As Biden sleeps through the Hamas invasion of Israel, that is nothing new. Biden is sleeping through a disastrous downturn in the economy and pretending that Bidenomics is working. It isn’t Joe!
The IBD/TIPP U.S. Economic Optimism Index sank to a 12-year low in October as confidence in the near-term economic outlook crashed to the lowest level in the poll’s history. The survey casts doubt on the Federal Reserve’s justification for turning more hawkish last month: robust consumer spending.
The overall IBD/TIPP U.S. Economic Optimism Index dived 6.9 points to 36.3, the lowest since August 2011. Readings below the neutral 50 level reflect pessimism. The 6-month economic outlook index cratered 9.6 points to 28.7, a record low since the IBD/TIPP Poll began in early 2001.
That means the outlook suddenly appears worse than it was at the depths of the dot-com crash, the great financial crisis and the coronavirus pandemic.
And on the personal savings front, net savings as a percentage of gross national income was negative for the second straight quarter.
Sleepy Joe, wake up! The US economy is slowing down REALLY fast!
US Treasury yields are a runaway train. The 30-year Treasury yield is soaring and rose above 5% … again. First time since 2007, just before the financial crisis and The Great Recession.
After last month’s (September) stunning payrolls report, when in our post-mortem we revealed not only a year full of monthly downward data revisions, but also collapse in tull-time jobs and surge in part-time jobs, as well as the worst unadjusted August payrolls since the great recession, we thought that nothing could shock us any more. And then we got the September jobs report.
We won’t spend too much time dissecting the report since regular readers are all too aware of the same old “upward goalseeking” tactics used by the BLS, so here are the highlights.
First, the 336K jump in headline payrolls – the biggest since January – was stunning when considering that it was not only above the highest Wall Street estimate but was a 6-sigma beat to expectations.
How is it possible to get such an outlier print to not only trends but expectations? Let’s try to answer that question.
If, as the BLS claims, in September the jobs market suddenly reversed a year of declines, surely there will be some qualitative validations to this quantitative outlier, right? Unfortunately, looking through the supporting evidence we don’t find any justification to the BLS exuberance.
Let’s start with the Household survey: here instead of a number anywhere close to the 336K jobs gained (as the far less accurate Establishment survey reports), the number of newly employed workers was just 86K, the lowest since May, and the second lowest of 2023!
And since the number of unemployed workers also rose to 6.360 million, the highest number since January 2022, the unemployment rate was sticky at 3.8%, and refused to drop to 3.7% as consensus had expected.
How about the Establishment survey? Well, here too, things stink. Yes, the headline surge was great, but the question here is how much of that was purely seasonals.
The official adjusted data showed this Leisure and Hospitality added a whopping +96k jobs. But unadjusted data showed that the sector lost 466k jobs in Sep. This means that the unadjusted private sector payrolls was -399!
Wait, if unadjusted total payrolls rose by 585K and yet private payrolls dropped by 399K, that means that… you got it: in September, all of the unadjusted jobs came from – drumroll – the government, which added a whopping 984K jobs(mostly teachers).
Translation: for yet another month all the strength in the Establishment was thanks to seasonals and various plugs that made the total number much stronger.
And now, let’s turn again to the much more detailed and accurate Household Survey, where we find the BLS back to its old tricks again.
First, as we pointed out earlier, despite the alleged quantitative surge, the quality of the jobs was anything but good. In fact, looking at the infamous table A-9 of the employment report, reveals that in September, a seasonally adjusted breakdown of jobs shows that part-time workers accounted for the entire increase, rising by 151K; as for full-time workers? Well, for yet another month, this number dropped, sliding by 22K in September.
Indeed, as shown in the chart below, while part-time workers rose for the third consecutive month to 27.336 million,and the highest since January, full-time workers have decline for three straight months, and at 134.167 million, this was the lowest number going back to February!
But hold on, you say, why use Seasonally Adjusted number when we already noted above that there continue to be chronic issues with the BLS’ seasonal adjustments in the post-covid era. True, so let’s use unadjusted numbers instead. What do we get?
Well, we get the following whopper: in September, the number of unadjusted full-time workers collapsed by 885K. This was the biggest monthly drop since – drumroll- April 2020 when the economy was shut down!
And if full-time workers plunged, that must mean that part-timers exploded, right? Why yes, they did: by 1.127 million in one month to be precise, and at 27.109 million the number of part-time workers was the highest since April.
Finally, let’s not forget the number of multiple jobholders: those unlucky souls which have to work not one but two (or more) jobs to make ends meet under Bidenomics. Also, multiple jobholders (which are measured by the Household Survey) are double, and triple- counted when it comes to the Establishment Survey. So how did thy do in September? Well, on a seasonally adjusted basis, the number increased by 123K to 8.151 million, the highest since January 2020. As for the much more accurate, unadjusted number, well that soared from 7.778 million to 8.146 million, an increase of 368K, or more than all the 336K payrolls reported by the establishment survey.
