Economy’s Vital Signs Start Looking Up

October 17th, 2010 at 7:03 am | 68 Comments |

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There are lots of reasons to think the economy will remain in the dumps for some time to come. But there are also reasons why I’d bet on a stronger upturn than most economists and other economic pundits now predict.

First of all, smaller businesses are growing more than official statistics indicate. As I’ve commented on before, there’s lots of reason to think that official reports of near stasis in the unemployment picture overstate things. During economic recoveries, smaller enterprises, many of them start-ups, create a disproportionate number of new jobs and nobody really knows how to count them. In fact, many startups (particularly at this stage) may be financed indirectly through unemployment checks, leading people — who are actually working quite hard and getting some money for it — to claim they are still “unemployed.” (I have at least three friends in this situation.)

Also, inflation seems to be picking up—and that’s a very good thing.  The latest report points to a modest uptick in wholesale (producer) prices. This is a good sign. The American economy needs inflation. Badly. Inflation will encourage successful cash-rich companies (I’m talking to you Apple) to invest more. It will also move make many people now “upside down” on their mortgages right side up once again.

Another reason to be on a stronger upturn is the rising trade deficit.  It’s mystifying why so many pundits think a trade deficit — the difference between what Americans invest in other countries and what other countries invest here — is a bad thing. In general, the American economy has done better when the trade deficit goes up and worse when it declines. A trade deficit is a vote of (relative) confidence in the American economy.

Finally, the “green economy” offers real promise — although not for the reasons many environmentalists would like. The promised “green economy” may or may not be a good way to protect the world from what may or may not be a serious problem resulting from human-caused carbon emissions. But at least one of the major “green” technologies—practical, plug-in electric cars—seems to have tremendous promise. Given the choice between a car that drinks $50 of gas a week and a similarly priced model that needs 10 cents of electricity, who wouldn’t pick the electric car?

The auto industry has done a good job bringing high end features to ordinary drivers: The cheap econo-boxes of today have features — powered windows, traction control, and anti-lock brakes — that were mostly the domain of luxury models even 20 years ago. There’s no reason to think that partly and all-electric drive-trains won’t move from exotic luxuries to standard features at least as quickly.  Widespread use of electric cars will require an enormous new infrastructure of charging stations, power plants, repair equipment, design bureaus, and auto factories.  This is the basis for an economic boom.

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68 Comments so far ↓

  • Churl

    armstp // Oct 18, 2010 at 11:58 am asks “Where exactly are the lack of results?”

    Look again at previously-referenced employment chart. Note dates on abscissa.

  • armstp

    Churl,

    Yeah, I have seen that chart a thousand times. Well before you brought it up.

    If you look at the raw data, the jobs losses reached their peak at about 750,000 in January 2009, when Obama took over. They decline after that and by June 2009, when Obama’s first policies finally began to take hold, we began to see some real positive improvement in the numbers. The recession or economic downturn that caused those job losses began in 2007. Umemployment is a lagging indicator. It lagged the economic downturn that had begun and built over Bush’s watch.

    And from your chart we can see that the job loss have stabilized and the there is the start of an improvement. And from your chart we can see how deep the dive was this time around, which is thanks to Bush, and it also tells us how much climbing we have to do to get out of the hole. It will not be easy, as Obama was handed both a employment and deficit shit sandwich.

    This is the chart you should be looking at. It shows a pretty amazing turnaround in jobs since Obama took over.

    http://www.flickr.com/photos/speakerpelosi/5062499482/

    Also, if you look at your chart peak employment was in April 2007 at 4.4%. So going forward your charts shows a troughing at 22 months after peak employment, which would have put it at mid-way through 2009, which was about when Obama policies began to kick in.

  • easton

    churl: perhaps the jobless millions will be cheered by quotes from Jonathan Chait.

    As I said before, my wife is jobless and yes, of course we are cheered by the information in this article. What, do you want her to hang herself in despair? And did you advocate Americans to give up all hope in 1983 when unemployment spiked at 10.6% under Reagan?

