And initial claims are back above 400,000, with the 4-week moving average rising, though continuing and extended claims fell.
Recovery my ass.
Category: Economy
Someone Puts a Cost to the Activities of Patent Trolls
$500-billion over the past decade,* and that does not count reductions in innovation, as the trolls, as:
- The patents are frequently of very low quality.
- The proceeds from patent trolling don’t go to inventors in the first place.
The problem is that a myth of “Intellectual Property” (When I use the term IP, I mean “Intellectual Product) has been created out of a limited exclusive license created, “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries“.
In other words, this is not property law, but rather it is public interest law based on the idea that temporary and limited restrictions to the free flow of ideas and expression only to the degree that these restrictions benefit the public as a whole.
Once you start calling it “property” you encourage all sorts of arbitrary applications, and Randroid thinking, and as opposed to encouraging innovation, you hamstring it.
*My unscientific gut says that this number is probably low by at least a factor of 2, if not a factor of 10.
It’s Jobless Thursday
And while initial claims fell a bit, with the 4-week moving average rising, and continuing and extended claims both falling.
Still it’s 423,000 which is far short of a recovery.
On the other side, you have the Leading Economic Indicators beating estimates, but a lot of that was driven by an increase in the money supply as investors moved to (safer) cash from other less liquid investments.
Not only do I expect unemployment to remain above 9% for the foreseeable future, I expect it to top 10% again at some point in 2012.
Why Our Economy is Going to Continue to Suck
First, because consumer expectations for the future just hit a thirty one year low, and second, because this fear is justified, because this feeling is an accurate reflection of a reality where your net worth is falling:
Consumer sentiment inched up in early September, but Americans remained gloomy about the future with a gauge of expectations falling to the lowest level since 1980, a survey released Friday showed.
The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment edged up to 57.8 from 55.7 the month before, which had been the lowest level since November 2008. It topped the median forecast of 56.5 among economists polled by Reuters.
“Overall, the data indicate that a renewed downturn in consumer spending is as likely as not in the year ahead,” survey director Richard Curtin said in a statement.
“Even without a downturn, consumer spending will not be strong enough to enable the rapid job growth that is needed to offset reduced long-term expectations.”
The gauge of consumer expectations dipped to 47.0 from 47.4. It was the lowest level since May 1980. The economic outlook for the next 12 months fell to 38 from 40, the lowest since February 2009 when the world economy was gripped by the credit crisis.
…………
It’s understandable if Americans feel poorer. It’s because they are.
The net worth of American households decreased nearly 0.3% in the second quarter as the value of their homes and stock portfolios slumped, according to data released Friday by the Federal Reserve.
Household wealth fell to $58.5 trillion, as home values skidded 0.5% and financial assets, including stock holdings, slipped 0.3%.
And consumers’ balance sheets may get worse before they get better, courtesy of declining stock prices over the past three months.
Half measures, and a fetish with punitive austerity do not make for either a recovery or consumer confidence.
It’s Jobless Thursday
And not only were the numbers worse than expected, but they are the worst numbers since June, with claims closing by 11,000 to 428,000, with the 4 week moving average rose by 4,000 to 419,500, though continuing and total claims both fell slightly.
We are not in a recovery, as the latest Philadelphia Fed’s Survey of manufacturing showed, with the numbers indicating contraction.
Why people aren’t running around like their hair on fire over this, I do not understand.
Another Gift from the Austerity Confidence Fairy
Thankfully, it’s the UK, and not us, but this is unbelievably grim:
George Osborne’s austerity programme will cut the living standards of Britain’s families by more than 10% over the next three years as those on the lowest incomes suffer most from the tax increases and spending cuts designed to reduce the budget deficit.
A study from the Institute for Fiscal Studies, the UK’s leading experts on the public finances, concludes that the chancellor’s strategy will result in greater inequality and rising child poverty, throwing into reverse progress made in the final years of the last Labour government.
The bleak picture painted by the IFS will be used by opponents of the chancellor’s austerity measures to call for a plan B to generate faster economic growth. There is likely to be further pressure on Osborne on Monday as the head of his independent commission on banking, Sir John Vickers, outlines measures for banking reform.
