Stormy weather?
by Tom Sullivan
Photo by SturmjaegerTobi.
The storms that dogged the acting president’s salute to himself on July 4th may portend economic trouble on the way. Donald Trump touts “his” economy as the best ever. That assessment depends on where one sits.
Stocks are at record levels. Great, if you own stocks. But not if you are one of the 40 percent of Americans still waiting to benefit from the longest recovery in American history. One health care emergency or unexpected expense can land workers such as Sommer Johnson on the verge of bankruptcy, the Washington Post reports:
“I keep hearing this is one of the best economies we’ve ever had and unemployment is down, especially among African Americans, which I am,” said Johnson, 39, who lives in Douglasville, Ga., an Atlanta suburb. “I’m looking around going, ‘Where is this boom?’ From where I sit, this doesn’t look like the best economy ever.”
[…]
“Just because folks on Wall Street think things are fine doesn’t mean most Americans feel like things are fine,” said Ray Boshara, director of the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis. “When every day is a rainy day for millions of families, things are not fine.”
When Johnson’s future mother-in-law died just before the wedding, she and her fiancé faced a series of large expenses that quickly ate the modest life insurance policy and left the couple with mounting bills and a car repossessed.
Four in ten Americans struggle to make ends meet despite cheery news from Wall Street. As a prominent Democratic candidate for president reminds crowds, this economy works great for those at the top. For the rest, not so much.
There are signs a downturn may make things worse.
Jordan Weissman writes at Slate:
As of this week, the U.S. Treasury yield curve has now been inverted for a full quarter—an incredibly dull-sounding turn of events that happens to be an unusually reliable warning sign that an economic downturn is on the way. The yield curve has flipped prior to each of the last seven official recessions over the past 50 years, without a single false-alarm during that stretch. If securities could talk, in other words, they’d be screaming bloody murder about trouble ahead.
Long-term U.S. government bonds normally return higher yields demanded by investors tying up their money for longer periods.
The yield curve inverts when the yield for short-term bonds exceeds that of long-term bonds. It is a sign investors anticipate “weak or nonexistent growth” ahead and little inflation.
Duke University finance professor Campbell Harvey cautions the yield curve is only one indicator. Yet the predictor has only given one false positive since the Eisenhower administration. It could take more than a year for a recession to manifest.
Meanwhile, manufacturing is “sputtering,” Associated Press reports, in part due to Trump’s China tariffs:
The pace of the overall economy is widely thought to be slowing sharply from annual growth that neared a healthy 3% last year. Even the job market itself, one of the pillars of the 10-year economic expansion, the longest on record, may be flagging. Job openings have grown just 2.2% so far this year, according to the jobs site Glassdoor. In 2018, openings had increased 9.8%.
Employers in some sectors of the economy are signaling less eagerness to hire. The construction industry, which had been adding jobs at an annual rate of more than 300,000 at the start of this year, is now adding positions at an annual rate of 215,000.
For now, jobs data out this morning are higher than expected:
Payroll growth rebounded sharply in June as the U.S. economy added 224,000 jobs amid concerns that both the employment picture and overall growth picture were beginning to weaken. The unemployment rate edged up to 3.7%.
Economists surveyed by Dow Jones had expected nonfarm payrolls to rise by 165,000 after and the unemployment rate to hold steady at 3.6%. May’s initially reported growth of 75,000 had raised doubts about the durability of the record-setting expansion that began a decade ago.
All of which is of little interest to people more attendant to whether they can make their car payments. The Post continues:
Maddy Dannemiller is a nurse’s aide who lives outside Columbus, Ohio. She replaced her damaged car after her boyfriend hit a deer while driving it. Her payments jumped to over $450 a month. She supports three children on just over $10 per hour. Dannemiller rents from a relative who will cut her a break on rent payments, but she’s still falling behind on car and credit card payments, the Post continues:
“I’m 25, but I feel like I am in my late 30s,” Dannemiller said, shortly before heading to work. “Right now, I’m two months behind on my car payment.”
The acting president has no conception what that’s like. His economy is working great and he’ll insist it is even when it’s not.