Friday's Construction Spending and Manufacturing reports provided still further evidence of a sinking economy. The 2 graphs below from Briefing.com show the overall trend.

Construction Spending declined 1%, leaving an annualized, seasonally-adjusted rate of $1.16 trillion. This was the largest decline since the recession in 2001. Residential Construction fell 1.9% in the last month. Residential Construction spending has also fallen for 7 consecutive months.

Since March, 100,000 housing-related jobs have been lost. Economist Zoltan Pozsar from Moody's Economy.com, (in today's Yahoo News) estimates that 300,000 more housing-related jobs will be lost in the next year.

Manufacturing also declined in today's report. This is the first contraction in the Manufacturing sector in almost 4 years. Manufacturing employment also declined in November, with the ISM Manufacturing employment index declining to 49.2 in November from 50.8 in October. (Readings under 50 indicate a contraction.)

The dollar has dropped 3% in relation to the Euro in the last week, and 1.4% since Thursday morning (11/30/06).

The stock market has declined for the 2nd straight week.

All of this follows November 28th's Durable Goods Orders decline, which was much larger than predicted. The original Durable Goods orders prediction was for a decline of only 6.0%. The actual change was a -8.3%. Though much of this was simply an offset from last months increase "alleged" 8.7% increase, October's total is still 0.3% less than August's, and 0.38% less than July's.
The August through October numbers can be seen on the chart below from the U.S. Census Bureau. The Durable Orders totals are underlined in red, as are the "Excluding Transportation" totals.


More importantly, Durable Goods orders have declined compared to October 2005, for a same-month change of -1.8%. This can be seen from the composite chart below, made from the superimposition of monthly Durable Orders reports from the previous months, with information on the furthest month back coming from the January 2006 report by the Census Bureau.
(October 2005's total was not available, so it was extrapolated from the percentage increase given between October - November 2005 change, shown in the far right column.) Once again, the Total and Ex-Transportation numbers are underlined in red.


From the above chart it appears Durable Orders peaked In December 2005, and have been generally declining since that time. Compared to December 2005's peak of $230.754 billion, October of 2006 is down 9% to $209.974 billion.

Meanwhile, the Corporatists and the NeoCon-Artists continue to claim the economy is "the strongest ever" and claim the statistics support them. Of course, they never give those "supporting" statistics. There's a reason for that. There aren't any. The economy is sinking and a recession is very likely within the next year. All the Right-Wing propaganda in the world isn't going to change this.

unlawflcombatnt

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The economy needs balance between the "means of production" & "means of consumption."


Edited to eliminate overlarge images.

This message has been edited. Last edited by: Karrow,

Economics goes in it natural cycles. It would seem to me that construction spending may have very well played itself out for a while. Like any other market, it takes a breather.

Another consideration is the new political landscape. With the Democrat majority now in control of both houses of Congress brings new economic uncertainty. Especially if they undo the President's goal of making the tax cuts permanent. And if that happens, yes a recession is a very real possibility.

The economy started going downhill long before the November elections. The impending recssion is exclusively the result of the policies of a Republican Congress, Senate, and President. If the newly elected Demcorats don't undo Bush's tax cuts for the rich, the recession will be that much worse.

unlawflcombatnt

_________________
The economy needs balance between the "means of production" & "means of consumption."

This message has been edited. Last edited by: Karrow,

Quite obviously we disagree. It makes absolutely no sense whatsoever to undo the tax cuts. If anything it would give the economy a shot in the arm to enact more cuts.

"Absolutely no sense whatsoever"? Economics is not an exact science, to say the least. No doubt quotes can be found on the web to contradict the ideas below, but to the degree of certainty suggested by 'absolutely no sense whatsoever'? I doubt it.

'Since 2001, changes in tax law have cost the federal government $929 billion, including $860 billion in direct cost and $69 billion in interest.1 Proponents of these tax cuts promised stronger economic gains than were typical of the past, but that did not occur.2 Unfortunately for most Americans, almost every broad measure of economic activity—GDP, jobs, personal income, and business investment, among others—has fared worse over the last four years than in past business cycles.

As the chart above indicates, there has been one bright spot in the economy—residential investment. But that sector has had a reduction in tax incentives because lower income tax rates reduce the value of deductions for mortgage interest and real estate taxes.'
www.epi.org (Oct 2005)

'Bush hailed the dwindling deficit as a direct result of "pro-growth economic policies," particularly huge tax cuts enacted during his first term. "Tax relief fuels economic growth. And growth -- when the economy grows, more tax revenues come to Washington. And that's what's happened," Bush said.

