Slump?

Pundits in the regular and social media are currently crowing with negativity about the US economy.  The term “slump” is often used to describe the economy.  Bad news travels fast.  

Bad news also sells.  Virtually all the major news medias are jumping to the suggestion that we are in a “slump” and heading for a recession and/or stagflation (high inflation AND high unemployment). 

The problem for the pundits is that all of the news is not bad. The economy is also an area that politicians have limited control over and which is global in reach and nature. 

The inconvenient truth is that now, and almost always, economics is mixed bag.

Here for your consideration are some current bellwether economic indicators:  

Inflation is up (E.g. gas prices at all time high), highest in decades (This is bad).

Wages are up (good for workers, mixed bag for small business employers, great for Standard & Poor’s 500 CEOs whose salaries increased 18% last year).

New unemployment claims down (Good).

There are 11 million jobs available right now (Mixed: good for those looking for work, bad for small business employers)

Unemployment rate in the U.S is 3.6% (This is Pretty good – some economists use 3% as a sign of full employment – zero employment being impossible to reach because of normal changes in the workforce including job changes initiated by individuals.)

Stock market Standard and Poor’s 500 index was up 26.9% in 2021; but down so far in 2022. (Short term: Stocks go up, stocks go down; Long term, stocks generally go up – the key unknown is when, “How long do I have to wait?”)

According to the Federal Reserve, US Household Net Worth was at all time high as of the end of 2021 at $149.8 Trillion (On one hand this is good but then… There is wealth inequality and a disappearance of the middle class in the US.  Measuring wealth is complicated and there is no easy single number to look at. Suffice it to say that a very small number of people control vast amounts of wealth and the rich are getting richer.)

Media pundits and naysayers also tend to focus on what might happen as if it is happening now. (E.g. billboards and memes denouncing how the current administration has raised taxes). Hint: there is no legislation that has been passed that would raise federal tax rates. The last big tax hike was the tariffs on consumers who bought certain goods from China placed in 2018 (btw: any way you slice it, tariffs are a form of taxation. Remember the Boston Tea Party?) Federal Tax rates have not changed since 2017.

The Good Old Days?

Some would have us believe that everything was rosier under the previous administration, and yet…

The unemployment rate In Jan 2021 was 6.4% Source: Bureau of Labor Statistics. 

According to the Wall Street Journal, in 2020, the final year of the last administration, the economy (GDP) shrank 3.4% and lost 9.4 million jobs. 

National debt grew over the four years from $19.5 Trillion in Fiscal Year2017  to $27.7 Trillion in FY 2020. This is a huge increase, especially during a time when we were supposedly cutting back on federal government spending. Source: US Treasury Department. 

Throughout history there has been a continuous cycle of feast or famine when it comes to the economy.  This is a world-wide cyclical economic phenomenon dating back to ancient times. The Bible refers in Genesis to seven years of abundance followed by seven years of famine.  This is nothing new. 

Of course, even during hard times there are those who do well financially (e.g. buying property at bargain rates).  

Also, during the best of times there are always some left behind or displaced. The adage that, “A rising tide raises all ships.” is true; unless you don’t have a ship, in which case the adage, “How long can you tread water?”, is more appropriate.

My point: the economy is always a mixed bag.  

The economy is also extremely complex.  Pulling a few stats out randomly to prove a point (Like I have done here above) always gives an incomplete picture no matter what your political viewpoint. There are just too many ways to slice and dice the numbers.  And the numbers themselves can be very difficult to obtain, much less understand. 

Take unemployment for instance.  The U.S. Bureau of Labor Statistics reports six different rates including the one most commonly used by the press (BLS calls this U-3) which I used above.  It only includes those actually looking for work.  The other rates reported by BLS use different numerators and denominators so of course come up with different rates. This allows politicians, pundits or for that matter, anyone, to pick the rate that supports one’s views. 

So, Jim, what am I to think?  Do?

Economists use two terms that might be helpful to us: macroeconomics and microeconomics.   

Macro being society as a whole and micro being an individual.  Almost all of the talk is about macro with an occasional individual used as an example of how that person or family are impacted as a part of a macro trend. 

This means that most people, myself included, focus on “other” people.  

We might also want to ask, “how am I doing?” or “How are things where I live?

My suggestion: We all look closer to home and honestly ask ourselves these questions:

Do you have a job?

Have you been forced to change careers in the past two years?

Are you retired with a steady income?

Do you own a home?   

Do you own it outright or have a mortgage?  Interest rate? Monthly mortgage payment?

If you rent, how much do you pay monthly? 

Is your rent or overall housing costing more than 30% of your gross income?

Is your car paid for?

Do you have any long-term debt beyond a mortgage?

How much $ do you have in savings? Retirement accounts?

Do you know what your net worth is?

Have any of your tax rates, (local, State or Federal) increased in the past year? Note: This question is about the rates, not the amount paid because one’s income and or property values may have changed.  Rates are all set by law. Has the rate actually changed?

Have you lost your job in the past year? Are you on unemployment?

Do you have high speed Wi-Fi in your home? Air conditioning? Cable TV? A Smart phone? Computer?

Do you have any school loans outstanding?

Has a family member lost their job in the last year? 

If so, were they fired or did they quit?

Are most people you know personally who want a job currently working?  

Is anyone you know personally on unemployment?  

If so, are they actively looking for work?

Are there empty business store fronts around you?

Is there construction of new buildings or homes near you?

Are there “Help Wanted” signs out in your neighborhood/town?

Are there homeless people living in tents or RVs?

What kind of cars are in the parking lot at your local Target or Walmart? (E.g. Beaters or newer models?)

Are parking lots empty or full? 

Do you see any trains, trucks or ships near your home? 

Are they moving goods?

Are roads around you busy or empty? 

Are there any active food banks in your neighborhood?

Are there items you need but cannot obtain?

Items you want, but cannot get?  

Are items you need or want unavailable or are they available but too expensive?

Do you have grown children or other adults living with you?

Have you moved out of state within the past year?  

Have you moved within your state in the past year?

Have you bought or sold a home within the last two years?

Have you bought a new vehicle (car or truck) within the last year?

If you can answer the questions above you should be able to answer the question, “Is there a slump where you live?” And, perhaps more to the point, “How am I doing financially?

At this point you might say, “OK, I have answered these questions about microeconomics, but, “How do we get to The Whole Truth about the economy? After all, macroeconomics does impact us all, especially our investments.”

Certainly, we can and should read/watch/see/listen to a wide range of responsible news sources.  Investments such as in the stock market or cryptocurrency are not something we can personally observe, and we must rely on other sources of information.  (Note: You are welcome to read the sources I use and consider reliable in my previous post on this blog titled “Truth”)

At the same time, we need to look around us and see what is really going on in our own hometowns.  What is really going on in our own economic life and in the lives of people we know personally?  What signs of economic activity can we see in our own communities?

What are your thoughts on the economy?  Are you personally doing OK?  

I would love to hear your take on this issue.  You are invited to click on “Comments” below, then scroll to the bottom and leave your reply.