I’m more of a cynic than the author, Larry Elliott, economics editor of The Guardian, because I believe that part of the reason that Osborne is supporting this is because of the, “greater inequality and rising child poverty, throwing into reverse progress made in the final years of the last Labour government.”
They are determined to roll back whatever minor progress occurred under Blair and Brown, and move back to where Thatcher and Major left the nation.
And once they’ve done that, they want to take Britain back to the Dickensian standards of the middle of the 19th century.
It’s Jobless Thursday, and the Numbers Suck Again
With initial claims worse than forecast, with an increase to 414,000 initial applications, with the 4 week moving average rising as well, though continuing claims fell slightly.
When you look at this, and a weak Beige Book from the Fed, and the fact that there were absolutely no jobs created in August, the idea that we are in any sort of recovery is laughable.
We’re in a deflationary spiral, and the already inadequate stimulus has been on the down slope for over 6 months, and somehow or other people believe that the austerity fairy will solve things, when it’s actually going to make it worse.
It’s On Girl!
AFL-CIO president Richart Trumpka just said that Obama has aligned himself with the teabaggers:
The most powerful union official in the country offered reporters his harshest critique of President Obama to date Thursday, questioning Obama’s policy and strategic decisions, and claiming he aligned himself with the Tea Party in the debt limit fight.
“This is a moment that working people and quite frankly history will judge President Obama on his presidency; will he commit all his energy and focus on bold solutions on the job crisis or will he continue to work with the Tea Party to offer cuts to middle class programs like Social Security all the while pretending the deficit is where our economic problems really lie,” AFL-CIO President Richard Trumka told reporters at a breakfast roundtable hosted by the Christian Science Monitor.Trumka dismissed Obama’s recent job creation proposals — an extended payroll tax cut, patent reform, free trade deals — as “nibbly things that aren’t going to make a difference,” and said the AFL-CIO might sit out the Democratic convention if he and the party don’t get serious.“If they don’t have a jobs program I think we’d better use our money doing other things,” Trumka said.
I do not think that Barack Obama has the slightest clue just how disappointed his “base” is with him, and if he did, I think that he would be dismissive of the fact.
Get ready for President Bachmann. (honest to God, how did the ‘Phants find someone scarier than Sarah Palin?)
Just Read This
It’s an article, from Forbes of all places, which explains how our zeal to become a “knowledge economy” is razing our economy to the ground.
They use Dell Computer as an example:
ASUSTeK started out making the simple circuit boards within a Dell computer. Then ASUSTeK came to Dell with an interesting value proposition: “We’ve been doing a good job making these little boards. Why don’t you let us make the motherboard for you? Circuit manufacturing isn’t your core competence anyway and we could do it for 20% less.”
Dell accepted the proposal because from a perspective of making money, it made sense: Dell’s revenues were unaffected and its profits improved significantly. On successive occasions, ASUSTeK came back and took over the motherboard, the assembly of the computer, the management of the supply chain and the design of the computer. In each case Dell accepted the proposal because from a perspective of making money, it made sense: Dell’s revenues were unaffected and its profits improved significantly. However, the next time ASUSTeK came back, it wasn’t to talk to Dell. It was to talk to Best Buy and other retailers to tell them that they could offer them their own brand or any brand PC for 20% lower cost.
It’s an evocative example, and one which is easily understand, but the problem is that it invites the criticism that it’s just another mindless “Yellow Peril” argument.
The meat of the argument, at least to me as an engineer, is further down:
So the decline of manufacturing in a region sets off a chain reaction. Once manufacturing is outsourced, process-engineering expertise can’t be maintained, since it depends on daily interactions with manufacturing. Without process-engineering capabilities, companies find it increasingly difficult to conduct advanced research on next-generation process technologies. Without the ability to develop such new processes, they find they can no longer develop new products. In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.
One of the arguments made by what used to be called “Atari Democrats” in the 1980s was that we could dump all the manufacturing, and then we could all sit behind desks and create the ideas for the lesser (i.e. non-white) people to manufacture.
It’s simply wrong. When you no longer make stuff, you no longer know how to make stuff, and when you no longer know how to make stuff, you can no longer come up with viable ideas.
