OK I admit it’s a stretch, but what else am I to do? Every day we see news that confirms the obvious. The economy, while recovering, is doing so at such a snail’s pace that most of us don’t notice. We are all running out of useful analogies to describe it. Our drift has gone adrift.
Take today’s report on new claims for unemployment assistance: it induces a yawn. At 367,000 it is marginally better than most people expected, and is marginally worse than last. So there is precious little information being conveyed. All we can say is that we know that already. The economy is woeful at generating jobs, and will stay that way until demand perks up.
So, just for fun, let me rant about the lack of coherence in the media when discussing today’s report. Here, for instance, is a quote from the Wall Street Journal’s MarketWatch.com website:
Economists see little chance of an upswing in hiring before the end of the year. Most consumers are husbanding their money and businesses have also grown cautious, worried about a political stalemate in Washington and global economic slowdown.
Let’s break this down.
The first sentence is uncontroversial. Most economists do, indeed, see little chance of an upswing this year. The same can be said for the early stages of next year. It is only later in 2013 that the more bold forecasters see an improvement such as it is.
Nor is it controversial to say that most consumers are husbanding their resources. That is the most notable characteristic of this crisis. To the extent that the crisis was brought on by an overhang of debt brutally exposed in the aftermath of a real estate bubble, husbandry of what’s left became paramount. The effect is everywhere around us: demand fell drastically, taking with it any hope of rapid recovery.
It’s the next phrases that gets me heated: ‘… and businesses have also grown cautious, worried about political stalemate in Washington …’. Ummm. No. Business has grown cautious because of the husbandry mentioned before. The impasse in Washington certainly adds to the problem, but it isn’t the primary problem. It’s almost as if the writer wants to negate the demand side narrative and so inserts this insidious supply side element. The way to think of this is to consider what would be going on were there no impasse in Washington. Either we would have more stimulus, in which case demand would perk up and business would react positively. Or we would have a commitment to supply side economics and austerity, in which case demand would not perk up and business would react negatively. The demand side narrative dominates the outcome either way. The impasse is incidental. Unless, of course, you are committed to the market magic of supply side economics. In which case why mention the husbanding of resources by consumers? It wouldn’t matter to you and your explanation of the economy’s malaise.
So, either the writer has no theoretical viewpoint, or is just muddled and is hedging his or her bets. But, unfortunately this mixed narrative helps drape the issues in fog and makes getting public support for breakout policies very difficult. It is all too common a problem. The media, it seems, has no understanding of the crisis beyond that which it reads in its own columns.
Naturally economists don’t exactly enlighten the media either: there are more points of view, theories, and ideas than there are economists. Unfortunately the economics profession is part of the problem not the cure.
As for the second of today’s reports, factory orders, the less said the better. They tell a confusing story. Orders fell 5.2% in August, which while a significant drop, is actually better than the numbers analysts were looking for. The reason being that earlier in the year orders were inflated by huge activity in aircraft orders. Once that bulge was done with orders were bound to fall back to a more normal longer term trend. So all today’s news is letting us know is that the bulge is done with. Take out aircraft and orders grew very slightly. The only tidbit of news worth noting in the report was the 0.6% rise in inventories which now stand at levels not seen since 1992. That’s not good news. It portends a decline in factory activity as manufacturers bring sales in line with production. Or, alternatively, it could mean that a couple of giant shipments arrived from China as stores get ready for the selling season. I think the former is more credible. So look for lower manufacturing activity in the new year.
All this simply adds to our ongoing story. We are stuck in an economy defined by low demand. Until policy is brought into line with that reality we will remain stuck.
