Is There Intervention in US Economic Data?

In recent weeks, not only Viet Hustler but all readers have gone from one surprise to another regarding recent US economic data. 

• First is the US GDP and consumption in Q2/2024, which was already good… was revised even higher. 

• Last week: the US personal savings rate, which was near its historical low… was surprisingly revised to more than double the level from over a year ago.

• And up to this week: 

  • Both manufacturing and services PMI increased strongly compared to the previous month. 

  • Payroll numbers continued to be 1.5x higher than forecasts. 

  • Unemployment rate decreased compared to the previous month…

  • In particular, just in September: the number of full-time jobs has recovered nearly 1/3 compared to the number of jobs lost over the past more than 1 year.

Coincidentally, the above important data keeps getting better as the US national election day approaches… it's hard to avoid suspicions about the reliability of these statistics.

This weekend's article from Viet Hustler is dedicated to summarizing the above economic data… In addition, some other unofficial economic data will be summarized at the end of the article… to provide a more multi-dimensional view for readers.

Disclaimer: Some opinions below are the personal views of the Viet Hustler author group… and are not investment advice!

Economic data surprisingly improved

All data changes this month and revisions for previous months are surprisingly good:

(1) Labor market surprisingly reverses imbalance:

Job growth (both payroll data and household survey NFP+HH survey) all surprisingly higher than forecasts:

• Payroll numbers were also revised upward for the previous month.

  

Even more notably: the labor market imbalance was surprisingly reversed!

• Different from the situation throughout the past 1 year when full-time jobs decreased by more than - 1.5 million jobs (replaced by corresponding increase in part-time jobs)….

  

• … then just in the past September: the number of full-time jobs increased by a surprising +414,000 jobs

  • => recovered 1/3 of the full-time jobs lost in the past year!

  • While part-time jobs only decreased: -95,000 jobs. 

  

• This is quite illogical when looking at the structure of job growth last month:

  • Leisure and hospitality sector (where there are many part-time jobs) remains the private sector with the second-highest payroll growth.

  

In addition: unemployment decreased - average hourly wage increased

=> All are good data for the people (but not good for the current sticky inflation situation)…

• Unemployment rate has decreased to 4.1% (from 4.2% last month)…

  • Unemployment rate decrease causes the labor recession indicator Sahm Rule to return to the 0.5% threshold - almost reversing the recession indicator.

    

• Average hourly wage growth also surprisingly increased back to +4.0% y/y (> estimate +3.8% y/y | previously: revised up to +3.9% y/y) …

  

Labor demand from businesses also continues to increase:

• Number of new job openings in August (job openings) also surprisingly increased again and much higher than forecasts:

• Completely opposite to the previous trend:

  • When businesses reached a labor balance state — no need to hire more but also no layoffs. 

(2) Manufacturing and business activity also surprisingly improved again

• Both service and manufacturing PMI unexpectedly surged back strongly: 

• Surprisingly, employment activity in both service and manufacturing PMI surveys is at contraction levels and continues to decline…

  • in contrast to the job openings survey's labor demand figures

    

(3) Savings and consumption revised upward for the entire past year

The next strange point is that last week's data shows:

• The US savings rate, thought to be depleted (at 2.9%)… was unexpectedly revised upward nearly double for the entire past year:

  

• Not just the savings rate: US disposable income was also revised upward nearly reaching the peak when reopening after Covid

  

• Spending was also revised slightly upward:

  

So, are the above data reliable?

1. Consumers are still spending strongly (accompanied by high income growth)…..

2. Businesses are still producing…

3. Business hiring is steady, job numbers still growing strongly

4. Consumer income remains high / stable => back to the first point!

The above points almost go against most logic of conventional economic theories that:

1. Fed raises rates at the fastest pace in history… + previous high price increases => Consumers must increase savings + reduce spending

2. Slower consumption with high input prices => Businesses must cut back production…

3. Businesses cut back production => Unemployment rate will rise sharply!

All the above data is as if the Fed never raised rates....

… or the Fed's rate hikes have no impact on consumer spending and savings — nor on business production.

The question the Fed is probably asking is:

• So why can inflation still decrease if demand remains high causing the economy to still grow?

• Are the above data reliable? 

• Or is it really that the election year is influencing revisions to economic data from the Bureau of Labor Statistics (BLS) and other statistical agencies?

  • When there are only 4 weeks left until the official election day… and economic data (especially labor) is revised positively surprisingly…

Note: 

• Fed decisions cannot be intervened by political factors… but other economic data is hard to be sure of this!

• However, the Fed partly relies on the above economic statistics to make interest rate decisions!

Whether the economic statistics are intervened or not is hard to verify…

But the government's intervention in consumption and money supply in the economy is quite clear.

• Government payments to US citizens are still at levels higher than pre-Covid trends… and surged in the first 2 quarters of 2024.

  • This contributes a large part to consumer spending growth as well as US GDP.

  

• The government is also subsidizing a large portion of jobs in the labor market.

  

• And US public debt is increasing faster: just in the last 3 days of the past workweek, US public debt increased by +350 billion USD.

  

Besides the unbelievably surprising data above… there are some other unofficial economic data… but seem more in line with conventional economic theory!

What are the other unofficial economic data saying?

Recall: logic of conventional economic theories

• Fed raises rates at the fastest pace in history… + previous high price increases => Consumers must increase savings + reduce spending

• Slower consumption with high input prices => Businesses must cut back production…

• Businesses cut back production => Unemployment rate will rise sharply!

In reality, as of the end of August 2024, the number of large businesses filing for bankruptcy reached the highest level compared to the same period in previous years since 2010 (post-financial crisis).

- S&P Global

• Among them, consumer goods sector businesses have the highest number of bankruptcy filings:

  

• This shows that consumption of everyday goods is contracting => pushing businesses into production contraction…

  => This aligns with the above economic theory… more so than with the PMI data or last week's labor data!

The hiring rate (new hires/current total workforce) of businesses has dropped to the lowest level since 2013 (except during the Covid period)

• This aligns with the contraction in hiring activity by businesses in the aforementioned PMI basket…

The consumer debt situation is also not very optimistic:

• About 9.1% of credit card outstanding debt has been delinquent over the past year - this is also the highest level in over a decade.

• The delinquency rate on auto loans has also risen to the highest level since the financial crisis (2008-2010)

  

CONCLUSION

A series of official economic data: from GDP, savings - spending, to labor… all have improved… or been revised upward over the past 5-6 weeks. All indicate that: the US economy is still solid, Americans are still living stably with jobs, income - savings - consumption all good… This message is getting stronger as the US election day approaches… it's inevitable to have doubts about the reliability of the above economic data.

Perhaps, the Fed itself is also surprised by last week's employment report and wondering if it was too hasty to cut interest rates -50bps in September.

The government's intervention to increase money supply in the economy is quite clear… but whether politics affects economic data statistics is still an open question…

Especially when statistics from S&P Global (representing private sector statistics) show: the number of business bankruptcies in the first 8 months of 2024 is quite alarming… And the delinquency rates on credit card debt and auto loans in the US at banks are catching up with the post-2010 financial crisis trend.