Business and Industry

Disappointing Economic News Likely a Result of Fear of D.C.

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Manufacturing and jobs

Yesterday, the Institute for Supply Management reported that U.S. manufacturing fell to a three-year low. That's disappointing news during what, we're told, is a "recovery" from the Great Recession. Why manufacturing is shrinking again after a brief period of growth requires a bit of speculation, but comments gathered by the ISM point not just to worries over the fiscal cliff but anticipated policy choices by the federal government that have business people hunkering down for the worst.

In its report, the ISM points to raw data gathered from 18 manufacturing industries, of which 11 are contracting:

Manufacturing contracted in November as the PMI™ registered 49.5 percent, a decrease of 2.2 percentage points when compared to October's reading of 51.7 percent. This is the fourth month in the last six months that the PMI™ has contracted, and the index is at its lowest level since July 2009 when the PMI™ registered 49.2 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

The numbers aren't entirely negative. New Orders are in positive territory, despite slipping 3.9 percent since October. And Production is not just in positive territory, but actually up 1.3 percent.

However:

ISM's Employment Index registered 48.4 percent in November, which is 3.7 percentage points lower than the 52.1 percent reported in October, and is the lowest reading since September 2009 when the Employment Index registered 47.8 percent. This is the first month of contraction in employment following 37 consecutive months of growth in the Employment Index.

That's no surprise. You don't need to employ people if you're winding up production, seeing orders slip and manufacturing less.

But why the sudden fall-off in numbers? The ISM points to the reason in the opening paragraph:

Comments from the panel this month generally indicate that the second half of the year continues to show a slowdown in demand; respondents also express concern over how and when the fiscal cliff issue will be resolved.

Specifically, a representive of the Petroleum and Coal Products industry is quoted saying, "The principle business conditions that will affect the company over the next three or four quarters will be the U.S. federal government tax and budgetary policies; the impact of those policies is not yet clear." And a counterpart from Fabricated Metal Products offered, "The fiscal cliff is the big worry right now. We will not look toward any type of expansion until this is addressed; if the program that is put in place is more taxes and big spending cuts — which will push us toward recession — forget it."

You can quibble with the concern over spending cuts (I do) without detracting from the overall impression that policy uncertainty has businesses growing cautious and taking a wait-and-see strategy until they know for sure just how stupidly federal officials will deal with the financial mess. Why place orders, stockpile inventory and hold on to expensive labor if the government is likely to sabotage the works?

Policy uncertainy and the market

Much has been made in recent days of a graph from BlackRock showing that market volatility has remained low even as the Policy Uncertainty Index has trended ever-upward. The manufacturing report seems to indicate that policy worries are reflected in the economy, even if not on Wall Street.

The people in Washington, D.C. may be lousy at most things. But they can certainly muck things up.

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  1. Ban automation! That’ll create jobs! Luddites unite! Dylexics untie!

    1. Almost a win, sarcasmic. You needed “Dsylexisc untie” for the win.

      1. Dang it!

        *hangs head in shame*

      2. I thought it was “Lysdexics untie” for the win.

        1. It can be both!

          1. Excel Disunity!

    2. I said it before, but it’s not just ATMs – they should ban email and have communication delivered by bike messengers.

      1. No, by Pony Express.

        That way, you not only give jobs to the couriers, but farriers, grooms, stable boys, street sweepers, horse breeders, etc.

        1. Ponies aren’t voters. We need to employ more voters. So, while your idea has merit, replace the ponies with litter bearers. All the rest still applies.

          1. Have the sedan chair carriers ride ponies, it will double the employment!

            1. Again, why ponies? They could ride people just as well.

              1. Hey, you might be on to something – tie in some waif servitude, er, youth employment, and you have the big win!

                1. I’ve suggested indentured servitude as a replacement for our entire immigration policy and making doctors into slave labor, so the statists should love me.

                  1. I’ve suggested indentured servitude as a replacement for our entire immigration policy

                    Already tried that. Didn’t work.

                    1. Didn’t have the right people in charge like we do now. And computers.

          2. Also, something something animal cruelty mumble mumble…

          3. Why can’t ponies vote? Why do you hate ponies?

        2. Speaking of which, aren’t you part of the horsey set, Aresen?

      2. My dad has a wonderful plan to charge everyone a penny an email and give the proceeds to the PO.

        How can people still be spouting bullshit like that in 2012 when they have been using the internets at home since like 1989 and are not completely functionally retarded? Whatever the answer to that question is is the reason we are all doomed.

