expenditures is making such a mockery of the way the government provides
economic data that, once again it is switching in mid-stream.
In order to support the contention the economy is recovering, the Commerce
Department is now counting as economic growth what can't be measured, seen,
felt, tasted or utilized--the long anticipated 'knowledge factor'. If this were
truly the case then the economic growth would have imploded since so many of the
young people lack the skills which make them attractive to employers. They've
become so used to 'remedial' classes they seem to assume employers will be willing to provide for the holes in
their education.
But our government showed an economic growth of $560 billion in the second
quarter of this year, $526 billion which was in this 'knowledge' factor area.
That means 94% of the 1.7% growth measured in the second quarter of the
year is phony and due entirely to a 'more improved' yardstick.
What makes up part of the knowledge factor is unearned, projected interest
earnings, particularly in pension plans. The government included the Detroit,
city-backed pension plans in this category. The destitute metropolis just filed
for bankruptcy. It also included Social Security interest from the Permanent
Trust Fund. So two of the categories they added into the calculation, no longer
exist except on paper and in the government's promises.
There is a looming problem ahead for consumer debt. Consumers, unlike the
government, can't print money or monetize the debt they've amassed. Yet month
after month, particularly in the second quarter every ounce of increase in
consumer spending was on debt.
Since the 2008 election, employment income has declined by 3% per data
compiled by the Bureau of Labor Statistics. Yet consumer spending has risen
fairly steadily since late 2009. The only way this is possible is through
debt.
The Administration's hopes for a faster economic growth in the second half
of the year is reliant upon stronger consumer spending. But for that to happen
income growth needs to accelerate, not continue to decline.
If the employment data is accurate this cannot happen. Most of the 162,000
jobs filled in July (down from an expected 200,000) were in the part-time
category for the seventh straight month, meaning since the end of 2012,
employers have been afraid of the unknown effects Obamacare is going to have on
full-time employers. Of the 700,000 reported as 'created' only 200,000 have been
full-time slots. Most of the remaining 500,000 part-time jobs were from
employers cutting full-time staff and replacing them with part-time workers to
avoid Obamacare penalties.
Since nobody has come out with a finished version of the Act, the
uncertainty is translating into fear among employers and that fear is being
transmitted to the employees. That's no way for the economy to gain
traction
It does not matter what games the government plays with the data or how
blatantly it disregards fundamental economic principles to force the data into
giving it a positive report; Main Street is still feeling the pinch of the
non-recovery recovery. Until that pinch is gone, until the government can
provide legitimate, measurable, real numbers, the fear factor remains
entrenched.
Fear trumps knowledge every time. That is a animal reaction the government
cannot fight by jiggling data.
"I have sworn on the altar of God eternal hostility
to every form of tyranny over the mind of man."--Thomas
Jefferson
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