The press in the United States has carried several stories about the “Turn-around” of the United States economy. Fox News and even CNN have referred to it as “sizzling” or “very strong”. We have reviewed the numbers in detail and this is what the numbers say:
Productivity has been increasing faster than wages, improving bottom lines. What this means that U.S. companies, because of lay offs, are causing workers and managers to work longer, harder hours, sometimes without compensation for those hours. As a result of fewer employees, corporate America is showing a “higher productivity”. Reduction in the ranks of middle management has reduced payroll pressures. What this means is that lower level employees are doing “management” tasks, for lower wages.
The percentage of consumers calling jobs “hard to get” fell to 29.5% in November. This does indicate improvement, but the truth is that 29.5% of consumers still find jobs “hard to get”. Americans calling current economic conditions “bad” declined to “24%” from 28%. This means that nearly ? of Americans still consider times “bad”. The percentage of Americans expecting more jobs to be available in the next six months DECLINED to 18.2% from 19.6%, suggesting a tougher job market. The National Association of Realtors said Tuesday that “home sales fell 5% in October, in spite of record low interest rates. Foreclosures of homes in some markets are at the highest levels in years. Retail industry experts report that retail sales are below even last year’s anemic level.
Foreign Trade: There is a largely unreported story about the U.S. Dollar. The Bush Administration stated publicly that they didn’t care if the value of the U.S. Dollar dropped even more. Thus, the monthly international payments account (wherein foreign investors normally invest about $40 Billion per month) dropped to the lowest level seen in many years. From $40 Billion to $4 Billion. This massive drop in purchases of U.S. Dollars and U.S. securities was of alarm to people at the Fed and Treasury. If this kind of trend repeats and continues, the United States could face some massive economic and liquidity issues. What international economists and foreign Central Bankers are observing is the massive deficits, the enormous budget imbalance in the U.S., and recognize that the debt hole that the U.S. has dug is so deep that huge interest rates and budget adjustments will be required. The result is that the U.S. dollar simply isn’t as attractive an investment to many Central Bankers around the world.
Thus, the truth on the U.S. economy is that there have been some improvements, but at the expense of jobs and middle class management positions. Is the U.S. economy booming? No. It is still in the dumps and while it is less bad, it is not good yet. But the specter of the huge deficit and debt burden is causing concern throughout the world. We suggest that there is a significant recession coming, because these policies of the Bush Administration simply don't make sense when the overall picture of the economy is taken into consideration. Our projection is that within the next few years there will be a major downturn.