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The economy isn't all bad - is it?

Aunt Spiker

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My sister recently moved to Philly-
Her previous job in California wasn't willing to really let her to. They kept her on as a part-time consultant long-distance.
Once in Philly, though, she had a few interviews - and landed a job as the Finance manager of a soon-to-expand branch of Urban Outfitters.

Interesting, to me - that this company has had increased, record profits. . . and they're expanding their corporate offices and developing new market lines.

I thought all companies were tanked?

So not *all* companies are tanked- it's just certain ones (certain venues of products - like auto?)
 
The company I work for is experiencing more orders than it can keep up with (in fact, one plant is booked solidly until christmas and is still taking in orders even with that lead time). A lot of it has to do with competition taking capacity out last year. One of my plants is about to plunk down 6 to 10 million in upgrades though (including all new cisco networking and phone equipment, mmmmm)
 
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The US Army is certainly a good business to be getting into thats for sure. Glad I nabbed that.
 
The rising unemployment coupled with steadily decreasing number of layoffs suggest that people think that the economy is in fact getting better. I know my firm picked up a sizable amount of work for the coming year so much so that one department is hiring more then usual. Furthermore, corporate profits I believe are the cause of top line rather then bottom line growth (more sales rather then cost cutting) which is vastly important. The structure of profits defines pretty much how a company's long term future is going to be. Cost cutting while short term good for survival doesn't bode well compared to expanding sales. That is a pretty strong sign that consumer spending is returning. The biggest problem is still housing with a smaller issue of bad assets on bank balance sheets. And banks are pretty stingy on lending. One way to fix this would be to stop financial reform as the GOP wants. But that doesn't fix anything that caused this mess. What the recession did was accelerate the death of certain industries.
 
I believe that the nature of our economy is much too complex to simply use the profit margins or market expansions of a few businesses or industries to make generalizations about the state of finances in America. The fact remains that we're hovering around 10% unemployment - the highest since the early 80's, sales of new homes is down an additional 12.5 % in the previous quarter - lowest since 1983, Many major businesses/industries are down-sizing with record layoffs and salary cuts for the "working masses."

Just from personal experience; my wife and I are public school teachers in one of the poorest states in the nation, and even after the $800 billion "stimulus" package which was supposed to provide "stop-gap" funding for essential jobs and industries at the state/local level; we both took a 15% salary cut - my first salary cut as a teacher in my 16 years in education. My school can't afford textbooks, and classes are extremely overcrowded due to a "hiring freeze."

I also have a brother in residential construction who was building an average of 30 new homes per year prior to 2007 - he hasn't gotten a contract to build a single house this year. I have another brother who is a fire fighter and he recently lost all of his ancillary benefits (health coverage, life insurance, dental, overtime pay, and retirement) due to budget cutbacks. Our local hospital recently layed off over 40 employees and closed down some crucial programs such as free vaccinations.

So, I suppose the answer to you question is certainly a matter of perspective, geography, and particular business or industry.
 
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I believe that the nature of our economy is much too complex to simply use the profit margins or market expansions of a few businesses or industries to make generalizations about the state of finances in America.

A few? Uh, corporate profits are up in virtually every industry and in the blue chips as a virtual whole. Even government backed firms like GM are showing healthy top line growth profits. From personal computer companies to agriculture, US firms are showing healthy profits and expansion. You seem to be under the impression that only a small slice of firms are growing. That is hardly the case.

The fact remains that we're hovering around 10% unemployment - the highest since the early 80's, sales of new homes is down an additional 12.5 % in the previous quarter - lowest since 1983, Many major businesses/industries are down-sizing with record layoffs and salary cuts for the "working masses."

True, unemployment is high, but when you examine it in the context of the low lay off numbers in the past couple reports, it's an indication that more people are now seeking jobs. That does not suggest the economy is getting worse. True home sales are not going well, but that's a complex issue. And you're quite wrong on the layoffs.

Mass Layoffs Summary

Just from personal experience; my wife and I are public school teachers in one of the poorest states in the nation, and evn after the $800 billion "stimulus" package which was supposed to provide "stop-gap" funding for essential jobs and industries at the state/local level; we both took a 15% salary cut - my first salary cut as a teacher in my 16 years in education. My school can't afford textbooks, and classes are extremely overcrowded due to a "hiring freeze."

