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Coronavirus Unemployment Could Cause Greater Depression, Deadlier than the Disease

The longer US unemployment rises due to our response to coronavirus, the greater our depression, whether mental or economic, even to the point of another Great Depression.

Suicides increased during the Great Depression. Suicide mortality peaked with unemployment, in the most recessionary years.

The great despair of the Great Depression and increased suicide rates were due almost entirely to job losses, and we are approaching those record job losses now.

Fighting Great Depression Or Causing One?

Unemployment during the Great Depression caused slums and poverty.
Unemployed man during the Great Depression | Source: National Archives and Records Administration / Public domain

The pain is real. The economy contracted nearly 5% in the first quarter due to the coronavirus lockdown, and it is estimated to reach several times that high in the second. As a result, US unemployment has just hit 30.3 million people.

The pain facing many Americans was on stark relief Thursday morning. Nearly 3.8 million people filed for unemployment benefits for the first time in the most recent week, the Labor Department said. That topped the consensus forecast among economists…. The new tally shows that over 30 million Americans have lost their job since the start of the coronavirus pandemic.

The total number of jobs created since the Great Recession has now been wiped out. As of this week, our coronavirus lockdown has raised unemployment to levels barely beat by the Great Depression.

We are beating other unemployment records. The US unemployment rate is a little slower to be reported than the total number of unemployment claims, but the previous week already set a record:

The number of people currently receiving unemployment insurance as a percentage of the labor force, was 12.4% for the week ending 18 April , the highest percentage recorded since the department started releasing those figures.

If you add up all new filings in the last 6 weeks, 18.6% of the labor force has applied for benefits.

Coronavirus unemployment may bring the same kind of despair known in the Great Depression by the unemployed.

Real unemployment worse than the numbers

The percentage of the workforce continuing to receive unemployment insurance (the unemployment rate) is smaller than the number just mentioned who have applied and been approved. It is also smaller than the percentage of the workforce actually unemployed.

Millions go unreported. Official statistics do not count the many who became unemployed due to the coronavirus shutdown who were not eligible for unemployment benefits.

Some people are not eligible because they haven’t been working long enough. Some because they have used up all their benefits and have fallen off the roll.

But there’s a unique factor right now due to the sudden impact of the coronavirus shutdown. For several weeks, state unemployment agencies were not able to process unemployment claims fast enough, though those backlogs are starting to decline.

The figures are also still undercounting the number of people out of work. Some states are still dealing with backlogs of claims after their systems were overwhelmed by the massive volume of applications.

Estimates range from another nine- to fourteen-million people still trying to claim unemployment benefits.

Unemployment Is Reaching Great Depression Records

Records were not kept during the Great Depression by the same measures used now, and present records leave many out. That makes an exact comparison in employment statistics impossible.

There was, for example, no nationwide unemployment insurance plan tracking the unemployed during the Great Depression. The first nationwide unemployment insurance did not become law until late 1935. By that time, the nation was well past the peak unemployment of the Great Depression.

The general level of unemployment throughout the Great Depression was only a little higher than today’s numbers.

The highest rate of U.S. unemployment was 24.9% in 1933, during the Great Depression. Unemployment remained above 14% from 1931 to 1940…. During the Great Recession, unemployment reached 10% in October 2009.

That 14% rate is not much higher than the latest publicized insured unemployment rate of 12.4%. That will jump higher when the official rate gets adjusted again next week.

The Federal Reserve shows peak unemployment in the Great Depression hit in May 1933 at 25.59%

Federal Reserve graph of Great Depression unemployment rate
Great Depression unemployment rate | Source: Federal Reserve

Is The Coronavirus Lockdown Worth the Destruction it is Causing?

Destitute farmer, stricken by drought during the Great Depression.
Farmer in despair over the Great Depression in 1932 | Source: National Archives at College Park / Public domain

Everyone’s first response is that you cannot compare the value of saving human lives via a pandemic lockdown to the economic costs of a lockdown. However, that ignores the ultimate cost in human lives and pain that will come due to unemployment … a lesson nearly lost in history. So long ago has been the last time we faced something like this as a universal experience, there are few left who remember it.

Many economists are starting to realize unemployment is going to last longer than just a few months. The longer the coronavirus lockdown continues, the greater the unemployment numbers, but also the slower the recovery on the other end as businesses die off waiting for that end to arrive.

The Great Depression brought a human cost of suicide, depression, loss of human dignity, hunger, and death from exhaustion that scarred the human psyche for a hundred years. It became a life-story of human suffering equal to the war stories of WWII.

In the Great Depression, surprise unemployment and drought that brought food shortages caused this deep human suffering. In these years after the Great Recession, we now find ourselves facing surprise unemployment and plague and likely food shortages caused by mandatory shutdowns.

Back then, labor discord erupted in response to the divide between the haves and have-nots. Communism or socialism gained unexpected widespread popularity as an alternative to the greed that was allowed to rule under unbridled capitalism. Despots like Hitler rose to save people from nationwide poverty. The Great Depression might equally be called the Great Desperation.

Today, labor discord is brewing and starting to erupt in small pockets due to forced employment and social lockdowns. Communism and/or Socialism is rising in unexpected wide popularity in the likes of Alexandria Ocasio-Cortez‎, Elizabeth Warren and Bernie Sanders. For now, one man’s leader is seen as another man’s despot. History will decide who the true despots are, not those who follow them; but half the population practically hates the other half.

Can we be sure the paths the nations have set themselves on do not converge at a Greater Recession than the one we just left or even another Great Depression like the one the world knew nearly a century ago? The times have a lot of common chemistry. Desperate times make desperate people, who may shred the thin fabric that weaves civilization together.

Given the pain and suffering we reached in the Great Depression due to unemployment and hunger, I think we need to ask, “Is the coronavirus lockdown worth the strains that it is creating?” Are we putting ourselves at risk of equally desperate times? Do we know the world can pull out of this and escape a greater depression when there has never been a time in history where all the economies of the world shut down in unison to stop a plague? Do we have any real idea how hard those massive, intertwined economic engines may be to restart?

Peggy Noonan wrote in her column recently that “this is a never-before-seen level of national economic calamity; history doesn’t get bigger than this….”

Coronavirus has changed everything. The longer it lasts, the less the future will look anything like the past.

Art Berman

Spend a little time to consider the cost in human lives and suffering of the Great Depression, and then say there is an easy answer as to which is worse — viral contagion or economic contagion:

(This article was originally published on CCN but has been expanded for this site.)

Fiercest Economic Collapse in History is Best Month for Stock Market

It was the best of times, it was the worst of times. April closed as the best month for the US stock market since the V-shaped recovery that followed the Black Monday stock market crash of 1987. April also delivered the deepest, broadest economic collapse of any month in history.

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GDP Screams U.S. Recession Has Begun, but ‘Real GDP’ Is Far More Terrifying

U.S. first-quarter GDP plunged profoundly negative, but real GDP would have crashed even harder if not for bogus BEA data revisions. According to the Bureau of Economic Analysis (BEA), the U.S. economy contracted 4.8% annually in the March quarter.

Stocks soared on the news for two apparent reasons. First, many media outlets immediately reported the number as +4.8% GDP growth, which they later reversed. The market paid attention to the false-positive print but ignored the later contrary truth.

Stocks also rose due to a possible COVID-19 treatment or cure.

Dr. Fauci praised Gilead Sciences’ remdesivir for its successful trial as a COVID-19 treatment in a study he personally shepherded, but another study later poured cold water on the treatment. The market, again, accepted the good news and wholly ignored the bad.

GDP Shouts “a Carpocalypse Upon Us”

GDP takes major plunge into recession for first time since 2008.
Source: Zero Hedge

GDP fell in both goods and services.

Under services, it was hit by “a pox upon us.” Ironically, health care experienced a considerable decline–an apparent result of people steering clear of doctors and hospitals to make room for possible COVID-19 patients and to avoid sites of high-risk contagion.

The plunge in goods was led by motor vehicle sales–already mired in “Carmageddon” by some accounts–which have now drifted into the abyss.

The first quarter’s pre-plague leap in housing helped levitate the overall numbers a little. Single-family housing boosted the aggregate of mostly bad numbers, but housing turned downward in the final month of the quarter.

The BEA highlighted COVID-19’s contribution to the crash in GDP, but indicated the plunge might not have been due entirely to the pandemic:

The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued “stay-at-home” orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.

Primary Factors In The Recessionary GDP Crash

  • Personal Consumption, -5.26% (most severe drop since 1980)
  • Fixed Investment, -0.43% (already in decline in Q4 2019)
  • Exports, -1.02% (barely positive in Q4 2019)
  • Imports contributed to growth, +2.32% (more on that below)
  • Government consumption, +0.13%
Chart comparing components in quarterly GDP reports as GDP now moves into recession.
Source: Zero Hedge

(Note that imports actually dropped, but imports are subtracted from GDP, so a decline in imports is positive to the bottom line.)

The BEA also indicated personal savings improved (+0.5%):

Personal saving as a percent of disposable personal income was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.

Personal income (adjusted for inflation) increased $95.2 billion in the first quarter compared with an increase of $144.1 billion in Q4.

Certainly a recession … probably a depression … numbers not seen since 1929:

BEA Has Been Adjusting Its Numbers Upward

Since government spending accounts for a contribution to GDP, stimulus money supports a better number even if it does nothing to increase production and is paid for with greater debt.