    You keep repeating the same talking points but adding no new information or solutions.
    And who are you to speak for the millions of unemployed? As I said, my wife is so don’t claim to speak for her. If you are unemployed speak for yourself.

  • Churl

    armstp, the graph shows, as you say, stabilization. But it is stabilization at a very low level after a startling (compared to other recessions) decline. And this stabilization occurs after the Democrats’ very expensive efforts to decrease – not stabilize – unemployment.

    easton, I don’t advocate despair, nor have I ever. I merely point out that we are waiting for the Democrats’ implemented new laws and regulations to decrease unemployment. Hope is nice, but it would be nicer to see some positive Change.

  • Rabiner

    Churl:

    “I merely point out that we are waiting for the Democrats’ implemented new laws and regulations to decrease unemployment.”

    You think a health care law that won’t be fully enacted until 2014 will have significant effects on unemployment in 2010? The stimulus act was only like 250 billion in actual stimulus, the rest being tax cuts and transfer payments to State and local governments.

  • Churl

    Rabiner, the health care law that won’t be fully “enacted” until 2014 and its nearly 3,000 pages and its 110+ new agencies with yet-to-be-defined powers and its many instances of the phrase “the Secretary shall…” without limits on what the “Secretary may…” does seem to be having an effect on unemployment. That effect is to slow hiring as businesses try to figure out what liabilities and costs they will incur as they hire employees to expand.

    As I said, we are waiting.

  • Rabiner

    Churl:

    If the bill was only 2,000 pages would you be that much happier? While some of your critique is valid (there is some long-term uncertainty), your reference to the size of the bill is retarded and without merit.

    However the reason unemployment is prolonged is the financial institutions inability to clean their books to start normalized lending practices, structural unemployment from manufacturing, and cyclical unemployment from the rest of the economy caused by a decline in aggregate demand in the economy.

  • Churl

    Rabiner, reference to the size of the bill may be, as you say, “retarded” but the size of the bill
    (1) …makes many of its provisions very loose and elastic, subject to bureaucratic overreach
    (2) …plus the way it was rammed though ensured that our supposedly elected representatives had no idea of what they were voting for. Obama passed responsibility for drafting to Pelosi and Reid who in turn gave free rein to a bunch of unelected, anonymous staffers and lobbyists to write their progressive wet dreams into law.

    Nancy Pelosi saying that they had to pass the bill so we could find out what is in it was the absolute summit of condescending fatuousness – symbolic of the whole process. And the implications of “what’s in it” are still not clear.

  • easton

    Nancy Pelosi saying that they had to pass the bill so we could find out what is in it was the absolute summit of condescending fatuousness

    Not that lie, you know damn well she meant that there were many proposals up in the air and we would not know exactly what was in the bill until we found one that could be passed. You are criticizing Pelosi for not knowing what would be the final score of the game even though the Democrats had the game well in hand. In fact, your lie just now was the absolute summit of condescending disingenuousness.

    Is it really so hard to realize you won’t know what the final score is until after the goddamn game is over? It is this type of smarmy lying that disgusts me so much since I know full well you know the truth of the statement.

  • Rabiner

    churl:

    “Nancy Pelosi saying that they had to pass the bill so we could find out what is in it was the absolute summit of condescending fatuousness – symbolic of the whole process. And the implications of “what’s in it” are still not clear.”

    Once against you take Pelosi out of context. Her statement was referring to the fact the Media (conservative media in particular) was distorting what was in the bill till it was unrecognizable. Once the bill would be passed people would have these mischaracterizations cease since it was now law.

  • armstp

    Churl,

    “armstp, the graph shows, as you say, stabilization. But it is stabilization at a very low level after a startling (compared to other recessions) decline. And this stabilization occurs after the Democrats’ very expensive efforts to decrease – not stabilize – unemployment.”

    Yeah.. I would hate to think where things would have went or how much lower that line would gone without the stimulus and other actions by the government. I think we could have easily been at 15% unemployment right now, which would have costed taxpayers and the economy much much more to dig out of. So it is a good thing that the Democrats stopped the free fall in the economy and the job losses. The stimulus did exactly what it was suppose to do, which was to stimulate the economy and stop the freefall. That is why almost every country in the world had their version of the stimulus. Germany actually had two stimulus efforts and China had a big one.

