Rosy scenario gets tangled up in reality.
The rout in Chinese stocks, the deteriorating Chinese economy, the subsequent rout in US stocks, and nagging questions about the US economy – they all got blamed for the unceremonious collapse of the confidence Americans have in our rosy scenario.
It’s sinking in. Even NPR has been talking about it. Whatever you do, “don’t sell,” was their admonition today. Those kind of shows first thing in the morning don’t fit into our rosy scenario.
That scenario looked a lot rosier in early January, when after a long hard climb the economic confidence of Americans reached the highest level in the Index since Gallup started collecting the data on a weekly basis in 2008. At the time, Gallup credited lower gas prices for the miracle.
At +5 in January, the index wasn’t exactly wallowing in exuberance, given its theoretical range of +100 to -100 (it hit -65 during the Financial Crisis). But these folks don’t live in the Wall-Street economy. They struggle with their daily challenges in the real economy. And it’s tough out there.
Yet, even at that level in January, lousy as it was, it was practically exuberant compared to what it is today.
In February, the economic confidence began to zigzag south. At first, it looked like statistical noise, the normal volatility of weekly data. But month after month it got worse. And for the week ending August 23, which Gallup released today, the index dropped to -14. The culprit, according to Gallup:
Growing concerns about China, which devalued its currency and saw major losses in its stock market, led to a global stock sell-off, including in the U.S., where the Dow Jones declined by more than 500 points by market close on Friday.
However, the mayhem in these departments that has happened since Friday hasn’t made it into the index yet.
So the index has dropped back to where it had been in the week ending July 14, which had been the worst level since September:
But the most troubling part is simmering underneath the overall index. The index is a composite of two sub-indices: one tracks how Americans perceive current economic conditions; the other tracks how Americans see future economic conditions.
The current economic conditions index has been trending down gradually, and today’s reading remains stuck at the dreary -6, where it had been more or less since late May, with 24% of Americans saying the current economy is “excellent” or “good,” while 30% said it’s “poor.”
An interesting way of shedding light on the Fed’s designer economy: for 30% of Americans, it sucks.
But the real issue is outlook on what’s coming down the pike, the index for future economic conditions. And this time, the score plunged 6 points from an already very crummy -15 last week to -21 now, the lowest since July 2014, with only 37% of Americans saying the economy is “getting better,” and a whopping 58% saying it’s “getting worse”:
The chart is not exactly a propitious sign. It speaks of a process by which people, who’re working in the real economy and are struggling with everyday things, are looking around and are seeing increasingly ominous signs, and their economic outlook is getting hit. The chart speaks of an unraveling.
Gallup points at the source of this unraveling:
Now, with the Chinese economy showing signs of weakness, and its government responding by devaluing its currency, investors abroad are showing concern. The questions surrounding China’s economy appear to be a major reason for losses in the global markets, including in the U.S.
This hasn’t yet “greatly shaken” – as Gallup put it – Americans’ overall economic confidence, based on the slowly degrading current conditions index. But it has slammed into Americans’ economic outlook. And it’s likely to get worse:
The situation in China may continue to reverberate in the U.S., with U.S. stocks closing much lower on Monday and European markets starting the week with large drops. To the extent stock markets continue to suffer, particularly if this affects broader aspects of the economy, Americans’ confidence could be shaken further in the coming week.
But there may be more to it than just Chinese and US stocks. Many Americans don’t own stocks and don’t pay attention to stocks even if they do own them in their retirement accounts.
They care about job prospects, promotions, and incomes, which aren’t really going anywhere; and health care expenses, college expenses, housing costs, and the like, which are soaring. For many Americans, this economy is tough. And it has nothing to do with the collapse of stock market bubbles in China or in Germany or in the US or the devaluations of one or the other currency. Their deteriorating outlook is a reflection of their end of the real economy in the US.
And now even the stock market catches the blues. “Capitulation,” that’s what I’m hearing a lot, which is ironic. Read… This is when Bullard Usually Says the Fed Should Restart QE
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Many Americans in the Austin, Dallas, Denver, Los Angeles, San Francisco, Raleigh, Charlotte, Charleston, and Salt Lake City metro areas are quite optimistic, because business in those places is booming. Detroit, Camden, Buffalo, East St. Louis, and Albuquerque are experiencing a much different business climate, and, if the folks living there are not pessimistic, they must be on psychotropic drugs. The way Americans feel about their economic futures has a lot to do with where in America they live.
