2014: America's Death Spiral?

[JohnyMac]

Death Spiral
from Wiktionary

n. The downward, corkscrew-motion of a disabled aircraft which is unrecoverably headed for a crash.
n. A manoeuvre in which a male skater spins in place while holding one hand of his female skating partner as she circles around him with one skate on the ice and one leg extended outward parallel to the ice surface, all the while slowly lowering herself until her back almost touches the ice surface.
n. The situation or course of action of one who is on a path toward some sort of inevitable catastrophic failure.

It is snowing here at the BOL so there is not a lot to do until it has finished. So I started surfing the news sites for my daily dose of news.

Let's see: There was Bridgegate - Boring and it just affirms my opinion that Christy is a thug. President Obama wants tax free zones to help "depressed area's" economy's get back on their feet - Old news...Yes Mr President, lower taxes do help businesses expand hence hire folks. Then there was the new U3 unemployment rate at 6.7% down from 7.1% which got me thinking. I wonder what the U6 unemployment rate was? 

Well the U6 unemployment rate is still around 14%. I also discovered that the "employment-population ratio" (Labor Force Employed ÷ Eligible Total Population) rate hasn't gotten any better - Still in the 58% range. Here is a graph that really shows the whole picture. OUCH!

So lets see: In 2000, 65 out of 100 Eligible Americans had a job. In 2006, 63 out of 100 Eligible Americans had a job. Since 2010 job participation has flat-lined at 58 out of 100. I wonder if this number accounts for folks who are now working two jobs to scrape by.

Well that surly sucks. I guess things are not getting better in the nations unemployment number.

So I pour another cup of coffee and I continue my surfing of the web. And the first article I click on talks about the past Christmas/ Holiday season retail results. 

As was reported by RetailNext; The 2013 Christmas retail season was down from the previous year:
> Traffic -6.5%, and
> Sales -3.6%.

Not being the sharpest knife in the drawer, I started to ponder the two related stories and ask: Could the "real" unemployment situation have affected the down turn in Holiday retail sales? Will the trend continue in 2014? Remember that 70% of our GDP is driven by consumer sales?

O-Kay, lets change gears now. I have read that the ACA (Affordable Care Act) is going to increase males health insurance premiums by 99% and women by 60%. That means those dollars will not be going into the retail system.

With less dollars going into the retail system that means that more people are going to be laid off and/ or hours reduced. Which then means that these people will have to drop their ACA insurance and/or stop spending money on retail items like: Medicine, food, gas for transportation, vacations, STUFF!

Is 2014 going to be the year of America's Death Spiral? I am asking YOU?   

[rah45]

Well John, to be honest, I don't know. Given that China is the male skater and the U.S. the female skater, balance seems to be the key issue. I am not certain China is strong enough to hold her steady, perfectly parallel to the ice, for long enough for her to complete the maneuver. I predict an approximate, averaged 7.5/10 score by judges.

[JohnyMac]

   Smarty pants!

[special-k]

@rah45
+1 for displaying a flavor of sarcasm that rivals my own.

[rah45]

I do what I can, guys. I am but a humble servant. 

[Alex1992]

Well you might never know what this year might hold, only thing we can do is prep and hope for the best and rah that was funny as hell 

[crudos]

We are in no more of a death spiral that we haven't already been in for the last 200+ years. Same excrement, different year on the calendar. Don't vote the usual suspects in again for the midterms, no matter how much the GOP whines and cries about how abused they are, and how only they can fix things. Same thing with the Democratic Party.

[JohnyMac]

I agree with your premise of don't vote the usual suspects back in Crudos. As a matter of fact, don't vote anybody in that has politics leaning towards; Theodor Roosevelt, Woodrow Wilson, Franklin Roosevelt, John McCain, Hillary Clinton, Chris Christie to name a few. All are progressives.   

I disagree that the USofA has been in a death spiral for 200+ years though. There has only been six times in our history that our debt to GDP ratio was high.

> Revolution (38%),
> Civil War (38%),
> WW I (39%),
> WW II (110%),
> Tech bubble (Late '90's - 42%), and
> Now (2014 - 80%).

