The US Economy is Not in Good Shape

There seems to be this narrative being forced out by the Brandon administration and their accomplices in the corporate media that the economy is “booming” and going gangbusters.

They back it up with data that shows GDP surging and wages increasing, as well as generally strong earnings reports from public companies (Facebook, Netflix and PayPal notwithstanding).

But Americans aren’t buying it. They don’t believe the economy is anywhere near as strong as the ruling class says it is. A recent Pew poll published January 25 found that only 28% of Americans rate present economic conditions as either excellent or good, including just 36% of Democrats. That’s down from 57% of Americans who rated the economy as either good or excellent pre-Covid:

According to same poll, only 27% of Americans expect the economy to be better a year from now, with 37% say it’ll be about the same, and 35% saying it will be worse.

In terms of consumer prices, the vast majority of Americans say just about everything has gotten more expensive and things are horrible compared with even just one year ago:

89% say prices for food and consumer goods are worse including 60% who say they’re a lot worse than a year ago. 82% say gasoline prices are worse, 79% say houses are unaffordable, and 55% say health care is more expensive. Also, 68% say the federal budget deficit is way worse. This stuff is all 100%. Americans are correct. The data bears it all out.

Come on–if the economy was in good shape, would we see stuff like this at every gas station?

The US economy is hot garbage and Americans know it–they know the government is straight up lying when they try to tell us the economy is in good shape. No, it’s not. We’d be the ones to know given that we collectively are the economy.

Store shelves are frequently found half-empty, and a lot of times, things you want are out of stock. Try buying a couch right now, for instance–you’ll have to wait months.

There are millions fewer workers employed in the labor force today than there were before the lockdowns hit.

You know if you read this site that my position is that the US economy, due largely to low interest rates, has been weak for 20 years now. And right now, it’s as weak as perhaps it has ever been in the past 20 years outside of the depths of the Great Recession.

But I want to get a little more into the data here.

GDP increases, touted by the corporate media and the Brandon Administration as proof of a roaring economy, are juiced up by inflation. The New York Times last month wrote that when you account for inflation, the economic growth trajectory of the country is still below what it was pre-Covid:

And more than half of the increase in Q4 GDP was rising business inventories, which the NY Times claims is a “promising sign”:

One promising sign in the fourth-quarter data is that the rebuilding of inventory among businesses made up more than half of the gains, the second-largest quarterly contribution since the last three months of 1987. That indicates confidence among businesses that they can sell what they are stocking — as well as “at least incremental improvement in supply chains,” said Jane Oates, an assistant labor secretary during the Obama administration and the president of WorkingNation, a nonprofit group focused on employment issues.

But then, just two paragraphs later, the Times article says this:

Import prices were 10.4 percent higher in December than a year earlier, according to the Labor Department. Many businesses, large and small, are preparing for supply chain issues to stretch beyond the summer, maintaining pressure on prices.

In other words, businesses are loading up on inventory because, 1. they think supply chains will still be in shambles through and even beyond the summer, and 2. because they’re expecting inflation to continue rising.

If I’m a business owner, and I believe inflation is going to get worse in the future, and that I might have trouble procuring inventory due to supply chain issues, I’m going to load up on inventory now, at lower prices, while I still can get my hands on things. It’s essentially stockpiling inventories.

This is not normally how the US economy works. Normally, we have a “just-in-time” supply chain model, where products basically go straight from the truck to the shelves. Business usually don’t hold large inventories–they ideally only have just enough supply to meet demand, perhaps a little bit extra at most.

Business inventories have risen at the highest rate on record, dating all the way back to 1992.

The website Shadow Government Statistics provides what it says are the true economic numbers on things like inflation, GDP and unemployment, because over the years the government has watered down its formulas for calculating them and biased them to look as positive as possible. For GDP, mainly what SGS does is adjust it for inflation, which the Federal government does not do. SGS data shows the economy is still in contraction and has still not fully recovered since the pandemic. The blue line is what we’re focusing on here:

The economy is not in good shape, and it hasn’t been in good shape since the late 1990s. Most of the “economic growth” the media is touting these days is really just inflation.

I mean think about it: if businesses are charging higher prices, then obviously business revenues and profits will be increasing.

Inflation is not economic growth. In fact, it’s the opposite of economic growth. Inflation is the consumer losing purchasing power: people have to spend more money on fixed costs like utilities, food and gasoline, because all those things are going up due to inflation, which means they have less disposable income.

In the Q4 GDP report, real disposable incomes dropped by 5.8% and the savings rate also dropped:

Real disposable personal income decreased by 5.8 percent in the fourth quarter, and the personal saving rate — the percentage of overall disposable income that goes into savings each month — dropped to 7.4 percent from 9.5 percent in the third quarter.

Of course the savings rate is down: people can no longer afford to save because everything has gotten more expensive. And a decline of almost 6% in real disposable personal income? Terrible.

Unemployment figures are also a sham. The U3 unemployment rate that is most commonly used when mainstream news and the government talks about unemployment is extremely narrow and doesn’t tell the full story. U3 only tells you how many people are actively seeking employment within the past month–it doesn’t tell us the people who are underemployed, and the number of people who have given up on looking for a job (discouraged workers, they’re called).

The U6 unemployment rate, which is a broader figure than U3, shows us “short-term discouraged workers” meaning people who have sought employment within the past year, but have not searched for employment within the past 4 weeks. U6 also includes underemployed workers (meaning people working part time jobs when they want full-time jobs, etc.) It’s more of an accurate assessment of the unemployment situation than U3, but it still doesn’t tell us the full story.

