Our worldviews are shaped by many different elements. How we were raised, our life experience, and the battles we’ve won and lost along the journey all play a part.
They’re also shaped by external narratives and how much (or little) attention we devote to them.
Depending on what media you consume, how much of your day is spent doom scrolling social media, and what you’ve overheard at the water cooler, you could have a drastically different view on reality than your neighbor down the street.
It’s our job to sift through which narratives hold kernels of truth and which aim to cover them up. Sometimes, it’s hard to tell.
Here, we’re diving into some of the latest economic narratives floating around and what they could mean for the bigger picture.
Getting Personal
Recession indicators continue to flash red while we wait for the official call from the media and the powers that be. This month, we’ve got our eye on several indicators, including the labor market and the consumer personal savings rate.
Right now, the consumer personal savings rate sits at 2.9%, a significant drop from last year’s rate of 4.5%.
On a recent segment of CNBC’s Fast Money, David Rosenberg expanded on why this is another alarm bell. Consumer disposable income grew 1% over the last year, but real consumer spending is running at 3%. The difference between the two points towards the relentless decline in the personal savings rate.
Powell’s concern that there’s too much slack being built up in the jobs market may be why he plans on cutting rates. However, unemployment is going up, making us wonder if the Fed is behind the curve.
Speaking of unemployment, we experienced further job loss in the last month to the tune of 438,000. Part time work continues to displace full time work, with 65,000 more multiple job holders recorded this past month as well.
Gig workers also increased in August by 274,000. While some of these folks are achieving the digital nomad dream, far more are simply picking up gigs with Uber and DoorDash to make up for what their other one or more jobs don’t pay.
Additionally, we’re experiencing what some have coined “The Great Replacement,” referring to the influx of foreign-born workers.
According to the August jobs report, American born workers lost over 1.3 million jobs, while foreign-born workers gained over 1.2 million jobs during the same period. Since the end of 2020, over 9 million immigrants have entered the country, 2.6 million of which came through legally.
The jobs report can’t tell the difference between legal and illegal immigrants, leaving it up to us to assume how this plays into the latest official numbers.
More Trends to Track
Will the “soft landing” crew eventually change their tune? Place your bets.
Here are some additional indicators to keep on your radar:
- US construction spending declined for the first time in 20 months. In July, nonresidential construction spending fell by 0.2% in July to a seasonally adjusted annual rate of $1.21T. Some blame Hurricane Beryl for screwing up construction activity along the Gulf Coast, but experts also blame high interest rates and a shortage of skilled labor.
- Manufacturing experienced contraction for the fifth consecutive month (47.2 points). New orders also fell from 47.4 points to 44.6 in July. It’s now in the second-longest downturn in history, shrinking in 21 out of the last 22 months. Stagflation is also a real possibility, thanks to rising prices. The prices paid index jumped from 52.9 points to 54.0 points, expanding for the 8th month in a row.
- The 10 year Treasury yield recently hit 3.71%, putting it above the 2 year yield at 3.65%, putting an end to the longest yield curve inversion in history. We’ve pointed out before that the flip back is a recession indicator to watch.
The Ordeal is Real
If you’re a hero committed to the journey, you know that getting things wrong is a natural part of the process.
Along the way, we take risks, make our best guesses at how to fend off the potential danger that lies ahead, and may take a punch or two as we fumble through.
We’ve had quite a bit of banter over the stock market and yes, there have been times we’ve gotten it wrong. However, we also know the stock market is just one piece of the puzzle.
As Factors and AR professionals, our job is to get things right 99% of the time as we climb the mountain. We can’t be wrong more than 1% of the time we’re in business.
We’re making credit-related decisions that are largely based on the economy and less based on how the Mag 7 might be doing.
We look under the hood and pay attention to the details of the environment, and the conditions in the economy are very different. Our mission is to understand these underlying details intimately so we can navigate our ship amidst any kind of waters.
While you may not always get things right, with the right processes and systems in place, you’ll always come out on top.
When you partner with Dare, you’ll be equipped with all the tools you need for a successful journey ahead.
Through our Back Room Service, you’ll get access to:
- Greater Income (like a lot more)
- Owning assets instead of commissions
- Zero investment down
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- Fifty-fifty split on risks and profits
- Portfolio management software from NN6, LLC
Eager to learn more? Give us a call.
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