The US Economy

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How do you think the economy is doing today? Has the recovery begun? Are you optimistic about the near future or do you think things are bad and getting worse?

This question has been kicked around in other discussions, but I thought I'd create one so people can give it the attention that it deserves.

In those discussions, I've seen a lot of people focusing on JOBS (a lagging indicator) while ignoring positive reports from many leading indicators. Today I found this article, which made me wonder if anyone out there has changed their mind:

Quote:

Dow Jones Business News
Signs Point to High-Tech Job Growth in Silicon Valley
Tuesday August 19, 2:01 pm ET
By Mark Boslet

PALO ALTO, Calif. -- After eight long months, Erick Klein found what many Silicon Valley workers still desperately seek: a job.
Mr. Klein started work last month as a senior product manager at the privately held Oakland software developer, Cyanea Systems Corp.

"I was interviewing like crazy," says the high-tech employee, who lost his former position during a downsizing at Epicentric Inc.

Mr. Klein said he averaged one to two interviews a week during his lengthy unemployment, scouring online job boards and working a network of business connections.

"Actually closing on a job was an extremely difficult process," he said. "I came pretty close on a number of occasions."

But cementing a deal has suddenly gotten easier. "It was the right fit," he said. Companies appear to be more willing to hire than several months ago. "I do think things are getting better."

He isn't the only one with a sense the job market is improving. Nearly 10 of Mr. Klein's acquaintances who were looking for jobs have found work too.

Optimism is on the rise in Silicon Valley and in the high-tech industry after a long dreary period of austerity and contraction. Companies say they are moving ahead with dormant plans for growth or increasing the pace of expansions already under way.

"We are growing [our hiring] faster than last year," said Christopher Lochhead, chief marketing officer at Mercury Interactive Corp. (NasdaqNM:MERQ - News) .

In 2002, Mercury increased its work force 14%. During the first half of this year, employee rolls were up 8%, a pace that would mean 16% growth for the full year.

"We plan to continue" hiring, Mr. Lochhead said.

The Sunnyvale, Calif., software developer separately brought on 200 employees with Monday's acquisition of Kintana Inc. and plans additional hiring for this new division.

More Job Postings

Companies say they see opportunities, both to find good employees and increase sales. Their enthusiasm is reflected in online job postings. At Monster.com, a Web site owned by Monster Worldwide Inc. (NasdaqNM:MNST - News) , seven quarters of decreasing high-tech job postings ended in the first quarter, when listings rose 2.8%. Postings rose another 4.9% in the second quarter and climbed 6% from June to July this year.

A company spokesman said Internet and e-commerce job postings were up 12% in the month, information-technology listings rose 8% and computer and software jobs increased 3%.

Yahoo Inc.'s HotJobs employment site has seen an increase in California listings. Year-to-date, postings for jobs in the state are up 17% and MIS, or management of information systems, jobs are up 21%. Most technology jobs listed on Yahoo's Web site are MIS jobs, a category that includes engineers and software developers.

The San Francisco Internet site Craigslist also has seen a rise. Engineering and software jobs listed in the San Francisco Bay area were up 31% from January to July, while all jobs were up 27%.

"July was our best month in a long time," says Richard Gostyla, managing director at the executive recruiting firm Spencer Stuart. More inquires appear to be coming in from companies interested in conducting job searches, he said.

Yet few Silicon Valley leaders are ready to say a powerful recovery is in place. The unemployment rate in Santa Clara County, at the heart of the valley, remained a stubborn 8.4% in July, down only modestly from 8.8% in January, according to California's Employment Development Department. For the nation as a whole, unemployment was 6.3% in July, and for all of California, 6.9%.

The unemployment rate in San Mateo Country on the northern edge of the valley was 5.3% in July, nosing up from 5.2% in January.

"I think we're seeing a trend upward in executive recruitment," said Silicon Valley-based David Nosal, global head of Korn/Ferry International's CEO practice. "I don't think we're seeing a big increase."

Still Some Caution

Many large companies continue to be cautious. Cisco Systems Inc. (NasdaqNM:CSCO - News) said earlier this month that its goal was to keep employment essentially unchanged and that any hiring as a result of attrition would be very selective. Agilent Technologies Inc. (NYSE:A - News) announced Monday that it had cut world-wide employment by 2,400 workers in the past three months, and International Business Machines Corp. (NYSE:IBM - News) said it was shedding staff in Vermont.

It is unclear, said Arnie Berman, a technology strategist at SoundView Technology Group (News - Websites), how much hiring is to replace workers and how much is to add new staff. Help-wanted advertising, often a good early barometer of an upswing in employment, hasn't boosted all advertisers equally. Silicon Valley newspaper, the San Jose Mercury News, hasn't yet seen an increase in its job listing ad revenue. Revenue was down 46% in the second quarter and 41% in June, the newspaper says.

