The Tale of Two Economies, Retold

An economic recovery is in progress.  Gross domestic product — the output of goods and services produced by labor and property located in the United States –  has increased steadily beginning in the 3rd quarter of 2009.  The economy has stopped shedding jobs by the hundreds of thousands, and the private sector actually added 100,000 jobs in June and July.

But, if you’re not feeling great about the economy, you’re not alone. As New York Times Economix blogger Catherine Rampell says, “… many Americans believe they’re still in a recession because they are indeed still facing recessionlike conditions; the turmoil isn’t just in their heads.”

The tale of two economies has been told on and off for the past 2 ½ years, since Rich Karlgaard wrote “Tale of Two Economies” for the May 5, 2008, Forbes Magazine. Karlgaard discusses how the housing market hitting bottom (one part of the economy) could mean an upswing for the stock market (another part of the economy):

“If [large caps] rally only modestly, the Dow could nip 15,000 this year. Hard to believe, isn’t it?

“Worst economy or decent economy? Buy stocks or duck for cover? The great unknown is housing prices, of course. American homes have fallen, on average, 12% since 2005. How far will they go? If houses drop another 15% to 20%, the ripple will wash over more than just builders and financials. The whole consumer economy could go south. The damage would be comparable to the 1973–75 recession, when unemployment hit 9% and stocks fell 40%.”

Housing prices, as measured by the S&P/Case-Shiller Home Price Index,  fell another 18% in the year following the publishing of Karlgaard’s article, and the stock market fell 48%, to 6538.85 on March 9, 2009. Unemployment hit a high of 10.1% in October 2009.

The stock market has recovered some.  The Dow Jones Industrial Average closed at 10653.56 last Friday – back to the levels of Spring 1999. Unemployment has edged down to 9.5%.  Still too high.  And not everyone is participating in the recovery.

The “two economies” out there can be illustrated in a number of ways:

• The He-cession continues. In December 2007, the unemployment rate for men versus women was about equal (4.5% vs. 4.4%). In July 2010, the unemployment rate for men 20 years and over was 9.7%; for women it was 7.9%.
• For those with only a high school diploma, the unemployment rate in July 2010 was 10.1%; for those with a bachelor’s degree and higher, it was 4.5%.
• The average unemployment rate for white Americans 16 years and over was 8.6% in July 2010; for Black or African Americans it was 15.6%.
• Those unemployed for less than 5 weeks numbered 2.8 million in July 2010; those unemployed for 27 weeks and over numbered 6.6 million.
• While employee compensation has increased 1.5% over the past year,  corporate profits increased 4%.
• CEO confidence is holding steady, but consumer confidence has been falling.
• Personal consumption expenditures have risen 3.1% over the past year, but personal savings has fallen -2.4%.
• The bank prime interest rate is 3.25%, the investment grade bond rate (Moody’s Aaa rates) is 4.7%, but the average credit card interest rate is 14.4%.

It’s true that inflation adjusted U.S. gross domestic product and national income are up 3% compared to a year earlier, when the economy hit bottom. But output and income are still below the peak reached in the 4th quarter of 2007. Even for those of us who are okay – we can easily make our mortgage payments, put food on the table and afford some of life’s extras – there is still a profound sense of loss as the economy climbs out of its hole.

Maybe we’re not feeling as lost as when our 401(k)s and other IRAs were down 20-40% in value (depending upon the proportion in stocks), but still, the majority of us lost equity. Most of us were planning on our retirement accounts increasing in value over time, not falling, especially not back to 1999 levels.

My grandmother lived to 101.  For me and many others, the “recovery” won’t seem real until we believe we can retire before age 80 and still be okay if we suffer the misfortune of living a long and healthy life.

The Economics of Blogging Redux

I just finished my blogging course offered through the Writer’s Studio section of Stanford University’s Continuing Studies program.  I’m discouraged.  Blogging takes time.  Unpaid time.

A few of my blogging classmates were able to write short and sweet blog posts, why not me?  Obviously their comments didn’t take hours to put together.  I microblog on Twitter, there must be some way for me to also post quickly about market and economic trends, right?  And yet I’ve spent more than forty-five minutes here at this post …

The blogging course readings reinforced my view that blogging takes a lot of upaid time, time which I know could be spent on client projects that generate revenue (I charge by the hour).  Technorati has a State of the Blogosphere Report with a post saying “More bloggers than ever are making money from blogs, however they are not the majority.”  I’m not even going to post the author’s estimate of the percent of bloggers who are hobbyists (i.e., “they report no income related to blogging”):  Apparently a survey was taken, but I am not able to find out how or when the survey was conducted, nor can I find how many people were surveyed.  And is there a revenue threshold I must meet before I can proclaim myself a professional blogger ($5? $50? $500/year)?  Surveys can easily be very poorly designed, and it’s especially hard to get a randomly selected group to represent the population you’re trying to learn about.   I spent an unsuccessful 10 minutes trying to find out the particulars of the State of the Blogosphere survey to see if I could trust the survey results.  Which just goes to prove to me (again) that quick blogging is an oxymoron.