GDP numbers put out by the BEA include numerous adjustments that allow room for the government to present a more positive picture of the economy.

Shadowstats, a site that attempts to recalculate GDP as it was historically configured, states that GDP would actually have come in at -7.1% if calculated by historical methods. Its calculation of GDP is:

… adjusted for distortions in government inflation usage and methodological changes that have resulted in a built-in upside bias to official reporting.

Shadowstats notes that all revisions over the years have tended to improve each current government’s GDP number:

With reported growth moving up and away from economic reality, the primary significance of GDP reporting now is as a political propaganda tool and as a cheerleading prop for Pollyannaish analysts on Wall Street…. The BEA comes up with three estimates of growth, a high, low, and most likely. The numbers then get re-massaged so that the reported growth rate is moved closer to whatever the economic consensus is expecting. There actually is a belief at the BEA that there is some value to economic consensus estimates…. The upward bias shown in the revisions is due to what I call “Pollyanna Creep,” where methodological changes regularly upgrade near-term economic growth patterns.

The BEA, itself, has acknowledged possible shortcomings in how it applies seasonal adjustments to the raw data in determining GDP:

So what’s at issue here is the seasonal adjustment that the BEA applies to the data once it has collected its standard inputs for estimating economic growth. In a statement to CNBC, the BEA’s Nicole Mayerhauser said the agency “has identified several sources of trouble in the data….” There has been a back and forth in the economic community over problems in how the first quarter is seasonally adjusted for.

Accepting claims by the Fed and government economists back in 2015 that its first-quarter results tended to be overly negative, the BEA stated it would make several changes in quarters to come that would tend to increase how much it boosts first-quarter data for “seasonal adjustments:”

Mayerhauser said … The BEA will also be adjusting “certain inventory investment series” that have not previously been seasonally adjusted. In addition, the agency will provide more intensive seasonal adjustment quarterly service spending data…. BEA will continue looking at components of GDP to determine if there are opportunities to improve seasonal adjustment methodologies.

All adjustments were toward improving first-quarter GDP over historic methods. That smells a little like goal seeking.

It also seems highly suspect to me that personal savings went up in the first quarter and that personal income went up when unemployment skyrocketed faster than at any time in history.

Unemployment checks and stimulus checks did not begin going out until after the first quarter ended. There is always a one-week delay before you can apply for unemployment and then two weeks more before your first check gets issued.

Note that the first quarter includes only one month of the COVID-19 pandemic’s hit on U.S. GDP. Second-quarter numbers, all under the pandemic’s assault, are expected to be substantially worse.

If this quarter’s GDP negative print is followed by a second negative quarter, which most, if not all, economists believe is a certainty, then the U.S. will officially be in recession.

This article was published originally on CCN.

If Bulls Had Wings They Could Fly; Without Them They’ll Die!

Today the bulls did it it again. This market remains deeply entrenched in denial, soaring even as unemployment soars higher toward the grand summits of the Great Depression and with certain knowledge that many jobs will not return.

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Lunatic Larry Promises Trump Candyland for Election Year

National Economic Council Director Larry Kudlow, a top economic adviser to President Donald Trump, said Wednesday that the White House plans to unveil a plan for additional tax cuts later in 2020. “I am still running a process of Tax Cuts 2.0. We’re many months away – it’ll come out sometime later during the campaign,” Kudlow told CNBC. “Tax Cuts 2.0 to help middle-class economic growth: That’s still our goal…. We will unveil this perhaps sometimes later in the summer.”


There is nothing like a tax cut to buy votes

It is important for Trump to announce middle-class tax cuts just before the election because everyone in the middle class now knows (or should) that the massive Trump Tax Cuts that were first on his agenda went to the rich. Even major pro-capitalist, Republican-leaning, Republican-owned magazines like Forbes acknowledge this:

For the first time in American history, the 400 wealthiest people paid a lower tax rate than any other group…. It’s never been more clear that our country’s tax code is built to serve only those who have the most money. While hedge fund managers, private equity executives and venture capitalists benefit from the carried interest tax loophole, everyday Americans barely get a deduction for their student loan interest payments…. Income inequality is widening to record levels and there’s no reason to believe the trend will slow down…. The Tax Cuts and Jobs Act of 2017 was the largest tax overhaul in over three decades. It was rushed through congress and it’s working exactly as it was intended to do so: to line the pockets of the wealthy at the expense of the working class. Optically, it was championed as a way to boost the economy, but the fact is that unemployment was already low and the cuts came amidst a long bull market…. The tax cuts are deficit-financed which … means that “resources will be taken away from future generations as well as today’s working class.”


The fact that the Trump Tax Cuts inured almost entirely to the rich is a fact Trump now has to massage in this election year. As an earlier Forbes article stated,

Whether the Tax Cuts and Jobs Act (TCJA) disproportionately helped the rich may be 2020’s biggest political issue…. The richest 1 percent received 9.3 percent of the total tax cuts, the top 5 percent got 26.5 percent, the top quintile received 52.2 percent and the bottom quintile got 3.3 percent.


The article argues that these numbers are actually progressive on the basis that the top quintile pays eighty percent of the taxes so 52% was less than they should have received. However, the article (as all Republican articles of this kind do) fails to mention that the top 10% also have 80% of the nation’s wealth — a portion so obscenely sickeningly and unmerited that it never occurs to anyone that the rich should be paying 80% of the taxes just to pay an equal percentage of what they have to what others are paying.

You can be sure Krazy Kudlow’s promise will be rolled out in the summer just as he has said because that will time out perfectly for countering the outcries against Trump as we transition from intra-party primary debates into inter-party main-election debates. Trump will be able to say when challenged as the protector of the establishment, “I’ve got this covered. I’m working on it. Elect me along with a Republican congress, and I’ll give you the best middle-class tax cuts ever!”

Are the Trump Tax Cuts and spending increases MAGA?

The problem with Trump promising a new round of tax cuts — this time for all the rest of us — is we’re not paying for the tax cuts Trump already gave. The Trump administration (with the blessing of the majority of voters) chose to save the rich by tapping the economic strength of future generations in order to pull money forward for our benefit now.

The 2020 deficit is projected to come in somewhere between a trillion and 1.2 trillion dollars. And future deficits are projected to grow parabolically like this:

That steep deficit growth is without Kooky Kudlow’s newly promised additional tax cuts that also will not pay for themselves because they never do! Of course Kudlow & Co. will promise, as they did last time, that the tax cuts will pay for themselves. Fool me once, shame on you. Fool me twice, shame on me. (However, US voters have already been fooled three times by promises that “supply-side” tax cuts (or “trickle-down” tax cuts) will pay for themselves. so triple shame on them! The Kudlow Kraze will be the fourth time if the nation falls for it, and people most likely will fall for it because people want to fall for it because people want to believe we can have the strong military we have, fight innumerable endless wars in countries around the world, and have all the welfare we want and still pay less in taxes. People routinely deny reality in order to have all they want, and politicians certainly know how to squeeze votes out of that. We’re being juiced.

So, let me point out that didn’t come in quite as great as promised under the latest round of sugary tax cuts:

DonkeyHotey [CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

The nonpartisan Congressional Budget Office projected that fiscal 2019 revenues, without the tax cuts, would be $3.69 trillion. Instead, revenues with the tax cuts were only $3.46 trillion…. Treasury Secretary Steven Mnuchin said during the push for the tax cuts and as recently as last month that they would pay for themselves by generating economic growth. Payroll taxes are higher than projected, as are tariffs, but corporate and individual income taxes are lower.

Washington Examiner

Revenue in the first year of the tax cuts dropped by a minor 0.4%. Since population keeps growing, it’s rare for government revenue to drop unless the nation is going into a recession, which was not the case in 2018. Moreover, revenue needed to rise by about 2% just to keep up with inflation in 2018. On the other hand, as you can see in the image below, government revenue did nudge up slightly in 2019:

This uptick in revenue, however, is not adjusted for inflation. Corporate taxes, which were cut the most, are far from paying for themselves, and individual tax revenues have remained about the same, but should have grown due to population growth, while revenues from payroll taxes, which were not cut, have increased because of population and job growth. The losses from corporate tax cuts have been covered by the record-breaking Trump Tariffs (mostly paid for by American companies and handed down to consumers). If those eventually go away, there will be a larger revenue shortfall. Even the Trump administration’s Phase One China charade may reduce tariffs enough to leave the nation with less revenue than it had in prior years.

More significantly, tax revenues benefited hugely in 2018 and 2019 from foreign profit repatriation (yet corporate tax revenue still declined) because that was front loaded into the tax cuts. Money that had been kept outside of the country suddenly came in as profits, benefiting the government with taxes that likely would not have been collected at all if not for the repatriation program. Repatriation of past profits, however, was a one-time opportunity that is now fading away because most corporations have likely brought back home about as much of those past profits as they intend to.

Given this ugly picture, it is no surprise, then, that Republicans are now bending over backward to find excuses for the poor performance of their tax cuts:

Rep. Kevin Brady (R-Tex.), a lead architect of the GOP tax bill, suggested Tuesday the tax cuts may not fully pay for themselves, contradicting a promise Republicans made repeatedly while pushing the law in late 2017.

Pressed about what portion of the tax cuts were fully paid for, Brady said it was “hard to know.”

