The November numbers are in and they continue to paint a gray cloud over our economy. We have to continue to remember all of the factors that go into determining economic conditions. Look at them from a birds eye view so we can best see what they are telling us.
Looking at the trade numbers we continue to be a huge net importer when it comes to goods creating yet another deficit on the month. The headline number came in -67.10 billion missing expectations but better then -81.40 billion from the previous month. It's important to note that last month’s number was that of a record setting deficit. These deficits have grown out of control in the past 25 years as our economy has become more financialized. We create way less stuff, which is really wealth, but export our currency, dollars, instead. This helps other countries grow, mainly China, as we decline.
China is not your friend, get that in your head now!
We did set a new record high on imports which came in at 290.70 billion. Looking at the chart above you can see ever growing amounts with no end in cite. The lack of investment in American manufacturing has been showing its head recently. Record deficit after record deficit is the result.
Ships are pilled up off the cost of California waiting to unload goods for Americans to consume. These are some of the supply issues that have added to the recent CPI inflation.
But where is all this demand coming from?
Record numbers of Americans aren’t working or haven’t been working. Yet consumer spending is at an all time high. Where’s all this money coming from? Such demand has grown import numbers causing the prices on goods to rise. Verses the alternative of prices going down if we made the products ourselves.
Managing to export more though helped weaken the blow from the higher import numbers. It is important to note how there is still a net negative with imports vs exports. Hence the negative print on the trade difference. Just remember we are still importing record numbers of goods!
I wanted to point out the continued decline in Worker Productivity, which can be seen above. Whenever you see productivity not rising it shows that real wages are not rising. Real wages are what improves the standard of living for everyday Americans.
Finally, Unit Labor Costs soured higher to 9.6%, up from 1.1% This means employers are paying 9.6% more for -5.2% output. That is not a healthy combination for either employers or employees. The lack of productivity will lead to slower real wage gains that aren't able to keep up with the rapid rise in CPI.
All these numbers continue to paint a picture of an economy on life support. The only thing people are getting productivity from is the value of their financial assets. Those assets have seen pressure over the last few weeks with the Fed hinting at taper acceleration. If rates rise then there goes the markets..
Some food for thought about government produced numbers:
This image shows the trade balance for the US vs China. Notice how recently the Chinese reported numbers have been significantly higher then the US reported numbers.
Translation, we should expect to see record trade deficit numbers in the months to come. In addition I would wager on even higher CPI prints..