March 16, 2016
“Prosperity is like a Jenga tower. Take one piece out and the whole thing can fall.”
That’s a direct quote from John Williams, the President of the San Francisco Federal Reserve Bank in a speech he gave a few weeks ago.
He could have just as easily been talking about propaganda. The Fed, the White House, Wall Street, the media have a vested interest in peddling a certain narrative about the economy.
The narrative goes something like this: “Everything’s awesome. Stop asking questions”.
But if you look at their own data, the numbers tell a different story.
My team and I were recently studying US manufacturing indices, something that has traditionally been a strong indicator of recession.
This is data collected by the Federal Reserve; they survey manufacturing businesses and ask if factory orders are growing, shrinking, or relatively unchanged.
You’d think that based on this “everything is awesome” narrative that all the numbers would be growing.
And yet, much of the data show that manufacturing is shrinking. Or to be even more clear, that the US is in a manufacturing recession.
In Texas, for example, just 4% of businesses report that they are growing. 38% are shrinking.
The Philadelphia Fed’s Manufacturing Index has been in recession since September of last year.
The San Francisco Fed’s Total Factor Productivity is also reporting negative growth.
The New York Fed’s Empire State Manufacturing Index was at minus 16.6 for February. In fact, the last time the index was below -15 was in October 2008, ten months into the Great Recession.
The numbers are all pretty clear: there’s an obvious industrial and manufacturing downturn.
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