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 Lining the cloud. Unemployment has certainly been a major cloud over economic recovery. The best we can say is that it’s not getting any worse. But let’s review the promising news. Stability trumps deterioration any day. This country was losing three quarters of a million jobs a month only a year ago. The first two months of 2009, the U.S. lost 1.4 million jobs, while in the last two months, it lost 81,000. Jobs actually went up in November. Temporary jobs have grown faster in the last five months than ever in history. New jobless claims are now back to where they were in August 2008. Payrolls have increased more in the last three months than they did when we started our recovery from the recessions of ’91 and ’01. December would have been much better, likely positive, if hadn’t snowed across the south ( Washington DC caught two feet). Bloomberg says that we lost 241,000 jobs in December just because people couldn’t make it to work. That’s a bigger weather impact on jobs than we’ve seen in December in over two decades.

 Small businesses see less rosiness. One dimension of this economic recession is that opinion seems to drive results as much as facts. We care more about how the facts “compare to forecast” than the actual facts. Considering that forecasting has a terrible track record, this emphasis on opinion seems misplaced. But here’s the bad news. Small business owners still have low opinions of the economy. The “Optimism Index” (run by what is called NFIB) indicates small business CEO’s are still pessimistic. They’re worried most about future taxes and government mandates. As proof of pessimism, they are not restocking shelves. Additions to inventory are at an all time low, and capital expenditure plans are at a 35 year low.

 A scary government spending statistic: In 1999, the Federal government spent $30,360 a year per senior citizen on Social Security and Medicare. Today, it’s 78% higher per person, and the Census Bureau is estimating a 79% increase in senior citizens over the next two decades. That 78% increase can’t be just inflation – consumer prices are up 29% in the same period.

 The decade’s big zero. Start to finish, we didn’t make a lot of progress in the 2000’s. The stock markets were net down, between 10 and 20%. Retail sales in Maine, inflation adjusted, went down 7.8%. Inflation adjusted wages also went down. Population in Maine grew 44,000, but added a net of only 56 jobs (yes, 56, four more than cards in a deck). In comparison, Maine employment saw 13% more jobs in the 1990’s, 28% more in the 1980’s, and 10% more in the 1970’s. What gives?

 Zero Sum. Charlie thinks one problem is a national “zero sum” mentality where we operate as if a gain for one group always has to be a loss to another. He believes this zero sum phenomenon has caused havoc in many ways, with two special mentions of politics and management of the earth’s resources. Charlie’s answer is to re-invent ourselves around a mentality of more planned distribution and metered growth where everyone shares in losses and gains. While “zero sum” is an interesting academic construct that may make you think it is a view that seems out of place in a world that, by most measures, has been steadily improving for most people especially when considering hundred year chunks of time. This zero-sum approach sounds a lot like a step toward a planned economy, which the world has shown repeatedly to be disastrous, with China the only big experiment left standing. Innovation is a sloppy business, with most ideas failing before good ones emerge. But they do if given a chance.

 Three pillars of solid good news:  1) Retail chains and auto sales did well in December. Auto sales are post “clunkers”.  2) Manufacturing is improving faster than expected, and the buzz is that this could create a Gross Domestic Product (GDP) in the 4% range for the quarter – whoa.  3) It looks like short term rates will stay low for awhile, or even if they go up 1 to 2% this year, we’re still at historical lows. While many talk of inflation, the market doesn’t seem to agree.

 Child mortality down.   There are few statistics as core to the global human condition than child mortality.  One of UNICEF’s missions is to reduce the effect of preventable childhood diseases. Their website has sobering statistics on how many children die per thousand, and even per minute.  But here’s their latest data:  Death rates of children age five and under have dropped by 60% since 1960, and 28% since 1990.

 Two other pillars of bad news.  1) Housing market: Foreclosures were up 80% in 09 versus 08; New home sales in November were 11% under forecast, and 9% under the prior November; Sixty percent of people who modified their mortgages a year ago are defaulting again; Builders aren’t building – construction spending slid a 7th straight month in November.  2) State finances are in trouble. This appeared last week in Bad News, but it has heated up even more as legislatures are meeting across the country to fix it, as they are in Maine.

 Tax Code gone off the chart.   What does it mean?  In 1939, the entire Federal Tax Code document was 540 pages. That sounds pretty long as it is.  This year’s publication is. . . (brace yourself). . . over 70,000 pages long.

 Two fundamental problems of traditional Market Research.   One: it’s expensive.  Good market research requires either very random sampling (which is hard to do), or large samples, and both cost. Two: The results are questionable, often because of the “Hawthorn Effect” – when the act of asking the question influences the outcome. People don’t always answer truthfully because they grapple with what they feel they should say.  Social Media on the other hand is very cheap and often starkly genuine.

 How it’s being used.  There are companies sending out questions to social media – like how do they feel about a product, or an idea, or what do they want in a service. They tweet it, or blog it, or Facebook it – but they get it out there. Believe it or not, people respond – by the thousands. It has flaws, but for the low cost, and the fact that old school research has flaws too, it’s not a bad alternative.  I found a list of 40 examples of businesses using this – here are a few: Pepsi, Netflix, Google, Microsoft, the Democratic National Committee, the Department of Defense (mentioned two weeks ago in this blog), and Cisco. Unilever, an $80 billion a year company in personal and home care products including Dove Soap, dropped their marketing firm of 16 years and joined a crowd-sourcing platform.

Crime rate dropping even in recession. States across the country are showing lower crime rates over the past few years.  Even in 2009, amidst economic downturn, cities like Los Angeles, Dallas, Detroit, Chicago, and New York have seen a dramatic reduction in violent crime. According to the FBI, in the first half of 2009, as unemployment doubled, reported murders, forcible rapes, robberies and aggravated assaults decreased by 4.4 percent compared with the first half of 2008. Some say it’s because our capture rate has gone up with modern forensics, discouraging at least some from attempting a crime. Or maybe we’re seeing a window into a less violent future as we become a more developed society.

Something positive about the government bailout: It seems the media hasn’t stopped to marvel at the fact that 12 banks have repaid $113B in bailout money- with interest, ahead of schedule (one year versus five). Aside from the fact that this means our largest financial institutions must be recovering, ask yourself how many government investments have had this kind of return, especially in a down economy.

Health check on housing – still sick. While confidence is rising, the core instigator of this recession, housing, is still not rebounding where we’d like.  The Conference Board indicates consumer confidence has doubled – up to 52.9 from a low of 25 last February. Consumers must not be looking at housing, however. The latest in bad news comes from housing prices – they are up only a hair, hardly what we’d expect with outlooks getting rosier. Add to this that mortgage rates have risen in four weeks 4.71% to 5.14%, making it harder to afford housing. Lower prices could spurn new buying, but prices tell the big picture story that the economy still does not see the long term value of real estate.  As quoted in the New York Times, “I’m worried. Everyone’s worried,” said Karl E. Case, the Wellesley College economist who helped design the housing price index that is being quoted. “If prices sink 15 percent from here, which is a possibility, and the 2008 and 2009 loans go bad, then we’re back where we were before — in a nightmare.”