In other words, all of the job gains in September were either from part-time workers or multiple jobholders forced to get another job in addition to their current one, and thus be counted by the BLS as two distinct jobs (or more). One final observation on the multiple jobholders: in September, the subset of multiple jobholders who held both a primary and secondary full-time job just hit an all time high.
Visually, this is what September’s “stunning” jobs report really looked like.
Source for everything: BLS, but one needs to do some actual work to get a sense of what is really going on.
And on top of the blood curdling jobs report, mortgage rates rates and are up 171% under Bidenomics.
And then we have Hillary Clinton pulling a Pol Pot and suggesting de-programming of Trump supporters like in the movie “The Killing Fields.” Pol Clinton??
Hey Bartender! The leading employment gain under Bidenomics was … low paying leisure and hospitality jobs at 96k jobs added.
The US added a whopping 336K jobs, the highest monthly increase since January. This is surprising given that the ADP report was so weak.
And the BLS decided to UPWARD revised past numbers. The BLS revised not only August but also July higher: the change in total nonfarm payroll employment for July was revised up by 79,000, from +157,000 to +236,000, and the change for August was revised up by 40,000, from +187,000 to +227,000. With these revisions, employment in July and August combined is 119,000 higher than previously reported.
Meanwhile wage growth continued to cool, and in September average hourly earnings increased 0.2%, below the 0.3% expected, and resulted in a 4.2% increase YoY, down from 4.3% in August…
… as a result of a big bump in lower paying jobs.
But perhaps the most remarkable divergence in the report is that with headline payrolls surging 336K (establishment survey), the Household Survey indicated that the pain continues, as the number of people employed not only rose by less than 100K (86K to be precise), but it was all part-time workers, which increased by 151K. Full-time workers? Why, they dropped by 22K, and the lowest since February.
Leisure and hospitality added 96,000 jobs in September, above the average monthly gain of 61,000 over the prior 12 months.
But the jobs report highlights Bidenomics. Lots of government jobs and the private sector getting crushed. +1 million government jobs, -400K non-government.
Hmm. How will The Federal Reserve view this report? Focus on the red-hot headline gain of 336k job added or the fact that it is mostly part-time jobs added? Odds of a rate HIKE rise to 44% after September jobs report and Fed PAUSE expectations have been extended.
After the jobs report, the US Treasury 10Y yield soared.
The 10-year Treasury yield has risen dramatically under Biden’s Reign of (Economic) Error.
Coping with inflation caused by Federal spending (and excessive Fed stimulus) is difficult and eventually consumer max out their credit cards. Like now!
Credit card useage nosedived by -10.8% in September, according to Citi. This is the fifth straight month of spending decleration.
Leading the decline was electronics. The leader on the positive sign was … jewelry?? Hey, I thought mobs of people were robbing stores because they were hungry!!
In terms of bank credit, rising rates to fight inflation, bank credit growth Bank credit growth has been negative for nine straigth weeks.
Then we have unrealized losses on bank balance sheets, expected to surge to $700 billion with soaring interest rates.
On a different note, Homeland “Security” head Mayorkas now claims the US has to build a wall to combat the out-of-control immigration on the southern border. Wait! I thought Mayorkas and Congressional members (angrily) claim the border was secure! It doesn’t matter, Mayorkas is simply signalling to blue states that he will build a wall. But how fast is a different question.
The massive Federal government and Federal Reserve Covid stimulus has worn out and we are left with a sagging jobs report and soaring credit card delinquencies.
After ADP’s reports printed almost perfectly in line with BLS last month (+177k vs +187k), all eyes are on today’s print, which was expected to decline to +150k. Instead it plunged to just +89k – that is the lowest jobs addition since Jan 2021.
Credit Card Delinquency rates at small banks have reached 7.51%, the highest level ever recorded.
Fear the talking Fed! Various Fed Presidents are talking this week and when they do. WATCH OUT!
The latest fear mongering will be … inflation is persistent and they might have to keeep raising rates.
The two-year Treasury remains above 5% and the 10Y-2Y T-Curve remains inverted.
Treasury 30-year yield rose to 4.856%, HIGHEST SINCE 2007.
The likelhood of another Fed rate hike is growing.
While inflation is cooling (but still elevated), The Fed could choose to rate hikes again.
Treaury yields have decoupled from US manufacturing data.
Best picture of Lael Brainard, Director of the National Economic Council of the United States and former Federal Reserve member and talking head. Or screaming head.
Wasting away again with Bidenomics, code for massive Federal subsidies to green energy donors. And incentives to buy impractical EVs. Imagine in an emergency and your car only goes 200 miles (and then you have to wait for an available charger to come open). Well, the top 1% are doing fine. But the bottom 80% of households by income are seeing rapid deplection of savings to cope with the rising costs of Bidenomics.
And then we have shrinking home affordability, now at a record low.
We know that the horribly-flawed Bidenomics doesn’t work, unless you are a large corporate donor in green energy. For the rest, particulary small companies, Bidenomics is a total bust.