        1. My dad has a wonderful plan to tax income over a million dollars at a 100% rate, and use the proceeds to give everyone else a minimum standard of living!

          What could possibly go wrong?

          1. Again, sarcasmic, our dads collide.

            1. I’m writing nicole dad/sarcasmic dad erotic slash fiction right now.

              1. Paging Barfman, paging Barfman – please report to the Orange Comment Thread.

            2. I still say you two have the same father and he’s somehow managed to live a double life all these years.

              As Tyler Durden might put it “fucker’s setting up franchises”.

          2. My dad informed me at Thanksgiving, that Obama is a Muslim. That was the only brilliant revelation that he had. Disappointing to say the least, as I was anticipating more from the old man.

        2. You had the internet in 1989?!?

          1. Hah, I used to email my parents in 1988 when I was a freshman in college. They used to get the email 12 hours later too!

            It was awesome! 450 miles in 12 hours! Everyone else had to wait days for their pleas for money to be dealt with. I felt like Count fucking Zero! 🙂

            1. tarran, wait a minute, wait a minute… imma let you finish…

          2. You had the internet in 1989?!?

            CompuServe, bitchez!

            1. THAT IS NOT THE INTERNET.

          3. She’s lying to us. Fuck her.

            1. You know, I’ve had it with nicole’s blatant lies. I don’t even think she’s real.

              1. I don’t think that was even her ass wiggling in that picture. I don’t think she even has an ass.

                1. You’d think you’d rather take credit for it, but that’s cool.

                  1. Did someone hear something?

                    1. LIES is all I heard.

          4. Yes, possibly the best thing about my dad is that he was a huge nerd and we had terrible, terrible dial-up internet when I was a little kid.

            The actual best thing to come out of this is that before one of our family trips to Disney World, he was hanging out on some Disney employee BBS and found out the exact time and place to stand when the crowd starts developing for the Sword and the Stone thing so I would get picked to pull out the sword and be crowned queen.

            And my little brother had to carry my train in the parade. Ha!

            1. My father had many computers and I so wanted to make a wardialer with his modem after seeing Wargames, but if I had he would have skinned me alive.

              1. This, also, explains so much.

            2. This explains so much.

              1. It also appears that the thread has run out. This explains so much.

            3. After pulling out the sword you yelled “in the place of a Dark Lord you would have a Queen! Not dark but beautiful and terrible as the Morn! Treacherous as the Seas! Stronger than the foundations of the Earth! All shall love me and despair!”, right? /nerdy LOTR reference

              1. I wish. It was seriously awesome for a little kid though.

                The worst part about having the internet then (aside from the cost and the fact it tied up the phone line) was that it made my mom totally nuts. My dad would stay up late doing god knows what with his various BBS nerd friends (uh oh…) until she would finally storm down and simply flip the light switch that controlled most of the outlets in our den–turning off the whole computer, nothing saved, countless hours of video gaming for naught, etc etc. At least Jezebel has taught women there is value in being online.

                1. “At least Jezebel has taught women there is value in being online.”

                  I am going to pretend I didn’t just read that.

                2. At least Jezebel has taught women there is value in being online.

                  I’m not sure hanging out on a site with other perpetually menstruating fem-tards bitching and carping about TEH PATRIARCHY and how all hetero sex is really rape is all that valuable. For anyone.

        3. Tell your dad I have an even better plan. We don’t use the threat of deadly force by the government to tax email and we completely privatize the post office.

          1. Privatize? But, but, but then someone might…. profit!
            Don’t you know that profit is theft?!?
            There’s a fixed amount of money out there, and every dollar of profit is a dollar that could have gone to a worker!
            Profits are theft! Capitalism is theft! Greeeeeeed! Greeeeeeeed!

          2. Whoever it was (I think it was you? but maybe not) that said something about everyone going full-retard statist when they get old because they are afraid of dying was so right. Dad was visiting sort of for Thanksgiving so I was hanging out with him recently, and it’s absurd. He’s super stressed about his health (which is not great), and the more stressed he’s become about it as he’s gotten older, the stupider he’s become about everything else. He looooooves the ACA. Usually we just wind each other up a bit but I actually said to him last week, “Look, as far as I am concerned you are enslaving well people to pay for you being ill, so I really just think we should not talk about this.” Which is worse, seeing your parent decline in health or seeing that decline accompanied by a huge stack of unethical bullshit? Ugh.