Economists said Bush was claiming credit where little is due. The economy has grown and tax receipts have risen at historic rates over the past two years, but the Bush tax cuts played a small role in that process, they said, and cost the Treasury more in lost taxes than it gained from the resulting economic stimulus.

"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. "It's logically possible" that a tax cut could spur sufficient economic growth to pay for itself, Viard said. "But there's no evidence that these tax cuts would come anywhere close to that."

Economists at the nonpartisan Congressional Budget Office and in the Treasury Department have reached the same conclusion.'
www.brendan-nyhan.com

Isn't the main problem with the Bush tax cuts that the government just kept on spending? Tax cuts would make more sense if there were consequent spending cuts. As it is, the Asian countries which have allowed this profligacy, by investing heavily in the dollar, seem to be changing their minds - hence the dollar's nose-dive, which might bring a temporary boost to US exports, but is hardly good news in the economic long run.

Quite obviously you can't both be right as far as the tax cut's effect on the economy is concerned. I would like to understand though, if one of you could explain your reasoning in a way I can understand. I thought that the difference between my income and my expenses results in either a surplus if I spend less than I earn, or a deficit where I spend more than I earn. In my case, if I continue to run a deficit, my debt grows and I have to borrow the difference. If I borrow money, I have to pay interest to my creditors.

Now suppose I already owe more money than I can repay, and I manage to keep the lenders from cutting off my credit by making only the bare minimum payments plus the interest on the unpaid balance. Am I not at the mercy of the lenders? Can they raise the interest rate or refuse to lend me any more money? Am I mistaken in thinking that the size of the national debt results in interest payments on it having reached a size that compares to the total cost of the defense budget? If I try to balance my budget by working shorter hours for less revenue, what do I do for food and rent, etc.? If I borrow more money to balance my budget, how long can I depend on being considered a good credit risk? Can I borrow more money on the expectation that I can profit from the intelligent use of other people's money? I have done that in the past, but doesn't it run the risk that my investments may not always prove profitable. Some investments fail, but obligations have a way of enduring. Are we not gambling with our children's and granchildren's future ? Do we not have a moral obligation to our posterity ? Do our elected representatives benefit from our "boggled" minds?

The fact of the matter is, the rules for the Federal Government are not the same for the private citizen. The former can be up its wazoo with debt, and still auction paper, known as bonds or treasury notes, knowing that the rest of the world is not going to look to redeem them en masse, because the death of the US would be the death of the world. Further, the private citizen does not have a pool of Social Security funds it can loot, not caring whether the next generation will ever have anything to collect. Anyone who expects the government to help the individual, whether it be through a Social Security pyramid fraud or a future health insurance scheme. forget it. The Federal Government is incompetent; it answers to no one. And it has no leaders, just a bunch of power-hungry politicians and entrenched bureaucrats.

"Are we not gambling with our children's and granchildren's future ? Do we not have a moral obligation to our posterity ?"

Well, yes, to both questions. (and not just regarding economics).
I often wonder about who on this board continually realizes this. Usually folks are more worried about themselves and this immediate era, with little regard for the future. But it should be less about money and more about [less] religion. IMO

Governments work differently to individuals (they're less constrained when it comes to financing debt).

Govt raises money from taxpayers but often, not enough money can be raised via tax in the timeframe required for spending needs. Therefore, government has a tool.... bonds.

Govt's issue bonds which are bought by investment companies and individuals. They are debts for a fixed time period offering to repay the debt plus some interest to the buyer (investor). Interest rates vary depending on the government's financial record, term of debt, etc... As long as investors believe that the government of the issuing country is stable, has not defaulted, etc. then investors are usually happy to continue to buy bonds (i.e. finance the debt). Bonds are often interesting for investors as they are a very stable though unexciting investment vehicle.

Of course, there is a limit to how much debt via bonds can be raised. When investors begin to doubt that an economy will perform well enough to generate the taxes and other income to enable repayment, then governments have to either: stop issuing bonds and start cutting expenditure (or raise taxes), issue bonds with higher interest repayment rates (increasing their own debt burden) or perhaps, and only 'in extremis' default on repayments. Defaulting of course gives you a bad credit rating and people are then very reluctnat to lend you money (buy your govt bonds) in the future... this gives govt's very big problems.

Typically, bond repayment is not a problem. The economy goes in cycles and when the economy booms, debt is repayed. Problems occur when debt is not repayed during the good times or the good times are slow coming or do not come at all.