August 17-23, 2024
Big news. It is quite specific in nature, since it concerns not exactly digital indicators. Namely, one of the largest revisions of statistics in the history of the USA took place this week. Moreover, it occurred in labor statistics, which, as we have repeatedly noted, are very heavily falsified.
In late spring, we wrote about the data on inflation distortion (Summers group article) and the labor market. Employees of one of the reserve banks found that, most likely, the Bureau of Labor Statistics (BLS) “painted” a fairly large number of jobs (from 800,000 to 1,300,000). See the review from March 30, 2024: https://fondmx.pro/en/weekly-wrap/no-signs-of-improvement-found/ . Note that this does not mean that they have not painted somewhere else, the question concerns only one local issue.
Generally speaking, the BLS revises its labor market data annually (methodology modification or data clarification) and usually everything fits within the margin of statistical error (range from minus 500 thousand to plus 500 thousand over the past 10 years, and on average it was minus 100-200 thousand employed).
This time the result was serious, but, lo and behold, it surprisingly coincided with the results of the previously conducted study. Namely, the negative revision was 818 thousand, which, of course, is comparable to the record revision in 2009, but is too similar to the studies of the reserve bankers. True, the lower range of their estimate. But this, by the way, is minus 68 thousand employed per month or almost a third of the average monthly increase in 2023.
All these jobs simply disappeared, there is no doubt that they were simply drawn out of thin air. And these data show that the entire statistical picture on the basis of which the legend about the stability and success of the American economy is built is crumbling to dust. We remind you that there is no guarantee that someone else will not find the same number of drawn jobs somewhere else.
In general, the picture is very indicative.
Macroeconomics. The balance of industrial orders in Britain has been in the red for 25 months in a row:
Рис. 2
PMI (an expert index reflecting the state of the industry; its value below 50 means stagnation and decline) of the Eurozone industry 45.6, the minimum for 8 months:
Рис. 3
Mainly because of France, where the rate (42.1) is the weakest on record (excluding Covid):
Рис. 4
Chicago Fed’s US National Activity Index is the worst in six months:
Рис. 5
And the PMI of industry (48.0) – for 8 months:
Рис. 6
The number of people receiving unemployment benefits in the US has stabilized at levels near a 3-year peak:
Рис. 7
And existing home sales are near 14-year lows:
Рис. 8
New Zealand retail sales -1.2% q/q, 9th worst in last 10 quarters:
Рис. 9
And -3.6% per year, the 7th minus in a row (repeating the anti-record of 2008/09):
Рис. 10
The Central Bank of China has not changed anything in its monetary policy, the rates are record low. Everything is the same at the Central Bank of Turkey, the Central Bank of South Korea, and the Central Bank of Indonesia
But the Central Bank of Sweden has cut the rate for the second time (by 0.25% to 3.50%), and another 2-3 cuts are expected before the end of the year.
Main conclusions. We will not talk about the quality of statistics, everything is clear here. Let us just pay attention to the fact that there has been no similar revision (yet?) for inflation. And what if it were done? We have already noted many times that inflation is much higher than the official data and even the Summers Group estimates. And the data have been cited many times. For example, orange juice has tripled over the past 2 years:
Рис. 11
We also explained that even if we accept Summers’ assessment, we will see a continuous decline in the American economy from the fall of 2021. And the global economy, of course.
But even with the official inflation, with its “childish” indicators of 3%, the US economy is clearly sinking. How they manage not to show the decline, given that almost all regional reserve banks report it for themselves is a separate question. It will be interesting to statisticians, not so much to our readers. But there is a whole bunch of unexpected indicators that indicate that things are not so good. For example, an assessment of labor productivity growth in the US. According to their own official data:
In fact, labor productivity is not growing. One can argue where the substantial growth of the economy came from in such a situation, but in the end it is not so important. What is important is where the growth of the stock market came from. Here we give the floor to Pavel Ryabov.
“Operating cash flow (OCF) is a key financial indicator that reflects the actual cash flow from the company’s core business. It is more informative than “paper” net profit or estimated EBITDA, as it shows the actual cash remaining at the company’s disposal after all operating expenses and income. This indicator is important for assessing the ability of a business to generate cash from its core business.
Companies’ operating cash flow is distributed among capital expenditures, mergers and acquisitions, long-term financial investments, dividends and buybacks, debt repayment, or companies can accumulate cash.
OCF fell by 3.8% y/y for all non-financial companies reporting from 2011 to 2Q24 – this is the worst result since the 2020 crisis and the 2015-2016 recession. Over two years, growth is only 6.9% at par.
The main positive contribution comes from the tech sector and Amazon, and if we exclude trade and technology, it is a serious 7% drop for the year and minus 2.1% over two years, which is slightly better than the 9.3% collapse in the previous quarter, but these are the worst indicators since the 2020 crisis.
Adjusted for inflation, the collapse is 9.3% y/y and minus 7.8% over two years, which is the worst dynamics since the 2009 crisis, adjusted for inflation.
By sector:
• Trade: -15.5% y/y, but +8.4% over two years, then in this sequence
• Medicine: -24.7 / -23.5% the strongest collapse
• Consumer sector: -2.7 / +43%
• Industry: -9.3 / +24%
• Raw materials and utilities: +5.7 / -23.5%
• Transport and communications: -9.8 / -7.2%
• Technology: +8.4 / +32.1%
Technology is the best of all – this is clear, and all other sectors are in the red, with the exception of raw materials, but raw materials are in the red for two years. Transport and communications have been stagnating for three years, medicine is really bad (stocks are high), and the consumer sector and industry are entering a stabilization phase at a high base.”
And we will also add that the inflation that Pavel Ryabov writes about is official. But what if we take the real one? Well, or at least in the interpretation of Summers & Co?
And finally, the European Union. More precisely, Germany. People there have somehow lost interest in opening new companies. I suppose it has not become a very profitable business.
And finally, the theses of the speech of the head of the Federal Reserve Powell at the conference in Jackson Hole:
▪️It is time to adjust the Fed’s monetary policy. (lower the rate)
▪️We will do everything possible to support a strong labor market.
▪️The timing and pace of the Fed’s rate cut depend on macro data and the balance of risks.
▪️Inflation is steadily moving towards the target of 2%.
▪️We have made significant progress toward achieving price stability while avoiding a sharp rise in unemployment.
▪️The risks to the Fed’s dual mandate have changed — the likelihood of rising inflation has diminished, but the risk of falling employment has increased.
▪️We do not seek or welcome further cooling in the labor market.
▪️The economy continues to grow at a solid pace.
Market reaction after Powell’s speech
🌐 Bitcoin – $63 135 📈4,54%
📈 S&P 500 – 5 617 📈0,84%
🌕 Gold – $2 509 📈1,01%
⚫️ Oil Brent – $79,01 📈2,52%
Both stocks and gold have grown… And it shouldn’t be like that. Hence the conclusion: the imbalance has already reached the financial sector. So we can only state that the structural crisis continues. And will continue. And we wish all our readers to take into account the information we give them and, thanks to this, win the competitive struggle! Summer continues, have a nice holiday!