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1980 Misery By Charles Payne

In 1980, I signed up for the US Air Force after graduation as a way of getting an education and getting out of the block. There was no doubt I had to move because it was like a black hole that could suck anyone in the wrong direction because all the overwhelming negative factors were simply too hard for most to escape. The 1970s were a disaster in so many ways, with one president resigning in disgrace and another so inept, it was easy to see America losing the Cold War, along with all its pride and determination. All the disappointments of that decade rolled into 1980 like a giant exclamation point.

The energy crisis of 1979 saw inflation spike to 11.3% that year and then reach 13.5% in 1980. Unemployment began to spike, and if prior methods ditched in 1980 were applied there would have been a double-digit rate. The homicide rate popped to an all-time high, and desperation was thick in the air and could be cut with a knife. But, it was the neighborhood where we saw the most pain and desperation. Murder and assaults were everyday occurrences as New York descended into a modern day Dodge City. The social fabric was changing rapidly as a result of years of unemployment and welfare not as a temporary aid, but solution of appeasement.

* In 1960, 51% of black women ages 15 to 44 were married.
* In 1988, 29% of black women aged 15 to 44 were married.

So, I sign up for the Air Force but there is a six month delay to actually go to boot camp. That was too big a window to not have a job, to be idle, to be bored in the worst part of Dodge City. I saw an ad for jobs at a McDonald's in midtown Manhattan, in fact there were three openings. The day of the interviews was here and I got off the subway train hoping I could land one of those three jobs, but turned the corner to find a crowd of more than 300 people. Yes, more than 300 people showed up for those three openings. Needless to say it was an all-day affair.

The interview process went in rounds, with each round eliminating 50% of applicants. I'm not sure what I said but after the first round of interviews the manager came over and whispered to me that I got the job so just sit in a remote spot and wait for the rest. It was a heartbreaking scene, and one I pray would never be the norm in this country again. I was a kid, going after the same job as grown men with families and single mothers with children. I needed that job, badly, too. I needed it for economic reasons, but also because I had to get off the block as often as possible.

Fast-forward to last week when McDonald's promoted an effort to hire 50,000 new workers in a single day. As it turns out, the 14,000 store restaurant chain got over 1,000,000 applicants and hired 62,000 people. McDonald's turned away 938,000. Imagine the unraveling of the social fabric beneath those numbers. Imagine the real desperation of the grown men and single mothers with children behind those numbers. Too bad the Administration didn't take a typical victory lap over the fact that 62,000 Americans got jobs on one day because that will be part of data used to promote the notion the country has turned the corner.


The fact is it's beginning to feel like 1980 again. In many ways, it's more depressing. I went into the military for an education because we couldn't afford college and never pursued loan options. Since 1978, college tuition is up 900%. Moreover, there was no war when I enlisted; today there are two with one brewing*.

We are heading in the wrong direction, and that move is accelerating. America saved itself with the election of Ronald Reagan, who allowed the Fed to take non-accommodative actions that created even more short-term pain, but ushered in a long period of prosperity for all Americans.

We are at that inflation point again. A recent Gallup Poll on where Americans see the U.S. economy.

Scary.
Sad.

Today's Session

Last night, and this morning, we are seeing another round of good to great earnings reports that are nudging equities higher pre-open. It's an odd mix of winners, including old industrial companies, many that have been around decades, even longer than a century (GT will be a big winner today), and young whipper-snappers in tech like Ansectory.com (NASDAQ:ACOM) and Shutterfly.com (NASDAQ:SFLY). There is still hell to pay for companies that miss (except AMZN) or couldn't provide strong guidance.
Economic data came in better than expected, proving that those with jobs are still spending but at the sake of savings. Personal income was higher, but wages aren't keeping pace with inflation in the real world.

There was an amazing line in Caterpillar's (NYSE:CAT) earnings report this morning. The weak dollar, (which the government doesn't seem to care about) is supposed to be creating jobs right? Well, a side effect is the strength in commodities. CAT this morning said that because of higher costs, the Company had to eliminate some jobs. "Manufacturing costs were up $219 million, primarily due to higher period costs related to increased volume and provisions for incentive pay. Material, primarily higher steel prices, and freight costs were unfavorable compared with the first quarter of 2010. Continued improvements in variable labor efficiencies partially offset these factors."