MORE EVIDENCE THAT THE ECONOMY IS COMING BACK
In an email to clients on May 25, I included a link to some graphs provided by the Value Line Statistical Service, which show that many widely followed financial indicators have been trending upward for months. Now comes evidence from so-called “below-the-radar” indicators that confirm that a recovery is underway. Bloomberg Business Week on June 15 reports that a number of oddball indicators show that the economy’s heartbeat is strengthening:
These shadow metrics include a 3.1 percent increase in the amount of diesel being pumped on Interstate highways (an indicator of trucking volume) in May the largest one month increase in over a decade. There has also been healthy increase in train shipments of waste and scrap materials as well as a significant jump in electricity usage from commercial consumers (up 10.8 percent for the week end of June 5, as compared to the 2009 week). This latter suggests that offices and stores are remaining open for longer hours. Although national employment does not seem to be increasing, this statistic suggests that existing employees are being asked to work longer hours to meet increasing demand.
All is not well, however. The article reports that states are assessing higher unemployment taxes on businesses to offset the huge number of claims that are depleting their unemployment trust funds. This is effectively an employment tax increase on business at times when they need to be encouraged to hire, not discouraged. So, it appears we are having another jobless recovery. This is good for capitalists, that is, stakeholders in businesses that manage to generate profits with fewer hours of labor invested, but it’s not good for Joe Six Pack.
To look at the full article, see the Businessweek link on the “Useful Links” page of this web site.
In another positive development (in my opinion) California’s governor, Arnold Schwarzenegger, has scored a small victory by negotiating a rollback of some overly generous pension arrangements with public employee unions. Under contracts won in recent years many CHP and state employed firefighters, as well as corrections officers can retire with a 90 percent pension at age 50. The governor’s negotiation with unions is now raising the age back up to 55 (at one time it was 65). However, this applies only to new hires. I have a friend with a brother, who retired a few years ago as fire chief of a large California city with $200,000 per year at age 55? There are thousands more still in the system, like him.
We are working through structural problems, public spending, the banking system, energy consumption, environmental limitations, to name a few. This has been brought about by the viral spread of capitalism throughout the globe, a virus that is creating better lives for billions of people in once desperate nations like India, China and South America. BUT, booming economies abroad also means the USA has a lot of competition on the planet, resulting in the need for our nation to streamline and become more economically efficient. This transition may take a decade or more, perhaps it will never end. There will be fits and starts. There will be those who suffer and those who benefit. I intend for my clients to be among the beneficiaries. Have a good weekend!
Gary Miller
