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Lying to yourself

Justin Wolfers at the NYTimes The Upshot is trying not to take the new GDP numbers too seriously:

An economic report issued this morning provides a good example of the hazards facing election forecasters. The Bureau of Economic Analysisreported that in the first quarter of this year, Gross Domestic Product, a broad indicator of the health of the economy, shrank at an annual rate of 1 percent. Even worse, an alternative and more accurate measure, called Gross Domestic Income, shrank at an annual rate of 2.3 percent. If that persisted, we’d call it a sharp recession.

But no one is using the R-word. Nor should they. Markets have taken the news in their stride, and few economists have changed their view that the economy is growing and will continue to through 2014. Likewise, consumers remain confident about their economic prospects. Their confidence rests partly on other indicators that suggested far better growth throughout the quarter, such as nonfarm payrolls, which grew by 569,000 over the same period.

And the economy motored along after that bad quarter ended, with employment growing strongly and unemployment falling in April, and new claims for unemployment insurance falling through May. Importantly, we know that the weakness in G.D.P. is partly due to one-off factors — it snowed heavily, keeping many of us indoors, rather than out making and buying stuff — and it partly reflects influences, like the inventory cycle, that don’t have an enduring effect.

In any case, G.D.P. data are known to be noisy, and subject to a lot of later revision — so much so that the difference between the first and the final reading of G.D.P. growth is typically 1.3 percentage points. For all we know, the recent measured decline in output may be revised away.

But many election forecasters rely on quite mechanical models, linking their forecasts to a single economic indicator. The worst of these models assert that a single quarter’s G.D.P. growth is sufficient; others average G.D.P. growth over several quarters, but they still put a lot of weight on very recent data. Because these computer models read the data so literally, they overreact to statistical noise. If the election were to be held next month, they would have no choice but to interpret this morning’s data as evidence of a recession, leading them to forecast a huge swing against the president’s party.

Oh, Lord, we can’t have that.  “We must protect Obama at all costs” has been the operative slogan since 2008.  Let’s all pretend that he’s a genius, playing 11 dimensional chess and his speeches are the bomb-diggity. (I just learned that phrase from number 1 child and I intend to use it all the time now).

Wolfers needs to get out more.  I meet very few people who are prospering and I meet a LOT of people these days in my part time job.  From what I can see, we are all pinching pennies.  The reason the economy is sucking is not all weather related, unless you see working people as crops that need to be periodically harvested for the last teensy bits of disposable income they have.  I swear that every industry has a meeting with some Wharton graduate giving a presentation where the numbers have been run to predict the threshold of the pain point where the consumer will be forced to fork over their hard earned dollars for gas, salad, auto insurance, health insurance, tuition, rent/mortgage.  It’s all been carefully modeled.  And each industry thinks it’s the most important one that the consumer can not live without.  We all have to have food and insurance and a place to live, amirite?  Where else are they going to go?

But income is part of a closed system these days.  It can’t be created out of nothing.  Every penny is accountable to the shareholder.  And if there is no money going into the system, it’s difficult to see how the economy continues to expand.  The contraction is real and it’s coming from the top.  The money is being hoarded or spent on the biggest yachts in the world.

The Great Recession or the Little Depression has dragged on too long but a person like Wolfers or Paul Krugman or some smart ass Democratic operative might not know it.  It’s dragged on and people are diving into the corners of their nests for a few eggs that are left, if there are any.  But this hasn’t stopped the MBAs and marketing dudes from creating new and improved ways of getting those last remaining dollars first.

So, color me unsurprised if the numbers that Wolfers finds so easily dismissible right now turn out to have real impact in November.  The economic contraction is real.  Whatever expansion was in the works may be getting strangled by the effects of the endless winter and the impact of the Obamacare individual mandate.  If you see your part time hours getting cut, you might not be quite so confident as a consumer.  Every item in a store starts to look like a moment of pain requiring a careful calculation of how many hours of work are required to buy it.