That seems more of a state issue rather then federal. More then a few states basically replaced state education money with federal, cut state ed money and financed something else. Take that up with your legislators. And 1/3 of the stimulus was tax cuts. That's not going to help you in the same sense when your state cuts salaries. My state certainty did that.

I also have a brother in residential construction who was building an average of 30 new homes per year prior to 2007 - he hasn't gotten a contract to build a single house this year.

Which is a fault of the industry. Housing should have never built that much new inventory. It's not surprising that they aren't getting new home contracts. The level of inventory out there built up from the past 5 years is staggering. Las Vegas is a prime example.

I have another brother who is a fire fighter and he recently lost all of his ancillary benefits (health coverage, life insurance, dental, overtime pay, and retirement due to budget cutbacks. Our local hospital recenlt layed off over 40 employees and closed down some crucial programs such as free vaccinations.
So, I suppose the answer to you question is certainly a matter of perspective, geography, and particular business or industry.

What state are you in?
 
A few? Uh, corporate profits are up in virtually every industry and in the blue chips as a virtual whole. Even government backed firms like GM are showing healthy top line growth profits. From personal computer companies to agriculture, US firms are showing healthy profits and expansion. You seem to be under the impression that only a small slice of firms are growing. That is hardly the case.
So, you seem to be a proponent of Reaganomics and the "trickle-down" theory? LOL We all know that profits in blue chip industries nearly never equate to more job opportunities in the blue collar arena, nor does it apparently have a direct effect on the availabilty of quality jobs for middle-income Americans.



True, unemployment is high, but when you examine it in the context of the low lay off numbers in the past couple reports, it's an indication that more people are now seeking jobs. That does not suggest the economy is getting worse. True home sales are not going well, but that's a complex issue. And you're quite wrong on the layoffs.
Let's take a REALISTIC look at unemployment and mass layoff reports (yes, I am a frequent visitor to the US Dept. of Labor website). Any student of Economics 101 should know that quarterly reports (taken strictly on a quarter-by-quarter basis) have more significance in the political arena - especially during election years and cannot wisely be used to evaluate the strength or the viability of economic growth. If we simply used quarterly labor reports to evaluate economic growth, many administrations, including that of Bush II, could be labled as "economically successfuL" LOL and I don't know many here who would realistically argue that. The fact is, we all know, or should, that the economy, especially the private business sector, is cyclical and must be viewed over "the long run". And the recent "run" hasn't been all that productive.

Mass Layoffs Summary



That seems more of a state issue rather then federal. More then a few states basically replaced state education money with federal, cut state ed money and financed something else. Take that up with your legislators. And 1/3 of the stimulus was tax cuts. That's not going to help you in the same sense when your state cuts salaries. My state certainty did that.
This is true, but it does not detract from the argument that one of the primary goals of the stumulus plan was to provide stop-gap funding for these programs at the local level - particularly in economically challenged areas - and the "relief" simply isn't making it's way there fast enough to keep up with the losses.



Which is a fault of the industry. Housing should have never built that much new inventory. It's not surprising that they aren't getting new home contracts. The level of inventory out there built up from the past 5 years is staggering. Las Vegas is a prime example.
Exactly! And isn't that what the current administration is attempting to do - bolster/reinvent industries like construction and housing. Can we agree that it was "loose" lending policies enacted/supported by Government-backed entities such as Fannie Mae and Freddie Mac that helped to create the current housing "surplus" as you put it? I still believe that the current and former administrations have failed contribute any policies to bolster our economic situation in the long run.


What state are you in?
Mississippi
 
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So, you seem to be a proponent of Reaganomics and the "trickle-down" theory? LOL

Corporate trickle down does work. Individual, not so much. Or at all. Individual trickle down is little more then voodoo. But corporations DO ramp up production and their spending down the line increases activity in supply chains.

We all know that profits in blue chip industries nearly never equate to more job opportunities in the blue collar arena, nor does it apparently have a direct effect on the availabilty of quality jobs for middle-income Americans.

Fair enough, but top line growth basically across the board is hardly an indication that things are getting worse. If the economy was really bad, we should be seeing growth from the bottom line with layoffs increasing. That isn't the case.

