Summary: today’s post is another helping you more clearly see the present. We look at the condition of the US economy in pictures, cutting through the statistical noise and economists’ hopes that fog our vision. It’s easy to see, if we try. When we decide to try, America will become a different (and better) nation.
During the past 4 years I have reported (& predicted) that the US economy has remained locked into slow growth, vulnerable to a shock (perhaps knocking it into recession), despite constant forecasts of acceleration coming really soon — returning us to normal growth.
If we had accurate newspapers, most economic reports would read like this:
The new economic data released today — the XXXX number — came in slightly less than expected by the consensus of economists, continuing its stable slow growth since early 2011. The monthly numbers change, but the trend does not. Also unchanged are economists’ assurances that the economy will accelerate during the next few quarters.
We often obscure this slow growth by reporting the change in terms of absolute numbers rather than percentages (since the population and economy grow over time, the same number represents a smaller percent change over).
News without the fake drama — would it sell advertisements? Or rather, we get the quality of news that we refuse to pay for.
This week the government released major new economic data. As always, analysis focused on tiny monthly changes (i.e., statistical noise) that support their forecasts, pretending to be ignorant of the tools to show statistical significance. And conservative financial “experts” whined about the large revisions made to past data (amnesiac about their complaints that the government taxes and spends too much, and the resulting gross underfunding of the vital government statistical agencies — our eyes by which to see the world.
So what did we learn?
(1) Real Gross Domestic Product
Let’s look at real GDP excluding inventory swings (which mask the trend), also called Real Final Sales. It has run at 2% per year for the past 3 years (starting Q2 2011). The month-on-month per cent change shows the trend, if you are familiar with such graphs.
The same numbers shown as percent change since a year ago (YoY, year-on-year change) more easily shows the trend — flat for 4 years — but will more slowly show the eventual change in the trend.
(2) Jobs jobs jobs
Perhaps the most important single economic metric is the number of jobs created (change in total non-farm employment). Same trend: slow growth since early 2011.
As always, looking at this as YoY changes better shows the trend. The flat trend.
How does job growth in this recovery compare to past cycles? Slower than usual, much like that after the 2001 recession.
(3) Wage inflation
What about the fears of “wage inflation”: some of the productivity gains going to workers, instead of all to profits? After years of compensation growing far more slowly than productivity or profits, it rose in Q2. Fluke? Trend? It’s too soon to say. But not too soon for corporate leaders and their shills to begin compaining.
For More Information
(a) Analysts look at the recent economic statistics:
- “Unemployment and the ‘Skills Mismatch’ Story: Overblown and Unpersuasive“. Gary Burtless, Brookings Institute, 20 July 2014
- “What Is Being Left Out of the ‘Inarguable’ Payroll Expansion Is Far More Important“, Alhambra Investment Partners, 1 August 2014
(b) Other recent forecasts and warnings:
- What can we expect from the US economy in 2014?, 21 February 2014
- Status report on the US economy: stand by for the boom!, 24 April 2014
- The next industrial revolution starts. Beware the Pied Pipers who lull us into passivity., 8 July 2014
- Economists forecast a boom soon. The numbers show slowing. Who is right?, 21 July 2014
(c) Looking further ahead, our longer-term prospects seem challenging, as described in these posts:
- The dilemma of the US economy: can’t take off & too close to the brink, 9 July 2014
- Has America’s economy entered the “coffin corner”?, 10 July 2014