In his post at The Week Jeff Spross outlines the state of the economy in a way completely consistent with the way I see it:
Contrary to some triumphalist assessments you may have read when everyone still thought Hillary Clinton was a shoe-in, the economy is not doing well. Labor force participation and the prime-age employment ratio are still unusually depressed, and under-employment is still unusually high. The rate of wage growth still shows we haven’t flipped from workers competing for jobs to employers competing for workers. Costs of health care, housing, education and such are still crazy high compared to past decades, and huge numbers of American households are still financially insecure. Simply put, the economy still kind of sucks.
Since 1980 kicking the economy into recession may have required an external shock but, contrary to opinion, the business cycle has not been repealed. There will be another recession. We just don’t know when. And unless present circumstances change, something which appears unlikely, there will be few tools to counter the next recession when it occurs.
That’s why I’m not as concerned about the worst case scenario that worries Mr. Spross: what happens if Donald Trump is super popular in four years? I think the odds are that we’ll have a recession in the next four years and it will be blamed on him. Otherwise, I think he’ll be a little less popular in four years than he is now which is not very popular at all.
I suspect you saw the graphics on the labor market:
http://www.zerohedge.com/news/2016-12-06/not-remotely-data-dependent
If Janet Yellen’s analysis (snicker) tells her now is a great time for a rate hike the service sector could join manufacturing in recession sooner rather than later. That said, a return to market determined rates needs to occur, and if not now, when?
Since the financial collapse, the Stock Market and Wall Street have been on a “sugar high” from the low interest rates and easy credit creation. The levels cannot be sustained, and since these levels are artificially high, the real floor is deep. I am not on top of it any more, but if what I read is correct, many companies are borrowing against their stock to finance buybacks. If true, it is really not a very good situation.
President-elect Trump cannot change this. The best case would be that it not collapse while the actual value increases.
The business cycles has not been eliminated, but since the financial collapse, it has been in hibernation due to limited economic activity. There has to be business for the cycle to operate.
I am noticing that the idea that offshoring manufacturing and importing the majority of goods is a bad idea is now acceptable in polite society. For those who would like to be ahead of the crowd, the old manufacturing jobs will not come back, but the goods they produced are also gone.
NEWSFLASH: Nobody wants to purchase an Atari video game system, a Ford Pinto, 100% snag free, dacron polyester Sansabelt slacks with or without the silk shirt, or buggy whips.
The new fangled manufacturing will cause new materials, techniques, methodologies, machinery, and outlooks to allow goods and services to be produced faster, cheaper, and cleaner than anywhere else in the universe. The much maligned US workers and students just need the yoke of stupidity thrust upon them by the know-it-all experts.
For anybody who does not know, does not remember, or does not care what today is, the last time an Asian country thought they could take the US it did not end well for one side. Economically, the US has not fought back against China. The Soviet Union tried it, and the Left screamed bloody murder.
Could somebody please tell me where the Soviets are today. Oh, that’s right – the Democrat party.
“but if what I read is correct, many companies are borrowing against their stock to finance buybacks. If true, it is really not a very good situation.”
Unlikely. Smaller companies generally pledge their.stock for all but the most pedestrian working capital and equipment loans. Not really a new phenomenon for a dividend recap. Larger companies generally use general lines for buybacks. The real issue here is corporate use of funds. Lack of growth / investment opportunities plus cheap debt makes return of capital a logical move.
As has been observed many times, manufacturing activity is actually up; its employment that’s down. The cost to employ is a big factor.
Regulatory headwinds are a big factor in retarding investment. And I know it’s not popular here, but so are taxes, which increased by over 50%. Obama was not good for those issues. And we are not going to Facebook or Google our way to prosperity.
We seem to be able to make a go of it. Beverage containers, pies, concrete structures, aerospace electrical system parts and so forth all made in the good old US of A. But it’s become tougher the past number of years.