Nevertheless, the anecdotal evidence of expanded hiring is accumulating. Among the companies that appear to be doing the most of it are Internet firms, such as search engine companies, smaller software makers and consumer-products firms. Online auction site eBay Inc. (NasdaqNM:EBAY - News) listed 95 North American jobs on its Web site as of Friday.

"Smaller software start-ups are starting to ramp their sales forces," said Girish Mirchandani, president of recruiting company SVI Search. "My own gut reaction (is) things are getting better."

One such company is Decru Inc., which has been accelerating its hiring a bit. The company added 14 Silicon Valley workers in the past four months and nine in Europe and outside the valley.

"We've been selective," said Dan Avida, Decru's chief executive. "People are not going to be hiring (like) crazy."

-Mark Boslet, Dow Jones Newswires; 650-496-1366; [email protected]

Link: http://biz.yahoo.com/djus/030819/1401001046_1.html

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Scrat, Those anectodal reports of jobs doesn't balance with the thousands still losing their jobs. Here's the real dope: Consumer spending provides 70 percent of our economy. The reason consumer spending has been level during the past couple of years is from borrowings on their homes by refinancing that still must be repaid - even at lower interest rates. Government and consumer debt has been on the rise during that same period, so what's keeping the economy floating is thin air - not job income. With the world economy in a slump, any turn-around in the US economy will be slow and painful. Most college graduates today cannot find jobs. The airline industry is bankrupt which affects the total tourist industry; namely hotels and restaurants. Those financial pundits that are claiming that our economy is in recovery mode just doesn't know what they are talking about. Even the stock market is over-valued according to all economic indicators. Only a few companies are making what can be considered good profit - which actually adds cash to the bottom line. Most are 'making' profits with accounting games. Sooner or later, they're going to pay the piker. It's my conservative guess that our economy and the world's economy will not see any stability for another five years - minimum. c.i.

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cicerone imposter wrote:

Scrat, Those anectodal reports of jobs doesn't balance with the thousands still losing their jobs. Here's the real dope: Consumer spending provides 70 percent of our economy. The reason consumer spending has been level during the past couple of years is from borrowings on their homes by refinancing that still must be repaid - even at lower interest rates.

Consumer spending up in July <- Link

Why is consumer spending on the rise as interest rates are rising? Perhaps there's more to it than just people sucking money out of their homes?

cicerone imposter wrote:

Most college graduates today cannot find jobs.

I don't know how to quantify "most", but there's no question these people are entering a tight labor market, but one that may be improving.

Quote:

Nationally, the unemployment level was 6.2 percent in July ... down from June 2003's 6.4 percent.
Link: http://birmingham.bizjournals.com/birmingham/stories/2003/08/18/daily9.html

cicerone imposter wrote:

The airline industry is bankrupt which affects the total tourist industry; namely hotels and restaurants.

Quote:

US airline stocks start to soar
20-08-2003
US airline stocks traded higher Wednesday morning, as the Air Transport Association's monthly sales report fueled hope that the industry is turning around.
Link: http://www.examiner.ie/breaking/2003/08/20/story110453.html

cicerone imposter wrote:

Those financial pundits that are claiming that our economy is in recovery mode just doesn't know what they are talking about.

Perhaps, though I imagine if I were to state here that anyone who disagrees with me "just doesn't know what they are talking about" you would not put much weight behind that statement.

Have you ever considered that perhaps your view of our economy is effected by your location (CA?) and your industry (travel?), both of which have been hit harder than most other regions and industries over the last several years. Perhaps a meaningful recovery--one that will feel like a recovery to you--will lag behind one that will effect me (my industry is already improving, my company's stock has been rising steadily all year, my company is quietly beginning to hire again, business in my area is picking up, unemployment in the state is flat from last month and I would not be surprised to see a drop when Aug numbers come out).

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Scrat, Many of those same financial pundits have been predicting an upswing in our economy for the past 18 months. I've been poopooing their prognostications for just as long. Many of the world's airlines are going broke, not just the US airlines. When I talk to people in the tourist industry all over the world, they tell me things are not improving; even in Banff, we were informed tourism was down 40 percent from last year. As for the stock market, look at the p/e ratios; the majority of them arel over-valued. A good balance would be about a 15 times earnings; but most are over 22 - and going higher with the recent uptick in the markets. As for the job market, we've lost over four million jobs since Bush took over this administration. There are too many middle-class families struggling to make ends meet. This war in Iraq is adding about $25,000 national debt per capita. The tax cuts gave $600 per family; not a good trade off in any bookkeeping scenario. The US infrastructure is in dire straights; over 30 percent of our highways are in bad repair, our energy grids of old and in need of upgrades - as our recent blackout have shown, our schools are being marginalized by cutting of fundings from all government sources, and finally, there is no foreseeable end to the quagmire this administration got us into in Afghanistan and Iraq. I'll feel comfortable with our economy when companies begin to purchase capital, because they've maxed out capacity. That isn't going to happen any time soon; many factories are still being closed down. c.i.

