I’m a bit surprised that anyone can be surprised by the lousy jobs numbers for August. Consumers are worried and too many economists have been trying to draw trend lines through noise in retail spending data and call it proof that a recovery in under way. Broad measures of unemployment are stuck in the upper teens, big companies are continuing to shed jobs, small businesses on the whole are pessimistic, state budgets are under pressure and federal deficit spending is set to be reined in. With housing in most markets not having bottomed, the overwhelming majority of consumers having taking a wealth hit, businesses not investing and government not taking up the slack, where exactly is growth supposed to come from? The tooth fairy?
The government and private sector confidence generation apparatus hasn’t made much headway against the ugly combination of a post financial crisis hangover (known more formally as a balance sheet recession) and poor policy responses (yes, Virginia, while the authorities did keep the financial system from imploding, the failure to clean it up and provide for adequate stimulus to offset private sector deleveraging were and continue to be massive errors).
But why has the media been so clueless? Cynics might argue that they are paid to be clueless, and there is more than a bit of truth in that. However, I suspect at least as powerful is that the overwhelming majority of reporters live in New York or Washington DC, two cities relatively unaffected by the downturn. DC is awash in lobbyist dollars and New York has been kept afloat by super low interest rates and other sops to the banks.
While readers provide some vignettes on how the rest of the country is faring, I got a real wake up here in central Maine. Even though yours truly has a bias to see the glass as half empty rather than half full, things here are visibly worse than in the last two years, meaning in the wake of the crisis.
I’ve gone to the Casco Bay area (Portland is at the south end of Cacso Bay) around this time of year for over 20 years, including the particularly bad 1990-1991 recession, which seemed to hit this economy harder than most of the US. Some indicators:
1. The roads are just not busy enough. We rent a house in a major vacation area. The traffic level is notably lighter than in the past. We expected to see this in 2008 or 2009 and didn’t much then.
2. Normally we avoid Freeport entirely till after Labor Day. Freeport is the home of LL Bean and has become a America shopping town of sorts, with lots of aspirational middle class outlet stores (Calvin Klein, Nike, J. Crew) and is typically mobbed in the summer and still pretty busy right after Labor Day. One of my relatives was in desperate need of a book fix, so mid-week we relented and went to a used book store on the edge of Freeport and could tell the roads in and out were way underpopulated relative to the norm. We decided to venture in today so the nieces could shop, and Freeport was a ghost town.
3. We always go further up the coast to Boothbay Harbor, and often take a cruise. There were notably fewer options on offer. Again, this is one of the biggest weeks of the year, and suggests the tour operators have cut back their schedules from past years.
And consider this too: given the strength of the Canadian dollar, you’d expect Canadians coming to the US to be a partial offset to any fall in domestic holiday spending.
I hope readers will give me their observations about how the economy is faring, both based on activity where they live, and for those who have gone on holiday in the US in the last month, what you’ve observed elsewhere.