Most commentators viewed the February jobs report released on March 7 as good news, indicating that the labor market is on a favorable growth path. A more careful reading shows that employment actually fell—as it has in four out of the past six months and in more than one-third of the months during the past two years. ( LINK)
I speculated in mid-December, based on the early indications of how the holiday retail sales season was going, that the economy may have hit a wall in November. I was basing this on my dissection of new and existing home sales data and on analysis of monthly auto sales data. We had good weather for most of the summer through December and interest rates had started to retrace their early summer spike higher, so neither the weather nor interest rates should have been a factor at all with the decline in housing/auto sales I was seeing in the data starting in July/August.
But as I was analyzing the month to month sequential data for housing and auto sales, it was clear to me that the economy had started to really slow down. Sales volumes as measured on a month to month basis, as opposed to the year over year comparisons reported and promoted by the media and Wall Street, were declining ex-seasonal factors. And both housing and auto inventories started to move higher. As we have seen since last year, auto inventories are the highest they’ve been since 2009 (LINK). Moreover, as has now been confirmed, holiday retail sales were bordering on catastrophically bad.
Sorry CNBC, Bloomberg, Fox News and Wall Street but the reason for the slowdown is not the weather. The real reason is the structural deterioration in the income and wealth of the middle class. Real disposable income per capital dropped from $37,265 in 2012 Q4 to $36,941 in 2013 Q4. And those numbers do not include the additional expense/person for Obamacare that will phase in this year, nor do they include the fact that the price of a gallon of gas is the highest it’s ever been for this time of year. In addition, the savings rate plummeted 16% between September 2013 and January 2014 (link for both disposable income and savings rate data). In other words, the ability of the middle class to spend, consume and buy new homes and cars is quickly declining.
If you read that link from the Wall St. Journal at the top of the page after the header quote, you’ll see that jobs data as reported and consumed by the public is total nonsense and that the economy is actually losing jobs. And that’s why it’s likely that the real economy hit a wall in November 2013. By the end of 2014, the National Bureau of Economic Research will likely have announced that the U.S economy entered a recession in the first half of 2014.