Sarah Palin...just another pawn.

...the latest GDP report seems to be.  Many around the world are crying foul, claiming that the most recent GDP report does not take actual inflation into account, and has been further bolstered by an increase in exports resulting entirely from the diminished value of the American dollar. 

As Robb already knows, I am a hopeless neophyte when it comes to matters of economics, but i will offer my own position: whether we call it a "technical" recession or not, the bottom line is this: for the great majority of people in this country, the current economy is worse than it has been in a long time, and something needs to change.  5.7% unemployment, highest national debt in history, highest rise of inflation in 27 years, 29% rise in bankruptcy filings, skyrocketing costs of living, drop in value of the American value (recently making some comeback), average credit card debt up 8% from last year, less average disposable income for Americans, less sense of upward mobility, and more resources moving from the many at the bottom to the few at the top than we have seen in quite awhile. In short, if you already have money, things don't seem too bad.  If you don't, well, you know better.

To quote Henry Ford, "If I don't pay my workers well, who will buy my cars?"

Here's a few other perspectives y'all might find interesting:

Q2 GDP is Mostly Inflation

"Call me a skeptic, but based on the accompanying graph of the GDP inflation figure and headline CPI (which most people already believe is lower than reality), there seems to be something of a disconnect between the two (which would imply, of course, that U.S. economic growth is a lot lower than reported)."

 

Recessions: How are they Determined?

"With everyone running around and screaming, arguing about whether or not we are in a recession, I think some have forgot to focus on how it is determined that we are in a recession. Many are waiting for 2 quarters of negative GDP growth, but in my opinion you will be waiting around for a while losing money if you wait for GDP to turn negative. GDP of late has also been propped up by one of the largest stimulus’ in history and a boom in exports fueled by a weak dollar, which has strengthened as of late. Looking at the time period of the last recession, one can see that there was not 2 consecutive quarters of negative GDP growth. In fact if you look at how the National Bureau of Economic Research determines a recession (this is the official board that comes out and declares recessions), you will see that 3/4 factors do not even directly factor into GDP. NBER does not weigh GDP as heavily as the following factors because GDP is released quarterly and the NBER likes to use monthly data because they feel it is more accurate. The NBER defines a recession as the following: a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real income, employment, industrial production, and wholesale-retail sales...."
 

An Unusually Strong GDP Number

"When the 2nd quarter GDP number came in at 1.9 percent last month, nearly everyone was talking about how much lower it would get revised. But today's update showed that growth was even higher at 3.3 percent thanks to upward revisions to exports and inventory investment and a downward revision to imports.

Still, despite the robust figure, most economists didn't change their dim outlooks for near-term growth.

Here is UBS economist James O'Sullivan to Reuters: "This number seems to overstate the underlying strength even though exports are obviously strong."

Goldman Sachs: "The details of the revision are not particularly supportive for growth."

RDQ Economics: "The strength of the economy in the second quarter suggested by the expenditure estimate of real GDP growth seems truly bizarre and is a product of a declining real trade gap."

Wrightson-ICAP: "The upward revision to the advance Q2 GDP estimate was even sharper than expected, but probably doesn't change the outlook for this quarter very much, with a substantial slowdown in overall growth still quite likely."

The consensus view that we're in a recession is also unlikely to get changed after today's release. And while it's not at all unusual for GDP to be positive during NBER-declared downturns, it's also not unique for the number to show seemingly robust growth. Here are the previous times were GDP growth came in above three percent during a full recessionary quarter:

1949 Q3 - 4.6 percent
1970 Q3 - 3.6 percent
1981 Q3 - 4.9 percent"

The Coming Collapse of the Middle Class?

"Next, she crunched some data on what a dual-income, 2-kid family spent their money on in 1970 vs. 2000.

Spending Less
We actually spend less on an inflation-adjusted basis on many things nowadays:

• 32% less on clothing
• 18% less on food - including groceries, eating out, and yes, even Starbucks
• 52% less on appliances
• 24% less on car expenses, per car

Spending More
Not so fast, we also spend more in many areas:

• 76% increase in home mortgage payments . Surprising, the actual house size didn’t grow that much based on number of rooms (5.8 vs. 6.1). I wonder if this would hold true if it was based on square footage, however, as my research on that indicates a big increase in size.
• 74% more for health insurance, even adjusted for healthy family with employer-sponsored health plans.
• 52% more for cars, since now we have more cars per household. We gotta get to work, right?
• Infinite% more for childcare
• 25% more in effective tax rates, due to higher income

In 1970, credit card debt was 1.4% of annual income for the median household. In 2005, it is 15%.

Education
Finally, we spend a lot more on education. In 1970, you needed a high school diploma to get a good job, which took 12 years of government-provided schooling. Nowadays, the average family pays for 2 more years of pre-school, plus 4 more years of college, all out of pocket.

Net Result: Not Good
Note that the cheaper things are the smaller, more flexible expenses… while the more expensive things are the larger, more fixed expenses. So a family now earns a bit more, but also spends a much, much larger percentage of their income. So much, in fact, that now we need both of those incomes to afford everything we buy. If either spouse loses a job, the family falls behind. Studies show that a family with children has between double and triple the bankruptcy rate of childless households."

I just had this discussion with a good friend who is an investment advisor - and a damned fine one. He said the same thing "We're technically not in a recession". To which I responded - find me some middle class people who care about that fine line. With food and gas price trends of the past 1-2 years, new or good jobs hard to find, a deficit (and geo-political environment) that everyone knows will constrain our flexibility in steering out of this any time soon - at least compared to previous "near recessions", well, it sure feels like a recession.

