Stressed and Depressed

I’ve railed that the government and Wall Street seem more obsessed that the “numbers look right” than if the economy is getting better. People tell you that the rate of job loss is declining in the U.S. making it seem like continuing and rising unemployment is somehow good news. Fact is there are fewer employed Americans now than at any time in decades! Home prices have stopped falling in some markets, still plunging in others, but home prices are in the cellar everywhere, it seems. Yet the “stall in the fall” is still viewed as good news. That like saying a terminal patient isn’t dying quite as fast as anticipated. Getting worse more slowly doesn’t seem exactly like getting better to me.

I’ve screamed that most of the rise in Wall Street market numbers is attributable to economies generated by cost-cutting, not revenue generation. Lay-offs and unemployment can be “great” when you are looking to reduce operating costs of a single company, but all those former employees (and those with reduced pay) aren’t new consumers; they aren’t going to spend more money and boost corporate revenues. Still the market seems not to care. It should.

I’ve repeatedly reminded readers that 70% of American economic activity is generated by consumer spending. And consumers are definitely not spending, so if companies think that they can grow and have good numbers by cutting costs but without customers, I’m wondering what planet they must be on. Where there have been retail numbers that show activities, a little “look behind the curtain” suggests that all is not that rosy. You may see more car sales, but what role does the government’s “cash for clunkers” program have in all that? When stores report increases in sales, how much of that is dumping inventory below cost (some stores seem to be in perpetual “sale” mode) to generate operating capital to stay afloat?

July retail sales were grim. The August 6^th Money on AOL: “‘The consumer is stressed and depressed,’ said Ken Perkins, president of retail consulting firm Retail Metrics. ‘Back-to-school shopping season is going to be very late.’ He added that jobs are ‘everything right now,’ and if the pace of job losses continues to slow, consumers will start to feel better… A number of special factors also depressed July's sales results. Lean inventories left fewer clearance options for bargain hunters, as stores wanted to protect themselves from getting stuck with piles of leftovers. The shift of the sales-tax holidays from July to August in most of the 14 states that have them because of a late Labor Day weekend also stole momentum from July.”

We’ve had eleven straight months of same-store-sales declines. Yet the government is telling us how we are turning the corner. What corner? Is it a corner that leads to another corner? If folks’ home values remain trashed, job loss rising and retail sales are like a stone falling over a financial cliff, how exactly are we turning a corner? “Show me the money!” Sorry, since I’m not a managing director at Goldman Sachs, you are going to have to explain exactly why this economy should look good to me… or even a bit better than it was. Things are actually worse! Naked emperors abound!

I’m Peter Dekom, and I really don’t see how we are getting better!