Wednesday , 13 December 2017


Optimism Regarding U.S. Economy is Misplaced – Here's Why

 

“I am amused by the Shadow Weekly Leading Index Project which claimsthe probability of recession is 31%. I think it is much higher….Let’s take a look at why.” >Michael “Mish” Shedlock< (http://globaleconomicanalysis.blogspot.com) Words: 530

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Shedlock goes on to say in edited excerpts from his original article*:

US Manufacturing PMI

Markit reports PMI signals weakest manufacturing expansion in 11 months:

  • PMI lowest since July 2011, suggesting slower rate of manufacturing expansion
  • Rate of output growth broadly unchanged
  • New orders rise at weakest pace in four months
  • Input costs fall for first time in three years

 

Durable Goods Orders Plunge

Those numbers do not look good but they are hardly disastrous. Here are some numbers that are disastrous.

Philly Fed Survey

For the second consecutive month the Philly Fed Survey has been solidly in the red.


(click on chart for sharper image)

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The above numbers are nothing short of a disaster.

  • The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of ‐5.8 in May to ‐16.6, its second consecutive negative reading. Nearly 40 percent of the firms reported declines in activity this month, exceeding the 22 percent that reported increases in activity.
  • Indexes for new orders and shipments fell 18 and 20 points, respectively.
  • Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries….
  • The percentage of firms reporting higher employment (14 percent) edged out the percentage reporting lower employment (12 percent).
  • The current employment index increased 3 points this month.
  • Firms indicated fewer hours worked this month: the average workweek index decreased 14 points and posted its third consecutive negative reading.

Misguided Optimism


(click on chart for sharper image)

Note the misguided optimism about six months from now [in the table above]. It’s not going to happen…[because]:

  1. Europe is a disaster.
  2. US manufacturing is cooling rapidly
  3. China is cooling rapidly: China Manufacturing PMI 7-Month Low, Sharpest Decline in New Export Orders Since March 2009
  4. US Monetary policy is at best useless, but more likely net harmful, especially to those on fixed income.
  5. First year presidential politics are frequently recessionary
  6. US still needs fiscal tightening
  7. Unemployment insurance has expired for millions: 200,000 Lose Unemployment Benefits This Week, Nearly Half From California
  8. Self-Employment desperation: 100% of U.S. Jobs Added Since 2010 Have Been Self-Employment, Contractor, or Other Jobs Without Unemployment Insurance Benefits
  9. Last two jobs reports have been dismal: Another Payroll Disaster: Jobs +69,000, Employment Rate +.1 to 8.2%, April Jobs Revised Lower to +77,000; Long-term Unemployment +310,000
  10. The 4-week moving average of weekly unemployment claims is at the highest rate of the year, at 386,250.
  11. New home sales cannot gain significant traction: New Home Sales Hype vs. Reality [Read “Housing NOT Coming Back Any Time Soon!” here]
  12. Tax Armageddon [Read article on “Taxmageddon” here]

Conclusion

Deficit spending has carried this “recovery” further than I thought it would, but the party is now over. It will be difficult if not impossible to overcome the above set of circumstances regardless of what anyone feels about economic back-tested recession probabilities.

*http://globaleconomicanalysis.blogspot.ca/2012/06/12-reasons-us-recession-has-arrived-or.html (To access the above article please copy the URL and paste it into your browser.)

Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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One of the problems with the debate over the “national debt” is that there’s no generally agreed upon definition of that term. Is it what the federal government owes, or what it owes foreigners, or what the whole country, private and public sector together, owes? Does it include off-balance-sheet items and contingent liabilities? There’s a hundred-trillion dollar gap between lowest and highest on this spectrum, which allows each commentator to confuse the rest of us by picking the measure that best suits their point of view. [Let’s try to decipher the true state of the nation.] Words: 1468