    It is funny the turnaround in the job losses lines up almost exactly to when Obama programs began to take effect.

    “a very low level after a startling (compared to other recessions) decline” It is amazing the “startling” recession that Bush left the country with. All Obama has largely been doing, other than healthcare, is cleaning up Bush’s mess.

  • armstp

    Churl,

    The healthcare bill is the single most important piece of legislation passed in the United States in a generation. It will drastically improve healthcare in this country. It is also the start of reform, not the end. It also puts the insurance industry on notice that we could easily move to a public option or single payer next. It is the first serious effort by any President in the last many decades to deal with the single biggest problem in this country.

    If retards in this country want to believe all the misinformation out there then so be it, but that will not change the fact that this bill is now passed and will not be repealed. The genie is out of the bottle. We will look back at this in 50 years and say how did we ever live in a society where we were not insuring all our people. And even if the Republicans completely take-over and Obama does not win re-election, this will be his single biggest legacy. Without 60 votes in the Senate the Republicans will never be able to repeal this and as the public lives with the bill and benefits from it, it will eventually become suicidial for any political party to try and repeal the bill.

    By the way there is a lot of misinformation in the polling about this bill. The latest Kaiser poll says only 44% view the bill as unfavorable, but a lot of that is people who do not think it went far enough and were disappointed it did not include a public option. There are really only about 30% of the population who are truly hardcore against the bill and want it repealed. The typical 30% far-right Bush supporters/tea baggers.

  • pnumi2

    C D-Host

    “The deficit” is mainly a shorthand way of arguing against particular spending you don’t like compared to other spending.”

    It’s also a shorthand way of saying “Hey, why don’t we earmark this $400 billion to service the national debt?”

    Yeah, good idea. What are we gonna do, spend it on infrastructure?

  • Churl

    Also sprach armstp // Oct 18, 2010 at 8:23 pm, “The healthcare bill is the single most important piece of legislation passed in the United States in a generation. It will drastically improve healthcare in this country.”

    Well, I’d take your word for it, but would like to see the results before I agree.

  • Churl

    armstp: Bush yadda yadda.

  • PatrickQuint

    Rabiner “your reference to the size of the bill is retarded and without merit.”

    armstp “If retards in this country want to believe all the misinformation out there then so be it”

    This conversation does not call for the use of the pejorative term “retard”. There are many alternatives that do not denigrate any identifiable demographic. Please use them instead.

    Predicting economic movement is like predicting the weather, only worse. The systems are large and fiendishly complicated. The advantage that meteorologists have is that the weather reports never change the weather. It doesn’t help that the economy is at least partially affected by the weather.

    This is why I have more trust in the meteorologist than the economist. I assure this is not the result of an unusual trust in weather men.

  • Rabiner

    PatrickQuint:

    “This conversation does not call for the use of the pejorative term “retard”. There are many alternatives that do not denigrate any identifiable demographic. Please use them instead.”

    retarded definition

    1. mod.
    bad; defective. : This old DVD player is so retarded. Time for a new one.

    Dictionary of American Slang and Colloquial Expressions by Richard A. Spears.Fourth Edition.
    Copyright 2007. Published by McGraw Hill.
    Cite This Source

    If I wanted to call a person retarded I’d of probably used a different term but considering I was calling the argument retarded I feel no remorse for doing so. I could of easily of said ‘without merit’ but I just didn’t feel the need to be so colloquial.

    Also I’m not going to be politically correct with the term ‘retard’. If a person is prone to doing stupid things due to a mental handicap I will probably refrain from calling that person a retard and just leave it at mentally disabled. However if a person who has no impairment continuously does stupid things I’ll continue to call them a retard to let them know that perhaps they should wise up and use their brain. It isn’t hard to figure out the truth if you aren’t so damn lazy or easily manipulated. I could call them an ignoramus or ignorant as well with can be just as insulting yet true.

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