September 2012

Low Income Households Have Expenses More Than Twice Their Income

A shocking claim was made by various press sources that those at the bottom of the American economic pile have living expenses which are double their income.

The bottom fifth of the U.S. income distribution -- 24.4 million households -- on average earned $10,074 in after-tax annual income and spent $22,001 last year,

Real Consumer Spending Up 0.1%, Real Dispoable Income Down -0.3% for August 2012

Consumer spending increased 0.5% from last month, yet when adjusted for inflation was only a 0.1% increase for August. Consumer spending is a name coined by the press and means personal consumption expenditures or PCE. Real personal consumption expenditures are hugely important to economic growth as consumer spending is about 71% of GDP.

 

Bad News for Economic Growth as Q2 2012 GDP is Revised Down to 1.25%

Q2 2012 real GDP now shows 1.25% annualized growth after revisions. The advance second quarter GDP estimate was 1.5%, whereas the second revision reported 1.7% GDP growth. The BEA rounds their final GDP numbers, so the actual GDP reported was 1.3%. When we're grabbing economic crumbs, 0.05 percentage points makes a difference.

 

 

What the Q2 GDP third estimate shows is a barely breathing economy. Businesses shed inventories, consumers spent way less, a dramatic swing from the Q2 GDP advance report and investment generally is down from the 1st quarter. Shedding inventories can be a recession indicator. Durable goods spending literally vanished in Q2, also a recession indicator. The drought showed up in Q2 GDP, negatively impacting farm inventories and potentially other GDP components indirectly.

New Home Sales Decline -0.3%, Prices Pop for August 2012

August New Residential Single Family Home Sales declined by -0.3%, or 373,000 annualized sales. July's single family new home sales were not revised from their 3.6% increase. The August monthly percentage change has a ±9.3% error margin and this is why we see large revisions to new home sales figures. In other words, don't get too attached to the monthly percentage changes for odds are they will be revised.

America is Great, Just Not for Most People Who Work for a Living

despairThe never ending stream of bad news for the U.S. work force cascades upon us like a tidal wave of despair. A host of studies have come out which put into numbers what most of us know, the American worker is being taken to the brink of financial ruin and even death.

Suicide has replaced motor vehicle accidents as the leading cause of death by injury and has increased 15% since 2000. While most people who commit suicide has psychiatric disorders, the fact is higher incidents of suicide do happen during bad economic times. Even more amusing is the government response, as if the best cure for feelings of despair, low self worth is not a damn job along with a healthy dose of respect for working people.

Homeless rates have actually not changed between 2009-2011, but that's only due to a large grant by the Federal government to keep more people sheltered. Now that funds have run dry and under attack by deficit hawks, expect homeless numbers to rise.

Despite the fact that the number of homeless people was essentially unchanged between 2009 and 2011, there is much reason for concern. As this report points out, economic and demographic indicators linked to homelessness continue to be troubling. Homelessness is a lagging indicator, and the effects of the poor economy on the problem are escalating and are expected to continue to do so over the next few years.

Q2 2012 Flow of Funds Overview - Household Net Worth Declined, Corporate Cash Still High

The Q2 2012 Federal Reserve's flow of funds report was released last Thursday. Household wealth decreased $321.9 billion to $62.67 trillion in Q2 2012. The losses were in stocks, mutual funds while real estate values increased. Below is a graph of annual household net worth and notice the Great Recession wealth wipe out in the below graph.

 

The Corporate Tax Dodge - Billions in Avoided Taxes While America Goes Broke

The Senate Subcommittee on Investigations held a hearing, Offshore Profit Shifting and the U.S. Tax Code. Did you know U.S. Multinational Corporations have more than $1.7 trillion in untaxed profits stashed as undistributed foreign earnings and keep at least 60% of their cash overseas? That these earnings have increased 400% in the last decade? That corporate tax as a percentage of total Federal revenues has dropped to only 8.9%?

Initial Claims for Unemployment Just Won't Budge, 382,000 for Week of September 15th , 2012

Initial unemployment claims continue to show never ending U.S. worker malaise. Initial weekly unemployment claims for the week ending on September 15th, 2012 were 382,000,. While the DOL reports this as an decrease of 3,000 from last week's revised figure of 385,000, last week was actually revised upwards by 3,000, so one might look at this as no change.

Existing Home Sales Increase 7.8% for August 2012

The NAR released their August 2012 Existing Home Sales. Existing home sales increased 7.8% from last month and inventories are down to a now tight 6.1 months of supply. Existing homes sales have increased 9.3% from a year ago. Volume was 4.82 million, annualized against July's 4.47 million annualized existing home sales. Existing home sales haven't been this strong since May 2010.

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