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A U.S. economy that has grown steadily and reliably has given way to an era in which soaring equity markets, a labor shortage, and strong consumer spending are ending as artificially low interest rates rise and trillions of dollars pumped into the system by Washington to fight the COVID War, dries up.
The facts are in the numbers.
Tesla will lay off 10 percent of its salaried workers, Elon Musk announced last week. Amazon, Meta Platforms, and Uber Technologies are among the companies that have slowed hiring.
Kohl’s, Target, and Walmart saw their share prices tank recently on reports of surprisingly weak first-quarter earnings, which we reported in “Major Retailers Take a Drubbing” (24 May 2022). Shoppers are beginning to spend less and buy fewer items, they said.
Stores that were unable to stock their shelves amid last year’s supply chain crunch now have more appliances, clothing, and furniture than consumers want to buy, the WSJ noted.
However, not all indicators are flashing red.
The U.S. economy sprouted 390,000 new jobs last month, beating analysts’ expectations. Restaurants and airlines are still desperate for workers.
Costco’s sales were up 10.8 percent in this year’s first quarter, rising above the rate of inflation. Sales by Lululemon Athletica, LVNH, and other luxury retailers are on the rise, which we noted in “Purveyors of Luxury Goods Foresee U.S. Boom, China Revival” (24 May 2022).
Many market analysts expect corporate earnings to improve this year over last, the WSJ said.
On the other hand, in late May the Standard & Poor’s 500 stock index followed the NASDAQ into a bear market. The S&P has slipped 14 percent this year as of last week; the NASDAQ has surrendered 20 percent.
Wage growth in April and May fell below last year’s average. Sales of existing homes slipped 5.9 percent in April from a year earlier.
Consumers are gouging their savings to keep spending, as we report in “Savings Rate Slows as Consumers Spend Their Cash Cushions” in this issue.
Walmart, Procter & Gamble, and other consumer product companies say they are emphasizing bargain items and store brands as they brace for a pullback in consumer spending.
The chief reason is inflation, which Americans cited as their overriding worry in the University of Michigan’s most recent monthly consumer survey.
TREND FORECAST: In this week’s Trends Journal article, “ECONOMIC ‘HURRICANE’ AHEAD, DIMON SAYS”, we note the economic pessimism spreading across the top of the U.S. business spectrum. These insights are not coming from “conspiracy theorists” the mainstream media stupidly labels and ridicules, but instead from their idols who they bow down to, suck up to and adore.
Indeed, our economic trend forecasts of what they are now saying which we had written over a year ago were completely ignored. Why have they been discounted despite the hard data to support our forecasts? As the great George Carlin said, “It’s one big club, and you ain’t in it.”
Now that “The Club” is saying “Danger Ahead” it’s legit!
The big question remains: Will the U.S. Federal Reserve continue to raise interest rates—with economists from “The Club” expecting the central bank to raise them to at least 2.5 percent by October which raises fears that “rate shock” will send the economy into a recession… or will they hold rates back and slowly raise rates?
The answer will lie in Friday’s inflation report.