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Monday, August 4, 2014

Consumer Hopes Fading Fast

Consumer Hopes Fading Fast 
In case you missed it, the stock market retreated on Thursday. And no ordinary retreat either. This was a full-fledged desertion of the battle ground but you didn't hear it from the major news outlets except in passing.
One ridiculous headline kind of summed up the media's treatment of the disaster that came less than 48 hours after the government announced a 4% uptick in the economy for the second quarter. The tagline was: "U.S. stocks plunge, July's gains lost."
Problems immediately arise because it wasn't July's gains that were wiped out but the gains for the ENTIRE YEAR to-date! That's right, in the third paragraph of the AP story it was revealed "The plunge snapped a string of five straight monthly gains, and pushed the blue chip index to a loss for the year." The real news was buried not only from the headline but in the story itself.
The explanation was there is a series of worrisome world trends, the confluence of which met Thursday in the plunge. Not so.
The real problem was the blatant lie put out by the government on the robust health of the economy a mere three months after the opening quarter was revealed to be a disaster.
The government would have had you believe the second quarter not only corrected events of the opening quarter but exceeded economists' expectations.
But the earnings reports across the board are telling a vastly different story. There was no "revival" of consumer spending. Retail sales, as reported by the Wall Street Journal just last Friday, continued to slump in the second quarter. This was before the government made its report.
The second part of the equation came in another report contradicting the government's official position. The government reported consumer confidence was "soaring". A Gallup poll just released Thursday, showed consumer confidence for July was at the lowest point of the year. It makes you wonder if the government analysts just turned the graph trend line upside down or if the massive, secretive, completely-biased "seasonal adjustments" were done to such an extent that the bad news magically morphed into positive news.
A major reason for the lack of confidence is the overtly compromised jobs report---again. The Bureau of Labor Statistics continues to show an unemployment rate of 6.2% and shows a healthy rise in jobs gains for a third straight month. To repeat the Rant's mantra, a job is not a job is not a job unless the jobs are the same in pay, security and career enhancement.
The jobs that disappeared are not the jobs coming back. The majority of the new jobs are the result of companies slashing full-time jobs and replacing them with part-time jobs. Since companies still need the work done, the hours consumed by the two jobs is slightly more than the hours consumed by the full-time employee. The caveat is the part-timers don't count against the Affordable Healthcare Act's mandates of number of employees a company is responsible for.
Thus consumer income has remained flat-lined while inflation has gnawed away at the dollar's purchasing power. The same story that went along with the Gallup poll, showed consumers have yet to catch up to pre-recession spending levels. The simple reason is they can't afford it.
The home mortgage market is once again showing the same bubble tendencies it did in mid 2007 before the system came apart in the fourth quarter of 2007.
Economy commentator Peter Morici and John Williams of Shadowstats both scoff at the unemployment rate of 6.2%. Morici released his unemployment analysis early today for U.S. citizens and 'permanent residents' and claims the 'real unemployment rate' is 18%. Williams continues to cling to a 23% figure for the same group.
Taking into account the number of jobs reported, the increase in recognized U.S. population and adjusting for those who have gone from a full-time job to multiple part-time jobs, the unemployment rate in the U.S. remains stubbornly past the 28% mark. In case you are wondering, that is higher than any time period of the Great Depression.
Part of the reason for this discrepancy is women were not generally regarded as "part of the workforce" unless they specifically held a job back in the 1930s. Today, women are an integral part of the workforce. This discrepancy alone shows how skewed our standard of living has become. Where a prior generation relied solely on one breadwinner, today it takes both parties to achieve the same standard--if it can be done even then. Many problems in society can be traced to this lack of a full-time parent at home because of life's necessities.
But supporters of the government don't want to give out the true data on what is happening. Thus it is left to pollsters to try and determine "why Americans don't feel better off."
In this manner the media can then find a pollster who will put the spin on the facts and show one area of improvement and use that as the headline attraction.
Here's a final fact for you to chew on. The average worker in America has had his pay flat-lined since 2001. In that same time frame, the stock markets have risen almost 200%. In the same time frame home values have skipped upwards almost 150%.
The obvious question becomes: "How much longer can this situation exist?" There is no solid answer but you can be assured the consumers' salad days are long, long past. The final question is then: "Without the consumer, what happens to the economy?" Maybe the answer is the economy's hay-day is past too!
"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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