Still Flying Blind--Part II

 Financial FAQs

“Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment. And while November's slowdown was broad-based, it was led by a pullback among small businesses.” ADP

wallpaperaccess.com

We know why consumer confidence has plunged to a new post-pandemic low. We have no news of current economic conditions to guide consumers and investors, much less what may happen next, so the U.S. economy is still flying blind.

The November unemployment report comes out on December 16, for instance, (skipping October’s report) after the Fed’s FOMC meet that decides whether another rate cut is appropriate, so we have only the ‘unofficial’ ADP private payrolls report on employment that showed -32,000 private payrolls were lost in November.

The goods sector of the U.S. economy, including Construction and Manufacturing, lost -19,000 jobs. The service sector lost -12,000 overall, though Education, Health and Leisure activities added +46,000 jobs in the sector.

September’s last ‘official’ unemployment report with 119,000 payroll jobs was ok, but that was before the government lock down. And the U.S. economy had averaged just 38,600 new jobs since April and the tariff announcements.

Dr. Nela Richardson Chief Economist, ADP said it best in the survey. Small businesses aren’t hiring because of the uncertain tariffs, since some 90 percent of small businesses import their products that are sold in the U.S.

September retail sales also reported before the shutdown. Retail sales are growing more dependent on a smaller group of consumers. The top 10% of earners in the U.S. accounted for nearly 50% of spending in the second quarter, the highest level it’s been since this data first started being collected in 1989, according to Moody’s Analytics.

And the poor ISM manufacturing index numbers show the manufacturing sector has been contracting for the past nine months.

“A closely followed manufacturing index fell to a four-month low of 48.2% in November from 48.7% in the prior month, the Institute for Supply Management said Monday. Any number below 50% signals contraction,.” MarketWatch

The Federal Reserve will probably lower interest rates another -0.25%, but next year is a rate tossup because of the inflation worries, as almost no tariff agreements have been ratified by congress and signed.

We still have a lot of postponed economic data from the government shutdown, in other words, such as personal consumption and spending data (PCE) that the Fed prefers to measure inflation. We know that annual consumer CPI inflation had jumped to 3% in September, also before the shutdown, and will probably go higher as the tariff costs are passed on to consumers and businesses.

It’s obvious that we are living in uncertain times, and the old Republican playbook of tax cuts combined with DOGE and Project 25 slashing of government benefits are hurting the 90 percent of Americans still living paycheck to paycheck, as I’ve said.

Is that enough to cause a recession, in spite of the stock market’s boost supporting the top 10 percent of Americans that can still afford more than the basic necessities?

It won’t take much to tip US into a recession. The data we need to predict the future will eventually come out. Then we will know if not only the manufacturing sector is contracting—e.g., employment, capital expenditures, and personal income—which are the other major components that determine whether we are in a recession.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Make America Weak?

 

Financial FAQs

“This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Franklin Delano Rooselvelt

theguardian.com

The Democrat’s election sweep on November 2 is proving that American voters  heeded President Roosevelt’s famous warning at his first inaugural address, that the Democrats' paralysis after the loss to Trump II is over and fear, the greatest enemy of Democracy, can be conquered.

The November 2 elections showed just how illusory were those fears that Donald Trump and Republicans wanted Americans to believe, that the largest, most prosperous country in the world had grown weak. Americans were now in danger and only he and his oligarchs could save US.

In fact, Donald Trump and the Republican Party have been attempting to weaken everything that makes America the oldest constitutional democracy since his first day in office.

He began by slashing of essential government services via Elon Musk’s DOGE computer hackers (such as social security, Medicare, Medicare) that benefit all Americans, the attempt to eliminate the the Department of Education that supports our basic universal K-12 and early childhood educational systems, while picking the most unqualified to run the FBI, Department of Homeland Services, and Health and Human Services so that they are no longer fully functional. 

The brutal roundup of undocumented immigrants, whether they have a criminal record, are decimating the ranks of workers that fill agricultural, manufacturing, and service sector jobs needed to maintain economic growth.

The biggest financial threat to ordinary Americans are the rising prices on basic necessities that most Americans depend on due to tariff rates now at Great Depression levels, impoverishing the majority of Americans that live from paycheck-to-paycheck.

It’s become obvious that the Trump administration’s intent has been to instill as much fear as possible in the most vulnerable Americans that the federal government won’t work for them and only Trump and his oligarchs can same them.

But the recent election and huge protests at the last No Kings rallies are a sign that millions of Americans haven’t been cowed or paralyzed.

In fact, they have said, as did Howard Beale, the News Anchor in the movie Network, “I’m as mad as hell and not going to take this anymore!”

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Whose Inflation Is It?

Financial FAQs

“Still, despite multiple offsetting drivers, the tariff shock is further dimming already lackluster growth prospects. We expect a slowdown in the second half of this year, with only a partial recovery in 2026, and, compared to last October’s projections, inflation is expected to be persistently higher. Even in the United States, growth is weaker and inflation higher than we projected last year—hallmarks of a negative supply shock.” IMF Global Economic Outlook 2025

FREDcpi

No one wants to admit who is responsible for the sharp rise in consumer prices since April 2. Democrats and the Biden administration had worked to bring the Consumer Price Index (CPI) portrayed in the above graph down to 2.3% from its high of 9% that occurred in 2023 from the COVID-19 pandemic.

