Savings Experiment: Snow Removal
The Money Man Behind Rick Santorum: Who Is Foster S. Friess?
Most investors understand the relationship between job growth and the U.S. economy: For a sustained U.S. economic expansion to occur, there must be job growth.
Further, politically, the responsibility for lowering unemployment rests with the party in power -- President Barack Obama and congressional Democrats. That's how the American political system works. It doesn't matter whether the problem started on your watch -- if you hold the office, you're responsible at election time. End of discussion.
However, comparing U.S. economic performance of the past decade to the current one, investors should keep in mind that we are dealing with two distinct economic climates -- and the current climate will affect job growth.
During the past decade, and specifically from 2003 to 2007, the nation experienced a pseudo economic boom, the Bush boom, with bubbles in housing and financial services that distorted job growth in those sectors, well to the upside. Most of the those construction and mortgage-related jobs are not coming back.
Why was the Bush boom a pseudo-boom? Because rising median home prices and easy credit aren't engines of growth. Expanding the nation's productive capacity is a legitimate economic boom, and not nearly enough of the latter occurred in the previous decade.
Because this decade will not include the faux job gains in construction and financing, job gains are going to be harder to come by. But the upside is that this decade's gains are much more likely to be real, substantive, and enduring jobs gains, rooted in an expansion of the nation's productive capacity.
This is not to lower expectations regarding job growth -- far from it. The United States has to create at least 2 million jobs per year for a long time; if it doesn't in 2010, 2011 and 2012, first congressional Democrats are going to suffer a huge defeat in November, and then President Obama will face -- at minimum -- a very tough election in 2012.
But investors need to keep in mind that job growth that occurs in this decade will stem from a real, sustainable expansion in commerce and will be harder to achieve; the economy does not and will not have the benefit of trillions of dollars of housing bubble money that artificially (and as we now know, temporarily) ballooned construction and finance sector jobs.
- -
Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 1 of 1)
3-10-2010 @ 2:41PM
MyKisa said...
....got to make stuff you sell to other countries....we don`t do it like we used to
3-10-2010 @ 3:06PM
C Caton said...
Well I'm not an economist, so I very could be completely wrong here, but I really do think that if they can get the average person's health insurance premium down to a decent level, people will have money to save for a down payment for a house, car, put something aside for retirement, etc. It certainly won't hurt.
It always amazes me when headlines like "Shocking poll results: People aren't saving enough for retirement" come out. It is not at all shocking, not even a little bit. How can some of them? I'd be impressed if some young struggling families managed to put $10 in a cookie jar once in a while.
The median HOUSEHOLD income for 2008 was $52,029. That means one-half of households in this country live on less than that, and a lot of them live on a LOT less than that. The average monthly family health insurance premium? $1,115 a month or $13,380 yearly
3-10-2010 @ 3:11PM
C Caton said...
My point was, that if people are able this time to save for down payments, etc., that maybe there could be another housing boom - a real one this time.
3-10-2010 @ 4:46PM
brian said...
The current crop of politicians, Bush era included, are worthless to the American people as a busted rubber. We are being sold, piece by piece, by our very own elected officials. "Redistribute the wealth" is what you are seeing in our time.
3-10-2010 @ 7:00PM
william lindblad said...
First, let me get to the blog - than onto health care.
Joe, since you are writing a book it might be nice to get your act together - historically. Please tell me under whose watch Glass-Steagal was repealed? Please tell me when the lady in charge of the commodities and futures trading comm. complained about derivatives who forced her resignation?
There is your root, although I do agree that Bushey had no idea of what was afoot, but than again, neither did the three musketeers that engineered this fiasco. It would make a good cover for "MAD". Alfred E. holding hands with the four and Clinton in the background with a caption that says how the hell did this happen? As all are here, hindsight and retrospect matter little, the future will be gain and fall, repeating many times until forward motion has the strength to endure. This is going to take awhile and I really think that Wall St. is counting too many chickens.
Health care, while one giant mess, is not going to make or break this economy. Before any real headway is going to be made the issue of why cost differ greatly from hospital to hospital, regardless of patient satisfaction has to be addressed. True, these costs will vary due to sections of this country, but I am talking about variations that are large and within a given locality. Somehow this does not make a lot of sense and does imply that some institutions are either better managed or more cost aware than the other. To solve this problem I suggest a national standard, adjusted to area, regarding all cost from procedural to the cotton swab. This is a simple solution to a complex problem, but it would solve all. When this is accomplished the insurance industry would now be dealing with exact fixed cost and there would no longer be any real sense in their receiving anti-trust status. Let them compete - country wide, the most efficient survives, Most of this already exists in the form of Medicare so this is not a fantasy panacea. Given that this area is area is not functioning well regarding reality, it is only a matter of time before it becomes an unsustainable burden. It has many hurdles including when does care end? Should this system include care for those in a vegetative state - and for how long? Would there be provisions for experimental medicine? Questions such as these would be sure to arise, but first the basics have to be solved.
3-10-2010 @ 10:44PM
Peter Van Schaik said...
"During the past decade, and specifically from 2003 to 2007, the nation experienced a pseudo economic boom, the Bush boom, with bubbles in housing and financial services that distorted job growth in those sectors, well to the upside." That is really the heart of the problem. We tend to consider rising asset prices solid, tangible growth but they aren't. They are simply higher asset prices. You can read more about it at http://bit.ly/2JkzH5.
http://sites.google.com/site/jpetervanschaik/