#4 | Posted by AndreaMackris at 2020-01-23 11:24 PM
So pardon me if I see a disconnect.
You are hereby pardoned.
It takes blinders not to see the sharp deceleration in the economy, despite spiking passive ETF and tech-led stock market.
Leading indicators for December 2019 just turned sharply lower and negative at -0.3% from already anemic 0.1%.
Lakshman Achuthan is a co-founder of the Economic Cycle Research Institute:
(Sources: U.S. government; Economic Cycle Research Institute)
"The Strength of Consumers Is Overstated. Weakening sales trends and wage growth underscore a sustained slowdown in spending.
The consensus is that the U.S. consumer is still strong enough to propel the economy forward even though the manufacturing sector has weakened. This view underpins expectations for improved corporate earnings in 2020. But the hard economic data strikes a discordant note. In particular, growth in industrial production on a year-over-year basis remains in a decisive downturn, sliding deeper into negative territory. Indeed, the production actually declined in 2019 amid losses in manufacturing job in recent months, fueling talk of a recession in that part of the economy.
The undeniable weakness in manufacturing has caused the consensus to trumpet the strength of the consumer. Yet, the consumer, while reportedly confident, is not spending hand over fist. Rather, weakening sales trends underscore a sustained slowdown in consumer spending.
Real retail sales growth fell to a six-month low of 1.25% in November on a y-o-y basis, from 3.75% two years earlier. Big rebound in December was due to a highly favorable comparison to the disastrous December 2018. Plus, that doesn't negate the fact that spending growth has been tailing off even though surveys report a confident consumer and the stock market is at record highs.
The lifeblood of the average consumer is job growth, not stock prices. So it's important to recognize that year-over-year growth in nonfarm payrolls has dropped to its lowest level in 2.25 years. Not only that, but growth in total hours worked " which reflects growth in both jobs and the length of the workweek " hasn't been this weak since 2010, dropping to 0.9% in December from just over 2% a year earlier.
Worse, growth in total pay has fallen even faster over the past year or so than growth in hours worked, slowing to a 3.8% pace from almost 5.5%. The y-o-y growth in average hourly earnings " the ratio of total pay to total hours worked " has fallen to 1.1% from 1.6%. That is worrisome downturn in wage growth even in the face of a very low 3.5% jobless rate.
For the average American, this limits spending growth. No matter how confident consumers might feel, there's only so much fresh debt they can realistically incur to support even more spending. The hard data shows growth in jobs, total pay and total hours worked are stuck in cyclical downswings. It also shows weakening trends in consumer spending and industrial production growth.
Meanwhile, one third of those buying new vehicles have negative equity in the used ones they are trading in, up from about one quarter before the financial crisis. And farm debt has topped $400 billion, up almost 40% since 2012.
That is why the boost to the economy from the Fed's dovish pivot primarily aided relatively narrow parts of the economy - financial services, residential construction and affluent consumers. But it has not helped business investment or average consumers.