{"id":44943,"date":"2013-12-04T05:36:58","date_gmt":"2013-12-04T10:36:58","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=44943"},"modified":"2013-12-04T05:36:58","modified_gmt":"2013-12-04T10:36:58","slug":"a-telltale-sign-of-economic-strength","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/12\/04\/a-telltale-sign-of-economic-strength\/","title":{"rendered":"A Telltale Sign of Economic Strength"},"content":{"rendered":"

By WallStreetDaily.com<\/u><\/a> <\/p>\n

Apparently, I threw one faithful reader for a loop yesterday when I agreed with Nobel Prize-winning economist Robert Shiller’s assessment that the U.S. economy<\/a> “is still weak and vulnerable.”<\/p>\n

Here’s what Rick H. wrote in to say: “Is the always optimistic, super bullish and esteemed<\/em> Louis Basenese suddenly becoming more pragmatic, perhaps even pessimistic? Say it ain’t so!”<\/p>\n

Well, it ain’t so!<\/p>\n

A bit of clarification is in order: I agree with Shiller that the U.S. economy is vulnerable<\/em>, not that it’s weak<\/em>.<\/p>\n

I mean, with so much debt and money printing, there’s a lot that could<\/em> go wrong with Bernanke’s grand monetary experiment.<\/p>\n

Not to mention that politicians still don’t seem to care about holding the economy hostage (again and again) as they hash out their ideological differences.<\/p>\n

Both conditions certainly make the economy vulnerable. However, that doesn’t mean we’re on the brink of another collapse or one step away from being put on life support.<\/p>\n

To the contrary, there are several bastions of strength that suggest the U.S. economy is becoming less and less vulnerable.<\/p>\n

Just ask Nomura’s strategist, Michael Kurtz. In his outlook for 2014, titled “The End of the End of the World,” he notes, “The Global Financial Crisis is over. Not that clocks have simply rewound to 2006, but: The U.S. property market has been recovering for no less than 20 months, the U.S. household balance sheet is largely repaired and the U.S.-China current account imbalance [is now] vastly reduced.”<\/p>\n

Rick H., if that’s not enough to convince you, here\u2019s an undeniably optimistic chart just for you… <\/a><\/p>\n

Consumers Step on the Gas<\/b><\/p>\n

With the holiday shopping season underway, everyone is laser-focused on consumer spending habits. After all, the consumer accounts for a sizeable 42% of U.S. GDP<\/a>.<\/p>\n

But holiday shopping is a one-off event. It\u2019s dangerous to make sweeping assumptions about the health of the consumer – and, in turn, the economy – based on a brief spurt of activity.<\/p>\n

It\u2019s much more instructive to track trends over longer periods of time.<\/p>\n

Like automobile and light truck sales, for instance. Why? The answer can be found on any local radio or television ad. As they all say, \u201cIf you\u2019ve got a job, you can buy a car.\u201d And if you don\u2019t, well\u2026 you can\u2019t.<\/p>\n

So car and truck sales provide insights into the health of the labor market. I think we can all agree – a stronger labor market makes for a stronger economy.<\/p>\n

As you can see in this chart, auto sales are actually a leading indicator. They keep climbing as more and more people get back to work.<\/p>\n

Some will try to discount this connection, arguing that the official unemployment rate, known as U-3 unemployment, conveniently excludes three groups of people. I agree with the knock against U-3<\/a> and have said as much before.<\/p>\n

Rest assured, though, that this long-term relationship between auto sales and unemployment still holds true if we use the broadest and most inclusive measure – U-6 employment. The reason I used U-3 in the graph is because the data goes back further.<\/p>\n

\"\"<\/p>\n

With that being said, let\u2019s get to the most important thing\u2026<\/p>\n

Throughout the day yesterday, automakers reported November monthly sales. There\u2019s no way to interpret the data as anything but bullish\u2026<\/p>\n