US Economy

[DBHunter7]

Anyone have an opinion on whats going to happen next concerning the United States economy?

[Gaulkin]

Gasoline is going higher......

[malumu200]

The country has to make some drastic changes. with the prices of gas going up it's a domino effect. I just read in the Seattle times that the all mighty Starbucks is closing down 600 of their "under preforming" stores. I thought they would never stop, but it's just a small example of what's going on in this country. The days of cheap energy is gone. In simple terms America has just gotten "bitch slapped" and it's feeling it. This is definetly a topic that will be at the forefront of this election year.

In my Opinion when the time comes where this country has to much a division between Rich & Poor and no longer has a so called "middle class" thats when we need to be afraid of a revolution. History has shown this to be a proven fact.

I'm optimistic that America will get out of this "recession" only with change in the way that this country has operated.

[antonio24]

Gas costs more than double in Europe and people make less. People are just spoiled here in the US. Chillex!

[pboychuk]

learn to drive less, and drive more economic vehicles, its not that hard..

[Aletheides]

Probably another depression.

[just1guy]

Probably another depression.

I think that's unlikely. A recession definately, it's here.

Starbucks may be closing 600 'underperformaing' stores, but keep in mind that just represents only 1/5th the stores it opened last year alone. In boom times, that would just be called streamlining.

Gas prices going higher actually may have a long term positive impact on the economy. It's forcing companies and people to innovate. Innovation drives new business.

Recession doesn't mean no one is making money, it just means less people are making money. A time to get creative.

[jasaunders]

My opinion solely, and probably the only person that thinks this way.
No depression, no recession. We're in nothing more than a media scare, which has caused consumer confidence to drop significantly. I mean really, if the news didn't say how bad off we were every day, we wouldn't be here. The consumer confidence causes peoples spending to drop and causes excess speculation in the markets, which exagerates any gains or losses. The Dow has been a rollercoaster. Even when it goes up, it shoots up. There's no moderation.

Good thing is, the economy has not contracted, at least not yet, and I don't think it will. Unemployment isn't that high. And if you read the actual unemployment reports from the DoL, they have tended to rise recently just because more people have entered the labor market, which is a good thing. It helps to know the difference between the establishment and household unemployment surveys and how the numbers can be misleading. For instance, the news can say unemployment increased by 50,000. But if 200,000 people newly entered the labor market, that's a good thing.

Oil prices are high solely based on speculation in the futures market. The price has doubled since 2007. Do you really think demand has doubled, or supply has halved? Some days, the price spikes 5%. Do you really think worldwide demand for oil spiked 5% in one day! It's ridiculous. The derivatives market was created to hedge against risk. Instead, it has created risk where none existed before. Congress needs to overhaul the market and either have it more regulated or increase margin requirements. When the oil futures market vastly exceeds all of the proven oil reserves in the entire world, we know there is a problem. It's only a matter of time before the bubble bursts.

As for gas prices, have they really hurt anyone that much. I mean seriously? I commute 50 miles a day for work. I have to fill up about every 4 days. I used to spend about $40 to fill up my tank, now I spend about $60. In a given month, I now spend about $100 more in gas. Does this suck? Of course. Is it killing me and making me file for bankruptcy, no! If people don't have a spare $100 in their budget for this, then they were already living beyond their means. If your financial well-being depends on $100, you need to adjust your budget. I'm sure gas prices hurt lower income and mid-low income individuals heavily, but for the vast majority of people, I think there is a huge exageration of whining going on.

There is a problem with credit markets and capital, but this is due to businesses overextending themselves. Lesson learned (I hope). Same thing with real estate. Both borrowers and lenders got in over their heads. Lesson learned. Don't borrow what you can't afford, don't lend what you can't afford to lose.

I think we'll snap out of this consumer confidence crisis within 6 months. I think we will head into 2009 full steam ahead.

[just1guy]

As for gas prices, have they really hurt anyone that much. I mean seriously?... In a given month, I now spend about $100 more in gas. Does this suck? Of course. Is it killing me and making me file for bankruptcy, no!

You make some good points, and I agree with the oil speculation, but this point I disagree with. Yes, it really hurts companies. Many companies rely on travel. One of my customers is a regional trucking company. Every time gas goes up $.01 it costs them $1,200 a day. If you estimate an easy to round dollar of increase in gas over the past year, that's $120,000 a day in costs increase since last year! That's hard to make up in surcharges and travel charge increases especially when there are existing contracts in place.

[jasaunders]

You make some good points, and I agree with the oil speculation, but this point I disagree with. Yes, it really hurts companies. Many companies rely on travel. One of my customers is a regional trucking company. Every time gas goes up $.01 it costs them $1,200 a day. If you estimate an easy to round dollar of increase in gas over the past year, that's $120,000 a day in costs increase since last year! That's hard to make up in surcharges and travel charge increases especially when there are existing contracts in place.

