Remember back in 1992 and the Clinton campaign phrase, “It’s the economy stupid”? Fast forward 20 years and for many Americans that is once again their primary concern for the upcoming presidential election. I have not studied economics and do not claim to fully understand the subject. With that said, my wife never took accounting classes in school, yet she handles our finances with far more efficiency than our government could ever dream of handling those of the nation.
Mitt Romney has campaigned on the platform that it is time to hire a business man to run our government. To the average person who simply listens to the news, or a campaign speech or two, that may sound like a logical statement. But have people ever stopped to examine the underlying facts about our economic situation? Well, that’s what I’m here for, to provide you with a few facts, on this Labor Day, that the candidates don’t bother mentioning.
First of all we have to consider what data is used when measuring the status of our economy. Do we go by the numbers at the end of the day on Wall Street, the amount of money spent by consumers, or perhaps we use the current unemployment level, or is it a combination of all three?
First of all, let me give you my thoughts on Wall Street and the stock market; and like I said, I am not an economist, these are merely my personal thoughts. With that being said, is the overall closing number at the end of a trading day a true marker of economic prosperity? Although money is being made when stocks go up in value, I don’t believe it is an accurate reflection of the true status of the economy. Let me explain.
The way I see it, stocks go up and down in value based upon a company’s performance. Sure, when a company is doing poorly it will lay off workers and fuel a recession, but that does not mean that if their sales are high the opposite is true. Say a company shuts down a plant in America and moves it offshore to China or some other nation whose labor force works for pennies compared to the wages they were paying American workers. The profit ratio would then, naturally, go up and the stock market would react accordingly by the value of their stocks going up in value. I know that is a simplified explanation, and that there is more to it than that, but nonetheless, it shows why I don’t think the stock market is an accurate barometer of the economy.
Sales may be a more accurate measure of a thriving economy. Face it, it is human nature, if people have money to spend they will spend it. While spending may be curtailed somewhat in times of economic uncertainty people, and this is a generalization, will not deny themselves the things in life they want if they have the money to pay for them. While the use of credit to purchase these things may come into play somewhat, most people won’t take out a loan, or load up their credit card unless they are of the belief that they can afford to pay when the bills come due. Again, that is not always the case, but most people, although not very credit savvy, will not use credit unless they believe they will be able to pay it back. So, yes, retail sales, and the sale of luxury items may be a more accurate measure of a thriving economy, at least more accurate than the numbers provided by Wall Street.
Then of course, there is the unemployment rate. And this is where it gets interesting because the numbers can easily be misunderstood, or manipulated. According to the Bureau of Labor Statistics, the current unemployment rate in the United States is 8.3%. How does the Bureau of Labor Statistics get that figure? First, it does not, and this is something I just learned, count the number of people who apply for unemployment benefits each month. What it does is it takes a survey which is designed to be representative of the overall unemployment rate for the nation.
To quote from the BLS webpage, “There are about 60,000 households in the sample for this survey. This translates into approximately 110,000 individuals, a large sample compared to public opinion surveys which usually cover fewer than 2,000 people. The CPS sample is selected so as to be representative of the entire population of the United States. In order to select the sample, all of the counties and county-equivalent cities in the country first are grouped into 2,025 geographic areas (sampling units). The Census Bureau then designs and selects a sample consisting of 824 of these geographic areas to represent each State and the District of Columbia. The sample is a State-based design and reflects urban and rural areas, different types of industrial and farming areas, and the major geographic divisions of each State.”
So, right off the bat that 8.3% may not be an accurate figure as it is a guess based upon the results of the survey. Secondly, in conducting this survey the DLS considers anyone who has a job to be employed. It does not matter if you used to work for Boeing but are now flipping burgers, you are considered employed. Therefore, the amount of money a person earns may have gone down dramatically, therefore reducing how much that person spends. But according to the BLS people who found a job making far less than what they may have made before would still show a reduction in the overall unemployment rate.
According to a recent Gallup poll the number of Americans who are, “underemployed” went up from 18.3% to 18.7%. Not a huge increase, but still it is showing that just because the unemployment rate goes down, people may still be working at jobs that either place them below the poverty level, or at least working paycheck to paycheck. And to make things worse, according to the Congressional Budget office the unemployment rate is predicted to hit 8.9% by the end of the year, and 9.2% in 2013.
And finally, we have all heard that we are in, or are recovering from a recession. However, are we truly recovering? There is a chart I found, based upon data from the Bureau of Labor Statistics, which shows the economic growth, based upon hiring, following recessions. Following every recession there has been a period of economic growth measured by large numbers of people being added to the workforce. That is, until now. Since the recession that began in 2010 the Civilian employment to Population ratio has not gone up, it has been hovering around 58.5%. The chart can be found at: CHART
I only present this data so that you will take the numbers quoted you about the unemployment rate with a grain of salt. They may show job growth, but they do not, in my opinion, provide an accurate reading of our economy. After all, just because people have jobs in the fast food or retail industry, does not mean our economy is exactly thriving, does it?
I would like for you to think about the term self-sufficiency for a moment. If you alone were responsible for working to provide food and clothing for your family would you be self-sufficient if you had to go to the store to buy it? Now, on a national level, if a country must import all the goods it consumes, is it self-sufficient?
Our current trade deficit, the amount of goods we export versus the amount of goods we import, jumped by 15.7% to $137.3 billion in the January-March quarter of 2012, This according to data provided by the Commerce Department. Can we call our nation self-sufficient when we have to import the goods we consume and the food we eat? Think about that as well when you hear the president tell you that we are on the road to economic recovery.
Now, let’s just spend a bit of time regarding campaign promises by the candidates to create jobs. Sure, everyone wants a job, but as far as I have been able to discern, nowhere in the Constitution does it give the government the power and authority to create jobs. The only way the government could, legally that is, help in creating jobs, is by creating a fertile environment for economic growth. If companies are overtaxed, or burdened by an unlimited number of government regulations then they will either go bankrupt, or move overseas where the climate is more favorable.
The only way government can create jobs is by increasing the size of government, and the number of people working FOR government agencies. According to a CNN report, a comparison of government versus private sector employees shows that those working for the federal government enjoyed average benefits which are worth 46% more than their civilian counterparts are. Even more drastic are the figures for those straight out of high school who go to work for the government, with their average wages and benefits being 72% more than are those of their counterparts in the civilian sector.
So sure, they may create jobs, lots of them. But think about it, those jobs are funded either through your taxes, or by increased borrowing. And, those jobs only add to the bureaucracy that is government, i.e. more rules and regulations that we are forced to endure.
If people want more jobs in this country then instead of taxing companies at a higher rate, or burdening them with all these regulations, make it easier for them to do business here in America, and in the process put Americans back to work. And, if they still feel that they must outsource, or move their operations overseas, then tax them heavily to pay for it.
But government won’t do that. As long as the companies can make a profit they will continue to provide the parties with funds to elect candidates who will maintain the status quo. Call me cynical and pessimistic, but that is my take on the current economic status and a dismal outlook for our future.
Other than that, enjoy your day off, and if you do have a good paying job, be thankful and pray that you keep it.