Just my 2 cents.  And, technically, you are indeed right Robb.

 

Patrick Walker, Cleveland, OH

"Comfort, that stealthy thing that enters the house a guest, and then becomes a host, then a
master. And then it becomes a tamer, and with a hook and a whip it makes puppets
of your larger desires.&

Actually, new numbers were released today and they are much more bleak then Corey outlined.  I tried to highlight some of the facts but by the end I realized you kind of need to read the whole thing!

from Bloomberg.com:

U.S. Economy: Payrolls Decline, Sending Unemployment to 6.1%

By Shobhana Chandra

Sept. 5 (Bloomberg) -- The U.S. lost more jobs than forecast in August and the unemployment rate climbed to a five-year high of 6.1 percent, a sign that the economic slowdown is worsening two months before Americans elect their next president.

Payrolls fell by 84,000 in August, and revisions added another 58,000 to job losses for the prior two months, the Labor Department said today in Washington. The increase in the jobless rate sent the misery index, which adds unemployment to inflation, to 11.7 percent, the highest level since 1991.

Treasuries gained as some traders bet the Federal Reserve's next move will be to cut interest rates, rather than raise them, and stocks sank. Today's figures increase the risk that President George W. Bush will become the first president since Richard Nixon to oversee two recessions, and may hurt fellow Republican John McCain's campaign to succeed him.

``It certainly increases the probability that we really are in a recession,'' William Poole, former president of the Federal Reserve Bank of St. Louis, said in an interview with Bloomberg Television. ``It is a weak number, including the revisions.''

Yields on benchmark 10-year Treasuries reached a four-month low of 3.55 percent and were at 3.61 percent at 9:43 a.m. in New York. The Standard & Poor's 500 Stock Index fell 0.4 percent to 1,231.92.

Workforce reductions at companies from UAL Corp. to Gannett Co. are adding to the woes of Americans hurt by lower home values, scarcer credit and higher prices. Separate figures today showed that mortgage foreclosures accelerated in the second quarter to the fastest pace since at least 1979.

Election Looms

Today's report is the penultimate look at the job market before the Nov. 4 U.S. election, with McCain vying with Democratic candidate Barack Obama to take the White House. McCain yesterday addressed the Republican Party convention, pledging to ``keep taxes low'' and rein in unnecessary government spending.

``This hurts McCain,'' said Daniel Clifton, head of policy research for New York-based Strategas Research Partners. ``He's going to get a bounce in the polls after the convention, but it could be less because of this,'' he said, referring to the increase in unemployment.

Keith Hennessey, Bush's national economic council director, said in an interview with Bloomberg Television that he remained ``an optimist'' about the prospects for growth. ``We hope'' the payroll readings ``will improve going forward,'' he said.

Economists' Forecasts

Payrolls, which have now fallen for eight months, were forecast to drop 75,000 after a previously reported 51,000 decline in July, according to the median estimate of 76 economists surveyed by Bloomberg News. The jobless rate was projected to remain at 5.7 percent.

Factory payrolls dropped 61,000 after decreasing 38,000 in July, with most losses coming in the auto industry.

Today's figures indicate the labor market is deteriorating faster than U.S. central bankers expected. Among Fed governors and district bank presidents, none projected an unemployment rate above 6 percent for the average in the fourth quarter.

Traders see the Federal Open Market Committee keeping the benchmark target rate for overnight loans between banks at 2 percent through year-end, futures show. The chance of a cut in December is 13 percent, up from zero a week ago, with the probability of an increase at just 2 percent, down from 20 percent a week ago and 43 percent in July.

Mortgage Rout

Rising unemployment may make it harder for Americans to keep paying their mortgages. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, the Mortgage Bankers Association said in a report today. That's the highest since their data began in 1979.

The Labor Department report also showed the effects of the housing slump and the credit crisis that it triggered. Payrolls at builders fell 8,000 after decreasing 20,000. Financial firms trimmed payrolls by 3,000 for a second consecutive month.

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 27,000 workers after cutting 12,000 in July. Retail payrolls fell by 19,900 after a drop of 18,100.

``We're losing jobs in all kinds of industries now,'' Roger Kubarych, chief U.S. economist at UniCredit Global Research in New York, said in an interview with Bloomberg Radio. ``This is the clearest recessionary signal we've seen.''

Government offices hired 17,000 after an addition of 6,000 in July. That meant private payrolls fell by 101,000 in August.

Today's report brings the total decline in payrolls so far this year to 605,000. The economy created 1.1 million jobs in 2007.

Recession Monitor

Employment is among the indicators tracked by the National Bureau of Economic Research, the official arbiter of U.S. economic cycles, in calling a recession. The others are sales, incomes, production and gross domestic product.

The group defines a recession as a ``significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.

Consumer spending, which accounts for more than two-thirds of the economy, in July posted the biggest drop in four years after inflation.

The economy ``is close to stagnating,'' Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, said in an interview with Bloomberg Radio. In part because of continued gains in worker productivity, employers will keep cutting jobs, sending the unemployment rate to 6.75 percent next year, he said.

The average work week remained at 33.7 hours. Average weekly hours worked by production workers fell to 40.9 hours from 41 hours, while overtime decreased to 3.7 hours from 3.8 hours.

Workers' average hourly wages rose 7 cents, or 0.4 percent, to $18.14 from the prior month. Hourly earnings were 3.6 percent higher than August 2007. Economists surveyed by Bloomberg had forecast a 0.3 percent increase from July and a 3.4 percent gain for the 12-month period. Average weekly earnings increased to $611.32 from $608.96.