“We will know in year 8, 9 or 10 what revenues it brought in to the government over time. So it’s way too early to tell,” said Brady at the Peterson Foundation’s annual Fiscal Summit in Washington D.C.

The Washington Post

The problem with begging for a lot more time for the tax cuts to prove themselves is that nothing was said about the need for eight to ten years to lapse before the cuts started paying for themselves back when Republicans like Brady were pitching the plan to the public. In fact, back then, we were all promised they would pay for themselves with GDP growth in the very first year. Remember all those big promises about how much GDP in 2018 would rise to 3% or 4% or 5%, depending on what snake-oil salesman was talking?

Moreover, the tax cuts were front loaded with the greatest stimulus effects in the first year. Because repatriation is fading away after being almost entirely spent on stock buybacks and shareholder dividends, we have created very few business improvements to propel future economic growth. That makes it hard to see how future years are going to bring more growth and more tax revenues so the cuts will finally start to pay for themselves. It’s an even more ridiculous argument when you consider that economic growth in the second year of the tax cuts was slower than growth in the first year! It hardly appears to be gaining momentum.

Spending stimulus is spent

The failure of taxes to pay for themselves might not be so bad if we didn’t also accompany it with spending increases (just as much under Republicans now as in the past under Democrats, proving neither group is more fiscally responsible). Here is what has happened with spending (not deficits, just spending) in the Trump years compared to those years that came before:

As you can see, the rise is steeper now than in almost anytime past with the exception of the large emergency leap at the start of the Great Recession, which then actually got reversed for awhile. Yet, government spending in the past two years has even exceeded those years during the Great Recession when the US government leaped into overdrive, trying desperately to save a dying economy while supporting millions of people who lost their jobs. We’ve now moved to setting new records in spending, which doesn’t even include the acceleration in spending that is now building for 2020 … even if we don’t have a war with Iran.

The Trump administration promised everyone that spending increases would also pay for themselves by stimulating the economy through infrastructure construction. So, we need to look at how much economic benefit all of this attempted tax-cut/spending-increase stimulus has bought us.

It has bought us precisely nothing. While Trump’s treasury projected the tax cuts and spending increases would create 2.9% GDP growth, and Krackhead Kudlow and Trump promised even more than that, we actually averaged about 2.6% during all of Trump’s presidency. Worse still, the numbers are getting consistently worse, not better. The average GDP growth rate last year through the third quarter is a fraction lower than Obama’s average, and it appears the fourth quarter will bring that down even more. That is a poor return for all the debt being piled on.

GDP growth dropped to 2.1 over the second and third quarters of last year while the fourth quarter is projected to come in below 2%. The Atlanta Fed’s GDP Now forecast for the fourth quarter of 2019 has just fallen off a ledge (and tends to become more accurate as we get closer to the first release date of GDP information):

Before the deregulation of the financial industry under President Reagan, which led to an explosion in consumer credit issuance, it required just $1.00 of total system-wide debt to create $1.00 of economic growth. Today, it requires $3.97 to create the same $1 of economic growth. This shouldn’t be surprising, given that “debt” detracts from economic growth as the “debt service” diverts income from productive investments and leads to a “diminishing rate of return” for each new dollar of debt. The irony is that while it appears the economy is growing, akin to the analogy of “boiling a frog,” we accept 2% economic growth as “strong,” whereas such growth rates were previously considered near recessionary.

Real Investment Advice

Average economic growth over the course of all of Obama’s eight years was a “near recessionary” 2.0%. Bear in mind, however, Obama’s term began during years when the nation was still crashing into its worst recession in most people’s lifetimes, a deplorable situation Obama inherited from the Bush Tax Cuts, which took us from a surplus budget to a deep deficit budget and into the worst recession in nearly a century. (Just the facts: that’s where we ended up after the Bush Tax Cuts that promised us accelerated economic growth!) Obama had some quarters after the Great Recession where GDP growth hit over 5%. Trump has never come close to that. (It’s just math, Folks, not arguable as an opinion, and out would be truly deplorable to make excuses for it.)

Economic growth, measured as the change in real GDP (inflation-adjusted), averaged 2.0% from Q2 2009 to Q4 2016. This was slower than the 2.6% average [under Bush] from Q1 1989 to Q4 2008. Real GDP grew nearly 3% during President Bush’s first term but only 0.5% during his second. During the Clinton administration, the GDP growth was close to 4%, slightly faster than the Reagan administration.


Real GDP per capita rose an average of 2.5% a year under Obama. (That is adjusted for inflation.) Real GDP per capita after the Trump Tax cuts grew 2.9 percent in 2018. However, 2019 isn’t in yet, and it now appears all but certain it will be lower than 2.9%. In short, there is nothing worth seeing here, Folks. No matter what you may want to believe, the hard, cold truth is that the economy is slowly ebbing away under Trump.

No jazz for jobs

Job growth is as important as GDP growth, but that has also dropped to a slower rate of growth than under Obama. In fairness, that is inevitable as a nation moves to full employment. (The term “full employment,” however is deceitful since a larger percentage of people after the Great Recession are part-timers who have replaced one job with two jobs at lower pay and lower benefits — true under both Obama and Trump. These part-timers are counted as two employed people because the nation refuses to use full-time equivalence as the basis for measuring job growth, which it would do if it wanted honest measures.)

All the same is true for the nation’s unemployment rate because people are no longer considered unemployed if they get a part-time job or if they just fall off the unemployment rolls because their benefits run out. You can see the glide path down was starting to flatten out even during Obama’s final year and has become completely flat now:

It’s only natural that the unemployment rate would flatten out at this point, since this is as low as it ever has been, but clearly Trump has nothing to brag about on jobs or unemployment over Obama either. (Just keep in mind that the actual unemployment rate during Obama’s years and Trump’s would be far worse if unemployment were measured honestly or even just measured as it was back in the seventies and eighties. See Shadowstats.)

Next in importance for assessing economic improvements would be wage growth because that is where the rubber meets the road for the average employed person. For about a year, wages grew more quickly under the Trump Tax Cuts and spending increases than under Obama, but that growth rate is now slowing back down. Even in the Obama years everyone anticipated wages would only start to grow as we got nearer to “full employment,” so it’s a little disappointing that wage growth is slowing down almost as soon as we got to where it was picking up. Let’s hope it, at least, maintains a flat line at the current levels is only one percentage point higher than the Obama years rose to.

Draw a line to show the trend through the middle of Obama’s last two years, and you’ll see it ends right where we are now. (Aside from using this number to show whether there is any improvement over the past administration, note that REAL wage growth is still almost zero because the past year of inflation at CPI 2.3% ate almost all of it.)

Apparently, Trump’s projections for the tax cuts and spending stimulus were all based on best-case scenarios, and that is aways a poor way to create a budget or a funding plan for anything.

All Trumped up and nowhere to go

Regardless, here in Candyland, Trump knows voters love their tax candy. So, he’ll be throwing out promises of handfuls of candy to the children as soon as the Dems choose their anointed one for Trump to campaign against. He knows also that arguing against middle-class tax cuts during an election year is likely a losing proposition for Democrats. So, it’s all politics intended to woo the nation’s middle class where the voting majority resides, but at the cost of driving the nation deeper into the hole at a steeper rate of decline every year.

Of course, if Trump really wanted to help the nation and not just get himself re-elected by throwing out fist-fulls of candy, he’d eliminated the special capital-gains tax rate that goes almost entirely to the rich and effectively puts them in a lower tax bracket than much of the middle class and that only gets recycled into endless asset purchases (an argument I’ve detailed many times in the past).

He’d set up tax structures that force the rich to earn their money the old-fashioned rich way by building factories that hire people and produce useful things and that pay people good wages and good benefits so they can buy those useful things, instead of giving the rich a tax break when all they do with it is take profits from asset sales and then recycle the savings into more stocks, more bonds, more real estate, more collector items and pricier football teams that play in stadiums the middle class people pay for!

Unless the middle-class finally gets its brains back and stands up and fights this, the same rinse-and-repeat national national debt cycle that subsidizes the rich is going to keep on happening. So, if you want a middle-class tax cut, make sure it gets paid for by the rich who have long been effectively in a lower tax bracket than the middle class, even more so under Trump who has served his Mar-a-Lago buddies well!

Just like capital-gains tax cuts, corporate tax cuts also have not gone into building new factories or into entrepreneurial new service businesses but — as I argued here before they even became law — have gone almost entirely into stock buybacks and dividends that just help the rich get richer without helping anyone else. Sure, they may finally help the middle class in their retirement years because 401Ks are about the one place where the middle class have enough money to buy stocks, but that is only IF those retirement funds don’t get crushed again as they did in the dot-com bust and in the Great Recession. That money all exists only on paper until the days in which you actually get to spend it. It doesn’t help the middle class any now; but the rich are helped fabulously right now. Fabulously! Better times than they’ve ever know!

Replacing those help-the-rich tax plans with ones that help the rest will never happen. The saddest apparent truth is that middle-class voters won’t even vote to make it happen. They’ll vote for more of the same shiny, cellophane-wrapped, candied, trickle-down promises, happy for any sweet morsel thrown their way and willing to get it by letting someone in the future pay for it. They’ll continue to rally to the argument that helping the rich is the only way to help the rest. That’s what the last thirty years of history shows us.

