The Economy According to Minyans
Minyanville will increase in value for all as Minyans share diverse viewpoints with us and we in turn share them with you. Some of my comments have elicited these two responses:
The problem of lagging perception is, I think, pretty straightforward to explain. For a small segment of the population it is absolutely true: things have never been better. That's for the people who benefited most from lower tax rates and asset inflation. That is the Bush stronghold.
For the rest of the country, other than house prices if one already owned one, life has not been so grand. This last month there was a reported drop of .5% in weekly earnings. A drop in what is supposed to be a strong recovery. Further, real inflation, not the concoction the BLS uses, looks to be running at roughly 6.5% based on the last report.
Not core? Yeah, well, it's money real people have to spend if they want to eat or drive.
Last, despite the up tick in jobs creation, plenty of people are still losing the jobs they had. Witness the mass layoffs in telecom. And I am willing to bet that dual income families have in many cases become single income or lower double income families. Would the official unemployment rate be as high as it is (and sure it's likely actually much higher) if this were not the case? How else to explain how nearly a million jobs can be added to payrolls with minimal statistical impact?
So the bottom line is I think that this is still a lackluster recovery for real people while businesses have been able to take advantage of tax breaks and currency effects to boost earnings. What's so hard to understand about that?
Minyan Bryan McCormick
I sense that the economy is slowing in California. My wife and I have a pretty big sample size of thousands of people that we know....most small and mid-sized business owners through her dental practice. This monitoring worked well for me in late 1999/early 2000.
Here's some of what we're seeing.
1) The housing market has come to a screeching halt. Escrow companies and realtors are reporting that they have no work. The phones aren't ringing. No deals closing. Prices haven't dropped yet, but it takes time for the owners to come to terms with the market.
(As you know, I sold my home in early April as the 10yr was starting to sell off. since then 15 homes have come on the market and ALL of them have just been sitting there. My neighbor took out an ad that mistakenly showed his home $100,000 less than his list price. Not one phone call. He lost his job and can only hold out two more months before he lowers the price.)
2) Business owners are complaining about increased costs. Not employee costs, employees have zero bargaining power. And there's no sense that inflation is hitting since everyone believes the government. If it keeps up, businesses will have to lay off. I sense that they are on the fence right now.
3) The older Boomers are petrified about a costly retirement. They are finally adding it all up. Their "safe" bonds tanked and stocks seem risky (rightly so) to them. They are aware that their homes are also vulnerable. The smart ones are selling and leaving California.
4) Lots of new strip malls were erected to help raise local taxes since Prop 13 (limited real estate taxes) can't raise the necessary revenue. California is special this way. Local governments rely on the Home Depots of the world and fight over them. Two Lowe's just opened up right across the street from a Home Depot. Best Buy opened up across from Frye's. The stores are vacant. There is way too much overcapacity.
Maybe I'm biased but I sense a palpable sea change these last few weeks. It's amazing how members of the press report that housing and the economy is on fire. Problem is they are working off of old data. Any closings from May were from contracts executed in April.
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