May 2010 Wholesale Trade Sales & Inventories was released today. Wholesale sales dropped -0.3% from last month. Last month sales were a revised +0.9% change from March. This is the first decline in sales in 14 months.
Lumber and Farm products has the largest sales declines. Non-durable goods declined -1.0% from April as a whole, durable goods was +0.5% increase from April 2010.
The most heated debate in Washington these days involves deficits and unemployment. There are lots of heated rhetoric, finger-pointing, and hyperbole.
What there isn't is a surplus of actual facts.
For instance, this headline reads "U.S. should cut deficit to spur recovery, IMF says". It implies that cutting the deficit would automatically increase economic growth.
That sounds good to me. The problem is that the IMF never actually says that. In fact, the article spends most of its time warning about a drop in economic growth.
The headline was misleading, as is just about everything said in this debate.
This report is as disappointing as it is unsurprising. It's clear it will take an act of Congress to do the obvious and call China out for its currency manipulation.
"Claiming China doesn't manipulate its currency makes about as much sense as saying LeBron James doesn't play basketball.
"It's clear that China's announcement before the G-20 last month was nothing more than a charade, but the Administration seems to have fallen for this rather unbelievable promise.
"Congress must pass strong legislation to address China's currency manipulation so that America's workers and businesses can compete on a level playing field.
"We will never double exports unless we stop China's cheating.
"This is a step backward."
Don't think it's just Democrats blasting the administration for refusing to confront China, Republicans are as well.
Economist Robert E. Scott has cranked the numbers on U.S. job losses if the South Korean Free Trade Agreement is passed. Yet another bad trade deal would cause 159,000 Americans to lose their jobs over 7 years.
EPI’s research shows it will increase the U.S. trade deficit with Korea by about $16.7 billion, and displace about 159,000 American jobs within the first seven years after it takes effect.
On The Economic Populist you might have noticed the right column. We try to list other sites and blogs who have exceptional insight and writing on what is happening in the U.S. economy.
Sometimes though, one cannot say it better but miss those who did.
Must Read Post #1
The Wall Street Journal piece, Extend and Pretend, shows Commercial Real Estate loans are being manipulated to keep the losses off the books and loans out of default.
Restructurings of nonresidential loans stood at $23.9 billion at the end of the first quarter, more than three times the level a year earlier and seven times the level two years earlier. While not all were for commercial real estate, the total makes clear that large numbers of commercial-property borrowers got some leeway.
Think about this. The U.S. needs 10,600,000 jobsjust to get back to pre-recession unemployment rates. EPI:
The labor market is now roughly 10.6 million jobs below the level needed to restore the pre-recession unemployment rate (5.0% in December 2007). To get down to the pre-recession unemployment rate within four years, the labor market would have to add roughly 325,000 jobs every month for that entire period.
Creating jobs has to be a top priority for governments,” said OECD Secretary-General Angel Gurría, launching the report in Paris. “Cutting unemployment and fiscal deficits at the same time is a daunting challenge but it needs to be tackled head on. Despite signs of recovery in most countries, the risk remains that millions of people may lose touch with the labour market. High joblessness as the new normal can not be accepted and has to be tackled by a comprehensive policy strategy.
Even worse, the OECD estimates it's member countries need 80 million jobs!
Naked Capitalism's Yves Smith, along with Rob Parenteau, wrote an op-ed in the New York Times. It brings to light corporations are sitting on profits and not reinvesting in their companies and America.
Over the past decade and a half, corporations have been saving more and investing less in their own businesses. A 2005 report from JPMorgan Research noted with concern that, since 2002, American corporations on average ran a net financial surplus of 1.7 percent of the gross domestic product — a drastic change from the previous 40 years, when they had maintained an average deficit of 1.2 percent of G.D.P.
They mention the obsession with quarterly profits as one reason corporations are sitting on wads of cash. Investors are also in part to blame. The minute a quarterly earnings miss or quarterly profits are not bigger than the last, investors pummel and punish a stock.
Also mentioned the reason corporations are sitting on profits and not reinvesting is to pay obscene executive compensation packages.
The point is to create corporate tax code changes to make corporations reinvest those profits back into their companies.
The whispers on Wall Street lately have been the feared "double-dip".
There is a much louder chorus of people proclaiming that we are only looking at a "slow-down". Of course they were the same people who were telling us as recently as April that we were in a "V-shaped" recovery.
Generally speaking, Liz Ann Sonders agrees.
"I'm amazed people still say it's not a 'V'-shaped recovery, which to means they're simply not looking at the charts," says Charles Schwab's chief investment strategist...
Ah, yes. The charts. I have several issues with people who say things like this.
The ISM Non-manufacturing report for June 2010 is out. The overall index decreased to 53.8%, lower 0.7 than the the last three months 55.4%. The index is normalized to 50 for the most part. Above 50 means growth, below 50 implies economic contraction.
Employment is in contraction again, after one month of growth. New orders dropped -2.7% from last month. Below is the employment index graph, normalized to zero for the expansion/contraction 50 inflection point, followed by a graph of new orders.
Moody's has estimated 400,000 jobs from State, City and Local governments will be lost next year due to budget cuts.
Up to 400,000 workers could lose jobs in the next year as states, counties and cities grapple with lower revenue and less federal funding, says Mark Zandi, chief economist for Moody's Economy.com.
it will slow the economic recovery and raise the risk that the nation will fall back into recession as the loss of Americans’ spending power ripples through the economy. States’ actions to close their $140 billion gap without more federal aid could cost the economy up to 900,000 public- and private-sector jobs.
More estimates:
Wells Fargo economist Mark Vitner expects state and local governments to cut about 200,000 workers this year if Medicaid benefits aren't extended. That's largely why Wells Fargo cut forecasts for third-quarter economic growth to 1.5% from 1.9%.
Even if Congress extends Medicaid subsidies, Zandi expects 325,000 job cuts the next year, though Vitner says losses could be far less.
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