If we simply used quarterly labor reports to evaluate economic growth, many administrations, including that of Bush II, could be labled as "economically successfuL" LOL and I don't know many here who would realistically argue that. The fact is, we all know, or should, that the economy, especially the private business sector, is cyclical and must be viewed over "the long run". And the recent "run" hasn't been all that productive.

Who uses just quarterly reports? I posted the monthly one. But I will grant you the recent run, especially over last 18 months has not been good. But the reduction in mass layoffs in the past 6 months is far more promising then when the recession started. No one can argue with that.

This is true, but it does not detract from the argument that one of the primary goals of the stumulus plan was to provide stop-gap funding for these programs at the local level - particularly in economically challenged areas - and the "relief" simply isn't making it's way there fast enough to keep up with the losses.

But that relied upon the states to do their parts. The federal government does not have the right to tell states where they can spend their money for the most part. And states were free to replace state money with fed. The problem is your state legislature. Obama cannot fix that. Nor would we want him to. The federal government already has too much power.

Exactly! And isn't that what the current administration is attempting to do - bolster/reinvent industries like construction and housing.

I'm not so sure about that. As I understand the policies, it's to stabilize the loan system primarily with boosting demand for existing homes. Not boost demand to the point where demand outpaces supply.

Can we agree that it was "loose" lending policies enacted/supported by Government-backed entities such as Fannie Mae and Freddie Mac that helped to create the current housing "surplus" as you put it?

Yes and no. Were they part of the problem? yes. But housing in itself did not create this level of national carnage. The process of securitization and massive leverage is why we are here. If Wall Street had not securitized and been leveraged up to the eyes, we would not have a recession. Housing itself is too small a portion of the economy to do this. Financials are.

I still believe that the current and former administrations have failed contribute any policies to bolster our economic situation in the long run.

I'll agree to that.

Mississippi

I'm sorry.
 
I'm sorry.
LOL, it's not all that bad. At least the cost of living is reasonable, state income taxes are fairly low, and at least we DO have the Casino industry here on the Gulf Coast where I live to shoulder a large portion of the property tax burden. Since Reconstruction we Southerners have always retained a bit of self-pity. :peace
 
Thanks for the replies - very interesting stuff.

You know, with how everyone's going on - I was actually expecting EVERY single business to be in need of a bailout :) Guess not! Maybe those who really are struggling should take note of why others are so successful.
 
obvious Child said:
A few? Uh, corporate profits are up in virtually every industry and in the blue chips as a virtual whole. Even government backed firms like GM are showing healthy top line growth profits. From personal computer companies to agriculture, US firms are showing healthy profits and expansion. You seem to be under the impression that only a small slice of firms are growing. That is hardly the case.

[emphasis added]

I have a different impression. Aggregate profit expansion has been significant but has, for the most part, not been the result of an expansion of gross revenues ("top line"). Quite the contrary, profit expansion has come almost totally from reduction in overhead, and that from largely reduced headcount. How much further can cost-cutting carry the bottom line forward without top-line growth? Impossible to say, but there would seem to be little room left.

The economy has now entered the recovery phase (increases in GDP), but has yet to enter an new expansion (GDP has not yet exceeded the previous pre-recession peak). Final demand in the economy has continued to run at an anemic pace of about 1% (the best aggregate measure of the "top line'). Hence, the pace of the recovery continues to be quite slow, especially as compared to previous recessions. Nonetheless, growth thus far remains positive, even if only by a narrow margin. The rising tide is lifting all of the boats, but some are leaky and are riding quite low in the water.
 
But there are companies growing, so how can you make the conclusion that it is all from reduced overhead?
 
My sister recently moved to Philly-
Her previous job in California wasn't willing to really let her to. They kept her on as a part-time consultant long-distance.
Once in Philly, though, she had a few interviews - and landed a job as the Finance manager of a soon-to-expand branch of Urban Outfitters.

Interesting, to me - that this company has had increased, record profits. . . and they're expanding their corporate offices and developing new market lines.

I thought all companies were tanked?

So not *all* companies are tanked- it's just certain ones (certain venues of products - like auto?)

