Economy slowing down more than expected

From the WSJ:

The U.S. economy grew more sluggish than initially estimated in the second quarter, and corporate profits nearly dried up, further evidence that the recovery is losing steam.

Gross domestic product, the value of all goods and services produced, rose at an annualized seasonally adjusted rate of 1.6% from April to June, the Commerce Department said Friday.

In the government's first report of the economy's benchmark indicator a month ago, the growth rate was estimated to have slowed to 2.4% after a 3.7% expansion in the first quarter.

Still, the revised estimate for the second quarter was above expectations for a 1.3% gain among economists polled by Dow Jones Newswires.

Friday's report also showed that companies barely managed to post profit gains, following several very profitable quarters. After-tax earnings edged up 0.1%, well off the previous quarter's gain of 11.4%. First-quarter profits were revised down from the initial estimate of a 12.1% increase.

Year over year, profits remained 37.7% higher, with companies cutting costs by trimming payrolls.

So, it is now clear that GDP is in a downward trend after a brief sugar high in the 4th quarter of 2009 from the so-called stimulus package. Here are the GDP numbers:

1st quarter of 2009: -4.90%

2nd quarter of 2009: -.70%

3rd quarter of 2009: 1.6%

4th quarter of 2009: 5%

1st quarter of 2010: 3.7%

2nd quarter of 2010: 1.6% (revised downward from 2.4%)

Bad economic policy ideas continue to abound: The very same people that trumpeted from the highest tree tops that the stimulus was and has worked are now running around telling us that it simply wasn't big enough. Now we have liberals in Congress making noise about a second package. The first one didn't work so they want to try it again! We even see liberal economist Paul Krugman calling to use Fannie and Freddie, agencies that are in conservatorship and that currently carry $5.5 trillion in public liabilities, in more useless transfer schemes. My lord, when will the madness end?

Obamaville

So, this is the "summer of recovery?"

1) Thousands showed up for Section 8 public housing applications in the hot Atlanta sun yesterday. We should get used to crowds like this as long as the White House believes that a super-regulated command economy will solve all our woes.

2) Some in New York City were protesting for MORE jobless benefits. I say what these people need are jobs. Where are the jobs Mr. President?

Leading economic indicators swoon

Evidence that the economy may be slowing. Do you think that all the new and untested regulatory hurdles, higher taxes, and ObamaCare will make matters better? Don't bet on it.

Companies are sitting on their cash

According to this report, non-financial firms have $1.6 trillion dollars in cash. My guess is that they are sitting on all this money due to all of the uncertainty that is expected when taxes rise in 2011.

I'm sorry, but this is still a waste...

According to this story on CNN, this one stimulus program is popular with Republicans because it puts people back to work:

There's at least one stimulus program that's creating jobs and winning praise from both sides of the political aisle.

A little-known Recovery Act initiative is expected to put more than 200,000 unemployed people back to work in 32 states and the District of Columbia. It's called the Temporary Assistance for Needy Families Emergency Fund, and it subsidizes jobs with private companies, nonprofits and government agencies.

But the $5 billion it receives runs out on Sept. 30, even though employers and state officials administering the money say there's lots more demand out there...

The "program will provide much-needed aid during this recession by enabling businesses to hire new workers, thus enhancing the economic engines of our local communities," Barbour said when the initiative launched last year.

While this program sounds promising at first, it essentially subsidizes hiring until taxpayer funds run out. Does that sound like an efficient way to run an economy? This is a perfect example of how people are fooled by short-term results while the long term ramifications are not even explored. CNN thinks this program is putting people back to work but this program is taking funds out of the private economy and having it redistributed by federal bureaucracy. How efficient is that?

Small businesses not hiring

More evidence that the "stimulus" has done nothing for small businesses and that matters will only get worse:

A payroll services firm says employers with no more than 19 workers made fewer hires in July than in any month since October. Those companies usually drive the unemployment rate down.

For the recovery to gain steam, most economists believe small businesses need to be strong enough to hire new workers. But according to one measure, the employment picture in this sector is weakening.

Intuit Inc., which provides payroll services for small employers, says the nation's tiniest companies had fewer new hires last month than any time since October.

The data are further evidence of a trend that has had many economists worried for months and intensifies concerns that smaller firms may not be robust enough to help lead the country out of its financial slump. The slowdown in hiring is particularly troublesome, experts say, because small businesses typically hire first during a recovery. A reluctance by little companies to add positions could mean that the big firms, which typically lag behind, will add jobs even more gradually.

