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After Labor Day: The Return of the Pols and the Oxpeckers

Irwin M. Stelzer

Monday will be an important day here in America. It is Labor Day, the day on which many of us say goodbye to summer—the last holiday from work until we carve our turkeys on Thanksgiving Day at the end of November. Barbeques will be fired up, beer kegs tapped, the all-too-short leases on beach homes will expire, stock exchanges will be shuttered, and thoughts turned to the new football season, especially in Washington and New York, where the end of the baseball season can’t come too soon.

As we face a return to work, it is not unlikely that we will find it less easy to avoid thinking about the problems the nation faces. Some 75 percent of us tell Gallup’s pollsters that we are dissatisfied with the way things are going in the United States—and that was before the possibility that President Obama might take the nation into still another ugly conflict in the Middle East and, worse still, without the support of our British allies. Not since early last year have Americans said they are so dissatisfied with the way things are going here.

High on the list of unhappinesses is the state of the economy and the inability of government to function the way we Americans think it should. That unhappiness will undoubtedly increase next week as the summer calm of Washington is shattered by the return of warring politicians and the gang of well-shod lobbyists that prowl the corridors of power—it is not for nothing that those corridors are known as Gucci Gulch—plying their trade on behalf of still-powerful trade unions and campaign-funding businesses, as the corporate-industrial complex figures how to pass more of its burdens onto ordinary Americans.

Yet 85 percent of Americans profess themselves completely or somewhat satisfied with their jobs, roughly the same portion that has expressed a similar view since polling on this issue began some 25 years ago. Perhaps most interesting in a country in which pundits claim that insecurity is on the rise and upward mobility is on the decline, the vast majority of Americans say they are unworried about the possibility of being laid off, and remain as satisfied with their chances for promotion as they return to work later this week as expressed similar views 25 years ago. All of this in a country in which some 14 percent of workers are unemployed, involuntarily working short hours, or too discouraged to continue hunting for jobs.

To confuse matters further, consumer confidence is on the rise, surprising economists by clocking in at an index level of 81.5, well above forecasts of 79. My guess is that Americans who have jobs, even jobs that liberals scorn as paying too little and offering only part-time work, are broadly satisfied, and that prospects are brightening for those seeking any job that pays significantly more than the benefits they are receiving. It is not unusual for polls to show dissatisfaction with the state of the nation but satisfaction with one’s personal situation. After all, views on the general outlook are influenced by a press that specializes in bad news, while views of one’s own situation are based on the hard facts of daily experience. We are unhappy with the performance of congress, but re-elect our own congressmen with a regularity that exceeds the reappointment rate to the Politburo under Stalin. We worry about the economy in general, but profess satisfaction with our own jobs and employment situations. Foolish consistency has never been a dominant American characteristic.

So, best to look at what is going on in the economy, and what consumers, businessmen, and central bankers, the latter refreshed by their annual visit to Jackson Hole, are doing, to supplement what voters are telling pollsters. And on this score most of the news is, if not perfect, reasonably good.

  • The annual growth rate in the second quarter has just been revised up from a pallid 1.75 percent to a more satisfactory 2.5 percent, once again wrong-footing most forecasters.
  • The Conference Board, a business research group, reports that its index of leading economic indicators is signaling a pick-up in growth in the second half of the year.
  • Sales of previously owned homes rose 6.5 percent in July, reaching an annual rate 17.2 percent above last summer’s and the highest rate since the summer of 2009. House prices continue strong, and are about 12 percent above year-earlier levels after recording year-over-year gains for 17 consecutive months. But sales of new homes were down 13.4 percent in July from June, causing some nervousness, and there are signs that rising mortgage rates might be discouraging some buyers. However, with inventories of unsold homes rather low, builders in cities such as Houston complaining that they cannot meet demand for new homes because of labor shortages, and cash sales—no mortgage required by buyers—increasingly common, it is too soon to declare the housing recovery stalled. Goldman Sachs’ economists, after a detailed study, conclude, “We do not think that higher mortgage interest rates are a deal breaker for the on-going recovery in housing activity…. With the improving underlying demand driven by household formation and economic recovery, we think housing demand will remain on an upward trajectory despite occasional ups and down along the way.”
  • Small-business optimism is running at the highest level since the onset of the recession. A Wall Street Journal survey of owners of small businesses find that 73 percent expect revenues to increase in the next year and 54 percent expect profits to rise. Separate surveys by Wells Fargo and the National Federation of Independent Businesses both indicate that small business optimism is up and rising despite these firms’ difficulty in getting bank credit. This runs contrary to the view that the onset of Obamacare has small business owners on the brink of nervous breakdowns, but doesn’t tell us much about whether improved business conditions would lead an employer of 40+ workers to add to his staff and become enmeshed in Obamacare requirements.  
  • The auto boom continues apace, with Ford leading the charge to expand output to meet robust demand. As further proof that 60 is the new 40, oldsters are snapping up the sportier models that grace dealers’ show rooms.
  • The banking sector is in decent shape: bank failures are down, industry earnings have been rising for 16 consecutive months. “We are looking at a banking industry that is significantly stronger than it was three years ago,” FDIC chairman Martin Gruenberg told The Wall Street Journal.

The usual clouds dot the horizon. Consumers, their incomes more or less static, are at least for now, inclined to leave their wallets in pockets and their purses snapped shut, and continue to make do with existing wardrobes, hurting low-end retailers such as Walmart and high-end retailers such as Saks Fifth Avenue and Neiman-Marcus, but creating long check-out lines at Home Depot and Lowe’s . Unemployment is too high and the labor force participation rate is too low to turn this recovery into an above-trend growth rate. Share prices closed the month of August after their worst performance in a year. The structure of the banking industry remains sufficiently unreformed to have eliminated “too big to fail, too big to jail.” Political stalemate over funding the government and raising the debt ceiling is adding to uncertainty. Obamacare’s job-crushing implementation date approaches. And interest rates might continue to rise even if the Fed attempts to hold them down, which it plans to do even if it does “taper.”

All of that is for next week. For now, it’s a holiday weekend in which to eat, drink, visit and be merry, for Tuesday we go back to work.

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