Those Economic Data
Monday June 4, 2012
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From Bayeux, France
I am in Normandy for the annual D-Day commemoration on Wednesday. As part of this year's festivities the World War II Foundation, headed by Tim Gray is presenting a statue of Major Dick Winters who was the central character in "Band of Brothers."
More about that on Wednesday.
As I type this it is 5 AM Monday morning in France That means it is 11 PM Sunday night on the East Coast of the United States.
That is only useful because I am looking at the Asian markets as they open for business after Fridays dreadful jobs numbers. As of this moment both the Japanese and Hong Kong market indices are down two percent. The European markets are set to open lower in that same range which means if the Dow follows suit it will lose nearly 250 more points today and end well below 12,000.
Other than my 401(k) being worth about 268.67(k) or minus one-third of its value, I am not much of a player in the stock market.
However, like you and everyone else I have a monetary interest in the direction of the economy.
The direction appears to be decidedly down.
On Friday both President Barack Obama and Governor Mitt Romney used the numbers to point fingers: Romney at Obama; Obama at Congress.
The GOP should make certain that every voter understands that Republicans control the House, but Democrats control the Senate. I know about the whole 60 vote thing and how Senate Republicans are blamed for holding things up, but Harry Reid (D-NV) is the Majority Leader and he can bring any bill to the floor any time he wants.
In case you were out of the office on Friday, only 69,000 net new jobs were created in May forcing the headline unemployment rate to climb from 8.1% to 8.2%. In addition, what is known as the U6 figure - which includes people who are underemployed or want to work but have become discouraged - jumped from 14.5% to 14.8%
If you want the official definition of the U-6 rate you can find it on the Bureau of Labor Statistics page, but I've looked it up for you:
U-6: Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.
Not only that, but according to Josh Mitchell, writing in the Wall Street Journal:
"The jobs report came a day after the government downgraded its estimate of economic growth in the first quarter to a 1.9% annual rate, down from 3% in the fourth quarter of 2011."
Which completes the viscous circle: Employers see the economy slowing down so they hold off on hiring new workers. Workers see the unemployment rate going up so they hold off on buying anything other than necessities. Store inventories begin to build up because consumers aren't buying and that causes employers to slow their manufacturing, thus shedding workers.
There is an old political hack's rule of thumb that voters take into the polling booth their sense of the direction of the economy in mid- to late-summer. I've never seen any actual polling on this, but let's take it as read for now.
If the U.S. economy - indeed the world economy - continues to weaken over the next six to eight weeks, it will spell a very difficult re-election for Obama, no matter how the economy is actually doing in the run up to election day.
In the infamous "It's the Economy, Stupid" election of 1992, the economy had begun to recover by election day but too late to aid George H.W. Bush in his campaign against Bill Clinton.
Ross Perot was in that race and the economic message played into his hands as well as he ran largely on a platform of keeping jobs from going to Mexico (that "giant whooshing sound") and reducing the deficit.
According to the RealClearPolitics average of national polls, Obama's lead over Romney has shrunk to 1.6 percent, but the impact of Friday's numbers are not fully represented so all eyes will be on the tracking polls as we move through the week.
As I finish typing this at 5:40 AM in France, CNBC.com has changed its headline to:
Tokyo Hits 28-Year Low Amid Global Rout
On the Secret Decoder Ring today: Links to the Wall Street Journal's analysis of Friday's jobs report and the Wikipedia entry for the 1992 Presidential election.
Also an amusing Mullfoto taken along the train ride from Paris and a Catchy Caption of the Day.
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