US growth slows as consumers cut back on spending

(* And really, since the govt counts goods that have been produced but not ordered or sold as "growth" if you discount those goods, we've not been experiencing slow growth, but the 4th year of an economic depression. --jef)

 

+++++++

GDP grew at 1.5% between April and June, government figures show, compared to 2% in the previous three months

• Dominic Rushe in New York

• guardian.co.uk, Friday 27 July 2012

Factories received fewer orders and exports were hit by a global slowdown, the commerce department reported.

 

The US economy slowed again during the second quarter of the year, government figures showed Friday.

The nation's gross domestic product (GDP) – the broadest measure of the economy – grew at a sluggish 1.5% between April and June, the US commerce department said. The latest figure compares to 2% growth during the prior three months, and 4.1% in the fourth quarter of 2011.

The slowdown came as consumers cut back, local governments cut spending, factories received fewer orders and exports were hit by a global slowdown and a stronger dollar.

The latest news comes as the number of jobs created each month has also fallen sharply. The GDP figure is likely to be a blow to president Barack Obama as the economy emerges as the key issue of the 2012 election.

A Wall Street Journal/NBC News poll released this week found the economy was the only issue for which voters expressed more confidence in Mitt Romney, Obama's Republican rival, than the president.

The GDP figure was slightly higher than many economists had predicted. Economists surveyed by Dow Jones Newswires had expected a rate of 1.3% in the second quarter.

Consumer spending slowed in the quarter. Personal consumption expenditures rose 1.5% during the quarter, down from a 2.4% in the first quarter and the smallest gain in a year.

Spending on durable goods – including cars and home appliances – fell 1.% in the second quarter.

Cuts in government spending, especially at the local level, also held back growth. State and local spending fell 2.1% during the quarter while federal spending declined 0.4%.

Non-residential fixed investment, including business spending on structures and equipment, increased 5.3% during the second quarter, down from 7.5% in the previous quarter.

The US economy has grown for 12 consecutive quarters, but the gains have been small.*

"The current recovery has been utterly anaemic in relation to the average recovery in the post-war era. Real GDP is growing at a pace slower than virtually any recovery since the war," Dan Greenhaus, chief global strategist at BTIG, said in a note to clients.

The Precarious Jobs Recovery

Friday, March 9, 2012 by Robert Reichby Robert Reich


February’s 227,000 net new jobs – the third month in a row of job gains well in excess of 200,000 – is good news for President Obama and bad news for Mitt Romney.

Jobs are coming back fast enough to blunt Republican attacks against Obama on the economy and to rob Romney of the issue he’d prefer to be talking about in his primary battle against social conservatives in the GOP.

But jobs aren’t coming back fast enough to significantly reduce the nation’s backlog of 15 million jobs. That backlog consists of 7 million lost during the recession and another 4.7 million that needed to have been added just to keep up with the growth of the working-age population since the recession began. And another 3 million outsourced overseas by corporations in cost-cutting efforts.

If the American economy continues to produce jobs at the rate it’s maintained over the last three months, averaging 245,000 per month, the backlog won’t be whittled down for over five years — long after Barack Obama finishes his second term, should voters grant him another.

But whether even that rate continues depends largely on whether consumer demand can be revived. Spending by American consumers is 70 percent of U.S. economic activity. But so far, spending is anemic.

American consumers have replaced worn-out cars and appliances, but little else. They haven’t had the dough. Their wages are still falling, adjusted for inflation. The value of their homes – most consumers’ single biggest asset – continues to drop.

Home values are down by an average of a third from their 2006 peak. Consumers understandably feel far poorer as a result. Declining home prices also mean consumers can’t use their homes as collateral for new loans, as they did before 2008. And even with low interest rates, refinancing is difficult.