That’s because they’d rather be right (in their own heads) about the beliefs they’ve been suckered into all those year than be wealthier. No one wants to admit they’ve been suckered. So, they’ll stay with their party-line votes and stand by their man and argue that the good times have never been better even though the only thing greater about America right now is its growing debt.

They will continue to syphon all economic power away from their grandkids to help themselves have all they want to have right now by leaving their children and grandchildren with the forever unplayable bill — a bill where the interest alone will cost every penny in taxes they can possibly scrape together. They’ll do that on the false premise that it will make the nation stronger for the future, as if a nation far deeper in debt can ever be considered stronger, especially when we are seeing no lasting benefits in improved infrastructure and a more vibrant economy. Mark my word. That’s what they will do!

That is, for a fact, what the nation is doing — pulling all economic power into the present just to keep the economic engines barely running by making future generations fuel all of it. In decades past, parents did all they could to make sure their children had a future that was brighter than their own times had been. We’re doing everything conceivable to undermine that environmentally and economically just to keep things on a more gradual downward glide path for now.

But we do have more rich people. That’s for sure.

And more poor.

And fewer middle class.

We have, indeed, trickled down.

The Relentless Road to Recession

“Show me the data,” demand those who cannot see a recession forming all around them and who keep parroting what they are told about the economy being strong because it is what they want to believe; yet, the data look like an endless march through a long summer down the road to recession.

Read the remainder of this entry »

How’s That Recession Coming, Dave?

Pretty good if you ask me. Most economic indicators this year have moved relentlessly in the direction of recession, and now the Cass Freight Index is saying a US recession may start in the 3rd quarter, fitting up nicely to my prediction that we would be entering recession this summer.

Read the remainder of this entry »

It’s Been a Great Recession for a Few; Let’s Do it All Again!

This month the economic expansion brought to you by your Federal Reserve and by US government largess becomes the longest expansion in the history of the United States! That’s something, right? Something? Let’s take an honest look at what we now call great.

Read the remainder of this entry »

Ten Big Steps down the Road to Recession

First, a decline in manufacturing, and then a slump in service industries, now a broad-spectrum inversion of the yield curve hitting its most critical metric this week, unemployment finally starting to rise again, a one-year relentless housing decline across most of the nation and the world, carmageddon pressing car dealers to offer big incentives once again just to hold sales flat, shipping everywhere sinking rapidly, broadly deteriorating general business conditions, plus tariff troubles for the US throughout the world — all of these economic stresses have gotten remarkably worst in just the past month.

At the same time, the stock market has soared back up to its three-time ceiling (now four-time) and managed to clear microscopically above that level. Apparently, the last recession was such a great recession, the stock market believes more of the same would be the best thing that could happen. And why not, the last recession made 10% of the US richer and 1% fabulously richer. Investors, it would appear, couldn’t be more delighted to see so many forces pushing the entire global economy — US now fully included — back into recession for another go at the best of times for the one-percent crowd.

With their best interests in mind, let’s take a closer look at all that is happening on that downhill run to recession — all the things that give investors sugar-plum dreams at night about the Fed being forced to inject more monetary narcotics into the market. Let me lay out all the recent hopeful signs that the economy is crashing just in time to force the Fed’s first interest-rate cut after a couple of years of rising rates — that cut of coke that the market is now demanding.

1. Factory orders/manufacturing are in repetitious months of decline

In May, factory orders fell 0.7%, month on month, which is the third decline in four months. April’s decline was revised lower to -1.2%. Within those figures, sales of transportation equipment plunged 4.6%, transportation being particularly indicative of where the overall economy is going. A look at the actual trend line makes the meaning of these drops much more apparent:

After months of decline, the ISM shows no signs of a bottom forming.

Here’s another view:

We are now the closest we’ve been to actual economic contraction since the Great Recession. Up to now, all talk has been about slowing growth. Now we are on the cusp of actual contraction (which means the same thing as recession if it lasts six months or more).

What is seen for manufacturing in the reports above is consistent with recent results from the Dallas Fed Manufacturing Survey, which crashed below the worst analysts’ estimates in June:

Things don’t look any better in the Empire State Manufacturing Survey:

Both are back in their contraction zones.

2. Services sector finally joins the fall

Many who have been seeing this decline play out over months in the manufacturing sector have been hoping that the services sector will save the day. Services have been holding up much better than manufacturing, so perhaps that sector of industry would carry the economy over this slump. However, as you can see in the graph below services are no long doing much better: (Anything below the 50 line represents economic contraction.)

Though serviced did see a minor uptick in June, it was barely visible and still leaves the service sector very near the “50” line. This keeps them just about at a three-year low, hardly encouraging given the massive business tax cuts in the US over the last year and a half that were accompanied with massively increased government spending. At the same time employment in the services industry dropped by its most in sixteen months. So, all that boost is creating now apparent lift at all.

An improvement in service sector growth provides little cause for cheer, as the survey data still indicate a sharp slowing in the pace of economic growth in the second quarter….. A major change since the first quarter has been a broadening-out of the slowdown beyond manufacturing, with the service sector growth now also reporting much weaker business activity and orders trends than earlier in the year. “Hiring was hit as firms scaled back their expansion plans in the face of weaker than expected order inflows and gloomier prospects for the year ahead. Jobs growth was the weakest for over two years and future expectations across both services and manufacturing has slipped to the lowest seen since comparable data were first available in 2012….

IHS Markit

The services sector employs more than 80% of all American workers. But, hey, that’s good for Fed addicts, right?

“With momentum clearly fading, it won’t be long before the Fed begins cutting interest rates,” said senior U.S. economist Michael Pearce of Capital Economics.


Yay. Let’s all join in hoping the economy crashes spectacularly so stocks can benefit all over again from years of more free Fed funds than they’ve ever seen before! The One-Percenters are already stocking champagne for that day when Great Recession 2.0 is finally announced.

3. The yield curve just inverted at its most critical level:

The bond market flashed yet another warning signal for investors on Wednesday that a downturn for the economy may be coming. Despite the S&P 500 hitting new all-time highs, the yield on 30-year U.S. Treasury bonds briefly dipped below the overnight fed funds rate, a signal that has preceded the past five U.S. recessions.

Yahoo! Finance

Economists have known for quite some time that yield curve inversions tend to be reliable predictors of business contractions (recessions).

St. Louis Fed

4. Unemployment has begun to rise at last

The first upticks in unemployment typically are one of the last events to happen before a recession begins. So, renewed hope for the one percent is not far off. While the number of job layoffs remains near a half-century low, initial jobless claims have started to rise:

The four-week monthly average of claims, considered the more stable report, has also begun to rise, albeit incrementally. The pace of hiring has dropped, but the pace of firing has not yet risen.

With the unemployment rate at a nearly 50-year low of 3.6%, good help is hard to find and companies are reluctant to let go of workers. The economy would have to stumble badly to get firms to start handing out pink slips en masse.


Whenever unemployment has settled this low, an uptick in joblessness soon begins, and recession always begins shortly thereafter:

Historically, a trough in the unemployment rate also tends to be a reliable predictor of a business recession.

St. Louis Fed

Well, good, then; the trough is already forming, and it doesn’t have to form for more than 2-3 months before recession is here. That uptick in job losses is particularly notable now in the bellwether small-business sector, where falling jobs haven’t looked this bad since the Great Recession (ADP’s worst plunge in jobs in this sector since 2010):

In fact, the only time jobs have been this hard to get is inside of a recession. (See horizontal line near top of the following graph:)

5. IPO insanity in the stock market is equal to that seen right at the dot-com bust

Unprofitability is no obstacle…. IPOs with negative earnings per share surpassed 80% in 2018, joining 2000 as the only period in which that dubious threshold has been reached in the last 28 years.

Grant’s Interest Rate Observer

All investors love a good unprofitable company right now like only one time before. The last time it paid this well to be unprofitable was at the change of the millennium moments before everyone’s 401K got wiped out in a big stock-market bust. Is it any wonder unprofitable companies are coming on like gangbusters when we still have a stock market that falls because of relatively good news about a temporary reprieve in the decline of the job market? The market has no interest in a good economy because the junky bulls crave only their next hit of Fed meds.

If the Fed doesn’t deliver the dope later this month, watch out below. On the other hand the dot-com bust tells us the first part of these recessions isn’t even good for stock investors; but it is the extremely long recovery period after the fall the has them all salivating … that and the fact that they think they can somehow slide right over the recession part and just go straight into recovery mode. Good luck with that!

6. Housing continues its relentless decline

Speaking of another whacky IPO bubble, we also have another whacky housing bubble — the best of both of the last excellent recessions at the same time! This has to have the One-Percenters salivating with the hope of more repos. Since I announced the housing decline had begun last summer, housing has fallen in unusual places … like the major tech centers of the US (just to tie in all the better with that whacky tech profitless IPO bubble that has re-inflated:

One might assume that the IPO wave has spurred another leg higher in Silicon Valley housing as tech employees cash out their newfound riches, but that’s not the case. An analysis today from Kate Seabaugh, senior manager at John Burns Real Estate Consulting, finds that a nationwide slowdown in residential housing markets has hit the Northern California tech epicenter particularly hard. San Jose, San Francisco and Seattle saw net resale deceleration (meaning the change in year-over-year price growth this year compared to last) in home prices of 26%, 15% and 13% respectively, in May. For instance, San Jose went from a 20% percent year-over-year price gain in May 2018 to a 6% drop this year. That’s the worst three showings out of the 33 metro areas tracked by the firm. 

