“George Jetson lives in the future and he works in a factory where all he has to do is push a button. He pushes it and robots do all the work. His job is literally a joke, and the joke is, you can design all those robots to do the work, but you can't design a robot to push a damn button? “
--Leonard Richardson, 2009
The joke is not quite as funny as it was in the 1960s. Robots are doing the work and George is out of a job. The predicament of the quintessentially middle-class George is a near perfect symbol of the US socio-economy, a word I’ve coined to denote the deepening bifurcation of modern America. The economy is recovering, but a large segment of the population, many of whom always considered themselves as solidly middle-class, is not. The reason is that robots—or computers or low-wage workers in other countries or simply greater individual productivity—are now pushing the buttons.
On November 24 we got a concentrated picture of what the new socio-economy looks like. Because of the Thanksgiving holiday, more data releases were crammed into one morning than I can ever remember. These data were:
|Data||Source & Period|
|Mortgage applications, new & refinance||Mortgage Bankers Association -weekly|
|Durable Goods Orders||Census Bureau – October|
|Personal Income & Spending, Personal Consumption Expenditures Index||Bureau of Economic Analysis – October|
|Initial & Continuing Jobless Claims||Bureau of Labor Statistics – weekly|
|Consumer Confidence||University of Michigan – November|
|House Price Index||Federal Housing Finance Agency – September|
|New Home Sales||Census Bureau - October|
Altogether the data was decidedly mixed, but the markets chose to focus on the good news, especially the continuing growth in consumer spending. The chart shows spending by consumers for services by month on a seasonally adjusted annual basis. Spending on services represents about two-thirds of all consumer spending, with spending on non-durable goods accounting for another 22.5 %. This propels the economy, because it means that almost 90% of what we buy today, we’ll have to buy again
tomorrow, or at least in the next year or so. As you see, spending on services has been rising steadily since hitting a trough in the summer of 2009. More than anything else, this is why economists have declared the recession over and why the stock market has rebounded from its March 2009 low.
The other bit of good news was that the fewest number of first-time unemployment insurance claims were filed in the week ended November 20 since the summer of 2008. Weekly initial claims peeked at 651,000 in March 2009 and have since been trending down. Still last week’s total of 407,000 remains well above the pre-recession average of about 325,000. And, continuing unemployment claims, a much more significant gauge, remain unacceptably high and well over the long-term average. Nearly 4.2 million Americans continue to collect unemployment insurance with 863,000 getting extended benefits. This compares to well under three million from 2004 through 2007.
The market chose to ignore the bad news. Durable goods orders fell and remain far below pre-recession levels, in terms of total dollars, again on a seasonally adjusted annual rate. Still, this data series is subject to both large monthly swings and large monthly revisions. As a result, the markets discounted October’s drop in orders as either a normal pause in a general upward trend or simply a reporting error that would be rectified in a later revision.
The housing reports were worse than expected, and the expectations were not rosy. While applications for mortgages rose, home values continued to drop. The Federal Housing Finance Agency reported that the average value of purchased homes was 1.6% lower in the third quarter than in the second and 3.2% lower than in the third quarter of 2009. (The data comes entirely from mortgages purchased by Fannie Mae and Freddie Mac.) At $191,000, the average home purchase price is back where it was six years ago, and 14% below its 2007 peak.
More distressing still is the continuing abysmal slump in new home sales. Calculated on the usual seasonally adjusted annualized rate, just 283,000 new homes were sold in October. A mere 202,000 new homes were on the market, the fewest since 1968. Existing home sales also remain at extremely depressed levels.
The picture that emerges is of a strengthening economy within a stagnant society; that is, a bifurcated socio-economy. In every recent recession, businesses have learned how to produce more with less expense as measured by productivity per hours worked. Businesses do not forget the lessons when they recover from the shock of the recession. Consumers, however, forget the shock more quickly. Those who have jobs begin spending freely again, spurred on by relentless advertising, door-busters, and other come-ons. But following each recession, a larger pool of unemployed and under-employed is being left behind. This time, the bifurcation is being widened. Household wealth is being squeezed by falling home values and the unavailability of traditional credit. Consumers can still use the credit cards but bank lending remains tight, not because banks and credit unions don’t want to lend, but because their regulators won’t let them. The big shots in Washington piously mouth their hopes for easier credit, but examiners on the ground squelch all attempts to take anything resembling risk. The outcome is a statistical economic recovery but societal malaise. The rich will bet richer, the poor will get poorer, while the middle class struggles in a slow-motion downward grind, their lifestyles becoming ever more difficult to maintain.
We look back on the utopian future imagined for George Jetson in the 1960s with an odd nostalgia. Maybe the joke was on us after all.