"It's a bad sign," said Susan Woodward, an economist who tracks small business employment for Intuit. "Small businesses hire first — and they're losing their steam."

Does anybody believe that tax hikes next year will help small businesses?

They refuse to see...

This was my comment to this post:

There are three ways to increase aggregate demand:

1)”Prime the pump”–transfer wealth from the private economy to the public and then redistribute.

2) Have the central bank print more colored green paper.

3) Cut taxes.

Numbers one and two have been tried and we have little to show for it. Jan. 1, 2011 will be very interesting when taxes bump up again.

With less people working and paying taxes (the real unemployment rate is closer to 17% IMHO), those that are working will have to take up the slack with more taxes to pay for all the promises made by the political class. Somebody needs to stop shoveling before the hole gets too deep.

I have noticed on many liberal blogs of late an unmistakable air of denial on how policies by the Obama administration has essentially hurt our economic recovery. Instead, they have tried desperately to find an answer for the lack of job growth and the precipitous economic recovery. Some say that the stimulus wasn't enough, others say that this sluggish, limping growth is the "new normal" because of competition from China, Brazil and India---developing nations with economies that are half the size of the U.S. economy combined! (The total GDP of Brazil is roughly the GDP of the state of Texas!) I've even seen posts praising the Obama administration for saving us from the Great Depression (by the mastery of Tim Geithner!) that would have surely followed if a stimulus would not have been passed; this, of course, ignores the sad fact that the stimulus was essentially a giant wealth transfer scheme that pushed off the inevitable reckoning which fast approaches.

I am convinced that many of these liberal bloggers refuse to see the coming economic storm and the failure of Obama's interventions into the economy because it is simply too psychologically painful to admit that their man was wrong or that liberal fantasies of wealth distribution will not make us more prosperous. So it continues.

Unemployment rate drops but most of the jobs created are temp jobs

From L.A. Times:

A burst of hiring of temporary census workers helped push down the unemployment rate in May, but the nation's private-sector employers added a mere 41,000 new jobs last month, the Labor Department said Friday.

The jobless rate edged down to 9.7% in May from 9.9% in April, but that was because the federal government added 411,000 jobs for the decade population count. Those jobs were expected and will disappear quickly over the summer.

Where are the green shoots?

So according to the BLS 431K jobs were created in May…41K were in the private sector and 390K were temporary government census workers. This is hardly good news particularly since this temporary bump will be short lived.

Based on employment patterns for the 2000 census, nearly all such census employment gains should reverse out of the data by the end of September, with June payrolls reflecting the first outright contraction in the reversal of current hiring.

Let's face facts, the "stimulus" was a very expensive joke that essentially pushed off the inevitable hardship that states are going to have to deal with sooner or later and that taxpayers are going to have to pay back with interest to China. And all the "green collar" jobs that Obama promised would save us all? It was all B.S. This is an epic train wreck.

The cold hard fact is that Obama's economic plan is not working and is not going to work: it's all a wealth transfer scheme while printing dollars in order to evoke the short-term Philips Curve. But this time, unlike other times, the coming (and current) tax burden to businesses and citizens due to massive debt is dampening economic growth.

Liberal economic plan is working to perfection...

From USA Today we find out that government payouts are now larger than private paychecks:

Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.

At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.

Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.

The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. "This is really important," Grimes says.

The recession has erased 8 million private jobs. Even before the downturn, private wages were eroding because of the substitution of health and pension benefits for taxable salaries.

The Bureau of Economic Analysis reports that individuals received income from all sources — wages, investments, food stamps, etc. — at a $12.2 trillion annual rate in the first quarter.

This is a worrisome trend that I don't see curtailing anytime soon with the wretched policies coming out of Washington.

Around The Horn...Newsworthy Links And Posts!

1) Good luck in trying to tax the rich to close the deficit.

2) Nearly half of U.S. homes escape taxes.

3) Mortgage rates jump higher as Fed stops buying mortgage-backed securities.

4) Another liberal crusade and another evil chemical that they need to save us from.

5) Milton Friedman on hope.

6) Is the Tea Party like the KKK?

A 14 Trillion dollar economy

I find that many people really do underestimate how large the U.S. economy is compared to other countries. The chart below, provided by Mark Perry at Carpe Diem, replaces the names of states with the name of a country that has a similiar GDP.

You can look up the data for U.S. states here
and for foriegn countries here.