[Lore]

I'm not sure what your talking about? The consumer spending figure of 3.8% is still, just, above the 10-year average.

[topcat]

I was just looking at the ten percent drop. Granted, 3.8 is above 3.7 percent.

Don't know any of the other historical numbers but from these few numbers it looks like it is headed down further, as 3.7 is only an average.

My take is with the housing market, there will be many more unemployed which means spending less, which then means less sales jobs, less items to manufacture/import, less to transport, less profits, less raises, etc. It all adds up to less.

[Lore]

$this->bbcode_second_pass_quote('topcat', 'I') was just looking at the ten percent drop. Granted, 3.8 is above 3.7 percent.

Don't know any of the other historical numbers but from these few numbers it looks like it is headed down further, as 3.7 is only an average.

My take is with the housing market, there will be many more unemployed which means spending less, which then means less sales jobs, less items to manufacture/import, less to transport, less profits, less raises, etc. It all adds up to less.

[TreebeardsUncle]

Ok. To the first poster SH:

So, the idea stated by the CNBC is that the stock market follows and reflects GDP. However, the stock market could just be reflecting inflation instead. Thus the stock market indicescould rise a great deal even with falling GDB?

The following is an article about increasing unemployment in the US. I do not know if this is the right thread to print such things but here it is:

From the Business section of the 5/5 2007 San Francisco Chronicle:

Unemployment Rate Creeps Up

Housing and Manufacturing Industries Hit the Hardest

by James P. Miller

Chicago Tribune

Employers created only 88,000 jobs nationwide in April, slightly below forecast and the smallest payroll increase since November 2004, as the housing sector's troubles seeped into the broader economy, the Labor Department said Friday.
As expected, the nation's jobless rate inched up to 4.5 percent from March's five-year-low of 4.4 percent. The rate of workers' pay growth slowed as well, and the average workweek decline fractionally, providing further evidence of slacking demand for employees.
"Some of the slowing in the economy is spilling over into the labor marekt, but not in a major way," said Bank of America economist Lynn Reaser.
Companies, understandably wary about the economy's near-term direction, "are being conservative when it comes to their new hiring," Reaser added.
The labor market's lackluster April performance, while unwelcome news, wasn't a complete surpise, given that the economy downshifted to a much weaker rate of expansion last summer, with the housing and manufacturing sectors faring the worst.
The latest jobs report demonstrates "the sort of job growth one would expect in a slow-growth economy," observed Nomura Securities economist David Resler.
The question yet to be answered, according to many experts, is the extent to which the jobs lost in housing and related industries will ripple outward and damage the general economy. When Americans lose their jobs, they cut back on spending, dampening demands for all kinds of goods and services, and over time causing other employers to reduce their workforce.

-> Unemployment: Page C2

Jobless Rate Inches Upward

-> Unemployment: From Page C1

Friday's report provided evidence that such damage is occuring, but at a relatively limited level.
A decline of 11,000 jobs in financial services employment, for example, means housing's troubles are generating layoffs at mortgage companies, experts noted.
The retail sector, meanwhile recorded a net drop of 26,000 jobs. Weather might have played a role in that, but many economists figure the decline is a signal that nervous consusmers are spending less time shopping for goods.
Manufacturing lost 19,000 jobs, and the construction sector lost 11,000.
"Overall, today's report was good," said Economy,com economist Zoltan Pozsar, who said the slim 0.2 percent increase in average hourly earnings, down from 0.3 percent in March, could help ease Federal Reserve concerns about the prospect of inflation.
Northern Trust economist Asha Bangalore took a darker view, calling the latest jobs report "a convincing signal of weakness in hiring across the economy" and evidence that the economy is unlikely to get well anytime soon.
The housing recession is "now infecting other parts of the economy, most importantly consumer spending," she said.
The United States needs to create between 100,000 and 110,000 jobs monthly just to accomodate a growing labor force.
In 2006, the Burea of Labor Statistics noted, the average montly payroll increase was a hefty 189,000. So far, in 2007, the average is 129,000, and that includes the numbers for February and March that the Labor Department revised downward Friday.
With the economy still losing momentum, most experts had been forecasting April job growth in the neighborhood of 100,000 to 115,000. The 88,000 new jobs were the fewest since 65,000 in November, 2004.
Service industries added 116,000 workers last month, the fewest since June 2006.
Citigroup Inc. said last month that it plans to reduce spending in next 3 years and eliminate 17,000 jobs.
Government agencies added 25,000 jobs last month, more than a quarter of the total increase.

