The US Bureau of Labor announced the United States created 255,000 jobs in July. While good news, and rightly praised by the pundits, there is trouble hiding behind those numbers. The US durable goods sector went into recession early last autumn, while the entire manufacturing sector followed by November. That’s over 12 percent of the economy. Here’s what isn’t well known.
The entire economy has followed the durable goods sector into recession in each of the last recessions since and including the Great Depression. Historically, it takes sixteen to eighteen months for the rest of the economy to follow durable goods. So we’re most likely looking at a recession hitting somewhere between October of this year and June 2017.
Given that 99 percent of all income growth from 2009 to 2014 went to the top 1 percent, an historic record, the next recession will likely be more severe than the last. That’s because the great middle class will historically have fewer dollars to spend during the coming recession, which means the demand for goods and services will be depressed at levels not seen in decades.
This is the fourth longest economic expansion on record, and also among the weakest when it comes to job and wage growth. The US experienced higher monthly job growth in the economic expansions of the 1960s (170,000 per month), 1980s (230,000 per month) and the 1990s (200,000 per month), despite a smaller population, smaller GNP, and less worker productivity. Those expansions also featured real wage growth, especially during the 1960s. The current boom period has seen only 184,000 jobs created per month. Contrast that with the much maligned President Carter. Job growth of 206,000 per month occurred under Carter, with a population 2/3’s the size of today, and a GNP roughly 40 percent of today’s economy. Wage growth was consistent under Carter.
In addition, the most recent housing bubble will burst, as it always has done when recessions hit. Typically, when a recession occurs along with a bursting of a bubble, things are significantly much worse than without a bubble.
So, given the bubble, and historic income and wealth inequality, we should be looking at a whale of recession that is coming down the pike at hurricane speed.