Worsening Inventory Pileup Rattles Goods-Based Economy

And how it compares to what happened during the Financial Crisis.

The goods-based segment of the economy is heading for rough waters, and it is further diverging from the path of the services-based segment of the economy that is still growing at a solid rate: that’s what the current inventory pileup tells us.

When inventories pile up, sales by those companies that supply that inventory do well. But companies that sit on that inventory and have trouble selling it will at some point cut their orders to reduce their inventories. When this happens, sales drop all the way up the supply chain.

And the inventory pileup, particularly in durable goods at the wholesale level, just keeps getting worse. In January, these inventories surged 11.7% from January a year ago, and are up 17% from January two years ago, hitting $415 billion, the highest ever, according the Commerce Department this morning.

At the same time, sales of durable goods by these wholesalers rose 4.7% in January year over year, to $245.6 billion. Sales had peaked in September last year.

And the inventory-to-sales ratio for durable goods rose to 1.69 in January, the highest ratio since August 2016, back when the goods-based sector was coming out of the last inventory pileup that had led to the recession in the goods-based sector that had dragged down overall economic growth for 2016 to just 1.6%, the worst since the Financial Crisis. Only the much larger services sector, which was still growing, kept the economy out of an overall recession.

During 2015 and 2016, wholesales of durable goods declined and inventories were whittled down as wholesalers cut orders, which slowed down the whole supply chain. It was a drag on GDP, but eventually the inventory-to-sales ratio was brought into line. Now a similar scenario is building up:

Over the seven years of the chart, sales rose 23%, from $197 billion in January 2012 to $246 billion in January 2019. But inventories surged 41%, from $295 billion to $415 billion. This inventory buildup is considered investment in inventories, and as such is added to GDP growth. When inventories get whittled down, the reduction is subtracted from GDP.

The transportation sector fell into a steep recession in 2015 and 2016, based on the Cass Freight Index for Shipments, which covers consumer and industrial goods shipped by all modes of transportation — truck, rail, barge, and air — but does not cover commodities such as grains.

Now a similar pattern is forming: Inventories have been piling up, and shipment volume of goods, as tracked by the Cass Freight Index, have started to decline on a year-over-year basis.

The chart below shows the Cass Freight Index for Shipments (columns) and wholesale inventories of durable goods (green line), both expressed as percent change from the same month a year earlier. Inventories follow shipments with a lag:

For folks who like to compare routine slowdowns to the Financial Crisis, I include that beloved era in the chart below. It shows inventories and sales in billion dollars (right scale) and the inventory-to-sales ratio (left scale). On the surface, there appear to be some parallels with the current dynamics; but in a moment, we’ll get to why that’s only on the surface.

On the surface, there are starting to be parallels with the conditions before and during the Financial Crisis. But what happened at the time? Secretary of the Treasury Hank Paulson got in front of Congress and told the entire world that he needed unlimited powers to bail out Wall Street, or else the world would come to an end. The moment he said this, everyone in the real economy that had so far more or less brushed off the turmoil on Wall Street pulled the ripcord. People still bought food and went to restaurants but they stopped buying big-ticket items such as cars or couches, and companies stopped ordering stuff, and cancelled what they could, and supply chains froze up.

The chart below shows the percent changes at wholesalers of durable goods sales and inventories, along with the inventory-to-sales ratio. It’s the same data as the chart above, but sales and inventories are expressed in percent-change from a year earlier: Sales plunged by 17% year-over-year in October 2009. That was a wild plunge in sales compared to the current 4.7% year-over-year increase in sales:

During the Financial Crisis, the inventory-to-sales ratio spiked because sales collapsed. These days, sales are still increasing year-over-year, though sequentially they have started to flatten out. The inventory pileup these days is happening because inventories have been rising persistently faster than sales have been rising – a very different set of dynamics than a collapse in sales. One was a panic that led to what was the first such crisis in my entire life, and thus a rare event; the other is just a run-of-the-mill harbinger of a routine slowdown in the goods-based sector, with no signs of a crisis in sight.

And as long as the services sector holds up – it is for now still holding up – there won’t even be an overall recession. There cannot be a recession without a pullback in services. Read…  Finance & Insurance Hit it Out of the Ballpark, No Slowdown in the Huge Services Sector

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  90 comments for “Worsening Inventory Pileup Rattles Goods-Based Economy

  1. Nasty Edwin says:

    I am in Construction. Generally at this time of the year my phone is ringing off the hook. It has been very quiet since early this year. Views on my Yelp page are way down. I have work that I acquired months ago, but my back log is dwindling. It is definitely different than it has been the past 7-8 years.