I agree gas prices hurt businesses, especially ones with large transporation costs. I was only talking about consumers. I don't think gas prices have hurt consumers as much as everyone wants to think.

[just1guy]

IMHO, it will reach consumers. When that trucking company I mentioned gets to recoup travel costs, the costs to ship go up, when that happens the products that get shipped go up, and after that the price of those products go up. Gas prices have gone up so high so quickly, the consumer market hasn't had a chance to feel the effects....yet.

[Aletheides]

The gov doesn't report the correct numbers when it comes to unemployment or inflation.

Our credit-filled boom is only going to bring a credit-crunch bust. That's just how the economy goes.

[SophieM]

I'm in the UK...but we're headed in pretty much the same direction. The government needs to improve Public Transport and the petrol costs on households will lessen...I can't believe we burnt out food mountains in the 80s...

I think there needs to be a decision if we are going to press ahead with our green agenda or focus all our attention on the current situation...

[jasaunders]

The gov doesn't report the correct numbers when it comes to unemployment or inflation.

I would love to hear your explanation on this.

[Aletheides]

I would love to hear your explanation on this.

Sure thing.

First off the worst thing you can do in recessionary times like this is blow it off as media hype and continue your day as normal. Our economy works in cycles - it always has and always will.

Invest accordingly.

There's money to be made, and there's also money to be lost, so be careful.

I'm a big fan of Peter Schiff. His economic predictions are always spot on and he has sound advice.

This video was back in 2007 when oil was 82 dollars a barrel. He correctly predicted that it was going to do nothing but shoot up, and that it has - it's $144 now as we speak. "Consumer prices are going to go through the roof, and if you think you're having trouble paying your mortgages now wait until you need to buy food to eat." He also touches on government reported inflation rates, which shouldn't be trusted - ever.

Also remember jasaunders that the price of oil is not just dictated by demand and speculation, but inflation as well. Commodity prices go up against a weak dollar, and lo and behold the dollar has been doing nothing but dropping like a bad habit lately.

Right now the Gov says the rate of inflation is 2-3%. The real rate is probably somewhere near 8%-10%.

As always, government officials are attempting to underreport the inflation estimates. Although the CPI shows that inflation increased from a monthly rate of .2 percent in June to .3 percent in July, government officials have reported that inflation declined from June to July. They get this result by estimating a "core inflation rate." This core rate excludes product prices that are "volatile," and by volatile they mean rising faster than other prices. Excluding the most inflationary prices from the CPI estimates allows the feds to conceal the true harm of inflation.

Of course, at all times, some prices are rising faster than other prices. Prices don't rise in tandem. Inflation always affects some goods more than others. Omitting volatile prices from the estimates is simply a way to discount inflation's effects on the public.

The CPI is a government statistic, and since the government's expansionary monetary policy creates the inflation, officials have an incentive to underestimate these numbers. Underreporting inflation helps government officials in at least three ways.

First of all, it provides more favorable economic news. Elected officials want to report and take credit for any positive economic announcements.

Second, if the government reports a rate of inflation that is lower than the actual inflation rate, this will increases tax revenues through bracket creep. If the actual inflation rate is 10%, but the measured rate of inflation is 4%, some taxpayers will be pushed into higher tax brackets even though their real income has not increased.

And third, a lower reported inflation statistic reduces government spending by limiting the spending increases that are tied to inflation. The state can take credit for cost of living adjustments that are allegedly keeping up with inflation although in real terms the payments are falling.

Jobs market worse than it seems

With all this in mind, the headline unemployment rate might not be the best way to judge how the overall labor market is doing.

That's because the unemployment rate calculates only the percentage of workers who describe themselves as unemployed, divided by the number of those potential workers counted in the labor force. So under-employed people don't show up as unemployed.

Also not showing up as unemployed are those who want a job but are no longer counted as being in the labor force for a variety of reasons. The number of people fitting this category rose by more than a half-million between November and February.

And if you look at the number of people out of work in addition to part-time workers who want full-time jobs as well as people not searching for a job at the moment, a far more alarming picture emerges.

Keith Hall, the commissioner of the Bureau of Labor Statistics, which prepares the monthly jobs reports, said in Congressional testimony last month that this broader measure stood at 8.9% in February, up from 8.1% a year ago.

"We've clearly had a broad weakening in the labor market," Hall said.

Don't forget contract workers

What's more, the somewhat confusing way that the government collects data about the job market may also mask how bad conditions are right now.

The unemployment rate is calculated by a survey taken among members of the general public, the so-called household survey. But the payrolls number is derived from a survey of employers.

The household survey shows the number of job losses over the past three months was 654,000 compared to a loss of only 44,000 jobs according to the payroll survey during the same period.