What Recovery?
Thursday, August 19th, 2010Cited: Newsweek
This is the Summer of Recovery according to the Obama administration anyway. They say that global recession is over, factories across America are producing more and corporate balance sheets are back in the black. Then why does it still seemed like a Winter of Discontent even with 90% humidity? New data last week showed that economic growth in the US was lower in the 2nd quarter than the 1st even though Ben Bernanke was talking about the end of the recession and that the downturn of 2009 was the worst than anybody thought. Technically, the economy is growing again. However, many economists are disappointed that it is not as much as they hope. Unemployment still remains high in many parts of the sclerotic Old Europe despite record company profits.
At least the continentals will be spending August on the beach. American workers, fearful of continued layoffs, are scrambling to put in more hours on the job. Meanwhile, wages are still flat. All this underscores what I believe is one of the most important economic trends of our age—the increasing disconnect between the fortunes of multinational companies and their countries of origin. What little recovery America is seeing can be chalked up to rising sales and profits within the biggest U.S. companies; top firms are sitting on “mountains of cash,” says Global Insight chief economist Nariman Behravesh. But that’s not because American consumers are spending—indeed, last week’s data dump proved that Americans are saving even more than we thought—6.4 percent of their income rather than 4 percent, a rate not seen since 1993. Consumers, whose spending makes up by far the largest share of the U.S. economy, are not feeling secure yet. Those bulging corporate profits are largely attributable to sales abroad.
Just look at the jump in U.S. export growth, typically about 7 to 8 percent a year, but now in the double digits. The majority of manufacturing industries in this country, from electronics to furniture to consumer goods, are growing strongly because of demand in places like China, Brazil, and India. It’s no wonder customers in these emerging-market giants are feeling flush—their nations have come through a global recession without so much as a hiccup, and their job prospects are good and getting better. According to Goldman Sachs, every year for the next several years, at least 70 million of these emerging-market consumers will be joining the global middle class.
Middle-class Americans, on the other hand, are still feeling pinched. The recession and housing slump has fueled a cycle of higher unemployment and stagnating wages that was already well underway. With the exception of the top 10 percent of earners in the United States, wages have been flat since the 1970s (indeed, during the last period of U.S. expansion, between 2002 and 2007, median household income dropped by $2,000). The reasons for all this are well known—changes in the tax system, the death of unions, globalization (that emerging middle class can now perform jobs higher up the food chain), and the rise of labor-saving technology.
DOWNLOAD: NEWSWEEK Radio and Video Podcasts »
None of these trends show any sign of reversing. Not only are businesses rather than consumers doing the spending in the U.S. this year, but much of what they are buying is technology—software and services from high-tech firms that will help them, at least in the short term, continue to boost productivity without hiring more workers. Of course, this is good news for Intel and a few other companies in Silicon Valley. But the tech industry isn’t a huge employer in and of itself. The theory is that technology should help businesses grow so much faster and come up with so many new moneymaking ideas and products that they’ll have to begin hiring more workers. Yet even as productivity and profits are increasing in corporate America, firms simply don’t feel secure enough to begin hiring.
Bernanke keeps saying that we are suffering through an “unusually uncertain” economic season. However, every positive item about the economy can be countered with an negative. It is an environment that will continue making things tricky for policymakers who are have to weigh the needs of stimulus to keep a weak economy going against adding more cache to the government debt that’s been piling up over the last 2 years. If the Summer of Recovery looks and feels like this, fall better get here quick.
————————————————————————
My Take: I think there is some improvement. Prices are still going up, especially for gas. People are still selling their homes to avoid foreclosure and some are using property auctions to do it. I actually think that home auction buyers get a great deal this way and it helps the homeowner to pay off the mortgage. Unfortunately, commercial mortgage loans don’t seem to be having the same luck.
Commercial mortgage brokers seems to be scrambling in an effort to save mortgages. Maybe that’s why many companies are cutting back on payroll services or at least looking for the least expensive integrated payroll service. They certainly are not hiring very many people. If they’re ramping up their production, you would think they would be hiring more. That definitely would help the economy.
There are a lot of people that have had to join a debt settlement program just to get by because they don’t have a job anymore and unemployment doesn’t last long or go very far. One thing is definitely for sure, credit card debt reduction is the secret to getting through this rough economy. Plastic will get you in trouble every single time because it is too convenient to use!
————————————————————————-
Related Resources
The protection of consumer’s rights in all areas of credit, collections, and reporting, providing the most distinguished and experienced consumer rights lawyers and collection harassment lawyers possible to help you fight back against creditors who may be violating the law in order to get your money. If what a collector or lawyer is saying to you just doesn’t make sense it probably should not have been said. Even if you owe the debt or some portion of the debt but have fallen behind, that does not give anyone the right to threaten and embarrass you. You have the right to fight back!