    • Unamused says:

      This is The Greatest Economy of All Time, so you’re obviously doing something wrong. Federal policy, sorry.

      Why not load up on stock buybacks and bail out? That usually works.

      • Unamused says:

        Stock buybacks and bailing out aren’t going to work if you’re a mom ‘n pop operation, so first do an IPO, and then stock buybacks and bail out.

        You can also offer unlimited financing to your customers. Then screw ’em in the fine print. You might like to reorganize as an overseas holding company first.

        • polecat says:

          The thing is, in order to do an IPO, you have to be a lying psychopath like lizzy holmes, one who specializes in vapor ware … fronted by big-wig power playas. Mom-n-Pop can’t get no cred … they’re too small and honest, hence no back up when it really counts ! … so no Idiotic Ponzie Operation for them.

        • William Smith says:

          Love @polecat’s comment!

        • Jessy S says:

          Or you can just go ahead and sell your soul to God (money). Then all you need to do is win a seat in Congress and become a millionaire. That is the most popular way of ensuring that you are well off for the rest of your life.

        • Dan says:

          You have a handle on things. Spit my coffee!

        • Harvey Darrow Cotton says:

          Have you considered launching your own cryptocurrency? Maybe you can reorganize yourself into a bank and get 0% interest loans from the Fed? You can buy Chipotle stock, that only goes up. You can sell high-yield bonds convertible into an equity position and use the cash to invest in a 4x China ETF (in either direction!) or pay Jerry Seinfeld $100 million to promote your firm? Maybe you can install chips on your planks of wood and connect them to an app on your mobile devices?

    • IdahoPotato says:

      Contractors who took three days to return my calls last year call me right back and want to now start work in two days.

      • Unamused says:

        Your competitors cut their rates and didn’t tell you.

      • Paulo says:

        My sister-in-law just had a house built on mid Vancouver Island. Her conractor has 3 more lined up and signed up from site prep to finish..so that’s about 1 years work for his small crew. He just tried to hire my brother-in-law to start as a 1st year at $25/hour.

        1,000 homes are slated for Union Bay, about a 15 minute drive from her place. Her new house has just been appraised at 400K over the builders loan due to appreciation. Building going on everywhere.

        No slowdowns here. Maybe Vancouver and points south, but not here.


    • akiddy111 says:

      Where is your business located ?

    • Just Some Random Guy says:

      My dryer broke last. It is still broken. Why? Cuz none of the local appliance repair places had any openings until this coming week.

      Granted, it’s not quiet the same as construction. But in a severe recession, repair guys aren’t 2 weeks out withs service are they?

      I had the same experience last summer when I needed to hire painters. They were all 3-4 weeks out.

      • Nicholas W says:

        It could well be that there aren’t as many repair people these days. More machines are designed NOT to be fixed and thus there are fewer people training as repair people, and there is less push to train people to fix them.
        Was talking to someone who works at a large laundromat/car wash who does all the repairs there. He wants to retire but says the owner can’t find people who know how to repair the machines.

    • sunny129 says:

      If I recall correctly, there was ‘NO Service sector’ (medical/educational/ rental (not commercial) recession, during the financial crisis, but the ‘recession’ as a whole still landed

      With rate ‘frozen’ by Fed, already regional banks took a hit on Friday. So are the other major banks with inversion of yield curve affecting from 1 month all the way up, except for the 30y!

      KRE, the regional banking ETF is almost 25% down from it’s 52wk peak!

      AmI wrong?

  2. Howard Fritz says:

    Despite the fact that many would believe that manufacturing is dead in the US, this nation is the world’s second-largest manufacturer in terms of output.

    However, automation has reduced the number of people employed in factories although it still accounts for 10% of employed individuals. (Notwithstanding the decoupling of productivity from wages)

    Consider this, airplanes, silicon chips, medical equipment, are made in the US, while much of China’s output is consumer electronics and plastic bobbles (I don’t want to hear about Anker, and Volvo), yes China can make high-quality things generally alongside huge externalities such as pollution of epic proportions.

    Therefore can the US continue to absorb increasing goods buildup without wage increases which halted by the 70s?

    I blame LBJ.

    • Unamused says:

      =>I blame LBJ.

      I blame McCain. I’ll need time to come up with a plausible rationale.

    • Paulo says:

      Just think how busy the US and European Airbus plants are going to be when 320s sub in for Boeing orders. It will be hard for Boeing to overcome this latest debacle.

      “The Boeing 737 is a bit smaller with a 148″ fuselage and only 139″ in the cabin. This means that the Airbus A320 has 7 more inches of width than the Boeing 737. If an airline did things right, each seat and the aisle could have 1″ more width than the 737. … On average, the Airbus A320 seats are wider, but not by much.”