            1. Yep, that was me.

              The Baby Boomers will be in for a big surprise when Gen X and the Millennials pull them from their geropsychiatric wards and hang them from the nearest lamppost, and the surprise just won’t be from the dementia either.

              1. “hang them from the nearest lamppost”

                How inefficient! My good man, just have your servants smother the oldster with a pillow, as God intended!

                1. It may be more inefficient, but the “propaganda of the deed” more than makes up for it.

              2. They’ll be sent off to the Soylent Green factory. Recycling old people is much better for the environment.

              3. Millennials pull them from their geropsychiatric wards and hang them from the nearest lamppost

                Hey, why do I have to hang with the old people?

            2. I dunno. My mother who has always been a stereotypical Christian conservative has been turning almost libertarian as she heads towards seventy.

              1. My mother who has always been a stereotypical Christian conservative has been turning almost libertarian as she heads towards seventy.

                Good. Hopefully she’ll be armed when the mobs come.

            3. Whoever it was (I think it was you? but maybe not) that said something about everyone going full-retard statist when they get old because they are afraid of dying was so right.

              Yeah, Gramps has fallen into this trap too. He’s an old-line Vermont farmer and machinist back when being from Vermont meant NEVER voting for a Dem. Now that he’s been on the retirement bus for 20 years, he’ll be goddamned if those “rich people don’t pay their fair share!” It doesn’t help that he’s constantly watching network news shows, so he never really gets an alternative viewpoint.

              I pointed out to him one day that we’re spending far more even on an inflation-adjusted basis than we did during the Eisenhower years, and that those budgets were 50% defense spending, and I might as well have been speaking Japanese to him. He literally can’t process now that soaking the rich isn’t going to get us out of this hole, and that a lot more than defense is going to need to get cut voluntarily.

            4. He looooooves the ACA.

              Why? Its largely funded by taking money from Medicare and giving it to (a) bureaucrats and (b) middle-income people with jobs.

              1. Well, he’s still a middle-income person with a job–and more than his share of preexisting conditions. Basically, he’s one of these people you always hear about who has hated his job for years but could never leave because oh noes he would never have been insurable again, or something, because let’s pretend COBRA doesn’t exist, and stuff like that.

            5. I’m with you. It’s sad to see the knots my older relatives tie themselves into in defense of soaking the young for ever more benefits. The degradation in mental acuity is scary too.

              1. It’s not so much statist, as it is selfish. Heinlein, in his book, Take Back Your Government, commented in the passage on political doorknocking that old people were the most profoundly selfish and grasping of any particular group of people.

                He found this interesting as he might have thought beforehand that old people, with wisdom and perspective, might see the value of leaving a viable institution/country/world for later generations. Nope. It was all, “Fuck you; where’s mine?” Heinlein used different language, of course.

                If you can find it, it’s a great little book on political theory, how to set up a political club and what can be done with it.

                1. I have a copy; it seems politics in the US has changed so drastically since then that his suggestions seem na?ve any more.

                  1. Agreed. And reading about them made me feel more than a little sad and wistful.

                    Related, I read Stranger in a Strange Land for the first time about two years ago, and was struck by the scene where Jubal is on his own property, waving around a shotgun(?) at the Federales who’ve come to try and grab Valentine. I couldn’t understand why the Feds didn’t instantly fill Jubal with six kinds of lead, and got yet another realization of how far we’ve fallen since even 40 -50 years ago.

                    1. Indeed. These days, starting a wierd religious cult is liable to get the feds anxious to nab you on a trumped up weapons charge, which ultimately results in your house being burned down with the children inside.

                    2. Doing anything that might make you look or sound like a scary milita person runs the risk of having federal agents kill you and your entire family.

                    3. Yeah. There is no such thing as “home as castle” anymore. The default action by government agents seems to be kill first, answer questions never.

        4. People are more bound by inertia and against change than they would care to admit. My cousin, no real fan of government, was kind of shocked when I proposed privatizing (or getting rid of) Amtrak.

          I don’t think he’d ever used it, but if they were funding it, there must be a reason.

          1. “I don’t think he’d ever used it, but if they were funding it, there must be a reason.”

            Oh yeah, they do have reasons.

            1. Oh yeah, they do have reasons.

              Well, how else are they going to transport us to the FEMA camps, duh?

