Oil Prices Break All-Time Record, Construction Slides for 4th Straight Month
Meanwhile, the Commerce Department reported on Monday that construction spending in June slid to $1.093 trillion, a three-tenths of a percent drop from the May level of $1.096 trillion and the fourth consecutive monthly pull-back from the record high construction reached just last February. The concensus forecast had predicted that construction spending would actually rise by half a percent in June.
The total four-month loss has been just over three percent, meaning that construction spending through the Spring and into the early Summer, when construction should be picking up steam, has been losing ground at an annualized rate of about 9.6 percent, even though construction spending as of June still stands 9.6 percent higher than it did at this same time last year. The private residential component of total construction spending fell by four-tenths of a percent, while the private non-residential construction rose by two-tenths of a percent, indicating that, while home construction was backing off, business construction was moving ahead, although somewhat anemically. Public residential construction surged a full percentage point, but public non-residential construction lost a half percent. Among the detail components in the report, education construction spending fell a seasonally adjusted 1.2 percent, and highway construction slipped four-tenths of a percent.Dark Wraith CyberGloss
Construction spending comprises private residential, private non-residential, public residential, and public non-residential spending. Private non-residential construction is business-related building, and public non-residential is government buildings, as well as such things as school buildings, highways and bridges, and other public goods.
Even with many economists hailing the strongly growing American economy, few would argue that the current growth rate can continue in the face of constantly rising energy prices. Despite the insistence by the Bureau of Labor Statistics that there has been virtually no inflation at either the wholesale or retail levels since April, most consumers are seeing substantial increases in prices they are paying.
Although such perceptions are anecdotal, eventually, expenditures on rising food and energy costs must translate into pullbacks in spending on other goods and services. The only way this could be avoided is if the Federal Reserve has quietly and contrary to its public statements revisited the expansionary monetary policies it prosecuted throughout the first four years of the Bush Administration to fund Republican-inspired tax cuts and war. Should it turn out that Fed has, indeed, again started printing money at a rate greater than that of the economy's ability to absorb it through real growth, the consequence will be further and escalating inflationary pressure that the government will have an increasingly difficult task of claiming doesn't exist.Dark Wraith CyberGloss
Unless additional money is created and distributed into the economy by the central bank, consumers have a fixed amount of income to spend: more spent in one sector categorically means less is available to spend in another sector.
Published 8/02/2005 12:28:00 AM
<< 27 Comments Total
I notice Shrub doesn't talk much about how great the economy is, nor even of how we've turned the corner.
- oddjob
So I'm not the only one who's noticed that, OddJob.
I'm trying to figure out why in the world he wouldn't be chortling like a deranged bird about all the good economic news that's been pouring in this past month. With the way the Fed has been pumping money into the economy since the end of June, it's a wonder this economy hasn't ascended to Heaven. The turn-around in monetary policy was nothing short of spectacular on June 30. The stock market went up for days on those punches of liquidity that showed up for no apparent reason.
It makes me wonder.
The Dark Wraith has some dark thoughts about it that he will keep to himself for the time being.
(Actually, given prior predictions about when you think the Fed. likely to actually get serious about addressing excess liquidity in the currency markets, I'm not sure that you are keeping your thoughts to yourself....)
- oddjob
Who? ME?! Not keep my thoughts to myself?!
The Dark Wraith is troubled by this perception.
Do you suppose this has anything to do with things going boom in the UK?
Saw this speculation on anther site.
Oh, lest anyone forget how little inflation there is in the economy, today's Boston Globe reports Healthcare insurance premiums expected to jump another 10%+ next year.
- oddjob
Around my office lots of people are people are wanting to and have bought homes. One of the more fiscally conservative of them is holding off for terms he likes because won't get near as much house as he could afford because he likes being prudent that way. The other guy who makes less than him decided to get way more house than he could afford on his salary with the tight budgetary voodoo that goes along with it.
Thankfully I talked him out of an interest only abomination thanks to what I learned here.
But I what I see going on here is that the Fed is going to continue to print money until the economy really gets hurt by the dollar inflating. I also think that people who have bought more house than they can afford are asking for more trouble than they have figured out yet.
In some brighter news I might get to go to Vancouver, BC yet and soon too. The finances seemed to have started working the way I want them too. :)
-Gary A
Good evening, Dark Wraith.
According to the article from Reuters, Refineries have been running near full tilt all summer, hitting 98.1 percent of capacity at the beginning of July, but outages have crimped operating rates. They were running at just 93.5 percent of capacity last week.
Sounds like they were trying to get too much out, causing the explosion, and later, the fire.
As far as construction spending sliding, I glad to hear that. I'm getting sick of seeing all the trees being raized. I also wonder where people are getting all that money to build. I know non-residential building continues, and wonder how well the buildings (losing tenants to the newer) will do in the future, or if these buildings will sit vacant.
Just what is "education construction?"
