State of the Economy

I have yet to publish my outlook for 2010. I have been trying to look for signs that we will see some light at the end of the tunnel. I have been trying to look for signs that our Government and the President get it. I have yet to see those signs. Don’t these people ever study their history; don’t they learn from the past mistakes we have made?

Today the US Labor Department announced that the unemployment rate in March remained unchanged at 9.7 percent. My prediction is that we will be very lucky if this figure dips below 9.5% any time this year. Only 162,000 new jobs were created on non-farm payrolls, this is well below than what was expected. I am not sure how anyone expected much more; all you have to do is look around to see what the economy is like.

To top this off is that 48,000 of those were temporary workers hired for the Census, another 40,000 temporary workers were hired health service workers. In the government’s future figures they plan on counting about another 550,000 additional temporary Census workers. In several months, these workers will be out of work again. Over 6.5 million Americans have been unemployed for six months or longer, that is a record!

The President and his staff do not think that unemployment will fall to 5% or below until about 2017. That is almost 7 years away. They believe this because they do not have the answers and do not want to follow what has proven to work in the past. That is because they want change for changes sake and currently are only doing things that history has shown does not work well. We live in a capitalistic society, in this society there will always be ups and downs. The proven way to get out of a recession is to spend your way out. Until this government figures that out, the economy will not move.

The spending has to come from the American people, not the government. Stimulate the middle class people to spend again and the economy will start to grow. It is a ripple effect. If you would have found a way to get all that money into the hands American taxpayers instead of bailing out all these companies where only the top executives have really benefited, the economy would have already been growing. If people had more money to spend - they would be more confident. Then they would go out and buy things, the more they buy the more products will need to be produced. The more products that are produced, the more workers will be needed to produce them. It really is a simple cycle, it is a proven cycle. But the current government wants to do things different, they want to bring down capitalism and become more socialist by controlling more and more of the corporate world. I have yet to see my benefit of the government owning part of GM. Since we the American people pay for the bailout with our tax money – where is my free car – we all deserve that for what was given to them. Ford did not take any money and they fixed things on their own – the capitalist way.

The high unemployment rate is becoming an Achilles heel for the Democratic Party, who is currently in control of the White House and Congress. The party is facing pressure to create new jobs. Why should government create the jobs, they need to stimulate business to create more jobs. How do you do this? Hmm – we if you stimulate the American taxpayer to go out and spend – guess what happens – Bingo!

There was a little movement that showed a slight increase on economic expansion of about 5.6%. But – much of this resulted from inventory adjustments by many businesses. Businesses greatly decreased inventories for most of last year, but slowed the decrease quite a bit in the fourth quarter of last year. Businesses are estimated to have shed their inventories by about $138 billion in the third quarter and about $160 billion in the second quarter. In the fourth quarter this amount was slowed, as inventories decreased only about $19 billion. This change in the fourth quarter added 3.75% to the fourth-quarter GDP rise. Now some of those inventories need to be replenished, so we may see a little uptick of maybe 3% or so a month for the next few months.

My final prediction this year is again based on the price of razor blades. You know the price is getting up there when you see all the stores start to lock up their supply of razor blades. Inflation will start to tick up slightly, the Fed will need to inch up the interest rate at least a quarter of a point in the next quarter and maybe another quarter point before the end of the year to keep things in check. It should all be a system of checks and balances, which is the only control our government should have. As far as owning businesses, they are out of their league. I believe we will not start seeing any sustainable growth until about the second quarter next year, the only thing that might speed this up is if American taxpayers, especially the middle class are somehow stimulated to spend again. This again is my explosion of thought!