State of the Disunion

Knowing of course that President Obama’s State of the Union speech last night was constructed to be more pep rally than a true accounting, I am still scratching my head over his assertion that 2015 turns a page economically for the US.

The president spoke in broad terms of how the US has come back after 6 years of malaise and that job growth and higher incomes were here for the middle class family.

Neither is true based on government data. Household income is flat and unemployment is flat to slightly higher than a year or two ago. The number of people in the workforce — or the denominator in the unemployment rate equation is far lower than 4 or 5 years ago, so the rate falls.

The labor force participation rate is now 62.7 percent, which is down from 65.8 percent six years ago.

The president even pointed to the Dow Jones industrial average as an economic barometer of how well America is doing.

Surely his economic advisers know a doubling of the DJIA has zero to do with anything coming from the White House and everything to do with Fed chiefs, Ben Bernanke and Janet Yellen, and QE programs that bought toxic debt from the banks, which freed up capital to be deployed in the markets.

This capital was ring fenced into the markets, so the Fed could contain inflation and the velocity of the $4 trillion hand out.

So when the Fed complains or worries about stag or disinflation, it’s a bit disingenuous, because Yellen could simply allow the banks to deploy the capital as loans to both business and personal to get the economy moving. That is how to get velocity up.

Anyway back to the SOTU,  if it is “morning” in America — to borrow a phrase — why are so many families “mourning”?

The president asserted 3 million new jobs were created in 2014. He didn’t say full-time jobs, he said jobs, which is supported by the data.

More Americans are working at part-time jobs than they were 6 years ago. Many of these jobs require the worker to say, “You want fries with that?” or “Welcome to Wal-Mart.”

If you look at the U6 jobless rate, which includes “marginally attached workers,” discouraged and part-time workers who want full-time work, that rate is nearly 11 percent

There are no benefits with these jobs and generally no future. That the President is touting as an accomplishment.

Quickly, two other real economic milestones that were not mentioned, but can be used as indicators of where the US is going.

  • The yield on the 10-year note is 1.7 percent. Using that yield as an indication of growth in the economy America has that a sub 2 percent gross domestic product. Not an indication of a robust economy, and far from the 5 percent blip printed in Q4 2014.
  • Gold prices have moved to record highs in yen and approaching all-time highs in euros. Gold moved past $1,300 this morning. another sign that its more “mourning” in America than not.

SOTU be damned.

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