      • Prairies says:

        Boeing is already trying to spin the blame onto the pilots who can’t defend themselves to keep their garbage tech in the air.

        • Its training, in the interview anecdotal story from former Trans Dept head, the plane went into a dive, the pilot opened the manual (kiss your ass goodbye) when a third pilot in passenger came forward and showed them what to do. Quote “It was VERY fortunate he was there..”

      • nick kelly says:

        Before you buy on the dip (a CNBC idea) wait for the lawsuit(s) and remember, punitive damages in the US are unlimited.

        And if you think Boeing is too big to fail,,, it is, but not too big for shareholders to take a big hit. Enter ‘Pennzoil versus Texaco’ which resulted in Texaco declaring bankruptcy.

        • sunny129 says:

          The class action suits are piling up. The news unraveling with the inner workings at BA is NOT encouraging! Besides now FBI is involved.

          The worst was to hear that FAA let the BA engineers to (SELF) certify many of the certifying processes! NO one trusts investigation by overseas!

        • Dale says:

          After all of the commotion about the 300 MAX, BA is still up 10% year over year.
          – P/E over 20.
          – Book value negative. (Extreme buybacks!)
          – $600B in 737 MAX orders at risk.

          I’ve done business with Boeing for over 20 years. Some of their operating units are quite good. But I’m afraid that financialization + lack of vision in long-range single-wide aircraft (causing them take shortcuts such as modifying the 737 airframe) are going to take their toll.

    • nick kelly says:

      Per capita Germany is ahead of everyone. It makes twice as many cars as the US, NOT per person, total. Apart from cars however, the NA consumer will rarely see ‘Made in Germany’

      Not that long ago,before China took off it was the number one exporter in dollar terms.

      Most of the NA customers are industry, buying machine tools etc., They will be told up front that ‘we are not the cheapest’, and the customer will not want the cheapest.

      It might be an idea if the US (and Canada and UK) took a look at the German model. Re: the education system, half the high school grads go into apprenticeships.

      Re: labor relations. it’s less confrontational than the English speaking world. By law a large outfit has union members on the board.

      An odd thing about German manufacturing: Ex autos, which is always big biz. small to middle- size outfits, often family connected, occupy a large space.

  3. DR DOOM says:

    The doctor got no diagnosis on this other than People are tapped out.I have been worKing in the in the service industry for +35 years.35 years ago people in the service industry had houses and bought stuff to put in them.The new crop ,besides pointing out to me that I’m dated, differ in that they rent and pay a greater percentage of pay for rent than it took to buy 35 years ago. Not much ever jives with government data and my personal empirical observations but the goods and service demand was a jolt. This jolt I fear will get worse when the talking heads start talking about topic dejure ,treasury rate inversion. That’ll scatter the herd.

    • ArcticChickens says:

      Perhaps the jolt will be food prices. Flooding in the Midwest has disrupted an entire year of planting, while destroying a huge volume of stockpiled grain/corn/soybeans. I suspect food prices to go up, and if people have to choose between food and SERVICES, well…

      • andy says:

        Between food and sevices people chose Taco Bell delivered via GrubHub or DoorDash.

      • DR DOOM says:

        Hey Arctic I agree , speaking of food , in North Carolina hog farming is big.Is it my imagination that the mc rib sandwich is available when a hurricane floods the hog farms on the coastal plain of n.c.? Your comment about jolt and food together made me think of that. By the way when the mc rib appears I buy two and put all the rib like meat on one,the doctor recommends limiting carbs.

    • joanrn says:

      most right to work states, allow the employers to count tips toward their minimum wage. the employer must pay them at least 2.50 $ (in arizona) hourly. the service workers pay check is taxed withholdings at the higher fed minimum hourly rate. A wait staffs pay check can actually be $0 net. I always pay my tips in cash.