Under Bidenomics (the Soviet-style command economy), small companies are paying reconrd interest expense WITHOUT a major boost from interest income. Well, ain’t that a kick in the head … to most companies.
Pension funds that invested in “safe” MBS are finding that MBS isn’t so safe under inflation.
Look at the 10Y-2Y yield curve since Covid. I had a slight surge by March 2021, then has flattened then inverted as The Fed’s balance sheet still remains above $8 trillion.
Face it. The Biden Administration and Congress are owned by BIG corporate interests. BIG defense, BIG tech. BIG Pharma, BIG banking, BIG auto, BIG Union, BIG anything.
No wonder the Obamas were seen snorkeling in The Med with Tom Hanks and Steven Spielberg. BIG Hollywood!
That has certainly been the case with US labor data, where as we first reported last month, every single monthly payrolls print in 2023 has been revised lower (see chart below), a 12-sigma probability and virtually impossible unless there was political pressure to massage the data higher initially and then revise it lower when nobody is looking.
But the BLS is not done: as we reported last week, besides the now traditional one-month lookback revisions the ridiculously high monthly payrolls prints accumulated over the past year will also be slowly but surely revised gradually lower at annual benchmark revisions for years to come. As Morgan Stanley chief US economist Ellen Zentner explained (full note available to pro subscribers)…
Payrolls get revised too, and we expect a downward revision. Payrolls have an annual benchmark revision that is published in February each year. The revision adjusts the level of payrolls through March of the prior year. For example, a new revision will be published in Feb-24, adjusting payroll levels from April-22 to Mar-23. And a preliminary estimation of the upcoming revision points to a decrease in payroll YoY% growth rates of -0.2pp.
But while downward payroll revisions under Bidenomics are as certain as death and taxes, what we wanted to discuss here are the just as striking downward revisions to US consumption which hit this morning alongside the comprehensive once every-five-years historical revisions to GDP. As a reminder:
Today’s release presents results from the comprehensive update of the National Economic Accounts (NEAs), which include the National Income and Product Accounts (NIPAs) and the Industry Economic Accounts (IEAs). The update includes revised statistics for GDP, GDP by industry, GDI, and their major components. Current-dollar measures of GDP and related components are revised from the first quarter of 2013 through the first quarter of 2023. GDI and selected income components are revised from the first quarter of 1979 through the first quarter of 2023.
Earlier today we already noted the disaster that was Q2 Personal Consumption: instead of the 1.7% unchanged print from the second estimate of Q2 GDP, the final number was a dire 0.8%, a 9-sigma miss to estimates…
… and the worst quarterly increase since the Covid collapse in Q2 2020.
But what about other historical data? After all today’s revision impacted all data from Q1 2013? Therein, as the bard says, lies the rub.
Let’s start with personal consumption, and compare the latest post-revision current data (link) with the most comprehensive pre-revision data as of last month (link). It should come as no surprise to anyone that with the (slight) exception of just Q4 2022, personal consumption in every single quarter since the start of 2022 – when the Fed aggressively started tightening and hiked rates by the most since Volcker – has been revised lower, and in some cases dramatically so.
Bloomberg also picks up on the GDP revision and looking at revisions to the historical data, writes that “the pandemic contraction is seen as being a bit less severe than previously thought: GDP is now reckoned to have dropped at a 28% annual clip in the second quarter of 2020, instead by 29.9%, as the government shut down swathes of the economy to fight the spread of the virus. But the recovery since then has been somewhat slower, according to the update. Growth last year was revised to 1.9% from 2.1%.” And of all GDP components, consumption was the weakest.
So not only was the Fed hiking at a time when personal consumption would grow much less period to period than previously expected, but the US economy was generally weaker than previously expected (as discussed here).
There’s more.
When looking at the composition of the US household’s income statement – the summary of economic accounts – we find just what we had expected: US savings were in fact far lower than previously expected.
… and indeed as the BEA chart below shows, Americans stashed away an average 8.3% of their disposable income annually from 2017 through 2022, down from a previously estimated 9.4%.
The reduction stems from an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts. Additionally, as Bloomberg notes, much of the reduction in personal savings seen in the revised data occurred prior to the pandemic, so its implications for how much extra cash Americans may feel they still have now is not clear cut.
Whatever the reason for the statistical adjustment, however, one can say goodbye to even the faintest speculation that US households have any excess savings left… why they don’t, of course, because even when using the previous methodology which artificially inflated total savings, JPM calculated that excess savings had already run out…
… which means that if Q3 GDP was bad and consumption was “revised” sharply lower (odd how economic data is never revised higher under Joe BIden), Q4 – when savings are virtually non-existant – and where we also get the i) return of student loan payments; ii) the UAW strike; iii) the government shutdown and iv) oil at almost $100 and gasoline at one year highs, is about to fall off a cliff.
Yes, Bidenomics is a form of Brawdo, the economic mutilator!
Confounded Interest - Anthony B. Sanders 
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