Transcript Economic Update April 2011

Economic Update April 2011
Daryl Montgomery
April 7, 2011
Copyright 2011, All Rights Reserved
The contents of this presentation are not intended as a recommendation to buy or sell any security.
Fiscal State of U.S.
• National Debt: $14.27 trillion
State and Local Debt $2.9 trillion
Unfunded liabilities $113 trillion
• Debt to GDP ratio 97%.
• Debt Ceiling has to be raised from $14.3 trillion
this week to avoid government shutdown.
• Budget Deficit for 2011: $1.400 to $1.650 trillion
- Cuts being sought to raise ceiling $0.033 trillion
- $1.10 trillion projected deficit in 2012
• 2010 Trade Deficit was $498 billion (most
dependent on price of oil).
Total Federal Outlays: 1900-2010
Right of Green Line Era of Keynesian Economics, Right of Red no Gold Standard
Economic Growth?
• U.S.GDP up 3.1% in Q4 2010, 2.9% for 2010
• Compare to 2008 (year of severe recession)
- GDP grew 3.3% from 2007 in original figures
- After 3 yearly revisions, is now flat at 0%.
• UK Q4 down 0.4% (some spending restraint there)
• 70% of U.S. GDP from consumer spending, but
consumers lack credit and jobs.
• Housing market (source of crisis) not recovering.
• Deficit spending supported by money printing is
holding up GDP. GDP overstated for other reasons.
Consumer Credit
Consumer Credit by Type
Existing Home Sales
Green Arrows Government tax credit programs
New Home Sales 1963 to Present
Employment – Review
• February Employment Report:
- 36,000 jobs created (revised to 63,000) , yet number of
unemployed decreased by 600,000
- reduced unemployment by 0.4% to 9.0% (not possible)
- 2.8 million unemployed not counted (marginally
attached), increase of 300,000.
• Alternative unemployment figure was 16.1%
• Benchmark changes revised total employment down by
483,000 (seasonally adj.) for December
• 192,000 jobs gained in February, 8.9% unemployment
(15.9%)
• March 31st Weekly claims: 388,000, 4-week MA 394,000
April Employment – AP April 1st
• Unemployment 8.8% or15.7%.
• Jobs added: 216,000 (1st time since 2006, PE>200,000)
Professional & Business Services: 78,000
Education & Health Services: 45,000
• Sectors eliminating jobs: construction, transportation and
warehousing, and information services,
• “A big factor in the lower unemployment rate is that the
proportion of people who either have a job or are looking for
one is surprisingly low for this stage of the recovery.” –
• “Workers' paychecks were flat in March. Average hourly
earnings held steady at $22.87, unchanged from February. Over
the past 12 months, wages have lagged behind [officially
reported] inflation.”
• “The number of unemployed people dipped to 13.5 million in
March, still almost double since before the recession began in
December 2007.”
Unemployment Post-War Recessions
Unemployment and Labor Force Participation
Forced Part-Time Workers
Long-Term Unemployment 1949-2010
Weekly Claims
Fed Policy
• Fed zero interest rate policy (and no taxes) are
supporting corporate earnings.
• Fed on 2nd round of Quantitative Easing (QE) – a
form of money printing should end in June.
• QE2 used for buying treasuries, financing 70%
of deficit for H1 2011.
• Governments do NOT print money to finance
their operations if they can borrow.
• BOJ released most funds ever into financial
system after earthquake. ECB raised interest
rates today from 1.0% to 1.25% (inflation 2.6%).
ADJUSTED MONETARY BASE –
Measure of Future Inflation
MZM Money Supply
Inflation is Here
• Global food prices hit an all-time high in
January. Oil back above $100 a barrel.
• ISM ‘Prices Paid’ was 85.0 in March, highest
number in report by far (50 is neutral). Up 21
months in a row. Recovery is inflationary.
• Chinese Inflation is rising (has raised key rate 3
times since last October).
• UK Inflation is rising at 4.4% (BOE rate 0.5%).
• Gold hit all-time high of $1465 today, Silver at
31 year high.
Chinese Inflation
UK Inflation
Official U.S. CPI
Shadowstats.com and Reported U.S. CPI