Why the U.S. is Already in a Recession
- Powell pivot. He dissed US statistical agency, talked about Indeed's wage tracking & jobs posting data, contradicted the Jolts data and talked about the conference board report. I've been breaking the law not cleaving to both its mandates, inflation & employment. He said they have only been focused on the inflation mandate. Going forward they will shift back to jobs as well.
- What triggered this? Annual benchmark revisions.
- jobs - if you are going to lose your job, they're confidence in getting another one is the lowest since 2011!
- Jobs data. benchmark revisions. Annual benchmark revisions, for September, 2023 said to be up 500k jobs were created - - no wait, make that down 192k, that is significant! This says job losses were occurring in the economy since as early as last July, 2023.
- National Bureau of Economic Research is now on a red alert."When did recession begin? 7 different metrics feed into thus report on when a recession is dated and they are reviewing revisions to these now. Retail sales will be revised down.
- McKelvie Rule = .3% increase in the 3 month moving average of the unemployment rate off of its last 12 month low (Oct 2023); indicates we are already in a recession. Media pays attention to the Som rule but not the McKelvey rule which has been around longer and has a perfect (70, 74, 80, 81).
- Hearing about layoffs now. Closing thousands of stores around the nation. (Route 21, Wendy's, silicon valley, Amazon, Google, trucking companies, etc) Now layoffs are coming with only about 60-90 severence pay.
- Shocking # of people working a second job to make ends meet.
- 14% have no auto insurance + 16% have inadequate auto insurance (22% increased in auto insurance - home owners more than doubled)
- Florida condo-magedon due to upgraded assessments added to homeowners association dues.
- Stagflation is high, double digit unemployment AND high, sustained inflation - BOTH. Don't think we are gong there, but.....
- Oil has reacted giving hope that prices at the pump will come down.
- the rest of the world is in recession! That will be a drag on global demand.
- impact of interest expense - households are spending more to service their non-mortgage debt than mortgage debt 22% credit card interest rates; the USA spending $1T to service its debt - rental eviction moratorium for 19 months - no mortgage or car payments by fed3ral mandate - student loans not paid for 4 years
- During this period US households lost touch with what a budget was, then that third and totally unnecessary stimulus check was sent in the mail
- then inflation followed
- What is the difference in this new deal and the original new deal? - original new deal (40% of GDP) we have tangible results, Hoover Dam, Holland Tunnel - leaving a legacy - dignity instilling the power of work and how wonderful it makes us all feel about ourselves. - the new one was just legacy of bad spending habits and We trained Americans not to work, $2500/mo, no rent, credit card, auto, payments! - shouldn't have closed small businesses, churches, etc. But, allowed protests to continue.
- decisions made at the federal level during these last four years were the most destructive in US history!
- Employee retention credit - fraud riddled program it became
- We are either already in, or about to be in a recession, what do we do? -1. many companies using AI to replace labor, this will be painful -2. use AI to maximize productivity & education, this will be good