Grant’s Interest Rate Observer

Anecdotal evidence says two words never witnessed in Palo Alto real estate ads in the past thirty years are now common: “Price Reduced.

Existing home sales have tumbled month after month … longer now than any time since the Great Recession:

For those like my lonely crow who still deny the reality of a housing decline across the US, just take a look at construction spending on a nationwide basis since I announced a year ago the housing decline had begun (as the first I know of to do so):

I see a slump there. I don’t know why some can’t. If the housing market were growing, contractors would be spending money. The last time we saw a drop this long in residential construction was during the housing collapse that gave us the Great Recession.

Here’s another view of the same thing that shows how the decline is not abating but is rapidly accelerating:

The housing collapse has spread throughout the global economy right now, too:

The global housing market is showing cracks. Those fissures could spread throughout the world-wide economy, potentially sending world-wide gross domestic product, or GDP, to its lowest annual pace of in 10 years, according to research from Oxford Economics…. “A combined slump in house prices and housing investment in the major economies could cut world growth to a 10-year low….” An Oxford Economics’ proprietary gauge of housing conditions in the globe shows that home prices have declined by 10% and investments in houses have shrunk by 8%. “Downturns in world housing markets have been important contributing factors to global recessions over the last thirty years, most dramatically in 2007-2009. As a result, the current slowdown in global housing is a cause for concern.”


7. Carmageddon morphs as it expands.

Carmageddon has now spread to the RV market.

May RV shipments fell by double digits.
Year-to-date RV shipments are down 22% Y/Y.
Free falling shipments could portend another recession.

Seeking Alpha

As it turns out, RVs are a luxury item for the middle class. When times are good, middle-class people buy RVs. When middle-class people are preparing for harsher times (or are in harsher times), RVs are one of the first things to get scratched off the list of must-haves. During 2018, shipments fell off 4% for the year; the downtrend continues at a steeper rate this year.

The decline continues in other American vehicles as well … of course … just as I’ve said for months will continue to be the case:

Analysts at RBC Capital Markets … forecast steep declines for General Motors Co. and Ford Motor Co. sales this month, and also predicted some trouble for sales of the companies’ perennially popular pickup trucks.


Auto sales for June were projected to be 7-8% lower than a year ago, and that is in spite of significant “incentives” being offered through dealers.

Auto job cuts haven’t been this high since the wind-up of the Great Recession more than a decade ago:

Hopes are running high that potential interest rate cuts by the Federal Reserve will support the auto and housing sectors, two parts of the economy that are sensitive to borrowing costs. The risk, though, is rising that any relief won’t come until after these critical leaders of the current economic cycle have already fallen into contraction…. The rapid rate at which auto layoffs are rising suggest a spillover into the broader economy…. It’s one thing to have a continuation of losses in the beleaguered retail sector, but the loss of high-paying jobs in both autos and industrials threaten to further hobble the housing market.

Seeking Alpha

You can see in the following chart the slope we’ve started down and how quickly it can fall off a cliff once we get a little below the present point:

8. Freight is a runaway truck down a steep mountain road

Naturally, if sales are pulling the economy down, you’d expect to see freight going down:

Looks almost as steep as a cliff from as high as a mountain to me.

9. Business conditions tightening quickly

The freight figures fit with Morgan Stanley’s assessment of overall business conditions, which haven’t been this bad since … well, once again, 2008 during the Great Recession.

10. Trade winds entering the doldrums

All of the above slowdowns have been exasperated by trade conditions, which have not been helped by the Trump Tariff Wars:

U.S. trade deficit in goods jumps in May

The surprisingly larger May trade deficit will be a modest drag on second-quarter GDP. A larger deficit is a negative for U.S. economic growth.

The oomph has gone out of trade, and the US trade deficit has actually gotten worse!

Maybe recession isn’t just around the corner any longer

All of this could actually make one wonder if we are already in a recession:

Gary Shilling, an economist and financial analyst who is credited with predicting several recessions over the past 40 years, thinks the U.S. is in a relatively mild slump. “I think we’re probably already in a recession….” Shilling points to: Declining industrial production … feeble job growth … the Federal Reserve Bank of New York’s recession probability chart … the Organization for Economic Co-operation and Development’s leading economic indicators … [and] weak housing data.

USA Today

No wonder American sentiment is turning sour! I don’t put any stock in sentiment as being much of a predictor or driver of where the Economy is going because I think it is more of a following trend. As such, however, it is still useful for seeing how many people are now agreeing with my start-of-the-year proposition of a summer recession. especially since so few agreed back when I made it.

According to Bankrate.com 40% of Americas now believe a recession will begin in less than a year with half of those believing it has already begun … rising stock market notwithstanding.

The experts, of course, believe a recession is, at least, 1-2 years away. Of course, few if any experts saw the last recession coming, even when it had already begun. So, if you’re going to await the PhD experts, you’re not going to know we’re in a recession until it’s over. You’ll feel it, but you won’t know it.

All that remains to happen now to give the One-Percenters an instant replay of the Glorious Great Recession is for the Fed to make its first interest-rate cut because each of the last two huge recessions with their attending stock-market crashes began right after the Fed made its first rate cut cut following a period of rate increases.

So, Permabulls, keep hoping the Fed makes its first move in July, and you may get all the free drugs you are hoping for; but, if you think you are going to skip over the painful recession part where stocks lose big, it hasn’t ever work that way. So, good luck with that, and don’t be a baby about it when the pain comes because you asked for it. No pain, no gain in the world of free Fed meds.

Tick, Tick, Talk, 2019 Recession Coming

The 2018 stock market crash is now a fait accompli, having taken a polar bear plunge that put ice in the veins of the Fed and electrified their collective spine with such a deep chill they ran like a fat walrus from the bear market to halt their long-nurtured plans of economic tightening. With that event fulfilled, I’m now predicting a 2019 recession as the major economic news for this year (both US and global).

To confirm my bearish claim on the market’s crash:

Several leading stock market indexes around the globe endured bear market declines in 2018. In the U.S. in December, the small cap Russell 2000 Index (RUT) bottomed out 27.2% below its prior high. The widely-followed U.S. large cap barometer, the S&P 500 Index (SPX), just missed entering bear market territory, halting its decline 19.8% below its high.


But the Dow fell completely into bear territory and the NASDAQ even further into the bear’s territory. Even the S&P hit an intraday low that was 20% down, so it’s stop right at the edge by the end of the day is nothing but a rounding error.

In terms of real cost, anyone who scoffed at my 2018 warnings and held their stocks through 2018 is still recovering from his or her losses. That we have only just this week recovered those losses is quite easily proven with one simple graph of 2018 where the breakdown begins in January where I said it would and hits full crash velocity in the fall:

2018 Stock Market Crash

And, technically, we’re still in the bear market, as we’ve recovered to the point where the market broke all to pieces in January 2018 but not to the point from which the bear market began.

If you like wild financial roller coaster rides that end right back where you started, stocks were the place to be in 2018. Obviously, it was an extremely bumpy ride to worse than nowhere for those who bought and held in the market thoughout 2018. The year was, however, a completely pleasant financial ride for those who were in cash all year, which was the only major asset that performed positive for the year! (And, of course, if you are the rare prodigy who can accurately time every peak and every trough, years of high volatility can make you more money than a steady climb; but then you are a very rare bird with a very high tolerance for risk — some would say a fantasy.)

I can attest to the calm because that is where I sat out the turbulence, being someone who doesn’t prefer bumpy rides to worse than nowhere. Moreover, those who jumped out at January’s peak, as I did, and remained out of stocks for the rest of the year, could also have experienced a joy ride of pure gains over the past three months in the stock market, instead of waisting the whole rally on mere loss recovery.

Now the losses are finally made up, and so reported here, but that doesn’t diminish the risk of a 2019 recession. On the contrary, US stock market crashes usually correspond with a recession, but often happen before or after the recession:

In the US, most analysts agree that bear markets and domestic recessions have generally been fairly closely related, though the exact leads and lags between the two may differ considerably across cycles. Furthermore, there have been several bear markets, notably in 1987 and 1978, that have not been accompanied by recessions, and vice versa.

Financial Times

That is not to say the stock market will make it back up to its record summit ( or not go deeper into its polar region than in December; but, whether it does or not, a 2019 recession is in the making.

What will spark the next bear market? An economic recession, or the anticipation of one by investors, is a classic trigger, but not always. Another trigger has been a sharp slowdown in corporate profit growth, as we are seeing now…. Stock market pundits are widely divided about the nature of the next bear. For example, Stephen Suttmeier, the chief equity technical strategist at Bank of America Merrill Lynch, has said he sees a “garden-variety bear market” that will last only six months, and not go much beyond a 20% dip, per CNBC. At the other end of the spectrum, hedge fund manager and market analyst John Hussman has been calling for a cataclysmic 60% rout.


Whatever continues to play out in the stock market, the main economy now steps into the forefront of the picture for me. The stock market’s 2018 trip on the Polar Bear Express already did its damage to investor confidence and pushed fleeing money into bonds, bringing long-term bond interest down, even as the Fed was dumping bonds, which should, otherwise, have pushed interest up. (After all, the Fed bought bonds in the first place to lower long-term interest.) That changed the bond market significantly enough to decisively align with recessionary sentiment in a historic bond inversion. And that makes 2018’s bear market a game changer.

