Several statistics were reported this week, and in large measure, they disappointed analysts. Personal Income was up, but Personal Spending was up even more. This means that Americans were adding even more debt to their balance sheets. Since Saving is where the Capital comes from to help grow our Capitalist system, this means negative growth down the road.
PCE Prices were up only 0.1% in August (same as July), but these numbers generally are in the fairy tale category. Looking instead at the CPI, the way it used to be calculated in 1980 (via http://www.ShadowStats.com), inflation is running at around 7½%.
Pending Home Sales were down in August by 1.4%, more than canceling out the previous month’s 0.5% rise. The Case-Schiller 20-City index was up, while the MBA Mortgage Index was down. The levels for real estate generally still are quite low, so these numbers are no help to the Economy.
Employment continued to be a problem. The ADP Employment grew by only 200K. When a Republican was in the White House, the press used to blast us with “150K just to stay even with Labor Force growth.” By this measure, we got 50K jobs working to reduce unemployment. However, Non-Farm Private Payrolls grew only 118K, which means we were 32K short of matching Labor Force Growth. Hourly earnings were flat, and the Average Workweek shrank a little.
Initial claims were 277K, while Continuing Claims for Unemployment still are well over 2 Million Americans. And, the Labor Force Participation Rate – including over 10 Million Americans who have given up hope of finding a job – is at multi-decade lows. The headline Unemployment Rate came in again at 5.1%, but that is wildly skewed not only by those who have given up, but also by those who work one or more part time jobs (like because of ObamaCare) but who would like full time, and by those waiting tables who would like a better job.
The Chicago PMI (at 48.7) and the ISM Index (at 50.2) both are business sentiment indicators. On net, they paint a picture of a shrinking Economy. Factory Orders were down 1.7%.
Meanwhile, the FED initially talked about raising interest rates above the current zero level on FED Funds in June. Didn’t Happen! Then they said they’d do it in September. Didn’t Happen!
Now, they intimate that it might be before the end of the year – but definitely in 2016 – although FED Chief Janet Yellen admitted that she couldn’t rule out NEVER raising the rate above zero.
But, what is the FED actually doing? Apparently, in an Economy which they say is practically booming, with near full employment, low inflation, and high consumer confidence, they have looked at the same statistics (and others) which I’ve listed above, and they have been scared witless. (Maybe it’s just the 2nd half witless from where they were.)
The FED in its wisdom has crashed interest rates drammatically from the levels of just last month. 3-month yields at NEGATIVE 0.04% and 6-month yields at 0.01% are insane! The leaders of the FED need to be put in jail. Maybe the newly elected crowd in 2016/2017 will have the brains and the guts, but don’t count on it.
In the meantime, I’m working diligently to get the software ready for early next year for my venture into “Facilitating the use of Silver Eagle Dollar Coins in everyday commerce.” I’ll write to you about it as we get close to the launch.