Late Cycle

Author: Neojuvenal

  • Mirage – misleading (bs) stats

    The analogy of the mirage is a useful way to characterize much of our economy and society: we are led to believe in a state of affairs that is not just misleading, but is actually nonexistent. We are are constantly being bombarded by messages (remarks by folks such as Fed Chairman Jay Powell, commentary by “analysts” on platforms such as CNBC and CNN) that the economy is in decent shape. But on scrutiny this presentation is off base, at best; worse, it is intentionally fraudulent. This presentation of a bogus state of affairs is the function of The Mirage.

    A recent example of this can be seen in the release of the May job numbers by the BLS. 139,000 jobs were added: a “solid” number that “proves” the economy is in great shape! Many “investors” jumped on the good news, and pumped the markets higher.

    But that headline number is far from the full story.

    For starters, ADP reported a very concerning job print. The 37,000 jobs number for May was the lowest private payroll gain in two years, and was the second consecutive month where the number was well below expectations.

    Already something doesn’t add up. Especially with increasing reports of increasing layoffs in the tech sector. Including recent grads giving freaked out presentations on social media as to how they have sent out hundreds of job applications, have accomplishments like high GPA, etc etc… and failing to get a decent job. Not to mention the growing number of tech workers who have been laid off, and even with stellar resumes and experience… are reporting having a difficult time landing a new decent job.

    One thing the MSM fails to do is to give fuller picture of the monthly report the BLS puts out. They fail to mention how that headline number is determined. It is not from a database, as is the case with ADP. It comes from a survey, specifically from one of two surveys. In this case it is from the Establishment survey; the BLS sends out surveys to businesses and collates the responses. The thing is, especially after the pandemic, the response to these surveys has declined (there is no law saying the companies have to respond). The result is that the job numbers have become quite “noisy.” We see this is in the constant downward revisions of the previously released numbers. In this May report, the previous two months saw a collective 95,000 miss. In case I need to spell it out, this means in March and April the numbers were overstated, to the tune of 95,000 for the two months combined.

    Another problem is the lack of reporting of the results of the Household survey. This survey goes out to actual households and collects data on number of jobs from people who hold them (full time, part time, looking for work). This survey is even more “noisy” than the Establishment one. So some analysts (the few who seem to bother looking at the larger picture) will average the results of a number of months. So for the first five months of the year, with the results averaged out, we see a decline of over 400,000 jobs.

    And with that number, out of sync with the Establishment survey, we are left, or should be left, to become skeptical of the headline number of jobs reported by the BLS (and hyped by the MSM). It should be noted that the sort of discrepancy just presented between the surveys, along with the constant downward revisions, has been in place for some time. A lot of the cheerleading over Bidenomics for example was simply misplaced focus on the headline number – a number that invariably got knocked down on subsequent reports.

    And by the way, part time jobs are counted in the same way as full time jobs. The fact is, we know that the number of American workers holding multiple jobs is quite high. It needs to be noted that part time jobs almost never have benefits such as health insurance as with full time positions. Further, recently we have been seeing a decline in full time jobs. But there is a further problem, and that is these numbers, at a summary level, say nothing about the quality of the jobs. And that includes compensation.

    Recent analysis by the Ludwig Institute for Shared Economic Prosperity (LISEP) is quite sobering. They simply looked at the fact that there are millions who work, whose jobs are part of the total presented by the BLS, who do not earn a living wage. In looking at the this group as well as others, such as those who do not have a full time job but want one, they came to the conclusion that approximately one in four workers are “functionally unemployed.” This leads to a figure of about 25% for the unemployment rate. And the thing is, there are many “on the ground” (who actually work as opposed to those who stare at numbers and stats on computer screens) who feel this 25% number is more accurate than what the BLS and MSM feeds us (with numbers in the 4% range).

    But the foregoing is mostly ignored by all those who take the MSM at face value, including many of those so-called “investors” (overall I am taking an increasingly jaundiced view of these folks, who appear to act more like gamblers – hence the stock market having transformed into a massive casino). They are in the equivalent position of someone who in the distance believes they see something that simply is not there – a mirage. But when we note how this belief then translates into behavior – in this case, pumping the markets higher – we see why this is so. The Mirage is a mechanism to create the psychological conditions conducive to perpetuating the narrative that things are going well… and so pile into those stocks!

    Updates

    Since this was written fairly recently (at the time of writing), the June report from the BLS will be briefly mentioned. At the headline level: things are going really well!

    But wait… August 1st the BLS came out with a “shocking” jobs report!

    First, the headline number was a weak 73,000 new jobs print.

