{"id":43874,"date":"2013-11-07T07:04:26","date_gmt":"2013-11-07T12:04:26","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=43874"},"modified":"2013-11-07T07:04:26","modified_gmt":"2013-11-07T12:04:26","slug":"three-key-indicators-say-u-s-economy-trouble","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/11\/07\/three-key-indicators-say-u-s-economy-trouble\/","title":{"rendered":"Three Key Indicators Say U.S. Economy in Trouble"},"content":{"rendered":"

\"061113_PC_lombardi\"<\/a>By Michael Lombardi, MBA<\/a><\/span><\/p>\n

The mainstream and politicians tell us the \u201cwounds\u201d of the financial crisis are over and the U.S. economy is in recovery mode. This simply isn\u2019t true.<\/p>\n

A few of the key indicators I follow to see where an economy stands are personal income, consumer demand, and businesses\u2019 activity. All three of these indicators are telling me the U.S. economy is definitely going in the wrong direction.<\/p>\n

First of all, the income gap in the U.S. economy continues to grow. The top earners make more, while the lowest income earners make less. According to the Wage Statistic from Social Security, in 2012, 23 million of the lowest wage earners earned a total of $47.0 billion in the U.S. economy. But those who earned $10.0 million or more annually in the year 2012 earned $64.3 billion! Here comes the kicker: there were only 2,915 wage earners in this category in the U.S. economy last year. (Source: Social Security, November 5, 2013.) Yes, you read that right. Less than 3,000 people cumulatively made more than 23 million people.<\/p>\n

The bottom line: while Wall Street and big business has boomed again, the average working American family is struggling under an after-inflation personal income that is lower than it was in 2009\u2014four years ago. In 1999, real median household income (that\u2019s adjusted for inflation) in the U.S. economy was $56,030. By 2012, that number was $51,017. (Source: \u201cReal Median Household Income in the United States,\u201d U.S. Department of Commerce, September 18, 2013.)<\/p>\n

Next, American consumers are pulling back on their spending\u2014something that\u2019s not supposed to happen when an economy is recovering.<\/p>\n

One indicator of consumer demand I follow is the build-up of wholesale inventories. When business inventories build up, it suggests companies are storing more of the goods they produce because they are selling less to consumers.<\/p>\n

In August, wholesale inventories in the U.S. economy reached $503 billion, up 2.5% from August of last year. Inventories of motor vehicles and motor vehicle parts increased 2.4% in just one month! (Source: United States Census Bureau, October 25, 2013.)<\/p>\n

Finally, businesses in the U.S. economy are worried.<\/p>\n

The CEO of Target Corporation (NYSE\/TGT), Gregg Steinhafel, while presenting second-quarter 2013 results, said, \u201cFor the balance of this year, our U.S. outlook envisions continued cautious spending by consumers in the face of ongoing household budget pressure\u2026\u201d (Source: \u201cTarget Reports Second Quarter 2013 Earnings,\u201d Target Corporation, August 21, 2013.)<\/p>\n

Dear reader, what I write each passing day in these pages points to one thing: the U.S. economy is headed towards an economic slowdown, not economic growth. Time will tell if I am right or wrong. As far as I\u2019m concerned, take out massive money printing and massive government spending, and there would be no economy.<\/p>\n

Michael\u2019s Personal Notes:<\/p>\n

We have seen cities like Detroit and others in California tell their municipal bonds investors, \u201cSorry, we can\u2019t pay you.\u201d The reason behind this? Their budget deficit was out of control, they reached the breaking point, and they filed for bankruptcy.<\/p>\n

But the troubles of municipalities and cities aren\u2019t behind us. In fact, they are marching forward with full force. And it\u2019s not just rural cities and counties that are struggling to fix their budget deficit; major ones are doing the exact same thing. And truth be told, they are failing at it.<\/p>\n

Take Fresno, California, for example. In the fiscal year 2014\u2014which began on July 1, 2013 and ends on June 30, 2014\u2014Fresno, one of the largest cities in California, will register a budget deficit of $6.0 million. If the city is unable to reduce its budget deficit in the fiscal year 2014, then its budget deficit can grow to as much as $32.2 million in the next five years. (Source: \u201cFY 2014 Adopted Budget,\u201d City of Fresno, California, May 29, 2013.)<\/p>\n

And Fresno has worked very hard to keep its budget deficit under control. In the last four years, the city has decreased its workforce by 1,200 employees (25% of the city\u2019s workforce), reduced or completely eliminated the maintenance and replacement of equipment, and now relies on volunteers for parks maintenance, community centers, and for different functions in the police department. The city has also reduced the number of employees working in public safety. One would assume that after this many cuts, the budget deficit would be controlled; but that\u2019s certainly not the case for Fresno, California.<\/p>\n

While this is just one example, the list of cities working to reduce their budget deficit is vast. And I don\u2019t expect them to get out of their misery very quickly. Why? The main source of income for cities is still property taxes\u2026which haven\u2019t recovered.<\/p>\n

Many of my readers are not invested in municipal bonds, and I understand that. The purpose of this story is to stress this $3.0-trillion market is under immense pressure. Despite municipalities and cities slashing their costs, they still can\u2019t cover their expenses.<\/p>\n

My concern is that struggling cities will ask for government bailouts. We\u2019ve already seen the federal government give money to Detroit. What happens when other cities come calling?<\/p>\n

It wasn\u2019t too long ago when the U.S. national debt was $9.0 trillion. Now, our national debt is beyond $17.0 trillion. As the economy slows further, as I\u2019m predicting, the municipal crisis will add considerably more to the national debt we already have.<\/p>\n

This article Three Key Indicators Say U.S. Economy in Trouble<\/a> is originally published at Profitconfidential<\/a><\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Michael Lombardi, MBA The mainstream and politicians tell us the \u201cwounds\u201d of the financial crisis are over and the U.S. economy is in recovery mode. This simply isn\u2019t true. A few of the key indicators I follow to see where an economy stands are personal income, consumer demand, and businesses\u2019 activity. All three of … <\/p>\n

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