Bobby’s Leading Economic Indicator
The stranger rode up out of the darkness on his bicycle in the quiet of the late-evening that covered the woods in muted darkness, then reached out and held onto our horse-drawn carriage with one hand and started gabbing with the carriage-driver for the rest of the ride back to our hotel.
The bike-rider’s name, it turned out, was Bobby, and he is native to this island—“born and raised here, like my parents and their parents.”
And however many statisticians the Fed has in Washington feeding those gajillions of lines of data into whatever number of computers they employ in their seemingly endless effort to figure out what is going on right in front of their faces, Bobby has them all beat: Bobby runs a chicken grill in town.
Without knowing Bobby at the time, a year ago I reported from this part of the Great Lakes (“Report from the Midwest”) on not just the rising cost of everything a businessman like Bobby needs—from the charcoal he uses to cook the food and the staff he needs to help tend the customers, to the diesel fuel that runs the ferries that delivers both his food and his customers—but also on the new-found ability of the restaurants and hotels and ferry lines to raise prices to cover those rising costs. (“They’ve all raised prices,” my report concluded. “Let the bond market beware.”)
What a difference a year makes.
Last night Bobby, the stranger on the bike, expounded in great detail on the factors affecting his very small business…and if Bobby’s business is a leading economic indicator, that indicator is slowing down pretty sharply.
Bobby’s Grill is as basic as it gets: a big charcoal cooker set up outdoors on the lawn near a church in town, with a table for fixings and chairs for the people while they eat. He gets the grill going around 9:30 in the morning, and by 11 he’s ready for the customers that line up every day for his grilled chicken.
On a normal day in a normal summer, Bobby told me he serves 50 to 75 chickens at lunch. Lately it’s down to 25. “I’m not getting the blue-collar workers,” he said. “Still get the higher income people, but not the blue-collars.”
And that’s despite cutting his price from seven bucks a meal to $6.25.
Being in the Midwest, and being a half-dozen hours north of Detroit, what we have here is the real-life impact of those GM and Ford oops-we-make-gas-guzzlers-and gas-is-$3.00-a-gallon headlines, multiplied across dozens of factories and thousands of lives dependent on those companies and their gas guzzlers for work.
(What is GM’s response to all this? Why, GM is bringing back the Camero, a gas-guzzling muscle car, of course! I am not making that up.)
Meanwhile, the Fed’s statisticians, in their infinite wisdom, will certainly ignore Bobby’s Grill as any kind of useful economic indicator for the simple fact that it is what the Fed likes to think of as a statistical aberration—part of those pesky food and energy sectors that get eliminated from the consumer price index in order to “smooth” the data into irrelevance.
But it’s not just GM and Ford that are laying off “the blue-collars,” as Bobby calls them. It’s Toll Brothers and Centex Homes, too.
And pretty soon—this is just a guess, but the food chain isn’t too hard to follow—Lowes will slow down its hiring and Home Depot will put on the brakes…and long after the bond market has begun another bull market on the anticipation of a slowdown and price deflation, one of those computers down in Washington will figure out that back in late 2006 we began to enter something called a “recession.”
But Bobby’s recession began last month.
Jeff Matthews I Am Not Making This Up
© 2006 Jeff Matthews
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