The Market Bull – June 20, 2019
Despite a dramatic escalation in geopolitical tensions after Iran shot down a US drone. The major averages closed with large gains.
The Philadelphia Fed is the second regional manufacturing index to crater. Falling 16.3 points to a barely positive .3 in June. Weakness was broad based. Price data fell hard with prices received plunging 16.9 points to just .6, prices paid dropped by nearly half to 12.9.
The Current Account deficit fell 9.4% to 130.4 billion in the first quarter. As a share of Gross Domestic Product or GDP it works out to 2.5%. The improvement was less than expected as imports slipped and exports improved somewhat.
11-years into the recovery, and based on the evening news, one could easily believe that the economy is booming, and everyone is doing just great, and yet, for many Americans the recovery is absent. A lot of debate has centered around the idea that the failed recovery is in fact a systemic issue, rather than the garden variety, and temporary, business or economic cycle kind. One of the signs that a crisis is systemic, rather than purely political or economic, is that key indicators decline or stay the same regardless of changes in political power or business cycles. Since 1970, the United States has experienced six party changes in the White House, five party changes in control of the Senate, and four in the House of Representatives. It has also experienced seven recessions and recoveries. With stagnant real or inflation adjusted wages for some 40-years despite a 50-year low unemployment rate. Add record income and wealth inequality. When I look around and see epidemic homelessness and shanties everywhere. I can’t help but wonder about the recovery, something I have commented on for years. The following charts and data points really drive it home. Thanks to Isaiah J. Poole an editorial manager for The Next System Project at the Democracy Collaborative and Open Democracy for the following.
For example, since the early 1970s:
● Wages have been stagnant for the vast majority of Americans. For production and nonsupervisory workers in the private sector, average hourly earnings today are essentially the same as they were in 1970 when inflation is factored in.
● The wealth share of the top 1 percent has substantially increased, while the bottom 50 percent saw virtually no growth in their share, with any gains wiped out during the 2008 financial crisis.
● The poverty rate in the United States has remained relatively constant at about 13%, even in the face of what has been called the longest period of economic growth in recent American history.
● The racial wealth gap has exploded. Whereas in the 1970s the median net worth of White households was around 1,500% higher than the median net worth of Black households, by 2016 White household median net worth was 4,000% higher than that of Black households, because Black net worth is actually shrinking.
● While average worker wages have stagnated for decades, the average cost of undergraduate tuition has more than doubled when adjusted for inflation, leading to astronomical levels of student debt, and per capita healthcare spending is close to five times higher.
Another way to assess whether a political-economic system is in crisis is to compare its outcomes against similar systems. The infamous slogan of the Trump presidential campaign “Make America Great Again” presumes a state of American exceptionalism that should be our business to restore. Our index shows that, far from being exceptional, the United States compares relatively poorly with other advanced systems specifically the 35 countries of the Organization for Economic Cooperation and Development.
● A higher percentage of children in the United States live in poverty (nearly 21%) than the population as a whole. Not only is that level of poverty unheard of in many other OECD countries, it’s unheard of that child poverty rates would be higher than overall rates. Several OECD countries have lower child poverty rates than general rates, including Denmark (2.9% vs. 5.5%), Finland (3.3% vs. 5.8%), Norway (7.7% vs. 8.2%), and Sweden (8.9% vs. 9.1%). The United States also has among the world’s highest rates of elder poverty.
● The United States still has one of the worst infant mortality rates of any advanced country, more than double many of its contemporaries in Europe. It also has one of the worst maternal mortality rates among advanced countries, with around 26 mothers dying during childbirth for every 100,000 live births. Finally, the United States has the lowest life expectancy of any of the high-income OECD countries (and is bested by numerous lower-income countries as well).
● Union membership has always been less robust in the United States than at many of its contemporaries; now it is even more so.
● In an “Index of Economic Democracy” that measures workplace and individual rights, distribution of economic decision-making, transparency, and associational economic democracy, the United States finished dead last.
These are not statistical flukes caused by transitory events; it is evidence of chronic dysfunction at the heart of our current system.
The numbers in the Index of Systemic Trends tell the story of a political-economic system that consistently fails to deliver improvements in the lives of Americans or remain qualitatively competitive with other advanced economies. They reveal a systemic crisis that can only be fully addressed by moving toward a new system that can and will produce better outcomes.
Standard and Poors 500 Index closed at: 2,954.18 up 27.72
NASDAQ finished the day: 8,051.34 up 64.02
Gold ended trading at: $1,392.60 up $43.80