Looming COVID Shadow: Global Recession Threatens As Election Approaches

The 2024 election is creeping closer, but another looming shadow stretches across the horizon – a potential recession, and it could be a doozy. A globally synchronized recession, some are whispering. While the political campaigns battle it out, the question on many minds is: will the brunt of this economic downturn hit before the election, or will the bulk of the pain be felt in the new year?

What happened? The simple answer is: COVID.

The massive COVID stimulus packages, intended to help the economy weather the storm, inadvertently boosted average worker income by about 20%. This surge triggered a spending spree unlike any seen before, followed by a whiplash effect. Retailers, across virtually every industry, responded to the sudden spike in demand (artificially inflated, it turned out) by ordering more goods, leading to a monumental upheaval in the balance of supply and demand. The result? A wild ride of high inflation and a backlog of shipping containers clogging the ports of Southern California, a visible symbol of the economic imbalance.

Fast forward three or four years, and it’s time to pay the piper. Incomes have plateaued, falling short of their pre-pandemic trajectory. Gas prices start to collapse, causing oil producers to curtail production. Warehouses are overflowing with inventory, remnants of the anticipated economic boom that never fully materialized. Job losses are mounting as major industries, reacting to softening consumer demand, start to pull back on spending. Major corporations from across the economy are starting to see the impact of this slowdown.

Here are some of the stark statistics painting a picture of the economic challenges we’re facing. It’s crucial to remember that the stock market is NOT the economy. The following metrics offer a more nuanced and realistic glimpse into the current economic landscape. Be warned, the data suggests a challenging period ahead.

Here’s the bad news, as highlighted by recent economic data:

The U.S. Economy Is Starting to Show Cracks

• Q2 2024 GDP growth came in at a respectable 2.8% annualized, but this masks the underlying weakness.
• Real GDP remains stubbornly behind the 2010s trend, a sign of a long-term slowdown.
• The goods economy contracted in Q2 2024, both in real and nominal terms. This is a sign that businesses are struggling to sell their products.
• Inventories rose sharply, adding 0.82 percentage points to GDP growth. This indicates that companies are overstocked, anticipating a boom that hasn’t materialized.
• Consumer credit from U.S. banks fell $10.3 billion in 5 months through early July 2024, suggesting people are tightening their belts.

The Job Market Is Turning Cold

• Unemployment rose to 4.3% in July 2024, a sign that employers are starting to let go of workers.
• The underemployment rate (U-6), which includes discouraged workers and those working part-time involuntarily, jumped to 7.8% in July 2024, a further indication of a weakening job market.
• Hiring plunged to 5.34 million in June 2024, the lowest since April 2017. This is a clear indication of a slowdown in hiring, with businesses becoming increasingly reluctant to take on new employees.
• The ISM Manufacturing employment index fell to 43.4 in July 2024, the lowest since 2020. This reflects the manufacturing sector’s struggles, as businesses are cutting jobs and pulling back on production.
• Initial jobless claims rose to 249,000 in late July 2024, the highest since 2023. This shows that more people are filing for unemployment benefits, a clear sign of job losses.

Consumers Are Feeling the Squeeze

• Retail sales declined 0.023% month-over-month in June 2024.
• Consumer confidence has been dropping, with three out of five Americans believing that the U.S. is already in a recession.

Inflation Is Still a Concern, but Maybe Not the Biggest One

• The CPI fell 0.06% month-over-month in June 2024. While this is a positive sign, the underlying trend remains uncertain.
• Shelter prices, a major component of the CPI, rose just 0.17% in June 2024, the slowest of the cycle.
• New vehicle prices in the CPI have fallen for eight of the last nine months, suggesting cooling demand.

Corporate Anecdotes Paint a Grim Picture

• McDonald’s reported the first negative same-store sales since 2020 in Q2 2024. Consumers are clearly becoming more cautious with their spending.
• Home Depot, a bellwether for the housing market, reported a 3% drop in comparable store sales in Q2 2024. This suggests that the housing market is also facing headwinds.
• LVMH, a luxury goods conglomerate, saw weaker sales in the U.S. and China in Q2 2024, indicating a decline in demand for luxury items.

The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.

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