No, not all companies are tanked at all. Nor all industries. When I was looking for work at the beginning of the year, I had numerous opportunities. So many, that it was easy to be picky. The company I decided to work for is STILL hiring people. And, I've gotten 4 calls from headhunters in the last two weeks with job opportunities for me, even though I'm not even looking.

But, I work in IT.
 
But there are companies growing, so how can you make the conclusion that it is all from reduced overhead?

I didn't say it was "all from reduced overhead." I described profit growth as coming "for the most part" and "mostly" from the cutting of overhead and increased productiviy. Of course there are exceptions. For example, the corporate sector has continued to spend heavily on equipment that increases productivity (i.e., automation and labor-content reduction). Equipment and software expenditures increased 24.9% in the second quarter of this year, following a 20.4% increase in the first quarter and a 14.6% increase in the fourth quarter of '09. Equipment and software contributed 1.53% to GDP in the second quarter, following contributions of 1.24% and 0.91% in the previous two quarters.

In comparison, investment in structures increased only 0.4% in the second quarter, following declines of 17.8% and 29.2% in the first and fourth quarters, respectively. Structures contributed only 0.01% to GDP in the second quarter, following -0.53% and -1.01% drags in the previous two quarters.

Further confirmaton of this can be seen in the Fed's Industrial Production indexes. In August, the index for business equipment was 9.9 points higher than one year ago, the largest increase by far of any of the major market groups.

Conclusion: Firms producing equipment and software that increases productivity, especially thru reducing labor content, are doing well, seeing increases in both top line revenue and profitability. On the other hand, firms that build plants and physical facilities that would typically involve increasing headcounts...not so much.
 
I didn't say it was "all from reduced overhead." I described profit growth as coming "for the most part" and "mostly" from the cutting of overhead and increased productiviy. Of course there are exceptions. For example, the corporate sector has continued to spend heavily on equipment that increases productivity (i.e., automation and labor-content reduction). Equipment and software expenditures increased 24.9% in the second quarter of this year, following a 20.4% increase in the first quarter and a 14.6% increase in the fourth quarter of '09. Equipment and software contributed 1.53% to GDP in the second quarter, following contributions of 1.24% and 0.91% in the previous two quarters.

In comparison, investment in structures increased only 0.4% in the second quarter, following declines of 17.8% and 29.2% in the first and fourth quarters, respectively. Structures contributed only 0.01% to GDP in the second quarter, following -0.53% and -1.01% drags in the previous two quarters.

Further confirmaton of this can be seen in the Fed's Industrial Production indexes. In August, the index for business equipment was 9.9 points higher than one year ago, the largest increase by far of any of the major market groups.

Conclusion: Firms producing equipment and software that increases productivity, especially thru reducing labor content, are doing well, seeing increases in both top line revenue and profitability. On the other hand, firms that build plants and physical facilities that would typically involve increasing headcounts...not so much.

But these industries that are producing labor-saving devices still need labor. Raising aggregate demand comparatively hurts them when compared to the situation where demand is left alone, is it not? So relatively speaking, by raising aggregate demand, isn't the end result just hurting those companies that are doing well at the expense of industries that are probably too bloated?
 
But these industries that are producing labor-saving devices still need labor. Raising aggregate demand comparatively hurts them when compared to the situation where demand is left alone, is it not? So relatively speaking, by raising aggregate demand, isn't the end result just hurting those companies that are doing well at the expense of industries that are probably too bloated?

Lost me with that one. A little further elaboration?
 
Lost me with that one. A little further elaboration?

You said that the companies that are growing are the ones that are producing labor-saving devices. But, since they are profiting, the market is signaling them to grow.

So here's what happens when aggregate demand is raised. People then can be less picky with what they buy. The hope is that this will allow failing companies to again see a profit. But compare it to the situation where you did not raise aggregate demand. These companies that were failing would go bankrupt more quickly, their assets would be sold off. The profiting companies would experience a greater real profit (although they profit in both scenarios, in this latter scenario the profit adjusted for inflation is greater), and production will have shifted more to where consumers have demanded that it shift.

And we should want production where people demand it, right? We can get full employment by having everyone dig holes and paying them for it, but it would just be a drain on the economy.
 
phattonez said:
So here's what happens when aggregate demand is raised. People then can be less picky with what they buy.

