The Economy May Have Hit The Wall In November 2013

Most commentators viewed the February jobs report released on March 7 as good news, indicating that the labor market is on a favorable growth path. A more careful reading shows that employment actually fell—as it has in four out of the past six months and in more than one-third of the months during the past two years. ( LINK)

I speculated in mid-December, based on the early indications of how the holiday retail sales season was going, that the economy may have hit a wall in November.    I was basing this on my dissection of new and existing home sales data and on analysis of monthly auto sales data.  We had good weather for most of the summer through December and interest rates had started to retrace their early summer spike higher, so neither the weather nor interest rates should have been a factor at all with the decline in housing/auto sales I was seeing in the data starting in July/August.

But as I was analyzing the month to month sequential data for housing and auto sales, it was clear to me that the economy had started to really slow down.  Sales volumes as measured on a month to month basis, as opposed to the year over year comparisons reported and promoted by the media and Wall Street, were declining ex-seasonal factors. And both housing and auto inventories started to move higher.  As we have seen since last year, auto inventories are the highest they’ve been since 2009 (LINK).  Moreover, as has now been confirmed, holiday retail sales were bordering on catastrophically bad.

Sorry CNBC, Bloomberg, Fox News and Wall Street but the reason for the slowdown is not the weather.   The real reason is the structural deterioration in the income and wealth of the middle class.   Real disposable income per capital dropped from $37,265 in 2012 Q4 to $36,941 in 2013 Q4.  And those numbers do not include the additional expense/person for Obamacare that will phase in this year, nor do they include the fact that the price of a gallon of gas is the highest it’s ever been for this time of year.   In addition, the savings rate plummeted 16% between September 2013 and January 2014 (link for both disposable income and savings rate data).   In other words, the ability of the middle class to spend, consume and buy new homes and cars is quickly declining.

If you read that link from the Wall St. Journal at the top of the page after the header quote, you’ll see that jobs data as reported and consumed by the public is total nonsense and that the economy is actually losing jobs.  And that’s why it’s likely that the real economy hit a wall in November 2013.  By the end of 2014, the National Bureau of Economic Research will likely have announced that the U.S economy entered a recession in the first half of 2014.


10 thoughts on “The Economy May Have Hit The Wall In November 2013

  1. Mr Paulson was talking about the financial crisis of the autumn of 2008, and in particular the devastation being wreaked on Fannie Mae and Freddie Mac, the two huge underwriters of American mortgages – huge financial institutions that had a funny status at the time of being seen by investors to be the liability of the US government, which in legal reality were not exactly that.

    Here is Mr Paulson on the unfolding drama:

    “When Fannie Mae and Freddie Mac started to become unglued, and you know there were $5.4tn of securities relating to Fannie and Freddie, $1.7tn outside of the US. The Chinese were the biggest external investor holding Fannie and Freddie securities, so the Chinese were very, very concerned.”

    Or to put it another way, the Chinese government owned $1.7tn of mortgage-backed bonds issued by Fannie Mae and Freddie Mac, and it was deeply concerned it would incur huge losses on these bonds.

    Mr Paulson: “I was talking to them [Chinese ministers and officials] regularly because I didn’t want them to dump the securities on the market and precipitate a bigger crisis.

    Now this is where we enter the territory of a geopolitical thriller. Mr Paulson:

    “Here I’m not going to name the senior person, but I was meeting with someone… This person told me that the Chinese had received a message from the Russians which was, ‘Hey let’s join together and sell Fannie and Freddie securities on the market.’ The Chinese weren’t going to do that but again, it just, it just drove home to me how vulnerable I felt until we had put Fannie and Freddie into conservatorship [the rescue plan for them, that was eventually put in place].”

    For me this is pretty jaw-dropping stuff – the Chinese told Hank Paulson that the Russians were suggesting a joint pact with China to drive down the price of the debt of Fannie and Freddie, and maximize the turmoil on Wall Street – presumably with a view to maximizing the cost of the rescue for Washington and further damaging its financial health.

    [ In Nevada, more and more jobs are nothing more than part-time 18-24 hours per week at minimal wage. I’m seeing evidence of money being “pumped in” (like into the casinos) but I don’t know where its coming from – like dark matter, it’s there but can’t trace the source. I am expecting a special session for this state soon, declaring the whole state bankrupt. I don’t see how this funding can continue. -mj ]

  2. I’ve met multiple college-educated people here in Portland, some with significant work experience, who are unable to find work. Many more are working multiple low-end jobs.

    The only jobs that seem to be in unending supply are web programming positions. New programmers with just a few years of experience are able to command $60 an hour, $120,000 a year. Good programmers with a decade or more of experience are hauling in $200,000 and up.

    My company would hire more programmers if we hadn’t made so many costly past mistakes. We have one, and maybe two, positions we’d hire for, but we are moving cautiously.

  3. The Nevada Supreme Court ruled Monday that the firing of a University of Nevada, Reno, police officer for talking to the news media didn’t violate his First Amendment rights.

    Officer Victor Garcia told a News 4 reporter he thought officers should be patrolling areas near campus in addition to the campus itself but that his commanding officer, Adam Garcia, discouraged him from doing so.

    In response to a question, Garcia also told the reporter he didn’t feel the campus was safe because there were not enough officers on patrol.

    Those statements contradicted those of a university police spokesman who told the same reporter patrolling those surrounding neighborhoods was the Reno Police Department’s responsibility.

    In addition to granting an interview with the media without first notifying the department, Garcia was accused of discourteous treatment of other police employees, using insulting and abusive language, acting in ways that discredit the department or university, and negligence.

    The district court granted summary judgment to the university finding that Garcia’s speech to the reporter was made as an employee and, therefore, not protected. His negative comments to another officer about his boss, the court ruled, were not about a matter of public concern and, therefore, also not protected by the First Amendment.

    The high court agreed.

    Be careful what you do or say “on-the-job” as you are not protected by the constitution. And if what you say is not about public concern, you’re also not protected. So much for Free Speech.

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.