Corporate profits are up but the money isn’t flowing to American workers. The ratio of profits to wages is the highest on record – since the government began keeping track in 1947. Not only has the median wage continued to drop, adjusted for inflation, but a far smaller share of working-age Americans is now employed (58.6 percent) than was employed five years ago (63.3 percent). Today’s employment-to-population ratio isn’t much higher than it was at its lowest point last summer, when it dropped to 58.2 percent.

The major driver of the U.S. economy over the past several months hasn’t been consumer spending. It’s been businesses rebuilding depleted inventories. Wholesalers increased their stockpiles again in February, bringing them up almost a quarter from their low in September 2009.

But businesses won’t continue to rebuild inventories unless consumers start buying again. big-time. And consumers won’t resume spending as they did before the recession until they’re far better off financially.

Yet how can they be sufficiently better off when their major asset has shrunk so much and when so few of the economic gains are going to them?

This is the central paradox at the heart of the American economy today. If it’s not resolved, the jobs recovery will stall, as it did last spring.

A year ago, remember, we had another three-month run of good job numbers. Last February, March, and April saw net gains of more than 200,000 jobs a month. But that job boomlet abruptly ended.

At the time most observers blamed the stall on external events – the Japanese earthquake, Europe’s gathering debt woes, and higher gas prices. In reality, it stalled because of the shallow pockets of American consumers.

Another stall this time might be blamed on any number of external events – slower growth in China and India, the unraveling of Europe’s debt-crisis deal, and higher gas prices.

But if another stall occurs, the real reason will be Americans once again ran out of money.

Adbusters Targets Corporate Propaganda With #OccupyXmas

Friday, November 25, 2011 by The Toronto Star

by Laura Stone 

 

The yurts are barely dismantled and the tents only just rolled up, but there is already a new movement on the horizon — Occupy Christmas.

Canadian magazine Adbusters — which prompted the Occupy Wall Street camp and subsequent set-ups around North America, including Toronto’s St. James Park — has put out a call for another round of capitalism-disturbing

This time, the target is the gift-giving season.

“Christmas has been hijacked for us,” said Kalle Lasn, editor-in-chief at Adbusters, a non-profit, Vancouver-based alternative magazine. “It’s become this ugly, soulless, consumer-fest.”

In a note on their website, the magazine asks supporters to “launch an all-out offensive to unseat the corporate kings on the holiday throne.”

It is all planned to start this Black Friday on November 25, a notorious day of shopping excess in the United States and also the date of the publication’s 20th annual Buy Nothing Day. American media reports suggest planned protests at stores such as Walmart.

Lasn said Occupy Christmas would extend from the end of November to the sales in early January. He added that the closure of Occupy camps in several Canadian cities, including Toronto, signals the end of “phase one” of the movement but warned of a “spring offensive” in the new year.

The ideas for Occupy Christmas, which Lasn likens to “shenanigans,” include:

— a Santa sit-in, whereby protesters sit outside a store and encourage people to cut up their credit cards;
— a Jesus walk, where people put on a mask in the Holy Son’s likeness and walk through malls, to create an eerie sentiment;
— a “whirly mart,” in which would-be shoppers fill their carts with products but abandon them at the cash register.

“This movement is somewhat about angering people,” Lasn said.

At the soon-to-be shuttered Occupy Toronto site, participant Shirley Ceravolo said she’d be interested in joining the Christmas movement.

“It’s a great idea. You don’t need to spend money to show your family and friends that you love them,” said Ceravolo. “Santa is just a symbol of corporate propaganda.”

But some think targeting Christmas goes a step too far.

“There’s a difference between protesting in a public park and on private property,” said Sally Ritchie, vice-president of communications and marketing at the Retail Council of Canada, which represents 43,000 storefronts.

“It’s illegal to do it on private property, such as malls or stores, because it’s dangerous and it interferes with rights of other people.”

Ritchie said the holiday season is most important to retailers.

“Christmas is vitally important to retailers ….it’s their make or break time,” said Ritchie, who added the industry contributes $74 billion annually to the Canadian economy.