"Putting more pressure on oil prices was the news of an announcement by BP that it will shut down a big Texas refinery for "maintenance," an announcement that comes in the wake of fires that crippled output at two other refineries."
i can see how this would put upward pressure on the price of refined products--gas--but it seems that it would reduce (ever so slightly) demand, and thus the price, for oil.
i'm also not quite understanding how an increase in the money supply will allow us poor consumers to pay for the increase in the price of everything due to rising fuel prices without skimping somewhere else. so demand for something we "consume" will go down.
my lack of understanding is growing daily. are we back to voodoo economics?
Good evening, Old White Lady.
Education construction includes everything from actual school buildings to school football fields, school administration facilities, and school annexes. It measures education construction expenditures from kindegartens through university classrooms. (Dorm buildings are a bit tricky to categorize, being education-related but nevertheless residential.)
You'll notice that education construction includes state and local projects.
The private residential number surprised me a little bit: it's running contrary to some other numbers that should be measuring approximately the same thing: activity in new home building. The difference could be rather important, and it will be interesting to see what happens now that the long end of the yield curve has begun to move up, which should start to translate into higher mortgage rates fairly quickly, which should, in turn, start the slow-down in the housing market.
We'll just have to wait and see. As long as the Fed keeps the money engine pumping, there won't be a burst in the bubble. At least, not for a while.
The Dark Wraith will, nevertheless, keep his distance from what will eventually be Ground Zero.
Good evening, Dread Pirate Roberts.
Naw, there's no voodoo in these here economics. Trust me: this is old-fashioned, if very risky, Keynesian stuff. That money is going into the economy at the high end of the food chain, where the major banks lend money to cats like large corporations and leveraging investors. These guys make money off the extra money, and then they spend that money, sometimes directly, sometimes through more jobs. Eventually, price pressures should cause wage demands to soar. Businesses have gotten really, really used to simply "holding the line" on any meaningful wage and salary increases; but eventually, they give in because they need the workers. More importantly, as long as there is some semblance of competition for workers, that will force corporations to start bidding against each other to attract and hold on to labor.
That certainly doesn't mean that good times are just around the corner: in fact, wages stay "sticky" for quite a while. Labor is the very last factor of production to get its share of an economy being artificially inflated. That's the point of the whole Keynesian trick: until wages start to catch up with the ballooning money supply, real output can rise. Eventually, however, the entirety of the gains in real output vanish as price increases replace the output increases. That means, in the long run, we end up right back where we were, with output back to where it started, and all the extra money watering down the value of each unit of the money: that means prices have to be higher to reflect the fact that each unit of the money commands less in terms of real worth.
Quite awhile back, I showed how this game works in terms of something called the "equation of exchange." What I'm working on right now is an Analysis that will go through this again, step by step, with good examples.
Trust me, it's not really as complicated as it sounds, and it's really important to understand this concept. What's fun is to hear the neo-cons repudiate this structural theory of money. They do something eerily similar to what creationists do: they challenge a well-accepted, perfectly sound model that explains the phenomena we observe in the world, and they try to obscure the facts with entirely silly ideas that, unfortunately, sound like reasonable alternatives to those who are untrained. They've been doing this for some years now, and they've made a lot more inroads into standard economics than the creationists have into standard biology. It's about time to start driving these economics loopies back under the rocks where they can sit in their think-tanks cursing the heathen world.
The Dark Wraith will be doing his part to help them find nice, big slabs of granite under which they can park for the remainders of their foolish lives.
Hey, Gary, does it look like you're going to get into the seminary about which you were talking awhile back? That would be very cool, especially since you'd have a good excuse to be in Canada for a good long spell while we here in the States twist slowly in the wind.
Canada has been doing nicely in recent times, even with getting decent-paying jobs in the manufacturing sector. The numbers indicate that the Big Three American auto makers are moving a considerable amount of production up to Canada. So much for the idea that a country with strong worker protection in terms of national health insurance and such is not going to attract businesses.
It might have something to do with education, too. The stories are getting pretty thick here in the States about companies that have simply had enough of illiterate workers. This is especially true in the Red States.
Apparently, if "ignorance is bliss," one must be happy without a job.
Sometimes, the Dark Wraith sees a bit of poetic justice in rational business decisions.
Good evening, elf.
Now, elf, you know very well I'm not one to dabble in that conspiracy theory stuff.
My goodness, it's just unthinkable that there could be a relationship between constant reminders of terrorism and efforts to keep a moribund economy jerking around as if it's still alive and kicking.
Outrageous, that's what those kinds of conspiracy types of ideas are.
The Dark Wraith cannot imagine our government doing anything other than what is right, true, and downright holy.
Strange. We've been steady for a week at $2.09/gallon on regular, several places within an hour have been down as low as $1.99(this is hearsay). Up until now, if the price on a barrel went up $1, we saw price changes at the pump within a day, sometimes several times in a day. I'm not getting it, unless the profiteering a@@holes have decided that any more winfall profits were going to spark a rebellion.
