Right now, if you’re an incumbent (and part of the party in power, to boot); you’re probably not sleeping very well. If you’ve got the sympathetic ear of a spouse, friend or therapist, you’re probably telling that person that there’s a perfect storm out there…a collection of storms coming together, descending like fire and brimstone from the heavens…just waiting out over the horizon for you and your kind.
Problem 1: The economy. Nuf said? The markets are troubled, the banks are teetering, confidence is faltering, housing is a mess, and jobs are disappearing. What more do you want to know?
A good place to start is with jobs (or should we say the lack thereof?): Noted economy watcher the CEO and co-CIO of Pimco, Mohamed El-Erian, told CNBC that unemployment is no longer a lagging indicator. According to the report, “Unemployment has shifted from a lagging indicator to a leading one and is warning government policymakers to confront problems in an economy mired in slow growth. The consideration of unemployment as a lagging indicator is a favorite mantra among economists who believe the rate primarily looks at the past rather than what is to come. But the internal details of current trends paint a different picture: More than half the labor force out of work for more than 26 weeks, the average length of unemployment at greater than 35 weeks, and the unemployment rate of 25.7 percent for 16- to 19-year olds.” El-Erian said, “These are structural aspects which cannot be solved overnight, cannot be solved with a cyclical mindset. And they are worrisome because they make the unemployment rate not only a lagging indicator but also a leading indicator."
Add unemployment: When it comes to employment, recent federal data reflected the worst June for the private sector in decades. In a piece for the San Francisco Examiner by Tom Blumer, the results justified “total depression.” According to Blumer, “The Seasonally Adjusted number for June is bad enough. In fact, June's seasonally adjusted workforce shrinkage is the largest for any June since 1963. But the Not Seasonally Adjusted number representing what really happened is even worse. In a normal June, the workforce increases significantly, because lots of people occupied with other things during the rest of the year typically test the waters in the seasonal and summer-job market. But whereas an average of about 1.75 million did so during the past seven Junes, including almost 1.6 million last year during the recession, only 901,000 did so in June of 2010. You have to go all the way back to 1954 to find a lower workforce change during June in the private sector than the June we just experienced. On a population-adjusted basis, the June 2010 figure is the worst June performance in the 63 years BLS has been tracking the data.” He took a swipe at the president, writing, “President Obama claimed that, ‘We are headed in the right direction.’ I'm not buying it, nor are hundreds of thousands of people who figuratively sat on the couch in June because they know how bad the prospects for gainful employment in the real world actually are.”
Last add jobs: John Batchelor Show colleague, Joseph Brusuelas (director at Moody's Economy.com, where he covers the U.S. and global economies for the Dismal Scientist web site; formerly, chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal), provides the following: “The [chart below] is the Economic Cycle Research Institute’s weekly job growth index. It flattened out the week of April 30 and started contracting the week of June 1. [Another chart – not included - shows] the cumulative number of individuals exhausting benefits by week based on Department of Labor Estimates. This is the near term policy issue that the Congress will have to address when the return from recess. If they do not, 3.3 million individuals will exhaust benefits by the end of July. This is a major problem.”
And that, as Joe will tell you, is an understatement.
Let’s look at housing and mortgages: Diana Olick, CNBC’s Real Estate Reporter, reports that “New Loan Delinquencies on the Rise Again.” The bad news on the housing front goes like this: “Just when you thought things might be turning around, the mortgage crisis takes yet another little dip to the downside. Lender Processing Services just put out its May Mortgage Monitor, and some promising trends aren't so promising anymore, specifically new delinquencies and cure rates.” She adds, “While the total delinquency rate rose 2.3 percent, which is not surprising given how much is in the pipeline, the 30-day delinquent bucket jumped 10 percent. That is surprising because the number had been coming down of late. The LPS data report says that's because the ‘seasonal improvement period has expired,’ but I'm not sure normal seasonal patterns really apply to this market anymore. More likely is that home prices are not rebounding at the expected/hoped for pace, prompting more borrowers who are underwater on their loans to choose not to pay. And while the job market isn't bleeding so much anymore, it's not adding jobs back at the rate we need, nor is it re-instituting those full time jobs that were slashed to part-time, leaving many borrowers still "underemployed." So the delinquency rate nationwide now stands at 9.2 percent from this particular data set, and with the rise in new delinquencies, it won't be coming down any time soon.”
Add housing: Despite “rock-bottom rates,” many experts believe the housing sector is in perhaps its most precarious position – ever. In an ABC News report, the government-backed financial institutions - Fannie Mae and Freddie Mac – (not to mention most of the mortgage market) are “on “government life support.” In the story, Rich Blake reports, “Interest rates for homebuyers are lower than at any time since the Eisenhower era and home prices in many regions have fallen drastically. Buyers who qualified for the federal tax credit program that ended in April, meanwhile, were given extra time, through the end of September, to close on their homes.” Rich goes on to report, “And yet, home sales are in decline. Existing home sales fell 2.2 percent in May compared to the prior month, the National Association of Realtors said in June. Pending home sales -- contracts signed but not closed -- dropped 30 percent in May, the NAR said July 1. As perplexing and disturbing as this economic brainteaser may seem, the housing sector would be in even worse shape if not for those twin government sponsored enterprises, Fannie Mae and Freddie Mac, both in government conservatorship and bleeding assets. Such a scenario, a housing market propped up by Fannie and Freddie, several economic experts admit glumly, is akin to running a power plant on an auxiliary generator that is jumper-cabled to a car running on fumes.”
