Unemployment at six week low! Manufacturing hits one-and-a-half year high! Dollar trades at six-month-high! North Sea oil offered at three-month low! Oil rises to two month high! Treasury bond yield hits one-month low on fears over Italy! Sun rises fastest in last 23 hours and 50…ah…err…um…ahem….
OK; scratch that last one because unlike the other new highs or lows trumpeted by the press in our real-life examples, the LAST one is just SILLY.
The others are silly too, but they are more than just silly; they are deceptive. And they mean to be deceptive too.
Let’s look at the unemployment claims for example.
The real story there is that the trend for unemployment claims is dropping over a longer period of time.
“First-time jobless claims unexpectedly fell by 7,000 to 340,000,” reports Bloomberg “in the week ended March 2, the lowest since the period ended Jan. 19, according to data today from the Labor Department in Washington. The median forecast of 50 economists surveyed by Bloomberg called for an increase to 355,000. The four-week average dropped to a five-year low.”
Now that’s a good story.
Jobless claims are now on par with the worst of the Bush administration!
Congrats Mr. Obama.
But that’s not all that he’s accomplished.
The sudden, Fed-induced lunge in stock prices and home prices has restored the wealth of the national household back to levels not seen since 2007.
“Surging stock prices and steady home-price increases have finally allowed Americans to regain the $16 trillion in wealth they lost to the Great Recession,” reports CNBC. “The gains are helping support the economy and could lead to further spending and growth.”
And just in time too.
At a time when tax hikes, oil prices and stagnant wages are eating up families, more and more families are dipping into savings in order to pay the bills…just like the federal government is doing.
According to Zero Hedge, American household debt has actually gone down since the last time the stock market was at these levels. In 2007, total household debt was $13.5 trillion, while today it stands at $12.87 trillion, says ZH’s Tyler Durden. Households, it seems, have been able to accomplish what the government can’t do namely: Cut debt as household revenues stagnate.
That’s good, because Americans are saving less and dipping into assets like 401(k)s and home equity in order to keep up with the government tax and spending jones.
“A new national study shows that too many of us are cashing out 401(k) accounts to pay bills,” reports a CBS News local affiliate in Pennsylvania. “If that retirement account is calling your name, a financial expert advises you to stop listening.”
The reason why families are dipping into retirement savings is because Obama’s tax hikes have wiped out any gains that they’ve made on the wage front.
“The good news,” says the Washington Post, “Many Americans saw their paychecks get fatter in 2012, as average weekly earnings rose 2.4 percent over the course of the year. The bad news: The expiration of the payroll tax cut this January will basically wipe away all of last year’s gains.”
The Post goes on to explain that the payroll tax hike “could” hurt the economy in 2013 because consumers will have less to spend. What the Post didn’t reckon on, however, was that households would mimic Big Brother and just borrow from Peter to pay…um…Pelosi?
From Daily Finance.com:
Americans saw their income drop so dramatically in January that it marked the deepest one-month decline in 20 years. Personal income decreased by $505.5 billion in January, or 3.6%, compared to December (on a seasonally adjusted and annualized basis). That's the most dramatic decline since January 1993, according to the Commerce Department.
Yet still, consumer spending on the whole was not much affected.
Spending still increased although the increase wasn’t very fat.
And where, pray tell, did the magical money come from?
…consumers are benefiting from a housing recovery and rising stock prices….
They're not able to save much, though. On average, people saved about 2.4% of their disposable income in January, down from 6.4% in December. That marks the smallest saving rate since November 2007.
So 3.6 percent wage decrease plus 4 percent less savings…carry the two, divide the whole number…is… 7.6 percent less for you!
Now this is all so clear: So the Fed is printing money, which drives household wealth up, so that the government can raise taxes, so that families spend a little more and save a whole lot less, while wages go down and household debt starts to climb back up.
Now all we need for this genius plan to work out is for housing prices and the stock market to continue to climb forever, so that the government budget can always ask for a more of your wages in either taxes or borrowing even at a time when wages are shrinking the fastest in 20 years!
A one-month high!
Oh, and, this time it’s totally different.
This won’t end well a lot quicker than it did last time.