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Originally Posted by Why_Yes_I_Do
Oh darn, we're not in recession after all. Sorry Bill Mahr. Better luck next time.
Consumer spending beats expectations - Shoppers reject phony media recession fears...
Average wage growth remains +3.5% year-over-year. The growth of overall income for American workers exceeds +5.4 percent year-over-year. Unemployment is a low 3.6% and U.S. consumer inflation remains low at 1.4 percent. Meaning: the middle-class has more disposable income to save or SPEND; and that’s what is happening….
- Reminder #1: Consumer spending is two-thirds of the U.S. economy.
- Reminder #2: We consume more than 80 percent of our own production (products created in USA). We do not rely on exports.
- Reminder #3: Because of #1 and #2, the “Main Street” U.S. economy is self sustaining -much stronger- and more protected from the negative impacts on the global economy.
- Reminder #4: Who/What is at risk from global contraction? The Wall Street economy (compromised primarily of multinationals). What is not at risk, the Main St economy.
- Reminder #5: Because of #3 and #4, Wall Street can drop while Main Street thrives.
This is also why the longer China delays talking tariffs the more they lose. Must be that magic wand Trump has  |
From A Navarro Recession, by the The Wall Street Journal Editorial Board, August 11, 2019:
https://www.wsj.com/articles/a-navar...s&page=1&pos=3
Multiple reports out of the White House last week say President Trump overruled all of his economic advisers other than Peter Navarro when he decided to impose new tariffs on China. Global and American economic conditions have been heading south ever since, so perhaps we should call this the Trump-Navarro trade-policy slowdown.
The U.S. economy has held up better than the rest of the world, thanks in large part to Mr. Trump’s policies. Deregulation and tax reform revived a recovery that was long in the tooth and barely escaped recession in 2015-2016. Business confidence and capital investment surged, which has driven further job market gains, rising wages and durable consumer spending.
But note the economic canaries. CEO confidence and capital spending have tailed off since the trade war escalated in 2018, and the falloff is beginning to affect economic growth. The near-3% surge in GDP has slid to 2%, and average monthly job growth has declined to 165,000 this year from 223,000 in 2018.
Exports have subtracted from GDP as global demand slumps, especially for manufactured goods. If oil demand stays low, the oil and gas industry will have to begin layoffs. The 10-year Treasury yield dipped below 1.6% Wednesday morning, another sign of slower growth ahead.
Oh, and has Mr. Trump noticed that the trade deficit hasn’t improved? Global supply chains are moving out of China to third countries such as Vietnam. But the overall U.S. trade deficit is steady. This is because the U.S. invests more than it saves. Thus it imports capital from abroad, which in the national income accounts is offset by a trade deficit.
The irony, and a dangerous one, is that Mr. Trump doesn’t seem to understand that his trade policy is contributing to exchange-rate instability and a rising dollar. When he slaps tariffs on China he reduces the demand for Chinese yuan. He also encourages capital flight to safe havens like the dollar, which encourages more capital into dollar instruments and the U.S. China isn’t manipulating its currency. It is setting a lower peg to reflect supply and demand and prevent greater capital flight out of China.
We aren’t predicting a recession, but then few thought we were in a recession in mid-2008 either. Economic downturns can sneak up on the smartest policy makers. Dan Clifton of Strategas Research Partners has begun noting that Mr. Trump is “‘trading away’ his re-election” as his trade policy erodes what was a strong economy. Mr. Clifton is a supply-sider who supports Mr. Trump’s tax and deregulatory agenda.
This is a warning the President should heed, and probably one Mr. Navarro won’t tell him. If Mr. Trump can’t strike a broader trade deal with China before the election, he should at least call a trade truce to reduce the damage. Economic expansions don’t end on their own. They almost always end due to policy mistakes. Mr. Trump’s willy-nilly trade offensive could be the mistake that turns a slowdown into the Navarro recession.
From The Navarro Recession, II, by the The Wall Street Journal Editorial Board, August 14, 2019:
https://www.wsj.com/articles/the-nav...s&page=1&pos=1
After we warned last week that U.S. trade policy was courting recession, White House aide Peter Navarro took to Fox Business to denounce us for sounding like The People’s Daily, the Chinese Communist propaganda arm. That was novel as criticisms of these columns go, but perhaps Mr. Navarro would care to comment again after Wednesday’s recession warning from the bond and equity markets? Are they Commies too?
Stocks fell about 3% on the day on bad economic news out of Germany, China and the bond markets. Europe’s largest economy shrank by 0.1% in the second quarter as exports fell amid trade and Brexit uncertainty. Chinese readings on factory production, consumption and employment also revealed an economy that is slowing sharply. China’s industrial production increase of 4.8% was a 17-year low.
Investors saw all that and headed for the tall grass of U.S. Treasurys. The yield on the 10-year note hit 1.58%, dipping for a time below the two-year bond yield. The 30-year Treasury hit a record low of 2.018% and closed at 2.02%. Yields this low show investors are moving out of risk assets and they signal slower growth ahead—perhaps even a recession unless events and better policies spur more optimism.
Some Trumpians are cheering the Chinese economy’s pain, but they should be careful what they wish for. They could drive China, the world’s second largest economy, into its first recession since Deng Xiaoping began the era of pro-market economic reform.
A Chinese recession would mean a European recession, which would send U.S. growth down too. The impact would be worse if slower growth triggers capital flight from China and there’s a disorderly fall in the yuan.
Mr. Navarro and President Trump spent Wednesday blaming the Federal Reserve for the market meltdown, and we suppose any scapegoat will do in a storm. The Fed isn’t blameless, and we argued it shouldn’t have raised rates last December. But it has since countered that rate increase with a 25-basis-point cut in July, and even another 50 basis points won’t be enough to counter a downward spiral of trade and currency mayhem.
We’ve been warning for two years that trade wars have economic consequences, but the wizards of protectionism told Mr. Trump not to worry. The economy was fine and the trade worrywarts were wrong.
But we never said tariffs would produce immediate recession. We said they—and the climate of uncertainty they were creating for business—would chill global trade and undermine the surge in capital investment spurred by tax reform and deregulation. The growth momentum from tax cuts and a strong labor market were able to mask the impact of helter-skelter trade policy for a time. But that old economic disciplinarian, Adam Smith, sooner or later exacts a price for policy blunders.
....Someone should tell Mr. Trump that incumbent Presidents who preside over recessions within two years of an election rarely get a second term.
Wait! Whot? We ain't all gonna die...
