- How do you square these numbers?…
- Economics and anti-economics…
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Dear Reader,
Through the Kobeissi Letter I learn that:
United States job cut announcements surged 47% year-over-year in May — the highest May amount in five years.
I learn further that the United States economy has shed 696,309 jobs year-to-date.
That figure represents the second-highest year-to-date shedding since 2009.
What malign forces explain the pink slip pandemic?
“Tariffs, funding cuts, slowing consumer spending, and overall economic pessimism were behind the layoffs,” the Kobeissi Letter informs us.
Yet are tariffs, funding cuts and the rest principally responsible for the yearly plummet?
Political Statistics
The Bureau of Labor Statistics issued data last week.
This data indicated that 2024’s year-over-year employment gains were likely inflated by a gobsmacking 907,000.
That is, inflated by some 75,500 false jobs each month.
Thus 2024’s hale and hearty employment market was not half so hale and hearty as claimed.
I believe the figures were merely the product of the previous administration’s manipulations.
I can only conclude the employment market has wallowed substantially for some time.
This Can’t Be Good
A Federal Reserve survey reveals that 52% of United States consumers cannot meet a $2,000 emergency expense through savings alone.
31% of Americans cannot meet a $500 unexpected expenditure whatsoever.
All the while, credit card defaults have catapulted to 14-year heights.
And average annual percentage rates near 23%.
Thus the water that merely wettens the ankles may soon wash over the head.
Many heads have been washed over — to which the numbers attest.
Above I sketch a scene not of economic dynamism but of economic malaise.
Not of actual illness perhaps — yet of malaise — like a man down with a lingering fatigue.
You Just Don’t Get It
Yet Business Insider argues the fatigued is a man who misdiagnoses his own condition.
It argues the economy is far zestier, has far more vim, than the languishing consumer imagines:
- The US economy is holding up, but Americans don’t seem to see it that way.
- The off-kilter vibes reflect a widening gap between “hard data” and “soft data” related to the economy. Simply put, forward-looking data like consumer sentiment is way down, while the backward-looking data the Fed uses to inform policy… is still strong.
For example:
- The latest consumer sentiment reading [last month] showed an unexpected drop… According to the University of Michigan, the preliminary index reading fell from 52.2 to 50.8.
- That’s the second-lowest sentiment reading the index has ever recorded. But it comes against a backdrop of upbeat developments, including cooler inflation data, an easing of US-China trade tensions, and a rally in stocks that erased year-to-date losses…
- The sour feelings about the economy don’t square with the hard data… Bank of America found in an analysis… that the gap between the soft and hard data was the widest on record.
“Hard Data” vs. Unofficial Data
Business Insider proceeds to inform us that Goldman Sachs has reduced its recession risk from 45% to 35%.
And that Barclays is withdrawing recession from its base-case forecast.
I believe the recessionary data I cited above represents “hard data.”
And that hard data, in my telling, speaks a different tale than the official data.
Yet let me set aside my biased economic evaluation for the moment.
Let me assume the crackerjacks and wiseacres at Business Insider, Goldman Sachs and Barclays are correct about the economic date.
In brief: Let us assume that they are correct — and that Gloomy Gus, languishing on Main St — is not.
‘What the Heck Does This Guy Know?’
After all, say our economic betters:
- ‘This Main St. guy is a rather oafish and unknowing fellow. He lacks even the most modest academic credential.
- I, on the other hand, hold a doctorate degree in economics from an Ivy League institution. I am an expert.
- And I can tell you that this simpleton’s fears of a slackening economy are phantom fears.
- He is going upon lean rations, he is tightening the belt encircling his waist, for unsound cause. He just doesn’t get it. He needs to start spending.’
Let us further assume the experts are correct.
That is, that the “hard data” stands in back of the experts.
Yet here is a question for the same experts:
Have you taken account of the self-realizing prophesy?
How Perception Becomes Reality
The Main St. dullard believes the economic direction leans towards downturn.
Thus he takes in his oars. Or — to transfer metaphors — he tightens the belt encircling his protruding waist.
He begins to save against the rainy day.
Thus, in the official telling, he sets the economy backwards. He throws the “virtuous cycle of spending” into the devastating reverse cycle of anti-spending.
He sets Lord Keynes upon his head.
Yet I assume the classical view. I believe savings form the granite foundations of a sturdy economy.
Again, to transfer metaphors, I believe savings represent the seed corn of a sturdy economy.
And upon those savings sturdy economies blossom and flower.
Let us then turn our ears from the mainstream’s siren singings of debt… for they may dash us upon the pitiless rocks.
Let us chain ourselves instead to the mast against debt’s Siren seductions… as did old Odysseus.
“Let us,” I say. Yet will we?
Brian Maher
for Freedom Financial News