The BLS (Bureau of Labor Statistics, the government agency that tracks unemployment data) in 1994 stopped counting long-term discouraged individuals, meaning people who have been out of the labor force for more than 12 months and have simply given up looking for work. U6 only includes short-term discouraged workers, meaning people who have been out of the labor force for 12 months or less and have given up looking.

Shadow Government Stats also keeps track of the long-term discouraged workers, and if you include them in unemployment figures, the rate of unemployment in this country is 24.5%:

Before the pandemic, it was about 21%. You can see that the labor force never really recovered after the Great Recession, and it has gotten significantly worse after the Lockdown Recession.

This makes sense because we can look at the chart for labor force participation rate (LFPR), which tells us what percentage of the total civilian labor force is actually employed, and it shows a participation rate of 62.2%, down from over 63% before the lockdowns:

Before the Great Recession, the LFPR was over 66%, and prior to the 2001 recession, it was over 67%. With every recession that hits this country, more and more people leave the labor force.

It may not seem like a lot because we’re talking about a difference of not even 2% between pre-Covid and today, but the total labor force in the US is over 160 million people. This means a 1% decline in the LFPR translates to over 1.6 million people.

So this means that, with today’s LFPR of 62.2%, roughly 99,982,768 people are participating in the labor force. If we had an LFPR of 66%, like we had in 2007 before the Great Recession, that would mean we’d have over 6 million more people employed today.

Don’t believe the headline unemployment figures that show we’re basically at “full employment” with a 4% unemployment rate. That is utterly laughable. We are nowhere close to full employment. The New York Times said in the article linked earlier that there are still 3 million fewer workers today than when the pandemic began.

We have one of the biggest labor shortages ever in this country right now.

Probably a lot of it has to do with Covid (people afraid of the virus) and the Covid restrictions (vaccine mandates costing people their jobs, plus people who don’t want to work if it means wearing a mask all day). But a lot of it also has to do with companies downsizing their payrolls: labor is the single largest expense for any company, and they are always looking to shed workers whenever possible and make fewer people do the same amount of work (or even more work).

This is why we see the labor force participation rate decline and never recover after every recession. Companies use recessions as excuses to permanently slash their payrolls.

When Covid restrictions including masks and vaccines are gone, and the Karens and Covidiots finally feel safe enough to leave their houses, the workforce will undoubtedly grow.

On to the next point: “Wage growth is up! That means the economy is doing well!”

Also not the case.

In nominal terms, sure, wages are up, and even above their pre-pandemic trendline:

But that doesn’t take into account higher prices people are encountering everywhere they look.

Adjusted for inflation, wages have not increased for the vast majority of Americans. In fact, they’ve gone down relative to prices.

Real total compensation for American workers is now 3.6% below the pre-pandemic trend. In real terms, Americans are now making less money than they were even a year ago.

Price increases are outpacing wage increases, and the net result is that Americans’ paychecks are not going as far as they used to.

The biggest problem with this is that we appear to already be in the midst of an inflationary spiral, where cost of living increases must be matched with wage increases, but those wage increases are covered by companies raising their prices even more, which will in turn have to lead to more wage increases, and on and on.

This is the inflationary spiral, and the only real way out of it is if the Federal Reserve intervenes and basically slams the brakes on the economy by hiking interest rates, which it is planning to do as early as next month.

We can also tell the American consumer is in rough shape by digging into the Amazon earnings. Amazon’s quarterly earnings reports are a great way to gauge the state of the economy, and what we can see is not pretty.

For one thing, Amazon’s Q4 2021 revenues missed estimates. Wall Street was expecting revenues of $137.6 million, but Amazon reported revenues of $137.4 billion. A small miss, to be sure, but the real story here is the guidance the company provided for its Q1 2022 revenues:

Amazon guided for first quarter revenue of between $112 billion and $117 billion, below the average estimate of $120 billion, according to Refinitiv. Operating profit in the fourth quarter will be in the range of $3 billion to $6 billion.

Amazon is expecting revenues this quarter of between $112-117 billion, when analysts were expecting the guide to $120 billion.

That is a bad miss. It’s normal for companies’ revenues to decline from Q4 to Q1 because Q4 is the quarter where Americans typically spend the most money–Christmas and the holidays and all that. So analysts were expecting Amazon to guide to $120 billion down from $137 billion. But Amazon instead guided down to $112-117 billion.

Now this isn’t to say Amazon is about to fall off a cliff or anything–they make most of their profits from Amazon Web Services and, nowadays, advertisements. The online marketplace is not their big moneymaker.

But Amazon’s revenue miss and their guidance for Q1 point to a weakening American consumer beset by rising prices on everything.

In fact, we need look no further than Amazon’s earnings report for evidence of this: Amazon announced it is hiking the price of a Prime membership up to $139 a year from $119. And monthly, it’ll bump up to $14.99 from the current $12.99.

That is inflation right there.

They have to find some way to pay for the wage hikes they’ve instituted, right? In 2021, Amazon increased average wages to $18 an hour.

This is the inflationary spiral in a nutshell. And it’s playing out at way more companies than just Amazon.

The bottom line here is that the economy simply is not in good shape.

We also have to keep in mind the reason we’re seeing all this inflation in the first place: trillions of dollars in government fiscal stimulus.

We had the $2.3 trillion CARES Act. Then the $484 billion Phase 3.5 bill. $44 billion for the Lost Wages Assistance program. Then later in 2020 there was the $900 billion stimulus package. When Brandon got in office, he signed the $1.9 trillion American Rescue Plan. Add all that up and it’s over $5.5 trillion in fiscal stimulus since March 2020.

But now it’s all done. And the economy is going to have to learn to deal with interest rates above 0%–plus no more QE.

Things might get ugly here, and soon.

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