I live in a large coastal town in one of the Carolinas. During the liar-loan housing boom here (2002-2007), Chinese buffets were springing up everywhere. At lunchtime, those buffets were filled with Mexican drywallers, framers, sheet rockers, roofers, painters and cement foundation guys. It wasn’t so much that they were Asian food epicureans, as much as they loved a place where they could eat as much as they wanted for very little money. By 2010, after the housing bubble burst, few Mexicans could be found in Chinese buffets, and by 2011, there were only a few Asian buffets. still open.
In the last couple of years, the infill lots here have been filling up, former zombie subdivisions have been building out, and “luxury” apartment complexes have been springing up everywhere. Two years ago, the biggest Chinese buffet I’ve ever seen opened up, and Mexican subs are rocking that place at lunch, and their families have been rocking that place at dinner. So until the subs are no longer eat there, it’s summertime on the Carolina Coast, the rentals are full, and the cotton is high. However, if guys like Trump had their way, this place would become so 2010. Cheap labor construction is the high tide that raises all boats.
So we need to track the Chinese Buffet Index now. I wonder if Google Maps can show all Chinese buffets in each state. Good for gauging the real estate market. Rising # = buy, falling = sell.
Yes, commercial and multifamily construction picked up in my area somewhat over a year ago after a six year hiatus post-2008. I guess they got the false “all clear” signal, starting their build-up just in time for the next, even greater post-bubble crash.
Nah. I wouldn’t be counting Chinese buffets, or the number of Mexican laborers as an indicator. I would be watching the printing presses at the FED building.
I drove I-70 thru St. Louis today on my way out to Bridgeton to load. I don’t use this road much, but it goes thru the old manufacturing part of the city. The first harbinger that you’re crossing into the Twighlight Zone is the mouldering ruin of an old Armour packing plant, the Armour name perfectly built into the still standing smokestack. As you head west there is mile after mile of old brick warehouses, still standing proud but all windows gone like grinning skulls. Then rows of brick apartments that used to house the workers, skulls all, often graffiti covering the brickwork. All dead with only the skill of craftsmen long dead still holding them up. My gut twists at the sight. Is it any wonder people are not sanguine about our economic future? This is the same city from whence the pioneers started their onerous trips West, opening up the frontier. How shiny and new and glorious it must have looked in its heyday. How sad.
Beautifully written comment Julian… thanks for these ruminations inspired by dead souls of a dying Empire..
I’ve been to St. Louis and perused the vast old breweries (“Falstaff”) … and around them decaying neighborhoods now only occupied by a few brave (bohemian) urban homesteaders… then there are the abandoned churches and schools … being from a parochial neighborhood in Queens, NY I can recall the kinds of lives that were lived in these neighborhoods… It’s then that I get the haunting feeling of dead souls… former residents– especially children— it’s wistful and sad to see the dead souls.
People (and thus nations) change over time. One artist has a series called “course of empire” which tells the well known tale. My favorite bit of history from St Louis is the Eades bridge. PBS has a write up here:
http://www.pbs.org/wgbh/amex/eads/filmmore/pt.html
If you rent the movie from Netflix or some such, it is very enjoyable. My take away from this was a business one; if you can bring commercial activity through your entity (city, company, port, whatever) then prosperity follows. At the time, the music companies were actively resisting digital distribution (the steam boat companies) and digital distribution (railroads) were the obvious future. Eades was a genius to build the bridge, both in engineering terms and business terms.
If you want a great America again, we are going to have to do precisely that; put ourselves in the middle of commercial everything and the prosperity will follow. Exporting our jobs, growing a welfare state, etc isn’t going to get us there. But our average populace seems distracted, mentally weak, and of low moral character these days.
Regardless, growth has a cycle; things can’t grow forever. All we can do in the storyline is be well read and good stewards to our selves, our family, our community, and our country.
Regards,
Cooter
NOTE: Do not conflate “country” with “government”. Thanks. :-)
The problem is our ruling classes have become seemingly irremediably corrupt. We don’t have men like the heroes of Capitalism of old, like Andrew Carnegie and Henry Ford who took pride in using their economic might to strengthen their country and enrich the lives of their fellow citizens. Until those who control the economic resource of our nation commit themselves to investing in productivity, creating full gainful employment, investing in infrastructure and education, paying good salaries so that money can circulate through the economy fertilizing business everywhere and develop an ability for long range planning and a higher ideal than maximizing their short term profits to the exclusion of all else. Only then will we have a chance.