While bond-market inversion has never failed at predicting a recession in the last half century, that is not, by any means, the only reason I’m predicting a 2019 recession, which I did before the full inversion. I laid out in my first Premium Post the numerous headwinds that would likely assail the US and global economies in 2019, regardless of anything that happens in stocks. So, my attention this year moves along to those things and to the likelihood of a 2019 recession hitting around summertime (as noted before not to be officially declared until half a year after that because that is just a fact of how recessions are declared — always more than half a year after they start as we wait for the stats to come in).

We may well see a second crash in US stocks because of this year’s recession, but whether we do or not is irrelevant now that we have already taken a trip with the bear. Another game-changing result of that excursion into the polar regions that happened because of the Federal Reserve’s Great Rewind is that it proved to everyone the Fed cannot do what it has always said it could (and I always said it couldn’t), which was to reduce its balance sheet and return to normal interest targets after building a fake (as in unsustainable) recovery. Therefore, confidence in the Fed is also badly shaken, leaving it weaker in its ability to lift us out of a 2019 recession than its bloated balance sheet and already-low interest rates leave it. At this time, the Fed’s moves are just following the market’s dictates. The Fed is now the market’s bitch in nearly everyone’s eyes.

Moreover, the Fed’s damage to the economy is still coming in. I’ve noted before that there is typically a half-year lag between any major Fed action and where the economy goes; yet, the Fed is continuing to reduce its balance sheet by the same amount this month and next, cutting that by half in June but not stopping until the end of summer. That means there will be half a year of lagging results after this summer, even as the Fed’s actions from this past winter are still playing out into this summer. With the Fed continuing to let more hot air out of the balloon until the end of summer, things certainly aren’t going to get more buoyant. So, there is plenty of downdraft still to carry through the general economy all the way to the end of this year as a result of the Fed’s recent and continuing actions.

My past statements about the next major economic downturn have always said the Great Recession will return like the undead because the Fed will go too far in sucking liquidity out of the economy. I believe the Fed has already done that, but the results of that withdrawal will take time to become fully realized. That’s why President Trump and his two stooges of finance are begging the Fed to go back to QE “immediately” because, if they wait until it is obviously necessary, it will be WAY too late!

You see, any results from the Fed jumping back into full economic-stimulus mode — if the Fed does as the Trump administration demands and as most financial analysts and investors now appear to expect — will also take time to be realized … other than in stocks and bonds. Moreover, any results they do get will have diminished returns at best. At worst, new Fed stimulus will now have an opposite effect if people are smart enough to realize it all means we are right back where we started and that Fed money–printing must now go on ad nauseam. So, the Fed has done its damage (which it really did by the recovery path it chose), and the bond market knows it. For stocks, as I laid out in that first Premium Post, this will be a year of turmoil whether stocks are generally up or down.

Now on to the talking points throughout the past week’s news that show we are, as I’ve claimed, goose-stepping our way into a 2019 recession as metrically as the ticking of a coo coo clock:

Tick tock goes the clock, counting down to a 2019 recession

The U.S. private sector added 129,000 jobs in March, the weakest reading in 18 months and below consensus expectations of 165,000, according to an Econoday economists survey. The report is watched for clues to official labor data due Friday.


New hirings around 120k or less are usually recessionary.

Following last month’s weak ADP print which front-ran the dismal “must be an outlier due to weather, shutdown, or anything else” payrolls data, expectations were for a slightly weaker ADP employment headline in March. However … ADP disappointed, adding just 129k jobs in March (well below the expected +175k…. This is the weakest growth in employment since Sept 2017.

Zero Hedge

On the other hand …

The BLS reported that the US added 196K payrolls in March, higher than the 177K.

Zero Hedge

Since the job reports are all over the place, it’s hard to know who to believe — the ADP or the government’s Bureau of Lying Statistics. You may recall that February’s jobs came in at an extremely disappointing 20k, which the BLS just revised upward to an almost equally disappointing 33k. To sort out the messy disagreement in job statistics, consider the following for the BLS’s more optimistic numbers: If you average all three months of the first quarter, 2019 is down from 2018’s average for the first quarter by a fairly significant 40,000 jobs per month. Annualized, that would be the lowest level in almost five years! So, even the better BLS numbers are not the numbers you want to see if you believe the Trump Tax Cuts and government hyperspending — now in effect for more than a year — are taking the economy upward! Kocain Kudlow must have lasting damage from his old habit in order to call this a strong economy, even as he begs for more immediate Fed assistance. No wonder he’s begging!

Meanwhile 2019’s rise in continuing jobless claims is the worst we’ve seen since the start of the Great Recession!

The overall unemployment rate just started trending back up as well:

Those little upticks at the end of each graph may seem insignificant, but they are actually highly significant because the first uptick in unemployment downtrends from a low bottom always immediately precedes a recession:

That means two of the most accurate predictors of recession, according to the Fed — yield-curve inversions and unemployment trend changes — are now lined up on the same side for a 2019 recession.

On average, since 1969, the unemployment rate trough occurred nine months before the NBER-determined recession trough, while the yield curve inversion occurred 10 months before…. The minimum lead times were one month for the unemployment trough and five months for the yield curve inversion.

St. Louis Fed.

On the downside of the above jobs report, wages (which had been seeing a little better improvement, albeit briefly) fell off badly to just a 0.1% gain. Manufacturing jobs within this report also dropped significantly; so, on to manufacturing statistics of the week just passing …

Markit’s March services purchasing managers index [PMI] came in at 55.3 above consensus expectations of 54.8, according to FactSet. A reading of at least 50 indicates improving conditions.


Pretty good except …

US Manufacturing PMI dropped to weakest since June 2017

Zero Hedge

So, services up but manufacturing well down … and …

The Institute for Supply Management’s services sector gauge fell to 56.1% in March, down from 59.7% in February.


A broad slide in manufacturing — as verified in both the jobs report and the PMI — is more likely to bring a 2019 recession than the converse rise in health-care and education jobs is likely to bring economic salvation.

Moreover …

In a world where Caterpillar is considered a global industrial bellwether and a key indicator of economic inflection points … today’s downgrade of Caterpillar by Deutsche Bank is a harbinger that the recent risk on euphoria may be coming to an end….. Dilllard says that “synchronized global growth has collapsed, the China Land Cycle is rolling over (and will continue to weaken despite the single positive data point this week), Europe is slowing more than expected and the US is oversaturated with construction equipment…. Together this synchronized slowdown will not only usher in a negative earnings revision cycle, but also make 2019 the cyclical peak.

Zero Hedge

Then again …

The Financial Times reported that the U.S. and China were nearing the final stages of trade talks (paywall) and had two issues left to resolve—the current tariffs on Chinese imports and details on an enforcement mechanism to keep China compliant with the deal.


US stocks jumped euphorically this week upon China’s PMI (manufacturing index) getting a mild bump; but, in fact, a rise to 50.5 is not considered expansionary for China’s economy, but merely flat; and that tiny bump came after a huge one-off bump in credit by the People’s Bank of China, now mostly used up.

Meanwhile, other Asian countries are fully in a manufacturing contraction. PMI throughout European nations also continued to plummet.

Autos, retail and housing continue to sputter “2019 recession”

Auto sales in the U.S. wrapped up an ugly first quarter with dismal results for the month of March as the buying frenzy from last year’s tax cuts wore off and the economy continues to decelerate…. General Motors saw deliveries drop 7% for the quarter, with all four brands falling…. Fiat Chrysler sales fell 7.3%…. Ford sales were down 5% in March….

Zero Hedge

All other major manufacturers with plants in the US were down, except Honda. Even pickup sales — a formerly hot performer — are sputtering.

Another area where the jobs report fell off was in retail. Only two periods in retail sales looked as bad as the presen — the dot-com crash and the Great Recession crash:

And that is including online sales!

One more higbly accurate indicator the Fed gives for timing a recession is a decline in housing:

Housing downturns have preceded every U.S. recession since World War II. For example, one measure of the momentum of residential investment turned negative before each of these episodes…. Recent movements in several housing indicators—mortgage rates, existing home sales, real house prices and the momentum of residential investment—resemble those seen in the late stages of past economic expansions. Could these storm clouds gathering over the housing market be signaling a broader economic downturn in 2019 or 2020….? Each of these indicators is in a range that, in previous cycles, preceded a recession by a year or two.

St. Louis Fed

The hottest housing markets are still cooling, which doesn’t bode well for jobs in construction either (where job growth remained moderate in the latest reports):

Listing prices are declining in what were some of the hottest housing markets in the country…. For instance, the median asking price in San Jose, California, was $1,100,050 in March – the highest of 500 metro areas, but down 11.6% from a year ago. Median asking prices in Denver and Boulder, Colorado, experienced similar declines. The median asking price declined the most year over year in Lynchburg, Virginia, plunging 37% to $145,000. Overall, 114 of the 500 markets Realtor.com surveyed saw a drop in the median listing price. On the other side, smaller markets in the middle of the county experienced the largest increases in asking prices.

USA Today

This is all just this week’s news!

