14.1.13

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Obama "No Ransom For Crashing Economy"; Republicans Threaten Default; Things Progressing Right on Cue

Posted: 14 Jan 2013 03:31 PM PST

I am pleased to report the debt-limit charade is progressing in order, right on cue, perhaps slightly ahead of schedule.

In Trillion Dollar Coin Idea Dies Sudden Death; Treasury, Fed Oppose Using Platinum Coin; Republican Strategy I proposed this seven-stage sequence of events.

Politics of the Debate

  1. Obama will chastise Congress with talk of financial Armageddon if Congress does not raise the debt ceiling.
  2. Congress will pretend to hold the president hostage
  3. The secretary of the Treasury will get into the act with its own version of the default debate
  4. Perhaps a few payments on non-critical budget items will be temporarily skipped
  5. Wall Street will feign panic
  6. Constituents will pressure Congress to approve a new debt ceiling
  7. Congress will raise the ceiling with another useless warning about next time


Obama Chastises Congress With Talk of Financial Armageddon

Exhibit 1A: Bloomberg reports Obama: No `Ransom' for Debt Ceiling
"The issue here is whether or not America pays its bills," Obama said. "We are not a deadbeat nation."

He also issued a warning about the potential tactics that House Republicans in particular are discussing, including demanding a new round of spending cuts attached to each incremental increase in the debt ceiling.

"They will not collect a ransom for not crashing the American economy," Obama said.
Increase the Debt Ceiling or Else

Exhibit 1B: CNBC reports Obama: Congress Must Increase Debt Ceiling or Else
President Barack Obama warned Congress on Monday that it must raise the debt ceiling or risk a "self-inflicted wound on the economy." Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner also delivered ominous calls for action.

"We've got to stop lurching from crisis to crisis to crisis," Obama told reporters at the White House in the last news conference of his first term.

Hours later, Geithner said in a letter to Congress that even a brief default would be "terribly damaging." And Bernanke said "we're not out of the woods yet," despite the deal to avoid the "fiscal cliff."
Congress Pretends to Hold the President Hostage

Exhibit 2: Politico reports House GOP 'Seriously Entertaining' Debt Default Idea
House Republicans are seriously entertaining dramatic steps, including default or shutting down the government, to force President Barack Obama to finally cut spending by the end of March.

The idea of allowing the country to default by refusing to increase the debt limit is getting more widespread and serious traction among House Republicans than people realize, though GOP leaders think shutting down the government is the much more likely outcome of the spending fights this winter.

"I think it is possible that we would shut down the government to make sure President Obama understands that we're serious," House Republican Conference Chairwoman Cathy McMorris Rodgers of Washington state told us. "We always talk about whether or not we're going to kick the can down the road. I think the mood is that we've come to the end of the road."

GOP officials said more than half of their members are prepared to allow default unless Obama agrees to dramatic cuts he has repeatedly said he opposes. Many more members, including some party leaders, are prepared to shut down the government to make their point. House Speaker John Boehner "may need a shutdown just to get it out of their system," said a top GOP leadership adviser. "We might need to do that for member-management purposes — so they have an endgame and can show their constituents they're fighting."
Secretary of Treasury Gets Into the Act

Exhibit 3A: Bloomberg reports Geithner Says Debt Limit Measures May Run Out by Mid-February
U.S. Treasury Secretary Timothy F. Geithner said so-called extraordinary measures the Obama administration is taking to avoid breaching the federal debt ceiling would work only until mid-February to early March and warned that a failure by Congress to raise the limit could "impose severe economic hardship" on the country.

"Congress should act as early as possible to extend normal borrowing authority in order to avoid the risk of default and any interruption in payments," Geithner said in a letter today to House Speaker John Boehner and other congressional leaders. The letter was released by the Treasury Department.
Fed Gets Into the Act

Apologies offered for not explicitly naming the Fed as point 4 of an 8-point scenario. Instead I offer the Fed as exhibit 3B, lumping the Fed and Treasury together.

Exhibit 3B: Bernanke Says 'We're Not Out of the Woods' Despite 'Fiscal Cliff' Deal
Although the "fiscal cliff" deal made "some progress" in resolving the nation's debt problem, "we're not out of the woods yet," Federal Reserve Chairman Ben Bernanke said Monday.

"We are approaching a number of other fiscal critical watersheds," Bernanke told the University of Michigan's Gerald R. Ford School of Public Policy. "We have the funding of the government, we have the so called sequester…and we have the infamous debt ceiling which will come into play."

Echoing comments made earlier in the day by President Barack Obama, Bernanke said raising the debt ceiling merely gives the government the ability to pay its existing bills.

"It doesn't create new deficits, it doesn't create new spending," he said. He said it was like a family deciding that to save money, it won't pay its credit card bill.
Progress or Lies?

Bernanke states that "some progress" has been made. While technically true, it's rather like removing one grain of sand from the Sahara Desert on a mission to remove all the sand, calling the effort "progress".