That strikes me as what most economists would call a heroic assumption - unless you can provide something more to substantiate.

If I understand you, you seem to be making a simplified case for avoiding moral hazard, that is, bailing out or even assisting weaker firms to keep them from failing. While I probably wouldn't have described the same way that you did, unless there are darned good reasons (national security or extreme systemic risk), I do not disagree. Firms that aren't making it, should be left to fall by the wayside.
 
Heard on NPR today, this recession is going to take years to recover. Not months, YEARS!!!

Small businesses that survived the intitial shock and are in relatively good shape are still in need of credit, some just to survive and some to expand. So it will be interesting to see if the new Small Business Jobs Act recently signed by Obama will have an impact in speeding up the job recovery. I think that it will still depend on consumers, because if consumers aren't spending then what is the point of hiring new employees? It's kind of a Catch-22: small business can't expand if customers are buying and customers can't buy if they don't have jobs.

After recently traveling around the country a bit, I noticed that the majority of the unemployed tend to live in large metro areas while the rural areas seem to be doing just fine AND getting most of the stimulus money. Whereas the local governments in the large metro areas are hardly spending their stimulus money at all because they say their projects are bigger and they say need more time for the bidding process.

Another thing I noticed about the unemployed is they aren't as flexible in relocating as people used to be in decades past. I think this might have something to do with the governments push in the last 10 or 15 years for more people to own homes and now that they own homes it's not as easy to relocate to where the jobs are because their stuck with a home they can't sell. Which again seems like a Catch 22; buy a house, lose job, can't relocate to get a new job because of house.

So yeah, I can kinda see how it's going to take years for the jobs to recover.
 
Housing/Construction was hit hardest. Finance was hit really hard, but they know how to play the game well enough to move some numbers here and there and recover. Everyone else was either hit because of their relationship with housing/construction fallout, or because of the overall market knee-jerk reaction that dropped value nearly accross the board. When individuals think their net work is now 50% of what it was a few years ago, they tend to get more strict on spending, and consumer goods are going to feel that no matter what.
As for individual companies? Nah, many not only continued to do just fine, some even boomed as a result, or even better, some were specifically created to take advantage of new market dynamics (huge labor pool, need for companies to outsource jobs to reduce payroll, etc.)
 
My sister recently moved to Philly-
Her previous job in California wasn't willing to really let her to. They kept her on as a part-time consultant long-distance.
Once in Philly, though, she had a few interviews - and landed a job as the Finance manager of a soon-to-expand branch of Urban Outfitters.

Interesting, to me - that this company has had increased, record profits. . . and they're expanding their corporate offices and developing new market lines.

I thought all companies were tanked?

So not *all* companies are tanked- it's just certain ones (certain venues of products - like auto?)
A recession is kinda like spraying bullets into a crowd; some unlucky ****ers are going to take it right in the face, others will get winged, and some lucky bastards will walk away un-harmed.

Almost every company is feeling the recession in SOME way. Maybe it's lost business, increase in cost of raw materials/products, cost of advertising, employee cost cutting, etc etc, but there are few sectors of the economy that dont at least feel a recession. They may not suffer much (or at all), but it's influence is still there.

And as someone who was looking (quite desperately) for work for quite a while, yes, yes it really is that bad.
 
And as someone who was looking (quite desperately) for work for quite a while, yes, yes it really is that bad.

Please.

I could get a job tomorrow if I wanted or needed one.
 
Please.

I could get a job tomorrow if I wanted or needed one.
Ok, dont stay stuff like that when I'm drinking hot liquid. It frickin' hurts to aspirate it when I laugh.

Come down do SoCal and try your hand at finding a job. 13.5% unemployment. Good luck :D
 
Ok, dont stay stuff like that when I'm drinking hot liquid. It frickin' hurts to aspirate it when I laugh.

Come down do SoCal and try your hand at finding a job. 13.5% unemployment. Good luck :D

I actually had two calls from headhunters in SoCal a few weeks ago. (and one from Florida, I'm not sure where the fourth was from).

I don't doubt there's a high unemployment rate, California is the most liberal state in the country so it only stands to reason that it would be in the most economic trouble. The job hunting issues really just depend on what industry you're in.
 
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