Lots of folks filling out applications at work, which generally means folks needing jobs-and these are not all returning students, these are mostly townies. Of course, of the last couple, the first just failed to show up for their first day of work-no call, no nothing. The second was called to come in-they weren't home and a message was left-and we've heard nada there too. Our fine upstanding reservist never mentioned when HE was hired that he had no intention of working once school started again, so we are scrambling especially since he was just off for the yearly drill thing, and is off next week again for drill. What the hell ever happened to courtesy? I recall getting a job at the dining hall and a week later turning down 7-11, despite 7-11 having more4 room for advancement because I felt it rude to work a job for a week then quit. Am I just an idiot, or has the culture changed?(Though with the norm now being that folks work lots of jobs and companies do the minimum to retain the loyalty of their workers, maybe it's simply payback for employers' shoddy treatment).
The culture has changed, Wild Clover. What you're describing is the bane that is being described by employers all over the country.
It's generally, however, a phenomenon of low-paying jobs. The economics of it is pretty simple: the jobs don't pay enough to give people a sense of a stake that goes beyond immediate need for the money or the immediate need for an alternative to the position. You're almost old enough (although not quite, I don't think) to remember the song, Live for Today.
Back then, it was an ideal.
Now, it's a requirement because there really isn't a tomorrow. Not, at least, for many people.
The Dark Wraith finds it somehow perversely ironic.
Whether or not I remember "Live For Today" is hard to tell-I'm notorious for not knowing mundane things like artist or title. A search has netted me a Pearl Jam and/or REM song about melting chocolate covered cherries, another that seems more appropriate to the discussion at hand titled "Tomorrow Never Lies" that has it as a refrain, and one by TOTO that is a guy convincing a girl to put out.
I'm well and truly old enough for any of these, and now my ISP is apparently not letting me out to websits, so I'm going to see if this will post. Either that or everyone is doing site maintenence right now :)
"Lets Live for Today" (1967, The Grass Roots)
- oddjob
Hi Dark Wraith:)
Education construction includes everything from actual school buildings to school football fields, school administration facilities, and school annexes.
Doh! I feel so dumb! For some reason, this did not occur to me. I was thinking it meant teaching construction... and could't figure out how or why they calculated that into the whole thing.
they must be tampering with my brain waves - or maybe it's the tinfoil.
Good Evening Oddjob.
I actually do remember that one too, despite being in the 5th grade...I've always been a bit of an oldies fan, so a lot of stuff I would remember if my parents had been younger and listened to pop I know from a few years later, and which songs I learned when is lost in time.
Of course, this assumes this was the song Mr. Wraith referred to... wanting inside someone is rather a stretch to relate to the discussion, ios it not?
Morning,
"Live For Today".. That is funny!
Could be a reason Rick Santorum wrote "It Takes a Family"..he may have been jilted by one too many "one night stands" or was he the cause?
And that makes me wonder how much he liked "Institutional Man".
Boy I liked Tommy James !!
Rick Santorum, now that's one little Ken doll, the kind that came out early on - with just a smooth place down there - and that could be the source of his frustration. Maybe that's why he's so adamant that NOBODY should be pursuing their own happiness...
Sorry I've been so long in responding. I've been crazy busy. But yes it looks very very good that I will North of the Border real soon now at the seminary I've mentioned before there in Vancouver.
I'm looking forward to it but there are loads of things to do to prep for it.
-Gary A
This post has been removed by the author.
WASHINGTON (Reuters) - "U.S. job growth picked up last month as employers added 207,000 workers to their payrolls, a healthy gain that outstripped Wall Street expectations, a government report showed on Friday. The unemployment rate held steady at the 2-3/4-year low of 5 percent reached in June, the Labor Department said. The payrolls gain, spurred on by service-sector hiring, was stronger than expected by economists who had looked for an increase of 183,000 with the jobless rate steady".
The entire article is at http://tinyurl.com/bjtta
(Emph. added by SOG.)
The payrolls gain, spurred on by service-sector hiring, was stronger than expected by economists who had looked for an increase of 183,000 with the jobless rate steady".
Let's all FLIP them burgers, now!
They've been doing this for some years now, and they've made a lot more inroads into standard economics than the creationists have into standard biology. It's about time to start driving these economics loopies back under the rocks where they can sit in their think-tanks cursing the heathen world.
I'd like to read your posts that do just that since I've probably fallen for quite a bit of their drivel.
Good evening, eRobin.
I'm working on it, week over week. Those cats didn't get into the cookie jar of mainstream economics overnight, and they're not going to be chased out in a single day, either. They've begun to assume positions of power throughout academia in the past decade as places like the University of Chicago, The Ohio State University, and other Right-wing doctoral breeding grounds began to pump them into junior faculty positions in the 1980s and 1990s, and now those youngsters are rising to the department chairs and getting grants and consulting agreements from the neo-con money machines.
Their kind is just about everywhere, now; and they're not about to let the counter-revolution get a foot hold. However, the one thing I know from having been in the war zone for many years is that even the neo-con undergrads, if they're truly bright, will see through the holes and the deceptions if only they're given a chance. They might not turn into raving Keynesians—at least, not right away—but they won't hold on to untenable positions, either.
In other words, eRobin, I'm the professor you might have heard about who's out there corrupting the youth of this country.
The Dark Wraith will probably go to Hell for what he's doing.