Wolfers can’t even use the R-word but I can.  It’s called a recession.  If I were a Democrat running a campaign, I’d be worried.

***********************************************************************

In addition…

Apartmenttherapy has been doing a series of posts lately on the realities of living on a strict budget.  The posts on food shopping have generated quite a bit of controversy with some readers in what sounds like the Obama contingent scolding poorer readers for not buying the best organic foodstuffs from Whole Foods.  It’s gotten ugly at times.  Even the “calming the waters” post from Cheryl Sternman Rule at The Kitchn affiliate makes a lot of assumptions that would only occur to someone at the top of Maslow’s pyramid of needs.  It’s a tragedy that we’re even having food fights like this.  Maybe Justin Wolfers should hang out in some of the blogs I visit regularly.

As for me, I have discovered Aldi, I buy bags of frozen chicken breasts at Trader Joe’s (because they are that good for that price), I am learning to avoid the “fuel perks! for food” scam at my local Giant Eagle and I am gardening this year.  Yes, yes, the weather sucked last year and all I got was squash, which I hate.  (So, I’m not planting any squash this year).  Call it the triumph of hope over experience.  I have a lot of yard and there’s no excuse for not turning it into a food manufacturing facility.  There’s a farmer’s market in East Liberty on Saturday mornings that I will visit when I can and when I’m in Target, I will look at whatever is on sale.  So there.  :-pppp

25 Responses

  1. I had to laugh at your having found Aldi’s! I have been a devotee for a couple of years. Also buy some things at Trader Joe’s. Their jar of green curry and 1/2 can of coconut milk added to cutup fried chicken breasts is soooo good with rice. I freeze the other half in the empty jar of the green curry for next time. I am shocked at how much cheaper it is from Giant Eagle. Aldi’s and Trader Joe’s are owned by same people. The produce at Aldi’s is good and so reasonable. Nothing is better than their Artisan Lettuce!
    This ongoing recession is devastating. The contraction is so obvious that to ignore it is damaging to ones health. These media types that dismiss the statistics are paid to keep this info hidden. If truth were told there would be panic! But knowing the truth is always better. This country needs some panic. Delusion is the over riding state of thinking of politicians, media and most everyday people. We can’t afford this thinking!

    • Do you live in the pittsburgh area too???

      • I live near Johnstown. We have Giant Eagle, Aldi’s but have to go to State College or Pittsburgh for a Trader Joes day. Just bought 4 jars of that Green Curry. I was in Fla over winter and stayed with friend that was really watching her pennies. Showed her Aldi’s…. She has thanked me a dozen times since. Red Rasberry Fruit Spread! Always have a spare of that nectar of the gods. Dollar General has some great buys too.
        Thank you again for your great insights and amazing honesty. It is so rare anymore.

        • Aldi’s and Trader Joe’s are owned by two brothers from the same family and the owner of Aldi’s recently died. I do not shop at Aldis, but do at Trader Joe’s. Some of the food at Aldis comes from China, so watch for country of manufacture. In China, there are no requirements that waste water from factories be treated before being put back into streams or rivers.

  2. Great post! It’s good to see you in top form. No very happy to learn that you have a part time job.

    The next resignation should be Obama’s. Now he’s exchanged Islamic extremists for a deserter? does this Bozo have any brains?

  3. I love Aldi’s. They’re produce is great-baby portabellas 10 cents/pk!! their crackers, spices, cheese are all good. Plus I’ve gotten a fire pit, enclosed gazebo, and kiddie pools for a fraction of what they cost elsewhere.

    • Oh, yes! Their special purchases! Our TV is from Aldi and 3 of our family computers are from Aldi. They are the only computers we’ve ever had that lasted well over 10 years. Amazing.

  4. Obama and the New Democrats are turning the clocks back to the era of Robber Barrons and Company towns. Meanwhile Diane Feinstein (D Bigbro’) is working to make legal what the CIA and NSA have been doing to us since forever. When the Anti-FDR Democrats are done we won’t be able to organize a chapter of the Molly Maguires without being remanded to Guantanamo or having a drone flown up our butts.

