Maybe you will be surprised. I don't know. There's no real story here. As always, the economy's strength is measured in many ways, and sometimes these measures conflict with each other. Let's try it anyway. Maybe I should have added more items than the 10 I chose. For example, I have not included the government debt or government spending or any measures tied to Gross Domestic Product. These are generally quarterly data and we won't have that information until April.
- The top of the table presents two key exchange rates. Over this two-year time period the dollar rose against both currencies -- the yen by 3.1% and the euro by 6.2%.
- Interest rates on government bonds have oscillated but been pretty stable. The rate on a 10-year government bond was unchanged. The 30-year rate rose from 2.4% to 2.6%.
- Both the inflation rate and the unemployment rate declined. The decline in the unemployment rate from 4.7% to 4% was probably more meaningful than the small decline in the inflation rate.
- Employment rose by 3.4% ending up at 150.5 million persons.
- The price of a barrel of crude oil fell to a little less than $53, declining about 5%.
- Stock markets did quite well. The Dow Jones Average was up almost 22%; the S&P 500 by 17%.
Seems like a yawner to me. What do you think? Is our economy falling apart? Do you see red flags on the horizon? True, I didn't put everything in the table. But you have to admit that these 10 indicators cover a lot of territory. Do you have a better top 10?
| 2017 | 2019 | Change | |
| Yen per dollar | 113.2 | 109.7 | -3.1 |
| Dollars per euro | 106.4 | 113 | 6.2 |
| 10 Year Treasury | 2.4 | 2.6 | 0.2 |
| 30 Year Treasury | 3 | 3 | 0.0 |
| Inflation Rate*# | 2.1 | 1.9 | -1.2 |
| Unemployment Rate* | 4.7 | 4 | -0.7 |
| Employment | 145.7 | 150.6 | 3.4 |
| Crude Oil | 55.68 | 52.71 | -5.3 |
| S&P 500 | 2316 | 2708 | 16.9 |
| Dow Jones | 20,620 | 25,106 | 21.8 |
| *Change in the percent | |||
| The
remaining changes are percentage changes #The inflation rate is the rate over the past 12 months in February |
|||
There is an old saying....if it looks too good to be true it probably is not. The big question by everybody is when and what will be causes of the decline? I have no idea other than US consumer spending power(not credit) due to a shift in the employment to lesser or not rising income for many who do not have the training or skill to compete in the AI age. The chart does not say that but as a now retired but former employer 3 weeks ago we coud not give sufficient raises for our employees to afford the rising prices even in this cheap burg. If we did, our margins would shrink and cut into working capital or we could compete on lower prices with the same results. So an idicator to me is real income chanes over the past 3 years across the strata of middle (declining) and lower middle income people who make up most of the consumer spending. Just think in the 50s most households had 1 person working and the other tending to the house and kids. Today in the above stated income brackets both parents (if there are any) plus 1 or 2 children have to work. Even though goods were a lot cheaper back then I wonder what was the proportion of earned income to the basic expenditures like cars, rents, mortgages healthcare? In essence what was the non credit discretionary income %.
ReplyDeleteThanks Hoot, but you seem to want to dwell in the longer term. The things you mention will ply out for the next 50 years. My post had a simple message...how did the US economy perform in the last two years. The things you mention have virtually no impact on the last two years. A guy starts drinking 6 beers a night a month ago. He weights himself and finds he has gained weight in the last month. He tells his wife -- Honey, I am getting old and that's why I am gaining weight. Please pass me another beer.
DeleteGuy across the street went on the vodka diet. He drinks a two quarts a day. He's already lost a month.
DeleteThanks Ash, Just think how much he'd lose on three quarts a day.
DeleteDear LSD. I don’t think the economy is fall’n apart . . but as you imply there are some red flags a’flutter’n out there. Here are three potential road bumps that could throw some North Atlantic cold water your ten indicators.
ReplyDelete1.The high-fly’n national debt will eventually come home to roost. Econ growth and attendant tax revenues—despite the administration’s narrative—will not be able to significantly reduce the dollar amount though keep it within a reasonable percentage of GDP. Federal budgetary interest payments will eventually increase causing a call for higher taxes/revenues—UNLESS spending declines—which has the same likelihood as a tuna learning to swim backwards.
2.To Señor Gibson’s point—the edukation/skills gap among middle/low income workers (and those look’n for work) is a major macro-megatrend headwind that will create economic friction for years—no short-term solution: Those folkz will require economic support to keep out’a the poor house = additional transfer payments = more pressure on budget deficits/debt. An adjunct to this is the student loan debt @ $1.56 trillion that likely will prevent young folkz from moving up the socio-economic ladder.
3.The great political divide/acrimony: Another major macro-megatrend headwind. Will impede/prevent legislation that otherwise would buttress the improvements achieved since January 20th ’17.
Sorry, I don’t have ten “better” indicators; only three down indicators. Nope, the economy isn’t fall’n apart . . . . only head’n for a potential rip tide. Is there a life guard in the house?
Your last comment reminds me of the show Baywatch. Anyway, you are guilty of the same sin as Gibson. You guys have very legitimate concerns about the future. And I would be an idiot to ignore your warnings about the future. I share them and accept them happily and glad you can share with the readers. But my humble task in this last post was to focus on the recent past. What happened in the last two years to the economy? One cannot attribute the numbers to Trump or anyone else in particular. It is too complicated for that. But it was fun trying to take some standard indicators and see if they had a story to tell.
DeleteDear LSD. You asked—rhetorically I assume—about red flags on the horizon—likely not Russian or Chinese flags. My three points referred symbolically to those rhetorical flags ‘cauz you asked.
DeleteNow that you’ve clarified your humble intent to find clarity in the explanation of changes in the economy last two years I’ll attempt to simplify and offer a modicum of clarity to the answer. Let’s think out’a the box for a nano second—go back to the future—and contemplate what the economy would look like had Billary won ’16. I suggest, modestly and humbly, that the inflation/employment/unemployment rates, S&P, and DJIA indicators would look much different—likely not as favorable (if one interprets them as favorable)—should she be POTUS. Yes, it’s complicated so let’s be simple and just humbly focus only on that one factor—Billary or Donnie. This humbe Chick-0-the-Sea figgers those indicators favorable due to DJT being POTUS, particularly. R we hav'n fun, yet?
Having fun is never a problem dear Tuna. While your newest answer will be appreciated by a certain shall we say right wing contingent of this blog, others might argue with the results of your counterfactual thought experiment. Some of those other might even be related to me. But what the heck. A good tuna can't win them all.
Delete