Friday, April 29, 2011

Recap of the week

Data this week has been surprisingly weak and the anecdotal information from a variety of sources is bordering on stunning.

The preliminary GDP data yesterday showed the economy grew 1.8% in the first quarter.

This growth is well below our long-term average of 3.1% and is very weak relative to historical recoveries. Expansion of inventories added 0.9% of the GDP so if you were to exclude the inventory build up we'd be talking about the fact that economy barely grew at all in the first quarter.

Consider that the Fed has basically cut interest rates to nothing, primed the pump with QE1, QE lite and QE2, and the government is spending $1.5 trillion more than it takes in to spur growth, but the result is a pathetic 1.8% growth rate. What happens to our economy when (if) the Fed stops intervening and/or government spending is cut?

This may seem like a harsh analogy but I think it is an apt analogy: our economy is like an 88 year old cancer patient that was just involved in a 2 car head on collision. We're propping this patient up with every medicine known to mankind to prep him for hip surgery and to repair 3 broken bones in his arm when the sad painful truth is that we should probably just accept the inevitable and move on.

Our economy is staggering again, but in today's continuous election cycle you can't allow for painful 10 year plans that just might right our ship. Politicians have to fix everything yesterday or expect to be voted out of office. That means our answer for every problem is the quickest and easiest solution with no consideration of it's impact on the future.

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Interesting stories.

* Wal-mart - "Wal-Mart's core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried. "We're seeing core consumers under a lot of pressure," Duke said at an event in New York. "There's no doubt that rising fuel prices are having an impact."

* McDonald's - Offered to hire 50,000 people. They got 1,000,000 applicants for part-time, minimum wage work.

* "Roughly one million people were unable to find work after exhausting their unemployment benefits over the past year, new data released Thursday by the Labor Department suggests.

About 8.2 million idled workers were receiving unemployment benefits as of the week ended April 9, the Labor Department said in its weekly jobless claims report. That compares to about 10.5 million individuals at the same time last year, a decline of roughly 2.3 million people.

Since the federal government estimates that the economy created 1.3 million jobs during the 12 months ended in March, economists said that slightly less people probably fell through the cracks and couldn’t find employment.

That leaves, roughly speaking, about one million people who have exhausted their unemployment benefits and have very likely not yet found a job,” said Joshua Shapiro, chief U.S. economist at MFR Inc. in New York.

* Japan has completely fallen off the radar of most Americans because we have much more pressing issues to deal with like what color hat the Queen is wearing today (side note: didn't we fight a war to get away from all of this royal garbage? I blame Disney and their princesses for undoing 200 years of fighting for the concept of a Republic).

However, there is a real economic impact from the earthquake and it is going to be with us for some time. Panasonic announced a major restructuring that is going to reduce their headcount by 30-40,000 people but they also cited supply disruptions caused by the earthquake that impacted operations.

Cheers!

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