What confidence?
by digby
The Upshot takes a look at the current economy:
After Donald J. Trump won the presidential election, Americans’ optimism about the economic future soared. But midway through the year, that optimism has not translated into concrete economic gains.
This seeming contradiction exposes a reality about the role of psychology in economics — or more specifically, how psychology is connected only loosely to actual growth. It will take more than feelings to fix the sluggishness that has been evident in the United States and other major economies for years. Confidence isn’t some magic elixir for the economy: Businesses will hire and invest only when they see concrete evidence of demand for their products, and consumers intensify their spending only when their incomes justify it.
The sharp rise in economic optimism after the election came through no matter how the question was asked or who answered, whether the survey was intended to capture consumer confidence or consumer comfort or consumer sentiment. It was true in surveys of small-business owners and of C.E.O.s of some of the biggest companies in the world. And the rise during the winter months in these surveys has mostly been sustained in the months since.
Ok, let me stop right there. WTF? Did “Americans” actually think electing a cretinous moron for president would be good for the economy? I guess I could buy that it might have no effect if I thought that US political leadership and government policies were actually pretty irrelevant to the economy. But what in the world made anyone but Trump’s personal cult believe he’d be a positive force for growth? Especially the supposedly smart people on Wall Street?
Well, now that I think about it, the supposedly smart people on Wall Street probably just assumed that he’d cut their taxes and that’s good enough for government work as far as they’re concerned.
Anyway, they were all wrong:
But the economy is plodding along at the same modest rate it has for the last eight years nonetheless — at least when you look at “hard” data around economic activity instead of “soft” data like surveys, as analysts put it.
President Trump said on Twitter on Sunday that the stock market was at an “all-time high” and that unemployment was at its lowest level in years, both of which are true (he added that wages would start going up, which is certainly possible).
But in overall measures of economic activity, the expansion looks much as it has for years, with steady growth of around 2 percent. The Trump economy so far looks an awful lot like the Obama economy.
For all of business executives’ apparent enthusiasm, the nation is adding jobs more slowly in 2017 than it did in 2016, and investment spending by businesses is growing modestly; new orders for capital goods are up only 0.7 percent so far in 2017.
Consumers’ spending was 2.7 percent higher in the first four months this year than in the same period of 2016, adjusted for inflation — which is slower than the 3.2 percent year-over-year gain at the end of 2016.
And while the stock market has been surging and the Federal Reserve has raised short-term interest rates, long-term Treasury bond yields remain very low, suggesting that traders do not buy the idea that growth is poised to accelerate. A falling dollar suggests currency markets see improving prospects in Europe and elsewhere.
There is no sign a recession is brewing, but neither is there evidence for the kind of boom you might expect if you believe that confidence is a crucial driver of economic growth.
He goes on to explain that the whole concept of “confidence” is mostly bullshit because people really don’t have any way of explaining something so complicated. Confidence does often grow when incomes rise and people gain wealth. Duh. But just “feeling it,” doesn’t translate into growth itself and neither just “feeling” that things are going sideways necessarily translate into a slump. Sometimes these things correlate but sometimes they don’t.
But don’t worry, we’re in the “you can believe me or you can believe your eyes” Trump era in which he’ll tell us how rich we all are and we’ll believe it. Let’s call it Trump’s virtual economy where we are all living like Ivanka. It’s so nice being rich and glamorous. If only we didn’t need food, shelter and health care, we could all live the dream.
By the way, it turns out that all that American confidence after the election was only Republicans. Democrats were not excited. So, it was simply partisanship and nobody who works with other people’s money should have ever looked at those numbers as if they had anything to do with the economy. In fact, it’s financial malpractice if they did …
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