who's your dady?

October 19,2004
Hello,

The market continues to push upward with intermittent periods of sharp selling, giving investors opportunities to get on board. Weather it is higher oil prices, earth quakes or government investigations of the insurance industries every couple of days the market seems to take a hit. When it looks bleakest the market then reverses to the up side. Day by day the economic data taken out of context seems to contradict it self. So for this email I am going to try to put some of the data in perspective.

As I have stated before the mainstream media and much of the business media have very much mischaracterized most of what has been going on in the economy. What I think has been very much misunderstood is the continued move in America to an ownership society. Here are some of the economic basics of our time;

According to the Cato Institute 68.6% of all American households own their own home which is an all time record high and some like John Kerry own five. There are many factors that create this environment among them low interest rates, tax cuts, and demographics. Most economists would agree that this is probably one of the best measures of the vitality of the middle class.

Even with the poor stock market environment since March 2000, the investor class now makes up over 50% of US households. That is up from 32% in 1989 and 19% in 1983.

So you ask what about jobs? According to the payroll Data since President Bush has been in office there is a decline of about 900,000, working for someone else(that’s payroll data) ,but household working survey shows an increase of 1.8 million jobs since January 2001(that’s working for yourself or someone else) . Again I think the wide spread use of technology is fundamentally changing the way we work and live, challenging our ability to measure changes in the economy. After all people like me are not showing up on the payroll survey yet the fact is I am working. The four week moving average for new unemployment claims is 348,500, less that the 25 year moving average of 380,520. Even the decline in labor force participation from 67.2 to 66 % which is almost exclusively do to the sudden lack of 16-19 years olds willing to work. The US will outsource about 3.5 million jobs from 2000 -2015; meanwhile there are currently 5.4 million jobs that have been in sourced.

What about manufacturing jobs? There has been and 11% decrease in manufacturing jobs in the US and world wide from 1995 -2002. China has had a 15% decrease in manufacturing jobs during the same period. This is primarily due too increases in productivity. Of late the US has seen a serious rebound in manufacturing activity and a slight rebound in manufacturing jobs.

Real earnings have continued to increase at 2% per year even during the 2000-2001 recession. Real earnings are higher now than at the height of the “dot.com” craze. This is entirely different than past recessions were real earning declined such as 1980-82, or 1990-91.

Real GDP growth is running about 3.3%, slightly above the 1990’s of 3.26%. The Poverty rate has reached 12.5%, up but below the 1998 rate of 12.7%.the recent raise in Child Poverty (1.6%) has been significantly below the raise in the past recessions of 1980 (5.5%) or 1990(2.7%).1/2 of all Poverty lasts less than 4 months and 80% of people in Poverty are out of Poverty in less than one year. 80.4% of all Americans had health insurance, up from 78.2 in 1996.


James