Not a Surprise, Construction Was Weak in 2009

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- Jim

On February 1 the Census Bureau told us that the value of construction put in place in 2009 was $939.1 billion. That was a plunge of 12.4 percent from the $1,072.1 billion spent in 2008.

Indeed, it was the first year that construction spending has been below $1 trillion since 2003. Nearly all forecasters expect further declines in 2010 and probably 2011 as well because the expected decline in nonresidential construction will more than offset the increases in residential spending. Click here to read the full post and comment (Insights subscribers) »

The ISM Delivers a Barnburner Number

On February 1 the Institute of Supply Management told us that their PMI index for manufacturing hit 58.4 percent in January, up from 54.9 percent in December. That index has now risen for six consecutive months after declining for 13 months in a row. Click here to read the full post and comment (Insights subscribers) »

Some Good News from Consumers

On January 29 the University of Michigan reported that its Index of Consumer Sentiment was 74.4 in January (March 1965=100). That was the highest since January 2008, the first full month of the recession.

Survey director Dr. Richard Curtin said, “Consumers are overwhelmingly convinced that the worst is over but nonetheless expect stagnating income and job prospects rather than solid growth during the year ahead.” Consumers’ attitudes and spending should rise during the course of 2010 as economic growth continues.

Retail Sales Were Pretty Darn Good in December

On January 14 the Census Bureau gave us the advance estimates of retail and food services sales for December and the full year 2009. The year ended better than most people expected.

The total for December (adjusted for seasonal variation, holiday and trading day differences) was $353.0 billion, up 5.4 percent from the year before. That was the third-best December ever. Click here to read the full post and comment (Insights subscribers) »

The “Great American Jobs Machine” Is Still Running

If you really want to know what is going on with employment in the US, you must go beyond “The Employment Situation” that the BLS releases early every month and which gets huge media coverage. (The next update is February 5 covering January and big downward revisions to 2008 and 2009 data.) The more detailed insights come on the second Tuesday of every month in the JOLTS (Job Openings and Labor Turnover) reports. Click here to read the full post and comment (Insights subscribers) »

You Can Speak to Me, But You Can’t Speak for Me

(title attributed to the late Professor of Economics Kenneth Boulding)

The Supreme Court’s decision to treat business entities as “people” has fired up political pundits and lobbyists on all sides. Corporate political support since 1990 has exceeded union political support by a margin of 3 to 1. But, corporate political support has been evenly divided between the two parties while union support has favored the Democrats 9 to 1. There is a lot of money at stake and many state and even local elections might be disproportionately impacted by the unrestricted entry of union and corporate funds into the political fray. The potential impact of differential access to money even haunts the issue of individual rights to participate in an election. Some individuals have much more money than others and can swamp the voices of many less wealthy individuals. That’s why we cap the amount of giving for individuals.

My concern is bit different and arises from an issue I raised in a commentary years ago about corporate support for such things as the local ballet or symphony. In most cities, large businesses including utilities are major supporters of cultural events. This certainly assists them in presenting various cultural events, but a very, very small and often wealthy percentage of the city’s residents attend these events. The CEOs of these companies get red-carpet treatment for their donations of what would otherwise be profits for shareholders or lower utility rates for users. I have yet to receive an invitation to the opera box for my utility’s support of their activities for my 25 years of contributions through my energy bills. My utility rates are higher than need be to support these civic activities. As the provider of the funds for this largess, I was never asked which cultural or charitable events I wished to support. It was the CEOs who chose and who got the credit for their largess.

Political support by corporations and unions presents the same problem. The funds used by the CEOs of these organizations are provided by customers or union members. But for the most part, those providing the funds have no say in how the funds are disbursed. It is unlikely that 100 percent of union members support a candidate that the union boss chooses. Similarly, it is unlikely that shareholders and rate payers agree with the political choices of CEOs. And rarely do we check to see if shareholders and rate payers might prefer not to donate at all, enjoying higher earnings per share and lower utility rates instead.

Personally, I guess I like the “one person, one vote” concept, which would mean no corporate or union money and limited contributions from individuals with a lot of money. The amount of money spent on elections has grown to absurd levels so that the “rich” are advantaged in running for office. OK, I’m an idealist, but I would like to know that my vote was as valuable as any other and was not washed out by the money multiplier. Meantime, I am still waiting for my invitation to the ballet recognizing my decades of financial support.

The “Great Moderation” Lives

There’s an important paper you ought to read by an “only in America” pair of economists–one from France and one from Ukraine–who teach at US universities on the east and west coasts (William and Mary for Prof. Coibion and UC-Berkeley for Prof. Gorodnichenko). It’s short, fairly easy to read and is based on their longer and more complex article on the same topic, which will be in a forthcoming issue of the American Economic Review.

They conclude that we are likely to see a return to moderate growth with low inflation for many years to come as a result of better monetary policy since the Paul Volcker-led FOMC dramatically reduced inflation in the 1979-1984 period. Of course, it took two dramatic recessions (the 6-month one in 1980 and the 16-month one in 1981-1982) to accomplish the goal.

Since my long-term forecast is also for moderate growth (3.2 percent a year over the next decade) and accompanying low inflation (1.1 percent a year over the same horizon), this article resonates with me. I hope you enjoy it.

Quick Jobs and Improved GDP

One of my friends/readers sent me an email on the previous post and in his note he said, ” I ask my clients how the US could genuinely employ more people? One quick response was, ‘Build 50 nuclear power plants as fast as you can!’” Here’s my take on that:

The man who suggested the nuclear power plants is really onto something. We ought to use this lull in natural gas prices to convert coal-fired plants to gas and get permits for many (50-200) nuclear power plants in the pipeline. Unfortunately, it might still be
ten years before they are up and running, but at least we’d know that our long-term power needs would be solved.

The rest of the story is: Click here to read the full post and comment (Insights subscribers) »

Bad News from Small Business Owners

Today the NFIB reported that the Small Business Optimism Index fell from 88.3 in November (1986=100) to 88.0 in December. That marks six consecutive quarters with the index below 90. In sharp contrast, such a dismal result happened in only one quarter of the 1980-1982 period, which was marked by two recessions. Click here to read the full post and comment (Insights subscribers) »

The Decade Isn’t Over Yet

You’d think people would have figured it out after all the misguided hoopla about 2000 starting off a new millennium. You need to remember there never was a year 0 because the concept had not yet been invented in 525 AD when the famous monk, Dionysius Exiguus, came up with the idea of separating time into “BC” (Before Christ) and “AD” (Anno Domini) in order to set the date for Easter. [Exiguus named "AD," St. Bede the Venerable named the English "BC" about a hundred years later.]

Thus, his count went directly from 1 BC to 1 AD with no year in-between. That means that 2010 is the last year of the first decade of the 21st century or of the second millennium AD.

Of course, the monk was off by a few years in his demarcation line as it is known that King Herod died in what is now known as 4 BC. The great planetary conjunction that many astronomers believe is what the Bible is talking about as the “Star of Bethlehem” occurred on September 15, 7 BC.

In any case, decades of millennia always begin with the years ending in 1 (2001, 2011, etc.). They always end in years ending in 0 (2000, 2010, etc.)

That means we have one more year to be rid of “the Naughts” or whatever you want to call this decade. Here’s hoping “the Teens” are much better.