              *tongue-only-1/2-in-cheek

            2. i have a family member (not my side) who works for amtrak. he ran off to S. America a few months ago. he’s still on the books. he’s not getting paid, but i’m told if he ever shows up for work again, it’s a reprimand and all is forgiven. but that might expire in a few months.

          2. The problem with Amtrak, and this is only from my perspective, is that it is sooo freaking expensive. I rode the train one time from Balmer to NYC, but that was the last time. It was nice, just way too expensive. The drive sucks, but it’s just a fraction of the costs. Surely a private company could get the cost down to at least make it practical to ride the damn thing.

            1. The problem with Amtrak, and this is only from my perspective, is that it is sooo freaking expensive.

              This. Ad it’s uber expensive WITH A SUBSIDY that is HUGE.

              I took the Empire Builder from Chicago to West Glacier, Montana, and it was a wonderful ride. But it cost about $2500 for a family of 3 to have the family room on the train.

        5. “My dad has a wonderful plan to charge everyone a penny an email and give the proceeds to the PO”

          *stares at that speechless, mouth agape*

        6. On the plus side, there woulkd be a lot less spam.

    3. The Luddites have already united, aka progressives.

  2. The manufacturing company I work for is looking at another round of cuts. Whether they are just financial or also include headcount, remains to be seen.

    Our heavy truck division – usually are cash cow – is way down, indicating the major fleet operators aren’t expecting to ship as much product or intend to keep their current trucks on the road longer.

    1. Back to the Wastelands wi’ ye?

    2. I used to work in power generation. The biggest lie in the world is that the manufacturing economy has been recovering. If it were recovering, demand for electricity would have been increasing. Instead it has steadily been decreasing since 2008. And it’s not due to falling natural gas prices. That would require people to be supplanting electricty using devices with ones that burn gas.

      The number of power plant retirements in recent years combined with the sluggish pace of new generation installations is showing a reduction in demand. Combine that with the fact that operating plants typically aren’t anywhere near capacity (except for nukes), and you have a dismal picture.

  3. Thanks for that good news – so glad I work an outfit that sells Commercial General Liability, Construction wrap-up coverage and Worker’s Comp policies. Shall I just put on my “who farted” look now, before 4th quarter results come out?

    1. Well, if it makes you feel any better, the coming further decline in construction should encourage a lot more worker’s comp claims.

      1. Yes, let us run the policies we have managed to sell right into the ground, aiiiee!!!

        /runs screaming toward Underwriting and Actuarial departments

  4. Perhaps the government should seize all private property through its Mandapenaltax power, sell it to other countries on eBay, then step aside and allow Americans to re-feed, re-clothe, re-house, and otherwise re-perform economically stimulating activities.

    1. I wonder what the “Buy it now” would be for, say, Boeing?

      1. Well, with so much to sell, I assume the government will price everything to move.

      2. With free, two-day shipping for America Prime members.

    2. “And there was a time in this country, a long time ago, when reading wasn’t just for fags and neither was writing. People wrote books and movies, movies that had stories so you cared whose ass it was and why it was farting, and I believe that time can come again!”

      1. I’m Not Sure, and I approve this message.

  5. Welcome again to 1937.

    All Obama needs now is another war to distract and unite all Americans into one common purpose: to blow people to Kingdom come!

    1. “We can’t make a decent television anymore, but we can bomb the shit out of your country!”

      1. Hah! Heard this rant on the radio this AM.

        1. Hah! Heard this rant on the radio this AM.

          Christfag!

    2. *Looks up from copy of Tehran Badonkadonks*

      Sorry, what was that?

  6. Has there ever been any indication that Barack Obama has any clue whatsoever as to what makes economies grow?

    A speech. Anything?

    I mean, I know he said ObamaCare would make America more competitive. I know he’s said that stuff he wants to do would make economies grow–but has he ever gotten one of those question right?

    Has he ever once said something would make the economy grow–and it really was something that actually would make the economy grow?

    I can’t think of anything. If the economy ever grew becasue of something he did, I think it would surprise him more than anybody.

    1. Re: ken Shultz,

      A speech. Anything?

      You didn’t build that!

    2. GDP = C + I + G + (X – M)

      Giving away freebies increases C!

      Giving money to Solyndra and others increases I!

      Everything else government increases G!

      Making cheap imported goods more expensive increases (X – M)!

      No matter what government does, GDP gets bigger!

      It’s a win all around!

      The worst thing government could do for the economy is stop doing what it’s doing!

      1. Government freebies increases BOTH C and G. More spending AND more consumption!

        That’s why unemployment benefits are so stimulative you know.

