Despite all the political turmoil and President Trump’s confrontational and divisory approach the US economy continues to do very well, but there are some warning signs
The US share market is easing off record highs – the boom there may be a good sign, but could also pose future risks of a big bust.
Market Watch: Job creation, wages slip in September as unemployment falls to 48-year low
The U.S. unemployment rate sank to a 48-year low of 3.7% in September as the economy added 134,000 new jobs, setting the stage for a strong holiday season to finish out what’s been stellar year for the U.S. economy.
The increase in hiring was the smallest in 12 months and below the recent trend, perhaps reflecting the effects of Hurricane Florence. Economists polled by MarketWatch had forecast a 168,000 increase.
Yet the increase in new jobs was enough to lower the unemployment rate to 3.7% from 3.9%. The last time the jobless rate was lower was in December 1969 — when the first man walked on the moon.
Many economists predict the jobless rate will fall even further in the months ahead.
Reuters: U.S. job growth cools; unemployment rate drops to 3.7 percent
U.S. job growth slowed sharply in September likely as Hurricane Florence depressed restaurant and retail payrolls, but the unemployment rate fell to near a 49-year low of 3.7 percent, pointing to a further tightening in labor market conditions.
“The weaker gain in payrolls in September may partly reflect some hit from Hurricane Florence,” said Michael Pearce, senior U.S. economist at Capital Economics in New York. “There is little in this report to stop the Fed continuing to raise interest rates gradually.”
Fed Chairman Jerome Powell said on Tuesday that the economy’s outlook was “remarkably positive” and he believed it was on the cusp of a “historically rare” era of ultra-low unemployment and tame inflation.
Bloomberg: Powell Heaps Trump-Like Praise on Economy as Rate Hikes Loom
In what Fed watchers say was unprecedented four public appearances over the past week, Powell repeatedly lauded the economy’s performance, calling it “remarkably positive,” “extraordinary” and “particularly bright.” And he said he expected the good times to continue.
“Interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral,” neither holding back nor spurring economic growth, Powell said. “We may go past neutral. But we’re a long way from neutral at this point, probably,” he added.
The Fed raised its interest-rate target range last week to 2 percent to 2.25 percent.
Breaking with decades of presidential precedence, Trump has repeatedly criticized the Fed in recent months for raising rates. His latest salvo came on Sept. 26, just hours after Powell and his colleagues boosted rates for the third time this year.
Asked by veteran television anchor Judy Woodruff for his response to Trump’s outbursts, Powell replied, “My focus is essentially on controlling the controllable”.
The current economic expansion is already the second-longest in history, trailing only the 10-year period of the 1990s. If it continues, it will surpass that upturn next year.
But one trend should be of concern, US Government Debt:
Today the Federal Debt is about $21,605,363,414,469.16.
The amount is the gross outstanding debt issued by the United States Department of the Treasury since 1790 and reported here.
But, it doesn’t include state and local debt.
And, it doesn’t include so-called “agency debt.”
And, it doesn’t include the so-called unfunded liabilities of entitlement programs like Social Security and Medicare.
Forbes: Why The Federal Deficit Isn’t Cause For Panic… Yet
If you’re reading this, then it probably means you have also watched pundits scream at the top of their lungs about the impending doom brought about by the US deficit. Numbers like $20 Trillion are enough to scare anyone, so concern is warranted, however, panic is not.
The federal government is projected to add $985 billion to the federal deficit during fiscal year 2019. That’s because the government plans to spend over $4.4 trillion dollars, while bringing in only $3.42 trillion dollars. Nearly $400 Billion of the spending will go to service debt that’s already accrued over the years and that figure will only rise as interest rates increase.
While those numbers are astonishing and difficult to really wrap your mind around, it’s not as bad as it sounds. According to the non-partisan Congressional Budget Office’s (CBO’s) Budget and Economic Outlook: 2018 to 2028, “In CBO’s baseline projections, which incorporate the assumption that current laws governing taxes and spending generally remain unchanged, the federal budget deficit grows substantially over the next few years. Later on, between 2023 and 2028, it stabilizes in relation to the size of the economy, though at a high level by historical standards.”
Now I said not to panic earlier, because there are a number of adjustments and scenarios that will let the U.S. keep borrowing and spending long after any individual would have had their credit cards canceled. That said, at some point time will run out and our options to fix the situation will be less and less friendly. It’s the equivalent of waiting until you’re in the hospital to make lifestyle adjustments. By then, it might be too late.
The Baltimore Sun: U.S. debt addiction threatens national security
Arising China. An emboldened Russia. A nuclear Iran. Cyberwarfare. Ask a defense expert to name America’s biggest security concerns, and one of these will likely top the list.
These threats are real, of course. But one of the biggest dangers to our nation isn’t a hostile foreign actor. It’s a domestic one — our leaders’ addiction to debt.
The U.S. national debt is rising unsustainably. The Pentagon recently has been asking for more money, and Congress has been inclined to give it to them. Absent dramatic reform, national security will soon take a back seat to mandatory debt service.
The Hill: Congress approved $2.4 trillion in additional debt during fiscal year 2018: Watchdog
Congress approved $2.4 trillion in debt during fiscal year 2018, according to an analysis published this week by the watchdog group Committee for a Responsible Federal Budget (CFRB).
Trump administration officials have insisted that the tax law will ultimately bring down the deficit due to economic growth, a conclusion that’s been rejected by many budget watchers as well as some official bodies.
“At a time when debt is already at record-high levels and growing unsustainably, the $2.4 trillion added to the projected debt over the past year is incredibly irresponsible,” CFRB wrong in a blog post. “These changes alone will increase projected debt from 86 percent of GDP to 94 percent.”
Trump is used to taking big financial risks in business, but the financial health of the United States as well as the world are at stake. If things crash it won’t be as easy to walk away as it has been from his business failures.
If the New Zealand Government was increasing debt here to anything like 86% or 94% of GDP they would be strongly and widely criticised, for good reason. But for some reason business leaning pundits don’t seem to care about those levels of debt in the US, they hail the economy there as great.