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CI - I understand your opinion, but pointing out that things have been bad does not justify the argument that they might not now be improving, nor does the fact that some industries are far from out of the woods mean that the US economy on the whole might not be beginning to improve.

Again, is it POSSIBLE that your location and industry color your perception on this question?

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Well, the stock market is a leading indicator, but c.i. is pretty good at this kind of thing. My only prediction is that we won't be terribly long in finding out which view is right.

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Scrat, My opinions are not based strictly on my base of residence. I try to read up on world economic news daily. It's the same stuff everybody else reads, but I have a different perception of where we are and where we are headed. From what many hear in the media and read, they have started to sell off on their bond holdings, but I'm holding on to our bonds. We still have 35 percent in equitities, so any unpredictable uptick in the market will balance our portfolio. The average loss in the market last year was 30 percent; we gained 4.5 percent. Do you know how long it'll take to make up that 30 percent loss? c.i.

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CI - Let me put it to you another way. Things are going well for me personally and in my area I see signs of growth and positive changes in the economy. I probably read a lot of the same news that you do, but when I parse that news through my personal perspective I am optimistic about the economy where you are not. Now, you could assume that I am stupid, or I could assume the same of you, but I do not. Instead, I suspect that to some degree our personal opinions on this are shaped by our personal experience, and I wondered whether you agreed with/recognized this as well.

And I am inclined to disagree with Roger's comment that we will soon know who is right and who is wrong. If we disagree about where we are today, what evidence is there that we will agree on where we are tomorrow or 3 months from now?

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Scrat, The thought that you are stupid never entered my mind; I think you are intelligent, articulate, and able to say things very clearly to communicate your ideas. Your ability to see the signs of growth and positive changes in our economy is encouraging, but I still disagree with your opinion. It's only an opinion - after all - mine included. You could be right, and I could be wrong. We're here to share our ideas; not to criticise the other's opinion. As you say, we shape our opinions by our own experience. If everybody agreed, there would be no use for discussion. That's what makes life interesting; my opinion still conflicts with most people in the stock market today. They've pushed the p/e ratio above 30 on the DOW. Many seem to have the same confidence you do about our economy. I hope you're right, because we also gain. c.i.

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Yes. Mine is absolutely only an opinion! And I'm not blind to evidence that throws that opinion into question, nor am I averse to learning that I am wrong. (I do HOPE I am right, of course. I'd imagine that you HOPE I'm right too, you just don't think so, which is completely cool.) Cool

Just to add fuel to the discussion, here's some commentary I got in my box today that not only does not bode well for my point of view, but seems to be in wholehearted agreement with at least part of yours when the author writes:

Quote:

The largest positive contributors to the index {of Leading Economic Indicators} were the interest rate spread and stock prices. The most significant negative contributors were the average manufacturing workweek and the index of consumer expectations. But the interest rate spread between the federal funds rate and the rate on 10-year Treasury bonds is a two-edged sword since higher 10-year rates mean higher consumer rates, which are generally a drag on consumption. As for higher stock prices, those are often looked at as indicators themselves.

Indeed, the rise in share prices in the past year has outpaced almost every other indicator. The stock markets rose yesterday, supposedly on the strength of the leading indicator report, meaning the market was cheering its own good news. When this happens too much the situation is ripe for another bubble, which may be happening already in the Nasdaq, with its composite index up about 27% in a year without any remotely comparable increase in company earnings.
Link: http://www.forbes.com/2003/08/22/cx_da_0822topnews.html?partner=yahoo&referrer=

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Scrat, I see the bubble, because it's impossible for our economy to "grow" that quickly from the past three years of depression - or bare survival. c.i.

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It's a pleasure to follow this discussion.

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BTW, as of last Tuesday, our retirement investments are up 2.9 percent for the year, and that's net after my withdrawals for living expenses. c.i.

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roger, What's your opinion on this topic? c.i.

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cicerone imposter wrote:

Scrat, I see the bubble, because it's impossible for our economy to "grow" that quickly from the past three years of depression - or bare survival. c.i.

Again, that's your opinion. Oh, and I'm not sure this dip even qualified as a recession, calling it a "depression" is a bit over the top.

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I base the Silicon Valley economy on the amount of traffic. Traffic is getting much worse, once again. So I'm saying rebound.

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Yes, "depression" is not the correct word, but "recession" isn't even used by many government economists. It would depend greatly on your personal economic status. Many without jobs for the past two-three years will call it a "depression." On the other hand, we are "comfortable," and have no immediate worries about money. c.i.

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BTW, the four million that lost their jobs in the past three years will probably see their economic status as 'depressed' or 'distressed.' c.i.

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Scrat, I don't think it's necessary to keep reminding each other that what we express here are always "opinions." c.i.

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cjh, Here's the latest info on our unemployment rate in silicon valley. http://www.bizjournals.com/sanjose/stories/2003/08/04/daily64.html
I hope this trend stays true; but I've always been leary about government statistics on unemployment rates, because many fall off the unemployment insurance rolls after they've maxed out their benefits, and they don't show after that. c.i.

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