“This is going to hurt very vulnerable, small independent retailers. They live and die on Christmas.”

Steve Tissenbaum, a professor of business strategy at Ryerson University’s Ted Rogers School of Management, said disruptions in stores may simply force more people to do their shopping online.

And while it could raise awareness around corporate culture, Tissenbaum said the Christmas season is too meaningful to too many people to simply be abandoned.
“I think they’ll alienate people more so than build on the cause.”

Adbusters created an #OCCUPYXMAS hashtag to mark the movement for those to follow and share online. As of Wednesday afternoon, more than 1,600 people had tweeted the page and some 20,000 had liked it on Facebook.

Pouring the Red Ink Down the Sink

September 1, 2011

The Politics of Debt Repudiation

by MIKE WHITNEY

The US consumer’s decade-long spending spree has ended, but there’s still an ocean of red ink left to mop up. And with housing prices falling and unemployment tipping 9 per cent, it will take longer to clear the family balance sheet than many had anticipated.


Traditionally, the government has helped to ease the pain of deleveraging by providing fiscal stimulus to boost economic activity and lower the real cost of debt. But Capitol Hill is now in the grips of deficit hawks who frown on such Keynesian remedies, so households and consumers will have to fend for themselves and pay-down debts as best as they can or default when repayment is no longer possible . That’s bad news for the economy that depends on consumers for 71 percent of GDP. Without a healthy consumer, the economy will face years of sluggishness and stagnation.


U.S. household debt as a share of annual disposable income is currently 115 percent, down from the peak of 135 percent in 2008. But, while consumers are making headway in paring down their debts, there’s still a lot of work to do. Economists believe that the figure will eventually return to its historic range of 75 percent, which means slower growth for years to come unless someone else makes up the difference in spending.


But what sector is big enough to make up for the loss in consumer spending? Business? Government?


Business spending is still significantly below pre-crisis levels of investment. Naturally, businesses aren’t going hire more workers and produce more products if demand is weak. And, demand is bound to stay weak if there’s no rebound in consumption.  But how can the consumer rebound when he’s buried under a mountain of debt and making every effort to increase his savings? Surely, if wages were growing, then it would be easier to pay down debts while increasing spending at the same time. But wages aren’t growing, in fact, they are falling in inflation-adjusted terms. So personal consumption–which typically leads the way out of recession–will continue to disappoint. This is from an article by Stephen Roach titled “One Number Says it All”:

“There are two distinct phases to this period of unprecedented US consumer weakness. From the first quarter of 2008 through the second period of 2009, consumer demand fell for six consecutive quarters at a 2.2 per cent annual rate. Not surprisingly, the contraction was most acute during the depths of the Great Crisis, when consumption plunged at a 4.5 per cent rate in the third and fourth quarters of 2008.

As the US economy bottomed out in mid-2009, consumers entered a second phase – a very subdued recovery. Annualized real consumption growth over the subsequent eight-quarter period from the third quarter of 2009 through the second quarter of 2011 averaged 2.1 per cent. That is the most anemic consumer recovery on record – fully 1.5 percentage points slower than the 12-year pre-crisis trend of 3.6 per cent that prevailed between 1996 and 2007.

These figures are a good deal weaker than originally stated. As part of the annual reworking of the US National Income and Product Accounts that was released in July 2011, Commerce Department statisticians slashed their earlier estimates of consumer spending. The 14-quarter growth trend from early 2008 to mid-2011 was cut from 0.5 per cent to 0.2 per cent; the bulk of the downward revision was concentrated in the first six quarters of this period – for which the estimate of the annualized consumption decline was doubled, from 1.1 per cent to 2.2 per cent.

