Food Stamps Boom Tells Tale of Woe

11/23/2010 12:00 pm EST

Focus: MARKETS

John Mauldin

Chairman, Mauldin Economics

John Mauldin, editor of Thoughts from the Frontline, writes that the most reliable statistics track dwindling jobless benefits and swelling food-stamps rolls.    

Our economy today is like an old lawn mower engine. We get one piece of economic data that is good to very good, and the next day we get some bad news.

Last week we got the New York Fed Empire Index. It was simply ugly. It fell from 15.7 to a -11.4. But then this week we get the Philly Fed Index, and it's shockingly high. The consensus saw a mild increase to an index level of five, but it jumped 21 points to 22.5. And all the underlying components were very solid. It is hard to square such a difference when the cities that spawned these reports are about an hour train ride apart.

Capacity utilization is slowly rising, but is still at a recession level 72.7%, up four points from 12 months ago and the highest since over two years ago. So are we getting better or are we still mired in the doldrums? I think the answer depends on how many hours you are working.

No Rush to Hire Help

The surveys from the National Federation of Independent Business continue to indicate that small businesses are not out of the woods. Hiring is at a virtual standstill but is at least not falling, as it was most of this year and last year.

The latest establishment employment survey shows job growth, though not at a level that can bring down unemployment. And if you look at the household survey, two things leap out. First, there is a significant rise in the number of people employed part-time. Part-time work, while better than none, does not inspire consumer confidence. It is not the fabric of a solid recovery.

Second, there are not many small business start-ups, which are the source, the feedstock of job growth. Whether because it is harder than ever to find money (it is) or because entrepreneurs are uncertain about what the future holds (they are) that is a very troubling metric. And the household survey showed a large decrease in the numbers of jobs and people working, a different story than the establishment survey.

What it all suggests is an economy growing between 1% and 2%. That is better than recession but not good enough to really bite into the unemployment rate.

Time Running Out for Millions

And that could mean trouble, as there are millions of people who are coming to the end of their 99-week extended unemployment benefits this next year. Already, people are running out of benefits. Earlier this year there were 12 million people on the extended and regular unemployment rolls. That is dropping each week and is now down to 8.9 million. Since the regular continuing claims number is not really changing all that much, much of it is from people dropping off the rolls.

And the number of people on food stamps continues to rise. As of the end of August, a total of 42.4 million people were receiving food stamps. This was an increase of 553,000 over July's number, or 1.32%. The year-over-year increase was 6.1 million people, or 17%.

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