An accompanying bar chart is entitled

Unemployment

Monthly net change in nonfarm, payroll employment

In thousands from 2006 through 2007

Month Amount (approximate)
2006:
April 150,000
May 100,000
June 125,000
July 220,000
August 185,000
Sep 200,000
Oct 110,000
Nov 200,000
Dec 225,000

2007
Jan 160,000
Feb 90,000
March 180,000
April 88,000

Source: Department of Labor Associated Press

[TreebeardsUncle]

Here is another article from the AP and reprinted in the Sacramento
Bee that addresses the same topic:


In the Sacramento Bee on 5/5?/2007

Hiring Slows Down a Bit

Unemployment Nudges up to 4.5% as Economy Sees Fewest New U.S. Jobs Since November, 2004.

By Jeannine Aversa
Associated Press

Washington – Job seekers had a harder time finding work last month as the economy cooled and wary employers added the fewest positions in 2 ½ years. The jobless rate edged up to 4.5 percent.
The fresh employment picture provided by the Labor Department on Friday showed that April payrolls grew by just 88,000 as job losses spread beyond the struggling manufacturing and construction sectors and into retailing and financial services. Workers’ paychecks also grew more slowly.
Given the housing slump, rising energy prices and sluggish overall economic activity, “businesses are a bit more cautious and reluctant to hire as aggressively as they had,” said Mark Zandi, chief economist at Moody’s Economy.com. “Businesses were voraciously hiring people a year ago, and now they’ve got a bit of indigestion.”
The new count of jobs added to the economy was the fewest since 65,000 in November, 2004. The rise in the unemployment rate, however, was slight compared
With March’s 4.4 percent rate – which had matched a five-year low.
Taken together, the figures suggest the employment situation is weakening a bit – but not collapsing – as the nation’s economy makes its way through a soft patch. Economists predict the unemployment rate will climb in the coming months and approach 5 percent by year end, still relatively low.
For jobs seekers – facing an even more competitive environment – that means sharpening their skills, networking more, and polishing their resumes.
“What I would say to anyone in the job market is ensuring that their skills are as updated as possible. This is a continuous learning economy. We all have to upgrade our skills every single day. Learning never stops,” said Commerce Secretary Carlos Gutierrez, who once ran cereal giant Kellogg’s.
“In our economy, there is a real premium for skills,” he added.
Those with jobs, meanwhile, saw wage growth slow.
Average hourly earnings rose to $17.25 in April, a 3.7 percent increase over the past 12 months. That marked the slowest annual rise in a year. Nevertheless, analysts considered the wage increase solid and, because it probably outpaced inflation, “workers are still staying ahead,” said Lynn Reaser, chief economist at Bank of America’s Investment Strategies Group.
Wage growth is important for workers and supports consumer spending, a vital ingredient to the economy’s good healthy. The slower growth in wages alleviated some inflation fears.
Against that backdrop, the Federal Reserve is expected to leave a key interest rate at 5.25% when it meets Wednesday. The rate hasn’t budged since August, giving borrowers a break. Before that, the Fed had boosted rates for two years to ward off inflation.
On Wall Street, stocks rose as the employment report eased investors’ inflation concerns. The Dows Jones industrials gained 23.24 points to close at 13,264.62.
Health care and education, leisure and hospitality, government and various professional and business services were among the sectors adding jobs in April. Those gains, however, were tempered by job losses in construction, manufacturing, retailing and financial services.
The figures “are likely to send up warning flags for anyone seeking evidence that weakness in the housing and automotive sectors are spreading to other areas of the economy,” said John Challenger, chief of Challenger, Gray & Christmas, an employment research firm.
Of the 88,000 new jobs created in April, the government accounted for 25,000 of them, while the remaining 63,000 came from private companies.
The economy added 26,000 fewer jobs in February and March combined that the government estimated a month ago. Economists pointed to that as additional signs of some weakness.
The slight increase in the unemployment rate in April affected people differently.
The jobless rate for Latinos rose to 5.4 percent, a three-month high. The unemployment rate for blacks however, dipped to 8.2 percent. The jobless rate for women and men each held steady at 3.8 percent and 4 percent respectively.
By one measure in the report, the job hunt grew longer. The median time the 6.8 million unemployed people spend in their job searches was 8.7 weeks in April, up from 8.5 weeks in March.
The median is the middle point.
The economy in the January-to-March quarter grew at a feeble 1.3 percent annual pace, the weakest in four years. That’s the most up-to-date figure on gross domestic product, the best barometer of the country’s economic fitness.