I have been tracking these so-called benchmark revisions for about 40 years. This is, by far, one of the most significant I have ever seen. We all knew it was tough for the American consumer – but this revision portrays the crisis-induced cutbacks and subsequent anemic recovery in a much dimmer light.” (“One Number Says it All”, Stephen S. Roach, Project Syndicate)

Roach’s timeline is key to understanding what’s going on. He says: “the subsequent eight-quarter period from the third quarter of 2009 through the second quarter of 2011 averaged 2.1 per cent.” The period that Roach calls a “very subdued recovery” coincides with the implementation of the $787 billion fiscal stimulus (ARRA).


Absent the Obama administration’s fiscal intervention, there would have been no recovery. This is worth considering in view of the fact that households continue to pay-down debts and will do so for the forseeable future. If the government doesn’t provide additional stimulus, then the economy will slip back into negative territory. And that’s precisely what’s happening now. Here’s an excerpt from an article by John P. Hussman, Ph.D, Hussman Funds who connects the dots drawing from recent data:

“It is now urgent for investors to recognize that the set of economic evidence we observe reflects a unique signature of recessions comprising deterioration in financial and economic measures that is always and only observed during or immediately prior to U.S. recessions. These include a widening of credit spreads on corporate debt versus 6 months prior, the S&P 500 below its level of 6 months prior, the Treasury yield curve flatter than 2.5 per cent…, year-over-year GDP growth below 2 per cent, ISM Purchasing Managers Index below 54, year-over-year growth in total nonfarm payrolls below 1 per cent, as well as important corroborating indicators such as plunging consumer confidence. There are certainly a great number of opinions about the prospect of recession, but the evidence we observe at present has 100 per cent sensitivity (these conditions have always been observed during or just prior to each U.S. recession) and 100 per cent specificity (the only time we observe the full set of these conditions is during or just prior to U.S. recessions). This doesn’t mean that the U.S. economy cannot possibly avoid a recession, but to expect that outcome relies on the hope that “this time is different.” (“A Reprieve from Misguided Recklessness”, John P. Hussman, Ph.D, Hussman Funds)

Policy should be based on more than hope. It should be grounded in a firm grasp of macroeconomics and a commitment to the common good.


Keep in mind, that during the peak bubble years of 2000 to 2007 households nearly doubled their “outstanding debt to $13.8 trillion” and “personal consumption grew by 44 per cent from $6.9 trillion to $9.9 trillion”. Also, from 2003 to the third quarter 2008 US households extracted $2.3 trillion of equity from their homes in the form of home equity loans and cash-out refinancings” (figures from “Will US Consumer Debt Cripple the Recovery”, McKinsey Global Institute)


$2.3 trillion! Think about that. That’s nearly $500 billion that was being pumped into the economy every year, which is more than Obama’s $787 stimulus distributed over a two-year period. That’s why unemployment stayed low while housing prices ballooned, because loose lending standards and easy money inflated the biggest credit bubble of all time. But now the trend has reversed itself and debt-deflation dynamics are in play forcing consumers to cut spending, increase saving, and pay down their debts. Only the federal government has the ability and the wherewithal to support the flagging economy while the process continues. The government must boost its spending, increase the deficits, and assist in the deleveraging process. This is from an article by economist Laura Tyson titled “Recovering from a Balance-Sheet Recession”:

“In other recoveries during the last 50 years, public-sector employment increased. This time it is falling: during the last year the private sector added 1.8 million jobs while the public sector cut 550,000.

What should policy makers do to combat the large and lingering job losses that result from a financial crisis and balance-sheet recession? Mr. Koo, whose book on Japan’s experience should be required reading for members of Congress, showed that when the private sector is curtailing spending, fiscal stimulus to increase growth and reduce unemployment is the most effective way to reduce the private-sector debt overhang choking private spending.