I entitle this post “Redux” because WomanistMusings posted “Mostly  Unpaid Labor:  The Economics of Blogging” at BlogHer last April:

Blogging is work. What’s more — it is unpaid labor for most of us that do it. This may not mean much to you, but I ask you to consider that most of the work women do in this world is unpaid and this largely contributes to the economic gender imbalance. …

A good blog takes time and energy and though women are very active in the blogosphere, they have yet to reach the same kind of success as men; this is even more true if you are a WOC [Woman of Color]. …

Many think that blogging has created this brave new world because voices that have traditionally been silenced now have the opportunity to speak their truth. But the reality is that this truth costs the marginalized more than ever. Not only do we have to deal with over-privileged bodies who are full of resistance, but the lack of remuneration also reaffirms the economic divide in the real world, thus once again devaluing our contributions.

High and long lasting unemployment, combined with the current low to no out of pocket cost of launching a blog, has lowered the opportunity cost of blogging for some, definitely.  But I’m not unemployed, I have “paid” work sitting there, and yet here I am, blogging.

So why am I launching a blog now that I’m convinced the economics of blogging are so bad?  I’m writing a book, The Entrepreneur’s Guide to Market Research, and I am convinced (in my gut) that blogging will be a great way to promote my book once it’s published in 2012. For now, I’m warming up.  Eventually I’ll be writing about the book launch and inviting readers to book signings.  I’ll not blog more than once a week until then, though, unless I can figure out how to post quick and insightful blog posts.

Is the Shorter Wait at Joe’s a Declining Economic Indicator?

Last night, Friday, at around 7:30 p.m., we had only a 30 minute wait for our table at Joe’s of Westlake.  We found a table near the piano in the bar to wait.  Weird.  Normally, we’d have to wait about a hour for dinner, or head over to the more expensive Gold Mirror restaurant for a quick seat.  And normally we’d have to hang around like vultures to grab a table in the bar for the wait.  So I wondered, “Is the shorter wait an indication that the economy hasn’t yet recovered from recession, or are people’s tastes in restaurants changing?”  The same thought had occurred to me a few weeks before when we had a short wait on a Friday night.

Back in June, my husband and I were seated immediately at Carpaccio’s, our favorite restaurant here in Menlo Park.  Before the recession, you couldn’t count on a table any day of the week without reservations.  But the Saturday evening before our wedding anniversary, we decided to try for a table in the bar area.   We dropped in and were instead seated in the dining area (with a choice of tables).  Dressed in my yoga wear, I wish I’d dressed a little better and thought, “This is weird, I thought the economy was in recovery.”  I realize that the National Bureau of Economic Research (NBER) has not yet called an end to this recession, but I like to be optimistic.

Turns out that restaurant traffic nationally was down in May, according to the National Restaurant Association’s Restaurant Performance Index (May is the latest data reported, on June 30^th).  And although restaurant operators remained  optimistic about future sales growth, their optimism has been slipping.

Consumer confidence fell sharply in June, too.

Now I love being able to stop by my favorite restaurants and get a seat quickly, rather than be turned away or wait an hour, but I’m concerned.

With unemployment insurance benefits running out for many Americans, government spending falling (and the tax reduction stimulus of the American Recovery and Reinvestment Act of 2009 ending), spending in the economy will grow more slowly or even fall.

So right now, consumer and business confidence in the economy is low, and our central banker, Ben Bernanke, is concerned about the U.S. small business sector.  Mr. Bernanke spoke recently on “Addressing the Financing Needs of Small Businesses” in Washington, D.C., concerned about our need for small businesses to restore job growth in the economy.  And there’s a lot of excess capacity out there.  The industrial capacity utilization rate was a low 75% in June (the motor vehicle and nonmetal minerals industries are operating at only 60% capacity).  With businesses sitting on the sidelines in this “economic recovery,” it seems unlikely that private business investment will rebound, which means the NBER is unlikely to call an end to this recession by the 2^nd quarter of 2010.

U.S. Personal Income, Disposable Personal Income, Outlays and Saving All Up in May 2010

The U.S. Bureau of Economic Analysis released its estimates of personal income, saving and outlays for May 2010 this morning, and they’re all up.  But I wonder:  Where is the personal income growth (to $12.3 trillion) coming from?  It’s hard to believe in growth when more retail shops and commercial spaces in the neighborhood become vacant.  I decided to dive into the numbers, and found some good news:  Manufacturing wages and salaries have increased by 3% since December 2009 (they totaled $672 billion in May).

Nonfarm proprietors’ income also grew a strong 2.9% from December, to $1,057 billion in May.  The data are seasonally adjusted, so things’re lookin’ up for small business owners and the self-employed.  The good national news prompted me to take a closer look at my own numbers, and my unadjusted business revenue for May was up 42% over December 2009 levels.  Not bad, especially since I’ve done a good job keeping costs low ~ maybe by the end of the year I’ll find that my proprietor’s income grew, too.

Some groups of people have taken hits:  Farm income was down 25% in May (to $30.5 billion) when compared to December 2009.  Interest income fell 0.2% from December (no surprise there, with many 1 year CD rates 1% or lower now), to $1,235.6 billion.  Dividend income also fell 2.9%, to $549.4 billion (are corporate profits falling, too?).

Personal saving has grown at a faster rate than personal income.  Saving as a percent of after tax/disposable income was 4% in May, up from 3.7% in December 2009.  Saving as a percent of disposable income reached a low of 0.8% in April 2005 and April 2008.

One month’s good data does not a trend make, but it does appear that income and savings growth has been steady since December.   That might explain why there isn’t as much economic angst out there as there was this time last year.