Alex Carrick: An Industry Created as if by Magic
If you want to know how the American economy is doing these days – which is much better than you may think – skip to the final one-third of this article.
Before covering that subject, however, I’d like to write about another aspect of the U.S. economic scene that ties into the recent election fever we’ve all been witnessing.
Our American friends are nothing if not inventive when it comes to their business dealings. They’re able to create whole industries out of thin air. For proof of this assertion, just look at how big the election process has become south of the border. It’s a huge economic driver and growing larger with each successive vote.
Every day of the year, somewhere in the United States, individuals are engaged in an enterprise of questionable value – running for office. Of course, the “questionable value” part of the preceding sentence can’t be strictly true. There must be great rewards for the victor and his or her supporters. Otherwise, why would so many people be involved in the process of trying to take someone to the top?
One must conclude there is tremendous profit in the exercise. Contrary to the rhetoric, running for office isn’t simply an exercise in altruism. Sure, every politician wants to “serve the people”, but there’s far too much money and far too many individuals involved in a campaign for it to be just a labor of love.
The U.S. is a 24/7 voting machine. Contrast the U.S. system with what we have in Canada. At the federal and provincial levels, there’s often only a six-week run-up to an election. This is considered to be plenty of time for candidates to appear at barbecues, distribute brochures, participate in a couple of town hall meetings and engage in a debate or two.
In the U.S., the president is always running for office. Potential opposing candidates have to declare early and with great fanfare. Up and down the political spectrum, there are party nomination votes long in advance of when the general public gets to have a say. And if anybody wants to take a break during the four-year Presidential term, there are the mid-term elections to put that idea to rest.
Our American friends have several layers of politics beyond what we “enjoy”. Their Senate is elected. They vote at the county level for more important and more numerous positions than we do. Judges and law enforcement officials are chosen at the ballot box. Not for nothing is the U.S. home to the saying, “I wouldn’t vote for that man if he ran for dogcatcher.”
Constituents in Canada are expected to be sufficiently informed to make up their minds relatively quickly. Does such a short time frame alter the results much? Perhaps, but at least that keeps us on our toes. Sometimes there are surprises, such as how well the New Democratic Party fared in Quebec in the last federal election.
There’s more political choice in Canada. It’s not just a two-party race. In the U.S., with only the Democrats and Republicans to choose from, polarization has taken root and become entrenched. This has ramped up the advocacy advertising. Vast sums of money are spent by each side to bash the other. Who profits? Public relations firms, multi-media companies, radio and television stations and the list goes on and on.
Estimates place the amount of money raised by the Obama and Romney campaigns at close to $1 billion each. That doesn’t include funds generated in the private sector through the newest mutation, the super-pacs. These are independent agencies set up to collect contributions and funnel dollars towards promoting one candidate or another.
The debates between the presidential and vice-presidential contenders prior to the November 6th vote were terrific theater. These showdowns are ultimate cage wrestling. They leave many Canadians envious. The passion comes through and there’s the potential for a knock-out punch.
We’ve tried to emulate them on our national stage. But the stakes aren’t as high. Our leaders wrangle over constitutional issues. When America’s leaders quarrel over foreign affairs, ears perk up everywhere.
The media laps it up. They’re willing accomplices. Not for nothing does Wolf Blitzer stalk CNN’s “The Situation Room”. Tonight’s topic may be a situation alright.
It’s just not always clear who created it.
We think we have a large government presence in Canada. Our public sector accounts for 20.5 per cent of all jobs nationally. In the U.S., the proportion is 16.5 per cent. But add in all the people trying to help someone get elected in the U.S., or promoting a particular political agenda, and I suspect their work force tied to government service in one way or another dwarfs ours on a proportional basis.
There are whole networks in the U.S. keyed towards electioneering. The Americans have an advantage over us in another way. Their news shows – and this is my own personal opinion – are more entertaining than ours. Their producers know how to heighten the drama at every turn; how to squeeze every drop of emotion out of difficult situations.
One way is to key on individuals caught up in large events that are beyond their control. This has long been a staple of fiction writing. It’s also been embraced by Hollywood and U.S. news broadcasters.
Lobbyists and special interest groups provide another layer of quasi-public-sector workers in the U.S. The Sierra Club and National Rifle Association are two of the better-known examples. And there are think tanks. There’s a U.S. think tank prepared to consider just about any question you might have the temerity to ask. And don’t forget ballot propositions and their proponents. None of this is free. In total, it’s a big financial enterprise.
The election campaign has served one useful purpose. Everyone’s been taking greater notice of the latest economic indicators. Unfortunately, election campaigns by their very nature – with the opposition hammering away at any perceived weakness – tend to focus on the negative.
That’s misleading. There’s reason to sit up and take notice at this time. The U.S. economy isn’t just scraping by anymore. In what is exceptionally good news for the global economy, many of the latest statistics are taking flight.
Prior to the emerging nations grabbing the spotlight, the U.S. was traditionally the leader of world growth. It appears we’re headed in that direction again in this recovery. Don’t worry about the supposed U.S. “fiscal cliff” (i.e., the $600 billion in automatic tax increases and spending cuts at the end of this year. Roadrunner style, Washington will find a way around it.)
Most encouraging are the latest results from two of the bellwether sectors.
U.S. auto sales are ahead by about 14% year to date in 2012. They’re approaching 15 million units seasonally adjusted and annualized, a level considered quite respectable before the recession.
The housing sector is staging a stronger comeback than expected. September home starts caught analysts by surprise. At 872,000 units seasonally adjusted and annualized, they were +15.0 per cent over August and +34.8 per cent compared with September of last year.
The momentum is likely to be sustained. Residential building permits approached 900,000 units in the latest month. That figure was nearly 50 per cent higher than in September 2011.
U.S. stock markets continue to swing upwards. All three major U.S. indices experienced their most recent troughs in February 2009. Since then, NASDAQ has more than doubled (+126 per cent) and both the Standard & Poor’s 500 (+96.1 per cent) and Dow Jones Industrials (+90.2 per cent) haven’t been far behind.
There’s a boom in the U.S. energy sector as shale rock is being tapped for large deposits of oil and natural gas. This is opening up fields in North Dakota, Pennsylvania and many other states.
What about the unemployment rate? It’s finally fallen below 8.0 per cent and is approaching Canada’s jobless figure of 7.4 per cent. Weekly initial jobless claims in the U.S. are at their lowest level in four years.
The U.S. has famously added stimulus by means of low interest rates, quantitative easing (i.e., the printing of money) and other assorted means. Included in the latter, and overlooked by most, are the huge sums spent during the latest election season.
As is the case with all U.S. elections, one thing is certain – there will continue to be tremendous employment and financial opportunities gearing up for the next one.
Alex Carrick is Chief Economist with CanaData, a division of Reed Construction Data (RCD). CanaData is the leading supplier of statistics and forecasting information for the Canadian construction industry. RCD is a division of the global publishing firm, Reed Elsevier. For more economic insight from RCD, please visit www.dailycommercialnews.com/features/economy. Mr. Carrick’s lifestyle blog is at
www.alexcarrick.com and he would welcome a follow on Twitter (Alex_Carrick) or Facebook. www.alexcarrick.com