Why the U.S. is Already in a Recession
5/11/24
from Schwab Network,
5/9/24:
Danielle DiMartino Booth discusses recession, the Fed's continued fight against inflation, the spending power of U.S. Consumers and how A.I. could impact the labor market.
From Schwab Network:
A summary of her comments:
- 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
QI Research founder and former Dallas Fed adviser Danielle DiMartino Booth discusses recession signals, how America lost its ability to budget, and whether we’re barreling toward stagflation.
Danielle unpacks a litany of troubling economic data in our interview. Layoffs are spreading from tech to retail, manufacturing, and transportation. And for the first time ever, Americans are paying more to service their non-mortgage debt than their mortgage debt.