Is the US economy good? Bad? Both?

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Augustus
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Is the US economy good? Bad? Both?

Post by Augustus » Fri Sep 07, 2018 1:02 pm

I am very confused, my gut says that we've over extended and over leveraged, and that it's going to result in a contraction, especially because interest rates are expected to keep rising. But then I keep hearing how everything is amazing and profits are increasing and wages are increasing and unemployment is record low. Thoughts?

https://fred.stlouisfed.org/series/NCBDBIQ027S - nonfinancial industry corporate debt
https://www.newyorkfed.org/microeconomics/hhdc.html - consumer debt

Lucky C
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Re: Is the US economy good? Bad? Both?

Post by Lucky C » Fri Sep 07, 2018 1:44 pm

The economy is going to contract (eventually), and the economy has been expanding, are not contradictory statements.
Economic slowdowns and market tops->crashes->bottoms don't happen very quickly. They usually take a few years to play out. So it shouldn't be surprising for example if the economy in 2018 is great, 2019 is mediocre, 2020 is terrible, and 2021 is mediocre again / starting to recover.


trfie
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Re: Is the US economy good? Bad? Both?

Post by trfie » Fri Sep 07, 2018 4:24 pm

I'm sure there is going to be a massive crash, based on many things that people have pointed out, including myself. The problem is that the economy is so large and the timeframe so long that it is impossible (or at least very hard) to predict when it going to happen. It might be years away. Maybe it is 5-10 years away. So I think it makes more sense to make changes to one's portfolio instead of being exclusively out of the US stock market, eg.

IlliniDave
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Re: Is the US economy good? Bad? Both?

Post by IlliniDave » Fri Sep 07, 2018 5:12 pm

Depends on what you are looking for maybe. A lot of the right here, right now numbers are pretty good: unemployment, job creation, even some indication of rising wages. Inflation has risen but is still pretty tame.

One thing to keep in mind is that to have a substantial contraction, you pretty much have to have expansion leading into it (until the final apocalyptic descent maybe). So IMO you can simultaneously say the economy is doing well, and say we're headed for a recession.

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BRUTE
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Re: Is the US economy good? Bad? Both?

Post by BRUTE » Fri Sep 07, 2018 5:15 pm

the market can stay irrational longer than humans can sustain their shorts :D

Augustus
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Re: Is the US economy good? Bad? Both?

Post by Augustus » Fri Sep 07, 2018 5:30 pm

what's confounding me is that the "right here, right now" numbers as iDave put it keep getting better, or at least i keep reading about them getting better. but i suppose that's how it was in the last 2 bubbles as well, they kept getting better even though fundamentals were getting worse, right up until they were no longer getting better.

does anyone think we're going to continue seeing nonstop growth for the next 5-10 years? is that even possible? if that were the case, it'd be the longest bull run in history right?

IlliniDave
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Re: Is the US economy good? Bad? Both?

Post by IlliniDave » Fri Sep 07, 2018 5:51 pm

Augustus wrote:
Fri Sep 07, 2018 5:30 pm

does anyone think we're going to continue seeing nonstop growth for the next 5-10 years? is that even possible? if that were the case, it'd be the longest bull run in history right?
It's probably possible because the growth hasn't been all that high. You could find past years in which to drop the 2018 GDP growth numbers that would make them look like nothing special without much difficulty.

However, my personal guess is that it will not last that long.

trfie
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Re: Is the US economy good? Bad? Both?

Post by trfie » Sat Sep 08, 2018 7:28 pm

Augustus wrote:
Fri Sep 07, 2018 5:30 pm
what's confounding me is that the "right here, right now" numbers as iDave put it keep getting better, or at least i keep reading about them getting better. but i suppose that's how it was in the last 2 bubbles as well, they kept getting better even though fundamentals were getting worse, right up until they were no longer getting better.

does anyone think we're going to continue seeing nonstop growth for the next 5-10 years? is that even possible? if that were the case, it'd be the longest bull run in history right?
It's already the longest bull run in history.

No, I do not think it will be nonstop growth for the next 5-10 years. There's already been tremendously high debt the past 10-15 years, there is a limit to how long it can last. Plus state debt keeps going up, corporate debt is very high, individual savings is low, etc, etc. If none of those factors were the case (low debt, high consumer savings, etc), then yes, I could see continued growth for 5-10 more years.

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Hobbes
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Re: Is the US economy good? Bad? Both?

Post by Hobbes » Sun Sep 09, 2018 1:25 pm

Is the unemployment rate actually low though? Shadowstats is pegging it at 23%, which includes short and long term discouraged workers and those working in part-times jobs only because they cannot find full-time work.

RealPerson
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Re: Is the US economy good? Bad? Both?