When the Japanese government tried fiscal consolidation to slow the growth of government debt in response to International Monetary Fund advice in 1997, the results were economic contraction and an increase in the government deficit. In contrast, when the Japanese government increased government spending, the pace of recovery strengthened and the deficit as a share of gross domestic product declined….” (“Recovering from a Balance-Sheet Recession”, Laura D’Andrea Tyson, New York Times)

Did you catch that? When the Japanese government tried to decrease the deficits by slashing spending, they increased the deficits. This is the lesson that every country in the EU –which has applied the ECB-IMF austerity measures—has learned. Cutting spending when the economy is weak is bad policy and bad economics. Struggling economies must "growth" their way out off of recession by spending liberally and putting people back to work, thus adding to government revenues. Here’s Tyson again explaining why this is so:

“The market understands that the most important driver of the fiscal deficit in the short to medium run is weak tax revenues, reflecting slow growth and high unemployment, and that additional fiscal measures to put people back to work are the most effective way to reduce the deficit.

“Every one percentage point of growth adds about $2.5 trillion in government revenue. An extra percentage point of growth over the next five years would do more to reduce the deficit during that period than any of the spending cuts currently under discussion. And faster growth would make it easier for the private sector to reduce its debt burden….Under these conditions, slow growth leads to a higher debt ratio, not vice versa…” (“Recovering from a Balance-Sheet Recession”, Laura D’Andrea Tyson, New York Times)

So, how do we speed up the deleveraging process so the economy can get back on track?


First, the government must be committed to long-term “sustained” fiscal stimulus until the share of household debt to disposable income returns to normal. Second, there should be a restructuring of household and personal debts “including”,– as economist Carmen Reinhart says– “debt forgiveness for low-income Americans”….


“Until we deal head-on with the fact that some of those debts are not ever going to be repaid, we will continue to have this shadow over growth”, Reinhart told Bloomberg News last weekend.


Debt repudiation, principle write-downs on underwater mortgages and amnesty on delinquent student loans should all be added to the mix of stimulants to future growth.


Finally–along with federally-funded government jobs programs (a revised WPA, etc)–Congress needs to address the chronic supply-demand imbalance that has emerged from Labor’s dwindling share in corporate profits. The imbalance has now reached historic levels which has widened gross inequality and threatens to keep the economy in a semi-permanent state of Depression. Here’s a quick summary from Barry Ritholtz’s “The Big Picture”:

“Labor share averaged 64.3 percent from 1947 to 2000. Labor share has declined over the past decade, falling to its lowest point in the third quarter of 2010, 57.8 percent. The change in labor share from one period to the next has become a major factor contributing to the compensation–productivity gap in the nonfarm business sector….

While Labor Share has recently plummeted to all-time lows since record keeping began, Median Household Income has stagnated for the past 12 years. In the last recession (2001), incomes had only begun to decline…. One decade later, Labor Share has collapsed, incomes have gone nowhere, and credit availability… has all but vanished except for the most creditworthy…” (“The Heart of the Matter”, The Big Picture)

Not only is labor getting a smaller and smaller piece of the pie, but, also, financial engineering–spurred-on by low interest rates and deregulation–has given rise to consecutive credit bubbles which have transferred a larger share of pension and retirement fund-wealth to Wall Street speculators. So, working people are not just getting screwed on their labor, the government and central bank are actually helping to facilitate the pilfering of their savings.


At the same time, corporate profits have continued to skyrocket. As the Wall Street Journal’s Kelly Evans notes, “Since the recession ended in mid-2009, U.S. corporate profits have jumped by about 43 per cent to a record $1.45 trillion as of the first quarter, after taxes, inventory and accounting adjustments, according to the Commerce Department.” (“More Liquidity Only Douses Growth Sparks”, Wall Street Journal)


So, despite sky-high unemployment, household deleveraging, historic inequality and slow growth; profits keep rising. Is there any doubt about whose interests are being served.


The only way out of the mess that workers find themselves in, is through politics. And–on that score–FDR said it best:

“We cannot allow our economic life to be controlled by that small group of men whose chief outlook upon the social welfare is tinctured by the fact that they can make huge profits from the lending of money and the marketing of securities–an outlook which deserves the adjectives ‘selfish’ and ‘opportunist.’” –Franklin Delano Roosevelt, “FDR Explains the Crisis: Why it feels like 1932″, Pam Martens, CounterPunch.

