Yellen, Associated Press Continue to Blame 'The World' As U.S. Economy Weakens

February 11th, 2016 5:28 PM

The Federal Reserve, Fed Chair Janet Yellen, and the ever-cooperative Associated Press have a message for America: "If there's an economic downturn, even one that turns into a recession, it's going to be the rest of the world's fault. The U.S. economy is fine, and it will stay fine if everybody else doesn't ruin it."

As the AP's Martin Crutsinger reported today ("YELLEN: TOO EARLY TO DETERMINE IMPACT OF GLOBAL DEVELOPMENTS"), Yellen told members of the Senate Banking Committee that, in Crutsinger's words, "that global economic pressures pose risks to the U.S. economy," and that the Fed will wait until its next meeting to see "how much economic weakness and falling markets around the world have hamstrung U.S. growth." Folks, to "hamstring" growth, you've got to have growth, and the best estimates at the moment are telling us that at the end of last year there either wasn't any, or that it barely existed.

As I reported last week, on the February 3 ADP Employment Report conference call — a call which AP reporter Christopher Rugaber definitely attended, and on which several other members of the business press typically sit in each month — Mark Zandi, the ordinarily sunnyside-up Moody's economist in charge of ADP's report, admitted that economic growth in the final quarter of last year, currently estimated at an annualized 0.7 percent, would likely be revised down to between 0.0 percent and 0.5 percent.

In other words, the U.S. doesn't need "help" from the rest of the world to have an economy which is underperforming.

Additional evidence of that underperformance came from the Census Bureau on Tuesday morning, in the form of December's Wholesale Trade report.

As seen below, seasonally adjusted wholesale sales in every month during 2015 came in below the same month in 2014. Additionally, during the final three months of 2015, they were below the same month in 2013:


Calendar year 2015 wholesales sales were 3.6 percent lower than calendar year 2014, and only 0.5 percent greater than calendar year 2013. After subtracting petroleum products to consider lower gas prices last year compared to 2014, 2015 still only comes in 1.7 percent ahead of 2014 — and that assumes no reduction in petroleum product usage, which seems unlikely based on lower shipping volumes. Additionally, fourth quarter wholesale sales ex-petroleum were 0.3 percent lower than the fourth quarter of 2014.

Finally, the wholesale inventories-to-sales ratio is at levels Zero Hedge has shown have ordinarily been associated with recessions:

Inventories to sales since 2000

The possible difference here is that in an artificially low interest rate environment, it doesn't cost companies as much as it would with normal interest rates to overstock on inventores — for a while. For many, it's better to keep the production lines running and avoid layoff while hoping that things turn around. If they don't, it seems pretty clear that a lot of firms are going to be sitting on goods they can't get rid of except at fire-sale prices, if at all.

All of this is not evidence of robust growth. It is evidence of a slowdown which has been in the making for some time — and the rest of the world has almost nothing to do with it.

Although the economy is getting a bit of a break from an overall less harsh than usual winter, there is little reason to believe that there has been a great deal of substantive strengthening since 2016 began.

Supporting Crutsinger's predictable blame-shifting, Alex Veiga's AP report on today's stock market results — another significant downer — also played the "blame the world" theme:


Jitters over the global economy and a steep drop in crude oil knocked U.S. stocks lower for the fourth day in a row Thursday.

The drop in the U.S. followed large losses all around the world, and left all three major U.S. indexes down at least 10 percent since the beginning of the year.

The latest slump reflected heightened concerns that global economic growth is slowing, even as Federal Reserve Chair Janet Yellen reiterated her confidence in the U.S. economy in testimony to congress Thursday.

Sure, Jan.

Thanks to this denial exercise, if a significant slowdown or recession occurs (or the one perhaps already in progess is confirmed), it's going to take most of the American people by surprise. If so, it's Yellen's and the press's fault for not seeing the clear signs.

Cross-posted at