US economic recovery is complete. pt 1 Archived

[GoIllini]

I keep hearing this recently, but it shows a worrying lack of understanding. Any politico-economic system requires energy to function at all, that's a given, basic services and production need energy. What this line of reasoning fails to account for, though, is the energy flow required to counter entropy within the existing system before any can be diverted to growth: Roads need repaving, bridges repainting, all capital infrastructure has to be continually renewed.

Sure, but we were underfunding our infrastructure well before 2005.

Furthermore, as primary source ERoEI declines more of the energy pie is diverted to energy procurement, competing with the energy required to keep society functioning, leaving less and less available for growth no matter how highly leveraged

Sure, but energy production ex-oil is up, including more than a quadrillion BTUs from wind. And we've got very profitable companies with fairly low leverage and high capitalization producing natural gas from fracking paying high salaries.

, which brings me to my final point: Oil Intensity, as measured relative to GDP is actually more a measure of financial leverage and derivative market "profits" than it is a measure of energy efficiency, but even greater pure energy efficiency means every joule lost to systemic entropy and ERoEI results in even greater loss of productivity to the economy, and once there's none left...

This is contradicted by the fact that the velocity of money in the economy is actually down, implying less leverage. In addition, outstanding credit derivatives and options, along with credit card debt are down as well. So there's a lot of explaining you've got to do for this very complicated model you've got.

For all the complexity folks talk about in the financial markets, us quants try to go for the simplest and most sensible models and explanations whenever possible. Perhaps a simpler and less complicated explanation is that CAFEs have been up 20% over the past five years and folks are driving less while working the same. Maybe the "leverage" you are trying to talk about is really us being able drive further on the same gallon of gas rather than us borrowing more either via consumer or corporate debt to pay for that gas:

http://en.wikipedia.org/wiki/File:CAFEStandard2.png

[OilFinder2]

I have lived in NC, working in one of those industries and now reside in MI. Michigan was a one trick pony and lost the greatest amount of manufacturing jobs during the great recession by a long mile. Which is why they tanked behind most every other state.

I too, have lived in North Carolina (went to UNCC in the 80's), and all 3 of my sisters and an aunt live there too. I'm fantastically familiar with the state. You're too fixated on the textile industry which even the most bullish North Carolina manufacturing booster would tell you is but a shadow of its former self. Manufacturing in NC nowadays is extremely diverse, ranging from pharmaceutical manufacturing to transportation equipment to chemicals to high tech manufacturing around Raleigh-Durham to ... just about everything.

The value of manufactured products doesn’t necessarily equate to putting more people to work.

That is true, but that wasn't the topic. The topic was the expansion of manufacturing activity in June in the Richmond Fed district, which includes North Carolina. NC being the nation's 5th-largest manufacturing state, this tells us at least one significant manufacturing region of the US saw a pickup in activity in June. Whether or not that leads to new jobs in this area, we do not know yet.

[Lore]

That is true, but that wasn't the topic. The topic was the expansion of manufacturing activity in June in the Richmond Fed district, which includes North Carolina. NC being the nation's 5th-largest manufacturing state, this tells us at least one significant manufacturing region of the US saw a pickup in activity in June. Whether or not that leads to new jobs in this area, we do not know yet.

The reference was to how meaningful the Richmond Fed is anymore to the markets. None of the other states made it into the top 10 other then NC and certainly as I mentioned the Carolinas stink as far as manufacturing improvement over pre-recession levels. Especially when it comes to jobs.

N.C. loses 286,800 industrial jobs in decade

North Carolina gained manufacturing jobs in the past year but the sector lost 286,800 positions in the decade ended in April. The state had the fourth-largest decline in manufacturing jobs among the 50 states, according to new data from the U.S. Bureau of Labor Statistics.

South Carolina saw a net loss of 108,300 manufacturing jobs during the decade.

The only state to gain jobs was Alaska, which had 100 more manufacturing jobs in April 2011 than 10 years earlier. The state with the smallest loss was North Dakota at 700 jobs.

Eighteen states saw at least 100,000 manufacturing jobs slip away during the past decade. The biggest drops hit California (down 572,400 manufacturing positions in 10 years), Michigan (down 348,600) and Ohio (down 345,600).

These declines occurred despite a recent upswing. Thirty-seven states added manufacturing jobs in the year ended in April 2011. North Carolina gained 5,800 manufacturing jobs, and South Carolina added 6,100. The biggest gains were in Michigan (up 24,300) and Wisconsin (up 14,800).
LINK

[OilFinder2]

Wow, so you just demonstrated ...

1. The states with the larger manufacturing bases had the largest number of manufacturing job losses over the past 10 years (what a surprise!)

2. With the possible exception of Wisconsin, the states adding the most manufacturing jobs in the year ended in April 2011 tended to (still) be the ones with the largest manufacturing bases. What a surprise!

We don't expect Wyoming to have shed 200,000 manufacturing jobs over the past 10 years, now do we. Nor do we expect them to have added 10,000 manufacturing jobs over the past year.

[tsakach]

Retailers Expect Booming Wedding Business from Gay Marriages

From Niagara to New York City, retailers across the state are predicting higher wedding sales and services once the same-sex marriage law goes into effect.