Elsewhere, the Canadian housing market is falling hard (just a fun fyi, not that it has anything to do with a US recession … but certainly fits the picture of a simultaneous global recession:

The Real Estate Board of Greater Vancouver (REBGV) reported today … the lowest sales total for [March] since 1986 – down 31% from a year earlier and 46% below the 10-year March sales average.

Seeking Alpha

And Australia’s is looking precarious:

Australia’s housing boom/bubble could unravel badly. Last week, Grant Williams highlighted a video by economist John Adams, Digital Finance Analytics founder Martin North, and Irish financial adviser Eddie Hobbs, who say Australia’s economy looks increasingly like Ireland’s just before the 2007 housing collapse.

Mauldin Economics

Elsewhere on the global recessionary front, German industrial orders just took a slam to a level Germany hasn’t seen since the Great Recession, and Germany can always be counted on as doing better than any other part of the EU:

Germany estimates that, if Brexit doesn’t happen neatly, Germany’s own numbers will get much worse.

On the other hand …

Global recession fears are exaggerated and … a recovery is most likely in store for both China and the Eurozone in the next several months.

Seeking Alpha

Sure. And what was this bit of good news based on?

While the financial media continue to fret over the global slowdown, a salient piece of good news having positive economic implications was largely ignored…. The good news is that at the end of the first quarter last week, the S&P 500 Index registered its best start to a year since 1998…. In years when the SPX was up strongly and didn’t suffer a significant decline in the first three months, it nearly always finished higher at the end of the year.

Yeah, that’ll do it. We’re safe from a recession in 2019 now. You can all go back to sleep. However, bear in mind, that assurance comes from a permabull who calls last year’s stinging bear market “a 20% correction,” making him, I think, the only person on earth who defines a 20% plunge that radically changes the course of the Fed and sets up a bond inversion as a “correction.” That man is from mars.

Why we NEED a 2019 recession

I am reasonably confident the few people (if not the only person) who mocked my prediction of a stock market crash in 2018 and of a housing downturn, both of which hit on every beat throughout the year, aren’t going to do any better betting against me on a 2019 recession.

I know that sounds smug, but here’s why I don’t care: I like to taunt them into trying to because, when this all proves out just as 2018 proved out, it all goes to demonstrate that the massive failure of the Fed’s fake recovery was as predictable as I’ve always said. The Fed’s plan is going to fail; it was always obvious it was going to fail; and it is now, in fact, failing in exactly the manner I’ve said it would.

What I really want to do is utterly destroy the Federal Reserve’s unmerited credibility and, with that, its centralized planning and manipulation of the global economy as well as its rigging of stock and bond markets. I want to see Capitalism rise again from the Fed’s ashes. To that more important goal, I think a big, fat recession in 2019 could be the best thing that every happened, even though it would be the worst thing that ever happened.

So, bet on the Goliath Fed, or bet on this little David. The Federal Reserve went down hard last year even as each of my little stones hit their mark (stock-market crash, Carmageddon, Retail Apocalypse, and Housing downturn). So, the Fed bears some disgrace by lying flat on its face already. Now, it’s time to cut off its head, which it will do for me when the 2019 recession starts to undo the whole well-Fed world, and Father Fed is helpless to prevent it.

Mass Stupidity Plagues Zombie Markets and Zombie Journalists

“Asian markets rallied on Monday, extending their gains at the end of last week, following another strong US jobs report that reinforced confidence in the US economy and helped settle trade war nerves.” (Newsmax)


So the majority of investors in Asia (and in the US) see the latest MEDIOCRE-AT-BEST jobs report as assurance that trade wars are not going to impact the US economy.



  • A RISE in unemployment.
  • A fairly typical and truly boring gain of 213,000 new jobs.
  • YET, most of those were part-time jobs.
  • Effectively (after current inflation), still NO WAGE INCREASES.


Hallelujah! How can trade wars impact us with such stellar news on the job front?


Global markets had been tumbling ahead of the imposition of the tariffs but bounced on Friday. The upbeat sentiment carried over into the new week after data showed the US economy created more than 200,000 jobs in June, beating expectations.


Oh my goodness, investors are dumber than zombies on a stick!

WHOOPEE! 200K in new part-time jobs without benefits and a rise in unemployment coupled with persistently flat wages for everyone but the top 1%. We’re on the home stretch to recovery now, Folks!


More pathologically braindead statements about US employment


It’s abundantly clear that Americans as a whole are experiencing the best economy since the Great Recession. U.S. employers are adding so many workers that more people are growing encouraged to enter the labor force. Wage growth is well above the average of the past decade. Corporate earnings remain rock solid. (Newsmax)


Well, hit me on the head with a brick! Is this just shill reporting for the president’s administration? You have to wonder whether journalists should be taking medication for this kind of delusional thinking.

I started writing on the economy after the crash of 2008 because nearly all financial journalists seemed to have lost the ability to think. That would be total job security for me to this day if it paid enough to be worthwhile, which it does not if you do not run with the pack.

People know what news they want to hear and tune in accordingly. You need to have solid credentials in the Republican Club or the Democrat Club or among the NeverTrumpers or with the Trumpettes. You have to join a side to be popular because clearly the majority of people (as these two articles demonstrate) are in deep economic denial and don’t want to read unhopeful economic truth. A full decade after the bust, denial still floods the world as the above article continues to demonstrate with nearly every word:

“US employers are adding so many workers?” Really, 213,000 jobs is “so many?” That is the same gradual path we’ve been on for a decade! And that is half a year after the biggest tax cuts in the history of the civilized world! That’s all we have to show for throwing the deficit flood gates wide open again — exactly the same level of job growth we had under Obama before any of the tax cuts? That’s it?

It is not like the difference between 178,000 new jobs one month and 213,000 the next is even meaningful. Its within the range of monthly fluctuation that we’ve seen for years. Typically more than half the jobs added are “seasonal adjustments” or other adjustments made by the Bureau of Lying Statistics. Even if the numbers were solid facts, so what? 213,000 jobs barely keeps up with population growth each month.



After all these years, the financial press is still just pumping out the bilge water that gets pumped into it by the government.

“People are growing encouraged?” Who has talked to these workers to know they are encouraged? We have no way of knowing how many of those measly 213K jobs were taken by people who had dropped out of the work force and have now re-entered. Fake news! Are they encouraged that the economy is now trundling along with endless part-time growth?

“Wage growth is well above the average of the past decade?” Really fake news! That one gets the Zombie-of-the-Month brain-bashing prize. Adjusted for inflation, there was NO WAGE GROWTH! Zip! The only thing that happened was that inflation is now well above the average of the past decade, so this vaunted wage “growth” is really nothing more than wages tracking even with inflation. All the repatriation that was reportedly going to be spent, in good part, by corporations on wage improvements has amounted to nothing more than a COLA increase. When one talks trickle-down economics, they need to strongly emphasize the “trickle.” Finally, after all these years of wages sliding backward, we get a cost-of-living adjustment! Praise be to the gods of greed!

“Corporate earnings remain rock solid?” Oh my gosh, People! This is getting so tediously stupid. We hear it over and over like the purr of zombies in the distance bashing their heads again brick walls. Earnings, as in overall pretax profits, are in total stagnation! Over and over, the only thing actually reported about earnings is the earnings-per-share number (EPS).

The supposed rise in earnings that have supposedly kept up with the rise in stock prices so that stock prices are supposedly not overvalued is due to nothing but a reduction in the number of shares over which those reported earnings are divided and a massive reduction in corporate taxes (because EPS is an after-tax report of profits). It is not due to improvement in business activity!

Earnings, as they are exuberantly trumpeted about by market mongers, mask a toxic picture of stagnation when it comes to the declining health of companies and of the US economy. The tax cuts provided an immediate double-impact boost to otherwise horrid EPS statistics by greatly reducing the number of outstanding shares and greatly reducing corporate taxes. In fulfillment of what I predicted for the Trump Tax Cuts, share buybacks have been hyuge. Trump has made buybacks great again!

If you want to read a surprisingly candid article about how the trickle-down tax cuts and repatriation of overseas income, past and present, have done nothing but contribute to stock buybacks and about how those buybacks are being used (exactly as I have said on The Great Recession Blog again and again) only to enrich executives and board members who are selling out their own companies, read the SEC Commissioner’s report here. The smart-money people are dumping at huge rates their own stocks in the companies they manage in order to get out!


Trade problems are over now!


Move along people. Nothing to see here. The trade war ended with Friday’s trade-deficit report.

More good news that saved stock markets on Friday was that trade imbalances between China and the US have already corrected. We can declare “Mission accomplished!” The correction of the imbalance, however, was actually because Chinese industries were stocking up on American goods before China’s own tariffs hit. How does one pan that nugget of news out of the gravel? Simple: note that the big mover for the lowering of the US trade deficit with China in May was soy bean sales — one of the few areas where China has said they will add significant tariffs.

Yeah, that’s salvation! It simply means the trade imbalance will look so much worse in July and August when all Chinese buying of those goods stops because the prudent Chinese all stocked up enough in May and June to satisfy several months of soy-sauce production. Sales of those goods from the US to China were simply moved forward as a way to avoid the cost of tariffs, which you’ll see reported in August (for July) and in September. Nobody in the financial media wrote that, of course; but it didn’t take much shaking out for me to figure it out, and that’s why I do my writing — to report what others do not say by thinking about what others do not think.