Clearly we are proceeding along the lines of my 7-point scenario. However, things are a bit ahead of schedule.

What to Expect Next

Allegedly, money will not run out until mid-February. So there is plenty of time for Obama to get back into the act, Republicans to reiterate "we really mean it" when they don't, and for the Treasury, the Fed, and Obama to preach more financial Armageddon talk.

Somewhere along the line, Wall Street will feign panic over the mess. You can also put into the bank another Obama Twitter campaign, with Obama telling everyone to "Tweet" about irresponsible Republicans. Also expect an Obama initiated Email campaign telling constituents to call or Email Congress demanding action.

I do expect Republicans to hold out until pressure from constituents comes in and Wall Street has a hissy fit (which could be as little as 50 points on the S&P).

Eventually, Republicans will cave in with some announced "compromise" to cut some trivial amount from the budget, with promises to negotiate harder next time.

Both sides will declare victory.

Why bother?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Consumers Cut Back on Toilet Paper, Pampers, Huggies; Payroll Tax Bite to Subtract .8% from GDP

Posted: 14 Jan 2013 10:18 AM PST

For some reason, many people are surprised to see a drop in their first paycheck of the year.  Yet, everyone should have known the payroll tax deduction was supposed end January 1, 2013.

Perhaps people put faith in the notion that when it comes to politics, "temporary" typically means permanent. Of course, some people were likely oblivious to the whole thing, simply not paying attention to the original proposal and when it was set to expire.

To be fair, a temporary two-year Congressional measure that lasts precisely two years, might easily be considered "unexpected".

Consumers Cut Back on TP, Pampers, Huggies, Purina

Regardless of what people thought or expected, the Payroll Tax Takes a New Bite.
A temporary cut in Social Security withholdings gave Americans hundreds of extra dollars to spend over the past two years. But Congress allowed that break to expire during the wrangling over the fiscal cliff, meaning that Social Security taxes have reverted to 6.2% of salary from the temporary 4.2%.

Kari Barker, an accountant in Salt Lake City, recently received her first 2013 paycheck and realized that she and her husband will take home $250 less every month. "I used to be a diapers snob and would only buy Pampers or Huggies," Ms. Barker said. "Now I buy Target's house brand, because it's two-thirds the cost."

Procter & Gamble Co. (PG), which owns Charmin, Pampers and other brands, declined to comment, citing the company's scheduled earnings report this month. Huggies maker Kimberly-Clark Corp. (KMB) also declined to comment.

Roberton Williams, a tax economist and the Sol Price Fellow at the Tax Policy Center in Washington, said the expiration of the payroll-tax cut will leave the average American household with $18 to $20 less to spend each week, or $900 to $1,000 a year.

For the country's consumers as a whole, Mr. Williams said, that is a decline of $120 billion from last year. The total comes to about 0.8% of U.S. gross domestic product and is nearly equivalent to the most recent full-year sales at P&G, J.C. Penney Co. (JCP) and McDonald's Corp. (MCD) combined.

Edward Riggle, a 61-year-old in Virginia Beach, Va., said he noticed a nearly $40 increase in the amount of Social Security tax withheld on his recent pay stub. Mr. Riggle, a Vietnam War veteran who retired from the Navy in 1991 and now works at a military call center, calculated that he will pay $1,036 more in Social Security tax this year, a large unexpected decrease in his take-home pay.

In response, Mr. Riggle said he changed the withholding amounts for his federal and state taxes to make sure no excess cash is kept from his paychecks and is looking to save money on regular purchases.

On a recent shopping trip, Mr. Riggle and his wife decided not to buy their usual Charmin toilet paper and Purina One dog food, choosing less-expensive versions instead.
Payroll Tax Bite to Subtract .8% from GDP

Bear in mind that analysts at J.P. Morgan reduced 4th quarter GDP estimates to .8% from 1.5%. Analysts at Morgan Stanley cut their forecast to 0.7% from 1.5%.

(For details, please see Global PC Shipments Decline 6.4%; Best Buy Sales Flat; Toys R Us Sales Decline 4.5%; 4th Quarter GDP Estimate Reduced to .8% from 1.5%).

Note that GDP is already well below the stall rate, which economists generally consider to be 2%.  Thus, a .8% hit to GDP may contract growth, especially if consumers pull back hard in the first quarter.

If GDP does go negative, expect to hear ridiculous terms bantered about such as "technical recession".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Interactive Map: Job Gains and Losses in the Recovery by Job Type (Healthcare, Education, Mining, Construction, Finance, Real Estate, etc)

Posted: 14 Jan 2013 12:07 AM PST

Inquiring minds are investigating job creation and losses during the economic recovery. Data for following Tableau Software interactive map is courtesy of Economic Modeling Specialists.

The interactive map below may take a while to load. Please give it time on a slow connection.

Map Usage Notes

Hover your cursor over any line to see additional information. You can also select a single category from the drop-down boxes to isolate a particular type of job.