But it began to rise again in this April at the same time that Trump announced retaliatory tariffs on the rest of the world. Republicans say the inflation was caused by Biden’s massive government spending programs that sped up the COVID-19 pandemic recovery.

Most economists maintain that the inflation spike was caused in large part because of the supply shortages during the pandemic. President Trump’s tariff war on imports from the rest of the world that he announced on April 2 exacerbated the product shortages as exporters scrambled to find cheaper supply routes to avoid the higher tariffs.

Add to this the looming worker shortage from tighter immigration policies that are shrinking the foreign-born labor supply—another negative supply shock on top of that from tariffs—that is beginning to affect labor productivity.

The International Monetary Fund (IMF) in its latest Global Economic Outlook report says both the tariffs and a looming worker shortage are “hallmarks of a negative supply shock” that will eventually slow down world economic growth.

China is now restricting the export of rare earth minerals, for which Trump has threatened to add an additional 100 percent tariff on China’s exports to US. And the government shutdown will only make things worse in closing down the statistical departments that tell us where we are and might be in six months.

“Overall, despite a steady first half, the outlook remains fragile, and risks remain tilted to the downside,” reports the IMF. “The main risk is that tariffs may increase further from renewed and unresolved trade tensions, which, coupled with supply chain disruptions, could lower global output by 0.3 percent next year. Apart from this, four simmering downside risks are especially worrying.”

What are they? U.S. financial markets are overinvested in AI with little to show for it, while AI is already causing white-collar layoffs, exacerbating the job losses incurred by the ICE roundup of undocumented immigrants.

And we have a record $39 trillion federal debt weighing on the credit markets that is competing with the private capital needed for new plants and equipment investment.

The Trump administration is vainly attempting to equate the record tariff rates, now at Great Depression levels, let us not forget, with some promised domestic industrial revival.

And Trump wants an easy money Federal Reserve to help grease its wheels. How do you think interest rates and inflation will respond to easier credit? The same way inflation and interest rates responded to Joe Biden’s New, New Deal?

We can’t borrow our way out of this debt mess with tax cuts for the wealthiest.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

 

Do Job Cuts = Recession?

 Popular Economics Weekly

“I don’t see any kind of well-thought-out, comprehensive strategy coming out of the White House,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, a nonpartisan forecasting firm.

What is the White House strategy? Is it based on the campaign promises to bring down inflation on “Day 1”, eliminate waste and fraud, and cut regulations that impede new investments, such as in AI?

The White House to date is attempting to explain why it hasn’t developed a strategy. Treasury Secretary Scott Bessent opined that,

“The market and the economy have just become hooked, and we’ve become addicted to this government spending, and there’s going to be a detox period. There’s going to be a detox,” Bessent, a former hedge-fund manager, said during a CNBC interview.

This description of a “detox” period is alarming, because the term has nothing to do with an economic plan, or anything else, but in fact means the Trump administration is hinting that a recession may be required to wean US off what they deem as too many government services that benefit ordinary Americans rather than the Oligarchs that have jumped onto the Trump/Musk bandwagon.

The wet dream of Republicans and conservatives has historically been to downsize government to little more than military defense. That’s why Trump has targeted USAID and the Department of Education, as well as cuts to social security, Medicare, and Medicaid.

Douglas Holtz-Eakin, a former (Republican) director of the Congressional Budget Office, said it was a fine sentiment for a Treasury secretary to want to reduce government spending but noted that there was no GOP plan in sight to accomplish this goal in any sustainable way, according to MarketWatch.

FREDfederalspending%GDP

Part of the problem in downsizing government is that it’s extremely difficult to bring federal government spending below 20 percent of Gross Domestic Product as portrayed in the above FRED historical graph dating from 2010. Spending surged above that level only twice to aid recoveries from the Great Recession and COVID pandemic.

Part of that surge was the Biden administration’s new, New Deal legislation that has already brought 700,000 manufacturing jobs home in the CHIPS, Infrastructure and Inflation Reduction Acts.

These were public/private investments that resulted in the US having the fastest economic recovery from COVID-19 in the developed world.

Trumps says he also wants to bring manufacturing jobs home with the trade tariffs. But his single-minded emphasis on tariffs against friend or foe without negotiating up front will increase inflation, largely because it will be reciprocated, launching a trade war.

And rather than eliminating waste and fraud, the DOGE firings are downsizing or eliminating departments and agencies that make it work—such as the FAA, Energy Department, VA and even social security—which will do exactly the opposite—make us less safe.

“It all seems to be very capricious,” continued Baumohl, “and I think this has been of great concern, not just to U.S. and foreign investors, but certainly to consumers, and we’ve seen that in the abrupt decline in confidence, which is now showing up in in their spending patterns. Once consumers start to cut back, there is nothing that the government can do to make sure that the economy keeps out of recession, because we’re talking about 70% of all economic activity.”

Will such a strategy, or lack of it, work? American consumers are already starting to give the final word. The University of Michigan’s consumer sentiment survey showed consumers becoming even more pessimistic about their future.

“Consumer sentiment slid another 11% this month, with declines seen consistently across all groups by age, education, income, wealth, political affiliations, and geographic regions. Sentiment has now fallen for three consecutive months and is currently down 22% from December 2024.” said Survey Director Joanne Hsu.

It looks like the Trump/Musk administration doesn’t want Americans to know what they are really up to, and it is leading to the wholesale destruction of the U.S. economy.

It will take more than picketing Tesla factories and dealerships for Americans to prevent what is sure to become a recession from happening.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen