Bizzy’s AM Coffee Biz-Econ Links of the Day (120205): 43% of the Country Believes We’re in a Recession!
NOTE: Moved “AM Coffee” post to the top for few hours (pre-lunch coffee?) because of the importance of the topic.
In an OpinionJournal.com column, Brian Wesbury, chief investment strategist with Claymore Advisors LLC, joins the chorus of the frustrated (requires free registration), and, at the end, reminds us why the economy in reality has done well in the past few years (bolds are mine; links to the page supporting the 36% and 43% “we’re in a recession” figures added by BizzyBlog):
Pouting Pundits of Pessimism
Every bit of good economic news gives them reason for despair
During a quarter century of analyzing and forecasting the economy, I have never seen anything like this. No matter what happens, no matter what data are released, no matter which way markets move, a pall of pessimism hangs over the economy.
It is amazing. Everything is negative. When bond yields rise, it is considered bad for the housing market and the consumer. But if bond yields fall and the yield curve narrows toward inversion, that is bad too, because an inverted yield curve could signal a recession.
If housing data weaken, as they did on Monday when existing home sales fell, well that is a sign of a bursting housing bubble. If housing data strengthen, as they did on Tuesday when new home sales rose, that is negative because the Fed may raise rates further. If foreigners buy our bonds, we are not saving for ourselves. If foreigners do not buy our bonds, interest rates could rise. If wages go up, inflation is coming. If wages go down, the economy is in trouble.
This onslaught of negative thinking is clearly having an impact. During the 2004 presidential campaign, when attacks on the economy were in full force, 36% of Americans thought we were in recession. One year later, even though unemployment has fallen from 5.5% to 5%, and real GDP has expanded by 3.7%, the number who think a recession is underway has climbed to 43% (page down halfway at link for both stats–Ed.).
….. Sharp declines in consumer confidence and rising oil prices were supposed to hurt retail sales; but holiday shopping is strong. Many fear that China is stealing our jobs, but new reports suggest that U.S. manufacturers are so strong that a shortage of skilled production workers has developed. And since the Fed started hiking interest rates 16 months ago, 3.5 million new jobs and $750 billion in additional personal income have been created. Stocks are also up, which according to pundits was unlikely as long as the Fed was hiking rates.
….. One key reason the U.S. economy has outperformed other industrialized nations, and exceeded its long-run average growth rate during the past two years, is the tax cut of 2003. By reducing taxes on investment, the U.S. boosted growth, which in turn created new jobs that replace those that are lost as the old economy dies. Ireland is also a beautiful example of the power of tax cuts to boost growth and lift living standards.
Economic growth is the only true shock absorber for an economy in transition. To minimize the pain of technological globalization and address the anxiety that these forces are creating, free-market policies must be followed. While tremendous pressures are building to increase government involvement in the economy, it is important that the U.S. stay the course that brought it out of recession.
I was skeptical about the ability of the WORMs (Worn-Out Reactionary Media, known to most as The Mainstream Media) to influence actual economic results until I read and sourced Wesbury’s paragraph about how many people think we’re in a recession.
Other key findings in the American Research Group data (based on “1,100 completed telephone interviews among a random sample of all adults age 18 and older living in telephone households in the continental United States”) show just how much the views of those surveyed differ from reality:
- After 10 quarters of 3%-plus GDP growth with low inflation and 5% unemployment, “A total of 35% of Americans rate the national economy as excellent, very good, or good and 63% rate it as bad, very bad, or terrible.”
- In the near-total absence of data that would indicate that there is trouble ahead, “A total of 13% of Americans say that the national economy is getting better, 36% say it is staying the same, and 50% say the national economy is getting worse.”
- This one’s more judgmental, but with no compelling evidence of economic storms on the one-year horizon, “A total of 17% of Americans say they believe the national economy will be better a year from now, 20% say it will be the same, 61% say it will be worse, and 2% are undecided.”
I really have to wonder how much better the economy would be if such a large plurality didn’t have beliefs that clearly differ from reality–after all, at least some of those clearly under the spell of what Dr. Sanity calls “Command Hallucinations” must be acting on those beliefs.
The “in recession” finding alone is the best evidence I’ve seen yet that the WORMs have had a negative impact on the economy that in a just world they would be held accountable for. Perhaps they are, as New Media continues to flourish, and the WORMs continue to lose readers and viewers. In light of the above, all I can say is “Faster, please.”
And I finally understand (a bit) why some allegedly conservative politicians in Washington who should know better are considering a tax increase (known in some circles as “repealing the Bush tax cuts”). Please, ladies and gentlemen–ignore the polls, vote the reality. Remove the expiration dates on the current tax structure.
UPDATE: Add the 215,000 net new jobs in October to the good news list, along with “objective” AP reporterette Jennifer Loven’s snarky aside: ” Bush, faced with the lowest approval ratings of his presidency….”
UPDATE 2: Willisms has a lot more on the jobs report and the growing economy.