      2. Giving away freebies increases C!

        What if we start selling freebies for a price?

    3. Government Motors is still down 25% from where it debuted.

      …but I guess that’s all part of the plan.

    4. “Has there ever been any indication that Barack Obama has any clue whatsoever?”

      Nope. There is ample evidence of the contrary.

    5. Has there ever been any indication that Barack Obama has any clue whatsoever as to what makes economies grow?

      Of course he has a clue. It’s just spectacularly wrong.

      All of his clues are exactly the kind you’d expect from a career ‘community organizer’.

  7. I’d like to be the first to blame Bush if no one’s done it already.

    Or maybe Libertarians.

    1. Blame Wal*Mart!

      They should be charging poor people more money to shop there.

      Blame corporations!

      The people who own, manage, and work for corporations actually think they’re people.

      1. Blame libertarians who work for korporashunz like Wal Mart. And Booosh.

    2. Why choose? Blame Bush, that libertarian president who forced us through massive austerity and deregulation.

  8. I wonder if he ever looks at the results of the last five years and thinks of the possibility, the ever-so-slight possibility, that Keynesian economics is not quite a panacea.

    1. He doesn’t care. It’s all about creating new constituencies (and reinforcing existing constituencies)of dependency in order to expand and maintain power. The economy is just a side effect he doesn’t give two shits about.

      1. You nailed it WTF

    2. The purpose of Keynesian “economics” is not to understand or improve the economy.

      It is to give an intellectual cloak to any government meddling in the economy.
      No matter what government does, C, I, or G will increase, thus increasing GDP and improving the general economy.

      The purpose of Keynesian “economics” is to increase the power and scope of government.

      It has nothing to do with economics.

      1. ^THIS^

        All I can say is thank God my college economics professor was an old fashioned Austrian ecnomist and a libertarian. I’d hate to imagine being subjected to a three credit hour course of Keynesian bullshit.

        When he taught Keynes he actually said “Everything I’m about to teach you is absolute horseshit, but a lot of other people believe this tripe, so here it is…”

        1. Today’s Keynesians have very little to do with anything Keynes actually wrote.

          1. Today’s Keynesians have very little to do with anything Keynes actually wrote.

            And the Soviet Union isn’t an example of actual communism.

            1. I’m not a Keynesian – but if the U.S. and Europe took his ACTUAL advise – run surpluses during periods of economic growth, spend the surplus and borrow rather than raise taxes during recessions – we would be a lot better off.

              He never advocated borrowing vast sums during periods of economic growth (like we did over the past decade). Nor did he recommend tax hikes during a recession – as Obama is insisting on now.

    3. I wonder if he ever looks at the results of the last five years and thinks of the possibility, the ever-so-slight possibility, that Keynesian economics is not quite a panacea.

      Was there a republican holding an office somewhere?

      I think now you have your answer as to why the last five years have been a bust.

  9. Fortunately, we cut so fucking much during our near-death experience in 2008-2009 that we could frankly suffer another true, full on “recession” and still make money. Don’t want it, don’t really expect it, but we would make it, no doubt.

    But – we have hiring slowed to a CRAWL, and operations SCREAMING for people. Ain’t gonna put people on till we’re much more certain what the US gummint is doing.

    Plus – EU is killing us right now. North America’s carrying the mail….as usual. And we don’t trust EU govts to do ANYTHING that will help (see – Greece), so…

    So – think it doesn’t matter to “the economy”, and to employers, what gummint does? Then you’re as clueless as the POTUS and his band of merry, prog fellators.

    1. “North America’s carrying the mail….as usual”

      I most exquisitely feel your pain. We span the globe, and get 50% of profit from us chumps here in the US (and a bit from Canada too).

  10. Isn’t this really a”dog bites man” story? Why is it even news when private sector business people are caught like deer in the headlights when government is driving the bus. I spend half my day trying to figure out whether to sit on cash or invest it, whether I should take a risk on hiring someone given the regulatory environment, and whether to move income into 2012 or leave it in2013. The opther half I spend on trying to find mixed metaphors for posts like this. Needless to say, that leaves no time for productive work.

  11. Why do you think it is fear and not education?

    Most business managers are well educated and have undergrad and/or graduate Macro-Economics courses under their belt. They know government spending crowds out business. It’s pretty clear government spending is going to continue to rise, regulations are going to get worse, and business will continue to suck.

  12. I do not know what is the post say.

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