Friday, August 27, 2004

Ready-made economic analysis 

I need to get back to my habit of doing a Friday macroeconomy review. First, you should read Jon Henke's review of the Kerry attack on the Bush economy. Next, consider this graph (taken from Ed Yardeni's economic site), which I've edited a little bit:

I've added red lines for the election years. As I've said before, what matters to voters, in my view, is both whether you are performing above the average, and the direction of change for the economy. Even with the latest figures putting Q2 growth at 2.8%, the trend is up, and we're above the 1990s average of 3.0% annual growth.

It perplexes some why the consumer confidence level is so high. (Yes, I know about the Michigan index, but don't sweat the month-to-month wiggles. Sentiment and expectation indices are both up strongly versus year-ago levels.) But it shouldn't. As Henke points out, the data is still positive for jobs despite the weaker payroll figure last month. The data on the diffusion index still shows that over 60% of industry groups in the USA are expanding payrolls on a year-over-year basis, that job losses are concentrated in a few industries. If you're coming out of a bubble, you should be still stripping some excess labor from overbuilt sectors. Not surprisingly, most are in manufacturing.

So, despite the naysayers, the economy is charging ahead. I'm sure the news cycle, flush with Swiftvet talk, is looking at the latest polling data through the eyes of political advertising. I say instead that a Bush surge is to be expected from the economy, and will last through November. Tradesports is currently showing the Bush electoral college vote (a new contract they introduced this week) at 268 bid, 276 ask. I'm buying.

BTW, they also run individual state winners on Tradesports. Bush has just jumped over 50% in Florida, within a whisker in Wisconsin, and from 50/50 to 60/40 in Missouri. Still only 30% in Minnesota -- I might wish to buy some of that to show support.

P.S.: While Kerry's unfavorable rating has gone up to 40% of voters, what is more interesting is this:
Compared to previous elections, are you more enthusiastic about voting than
usual, or less enthusiastic?
Democrats/Democratic Leaners
  • July 30-August 1 73% more enthusiastic, 21% less
  • August 23-25 60% more enthusiastic, 30% less

Republicans/Republican Leaners

  • July 30-August 1 62% more, 27% less
  • August 23-25 60% more, 30% less

Further evidence that the DNC convention bounce has dissipated completely.