As Labor Day approaches and the media try to spin or ignore the fact that of the two surveys on employment reported yesterday by the BLS, the "establishment" survey that gave the better results was still 400,000 jobs short of what is necessary merely to maintain the unemployment rate stable. With that in mind, and the S&P 500 index up 50% in 6 months as millions of jobs have been lost and as GDP is lower now than 6 months ago, consider the following headline:
U.S. Recovery Leaving Workers Jobless May Spur Company Profits.
Orwell's 1984 put it well:
"From where Winston stood it was just possible to read, picked out on its white face in elegant lettering, the three slogans of the Party:
WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH."
The title also recalls Dr. Pangloss of "Candide" that "all is for the best" and that we live in the "best of all possible worlds".
After all, if the S&P can get to 1000 with 10% unemployment with surging profits (allegedly), then why not project S&P 1100 with 11% unemployment and a record S&P 1600 with 16% unemployment? Why should anyone ever answer a phone anymore in corporate America, anyway? Voice systems will do. We can have a virtuous cycle of unending prosperity as unemployment rises. Fewer commuters mean less demand for gasoline, less wear and tear on the roads, less time lost in traffic, etc. There will more time to shop, and the government can print as much money as needed to allow these non-workers to keep the engines of profitability working. Plus as people sit around with little to do, they can spend more time eating, thus enriching drug manufacturers, manufacturers of prosthetic hips, and the medical establishment.
Meanwhile . . . as Woody Allen said to Christopher Walken's semi-psychotic character in "Annie Hall": back on Planet Earth . . .
The news out of Gallup matches that out of Discover Financial (see EBR's People More Hopeful But Can't Spend the Hope) from August. Click HERE for Gallup's latest 3-day moving average poll of people as to whether their employer is hiring, firing or standing pat. Click HERE for what they are spending (3-day and 14-day moving average data; the 3-day data is skewed by extra spending on weekends). EBR to Earth: there has been no real recovery in the real world of real people. These results are back to levels of S&P 700, not 1000.
In other words, this has been a faith-based stock rally. The economy is sick. The bearish economists got the economy right. The P/E ratio ("profit-to-earnings" per the President!) from Fed money-printing and Governmental gimmicks such as cash-clunkers or $43,000 per first-time home buyer is minimal.
It's time for a change. The change that is needed as Labor Day approaches is the creation of jobs that fulfill a legitimate economic function. The resurgence of profits at Big Finance is the wrong trend. Better that Vegas boom again. At least Vegas didn't put the world into the "Great Recession" the way the Big Finance gamblers did.
One thing that can be stated with certainty is that an 8% "health insurance" tax on all labor will inhibit both hiring and creation of small businesses.
EBR believes that the President needs to settle for bipartisan health insurance reform, hope to do well in the midterm elections, and then, with the economy presumably stronger in 2 years, "do healthcare" in a more sweeping fashion.
Copyright (C) Long Lake LLC 2009
As I recall voltaire when writing Candide was strongly motivated by the pithy maxim Whatever is is right penned by the sometimes competent king of the status quo ah but his name escapes me. As to bipartisan reform that is nonsense when the Republicans are a punch drunk middleweight up against a heavyweight who unfortunately for us has been bought off by his promoter. Then his manager will steal most of his money and he'll be left holding the bag. Obama is much more like Hoover than Roosevelt who didn't do nearly as much in the real world as he did in the world of the day's press monolith. I think your prescription for two more years of dilatory status quo would have Voltaire saying : that is a prescription written by (insert his archenemy's name) own doctor. In litigation the defense has two tactics : deny and deny and delay and delay. Both are on ample display in this muddled Republic which is characterized more and more by Bananas than Jeffersonian reason.
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