The Economy in Context: November 2019

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The latest job numbers were released, along with the first estimate of GDP growth for the third quarter. Let’s focus on the big four numbers that best indicate how the economy is fairing: GDP growth rate, labor force participation, jobs created, and federal funds rate.

The GDP growth rate for the third quarter (July through September) was estimated to be 1.9%. Compared to the peaks of 7.0% under Bush in 2003, the more modest 5.5% under Obama in 2014, and even the very modest 3.5% under Trump in 2018, 1.9% is mediocre.

Labor force participation remained at 63.3%, which is the highest the labor force participation rate has been since about 2013. It is still only 0.4 percentage points above where it was when Trump took office in 2017 and represents a very modest gain.

The net jobs created for the month of October was 128,000, which beat the fairly low expectations for the month, but under-performed against the average of the last four Octobers of 259.75K and below Obama’s second term October average of 239K.

The federal funds rate is now below 2.0%, undoing all the gains from mid 2018, with a top rate of 1.75%, which is well into fiscal stimulus range. Coupled with the Federal Reserve expanding its balance sheet (essentially quantitative easing), things look bad.

It should go without saying that the Federal Reserve rapidly lowering the federal funds rate is not and has never been a sign of a robust economy, and it’s dropped 0.75 percentage points since just June, in half the time it took to climb that same 0.75 points.

The economy is not in the best of shape presently, and this becomes even more obvious the more the administration tries to pressure the Federal Reserve Board to further lower interest rates, and yet the pundits continue to claim that things are going well.

Someone is lying about the state of the economy, and it isn’t the numbers.


Liberty is For The Win!

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