Economy Strengthening?

Economy Strengthening?

We keep hearing, particularly from the Federal Reserve and those in DC, that the economy is improving. Hmmm, let’s look. With consumer spending responsible for roughly 70% of the economy, how about retail sales?

2016-09-19-retail-sales

Ok, so maybe not there. How about employment? We keep hearing about how strong employment has become.

The percent of working-age people who are actually employed is back where it was over 30 years ago. That doesn’t look like a recovery to me.

What about new jobs? The level of job openings looks to be rolling over as well.

As for inflation concerns?

2016-10-18-cpi-trend

 

Not so much there.

But then it is tough to get inflation going when we have a heck of a lot more productive capacity than we need!

As for industrial production, that peaked way back in 2014.

As for that painfully weak GDP growth, if we strip out healthcare costs which have been on the rise as a percent of household spending in recent years, we get an economy that is nearing stall speed.

img_0868

 

Bottom Line: The data is not painting a clear picture of an economy that is strengthening, but rather one that is rolling over, having never achieved even the typical average rate of growth. Keep this in mind when looking at equity markets sporting historically rich valuations.