The following caption was included with accompanying charts:

Unemployment

The monthly unemployment rate nationally for the past 13 months:

Monthly net change in non-farm, payroll employment

Source: Department of Labor

[TreebeardsUncle]

This next article discusses consumer spending. It was printed in the Sacramento Bee most likely on 5/5/2007.

Consumers Show Signs of Scrimping

Gas pricees, home equity slump, other factors put the brakes on spending.

Associated Press

San Diego - Craig Gardner is eating at home more to save a few bucks. He cringes at paying $100 to fill his truck with gasoline, so he no longer drives with a full tank.
The 30-year-old National Guardsman from Fayettville, Ark., has taken the cost-cutting measures even though he is earning more money than he was a year ago.
Consumers such as Gardner are showing flashes of frugality as high gasoline prices and shrinking home equity make shoppers count every penny.
Among the worrisome signposts are: Earlier this week the Commerce Department reported that inflation-adjusted consumer spending was its weakest since September 2005, after two massive hurricanes slammed into the Gulf Coast, disrupting oil supplies and sending gas prices skyrocketing.
Also this week, all the major automakaers reported sales declines for April, with light U.S. vehicle sales falling 7.6 percent comapred with April 2006. Even Japanese carmakers such as Toyota were hurt by the sales drop that many blamed on rising gas prices and the slump in housing.
The Labor Department said growth in worker productivity and wages slowed in the first three months of this year.
It's hardly all gloom and doom for consumers, though, and some analysts say the wariness has yet to trigger alarms about a broader economic downturn.
Personal income rose a healthy 0.7 percent in March. And while the Labor Department reported Friday that the unemployment rate rose to 4.5 percent in April on sluggish jobs growth, it was a small uptick from March's 4.4 percent rate, which matched a five-year low.
"we expect some deceleration in consumer spending, but the consumer will continue to be the mainstay of the U.S. economy," said Narimah Behravesh, chief economist at consulting firm Global Insight. He predicts consumer spending will grow about 2 percent in the second quarter.
The weakness may be limited to certain industries, such as autos or construction, and to specific companies, some analysts argue.
Auto sales plunged because manufacturers aren't making the right cars, not because home prices are slumping, said Joseph Brusuelas, chief U.S. economist at IDEAglobal, a research firm.
"Consumers are buying plenty, it's just that they no longer want to buy the fuel-inefficient cars that Detroit makes, " he said.
The housing market has certainly crimped spending for some consumers.
David Rivera Jr., a construction project manager from Bensenville, Ill., said he is spending about 35 percent less than a year ago. Dinners out have dropped from once a week to once a month, and vacation plans are on hold.
Rivera, 35, bought a second house in Chicago as an investment in 2004 when interest rates were near historic lows. He remodeled the house, bought a new van and took a trip to Argentina.
But this year, the squeeze is on. He put the house on the market a month ago at $425,000 and hasn't had a single offer, despite dropping the price [to about $360,000, according to the San Jose Mercury News]. Gas p[rices have led him to take a commuter train to Chicago instead of driving.
"Naturally I'm concerned," he said while waiting for a train in Chicago's Union Station. "I would like to take another nice vacation, but the way things are, I don't want to spend a dime. The uncertainty is really scary."
Consumers are no longer tapping home equity like an ATM, said University of San Diego economist Alan Gin, who used the increased value of his home to get a loan for a new minivan in 2004.
Gin compiles an index of economic indicators that he said fell in January to its lowest level since February 2004, led by a declin in building permits.
Gas prices hovering around $3 a gallon nationwide (approaching $3.50 in California) for regular are causing some consumers to change their habits.
Jeff Simon, 43, a San Diego investor, started bicycling to the gym to save money on gas. "I used to just drive anywhere," he said. "But now I stop and think about it first."

The following caption is included:

Mark Sherwin pays $3.67 per gallon as he tanks up Wednesday in Del Mar. Nationally, gas averages $3 a gallon.