The question is whether we want to have the German economy, or the Mexican one, and increasingly, it appears that we are trying to achieve the latter, since by making everyone else poorer, it makes the people at the top of the pyramid comparatively richer, and they are the ones who make the big campaign donations.
Read all 4 parts.
H/t DC on Stellar Parthenon BBS.
Philly Phed Phail
Click for full size
The Map Pr0n
and the Graph Pr0n
Calculated Risk looks at the quarterly change in the Philadelphia Fed’s 50 state coincident index, and the map, and the graph and the map is getting redder (worse).
The idea that this is going to a meaningful recovery with a significant fiscal push from the government, which ain’t happening, because the ‘Phants are tanking the economy deliberately for political gain, is pure panglossian delusion.
Thorstein Veblen is Back
Not the historical figure, but rather the nom de blog of the principal of Economic Policy Advice for Barack Obama, formerly called Economists for Firing Larry Summers, has returned to posting after taking a few months off because life (Grad School, my guess) got in the way.
I still use the old name in my blogroll, because I think that it is a better name.
His posts are uniformly good, but rather too infrequent for the medium of a blog.
Philly Phed Phalls
Click for full size
H/t Calculated Risk for the Chart Pr0n
The Federal Reserve Bank of Philadelphia’s index of economic activity just fell off a cliff:
Optimists on the U.S. economy have conceded that things are weak, but they’ve argued we’re not falling off a cliff.
But on Thursday, Wall Street got a hint that a cliff dive could be imminent.
Philly The Philadelphia Federal Reserve Bank’s index of economic activity in the mid-Atlantic region plummeted to a negative 30.7 this month, down from a positive 3.2 in July and the lowest since a negative 30.8 reading in March 2009 — in the depths of the last recession.
Get ready for President Bachmann and similar disasters.
Economics Update
It’s been a busy economic news day, with the Federal Reserve declaring that it will keep its benchmark interest rates low for the next two year:
The stock market staged a dramatic rebound Tuesday, recording the biggest gains after the Federal Reserve announced it would keep its ultra-low interest rate policies in place for two more years.
The surge ended a wild day of trading in which the Dow Jones industrial average dipped in and out of negative territory four times, giving back hundreds of points in early gains before finishing the session up 429 points. That represented a nearly 4 percent rise, the largest increase in two years.
Investors seemed uncertain about what to make of the announcement by the Fed’s main policymaking board, which for the first time set a firm date for maintaining its near-zero target for short-term interest rates. This move could provide businesses and consumers with greater certainty about the availability of low-cost borrowing as they consider making investments or major purchases, such as homes or autos.
At the same time, the Fed declined to make any significant new efforts to bolster the nation’s flagging recovery. A rare dissent by three of the policy committee members to the interest rate decision signaled that it could prove hard for the central bank to take more dramatic steps in the coming months to lift the economy and prop up the financial system.
When one considers the fact that the interest is effectively 0%, this is not a ringing endorsement of where the economy is going, and the markets were hoping for more. (Full Fed Statement below the fold)
Why are the markets expecting more, perhaps because productivity fell for the 2nd straight quarter, and small business optimism for the 5th straight month.
Between Democrats who believe in the austerity fairy, and Republicans who are deliberately tanking the economy for political advantage, the Fed is all we have to fix things.
Release Date: August 9, 2011For immediate releaseInformation received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity. Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions. More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable.Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.
ECB Concludes that Gasoline is not the Best Way to Put Out a Fire
David Bowie Says the Same
The European Central Bank has caught a clue, and realized, for this month at least, that there is no threat of inflation, so they are buying bonds and not raising their interest rates.
So, after pointless and stupid rate hikes in the teeth of a recession, they have decided that perhaps they were being stupid with their focus on non-existent inflation.
Seriously, if there has been a central bank that a greater record of rank incompetence on dealing with a recession, I’d be hard pressed to name it.
In all fairness, I would note that ECB is very limited in its charter. Unlike the Federal Reserve, for example, is has no duty to maintain stable employment, just to forestall inflation, and so it’s all that they look for.