The Big Contraction

Look Out Below!
By MIKE WHITNEY

The slowdown has begun. The economy has started to sputter and unemployment claims have tipped 400,000 for the last seven weeks. That means new investment is too weak to lower the jobless rate which is presently stuck at 9 percent, according to the U3. Manufacturing--which had been the one bright-spot in the recovery-- has also started to retreat with some areas in the country now contracting. Housing, of course, continues its downward trek putting more pressure on bank balance sheets and plunging more homeowners into negative equity. 

The likelihood of another credit expansion in this environment is next-to-none. Total private sector debt is still at a historic high at 270% of GDP which augurs years of digging out and painful deleveraging. Analysts have already started slicing their estimates for 2nd Quarter GDP which will be considerably lower than their original predictions. With the economy dead-in-the-water, the IPOs, the Mergers & Acquisitions, and the stock buybacks and all the other ways of amplifying leverage will slow putting a dent in quarterly earnings and pushing down stock prices. Here's a clip from the Wall Street Journal:

"After a disappointing first quarter, economists largely predicted the U.S. recovery would ramp back up as short-term disruptions such as higher gas prices, bad weather and supply problems in Japan subsided.

But there's little indication that's happening. Manufacturing is cooling, the housing market is struggling and consumers are keeping a close eye on spending, meaning the U.S. economy might be on a slower path to full health than expected.

"It's very hard to generate a rapid recovery when rapid recoveries are historically driven by housing and the consumer," said Nigel Gault, an economist at IHS Global Insight. He expects an annualized, inflation-adjusted growth rate of less than 3% in coming quarters—better than the first-quarter's 1.8% rate, but too slow to make a meaningful dent in unemployment." ("Economists Downgrade Prospects for Growth", Wall Street Journal)

The Fed has tried to revive the economy by buying government bonds (QE2) which helped to boost equities prices. Unfortunately, the program sent gas and food prices higher too, which has only deepened the distress for consumers forcing them to cut their discretionary spending even more. While retail sales improved significantly in the latter months of the program, a closer look at the data shows that most of the money went for food and fuel. So, basically, QE2 was a "wash". Now businesses are left with bulging inventories and fewer customers because demand is weakening. This is from the New York Times:

"An economy that is growing this slowly will not add jobs quickly. For the next couple of months, employment growth could slow from about 230,000 recently to something like 150,000 jobs a month, only slightly faster than normal population growth. That is certainly not fast enough to make a big dent in the still huge number of unemployed people.

Are any policy makers paying attention?...

The most sensible response for Washington would be to begin thinking more seriously about taking out an insurance policy on the recovery. The Fed could stop worrying so much about inflation, which remains historically low, and look at how else it might encourage spending. As Mr. Bernanke has said before, the Fed "retains considerable power" to lift growth.

The White House and Congress, meanwhile, could begin talking about extending last year's temporary extension of business tax credits, household tax cuts and jobless benefits beyond Dec. 31. It would be easy enough to pair such an extension with longer-term deficit reduction." ("The Economy Is Wavering. Does Washington Notice?", New York Times)

This is more than just a "rough patch". The economy is stalling and needs help, but consumers and households are not in a position to take on more debt, and every recovery since the end of WW2 has seen an increase in debt-fueled consumption. So, where will the spending come from this time? That's the mystery. The early signs of "green shoots" were produced by fiscal stimulus from increased government spending. But now that the deficit hawks are in control of congress, the budget will be pared and the economy will remain sluggish. If government spending is cut, unemployment will rise, the output gap will widen, and GDP will fizzle. Contractionary policies do not lead to growth or prosperity. Just look at England. 