[TreebeardsUncle]

Here is a collumn that appeared in the Saturday, May 6, 2007 issue of the Sacramento Bee that addresses the economic imbalances in the current economy.

An Economic disconnect

by Paul Krugman

Last fall Edward Lazear, the Bush administration's top economist, explained that what's good for corporations is good for America.

"Profits," he declared, "provide the incentive for physical capital investment, and physical capital growth contributes to productivity growth. Thus profits are important not only for investors but also for the workers who benefit from the growth in productivity."
In other words, ask not for whom the closing bell tolls; it tolls for thee.
Unfortunately, these days none of what Lazear said seems to be true. In the Bush years, high profits haven't led to high investment, and rising productivity hasn't led to rising wages.
The second of these two disconnects has gotten a lot of attention because of the political consequences. The administration and its allies whine that they aren't getting credit for a great economy, but because wages have been stagnant -- the median worker's earnings, adjusted for inflation, haven't gone up at all since the current economic expansion begain in 2001 -- the economy feels anything but great to most Americans.
Less attention, however, has been given to the first disconnect: the failure of high profits to produce an investment boom.
Since Bush took office, the combination of rising productivity and stagnant wages -- workers are producing more, but they aren't getting paid more -- has led to a veritable profit gusher, with corporate profits more than doubling since 2000. Last year, profits as a share of national income were at the highest level ever recorded.
You might have expected this gusher of profits, which owe something to the Bush administration's pro-corporate , anti-labor tilt, to produce a corresponding gush of business investment. But the reality has been more of a trickle.
Nonresidential investment -- that is, investment other than housing construction -- has grown very slowly by historical standards. As a share of GDP, nonresidential investment remains far below its levels of the late 1990s.
Why aren't corporations investing, and what does the lack of business investment mean for the economy?
It is possible that sluggish business investment reflects lack of confidence in the economic outlook -- which is understandable, given the bursting of the housing bubble, which has already caused GDP growth to slow.
But as Floyd Norris recently reported in the New York Times, there is a more disturbing possibility. Instead of investing in physical capital, many companies are using profits to buy back their own stock. And cynics suggest that the purpose of thse buybacks is to produce a temporary rise in stock prices that increases the value of executives' stock options, even if it's against the long-term interests of investors.
Whatever the reasons, we now have an economy with incredibly high profits and surprisingly low investment. This raises some immediate short-run concerns: With housing, still in free fall and consumers ever more stretched, optimistic projections for the economy depend on vigorous growth in business investment. And that doesn't seem to be happening.
The bigger issue, however, may be longer term. Lazear was right about one things: Business investment plays an important role in raising productivity. High investment in equipment and software was one major reason for the productivity takeoff that began in the Clinton era, and continued in the early years of this decade.
And low investment may be one reason produtivity growht has slowed dramatically over the last three years -- another development that hasn't received as much attention as it should.
In any case, next time someone tells you that any action that might reduce corporate profits a bit -- like actually enforcing health and safety regulations or making it easier for workers to organize -- will reduce business investment, bear in mind that today's record profits aren't being invested. Instead, they're being used to enrich executives and a few lucky stock owners.

Paul Krugman writes for the New York Times.
His collumn appears routinely in the Bee on Saturdays and occasionally on other days. He can be reached at krugman@nytimes.com.

[pea-jay]

Kunstler and Fleckenstein (my favorite MSM columnist at the moment) are both inclined to think that the Dow's upside trend does mean something and it is not good.

http://kunstler.com/mags_diary21.html

http://articles.moneycentral.msn.com/In ... treak.aspx

[Lore]

$this->bbcode_second_pass_quote('ferrelgiraffe', 'S')ay!
I have an idea!
What if everyone just bought stocks FOREVER?
I mean, it cannot go down then!
If no one would ever sell and everyone would buy it would always go up!
Man, this is better than a ponzi.

___________________________________
Please donate to: CEPSS, a great americun institution.
(CHEAP ENERGY FOR PLASTIC SALAD SHOOTERS!)

[ohanian]

$this->bbcode_second_pass_quote('ferrelgiraffe', 'N')o kidding, I was being stupid, and this guy is making money on it.
If I didn't have a conscience I could be rich.e are Sooo many stupid people out there.