January 06, 2018

December Employment Slump Masks Massive Economic Boom

Timothy Birdnow

The Patriot Post has an article discussing a December decline in economic growth. According to the article:

"December’s jobs report was underwhelming, particularly when compared to recent months. For example, 252,000 jobs were generated in November, but December saw just 148,000 — a month-over-month reduction of 104,000 and about 42,000 fewer than economists’ expectations, according to CNBC. At 4.1%, the headline unemployment rate remained static, though the U-6 rate, a better measure, ticked up to 8.1% from 8%. Most of the jobs report blame is being pegged on the retail industry, which fell by roughly 20,000 jobs, and that certainly makes sense as brick and mortar stores are still grappling with Internet sales. But other factors may be at play.

While the jobs numbers failed to meet economists’ expectations, there was one person who anticipated the possibility of a lackluster report. On Nov. 30, meteorologist and Patriot Post contributor Joe Bastardi warned, "Caution: December Weather May Cause Skidding of the Economy.” Americans were accustomed to unseasonable warm Decembers in recent years, but Bastardi foresaw a major change this time around. He wrote, "The potential for more extreme cold between Dec. 10 and Jan. 10 has us very concerned.” In fact, his research revealed that the coming cold "would have a huge effect on the economy in almost all sectors from the Plains and areas east.”"

End excerpt.

Fair enough. Please notice I
observed that the Christmas sales weren't all they were cracked up to be.
I was derided in many conservative circles for this, but I was right. And I laid the blame squarely on the media and the Progressives who led a war on Chrismas this last year. But Joe Bastardi is correct in claiming the cold weather played a part. But I'm not sure how much a part it has played. Here in Missouri it has been bitterly cold, as cold as it ever gets in these parts, and yet my coworkers tell me that our business is absolutely booming. I work for a property management and sales company (I've been on hiatus for a bit) and they are renting and selling at a ridiculous rate, in the worst month of the year for both. I was tole by a sales agent that he listed a house for nearly four hundred thousand dollars (a very pricey sum in the cheap market of St. Louis) and he got almost all of it within one week - until now the house would have sat six months or longer at that price point. Clearly people are confident of future earnings.

It hasn't been like that since before the housing bubble burst. Cold weather isn't stopping people from moving.

Which itself may account for the slumping December; people are spending money on expensive items and not the nickle and dime stuff.

Existing home sales are higher than at any time since the crash in 2008. As the National Association of Realtors observes:

"Existing-Home Sales. Total existing-home sales jumped 5.6% to
a seasonally adjusted annual rate of 5.81M in November from an upwardly
revised 5.50M in October. After last month's increase, sales are 3.8% higher than
a year ago and are at their strongest pace since December 2006"

End excerpt.

Meanwhile rentals have increased by 19.2% meaning more young people are moving out of their mother's basements and also that established homeowners are preparing to upgrade, renting while they sell their current homes. And rents grew at a rate of 2.7% despite increased home sales and a solid year of hysterics and acrimony by the media. The uptick in rentals is not because of discounting of prices.

So people are on the move and putting such a sizable chunk of change out means less money to spend on other items.

But what of car sales? Does this dovetail with the big ticket item theory?

Well, yes and no.

Auto sales ended the year mixed.

"Major automakers on Wednesday reported mixed U.S. sales figures for December, helped in part by large consumer discounts aimed at moving vehicles off dealer lots by the end of the year.

December capped another strong year for U.S. new vehicle sales, with final 2017 figures - which are yet to be in - set to be just shy of the record 17.55 million units sold in 2016.

[...]

General Motors Co (GM) reported a 3.3 percent drop in sales in December, driven by a decline in lower-margin fleet sales to government agencies and rental car companies. The company's retail sales were up 1.8 percent in December.

For the full year, GM's sales were down 1.3 percent. The automaker said its average transaction price hit $35,400, above the industry average of $31,600.

The No. 1 U.S. automaker said it expects industry-wide U.S. new vehicle sales in 2018 "in the high 16 million-unit range."

End excerpts.

There are reasons for the drop in year-end sales. First, as the article states, sales TO GOVERNMENT dropped as the Obama-era of public sector largesse ended. Couple that to high discount rates (which auto makers don't like because they reduce resale value) and a changing market (the return of the SUV) and the dealers had to make do with thin inventory as the manufacturers gear up for changing demand. And while the article does not mention it, the fact is Obama subsidized car sales to a large degree and a lot of people are stuck with the rice burners he was pushing, and are loathe to buy new vehicles when they have reasonably new ones in their garages. Cash for Clunkers put a lot of people in cars they don't really like but aren't ready to part with at this point. That will change.

Also, a record breaking 107 million Americans traveled for the Christmas season, which takes a bite out of their December shopping budget. In fact, travel expenses increased last year by 12.5% with over a hundred billion spent on summer vacations.

December's slump can also be attributed to the Federal Reserve raising interest rates by a quarter percent, something they never did to Obama, more than likely with the intent of sticking it to Trump. (I've always believed this Keynsian idea of the economy "overheating" is a putrid pile of parrot droppings; government spending causes inflation, not economic growth.)

Reuters crows about 'cooling economic growth in December", the Washington Post whines that we only added 148,000 jobs in December - this despite so many liberal media outlets being thrilled with comparable job growth when it happened on Obama's watch. Try as they might, even these bastions of leftist Trumpoclasty have to admit that times are good, no matter how much cold water they spill on the nation.

Good news from all over! But don't expect to hear any of this from the mainstream media, who will pound the notion that Trump benefited from the hard work of Obama (after eight years of no growth) and that the gravy train is over. Don't believe it.

It's only just begun raining gravy, and ours is made from cream!

Posted by: Timothy Birdnow at 11:35 AM | No Comments | Add Comment
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