  4. William Smith says:

    I (stupidly) hope this might signal the start of a change in zeitgeist. Most physical items are completely commoditized. They are sold way above what they really cost to make (clothing, sunglasses, handbags and “runners” which sell for hundreds cost a few dollars to make). Further, we have the “right to repair” movement gaining strength. This should help to curb new high-ticket item sales. Modern materials science is now so good that it can accurately predict exactly when a component will fail: planned obsolescence; and people are waking up to this fact. After china stopped buying 1st world “recyclables”, the waste problem is becoming more urgent. (also see youtube docos on the problem caused by old television tubes in the US: they are toxic and ain’t being recylced!) The financial shenanigans have ensured that the average Joe has far less discretionary spending ability anyway. Another angle: if I buy a washing machine or fridge, I demand that it lasts 30 years+ (as in dayes of yore) and there are no technical reasons why this is not possible, not just 3-5 years as is common now. Same thing if I buy a car; and I demand that I can fix it myself! (true) Democracy and capitalism have completely conquered the material needs imperative for human existence in this reality. Humanity now needs to focus in other areas (such as social inequity). The production and delivery of material goods needs to assume a much smaller place in human endeavor. Just how many drawers of old (unrepairable) smartphones, tablets and assorted electronics does one need? And just how many pairs of shoes does one _really_ need to get through the week? How many chairs can one’s (normal sized) bum actually alight on at the same time? I personally find “shopping” incredibly boring and try to limit time wasted in that pursuit. If you “live to shop” (hoarder) then you have a psychiatric problem and need professional help. I live in the (possibly delusional) hope that the modern religion of rampant materialism will eventually defeat itself and that the McMansions (which ravenously consume “durable goods”) will go the way of the dinosaur. A final parting thought: just consider the correllation between expanding girth and gluttonous acquisition of physical goods: both are the same thing. The body is faithfully (in its own sphere of influence) mirroring the thinkology of the individual, and more broadly of society in general. The way you think about physical matter matters!

    • David G LA says:

      Exactly !

    • andy says:

      How does one go about demanding to fix a car on their own? Or a fridge..

      • Pure Logic says:

        Currently, the way to go is to buy a used 90’s Corolla or Camry. Early 2000’s might be okay, too. I believe the newer vehicles increasingly suffer from too much electronics or too many cheap plastic parts that break after a while. Demanding to fix a car on my own means refusing to buy new cars until they build them right. The same goes for appliances. Now that the economy in Las Vegas is booming, the price for used appliances is quite low (everyone is trying to get rid of them). Dishwashers go for under $50, fridges for under $100 (even side-by-side fridges under 15 years old), washers and dryers go for $50 a piece. (Prices were 3-4 times higher in 2012 in the aftermath of the housing bust.) The basic dryers and top loading washers made by Whirlpool around 15 years ago will practically last forever, once you feel comfortable swapping out various parts as they break. I avoid newer appliances with control boards like the plague. I’m sure that in another 10-20 years, the simple appliances that I like will be extremely rare and everything will be redesigned so that traditional repair skills are worthless. There’s more money to be made selling new things.

        • andy says:

          Why not fix a bimmer. At least you can enjoy what you demand fixing.

        • Elmerfud says:

          My wife recently purchased a Speed Queen washer. No idiotic electronic controls, just old fashioned analog dials. Units are intensely tested at the factor and are very rugged – why they are mainly used by commercial laundries. Company has been around since 1908, so I guess they are doing something right the old fashioned way.

    • lion says:

      “hope that the modern religion of rampant materialism will eventually defeat itself”

      Hopefully it will, before it defeats the Planet

  5. Bankers says:

    “There cannot be a recession without a pullback in services.”

    Admittedly this chart is only consumer expenditure on goods and services


    I don’t know what broader data is available or where. However in that consumers reduced spending maybe a year before wholesalers did above, and a recession was well underway before consumer service spending dipped. This is not to try and prove or disprove anything – I really don’t know how or in what order goods and service spending affect each other, or if they nescessarily have to.

    • Wolf Richter says:

      Personal Consumption Expenditures (PCE), all data seasonally adjusted annual rate, Q4 2018. Services = 69% of total PCE. Durable goods and non-durable goods combined = 31% of total PCE.

      PCE total: $14.2 trillion

      PCE services: $9.8 trillion, or 69% of total PCE

      PCE durable goods: $1.5 trillion

      PCE non-durable goods: $2.9 trillion

      • Bankers says:

        Thanks. Being no sleuth at how gdp is calculated in terms of its inputs, i.e. what exactly is capable of dropping it vs. what is more of being an indicator, apart from durable goods the other one I found that stood out as early was


        while Personal consumption expenditures: Services: Housing and utilities (DHUTRC1Q027SBEA) just levelled. So I am going to guess that construction and investment slowdown fed through to durable goods, followed eventually by other services ? I expect it was a mixture of financial, sentiment, devaluations and less work/spending, very hard for me to be able to extricate any particular reading as “responsible”, even finance which is pinned as originator is part working with, as well as driving, public sentiment.

      • Dale says:

        Thanks Wolf.

        I took the liberty of using Wolf’s URLs to compare the PCE for services and goods to GDP (see: https://fred.stlouisfed.org/graph/fredgraph.png?g=no7W). What is interesting is that the PCE (consumer) share of GDP hasn’t really changed much in 20 years, but over the last 70 years the services share of PCE has been consistently eating away at the goods share.

