The U.S. economy is slowing, and economic health is weaker than the Harris-Biden administration’s economic data has led investors to believe. Last week, the U.S. Bureau of Labor Statistics reported that the U.S. added 818,000 fewer jobs over the last 12 months (from March 2023 to March 2024) than previously reported. The largest reductions to estimated job-gains were in high-paying professional and manufacturing jobs, too.
A large reason for the miss is that the Bureau of Labor Statistics (BLS) has incorrectly estimated the start and death of businesses (the birth-death adjustment) since the Covid lockdowns and stimulus, which has incorrectly pushed estimates of job creation higher. The birth-death adjustment was likely skewed post-stimulus because of the many business entities opened to facilitate PPP (Paycheck Protection Program) loan fraud. This could mean a large number of added jobs since 2021 are fake. Even if the data is correct, most of the existing gains have gone to foreign born workers.
There are other signs of a slowing economy. The consumer is slowing, unemployment is edging higher (which is related to, but not exactly the same as the lower job-adds), and the yield curve is inverted (the yield on 2-year Treasury debt has been higher than the yield on 10-year Treasury debt), something that occurs before recession. Worse, a large part of post-Covid growth and job-adds (the real ones) have been fueled by government spending. This spending-binge is about to turn from a tailwind to a headwind.
An unprecedented federal spending binge
