I’m watching CNBC this morning (well “watching” might be a bit of a stretch – but its on in the office) and I hear the Beatles singing in the background “I’ve got to admit it’s getting better” as the talking heads pump the recovery.
Relatively — perhaps so. Absolutely — not so much.
The consumer economically is still in the ditch. Household debt is still too high, household wealth is still suffering from falling home values, the stock market while rallying is still well below 2007 levels, and the job picture remains bleak.
o One in seven Americans is on food stamps (USDA)
o 27% of US consumer mortgages are “underwater” (Zillow)
o 13% of US consumer mortgages are either in foreclosure or 30 days delinquent (Mortgage Bankers Association)
o US household debt is twice the 2000 level (McKinsey & Co)
o The DJ Industrial average closed the 2000 – 2010 decade up only 6%.
o Unemployment remains stubbornly high – 13.9 million are “unemployed” (U-3), 24.7 million are “unemployed or underemployed” (U-6) and 34.0 million are “chronically unemployed or underemployed” (SGS estimate)
o We need to add 150,000 to 175,000 jobs per month just to stay even – in January we added 36,000 ! Even is we add 300,000 jobs per month we won’t recover to 2007 unemployment levels until 2015.
Businesses are faring better – thanks to continued costs cutting, swelling cash reserves and flat to declining payrolls — but they’re not ready to stand up and stimulate the economy either.
o Commercial real estate loan delinquency rate rises from 1.53% (Q4/07) to 8.47% (Q4/10)
o FDIC seized 118 banks in 2010 – 24 seized thus far in 2011
o Most S&P 500 companies increased cash reserves – currently $1.18 trillion – while simultaneously reducing spending, keeping a jobs recovery stalled (Bloomberg)
o Pfizer announces 1000 job cuts as profits rise (USA Today 2/3), Reliance on Temps Grows (Financial Times 2/3), No Rush To Hire Even As Profits Soar (WSJ 2/7)
Governments – the last spender standing – still spend more than they take in, face terrible tax revenue/budget forecasts and the great government de-leveraging is next on the economic horizon.
o White House projects federal deficit would spike to $1.65 trillion in current fiscal year (WSJ 2/14)
o States face $555 billion in unfunded pension costs (WSJ 2/14)
o 45 of the 50 states project 2012 shortfalls as a percent of the 2011 budget — Indiana is the lowest at 2% and Nevada is the highest at 45.2% (Center for Budget and Policy Priorities)
The famous Pennsylvania groundhog may think spring is on the way — and maybe it is — but I’m counting on an early winter as there are just too many fundamentals still wrong to get me in a laughing mood just yet.