Unemployment rates remain high as job growth sagged and the so-called “improving” data has more to do with a shrinking pool of job seekers than job growth. Consumer credit also sagged with two months of contractions, especially in credit card debt. The Empire State manufacturing report was down, reflecting higher inventories and flattened new orders. Industrial production has flattened as well with a slight decline in manufacturing. Capacity utilization also flattened in February and March (actually a slight decline in March). Retail sales continue their lackluster performance, showing a declining-to-flattening trend since last October.
What gives? If we were in recovery, wouldn’t these data be more consistent with growth?
The answer given by most economists is that, “Oh well, what can you expect? These things take time.” The other answer is that maybe there are more severe underlying factors that are reasserting themselves after months of monetary stimulus has wound down. Monetary stimulus never solves any economic problem; it creates problems.
What concerns me is that several rounds of monetary stimulus have further destroyed real savings needed for further economic growth. This would tend to explain why the economy is stalling. I believe that what most economists call a “recovery” actually never took place, and that what “growth” we have seen in the economy is mostly a manifestation of more dollars floating around the economy rather than real, organic growth. It can give the appearance that things are better, but are they? There has been some real growth as we (i.e., the “economy”) repair our personal and business balance sheets, and as businesses struggle to get back on their feet. But quantitative easing is taking its toll on savers and businesses alike.
A careful look at economic data in coming months, as well as money supply, will reveal that weakness, and continued stagnation is likely.