Number and Types of Jobs Since 2007

Description2007 Jobs2008 Jobs2009 Jobs2010 Jobs2011 Jobs2012 Jobs
Agriculture, Forestry, Fishing and Hunting1,922,7901,869,0781,839,4321,834,6431,859,1071,857,019
Mining, Quarrying, and Oil and Gas Extraction677,207729,813658,373667,226745,595784,070
Utilities549,539557,983560,714551,287549,921556,529
Construction9,954,9619,423,1768,214,4357,633,8637,607,3157,594,530
Manufacturing14,093,90113,629,74212,051,82911,712,06311,920,26212,116,646
Wholesale Trade6,180,0356,133,9495,738,3155,634,2365,711,6835,817,036
Retail Trade16,279,66116,040,30715,262,80915,158,57515,338,72715,427,475
Transportation and Warehousing4,942,0744,904,5684,601,1104,544,1284,664,3514,763,272
Information3,181,0353,129,2452,949,8202,838,9542,808,7342,801,533
Finance and Insurance6,462,1416,308,7896,058,5195,976,2456,042,8626,081,019
Real Estate and Rental and Leasing2,767,8682,699,4302,553,1302,477,3302,439,2202,467,061
Professional, Scientific, and Technical Services8,970,7489,110,9648,789,4368,744,0228,951,2229,202,138
Management of Companies and Enterprises1,839,6161,895,4171,855,1391,854,7781,914,5431,949,283
Admin and Support and Waste Management9,301,8608,892,1178,081,9988,311,8728,626,8008,934,731
Educational Services (Private)3,317,3133,413,5863,504,7643,575,9723,666,8513,760,523
Health Care and Social Assistance16,304,38616,716,85717,036,69317,301,03617,506,39617,848,232
Arts, Entertainment, and Recreation2,375,4892,389,6922,337,9922,313,7732,336,4482,342,772
Accommodation and Food Services11,615,70911,643,56011,306,01311,322,30711,588,41211,875,069
Other Services (except Public Administration)7,502,0597,522,6207,451,8327,398,3267,478,0307,525,044
Government24,187,20724,510,27124,568,23124,561,91124,253,39024,152,210
Unclassified Industry216,926208,532173,872152,667173,741186,339
Total152,642,524151,729,695145,594,456144,565,212146,183,610148,042,530


Gains and Losses Since End of 2007

Description2012 - 2007
Agriculture, Forestry, Fishing and Hunting-65,771
Mining, Quarrying, and Oil and Gas Extraction106,863
Utilities6,990
Construction-2,360,431
Manufacturing-1,977,255
Wholesale Trade-362,999
Retail Trade-852,186
Transportation and Warehousing-178,802
Information-379,502
Finance and Insurance-381,122
Real Estate and Rental and Leasing-300,807
Professional, Scientific, and Technical Services231,390
Management of Companies and Enterprises109,667
Administrative and Support and Waste Management and Remediation Services-367,129
Educational Services (Private)443,210
Health Care and Social Assistance1,543,846
Arts, Entertainment, and Recreation-32,717
Accommodation and Food Services259,360
Other Services (except Public Administration)22,985
Government-34,997
Unclassified Industry-30,587
Total-4,599,994

Job Winners

  • Healthcare gained jobs every year since 2007, a total of  1,543,846
  • Private Education Services gained every year since 2007, a total of 443,210
  • Mining and Quarrying gained every year since 2007, a total of 106,863 

Job Losers

  • Construction lost jobs every year since 2007, a total of -2,360,431
  • Information lost jobs every year since 2007, a total of  -379,502
  • Government lost jobs every year since 200, a total of -34,997
  • Real Estate lost jobs every year from 2007-2011, a total of -300,807 since 2007
  • Manufacturing has gained jobs two consecutive years but the 2007-2012 total is -1,977,255
  • Retail Trade has gained jobs two consecutive years but the 2007-2012 total is -852,186


Lost and Gone Forever

The three largest net losers (construction, manufacturing, retail trade) have a net combined total of -5,189,872 since 2007. Most of those jobs are lost and gone forever.

Another 300,807 real estate jobs are lost and gone forever, as are 381,122 Finance and Insurance jobs, and  379,502 Information jobs.

Economic Modeling Data Notes

Data is yearly, so the period 2007-2012 is from the beginning of 2007 to the end of 2012. Snapshots below are from end-of year numbers.

Data is from multiple sources as explained below so it will not exactly match BLS reported numbers.

Comments from Economic Modeling Specialists
"Our data is used by many to research and understand regional employment trends and dynamics. It's composed of comprehensive information on industries, occupations, demographics — as well as things like occupational skills, education, training, and even the names and size of companies in your region broken down by industry.

To do this we link nearly 90 data sources — from federal sources like the Bureau of Labor Statistics to state and private sources.

If you've ever worked with this sort of information, you know it can be hard to collect and present. It's also often incomplete and outdated. So we organize the data, bring it up to date, and build software and reports around it so you can put it to use more quickly and effectively"
Thanks to Economic Modeling Specialists and Mike Klaczynski at Tableau Software for this post.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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