The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.
Each week, it becomes increasingly clear that we are governed by very unserious people. Last week, Congress passed yet another “continuing resolution” (CR) to keep the government open because they are completely unable to perform the most basic of their functions – to create and pass a budget.
The Congressional Budget Act of 1974, lays out the budget process, which begins with the President submitting a budget proposal, then the House and Senate working on a budget resolution to be passed by April 15, and Congress then passing a series of 12 appropriations bills by October 1. I assume that most members of Congress can read a calendar, but perhaps not. When was the last time Congress was able to accomplish this most basic task on time? In 1996 for the fiscal year (FY) 1997 budget! 28 years ago! Since 1996, Congress has never passed more than 5 of the 12 appropriation bills on time. In fact, they have only done it FOUR times since the act was passed – FY 1977, FY 1989, FY 1995, and FY 1997.
And so, here we are again, nearly half way through the fiscal year, and they can’t seem to pass a budget. Last Thursday, Speaker of the House Mike Johnson said “the appropriations process is ugly.” No, what is ugly is the fact that 535 adults can’t perform the most basic function of governance. What is ugly is that since the “deadline” of September 30th, this is now the fourth time that they have kicked the can down the road. What is ugly is that we are adding $1 TRILLION to the federal debt every 100 days!
Thirty years ago, when network news was worth watching, I heard a famous commentator say that U.S. politics had gotten to the point where “if you wanted to run for President, it probably means you aren’t qualified.” Today, I think that applies to nearly every level of government….at least at the federal and state level – President, Senate, House of Representatives, Governor, state legislature, etc. Most of these are simply not serious people.
As a nation, we are broke. Debt is growing faster than GDP…by a long shot. I pointed out last week that $1 of GDP growth in the fourth quarter last year cost $2.49 in new government debt. We can’t afford to be spending federal money on a steroid-induced hamster fight club; a study to see if kids love their pets; a study of the romantic patterns of parrots; an NIH grant to study Russian cats walking on a treadmill; or millions to promote tourism in Egypt. (Thanks to Sen. Rand Paul for this list.) Federal debt is 121% of GDP and moving higher!
But at the end of the day, it is our own fault. Thomas Jefferson said “the government you elect is the government you deserve.” So, as the government prints money, inflates the currency, and ultimately drives prices higher, we have only ourselves to blame. Want to know why home prices are high and inventory is so low? Want to know why it costs $30 to eat at McDonalds? Look in the mirror.
Jefferson also famously wrote that “Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government.” (emphasis mine)
Until we as a nation decide we deserve something better than these unserious, feckless clowns in government, nothing is going to change.
Consumer Credit
Speaking of debt, we got an update on consumer debt this week. Last month, I suggested that, with respect to debt, “consumers may have finally hit the wall.” Well, you can toss that idea out the window. After pausing to take a breath in December, consumer credit rose $19.5 billion in January, nearly twice the $10 billion that was expected. With the exception of the blowout November number, that was the biggest jump since last January! Total consumer credit is now over $5 trillion (excluding mortgage debt).
Revolving debt jumped $8.4 billion in the month to a total of $1.3 trillion, the bulk of which (more than $1.1 trillion) is on credit cards. However, more interesting is the fact that revolving debt has surpassed the pre-COVID trend, and is growing at a much more rapid pace. At the same time, the savings rate is near an all-time low. Basically, this is how people are dealing the fact that prices are rising faster than their wages.
Job Openings (JOLTS)
The number of job openings fell for the second month in a row in January down to 8.86 million. On a year-over-year basis, the number of job openings has fallen for 18 consecutive months indicating a continued, albeit gradual, softening of the labor market with respect to available jobs.
Further confirmation of this is the fact that the quit rate (the number of people quitting their job as a share of total employment) has been in steady decline since April 2022. At 2.1%, the quit rate hasn’t been this low since 2018. Obviously, people are less likely to walk away from their job as the labor market softens.
Employment
This morning we got the February jobs report. The media will report that it was a “good” number and “much hotter than expected!” Here is the problem. It doesn’t mean anything. NOT A THING! Why? Because they will revise it down next month. For example, just one month ago, they told us that January employment came in at an incredible rate of 353K new jobs! Everyone went crazy! Today, they “revised” that number DOWN to 229K! So, by their own admission, they overstated January employment by 124K jobs, or by 54%! (I wish I could be 54% wrong and not get fired.) Clearly, the initial jobs number is completely meaningless! As such, I’m not even going to report it. There is no point.
Further, the difference between the payroll survey and the household survey continues to widen. According to the household survey, we actually LOST 184K jobs! As such, the unemployment rate actually ROSE to 3.9%. For the past three months, the payroll number has moved in the opposite direction of the household number. And for four of the past five months, household employment has been negative.
According to the household survey, over the past 12 months, we have added just over 600K jobs….no where close to the 2.7 million reported by the payroll survey. In addition to some of the shenanigans that the BLS does with the payroll survey (including their “birth-death” model) this could be because people are having to take on multiple jobs and, as such, show up on multiple payrolls. Digging deeper into the household survey, we find that over the past year, the economy has added 921K part-time jobs, while losing 284K full-time jobs! Again, the payroll job number just reflects those on payrolls…it doesn’t distinguish between a part-time job and a full-time job. A labor market that over 12 months creates only part-time jobs, and loses full-time jobs, is not reflective of a strong economy.
Factory Orders
U.S. factory orders plunged in January, down 3.6% from December. That was the largest monthly decline since April of 2020 when the economy was shut down for COVID. On a year-over-year basis, orders were down 2.0%, the largest annual decline since September 2020.
Excluding transportation, orders were down 0.8% for the month, and 1.6% year-over-year. The biggest plunge was in “non-defense aircraft and parts” (aka, Boeing) which plunged 59% in the month. But, on the positive side, we do seem to be ordering more boats! (The white bass are running up the Oconee River this week, and I plan to take some time soon to enjoy that! Although, I personally don’t have a boat, I have something even better….a friend with a boat!!)
ISM Services Index
The ISM Services Purchasing Managers Index measures activity in the non-manufacturing sector in the U.S. economy. In February, the index fell to 52.6 from a four-month high of 53.4 in January. This was below expectations of 53. The index is still above 50, which means that the services sector isn’t yet contracting, but it does continue a 14-month slowing of the non-manufacturing sector. (By way of reminder, as reported last week, the ISM Manufacturing Index has been below 50 for 15 months.)
Within the index, employment did fall below 50 into contraction territory, Price pressures fell from a spike in January, but are still higher than they have been since September of last year, confirming the stubborn inflation numbers we got last week in the PCE. In other words, like I have been saying for weeks, inflation has not been beaten, it is still an issue, and rate cuts are not going to happen in the near term.
Final Thoughts
Finally, this week, I want to mention that I will be giving the keynote at the Partnership Gwinnett Economic Outlook Luncheon on March 21st at the John C. Maxwell Leadership Center in Duluth, GA. This is a great event and one at which I have had the privilege of speaking for the past several years. Given my past role as County Economist and Director of Economic Development with the Gwinnett County Board of Commissioners, Partnership Gwinnett is special to me and I am looking forward to seeing everyone at the event!
