Sunday, April 04, 2010

V-shaped recovery?

Reading some financial market commentary this evening, it was surprising to see a trader quoted as talking about the V-shaped recovery that we are having in the U.S. Wait a minute. He must have been talking about equities only, which are 3/4 of the way to making that V, because if he is talking about the overall U.S. economy that's not even close to being true.

Tomorrow the stock market will, at least at the outset, celebrate the higher than expected jobs number released on Friday and Apple's latest coup, and may well have a good week. That jobs number has a long way to go, as the unemployment rate is still 9.7%, it's higher still when people who have just given up are factored in, and then add in the underemployed part timers and statistics get to around 17%. One could wonder what that number would be if there was any way to collect data on people who are working at jobs well below their capability, experience, and education, such as former office or service workers handing out samples of lobster spread on crackers at Costco. This is not an economy yet in any convincing recovery.

Unlike the stock market house prices are showing no signs of any significant rebound, just fairly certain stabilization in some areas and the bottom still being searched for in others. Retail commercial real estate in many exurban and rural areas is still in free fall. There is no yield in the money markets for those who need to play it safe and with that large segment of the U.S. population that owns little or no equities there is no V in sight. Of course the 20% or so who do have the skill, luck, inheritance, or guile to own some meaningful amount of equities are back in the stores and creating some uptick in retail sales from 2009, some increase in investment from 2009, but that's not necessarily much of a treat for most people.

In fact, one could argue that there is something more serious going on than a cyclical downturn or a credit crisis precipitated by excessive risks that built up in the financial sectors. That something more would be a structural problem, one that is based on the great American middle class being whittled down over the last 30years as technology efficiencies and business concentrations have cut reasonably paid employment in manufacturing and agricultural sectors, and even reduced the demand for adequately compensated white collar workers in many areas, especially if you look at workers in call centers making $25,000 a year as white collar.

A structural problem with our economy that has been years in the making is no quick fix and President Obama and his team are right to warn that there is still a long distance to go.

I could speculate that if there was a real recovery in jobs, credit availability, and home prices this tea party movement would lose steam with just the obvious racists, attention seekers, extremists, and fearful elderly left holding the tea bag. With a structural problem they unfortunately could be around for quite a while and may well have surfaced no matter who was President.


Anonymous KF said...

The fact is that you can have an economy that leaves many people behind but still has a robust stock market and overall economic data that in the aggregate looks like a strong and growing economy.
Look at Brazil as an example. Growth, strong markets that I always feel like I've missed so I keep missing it, and still we see the extreme poverty in parts of the major cities, the crime, and the left out plight of the indigenous people in the rural areas of this huge country.

Comparing the U.S. to a major emerging market may seem strange but it may be apt. So we can have our cake and only some get to eat it. Some could see the great recovery following the great recession while others could see just more of the same with little hope.

This comment is too serious but someone has to say it. Kizziah

3:01 PM  

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