September/Mid-October 2021
Introduction
The Biden Administration has much to be optimistic about as it recently reflected on stock market growth as President Trump often did. A little more than halfway through the month of October 2021, all three major US stock markets are up double digits for the first nine and a half months of the year. The NASDAQ closed 2020 at 12,807; it recently closed at just under 15,585, up more than 21.5 percent year to date. The news is equally good for the S&P 500 which recently closed at 4,551.68, up almost 22 percent for the year and the Dow Jones Industrial Average at the same time closed at 35,490.69, up 16.7 percent to date. As we criticized President Trump in year’s past, one must look to more than just the stock market to truly understand how the economy is doing.
Key September / October Data — Positive and Negative Signs
According to the U.S. Bureau of Labor Statistics (BLS) the U.S. economy added a disappointing 194,000 new jobs to the economy this September, while reporting a drop in the U.S. unemployment rate to 4.8 percent; the lowest it has been since its 2020 peak of 14.7 percent during the early stages of the COVID-19 pandemic in the United States. Gold and Silver have hovered around $1,800 and $24 a troy ounce respectively, seeming to validate the Biden administration’s view that inflation is not a problem. However, recent movements above 1.6 percent in the U.S. Treasury Bond Yield are signaling inflation to many economists, especially as Bitcoin, a potential new inflation barometer, recently traded above $67,000. Consumer Confidence has been mixed in 2021, with the October report up four points, closing just above 113. This Conference Board survey also indicates that consumers are eager to buy new homes especially as long-term interest rates are beginning to increase. The same survey shows the U.S. consumer is ready to buy new and used motor vehicles but cannot due to supply shortages.
Current Issues
As we begin the fourth quarter of 2021, we felt it appropriate to give our readers a snapshot of the overall economy and its underlying strength or lack thereof.
GDP
The Federal Reserve Bank of Atlanta had 2021 Q3 GDP coming in at 6 percent in July and now has Q3 GDP coming in at .5 percent growth…an unexpected decline if it comes to fruition when the official number is released at the end of October.
Overall U. S. National Debt
The overall U.S. National Debt continues to grow at an alarming rate with the total U.S. national debt at almost $28.93 trillion, giving America a per capita national debt of $86,892 and a per taxpayer debt of $229,705. In addition, the total U.S. State debt is almost $1.22 trillion and the total U.S. local debt is almost $2.1 trillion. The total combined U.S. National, State and Local (NSL) Debt is $32.25 trillion and the per capita NSL Debt is just under $96,900. These numbers needless to say are of great concern especially in light of the proposed new spending bills coming out of Washington.
The Polls
A recent poll by CBS shows that 57 percent of Americans know nothing about the specifics of President Biden’s “Build Back Better Plan”. This, paired with a recent Quinnipiac University Poll showing only 39 percent of Americans approve of President Biden’s job managing the economy while 55 percent disapprove of his economic stewardship… painting a troubling picture for the U.S. economy moving forward.
China
Earlier this month the U. S. and China announced phase 1 of a new agreement. The highlights which have yet to be finalized call for:
Greater protection of U.S. Intellectual Property (IP),
A call to end forced transfer of technology in business agreements.
Expanded U.S. access to Chinese financial markets and
Greater Chinese purchase of U.S. Agriculture. In general, the initial agreement seems promising, yet as is always the case regarding China, the “devil” is in the final details.
U.S. Inflation
U.S. inflation is up roughly 5.4 percent from September 2020 to September 2021. The Biden Administration and the U.S. Federal Reserve are now seeing inflation is probably not transitory with U.S. Treasury Secretary, Janet Yellen stating inflation will be with us throughout 2022. Many economists believe inflation is higher than currently being reported. The reason many economists are concerned as to the true inflation rate are samples of price movements over the last 12 months like: diapers, up 9 percent, clothes up 4.2 percent, new cars up 8.7 percent, meat up 9 percent, eggs up 10 percent, steak up 22.1 percent, fuel oil up 42.6 percent, gasoline up 42.1 percent, hotel room prices up 19.8 percent, seafood up 10.7 percent, television sets up 12.7 percent, car rental prices up 42.9 percent, beef prices up 17.6 percent, energy up 24.8 percent, used car and truck prices up 24.4 percent, transportation services up 4.4 percent, general food up 4.6 percent, and appliances up 7.1 percent.
Infrastructure and Reconciliation Plans
The most recent Biden infrastructure plan is down to $1.2 trillion in new spending, down from its initial estimate of $1.9 trillion. While the President’s reconciliation or “Build Back Better Plan” is being negotiated at roughly 1.75 trillion, down from Senator Bernie Sanders original plan of roughly $6 trillion. Again, the “devil” is in the details as many budget experts believe the actual cost will be closer to $3 trillion if the newest version becomes law.
Conclusion
It has now been 18 months since West Texas intermediate crude dropped to almost negative $40 a barrel for a brief time in April 2020 while oil today is above $81 a barrel. Total U.S. employment is improving, with 153.68 million Americans employed today. However, we are still roughly 4 million below the pre-pandemic employment level of 2019 and have more than 10 million jobs currently available that remain unfilled. It is also troubling that 4.3 million Americans quit their jobs this past August with a recent CNN poll indicating that only 25 percent of Americans believe they will be better off if the Presidents new spending bills become law.
Unfortunately, we believe the more than 140 executive orders President Biden signed early in his presidency handcuffed much of the U.S. economy, while his current fiscal and monetary policy seem to be leading the U. S. economy into an economic slow-down with increasing inflation rates not seen in more than 30 years…we fear stagflation is on the horizon in the first half of 2022. We hope we are wrong!
Contact Us
Comments or questions should be directed to Dr. Timothy G. Nash at: tgnash@northwood.edu. The NU Outlook is a monthly publication of The McNair Center for the Advancement of Free Enterprise and Entrepreneurship at Northwood University. This month’s publication was co-authored by McNair student scholar, Brad Getchel. To view Northwood University’s Monthly Economic Outlook Newsletters from previous months, please visit: mcnair.northwood.edu/mcnair-economic-outlook. For more information about Northwood University, our academic programs and enrollment opportunities for students, visit www.northwood.edu.