Marvin Gaye And US Economy

Charles V. Payne is a regular contributor to the Fox Business and Fox News Networks. He is also the Chief Executive Officer and Principle Analyst of Wall Street Strategies, Inc. (WSSI), founded in 1991 which provides subscription analytical services to both individual and institutional investors.

Hey, Man I Just Don’t Understand

Hey baby, what you know good?
I'm just gettin' back, but you knew I would
War is hell, when will it end?
When will people start gettin' together again?
Are things really gettin' better
Like the newspaper said?

What else is new my friend
Besides what I've read?
Can't find no work, can't find no job my friend
Money is tighter than it's ever been
Say man, I just don't understand
What's goin' on across this land
Ah, what's happenin' brother

This week we have seen a ton of "good" economic news, and yet as we head into the weekend, the question is what's going on? What's really going on with the economy, and should we really be singing its praises? Marvin Gaye's "What's Going On" album has been ranked the 10th best of all time by Rolling Stone magazine, and its lyrics continue to be timeless. 
Lately, I find myself thinking and singing them, especially those from "What's Happening Brother," that ask "are things really gettin' better, like the newspaper said?" Of course these days, it would seem newspapers are less into news-gathering and more into cheerleading, although some play it down the middle.

But music, books, and poetry remind us that the more things change the more they stay the same. "What's Going On" was released in 1971, and Marvin Gaye's intuition that things were getting worse was spot on. America entered into its worst decade ever outside the 1930s and had to eventually be rescued by the presidency of Ronald Reagan. The question is could it have been better had we been more honest about the condition and more willing to fix it.

The fall of Saigon happened on April 30, 1975, and while the war was over, the battles at home where growing more challenging. It would seem we couldn't afford to lose them. But for the most part, we did for years to come.

There are a few parallels to that period of the mid-1970s and to what's happened in America over the past few years. During November 1973 to March 1975 the U.S. saw a devastating recession, coupled with our realization that we lost the war in Vietnam after a twenty year struggle that left 58,209 Americans slain. It would seem things couldn't get worse, but nobody thought it would get better. In fact, things didn't get better as self-doubt and a culture that encouraged people to drop out made for a very indifferent backdrop for the wobbling economy.

Yet, the unemployment rate surged to 9.0% in May, 1975 up from 5.1% a year earlier.
Investment tumbled to $124 billion from $184 billion a year earlier and from $203 billion in 4Q73.

Money is tighter than it's ever been, and this is embarrassingly all too true today as well. Last year a survey published by the National Bureau of Economic Research was almost as shocking as it was heartbreaking. When asked about their ability to raise $2,000 in cash in one week more than half of the respondents couldn't be sure. This is nothing short of amazing and underscores that money is tighter than it's ever been. We aren't just talking about more stringent standards at banks that have been browbeaten into not making risky bets, which means not lending money to Americans that really need the cash, but also being told by friends and family they're tapped, too.

With this startling statistic it's easy to see why a program that even adds just $20.0 a week to a family budget is popular, but it comes at the expense of further strains on social security.

So are things really getting better?

* The unemployment rate is dropping, but people are fleeing the job market.
* Housing starts jumped again, but single-family starts were -1.0% while apartments drove multi-family starts up 8.5%, so we give up the dream of home ownership to pay rents for apartments.
* Small business optimism is higher but below recession levels.
* Gasoline prices are up 85% since inauguration day even as we are driving less.
* Foreclosures could be ready to explode after increasing 3% in January.

So, what else is new my friend, besides what I've read? Well, we are being sucked into a dependency nation where the welfare mentality is encouraged and rewarded. Yesterday the CBO reported the unemployment rate will probably remain above 8.0% to 2014. So, it's been 36 months and counting, the longest stretch outside the Great Depression.
Moreover, long term unemployment, which hit 40% of total unemployment for the first time since these records have been kept (1948), is expected to stay the same. Historical patterns for long term unemployment have been in the 20% to 25% range of total unemployed. This is a true catastrophe. The CBO report talks about the stigma being mitigated because of the nature of this down period but acknowledges a self-perpetuating cycle that creates reluctance to hire the long term unemployed, which makes their unemployment even longer.

The CBO report also mentions good things about longer term unemployment insurance like paying bills and looking for the right job and also talks about the double-edged sword aspect.

However, the availability of UI also discourages unemployed people from taking a job they might consider unsuitable because those benefits reduce the hardship of being unemployed. Economists have traditionally viewed that effect as significant. One widely cited study from 1990 found that eligibility for five extra weeks of benefits led to, on average, a one week increase in the length of an unemployment spell. More-recent studies have suggested, however, that only about 40 percent of that one-week increase in the duration of unemployment was the result of a diminished incentive to take a job; the remaining 60 percent of that increase represented an expanded search effort, which can ultimately result in better job matches.

War is Hell and so is this Economy

What's been shakin' up and down the line?
I wanna' know, cause I'm slightly behind the times

Last year our economy avoided a double dip recession by the closest of margins because we have an economy already built to last and global demand created opportunities for American businesses. The stock market is in the midst of an amazing, albeit stealthy, rally but that is also for the same reasons.

Manufacturing jobs decreased to 11.7 million last year from 13.9 million in 2007, so to brag about 100 new jobs at Master Lock is simply disingenuous. There isn't real demonstrable evidence that things have gotten much better. I wish I could say I don't understand, but I do.

There are green shoots, but not a lot has really changed in the last three years. Unemployment is sky high, gas prices are sky high, and home prices keep falling. On the dance front I think you can still rock the dougie but, unless you do it great, stay away from krumping.