Posts filed under “Research”

Not Too Stimulative

Obama had one shot at a stimulus package when the economy was reeling from the near economic collapse of 2008.  Some members of his team argued it needed to be bigger (it did), but for whatever reasons they did not prevail.  What was needed then — as now — was to put money to work in such a way as to get the best bang for the buck and put as many people to work as possible.  It’s been my long-held contention that infrastructure would have been an ideal use of stimulus funds.  Consider (much more data at the link):

With 45 percent of roads in less than good condition and 12 percent of bridges structurally deficient, the U.S. faces severe infrastructure needs that significantly impact the nation’s economy.

  • More than 150,000 miles—or 45 percent—of federal highways and major roads in the U.S. are not in good condition, according to the Federal Highway Administration.
  • More than 71,000 of the nation’s bridges—12 percent—are rated as structurally deficient. More than 78,000 are rated as functionally obsolete.
  • More than 20 states this year will likely reduce transportation investments because of federal inaction on a new surface transportation authorization bill.
  • So, perhaps we could have used some money to give our highways and streets some needed attention.  Other areas that come to my mind as good candidates for construction are:  Public Safety, Sewage & Waste Disposal, Water Supply, and Educational.  Sadly, it seems as though not much money went to these necessities.  Thanks to some data sets recently picked up by FRED, we can take a look at all of these areas.  First up, Highway & Street and Educational construction spending.  What I’d really like to see here is a spike — a big one — which would indicate stimulus funds had been allocated to these crucial areas.  Do you see a meaningful spike?  Neither do I, and what’s worse is that both series are now on the decline.

    (NOTE:  These expenditures all have to do solely with construction spending)

    Let’s look at the other areas I mentioned (I broke the data into multiple charts to keep similar dollar expenditure levels together and thereby render greater detail).

    No signs of a meaningful spike here, either.

    One last look, this time at Transportation (like, say, the high speed rail I’ve always hoped Obama would embrace):

    So, nothing significant has really been done on any of these files, and now Obama’s out of bullets.  The beauty of construction spending is that you wind up with things — roads, bridges, tunnels, rails, schools, sewage treatment plants, power plants, airports, dams — that last for decades and get passed from one generation to the next.  Now that opportunity has been squandered — DC is in full-on austerity mode, and the states and municipalities are having their own issues.

    I wrote in June 2010“And, for the record,  I’ll state here that I think Obama and his team badly misallocated the stimulus in ways that did little to create jobs, unarguably its most important objective.  And that will cost him dearly (as evidenced by yesterday’s third defeat of an unemployment benefits extension?).” Nothing that has happened in the past 14 months has caused me to waver from that position.

    Final note:  As I was wrapping up this post, I received an alert that the Philly Fed’s Leading Index series had been updated, so of course I took a gander.  The contours of our two “soft patches” are clear.  The difference is that last year at this time The Bernank was announcing QE2.  It remains to be seen whether or not Ben has another rabbit to pull out of another hat.

    UPDATING, Aug 3, 10:24AM:  In his daily today, David Rosenberg makes the same point regarding the stimulus:

    The overhang of excessive debt burdens is still with us today and the problem with the government stimulus programs that were put into place is that they were not designed properly; the multiplier impacts never did kick in.  So we can’t “grow” our way out.

    Category: Current Affairs, Data Analysis, Economy, Research

    Rosie v Krugman

    Invictus writes: I could not help but be struck by the different positions — both articulated on Friday –  on federal spending taken by two economists for whom I have the utmost respect — Paul Krugman and David Rosenberg.  In his daily missive Friday, Rosie went off on federal spending: Government spending, in the United…Read More

    Category: Economy, Research

    CFNAI — Toeing the Line

    The Chicago Fed’s National Activity Index (CFNAI) printed this week.  The CFNAI is among my favorite indicators that no one seems to follow (though it is covered monthly by Calculated Risk and usually David Rosenberg).  It is an amalgam of 85 distinct economic indicators that gives a very accurate read on the economy.  The folks…Read More

    Category: Data Analysis, Economy, Research

    Read It Here First: Labor Market Slack

    A Bank of America Merrill Lynch research note on the abysmal nonfarm payrolls number for June contained this graph: A February 2010 Big Picture post on slack in the labor market contained this graph: My comment at the time, which holds true today: I’d postulate that only when this gap starts to close meaningfully will…Read More

    Category: Data Analysis, Economy, Employment, Research

    Time Running Out?

    A mention by David Rosenberg in a recent note sent me scurrying to find this report from the San Francisco Fed in August of last year.  The report — remember, it was almost one year ago — used the Leading Economic Indicators to assess the probability of another recession within the next 24 months (from that date,…Read More

    Category: Analysts, Cycles, Data Analysis, Economy, Research

    Fade the Inflation Hysteria

    Tons of talk and pixels being spilled over the imminent inflation threat.  It bears an eerie resemblance to what we heard from the likes of Jerry Bowyer and Art Laffer two years ago.  I’d fade it now, exactly as I suggested back then (here and here, the latter piece co-authored with Bonddad): Exhibit A —…Read More

    Category: Commodities, Current Affairs, Cycles, Data Analysis, Economy, Inflation, Markets, Research, Wages & Income

    MER: Pondering How Things Might Have Been Different

    Invictus here. I’m halfway through Greg Farrell’s Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America. Perhaps I’ll post a thorough review when I’m done with it. So far, so good, though I’ll confess it’s a bit like watching one’s own funeral — very morbid; sad…Read More

    Category: Research

    The U.S. Wealth Barbell

    Duly noted in a research piece by Merrill Lynch, the wealth gap continues to widen, poverty grows: The following article caught our attention on the Wall Street Journal Online, “Millionaire Population Soars – Again.” The Wall Street Journal is reporting on a survey performed by Phoenix Marketing International’s Affluent Market Practice. According to the survey,…Read More

    Category: Current Affairs, Data Analysis, Economy, Research

    Refi Madness: The Heat is Frying your Brain (Redux)

    It is a very hot August and the heat seems to be getting to people on Wall Street. In Washington the greater heat stems from fears about the impact of the economy and housing on the mid-term elections. As a result, Wall Street is expecting a big “surprise” in the form of a massive GSE…Read More

    Category: Credit, Real Estate, Really, really bad calls, Research

    TBP “Déjà Vu All Over Again” Post

    Warning:  The following post is offered in the spirit of shameless self-promotion. Those who prowl the web and consume all manner of economic research probably saw some things late last week that looked eerily familiar.  Maybe you could place them, maybe you couldn’t.  Perhaps you wondered, “Where have I seen that before?”  Well, in at…Read More

    Category: Data Analysis, Economy, Employment, Research