Agree 100%
The feds designer economy, that is a nice bit of control of the language Wolf. Some good things about the economy are 1/2 loafs of bread by cobblestone, young people can’t afford gas so there’s no cruising going on Fri sat nights. A lot of people are taking an interest in growing, preserving food and recycling.
Good comments above. Sometimes I fear I am old and out of touch. OK, I am old, but I try to keep current on economic matters. I do tend to be a glass half-full kind of guy, but having watched the great Wall Street hype machine since 1987, I have trouble believing anything I hear from the cheerleader squad. Could someone explain to me again how the US is ever again going to have a robust economy raising all ships by serving each other hamburgers and selling gadgets and apps?
I don’t think anyone that made the decision to offshore the well paying jobs even thought about the consequences. Or perhaps they did not care.
It was Bill Clinton, passing NAFTA, and it still looks like the Clintons don’t give a damn. I’m still sorry I didn’t vote for Perot.
I did. I may have been wrong then and I may be wrong now, but I think people like Perot who build something big out of nothing have more concern for the country and for the people who made/make it great, than those who inherit or just manipulate money to make more money without creating anything. Sorry for the run-on sentence.
At the same time they ensured we’ll never have inflation again, since companies can now just offshore production if wage pressure increases. Yet the Fed is still trying to fan inflation.
THEY DID NOT CARE and the fact that she is running for president speak for itself.
Stock market is supposed to look 6 to 9 months ahead and if future economy outlooks look so rosy than it may justify the current share prices and valuations. I cannot see into the future certainly but I think we may along with the rest of the world will likely tip toe back into the Great Recession II. Therefore only direction for the market is down.
Our universe is cyclical, like a sine wave, the tides or heart pulse rhythm, so things and events tend to follow the pattern despite puny human efforts to thwart it. We are on a down wave now with warmongers and destruction in charge. We cannot start to ascend from this cycle until the bottom is reached, assuming we survive said bottom. “There is good and there is evil. One must choose.” (Albert Camus) Find your bolt hole and batten down.
Thank you Julian. I always enjoy reading your comments.
Thanks for the kind comments. I watched the 1000 point drop the other day with equinimity, but the decay of greatness leaves me sad.
I am, Dear friends, your Servant
JULIAN
Here’s the one and only reason why we had a rebound today, folks:
http://www.wsj.com/articles/feds-dudley-says-new-york-economy-is-a-bright-spot-1440597601
GREED
Is it any wonder that “Americans’ Economic Outlook Plunges”? Consider these ominous milestones:
1 The US National Debt is $18.5 trillion, rising at the breathtaking rate of nearly $1 trillion a year, since the administrations of Bush jr and Obama.
2 The unfunded debt is $205 trillion, according to Professor Lawrence Kotlikoff of Boston University.
3 About 45 million people are on food stamps, reminiscent of the Great Depression.
4 About 97 million are out of the job markets, reminiscent of the Great Depression.
6 Yet about $8.5 trillion cannot be accounted for in the Pentagon today, up from $2.3 trillion in 2001, as announced by Donald Rumsfeld on the eve of 911 and no one is in jail.
7 The US has, by far, a larger military budget than the other 20 major nations’ military budget worldwide, in a self-destruct paradigm of endless wars.
8 The FED printed $16 trillion circa 2008 and loan that to banks in the US, the EU and others around the world and yet *Congress* could not even get the names of the banks the loans were made to.
9 The FED can move markets by merely making predictions of rate hikes after 3 QEs and yet the US dollar index is sky high while gold price and commodity prices have swooned.
10 Germany could not even inspect all the 300 tonnes of Gold held by the FED and the FED cannot repatriate them until circa the year 2020.
More about the FED here :
https://biblicisminstitute.wordpress.com/2014/08/24/the-corrupt-federal-reserve-is-not-federal/
All the above are little canaries in the coal mines and Lindsey Williams, who used to be a Chaplin for the Elites, now advises people to buy all the gold and silver they can, as the world is heading for a financial collapse.
http://www.lindseywilliams.net
Wow great link – thanks
Defending The American dream summit !! Aug. 20-22 !!
Had a great time, lots of fun! I walked the down town area !!
Columbus Ohio is EMPTY !! The buildings have things in some windows to hide EMPTY,,,,, lots of closed stores run down city.
Some new Empty buildings to . I see lots of Goverment control
Zoning to bankruptcy looks to me !! Lots of cops to keep it going!
So many COPS!