We may well be on the front end of a recession, as the economic storm clouds darken even more and that's the subject of the riff. With today's terrible jobs report and another big smackdown of stocks, it certainly looks like the U.S. economy is standing on the front-end of a recession.
The economic storm clouds continue to darken. Recession indicators are proliferating. Here's one: the unemployment rate has moved up to 4.3% from its low of 3.4% last year. Some economists believe that when the 3-month average unemployment rate rises above the 3-month average rate in the prior year, that's a recession signal.
So, what you get is: last year, the lowest 3-month average rate was 3.5%. Today, it's jumped up to 4.1%. Again, those are 3-month smoothing techniques, but it tells a very disappointing story. Besides, the rising unemployment rate in July, 352,000 were reported as unemployed. That's the biggest number in a long time.
WHICH INDUSTRIES HIRED THE MOST WORKERS IN JULY?
The small business household employment level increased a scant 57,000. On the corporate side, private payrolls rose only 97,000 -- way below expectations and another big recession threat indicator is a drop in overall hours worked, and an even bigger drop in manufacturing hours worked. This comes directly after yesterday's recession-prone manufacturing report from the Institute of Supply Managers. There's more evidence that a housing recession is deepening, and consumer confidence has been in the dumps for quite some time.
We can say with certainty that a recession has arrived when the levels of income, jobs, industrial production, and total retail sales begin falling. That's the classic recession definition from the NBER, National Bureau of Economic Research, but that has not happened yet.
The Biden-Harris administration has already suffered at least a mini-recession in the first half of 2022, when skyrocketing 9% inflation drove GDP down for two consecutive quarters and, of course, the soft underbelly of Bidenomics (now Kamalanomics?) is the ongoing affordability crisis where the level of consumer prices has surged 20% during their term.
The year-to-year change in the CPI has gone from 9% to 3%, but tell that to middle-class working folks sitting around their kitchen table trying to figure out how to buy groceries, gasoline, pay insurance costs, and afford day-to-day essential consumer goods and these consumer price numbers no longer include high borrowing costs for mortgages, car insurance, and today's 20% to 25% credit cards.
Meanwhile, all the liberals want the Fed to slash their interest rate targets to avoid a recession, but Fed policy changes in August or September wouldn't impact the economy for at least a year and, meanwhile, the plunge in market bond yields looks like a coincident indicator of recession, even while lower interest costs are welcome.
If you take a look at what Kamala Harris seems to be promoting, she wants the Fed to cut their interest rates, but meanwhile she wants to put into place huge tax hikes and keep up the over-regulation of business and energy. You know what you get out of that? Inflationary recession. An easy-money Fed increases demand while tax and regulatory penalties reduce production supply, but you're never going to believe this folks, Kamala’s people are actually blaming Trump for this downturn -- 4 years after he’s left office.
That’s even better than she doesn't believe in a ban on fracking. Trump on the other hand is much smarter. He wants major tax cuts and regulatory rollbacks to make it easier and more productive for businesses to produce and bring down energy costs. That'll increase the supply of goods, curb the inflation rate and generate a tremendous economic boom. So, folks, tighten your belt for the moment, but help is on the way. That's the riff.
This article is adapted from Larry Kudlow’s opening commentary on the August 2, 2024, edition of "Kudlow."