        • Wolf Richter says:

          Thanks. Interesting. Hadn’t looked at it in those terms. But makes total sense, given how more we’re spending on healthcare, rents, mortgage interest, and the like.

    • Lance Manly says:

      Fred graphs are fun. I like this one, the December M/M drop in “core” real PCE was the worst since the “Polar Vortex’ event in 2014

      For total real PCE worst since 2009

      And given the December revision in retail sales, I would expect the drop to widen a bit for the next PCE revision.

      • Wolf Richter says:

        Lance Manly,

        You’re misrepresenting data. If you look at the month-to-month percent change, which is the PCE series you linked, you’re picking up all the ups and down every month, as you can see from the zigzag chart, and you cite just one zag, just one month. So make sure you report on the bounce next month. That would be the “zig.” On a year-over-year basis, PCE in December adjusted for inflation (the data series you linked) was up 2.2% from December a year earlier. That’s adjusted for inflation. So slower than during the peak in 2018 but not bad.

        Here the series that gives your the dollar total, the year-over-year percent change, and the like:

        • Lance Manly says:

          Thanks for the critique, I should have noted the volatility of M/M data. I apologize. The zag for next month will be +.3% on consensus. We will know for sure on Friday of course.

          I was ineptly attempting to point out the anomaly of December’s consumption numbers. We were told by the financial press that the 2018 holiday season was gangbusters. And without official statistics due to the shutdown there was no way to refute it.

          When the Retail Sales number (a major component of PCE) came out everyone was shocked by the -1.2 M/M. Even Larry Kudlow said that the number was sketchy in a CNBC interview. At the time I agreed with him and put it down to bad survey results due to the shutdown which would be corrected in the next revision.

          Low and behold the second revision went to -1.6% so something probably did happen in December, maybe it was people preparing for the shutdown, but November’s number was revised down as well. Maybe that is why the consensus for Thursdays 4q GDP revision is down to 2.2%. It will be interesting if the 4q/4q number stays over 3%.

          I think Y/Y numbers are going to be better to work with over the next few months as the aberration from the stimulus fades. I was thinking March should be ok, I sometimes look at WLI growth rate for short term thoughts and it has been picking up. I am well aware of the problems with that index.

          But with the Boeing debacle, the “Bomb Cyclone” and the headwinds from Europe and Asia maybe not so great. Only time will tell.

        • Wolf Richter says:

          Lance Manly,

          Just to add to the discussion: There is has been a slew of data that was very volatile in Dec and Jan. The Commerce Department says the shutdown didn’t hurt the accuracy of the data, but I think they missed some things in the Dec data and captured them in the Jan data. Just a hunch. There is just too much of this volatility.

          There is a weakening going on, but with all the volatility, it’s hard to see how much the economy is weakening.

  6. SocalJim says:

    Durable goods may look better shortly in a response to the suddenly hot existing housing market. Just months ago, people had the housing market on death watch. Not me. No sir.

    • Lance Manly says:

      >suddenly hot existing housing market

      Existing home sales are down Y/Y, it was a good pop over a horrible January though.

      “Total existing-home sales1, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, shot up 11.8 percent from January to a seasonally adjusted annual rate of 5.51 million in February. However, sales are down 1.8 percent from a year ago (5.61 million in February 2018).”

  7. alex in san jose AKA digital Detroit says:

    I’ve got 6 things on Craig’s List right now, some Really Cool Shit(tm) 3 things being musical instruments and 3 being metalworking type stuff and I’ve not gotten a single phone call or email. It’s been over a week now. I’ve never seen it this dead.

    • andy says:

      Craigslist been down for a week in most areas. Probably migrating to the cloud.

    • Bobber says:

      You’d think Craigslist would be hot when the economy is not, and vice versa. Many people go to Craigslist when they don’t have the money to buy new and when they have to sell something to raise money.

  8. Tom says:

    Sold one business…got tired of the 24/7 babysitting of employees.
    People you would not have hired 10 yrs ago….now you beg them to show
    up 50% of the time.

    The other business is tied to construction. Good luck finding a builder for 2019. They are booked. Of course you have to put it all in perspective.

    1.) we have much smaller work crews than pre 2008.

    2.) older workers & owners. We survived the housing depression, and Obama care, and the bankers. Cant push/do the 80+ hour weeks
    anymore. Have no idea who is supposed to replace us. Apparently AI.

    • bungee says:

      I definitely appreciate your situation. Possible strategy:
      offer part ownership to your best employees? It gives them a reason to stick around, gives the business a new future and helps the next generation. Plus they might actually care about what theyre doing.