Post by RealPerson » Sun Sep 09, 2018 1:59 pm

Hobbes wrote:
Sun Sep 09, 2018 1:25 pm
Is the unemployment rate actually low though? Shadowstats is pegging it at 23%, which includes short and long term discouraged workers and those working in part-times jobs only because they cannot find full-time work.
In my area employers have a very hard time finding any employees, including for full time jobs. If 23% are discouraged or involuntarily working only part time, how could this be? There are even sign up bonuses for mundane jobs that require no special skills. The hiring situation is even more challenging for skilled jobs. Where I live, anyone who wants a full time job can find one very easily. I have no reason to doubt the official unemployment rate. It matches the experiences of employers.

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Hobbes
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Re: Is the US economy good? Bad? Both?

Post by Hobbes » Sun Sep 09, 2018 2:38 pm

RealPerson wrote:
Sun Sep 09, 2018 1:59 pm
In my area employers have a very hard time finding any employees, including for full time jobs. If 23% are discouraged or involuntarily working only part time, how could this be? There are even sign up bonuses for mundane jobs that require no special skills. The hiring situation is even more challenging for skilled jobs. Where I live, anyone who wants a full time job can find one very easily. I have no reason to doubt the official unemployment rate. It matches the experiences of employers.
Where do you live? That sounds to me like your local job market may be good, but that doesn't really address the (overall) US unemployment rate. Also, for what it is worth, I personally know many college grads who cannot find full-time professional jobs in their fields.
Me thinks you're in a bit of a bubble :)

RealPerson
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Re: Is the US economy good? Bad? Both?

Post by RealPerson » Mon Sep 10, 2018 8:04 am

Hobbes wrote:
Sun Sep 09, 2018 2:38 pm
Where do you live? That sounds to me like your local job market may be good, but that doesn't really address the (overall) US unemployment rate. Also, for what it is worth, I personally know many college grads who cannot find full-time professional jobs in their fields.
Me thinks you're in a bit of a bubble :)
That is interesting. I don't doubt that there is a bubble created by 10 years (!) of nearly zero interest rates. All I can suggest to the college grads who can't find jobs is to look around, across state lines, and go to where the jobs are. They can enjoy the bubble wherever it is and as long as it lasts. I generally don't trust the accuracy of official unemployment stats, except in a bubble situation like we experience at the present time.

Stahlmann
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Re: Is the US economy good? Bad? Both?

Post by Stahlmann » Mon Sep 10, 2018 10:14 am

Posters boys and girls (today's udarniks) [of the biggest imperialist country of the world] are discussing its economy...
Hmm...

Mister Imperceptible
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Re: Is the US economy good? Bad? Both?

Post by Mister Imperceptible » Mon Sep 10, 2018 1:41 pm

@Stahlmann

I just looked up “Udarnik” and was amused by the Wikipedia definition. Although I have never been close to any “employee of the month” award! :lol:

https://en.m.wikipedia.org/wiki/Udarnik

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Re: Is the US economy good? Bad? Both?

Post by jacob » Fri Sep 14, 2018 10:48 am

https://www.nytimes.com/2018/09/14/opin ... y-gdp.html has interesting graphs.

I think the answer to the question comes down to individual situations. There's no disputing that the US financial markets are currently richly valued. Thus if your networth is largely composed of stocks---i.e. if you're wealthy or part of the FIRE(*) community---you're doing pretty well indeed. Standard consumers whose networth is largely non-existent or composed of home equity are not doing well.

Similar with wages. If your income is derived primarily from capital means (again the wealthy and FIRE), these are great times. However, real wages are once again down yoy despite the fact that GDP has been growing at a steady clip since 2009. So if you work for a living, especially if you're part of the 90% (so not a doctor, lawyer, or engineer), these are not great times.

Unemployment is down ... but the number of people not working is up. Wait what? Well, this is great news if you're FIRE'd. It's not great when low unemployment really just mean that people have managed to cover their expenses by holding down >=2 part time jobs while being unqualified to transition into a full-time position.

Tax breaks? Well, again, great if you own stocks because it translated into lots of buybacks and dividend hikes. Reducing the corporate tax rate instantly disappeared enormous unrealized tax liabilities and so effectively reevaluated the balance sheets. Nice!---if and only if you already held stocks. As for people who work for a living ... apparently it hasn't made much of a difference for those making around the median salary which BTW is $35,000/year! The biggest impact will probably come when people realize they should have changed their withholdings come tax season. There's some worry it'll turn into a shitshow.

In conclusion, the answer is: it depends on who you are.

(*) I think this is a substantial part of why FIRE is currently getting so much MSM exposure. We've received a material tailwind from a bubbling market over the past 9 years. Without this there would be far fewer [examples] who would be able to FIRE at this moment and thus less media interest.

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