How’s the US Economy doing? That depends on who you ask.
The “official” unemployment rate, at 5.7% is a little high by historical standards, but way down from the peak of the Great Recession. The US Dollar is way up in Forex Markets, and that usually means that the US Economy is booming and everyone wants our strong currency. GDP is up again – at a 3.8% annual rate during the 2nd half of last year.
Who could ask for anything more?! Let’s look at these and other numbers a little more deeply.
The government’s unemployment numbers are bogus for several reasons. First, if you’ve given up hope of finding a job, or if you worked at least 1 hour and earned $20 last week, you’re not counted as unemployed. If you have to work part time because you can’t find a full time job – but you want a full time job, then you’re not unemployed. And, if you have to work three part-time jobs to earn enough to live on, then you’re counted as three people working!
If the Unemployment Rate were calculated the way it used to be calculated, in 1980, then the number would be well over 20% (chart courtesy of http://www.ShadowStats.com)! Looking at the Workforce Participation Rate – how many Americans of working age either are employed or looking for a job – it’s the lowest it’s been for a generation – down several million Americans from 7 years ago.
Retail sales fell 1.7% during the past two months, and with the strong Dollar, and with the collapsed price of oil causing big layoffs in the US oil patch, it looks like retail sales will be declining for a little longer.
The US Dollar is up, but it’s up against a Euro having big troubles right now. Greece may exit the single currency, because it will default on it’s debt, and that might take the whole Eurozone with it. And Japan has been cheapening its Yen to gain competitive advantage. BTW, both Japan and China – the two biggest holders of US Treasury Debt – do NOT want more Dollars, with China’s holdings falling a little during the last couple of years.
A strong Dollar is a double edged sword. Yes, Americans have more buying power in international markets, which is good. But, that also makes our exports less competitive in foreign markets, while giving imports a competitive advantage here in the US. We can expect the number of layoff we already have seen, because of this, to grow even larger.
GDP is a concept created during the FDR years to make the Economy look better. It weighs government spending as being just as valuable to our Economy as spending by you and me, and just as valuable as business spending and investment. If Uncle Sam taxes Peter to give to Paul, that counts as GDP, even though all that’s happened is that the money has changed hands, with a cut for various government employees.
Housing, which took a big hit starting in 2008 because of the Housing Bubble has not recovered. There still is a huge inventory of Bank Owned homes, and “non-performing mortgages” which remain open. If the US Economy turns down again soon, as I expect, then the housing crisis which never went away will flare up again.
Durable goods orders are dead flat with the level of 3 years ago – there isn’t even a bump because of inflation of the goods prices. Electricity production is down to the same levels as 12 years ago. We still have almost 50 Million Americans on Food Stamps. Budget Deficits continue, and the lower (sic!) level of $½ Trillion last year is expected to return this year to the $1+ Trillion Budget Deficit level this year (and on into the future).
The FED just backtracked on its trial balloon of raising interest rates soon, and although it officially stopped QE3, the FED still is buying Treasury debt and other securities with both hands. The FED’s Monetary Base still increased by 2.5% after Janet Yellen became FED Chair a year ago.
Price Inflation is only 2-% by official numbers, but calculating it the way the BLS used to do it in 1980, the CPI is closer to a year-over-year rise of 8%
The US stock markets are expensive by any measure – unless you’re a cheerleader – with a PE Multiple around 20 for the S&P 500, compared to a 100 average of 14 and an “Expensive” level of 21. Around 90% of reporting companies in the S&P 500 have missed expectations – some big time – so when all the results are in, that PE should surge even higher, into Expensive to Bubble territory.
So again, it depends on who you ask. I’d rather depend on independent reports rather than government numbers subject to interpretation (eg. using the “Birth-Death Model for employment of all the adjustments to the CPI calculation), whether put out by a Democratic Administration or a Republican one. The politicians have too much reason to lie about the numbers, and they have too much to lose by reporting bad news, even if it’s true.
I’m conserving my cash and staying out of the general stock market, preferring alternative investments. You may want to do the same.