Posted on 06/26/2022 2:14:26 PM PDT by blam
While everyone has been transfixed by the unexpected drop in the UMich 5/10 year inflation expectations, which dropped to 3.1% from a preliminary 3.3% print, which means that the alarm signal that prompted the Fed to panic last week and prompted the market to aggressively reprice (lower) the odds of future Fed hikes…
… the report also showed the lowest consumer sentiment reading in the 70-year history of the series, realistically speaking a far more troubling indicator than what a small group of respondents think inflation will be in 10 years (spoiler alert, it will be much higher than they expect).
So as Friday’s Chart of the Day titled “When not if…” from Deutsche Bank’s Jim Reid (excerpted from his latest chartbook, available to professional subs) shows, this is remarkable when the unemployment rate is so low. We have never seen such a divergence between the two series. The full survey shows that inflationary pressures are the main reason confidence is so low.
Eyeballing the chart, while sentiment is clearly more volatile than unemployment, the peaks in sentiment and lows in unemployment tend to broadly coincide. Reid circled the main occasions where sentiment has notably led unemployment and, interestingly, they were all between the late 1960s and the late 1970s when inflation structurally picked up. All of those situations led to a recession and a sharp turn higher in unemployment. Indeed, if sentiment is the leading indicator and if unempolyment is set to soar to 14%, we are about to have a monster recession on out hands.
As Reud concludes, “with unemployment currently so low it might still take a while for a recession to play out it’s almost certainly when not if. I would love to have a more optimistic message to deliver. If you have one please email me as I would be only too happy to be proved wrong and persuaded otherwise. Hopefully my mail box will be so full that I’ll be very bullish on the economy by Monday.”
IMF Slashes US Growth Forecast But Claims Recession Will Be ‘Narrowly Avoided’
"The IMF seems to be painting a future economy in which the rest of the world is in crisis, but the US will be just fine. And, like we saw with their inflation predictions, this fanciful notion should be taken with a grain of salt."
Remain calm, all is well.
I’ve got a reasonable Income Tax Refund coming to me, if the IRS ever gets off their asses. But I won’t be putting it into the retail economy. I’m saving it to pay for heating oil for the coming winter.
Rejoice, comrades! Your monthly chocolate ration has been increased from 100 grams to 50! Have another slug of victory Gin!
My buying power has been hit hard by Biden’s Donkey Team, but things are still booming in my part of Florida.
Said the Titanic Captain.
s Reud concludes, “with unemployment currently so low it might still take a while for a recession to play out it’s almost certainly when not if.
We are in an economic time never seen before. Lack of economic activity is not being driven by a lack of demand but a politically driven artificial lack of supply. Demand is as high as ever, but the elites are doing everything they can to keep supply from happening; from creating labor shortages, to rising prices, to destroying manufacturing and production, to limiting energy supplies, etc.
We are under attack.
Historic Bayley's Seafood Restaurant Closing Its Doors
"We just can't get another cook and I'm too old. I'm 77 years old, I don't need to be back there trying to cook," said Bill Bayley. "We don't have but one waitress. We ran a sign out here for about 3 months before we got the first application."
Why is everyone upset? There will be plenty of weed and porn. /S
Things were so dismal under the Obama years. Things appeared in black and white, like an old movie. Trump got in and things were in color again. Now we are back to the old movies . . Sigh.
Kids think they can make a living trading crypto and by making youtube and only fans videos instead of by putting in an honest day’s work.
Why does it have to be a monster?
Why couldn’t it be a mermaid?
It’s still a bust, but you don’t mind so much.
“Is this a bust or what?
You nailed it.
There used to be an old joke about how in the future, everyone would have a job delivering pizza to everyone else.
The details differ, but we’ve come pretty close to building that sort of economy. And it doesn’t work. Which is why this sort of thing was the basis of the old joke.
Unemployment is low, according to the BLS. The figure we should be concerned about is the labor participation rate. Trump had good unemployment and excellent labor participation prior to the Democrat COVID shutdowns. Biden talks about how good the economy is doing and the millions of jobs he has created. That's complete bullshit, it's just people returning to their jobs. Given vaccine mandates there are some people that will never return. Take the airline industry for instance. They are canceling flights and cutting routes because they don't have enough staff. They are not coming back.
By the way, high employment as little to do with recession. Inflation has a greater impact. High unemployment will follow recession. We are headed for recession as soon as GDP numbers come out in July. Unemployment will begin increasing this autumn. Inflation will be the one thing that will hold fairly steady, unless there is something unexpected like a hurricane in the Gulf of Mexico that shutters oil rigs or Biden tries to something galactically stupid. Everything Biden touches turns to shit.
The figure we should be concerned about is the labor participation rate.
https://www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm
Folks, here is the labor participation rate
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