  5. While I don’t recall which brilliant post instantly made me a faithful reader a few years back, I imagine it was one much like this. Especially with such spot-on phrases like this one: “The reason the economy is sucking is not all weather related, unless you see working people as crops that need to be periodically harvested for the last teensy bits of disposable income they have.” Can I get that on a vanity plate, I wonder?

  6. It’s pretty rare to find a blog that combines a shrewd reading of politics and economics in a way that connects them to real life, but you do it really well, consistently. Yeah, I wish the reigning geniuses in the big firms and the administration would realize that people don’t feel good about themselves, spend money, or vote the way they’re “supposed” to if they’re being bled dry. I dunno. It strikes me that, if I were an ambitious pol-type guy, there’s success to be had running on a program of giving money to the rest of us instead of those at the tippy-top. Maybe more risk in it than taking lots of campaign money from rich people and doing their bidding, but it’s still surprising to me that no one has taken advantage of an obvious opening to do well politically and (most importantly) Do The Right Thing. Frustrating.

    • The Willards of Wall Street don’t care how you feel or if they bleed your wallet dry because when that happens they’ll find another group to fleece in some other developing country.

  7. This post highlights the difference between saying “the economy sucks” and “the economy is improving.” You are highlighting that the economy still sucks – and it does. There are still 6%+ unemployed and another 3% who aren’t even looking for a job but want one now. Lots of people, like yourself, are underemployed or involuntarily working part time jobs. Real, inflation-adjusted wages have been stagnant for 15 years.

    Wolfers is writing that the economy is still improving, and the first quarter was a one-off due largely to the weather (and also somewhat to the cutoff in extended unemployment benefits, which probably cut about -.3% from GDP because of the multiplier effect of spending). That’s why markets shrugged off the poor report.

    In my opinion, Wolfers is also right. Rather than wait for quarterly or even monthly reports that are frequently stale by the time they are reported, every Saturday I post a piece called “Weekly Indicators,” featuring economic reports that are updated every week. Here’s a link to a post from February:

    http://community.xe.com/forum/xe-market-analysis/weekly-indicators-big-chill-edition

    Click through to see the sea of negative numbers. In relevant part, here was my summary:
    “The coincident reports were almost all negative. Consumer spending was poor. Rail traffic was negative. Shipping was negative. Steel production was negative. YoY comparisons of gas usage are negative again.reports took big hits two weeks ago. As noted above, the bright spot is that YoY tax withholding was positive.

    “If it weren’t for the positive turn in several of the long leading indicators in the last few weeks, and that 4th quarter corporate profits look like they will be a positive, I would look at this report as indicating the start of an economic downturn.”

    Contrast that with the post I put up just last Saturday:

    http://community.xe.com/forum/xe-market-analysis/weekly-indicators-spring-spring-especially-strong-week-edition

    Again, click through to see all of the big positive numbers. Here’s the basic summary:
    “The coincident reports were more mixed. Consumer spending was uniformly and strongly positive. Rail transport became even more strongly positive. Steel production turned positive, and shipping was neutral. Tax withholding turned more positive.

    “We remain on track for a strong rebound in economic activity and the GDP in the second quarter.”

    I could literally see the numbers start to rebound sharply in about mid-March. So I have to disagree with you when you say: “ The economic contraction is real.” It *was* real in the first quarter. Since then things like rail transportation and steel production have picked up, in some cases sharply. Consumer spending has really taken off, to the point where Gallup’s report shows the most consumer spending since before the fall of Lehman Brothers in September 2008.

    Where you are spot on is that, even with the continued improvement, on an absolute basis the economy still sucks. It would be nice if Washington cared as much about the middle and working classes as it does for its big money contributors. But it doesn’t, and it doesn’t look like it’s going to for the foreseeable future.

    In the meantime, you can’t go from a bad economy to a good economy without improvement, and we continue to have improvement – not nearlly enough, and not nearly fast enough – but improvement nevertheless.

    • Sorry, I have a ring side seat on how spending is actually going and it’s not good.
      Time will tell.

  8. “It’s called a recession. If I were a Democrat running a campaign, I’d be worried.”

    And what if you were the Democrat running Hillary’s campaign?

    I’m not as enamored with her as I once was, but she would certainly be better than what we have now. And yet — her electability depends to no small degree on how people perceive our current failure of a president.

    Quandary!

    By the way, we have Aldi’s here and it’s great. So is home-grown squash.

  9. My son used to call me the bomb diggity back in the 1990’s. Nice to hear that the term has been revitalized.

    One of my favorite resources for creative ideas for “waste not want not” food preparation is my grandma’s WWII era cookbook. There is actually a chapter entitled “Win the War Through Cookery!”

  10. Roast the squash and then puree with a little butter and maple syrup. I bet you would like it then!!

  11. Linked to you from Corrente, still the best commentary on the Un-Affordable Care Act – thanks for “Dem in exile”! captures the spirit – I agree w/most of credo but move single payer and full employment, reversal of inequality, and exit from trade agreements up beyond all the marriage equality/”my rights” stuff – I’ve been underemployed for 4 years now. And just because you’re not free trade, does not make you “protectionist” – I’m tired of that shibboleth. Been doing garden for food several years (some of it anyway). Also – if the politician follows my credo (much of yours, not all, some difference), don’t care if male instead of female. I’ve felt much more discriminated against as overly educated working class person, and now over 60, than as woman.

  12. This coming November and again in 2016, I’m taking some pages out of my phone directory with me into the voting booth. Writing random names as Democratic Party candidates will yield as effective legislators as what we got infesting Washington.

    • For the last three elections, I have written on my ballot the URLs
      of websites I read. Maybe someone reading this comment
      learned of this website from my ballot.

  13. Obama is a joke. He needs to be taken out of office.

    • JB really should have said “He needs to be impeached and removed from office. It’s not a good idea to give the Secret Service the wrong idea.

      • *sigh* I left off the 2nd quotation mark.

        I can haz edit feechur, plz? 😛

  14. Off topic: Scientists have built a small-scale tractor beam. 😎

    As Dave Barry would say, I Am Not Making This Up.

    http://www.digitaltrends.com/cool-tech/scientists-just-built-working-tractor-beam/#!V2dMw

  15. It maybe “improving” but not for all. My Disney Pravda local TV channel proudly announced all the jobs lost after the 2008 melt down have been restored…

    That these ” do you want fires with that ” restored jobs pay 10s of thousands less than the jobs lost is not said

    Why can’t the US media get folks behind the last war efforts? One of the reason’s the NYT editor lost her job imo is the upper crust has not be able to get the peons on its latest war bandwagon for some time
    and an example was made

    …Syria last Summer and and then the Ukraine this Spring… where’s the new war we ordered ?? the US media is scapegoated for this failure … though Lord knows its working as hard as it can to gets us on board for the war dej-our…now Russia is the new love to hate place …Putin has to pay for stopping us in Syria ….on our way to Iran

    I’m think Dick Chaney has never stopped running things since 2000
    He’s just behind the scenes more

    But what the upper crust does not / will not take into account is while they are vastly more wealthy since 2003…We ,the Peons ,are vastly more poor… when you don’t know if you can make ends meet ever again , it tends to take the air of support for these made up humanitarian wars

    Like I’m supposed to believe we give a hang about anyone’s “freedoms”? please…oh and shall we look at the wake of our
    humanitarian wars since 2003? Everywhere was much better off before we bombed into the stone age to ” save it ”

    So now someone has bought a clue and they are trying the deserter soldier thing…if humanitarianism isn’t working to pep up our taste for war…then let’s give ’em some good old red meat feast upon

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