    However, the real shocker was the revisions. And for June, instead of the initial print of 147,000 new jobs the revised number was 14,000. The thing is, a number of people, including many “investors” took that initial number as proof that the economy was in great shape. Meanwhile, we were hearing things like companies, including large ones like Microsoft, laying off workers right and left, tech workers complaining of difficulty of finding decent work – for new grads and those who had lost their jobs, and so on. Something didn’t add up. And the original numbers turning out to be way off base is… an example of The Mirage.

  • Who’s Partying?

    While the so-called Big Beautiful Bill, a massively irresponsible piece of legislation, recently passed the House, some commentators have noted with the irony that 10 of the richest Americans saw their wealth surge by over $360 billion in 2024. These folks and others in the top economic tiers are poised to win big with that bill by virtue of a number of tax breaks. They do not need any further help in adding to already large wealth positions. Meanwhile significant numbers in the bottom tiers are, to put it bluntly, set to get screwed.

    This article from CNBC gives an overview of who is set to win, and who will lose. Those on the higher income tiers will see tax breaks for business owners and investors, such as with the SALT deduction, rates for income taxes and the estate tax. The Congressional Budget Office estimates that the top 10% would see an increase in income, with an increase of 4% in 2027 and 2% in 2033. In contrast, the CBO projects that the bottom 10% would see a decrease in income of 2% in 2027 and 4% in 2033.

    The idea is that the tax breaks will lead to greater economic activity (GDP). But many sober estimates yield increases around 0.5%. Meanwhile, the deficits (and government debt) is set to soar by trillions of $s. If the tax changes in 2017 are any guide, we will mostly see the wealthy only getting wealthier, while majority of Americans will see little if any benefit. And some of those at the bottom tiers will simply be in worse shape.

    government programs

    At the time of writing, a handful of GOP Senators (along with Democrats) stand in the way of the bill’s passage in its original form. However, it appears that even with changes there will be cuts in programs such as Medicare; the question is by how much.

    To do – more on this second half/ including reference to Oxfam study

  • The Party Is On (Again)

    The markets had plunged in the wake of “Liberation Day” (a term that is yet another example of the bs that characterizes the Decline), but now, as of mid-May, the S&P 500 has recovered its loss (“… one of the greatest comebacks in market history” – analyst). The Party is on again.

    Or seems to be.

    Did anything actually change? Not really. Sure, a few “deals” have been made over trade (very few), such as with the UK. But, um, how many more deals to go? And no, the 90-day “pause” with China (in addition to other countries) hardly counts, as there is just some breathing space, during which tariffs have only been lowered (not erased). But damage has already been done, and will take some time to fully undo even if some “amazing deal” is reached with China. The supply chain has been interrupted, and Walmart, as a prominent example, has announced price increases (despite threats from Trump – who can do what, exactly?).

    So what appears to have happened is that with the introduction of stiffer-than-expected tariffs, and on an unprecedented scale, there was a kind of acknowledgement of reality. And with the markets so disconnected from the “real economy” (see, for example, the Buffett Indicator), this “shock” was enough to flip optimism into concern and fear. Even if many corporations say their earnings are “strong,” it would appear any return to optimism is suspect. See recent statements from Walmart, in which prices for many items, particularly from China, are expected to rise. Also note recent statements concerning their customers over “stressed behaviors,” with reduced spending in general (somewhat compensated by rise in the number of higher-income customers, itself a data point), particularly over discretionary items. And it is not just Walmart expressing such wariness over the general consumer.

    Speaking of the American consumer, the University of Michigan just released a reading on consumer sentiment that should be a wake up call. It shows a further decline, the 5th monthly decline in a row, and is the second to the lowest reading on record. At 50.2 it is a lower reading than what was recorded in 2008 (GFC) and during the 1980s recession. Not much in the way of optimism with a larger percentage of the population.

    Such a discrepancy encapsulates the current situation: a large disconnect between the elite and investors with their indefatigable optimism and the many consumers expressing concern and wariness over the economy – and their own fortunes.

    “The Party” is really just a name for the hype inculcated by and spewed out from the mainstream media (most of it, anyway) and by government and financial elites. And it is apolitical. We heard about the fantastic economy under Biden (Bidenomics) and we are hearing it now, albeit in a diminished form (such as with talk on a possible avoidance of recession). It serves those in power to “prove” things are swell for the majority and so those in power can take credit. It all sounds so wonderful until the surveys are taken – as were done before the last election and now recently (see University of Michigan). The majority is not buying the wonderfulness.

    Currently, any talk of avoiding a recession or even, entering into (outright delusion) a new “bull market,” is taking place as storm clouds continue to gather. And they are gathering:

    The tariff situation is far from being settled. And “pauses” as noted do little to assuage the damage that has already occurred.