Problem 2: The majority party can’t help themselves. Despite all of the signs, warnings and public anger, many of its stalwarts are determined to repeat history and further drive the economy into the ground.
According to the Wall Street Journal, the current finance reform legislation – aka: The Dodd-Frank bill – is so chock-full of problems that it will damage the American economy…perhaps irreparably. “Remaking American finance hasn't yet become law, but corporate treasurers are already bracing for its impact. In the days surrounding this fall's election—after the close of the September 30 quarter—expect a series of warnings on liquidity from companies that had nothing to do with the credit panic and are not even in the finance business. It could be an eerie replay of ObamaCare, whose passage triggered a series of charges by public companies facing higher retiree health-care costs. If Dodd-Frank passes the Senate, U.S. companies could be forced to put up an additional $1 trillion in collateral.”
What’s more, it’s expected to send tens of thousands of American jobs (and maybe more) overseas. Nice work there, boys.
Problem 3: Your Dear Leader is not leading. A year-and-a-half ago, the twin promises of Hope and Change™ were supposed to be a positive thing. Now look: landmark legislation that promises to Change© America – perhaps for the worse – for decades to come was enacted, but only after being pushed through by majority votes…over the will of the people. The people are now pulling back and the support that was once there for the Dear Leader is beginning to dry up.
According to the Gallup Poll, “Obama Job Approval Rating Down to 38% Among Independents - Overall job ratings for the president continue to be below majority level.” The venerable survey company now says that “Thirty-eight percent of independents approve of the job Barack Obama is doing as president, the first time independent approval of Obama has dropped below 40% in a Gallup Daily tracking weekly aggregate. Meanwhile, Obama maintains the support of 81% of Democrats, and his job approval among Republicans remains low, at 12%.”
If you’re someone who rode the Dear Leader’s coattails to victory or to a position of power, come November you should be afraid…be very afraid.
Dear, Happy Leader...
Problem 4: The minority party - thanks to the majority leadership’s overreach, incompetence, lack of vision and focus, as well as inexperience – has risen from the dead. Just a year or so ago, pundits predicted that the majority party would “rule for decades to come.” Take all of the negatives listed above and throw in a socio-political movement like the Tea Party, and it all changed in the blink of an eye. The minority party has now laid claim to key positions in New Jersey, Virginia, Massachusetts and numerous other state and municipal offices. The predictions are that come November, the minority will likely take back the House of Representatives, will challenge in the U.S. Senate and is “poised to win the most gubernatorial seats in 90 years. Republicans on pace to eclipse the 24 seats won in 1928, 1966, and the Republican Revolution of 1994; GOP could challenge 100+ year Party mark of 29 seats won in 1920. The question on the minds of officeholders, party leaders, and D.C prognosticators is not whether the GOP will gain seats in the midterm elections across state and federal legislative and executive offices, but how many.”
Problem 5: The war (in Afghanistan) was inherited, to be sure, and the current administration was saddled with the burdens left after the previous administration all but neglected the fight for years. The problem now – beyond the recent McChrystal dust-up – is at least two-pronged: a lack of vision and a corrupt partner. The theater’s new commander, Gen. David Petraeus, has said the allies are “…in it to win it,” but the longer it drags on without any vision from the Commander in Chief – beyond just issuing a quit/withdrawal date – the more the conflict will be viewed as a waste.
Problem 6: The BP oil leak/spill in the Gulf of Mexico. We’re now at Day 78…and counting. The problems continue to worsen, despite promises of Hope & Change®. Obviously, the blowout and disaster weren’t Obama’s fault (though his administration does share in some of the blame), but his team has woefully underperformed during the crisis. What’s more, it has shown that the administration’s energy policies, crisis management abilities and business sense are out of whack. The president and his supporters should not be surprised that disappointment now rules the day. When you promise that government has all the solutions to your problems – be they healthcare, banking, industry, etc. – don’t be surprised when folks get a little miffed at your inability to handle disasters…especially when you spent the last president’s term criticizing him for his lackluster performance in crisis situations.
Problem 7: Immigration - with 59 percent of the electorate against illegal immigration; states fighting cross-border crime; and a growing unemployment problem, this is the time to stand against illegal immigration...not champion a softening of enforcement or attitudes. Instead, the public has been treated to a lecture on tolerance and acceptance...not to mention a lawsuit against Arizona, which is trying to protect its citizenry at a time when the feds won't...