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The “Excess Savings” Hypothesis vs. Economic Deceleration

There is some speculation that because only a little more than half of the buildup in savings from the stimulus checks and enhanced unemployment benefits was spent through July, Q4 economic activity will continue to show recovery as the “savings” continues to be spent.  Call this the “Excess Savings” Hypothesis.   Unfortunately, the incoming data makes this appear to be little more than “hope.” The weekly state and PUA unemployment data …Read More

Main Street Boom Frightens Wall Street

On Friday, November 2nd, the Dow Jones Industrials ended down 110 points in a wild day in which the index swung over 500 points from its intraday high to its intraday low. This occurred despite one of the most stellar employment reports in recent memory, a report that raised hopes that the economy would continue to grow in the 3% range, and a report that put smiles on the faces …Read More

Deflation’s Persistence Implies Yields Will Be Lower for Longer

Despite what you hear from the TV pundits, the U.S.’s second quarter ended on weakness, and there is little evidence that economic acceleration occurred.  In previous years, slow GDP growth in Q1 was followed by 3%+ in Q2.  Not this time!  The Atlanta Fed GDPNow model, which uses a lot of sentiment indicators, is all the way down to 2.4% for Q2.  I suspect that the Commerce Department’s initial GDP …Read More

On a Recession Watch

For the first time since the industrial revolution, the U.S. faces two significant growth issues: 1) a declining labor force; and 2) a job skills mismatch.  The declining labor force is demographic in nature and is occurring in every industrial economy; likely a function of the long-term success of capitalism.   The skills mismatch is a function of technological change that is so rapid that the skills of the existing labor …Read More

“Normal,” It’s Not What You Think!

Most readers remember the pre-recession days of 4% GDP growth, interest rates at levels where savers had return choices worth pursuing (e.g., the 10 year T-Note at 4%), and workers could count on annual real wage growth.  Today, many refer to this as “normal,” and there is a desire, if not a movement, to return the economy back to such a state. You can see this in the political arena.  …Read More

Market Melt-Up: Caution – Sentiment in Nosebleed Territory

Since my last column, the Dow Jones Industrial Average (DJIA) did indeed hit 20,000 and has since gone well beyond.  Most of the post-election run-up initially appeared to have occurred in the November 8th to December 20th period when the index went from 18,333 to 19,975, a rise of 1,642 points (7.9%).  Over the next 44 days, until February 2, the DJIA was flat, actually losing 116 points.  But since …Read More