      • dr_doomz says:

        “offer part ownership to your best employees”

        No, it does not give them a reason to stick around, rather it tends to make them arrogant. Besides, having one partner is bad enough. FYI, you give part ownership to employee based on performance and put it into a contract in detail, and in tiny minority stakes, 1%’s, only to those who are truly exceptional. And if an employee doesn’t “care” what they’re doing and are still employed by you, then YOU are the problem.

        • bungee says:

          Maybe you didnt read toms comment which i was replying to. Also, its a personality judgement. Managing people is very difficult. There are no fast and hard rules for this stuff. If you have an employee who is going to follow the letter of the law only and not the spirit then you do not offer them shares. If you like someone then you have an honest conversation to feel them out. Youll have to invest in them and theyll need to understand theyll have obligations to you. You pay the percentage out over time. You and other owners set the tone of what theyre attitude will become. Young people want responsibility and need to understand money and the way it works in our system (which is to say its FUBAR). If you actually have something to teach them it can be mutually beneficial. But its MORE work for both parties, not less. And btw having a partner is NOT all negative.

      • kitten lopez says:

        you don’t even have to give them ownership; you can PROFIT SHARE (gross vs “net” which can be b.s.).

        i have a couple of businessman friends who had a string of cafes in the city they turned into profit share and they said once they explained the employees would get a base salary and profit ON TOP of that, they said even the most mild mannered employee became seriously motivated when they saw how much they could make.

        the business did well enough that my friends said they could leave the business in the employees’ hands (they even had power to hire and fire) and my friends, the owners, didn’t have to micro manage anyone.

        • Paulo says:

          I used to work at a company that did profit sharing. The first year, big bonuses. 2nd year was smaller. Finally I/we realized that we could not control the spending habits of the owner and just asked for higher wages. Profit sharing cannot be based on gross, (there may be no profits if the owner is shrewd), although I know many companies that pay a flat % of gross and the worker is employed as a sub-contractor. Profit sharing is a scam when wages are lower because of it. Been there done that.

          It has always been my opinion that most people want to do a good job at work. I used to run a couple of companies and we usually eased the deadbeats out the door before they got entrenched and protected. Follow the process and there is no comeback. They either measured up or they couldn’t stay because every other employee had to carry them.

          I have heard from folks still working that it is different these days so maybe I was just lucky. I was also brought up brainwashed to provide a good days work for a fair days pay. My kids are the same and I am proud of their work ethic.

    • Jessy S says:

      Love her or hate her, Ivanka Trump does have a plan. The problem is that most of us are addicted to colleges and universities and want to be a part of something. They should be teaching trade school type jobs in high school or kids go to an actual trade school. She is right to be concerned about the student debt problem. This is something that President Trump needs to and will address.

      • Paulo says:

        regarding university vrs trades

        For the last 17 years of my work life I taught trades (carpentry, CAD, and intro electronics). I encouraged my son to go into an industrial setting as an electrician instead of university. He now makes over 200 k per year on a 2 week on and 2 off rotation. He just stayed on for an extra 3 days in order to complete a refit and did so because he would clear $1,000/day. (Another other divison phoned over and asked if they could use ‘their electrician’ for a few days?) The net is after 50% taxes on the ot. The company also pays an additonal $7.00 hour towards his pension and also matches his contributions at the end of the year. This is on top of full benefits and a housing allowance. And yes, the company is very profitable.

        I told him to make himself indispensible, despite being a union operation with seniority provisions. You always want to be the hardest worker on the jobsite, imho. Always, until you get too old to do it. Then, you have to be the smartest and save/make money that way.

      • Paulo says:

        One more things on trades:

        Canada has always had strong trades training mindset and never did phase them out as was done in the US. In fact, teaching trades is the best job in the school system with immediate full time status and recognition of industry experience on the 10 year pay scale (my district).

        People who wish to emigrate to Canada will go to the head of the line if they have a ‘ticket’. No one even cares if they have a university degree unless it’s in medicine, etc. My buddy had a masters degree in something or other from England. He got in as an automotive technician.

    • dr_doomz says:

      @Tom – you are 1000% right.

    • rhodium says:

      The customers always want things done as fast as possible, and hey why not, but when I hear these older guys talk about the insane hours they used to put in frequently, I’m shocked because unless it’s all just the result of bad memory, in comparison a lot of younger folks now just don’t have the stamina to work a lot of overtime without getting exhausted quickly. You hear about a lot of them with bizarre health problems too, and it makes me wonder if there really is something strange going on. Personally, I’m deeply skeptical over the quality of our food. I’m not that old and have had to deal with my own stuff which was basically only improved by eating a lot healthier, to the extent that a lot of people think my diet is freakish, but anyway it’s not like people 50 years ago were sitting around shoveling in the greens and yet they were perhaps actually far hardier than the current generation who seem to be wilting, and yeah you can see it on construction sites where a lot of older guys still have more energy than the younger ones. Idk what it is, monoculture farming and pesticide use? All this microbiome health stuff that biologists say are getting worse for us? End of the day it doesn’t really surprise me that longevity for people is now falling since we have people living out their days sicker and weaker. Robots will be coming out sooner or later, good ones that actually think well maybe not for some time, but they’ll have to do the work that people are finding harder and harder to do.

