Amidst claims that “The U.S. economy is fine,” let’s take a closer look at the economic landscape. Manufacturing is contracting, and services are teetering on the brink of contraction. The alarming signal? Private-sector job growth is being overshadowed by government-sector job growth.
While the Biden administration touts phenomenal job creation over the past two years, a deeper dive reveals a different story. Job growth post-lockdown was expected, fueled by increased demand from extensive government spending. Since early 2021, the surge in job numbers leans heavily on government-sector growth, a far cry from organic economic development.
Ludwig von Mises’ words resonate – government-funded jobs don’t drive growth; they hinder it. The recent positive turn in the yield curve’s spread and the historical parallels with 2000 and 2007 are ominous signs. The recession looms, yet the stock market hits new highs, echoing a familiar tune from the prelude to the 2008 financial crisis.
The U.S. Dollar Index spikes, and a staggering 91% of fund managers anticipate lower short-term interest rates.
Get ready for a bumpy ride – it looks like economic turbulence is on the horizon.
“The U.S economy is fine”
The economy:
– Manufacturing contracting
– Services about to contractProbably nothing. pic.twitter.com/DWvCXs1wkj
— Genevieve Roch-Decter, CFA (@GRDecter) January 16, 2024
Recession Signal: Private-Sector Job Growth Is Being Replaced By Gov’t-Sector Job Growth
In reality, of course, much of the job growth that did exist was the predictable job growth that came with the end of forced business closures and lockdowns. Job growth was also fueled by rising aggregate demand fueled by runaway growth in government spending. After all, during 2020 and 2021, the regime’s easy money policies meant that the central bank and private banks created approximately seven trillion dollars during that period.
Since early 2021, however, the job growth we’re seeing has been increasingly fueled by growth in government-sector jobs. In other words, the job growth we do see in the government sector does not represent the result of private investment, saving, or demand. It’s not organic economic growth. Rather, these government positions are positions that only exist as the result of wealth transferred from the private sector to the government sector.
The spread between 2 vs. 30-year yields just turned positive.
Last time this happened from deeply inverted levels was in late 2000, right after the S&P 500 also marked a double top that resulted in the tech bust. pic.twitter.com/lqIGjS07dP— Otavio (Tavi) Costa (@TaviCosta) January 16, 2024
🟥The recession is upon us. Despite the prolonged inversion of the yield curve, the stock market continues to reach new highs, reminiscent of the situation in 2006-2007, just before we were plunged into one of the most significant financial crises of our lifetime pic.twitter.com/9EjdO0uLek
— HZ (@MFHoz) January 16, 2024
U.S. Dollar Index $DXY jumps to highest level in more than a month pic.twitter.com/wVD2HnYd44
— Barchart (@Barchart) January 17, 2024
All-Time High 91% of Fund Managers expect lower short-term interest rates during the next 12 months pic.twitter.com/HMFPbypqRn
— Win Smart, CFA (@WinfieldSmart) January 17, 2024