Continue to Beware the Job Numbers (Is it the Bureau of Labor Statistics or Bureau of Lying Statistics?)

One reason I started my own economics blog was because of how tired I was of reading government-regurgitated half truths about the economy. Nothing has changed. As Newsmax and other publications report this week that July was a bumper month for lower-wage earners, I continue to have to sift for myself through all the glitter to find the globs of buried ugly truths. First, the DayGlo report:


Eight years into the economic recovery, Americans on the lower rungs of the ladder are finally getting some relief in the job market, and there could be more to come.

Underneath a 209,000 gain in July payrolls that was stronger than forecast on Friday, significant shares of job growth were in lower-wage industries such as restaurants and home health-care services. As the overall labor-force participation rate ticked up 0.1 percentage point, the level for people age 25 or older without a high school degree surged to the highest since 2011. In leisure and hospitality, which typically carries lower pay, annual wage gains of 3.8 percent outpaced the average.


That’s wonderful, but parse between the lines and look for some background statistics, and a hideous picture of a continually deteriorating jobs market emerges. Parsing the lines: while the unemployment rate supposedly fell to 4.3% in July, all the job growth last month happened in part-time, mostly minimum-wage jobs. Looking deeper into statistics not included in that article, full-time jobs actually stepped backward by 54,000 in July. The headline should have been “Full-time Jobs on Retreat” because those are the jobs we care about. Part-time jobs, on the other hand, saw huge growth (+393k) (The numbers don’t reconcile because the 209k increase was from the BLS Establishment Survey of Nonfarm Payroll: The other numbers (+393k PT and -54k FT jobs) come from their “Household Survey” to give a broader picture.)


Said the late Henry Hazlitt, economics writer for the New York Times (back when it was in the news business):



The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups. (Mises Institute)



Looking at the effect on various groups changes the picture substantially. July saw the biggest increase in part-time jobs in almost a year, but how many of those were full-time people losing those 54,000 FT jobs and scaling down?

As a result of such a big leap in PT jobs, minor wage increases should be expected in the part-time sector. However, even those wage increases may have only been due to parts of the country that have been raising their local minimum wage — a factor that would be hard to sift out. Certainly the noted wage increase happened entirely in the sector that has been receiving a lot of talk lately on minimum-wage increases. (Seattle being a prime example of a city that voted several years ago to graduate its minimum wage up to $15 an hour — a move that is still in progress.)

I doubt the statement that wages at that level grew 3.8% annually is what it appears, although that is still a minute increase when you are talking about wages that are so small in the first place. You cannot tell for sure from the way Newsmax wrote its article, but was that 3.8% increase the actual year-on-year gain, or is that the “annualized” figure of what last month’s increase would amount to if it continues for the next twelve months? If they meant the latter, that is a case that is unlikely to actually play out.

Either way, one would expect this sector to have the largest percentage increase because you are 1) talking about the smallest wages in the first place where every 1% wage increase amounts to mere pennies and because 2) jobs are shifting from much better paying full-time jobs to lower-paying part-time jobs, giving room for companies to bump up the PT wages. What’s not included in that insignificant wage gain (as the reason why I call it “insignificant”) is the huge loss in benefits that almost certainly corresponded with this human migration downward from full-time jobs group with benefits to the part-time jobs group without benefits. Companies may be willing to pay a few shekels more in wages when they are saving hundreds of dollars on benefits. The transition is a net gain for the wealthy for certain.

So, that was the real story this month — full-time jobs actually declined as part-time jobs shot upward. That, to me, looks less like job improvement than like a tipping of the scale from one side of the economy to the other. What the government never measures (or, at least, it never gets reported) is the change in full-time equivalencies. Last month was probably a decline on that front also, but we cannot tell because we don’t know how part-time the part-time jobs were (three-quarter, half, one-quarter time, half a day a week?). We have no idea.

The way the figures are window-dressed in articles like this, which just parrot the government’s statistics, makes it sound like poor people finally got the boost they’ve been yearning for. Hallelujah! The wage gains are starting to trickle down! The real truth? More formerly full-time people became poorer part-time people. Oh. Sad.

This is the reporting baloney we have had to live with throughout the Great Recession and its aftermath because investigative reporting is dead. The numbers required to get the fuller picture just aren’t presented, except on alternative-media sites like Zero Hedge.

While the job market in July deteriorated significantly toward more part-time jobs, the news about jobs this month is even worse than that.


Insidious evil buried in the jobs data


The New York Fed reported the following for the past year, but you don’t see much about it in the derelict press either: Those with a high-school diploma or less saw their ratio of employed people to their population go up; while those with college educations, saw the percentage of those who are employed drop over the past year.

It would appear we’re adding a lot more bar-tenders, house-keepers and burger flippers. In fact, yes, statistics in July showed that almost all the jobs added were in those industries, which have been the hottest hiring sectors both last month and over the past seven years. “Food services and drinking places” saw the biggest increase in July’s job numbers. (That adds up since that is also an industry with a lot of part-time jobs.) No doubt, the nation needs more bartenders of late with all those people in retail who are losing jobs as 20,000 retail establishments shutter their doors this year next (many of them major retailers).

With an average wage of $13.35/hr in the hospitality sector, the 3.8% annual increase (if it actually happened and is not just an annualized projection) would be a boost of fifty cents an hour. Sure, that’s better than a peck on the head with a sharp stone … unless a lot of those people formerly had full-time jobs that paid even better and that had benefits.

Other areas where the largest gains happened were “waste services” and “health care” (due to an aging population).

Happy to take all of this a proof of his success, Trump touted July’s job report as “excellent job numbers” while noting that he has “just begun!” America is becoming great again!


BS from the BLS


Oh, but wait. There’s more. There is this tidbit, hardly mentioned everywhere, and not spelled out as it will be below ANYWHERE (except here):

The entirety of job gains in July was due to “seasonal adjustments.” The real number, without government manipulation, saw a job decline of 1.3 MILLION jobs!

Oops. (Wonder if Trump will accept the credit for that!)

As the New York Post reported,


The US economy lost 1.03 million jobs in July. That’s a fact.

But  … didn’t the Labor Department announce last Friday that July had a gain of ____ new jobs?

Sure, and the discrepancy, as I explained last Saturday and many times before that, was caused by seasonal adjustments.

Adjusting for seasonal oddities — like teachers leaving the workforce en masse in the summertime and retail workers getting laid off in bunches after Christmas — is normal and acceptable to economists….

But the devil, as they say, is in the details. Were the seasonal adjustments applied fairly and consistently in July?

There’s evidence that they were not….

Had Labor used the same 1.22 million seasonal adjustment this year that they used last year, it would have produced 65,000 fewer new jobs last month….

That extra 65,000 jobs comes at a time when the US economy is clearly weaker than it was in 2015 — so why increase the adjustments by 5 percent?


OOPS AGAIN. That article was written last year (August 2016), when the Dept. of Labor made a much bigger seasonal adjustment than in 2015, resulting in a better job figure during the election year of 2016, which raised the eyebrows of that economics reporter. (Hence the mention of losing 1.03 million as opposed to 1.3 million, but I wanted to point out a trend of something that was already looking bad in 2016.) This year the BLS did even worse in adjusting their adjustment — much worse!

Here is the trend in lying statistics:


  • In 2015, the Dept of Labor added 1.22 million jobs to the July number as its seasonal adjustment.
  • In 2016, it added 1.29 million jobs as its seasonal adjustment to the July number (a 6% increase in from 2015’s adjustment)
  • How many did it add in July of 2017? 1.51 million! (a 17% increase in the adjustment from 2016’s adjustment)


Every year, the adjustments keep getting better … for the government, regardless of weather, etc.. Now, I don’t pretend to know how the Department of Labor’s Bureau of Labor Statistics devises its seasonal adjustments, but I get suspicious when year after year, their economists have to keep moving their adjustment up in order to continue coming up with a positive jobs number. I get especially suspicious when the “adjustment” jumps so much in one year but even more so when the change in their seasonal adjustment from last July to this July was greater than the entire number of jobs supposedly added to the economy in July.

I’m not saying the BLS lies intentionally, though I wouldn’t rule that out. I just wonder how much confirmation bias there is in how they choose to adjust for seasonal factors. There is only so much BS from the BLS a guy can handle, and I think the BS Factor appears to be growing faster than the actual Labor factor.

As Hazlitt also noted,


Economics is haunted by more fallacies than any other study known to man…. They are multiplied a thousandfold by … the special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also … interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies … will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.


The real truth about July, stripped of all the befuddlement and Trumpeting, is that America got weaker, not greater:


  • Full-time jobs lost while part-time jobs gained. Weaker!
  • Actual job losses were over a million with all purported gains happening only within the suspect adjustments. Big league weakness!
  • The seasonal adjustment increased by 17% from last year’s adjustment with no stated reason as to what made this season in 2017 be so vastly different from this season in 2016 to where their adjustment to the adjustment should be three times larger (percentage-wise) than the increase the year before that! Weakness upon weakness!
  • Employment declined for those with a college education while it rose only for those with a high-school education or less. Weaker for some, better for others. Not great for any.
  • Wage gains happened only in the bottom tier of part-time jobs, which may be mostly due to mandatory minimum-wage increases. Weak!


Is it time for the Hallelujah chorus or the What-the-Heck curse?