      • bungee says:

        You are totally spot on! Where i work we have a weekly csa (community sustainable agriculture). Its a box of fresh, locally grown vegetables delivered. Our job is very stressfull and physically demanding, but becoming health concious by frowning on smoking and drinking and encouraging fruits and vegetables instead of cheeseburgers has changed our lives and made work workable. Its so difficult running a small business with skilled employees because the stress and pace of the world has been ratchted up like 10 notches. When i started as a repairman/installer you would take a few jobs off the board then dissappear all day. The ubiquitousness of the cell phone changed EVERYTHING. It has added to the stress of society in so many ways. But adapt or die. (Unless youre amish – who i admire)

  9. Unamused says:

    =>Have no idea who is supposed to replace us. Apparently AI.

    People shouldn’t think of themselves as obsolete. People should think of themselves as non-performing assets, a drag on the bottom line, for which there is no market, unnecessarily maintained at high cost.

    The good news is that it turns out to be rather easy to program a robot to play golf and corporate politics, cheaply automating most boardrooms and corner offices.

  10. Jos Oskam says:

    Well, if the goods-based economy goes down the tubes, that will be a boon to the service-based economy, right? All these appraisers, debtors attorneys, bankruptcy lawyers, bankruptcy trustees, judges, court personnel, movers, auction house personnel et cetera will have more work, earn more, pay more taxes and add to GDP.

    The more bankruptcies, the better for the economy.

  11. Cynic says:

    We shall surely see more of this going forward: as Wolf rightly says, no official recession without services also going down substantially, but the continuing erosion of the ability of the mass of the population to afford basic goods and services; a keen awareness of declining real prosperity; and the correct understanding that it is irrecoverable.

    If you are in government, a CB, or in one of the favoured (often effectively monopolistic) service sectors, a beneficiary of the asset bubbles,etc, everything will still look simply fantastic.

    Meanwhile, immense social and hence political pressures build, maybe to an explosion.

  12. Bologna says:

    How long can a service only sector really hold up ?we can flip burgers for each other or cut each others hair for so long but sooner or later I’m going to need a new pair of scissors and a new grill then what ?how long really
    Service only eh

    • Just Some Random Guy says:

      For crying out loud man. Service isn’t just burgers. Service is engineers, nurses, anything in tech, pilots, truck drivers, doctors.

  13. Al Loco says:

    Pinched tax returns an issue? A majority of people I know got less back, I know I did. It’s caused me to add on to my list of items I wont hire a contractor to do. The price of wood studs are also up about 15% in the lst 6 months.

    • Just Some Random Guy says:

      Do you believe that a small tax refund = you paid less in taxes? Sounds like it. But you’re wrong.

      Most likely you paid less tax in 2018 vs 2017. Due to witholding changes, less was taken out of each paycheck proportional to your change in tax obligation. So your refund was lower. But nobody seems to understand this, especially the dullards in the MSM.

      I haven’t had a tax refund in 15 years because giving the govt an interest free loan for a year is financially dumb. However, total taxes paid by me in 2018 was about $6,000 less than 2017. That’s what matters, total taxes paid, not the size of your refund.

      Never get a refund.

      • Bobber says:

        Actually, he’s liable for more tax this year and in the future. His 2018 taxes might be a little lower than 2017, but corporate taxes were lowered a ton. As a result, he’s liable for a greater share of the huge US national debt burden in the future. It’s like they threw pennies in the air to distract people, while their wallets were picked.

        Some folks were not distracted by the penny, so they had to make up a story, like tax cuts pay for themselves. They said, Average Joe is going to be rolling in dough as corporations shower him with job opportunities.

        I think public trust has been abused.

      • Al Loco says:

        Have you thought about writing for the WSJ;). Yes, I am aware that giving the government an interest free loan is dumb. Part of my issue is I get paid commission and my wife owns a small business. Our income can fluctuate significantly and throw in raising 3 children we choose to make sure we don’t owe. Problem is I never submitted a W-4. They did it for me, without telling me. Yes, shame on me for not figuring it out during the year. The form we received on our 2017 taxes forecasting our 2018 taxes did not account for the automatic adjustment in withholding. I would say that form straight up misled me. As Wolf stated, it may not be an issue now but I would be surprised if it doesn’t start to show up soon. I know a lot of people in the same boat.