The current Progressive plan to reduce the GDP to Debt number, is to tax corporations (US Corp tax is 35% while Canadian Corp Tax is 15%) and to tax the average joe via inflation*. Pass off old debt with new devalued dollars. Which is the main reason for QEIII. Pumping $75B a month into the economy is like putting more and more tonic in that Gin & Tonic drink. You will be able to stretch the gin forever. 

With all that said, I truly believe we have come to the end of the road and we are moving quickly into a new round of lay-offs, mortgage foreclosures, stock market corrections and basically people with little to no money to spend.

I pray to the Old Mighty that I am wrong. Time to vote the bums out - Both Dem & GOP Progressives.

Addendum:
I just wanted to add to what I wrote yesterday this great article on how the Fed is using inflation to tax the average joe. 

[JohnyMac]

Macy's to lay off 2,500 employes and close five stores...

Sears in death-spiral may go bankrupt and which would result in 25,000 employes being laid off.

And so the house of cards start to fall. NO QEing are going to stop the topple. 

[JohnyMac]

JC Penny closing 33 stores. At 75-125 employees per store, that means in theory,* 2,500 - 4,000 lay offs coming to your neck of the woods soon.

* = I am sure that 10-15% will be relocated to existing stores.

[rah45]

Macy's really does look like a reorganization, not an attempt to disguise severe financial distress. The article says that while five stores are being taken down, eight new stores are in the works.

Sears is just horrible, and JC Penny doesn't make me feel any better. However, is this really that surprising? There are a TON of different clothing retail stores. I go to maybe 3-4 of them: WalMart for the majority of cheap tshirts, and a couple of stores like JC Penny maybe once a year if I need a nicer shirt. Was there ever really a large enough customer base to support the very large number of different competitors we currently have?

[crudos]

To be fair, JCP has sucked for a long time before this and was always seemed behind the retail curve. I haven't shopped there in a decade at least, and surprised they lasted this long, frankly.

[JohnyMac]

I do not shop at JC Penny either. With that said, the reason for my post was not to discuss the +/-'s of the retail strategy of JC Penny or Sears  It was to point out that:

1) There will be more folks on unemployment which is a bummer for the people laid-off & the economy, and
2) The pruning of the dead branches on the apple tree called retail. "The weak go away while the strong survive.

Having a retail background, I find it interesting that retail stores at both ends of the social financial spectrum are surviving (Walmart vs. Nordstrom) are surviving and prospering, while the stores that cater to the middle class are reorganizing/ reinventing themselves or at worst going away.

Is this observation a symptom of the Death Spiral we are seeing of America's economy?

[mariecurtishomes]

J.C Penney is one of the stores that wouldn't say Merry Christmas.  We remembered that and stopped shopping there.

[JohnyMac]

I forgot that one Marie. Not the main reason they are down sizing but one of the "death by a 1,000 cuts."

[JohnyMac]

Sam's club to lay-off 2,300 employees.

NBCNews wrote:
Wal-Mart Stores Inc. said it's eliminating 2,300 workers at its Sam's Club division as it reduces the ranks of middle managers in a bid to be more nimble.

The layoffs, which cut 2 percent of the membership club's U.S. employee count of about 116,000, mark the largest since 2010 when the Sam's Club unit laid off 10,000 workers as it moved to outsource food demonstrations at its stores.

The cuts come as Sam's Club strives to compete better with Costco Wholesale Corp. and online players like Amazon.com's Prime membership service. They also follow layoffs announced by several other major retailers in recent weeks that include Macy's Inc., J.C. Penney and Target Corp.

Tick-tock...Tick-tock....To be continued.

[Well-Prepared Witch]

They can't compete with Costco by laying folks off.  The worst of it is Costco pays living wages, gives retirement accounts, etc. and still beats the pants off Sams!

[JohnyMac]

Your right Wellie, "They can't compete with Costco by laying folks off." They are obviously doing it to protect their loosing bottom-line.

It has been my experience in business when you cut to the bone the next step is amputation. In other words Mal-Mart selling/ closing Sam's Club (s).