This is supposed to be below the zero line for two reasons.
- Below zero is good
- When it goes above zero it tends to (usually) spike upwards soon after.
there is no historically massive unemployment event like COVID ever in the history of the United states, i would be a bit leery depending on historical charts for such an unprecedented event.
Allan
the US continues to have a massive housing shortage into 2024.
wonder how that will be alleviated.
Allan
leery? yes
but given the data available (goes back only to 1990)
this has happened 3 other times
- the dot.com/9-11 recession
- then GFC recession, and
- the COVID recession.
When this recession happens, it too will get a name. (I’d vote for “the Fed extravagance recession” but I don;t think that’ll be it.)
people still have excess cash to spend as long as they do that, no recession.
bank accounts are still above average despite last years drawdown.
Allan
Correct.
and that has been (one of) my main point(s) all along.
The current economy is being buoyed by spending out the pile of helicopter money left over from the great COVID giveaway.
Thing 1)
I grow corn. I eat a lot of corn because I grow a lot of corn.
Thing 2)
My fields are much less productive. I cannot even grow enough corn to feed my family. I am feeding my family, for now, only because a while ago someone dropped off a truckload of corn. I am eating the dropped-off corn. My fields don’t grow enough corn to feed my family.
Thing 1 is not Thing 2
Exactly who has the excess cash though?
https://www.axios.com/2023/11/29/americans-savings-falling
Evidence is stacking up showing Americans are saving less and drawing down their existing savings cushions.
The latest: The share of adults who say they can cover six months of expenses using their savings is considerably lower than it was last year, according to polling from Morning Consult.
And the share that simply doesn’t know how long their savings will carry them has grown, to about 21%, from 15.5% in July 2022.
The big picture: The savings drawdown shows how consumption patterns are sticky — people want to maintain their lifestyles, even if it costs more and they have to dip into their savings, says Jesse Wheeler, senior economist at Morning Consult.
This spending has been buoying the economy — though it’s unclear how long that’ll last.
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How many people?
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Well we know who got the excess cash first.
That much is clear.
It was
- Recipients of stimulus checks
- Recipients of PPP “non-recourse loans,”
- Recipients of other COVID bailout money especially
- Whomever held MBS but sold them to the Fed when the Fed started buying them.(commercial banks, esp BoA.)
Who (still) holds that excess cash and where will it go are more complicated questions.
I would watch the growing default rate in credit cards, vehicle loans and mortgages to determine when the remaining reserves have been wrung out of the hands of individual consumers.
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I was just reading this today:
Barring future unexpected events, some economists think present conditions still have the potential to usher in a recession in the coming year.
“The recession is just delayed, but not completely removed,” said Kathy Bostjancic, chief economist at Nationwide Mutual.
One metric Bostjancic has been keeping close tabs on is employment in the private services sector, excluding health and education. The remaining sectors within private services — such as transportation and leisure and hospitality — are more cyclical, meaning they are more vulnerable to economic downturns. So studying movements in that sector gives her a better sense of the state of the economy, she said.
In November 2022, monthly hiring in the private services sector excluding health and education equaled 92,000, according to Labor Department data. However, the November 2023 jobs report shows a steep drop, with 22,000 new hires in the sector.
Overall, job growth has been solid over the past year, which has helped keep the unemployment rate below 4%.
Bostjancic isn’t convinced that will carry over into the new year, though. She thinks there’s a 65% chance of a mild recession in 2024 and predicts the unemployment rate will rise to 5% by the third quarter.
Thank you.
I always feel vindicated when someone posts a an article with a little bit of intellectual analysis. (such as which sectors/industries are expanding and which are laying-off.
Not surprisingly “temporary employment services” is very cyclical. The tendency is, when it dip into negative territory a recession follows:
In fact, until very recently, it has been an absolute predictor of the GDP.
HOWEVER
post-COVID they started moving in opposite directions. Unprecedented!
It is obviously related to something we did before then (COVID bailouts), and tends to indicate a K-shaped economy, but it is kind of a Rorschach test so, who knows?
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Here’s this from Warren Buffett:
During Berkshire’s annual meeting, Warren Buffett cautioned that the majority of their businesses are expected to report lower earnings this year compared to the previous year. This statement is somewhat surprising given Buffett’s historically bullish stance on the U.S. economy.
Buffett’s recent cautionary remarks mark a significant departure from his usual optimistic view of the U.S. economy. So, what has led to this change in perspective? It’s a combination of several factors, including persistent high inflation, escalating interest rates, and an ongoing banking crisis. These challenges have collectively contributed to Warren Buffett and his longstanding business partner, Charlie Munger, adopting a more prudent stance regarding the prospects for investment returns in the upcoming year. Munger succinctly summed it up by saying, “Get used to making less.”
Stocks right now are priced to perfection, so if earnings (which start in a few weeks) come in light, I would anticipate a significant pullback.
Economic returns are grounded in consumer spending. As more and more consumers run out of the ability to maintain, let alone increase, their spending it is going to get very interesting.
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This isn’t going to help things if consumers are upside down on available cashflow for spending. Raising prices in a cashflow poor environment isn’t going to help.
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have you noticed the current measures of money supply?
It’s been moving sideways ever since last March or so when the Fed began bailing out
big depositers at SVB and other fly-by-night banks
I blame yet another Fed miscalculation (not a conspiracy or whatever) but the timeline works like this:
- April 2022, Fed, recognizing its previous miscalculation begins QT
- Mar 2023, Fed, begins a new program (known by its initials “BTFP”) while calculating it will not interrupt QT
- Mar 2023-to-present QT has been interrupted. Money supply is moving sideways
Saw this today:
Have the banks started to report earnings yet?