    • Wolf Richter says:

      Yes, that’s one of the issues starting in February and going forward to April or so. So it will impact Q1 GDP. But this is January data. And the problem started last year. So I don’t think it reflects the effect of the lower tax refunds yet.

  14. Iamafan says:

    Somehow the number we really need is where the inflection point is – beyond that people make huge changes and the numbers make a different curve.

    Merely comparing numbers pre GFC and today does not seem to make a whole lot of sense anymore. I don’t think we’re leaving life ten years ago. I have a feeling in some places we’re close to overstretching. I don’t have the numbers to prove what I’m feeling. But, I don’t think the future is that great.

  15. Paulo says:

    Parallel topic:

    I see Italy is now officially part of China’s Belt and Road. All that is needed is for Mexico and Canada to sign on and Bob’s your Uncle. :-) (US is already a member through its proxy, WalMart.)

    • Bankers says:

      The MOUs are political substantiation, investment contracts exist outside of this, for example the Asian Infrastructure Investment Bank might eventually include S.America and Canada. The US officially is acting as counterweight to the initiative, but in practice ?


      has some detail plus country list. For EU ft.com/content/23e0245a-4b2e-11e9-bbc9-6917dce3dc62 (and I don’t endorse the ft) has a look at where this stands for Europe .

      I think there is obviously some questioning as to why say European countries are so slack they cannot get their own act together for infrastructure, but I guess money talks and they are politically, if not financially and morally , bankrupt. I don’t mind the Chinese though either, and they are willing to do the work where “we” prefer to just bask…they built a large part of the US railroads if I remember, even if under US management.

  16. MooMoo says:

    Because these French Riots are just French business as usual, eh?

    “Macron to deploy French army against “yellow vest” protests — This is the first time since the 1954–1962 Algerian war that the army is to be mobilized in policing operations on French soil against the population.”

    …nothing to see here.

    • Wolf Richter says:

      Two months ago, you said France was in “free fall.” Not a sign of it. French PMIs look better than Germany’s PMIs. French GDP growth better than Germany’s. Business as usual in France.

      • Bankers says:

        Greece’s PMI looks better than France’s, and so does Spain’s GDP annualised …. though these can all be called false comparisons …. private debt is being signalled (though not household debt which remains “reasonable”)


        ..if you choose max range . Maybe there is a reason it is so high, higher than the US for example ? Whatever does or doesn’t go on in France is not going to care if you are long on the country or not, that is all I can add.

  17. Keepin it real says:

    Isn’t a lot of the inventory build up due to the threat of massive tariff increases in the fourth quarter? Not sure this is anything more than an accounting if that build up.

    • Wolf Richter says:

      Inventories are real. You drop it on your foot and it hurts — that type of real. You have too much on your shelves or in your warehouse, and suddenly you start looking to lease more warehouse space (already happening). It’s not just accounting, though accounting does track it.

  18. akiddy111 says:

    I like looking at data and growth compounded over slightly longer time horizons. So here goes :

    Based on FRED, PCE has grown at a 4.24% CAGR over the last 5 years from December 2013 to December 2018 .

    4.24% a year nominal growth. That’s respectable. And US household debt to GDP is quite a bit lower than it was 10 years ago.

    The future will be fine. And Zerohedge will do just fine too. There is a market place out there for all of us to enjoy.

  19. Nicholas W says:

    So according to your article, It was basically society hanging on the words of Hank Paulsen and then deciding that the world was coming to an end thus they’d better sober up…yadda, yadda……. that caused the 2008 credit crisis. And that could be the case. After all, with the correct type audience, all it takes is for one person to scream fire and everyone panics and people can get trampled.

    Do we think it was deliberate? Think the movie “The big short”.
    When ever we have some overly dramatic event these days, it seems so staged. Brexit, major sports b.s., California wild fires, the hacking up of Subway by trying to use a former spokesperson to slash interest in the company a few years back(who had sold short before that started), and all the companies affected by leveraged buyouts.

    It seems like we can’t even enjoy a real life disaster these days without knowing that someone probably staged it because they sold short or some other type of arbitrage, before hand.

  20. Brian James says:

    March 28, 2019 Economic Collapse Is Confirmed! $99 Trillion Dollar Devastating Debt Stock Market CRASH! ( Shocking Videos )

    The imminent economic collapse and next Great Depression. Temporary prosperity that is created by exploding levels of debt is not actually prosperity at all.


Comments are closed.