Signs of the Apocalypse: I think That Larry Summers is Right
He is saying that we are in danger of having a double dip recession:
On the current policy path, it would be surprising if growth were rapid enough to reduce unemployment even to 8.5 percent by the end of 2012. A substantial withdrawal of fiscal stimulus will occur when the payroll tax cuts expire at the end of the year. With growth at less than 1 percent in the first half of this year, the economy is effectively at a stall and facing the prospects of shocks from a European financial crisis that is decidedly not under control, spikes in oil prices and declines in business and household confidence. The indicators suggest that the economy has at least a 1-in-3 chance of falling back into recession if nothing new is done to raise demand and spur growth.
Considering Larry Summers’ record, I would put this to a stopped clock being right twice a day, but I agree with him.
Guess What, The ADP Employment Numbers Suck
Their report on job activity in the service sector is the weakest it has been in over a year:
The pace of growth in the services sector ticked down unexpectedly in July to the lowest level since February 2010 and the number of jobs created by the private sector also slowed, reports showed on Wednesday.
Taken alongside disappointing data on the manufacturing sector earlier in the week, the services data showed an economy that was frustrating hopes for a rebound in the second half of the year after a very weak first half.
“It looks like this confirms that we are in a bit of a soft patch here,” said Rudy Narvas, senior economist at Societe Generale in New York.
Gee Rudy, you think?
It’s getting to be a habit: The economy looks a little bit better, Washington declares victory on the recession, backs off, and we slide back into the abyss.
It’s 1937 over, and over, and over, and over, again.
Holy Sh%$ (Economics Edition)
Remember the recession? Well it turns out it was much worse than we were led to believe at the time:
Two days after that, Americans received grim news about the economy: in the fourth quarter of 2008, GDP contracted at a 3.8% annual pace—the worst quarterly performance since the deep recession of 1982. More bad news hit on February 6th, when the BLS released new labour market figures. It reported an employment decline of 598,000 in January, following on revised drops in employment of 577,000 in December and 597,000 in November—a three-month drop of 1.8m jobs. On February 10th, the Senate passed its version of the stimulus, worth $838 billion. In conference committee, the bill shrank to $787. On February 17th, Mr Obama signed the bill into law.
In the months and years that followed, Washington provided additional support to the economy, perhaps ultimately contributing approximately $1 trillion in total stimulus. But that first bill was the big bite at the apple. The White House looked at the economic situation, sized up Congress, and took its shot. Unfortunately, the situation was far more dire than anyone in the administration or in Congress supposed.
Output in the third and fourth quarters fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data.
OMFG!
That’s depression level of contraction.
So, not only was the this recession the worst since the Great Depression, but it was even worse than first reported.
And so the stimulus in 2009 was even more inadequate than was previously reported.
This is why moderation in such situations is so disastrous.
Not Good At All
The economy, and I don’t mean the furshlugginer debt bill, just showed us that if we aren’t headed for a double we aren’t in for a recovery either, as consumer spending has just fallen for the first time in two years, probably because scared consumers are scared, and so paying down their credit cards instead of spending money.
And today, the Obama administration is announcing that they are pivoting to jobs, after going full out for a debt reduction deal that will slow the economy and cost jobs.
This isn’t closing the barn door after the cow has gotten out, this is closing the barn door after you let the cow out, and shot it dead.
Hello, Double Dip Recession…
The ISM manufacturing index in July fell to a two year low, 50.9, with the new orders index falling to 49.2, indicating contraction in that index.
And Barack Obama just put through massive cuts in government spending.
Well, This Might Explain the Bank Failure Spike
It appears that the economy is slowing, with the last two quarters GDP disappointing.
1st quarter GDP was revised down from a 1.9% annual rate to an 0.4% annual rate, and the 2nd GDP disappointed, coming in at a 1.3% annual rage, below the 1.6% forecast.
So, as the (already grossly inadequate) stimulus has run out, the economy has sputtered to a halt.
No worry though, austerity will create growth by:
- Collect Underpants
- ?
- Profit
What this has to do with bank failures?
The fact that they are a lagging indicator.
You see banks become insolvent when too many of their loans go bad, and those loans go bad following the economy tanking, not before.
We are in a double dip recession in all but the NBER ruling.