Most of the Inflationistas have returned to their bunkers sensing that deflationary pressures are building and the signs of Depression have reemerged. Stocks appear to be on the brink of a major correction. Here's what economist Nouriel Roubini told Bloomberg News on Friday:

"The world economy is losing strength halfway through the year as high oil prices and fallout from Japan's natural disaster and Europe's debt woes take their toll....

Until two weeks ago I'd say markets were shrugging off all these concerns, saying they don't matter because they were believing the global economic recovery was on track. But I think right now we're on the tipping point of a market correction....

With slow global economic growth, they're going to surprise on the downside. We're going to see the beginning of a correction that's going to increase volatility and that's going to increase risk aversion." ("Roubini Sees Stock-Correction 'Tipping Point'", Bloomberg)

With short-term interest rates stuck at zero and QE2 winding down by the end of June, the Fed appears to be out of bullets. At the same time, government (at all levels) is trimming spending and laying off workers. 

When spending slows, the economy contracts. It's that simple. Without emergency stimulus, commodities will fall hard and stocks will follow. Look out below.

U.S. Underemployment Steady at 18.4% in July (the real rate)

Among those aged 18 to 29, 28.4% are underemployed
by Dennis Jacobe, Chief Economist | August 5, 2010

PRINCETON, NJ -- Underemployment, as measured by Gallup, was 18.4% in July, essentially unchanged from 18.3% at the end of June and in mid-July. Underemployment peaked at 20.4% in April.

Gallup's underemployment measure includes both Americans who are unemployed and those working part time but wanting full-time work. It is based on more than 17,000 phone interviews with U.S. adults aged 18 and older in the workforce, collected over a 30-day period and reporteddaily and weekly. Gallup's results are not seasonally adjusted, and tend to be a precursor of government reports by approximately two weeks.

Changes in Unemployed and Part-Time Employees Wanting Full-Time Work Offset

The unemployment rate component of Gallup's underemployment measure fell to 8.9% at the end of July -- down from 9.2% at the end of June and 9.3% in mid-July. However, this decrease was more than offset by an increase to 9.5% in the percentage of employees working part time but wanting full-time work.

Substantially Higher Underemployment Persists Among the Young

Americans aged 18 to 29 had easily the highest underemployment rate in July of any age group, at 28.4%, including 11.8% who were unemployed and 16.6% who were employed part time but wanted full-time work. Among all U.S. adults in the workforce, a higher percentage of women than of men are underemployed.

Less Educated Face High Underemployment

Workers without any college education are more likely than those with more formal education to be underemployed.

Underemployed Are Less Hopeful

The percentage of underemployed Americans who are "hopeful" that they will be able to find a job in the next four weeks fell to 40% in July -- down from the better levels of May (43%) and June (42%).

No Real Improvement in Job Market Conditions

Gallup's modeling suggests that July's U.S. unemployment rate will remain at 9.5% or possibly decline to 9.4% -- below the 9.6% consensus -- when the government reports its figures on Friday. This is consistent with the ADP report of 42,000 private sector jobs being added and the Challenger report that layoffs remain down. Of course, the hiring and firing of census takers and seasonal adjustments make the jobs picture particularly murky right now.

While any decline in unemployment may be cheered on Wall Street, the real focus should be on the lack of improvement in underemployment. The magnitude of the 28.4% underemployment rate among those aged 18 to 29 and 23.0% among those without any college education creates significant social and economic challenges for the U.S.

On Monday, Federal Reserve Chairman Ben Bernanke noted that, "significant time will be required to restore the nearly 8½ million jobs that were lost over 2008 and 2009." That same day, Treasury Secretary Tim Geithner stated that the unemployment rate is likely to increase at some point during the coming months. If this is the case, then the country's leaders need to figure out how the nation deals not only with the long-term unemployed, but also with the long-term underemployment facing younger and less-educated Americans.

Gallup Daily tracking will provide continuous monitoring of the jobs situation in the weeks and months ahead.