    Some point to the job market, such as not-so-bad first time claim numbers, as a sign that the economy is “solid.” But red flags are mostly being either downplayed or simply ignored. Continuing claims is concerning, and the number of those unemployed 5-14 weeks has increased to 2.27 million in April. Indeed just released stats showing level of hiring is a “fresh low.” Hiring has substantially declined. And then there are the quality of the jobs that are advertised: healthcare for example is not a great proxy for a robust economy.

    Speaking of jobs, the reports of layoffs and difficulty finding work in tech and finance have surged of late. These are well-paying jobs. New grads, for example, via social media, are voicing frustration in getting that first job (many of whom have substantial student debt, by the way). And it appears increased usage of AI in major corporations is leading to the elimination of humans in an increasing number of roles.

    There are all sorts of other concerning data. Delinquencies are on the rise (credit cards, car loans). Reliance on buy-now-pay-later is also increasing; including for everyday goods such as groceries (this is definitely not a good sign).

    But looming over all of this is something that could prove problematic, even catastrophic (in a future that seems to be coming into view) to the US, with the continued increase in the federal deficit. It is being noted that the interest on this debt is increasing at a concerning pace and in the near future could be the largest line item in the federal budget. Didn’t Trump promise to “balance the budget?” (Oh, he did say, “soon”) Well, so much for the pretense of being concerned: that “big beautiful bill” that now has gone to the Senate is alarming, and irresponsible. More will be written about this on this in the next post. For one, the bill means more red ink – a lot more (trillions of $s). The recent downgrade by Moody’s, although in itself not “end of the world,” could and should be a wake up call. It is at least in part the trigger behind the recent increase in long term yields (10 year, and 30 year). One of the storm clouds is the problem for many banks that these yields present (in relation to unrealized losses – more on this later on). And then there is the fallout with elevated mortgage rates. Oh, then there is also the recent retreat of the dollar.

    But no matter. What counts – for some (such as the top 10% who own the majority of stocks) – is that assets like stocks continue their ascent. It means things are fine in the economy, right? No need to bring up pesky contrary stats to spoil the party.

  • First Post – General Intention

    This site is a set of interrelated blogs relating to changes that are occurring in the society of the United States, along with analysis of the nature of these changes. Further, the intent is to “give it you straight.” As such, the focus is getting to what is really going on, sans propaganda and comforting platitude. And as much as possible without a particular political bias (to be clear, I will eschew a lot of both liberal and conservative narratives and assumptions).

    There is no getting around it, but there is a general theme of unraveling in play, now, and going back decades. For one, this site will document various aspects of this unraveling. It also seeks to give a perspective as to why this unraveling is occurring – with analysis rooted in historical development. And attempts to give some idea as to what lies ahead.

    Some of the material that I will be using include:

    • Classic works such as The Image, Revolt of the Elites, Understanding Media, Amusing Ourselves to Death, Society of the Spectacle
    • All sorts of more recent work, such as The Shallows, and discussions dealing with the themes of social dynamics (focus on breakdown), media impact, and techno/neo-feudalism. Authors such as Peter Turchin, Marshall McLuhan, [ ] Postman, Chris Hedges (to list a few that I find useful)
    • History of empires, such as the Roman Empire, and empires described in recent work by Ray Dalio – Dutch, Spanish, and British – and how their experience helps shine light as to what is occurring here (Note: I reference Dalio because of his stature in the financial world)
    • Statistics, such as that relate to the (huge) wealth gap, income levels, electronic media usage and so on that I see relevant to the overall theme
    • I will add more to this list later on

    As for the title Late Cycle, the reference is to a late phase of development of a social-economic entity, marked by a rise in problems and crises. If the theme seems off base, I invite the reader to attempt to answer the following questions:

    • Why are so many Americans dependent on government transfer payments (including Social Security and Medicare)
    • Why are we so dependent on debt – with levels in all three sectors, public, private, and corporate, at record levels
    • Why are a number of once vibrant down towns so run down, with many stores closed and overwhelmed by homeless
    • Why is wealth distribution so skewed
    • Why, in the wake of the dot-com bubble, have we seen not one but two more speculative bubbles in a relatively short span of several decades
    • Why has the average life expectancy actually declined (not by a large amount, but still, the trend is eye opening)
    • Why have the recent presidential elections been dominated by two old men who both should have been put out to pasture (playing golf; also, I am looking at Harris as an extension of Biden)
    • How did Trump get elected two times (and consider how he was outspent in the recent election)
    • And why are so many recent college graduates, armed with the computer science degrees that are supposed to be their ticket to interesting, well-paying jobs, finding it so difficult to find work

    This site is an exploration of these questions and discussion of underlying causes. And acknowledges we are living in a dramatic period, where an order that has been in place since mid-twentieth century is unraveling.