An analysis by former city Controller William Thompson predicted revenues of $150 million for New York City within three years of legalizing gay marriage. Meanwhile, state Senate Democrats estimated the state would earn nearly $400 million from same-sex marriage over the same time period.

Richard Crogan, president of the Main Street Business and Professional Association in Niagara Falls, looks forward to the economic boom for his town.

21,309 gay and lesbian New Yorkers are expected to marry in the next three years, with a predicted 45,000 couples from other states marrying here.

http://www.allmediany.com/details_news_article.php?news_artid=1342

[Lore]

Wow, so you just demonstrated ...

1. The states with the larger manufacturing bases had the largest number of manufacturing job losses over the past 10 years (what a surprise!)

2. With the possible exception of Wisconsin, the states adding the most manufacturing jobs in the year ended in April 2011 tended to (still) be the ones with the largest manufacturing bases. What a surprise!

We don't expect Wyoming to have shed 200,000 manufacturing jobs over the past 10 years, now do we. Nor do we expect them to have added 10,000 manufacturing jobs over the past year.

I demonstrated how pethetic any recovery to US manufacturing has been.

[tosenton]

Perhaps it has but it will be short-lived. It's as simple as this: the U.S. economy is mature and rapidly losing steam. And economists and politicians must get their collective minds around that fact. This doesn't mean we are doomed. But it does mean that sustained GDP growth of 3 percent is pure folly. Can US GDP grow at 3 percent in a given quarter or even year. Certainly it can. But it will never ever grow at 3 percent - or even 2 percent - for an entire decade.

Let's review:

Average rates of growth for US Real GDP by decade:

1940s: 5.99%
1950s: 4.17%
1960s: 4.44%
1970s: 3.26%
1980s: 3.05%
1990s: 3.20%
2000s: 1.82%

The rate of US GDP growth peaked in the 1960s! And has been trending down ever since. The minor exception was the 1990s when Personal Consumption Expenditures (PCEs) were driven by a) increased access to goods in the form of mind-numbing retail expansion; and b) consumer individuation - a cultural shift that supported the move toward individually-owned products (my room, my car, my phone, etc.). It was the PCEs on steroids period which drove the slight up-tick in overall Real GDP for the 1990s.

The fact is that the US economy today is a 1% economy. That's it. Anyone who thinks that US GDP will grow at 2 percent or more for the decade 2010-2019 is delusional. I will wager $1 million with anyone who is willing to bet that the US economy will grow at 2 percent or more for the current decade. It will not.

[Daniel_Plainview]

I will wager $1 million with anyone who is willing to bet that the US economy will grow at 2 percent or more for the current decade. It will not.

Be careful. A substantial portion of US GDP (45%) is govt expenditures. As long as the govt can borrow and/or print, GDP will be significantly inflated due to govt expenditures. Given the current fiscal (Obama) and monetary (Helicopter Ben) policies, several percentage points of GDP derive entirely from govt expenditures.



The problem, of course, is that once the govt can no longer borrow and/or print, then a deflationary and/or hyperinflationary depression will result. Another problem is that interest must be paid on the debt ... so when interest rates rise appreciably, the economy will crash.



Without govt spending, US GDP would be stagnant or declining each quarter ... this is especially true once the suffocating effects of peak oil take foothold.

[OilFinder2]

What a horrible day for Cornucopians:

[...]

2. Chicago PMI plunged from 67.6 to 56.6, the steepest drop since October, 2008, and the second largest two month drop since 1980.

[...]

OOPS! Doomer hopes dashed once again! Chicago PMI unexpectedly surges almost 5 points to 61.1

Business activity in the U.S. Midwest grew more than expected this month, helped by a jump in new orders, a report showed Thursday.

The Institute for Supply Management-Chicago's business barometer rose to 61.1 in June, above the 56.6 in May and economists' expectations for a drop to 54.

The unexpectedly strong reading suggests that manufacturing, a driver of the recovery that has recently appeared to be faltering, may be gearing up again. Other regional manufacturing surveys had suggested a continuing slowdown.

"The really good news is that orders jumped back up in the Chicago survey," said Pierre Ellis, a senior economist at Decision Economics in New York. "The case for a weakening at the national level is now less strong."

New orders surged, to 61.2, from 53.5. A reading above 50 indicates expansion in the regional economy.


[...]

CNBC

Elsewhere in the Midwest ...

Kansas City Fed manufacturing survey soars 13 points to 14. Production sub-index soars.

Growth in Tenth District manufacturing activity rebounded solidly in June after a brief slowdown last month, and producers remained generally optimistic about future activity. Raw materials price indexes fell for the second straight month, but more producers plan to raise selling prices in the months ahead.

The month-over-month composite index was 14 in June, up from 1 in May and equal to 14 in April. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Growth in factory activity increased at both durable and non-durable goods producing plants. Most other month-over-month indicators also improved in June. The production index jumped from -2 to 22, and the shipments, new orders, and order backlog indexes also posted solid gains. The employment index increased from 9 to 17, and the new orders for exports index also edged higher. The raw materials inventory index climbed from 1 to 16, while the finished goods inventory index was unchanged.

[...]

Bloomberg