There was yet another sighting of the U-word ("unexpectedly") in connection with disappointing economic news today.
Bloomberg News, which most frequently employs the word, told readers that "Consumer confidence unexpectedly declined in November to the lowest level in more than a year as Americans grew less enthusiastic about the labor-market outlook." Expectations were that confidence would increase from October's value of 99.1 to between 99.6 and 101.0, not drop like a rock in just one month by almost 9 percent to 90.4. Over at the Associated Press, aka the Administration's Press, Economics writer Josh Boak clearly wanted his readers to believe that the news was a one-off "curveball" in an economy which he contended "has strengthened by many measures over the past month." All one can say is that he must not be looking at the same economy as the rest of us.
Here are excerpts from Boak's report (bolds and numbered tags are mine):
US consumer confidence falls hard in November
Confidence in the economy eroded this month as Americans became more worried about the job market.
A business research group said Tuesday that its consumer confidence index fell to 90.4 in November, down from 99.1 in October. The index is at its lowest level since September 2014.
... The decline in the confidence index comes after a robust month of hiring in October. Employers added 271,000 jobs last month as the unemployment rate settled at a healthy 5 percent, [1] an indication that companies see the economy as continuing its gradual, six-year expansion from the depths of the recession.
The drop in consumer confidence was a curveball for many economists, some of whom warned that the population might be reflecting concerns about hiring momentum while others could not reconcile the survey with other indicators hinting at a resilient U.S. economy. [2]
"November's results could be sending a cautionary signal about the key economic variable of job growth," said Joshua Shapiro, chief U.S. economist at the consultancy MFR.
Still, the decline conflicts "with what practically every other gauge of consumer attitudes (and labor market conditions) is showing right now," [3] said Stephen Stanley, chief economist at Amherst Pierpont Securities.
The economy has strengthened by many measures over the past month. [4] Hiring averaged just 145,000 in September and August, as the weight of China's slowing economy has damaged growth prospects worldwide, the dollar has risen in value and oil prices remain low amid relatively weak demand.
U.S. economic growth appears to have improved slightly after slowing in the July-September quarter. [5] The economy expanded at an annual rate of 2.1 percent in those months, up from an initial estimate of 1.9 percent but down from growth of 3.9 percent in the prior quarter. The Atlanta Federal Reserve expects that growth domestic product will advance at a 2.3 percent rate during the final three months of the year.
The October jobs report also indicated that wage growth is starting to improve. Average hourly earnings have advanced 2.5 percent over the past 12 months to $25.20, the largest gain in more than seven years. [6]
Notes:
[1] — The allegedly "healthy" 5 percent unemployment rate isn't really that healthy, given that 94 million American adults are not in the labor force, that job gains have for some time been taking place largely among those who are 55 and older, and that so many Americans are in part-time and temporary positions. If the currently calculated 5 percent rate was really "healthy," there would be far more upward pressure on wages and salaries, and there are only hints that this is finally beginning to occur.
[2] — Someone need to explain to me, in context of the following possible definitions of the word, how the economy can be said to be "resilient":
1. springing back; rebounding.
2. returning to the original form or position after being bent,compressed, or stretched.
3. recovering readily from illness, depression, adversity, or the like; buoyant.
Definition 1 doesn't work, unless one acknoledges that the "rebound" has been painfully slow, rendering "resilient" a negative term instead of a positive one.
Definition 2 implies "bends but does not break" characteristics. But so what, if the conditions being maintained are mediocre or worse (i.e., the worst economic "recovery" since World War II by far)? That's not positive either.
The final word in Definition 3 is the only one in the entire definition which is positive. But if the business press, economists and analysts really believe that the economy is buoyant ("cheering or invigorating"), they're not liviing in Realville. Those who really can't reconcile today's confidence news with a "buoyant" economy need to understand that their failure to reconcile is due to the fact that it's just not "buoyant."
[3] — As to consumer attitudes, the quoted Mr. Stanley must not be familiar with Gallup's confidence survey, a likely more reliable rolling three-day average which has been in decidedly negative territory since May. As to Stanley's contentions about the labor market, see Note [1].
[4] — The economy has also weakened by many measures in the past month. Here are just a few:
- The Institute for Supply Management's Manufacturing Index was a barely positive 50.1 percent (the threshold for expansion is 50 percent). Given that so many other regional surveys conducted by the Federal Reserve have been mostly or entirely negative for several months, it seems that the ISM survey has become the true outlier, and that the regional surveys are more reliable.
- October retail sales advanced by only 0.1 percent, compared to expectations of 0.3 percent to 0.5 percent.
- October Industrial Production fell by 0.2 percent, compared to expectations of a 0.1-0.2 percent increase.
[5] — While Boak is correct that the Atlanta Fed is still predicting fourth-quarter annualized growth of 2.3 percent, it hasn't yet incorporated today's GDP data into its estimates. Moody's did and is now predicting fourth-quarter annualized growth of 2.0 percent. The Atlanta Fed will likely revise its estimate downward within the next 1-3 business days. Additionally, as I noted at my home blog this morning, if businesses stop accumulating additional inventories during the fourth quarter — a move which would make sense, because current inventory-to-sales ratios are extraordinarily high in historical context — we'll see a 2-point or more hit to GDP in the fourth quarter, and a far lower GDP growth figure.
[6] — Seriously, if 2.5 percent is the best gain in seven years, it means that the past seven years have been absolutely awful. Although the data Boak referenced was not fully available during the past decade, comparable data seen here for production and non-supervisory employees shows that increases in average hourly earnings averaged over 3 percent from 2003-2007.
Sorry, folks. The Conference Board's report shouldn't have been "unexpected." The problem here is the business press and the economists and analysts who read their coverage have been in a continuous feedback loop of false positivity that even seemed to work for a while on the general populace (or at least that portion interviewed by the Conference Board) — and the chickens finally came home to roost.
Cross-posted at BizzyBlog.com.
