WHERE IS THE ECONOMY HEADED?

A question a lot of us would like to see answered is where is our economy headed.  Steve Rattner thinks it might be into a recession.*  Below is his figure from Morning Joe showing that every time the Yield Curve drops below zero, a recession has followed.  You can see that this has happened recently (at the extreme right in the figure).  Rattner attributes this to the ongoing Global Tariff War.

(Click on figure to enlarge)
The  yield curve is the difference in interest rates between the government’s shorter term debt and its longer term debt.*

MANUFACTURING
Among the factors indicating economic problems is the decline in the manufacturing index.
“The Trump bump to manufacturing in the US which takes place in many swing states has already petered out,” Binky Chadha, chief strategist at Deutsche Bank, said in a research note. “In our view, a continued decline and in particular a falling below 50 will be hard to spin as anything but a manufacturing recession.”

The ISM reading for May came in at 52.1, essentially a percentage reading representing manufacturers who plan to increase activity. That means a reading under 50 means more companies are planning to decrease activity.

The index rose from 51.8 when Trump took office up to a peak of 60.8 in August 2018 during a year in which U.S. GDP increased nearly 3% and posted some of the strongest levels of activity since the recovery began in mid-2009**

TRUCKING
But that is not all.  there also are problems in the trucking industry.
FTR’s Trucking Conditions Index for March showed its first negative reading in several years, reflecting a softening environment for carriers.

The March TCI reading fell to -1.18 driven by easing freight rates and sluggish, though still positive, demand. Active truck utilization and the truckload rate have also continued to ease. The weakness in truckload rates was attributed mostly to spot rates, but FTR also found that the contract rate outlook has turned slightly negative.

FTR’s outlook for loadings growth has been revised downward from previous forecasts with year-over-year growth now expected to be under 2%.

...............................................................

This trend was also spotted by analysts at ACT Research who noted in the May Freight Forecast that slowing freight and increased tractor sales will likely have a downward effect on freight rates.

“Freight remains soft, as expected, and while we see reasons for recovery in the second half of 2019, escalating trade tensions raise the risk of freight recession,” said Tim Denoyer, ACT Research’s vice president and senior analyst.***

FARMING
Then, of course, there is farming where problems due to tariffs are acute (particularly soy beans), but there are also problems related to natural disasters such as Hurricanes Michael and Florence plus the midwestern floodings.  Though the relief bill was held up in the House by two Republican Representatives, it finally has passed on a rare bipartisan vote in early June.****
The fight in Washington has turned the nation’s farmers into collateral damage. The disaster bill includes $3 billion in direct aid that covers not only cotton farms in Georgia, but also cattle ranches in the Midwest that suffered historic flooding, vineyards in California hurt by wildfires and sweet potato fields swamped by Hurricane Florence. The Farm Bureau, an industry group, estimates losses to the agricultural sector at $8.5 billion.****

“It’s a reflection of our broken politics, but also of how few things are getting done these days,” said Brendan Buck, a former top advisor to House Speaker Paul Ryan. “Any legislation that matters is now a hostage to be taken. When so few bills become law, there’s much greater incentive to hold out to get what you want in there.”****

But not all information is bad.  For example job hirings hit a new record in April
Hirings increased to 5.9 million for the month, a gain of 240,000 from March, the Job Openings and Labor Turnover Survey indicated. The hiring rate rose to 3.9%, an increase of one-tenth of a percentage point. The total hirings was the most recorded in the data series’ history going back to December 2000. (https://www.cnbc.com/2019/06/10/jolts-hirings-hit-record-high-1point6-million-more-jobs-than-unemployed.html
https://www.cnbc.com/2019/06/11/manpowergroup-hiring-expected-to-hit-highest-in-13-years-during-q3.html)

* https://stevenrattner.com/2019/06/steve-rattners-morning-joe-charts-trumps-erratic-policies-stoke-recession-fears/
** https://www.cnbc.com/2019/06/11/that-big-trump-bump-in-manufacturing-is-pretty-much-gone-now.html
*** https://www.truckinginfo.com/331832/trucking-industry-hits-the-doldrums-with-neutral-economic-outlook
**** https://www.cnbc.com/2019/05/07/farmers-feel-the-pain-as-lawmakers-haggle-over-disaster-relief-plan.html
https://www.cbsnews.com/news/disaster-bill-house-passes-long-delayed-19-1-billion-aid-package-sending-it-to-trumps-desk/

https://www.cnbc.com/2019/06/07/heres-where-the-jobs-are-in-one-chart.html





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https://www.cnbc.com/2019/05/09/us-trade-deficit-widens-to-50-billion-in-march.html

https://www.cnbc.com/2019/04/25/americans-financial-happiness-hits-new-high-long-running-index-shows.html

https://www.cnbc.com/2019/04/25/heidi-heitkamp-trump-has-failed-rural-americas-reagan-test.htm