Adding 1.8 million jobs to drop the nation’s unemployment rate to 10.2%, White House Economic Adviser Joseph LaVorgna said the new data showed claims of a “broader” economic slowdown or recession were overblown. Chief economist on the National Economic Council, LaVorgna admitted that a resurgence of coronavirus AKA SARS CoV-2 or Covid-19 cases temporarily set back the economy but sees light at the end of the tunnel. “It’s not to say that it won’t reaccelerate for a couple of reasons,” LaVorgne said, believing that the economy could bounce back in the third quarter. “It’s very hard to say what the next report’s going to look like, but for us to assume, just because we’ve had some very good numbers that surprised everybody, we are supposed to look for a big deceleration—that may not happen,” LaVorgna said, giving some reason for optimism
LaVorgna completely ignores the Federal Reserve Board that slashed the Federal Funds Rate to zero March 15, only four days after 55-year-old World Health Organization [WHO] Director Tedros Adhanom declared a global pandemic March 11. Federal Reserve Board Chairman 67-year-old Jerome Powell admitted that the Fed has limited resources to deal with a global pandemic. U.S. currency has been losing ground for a good month against all major foreign currencies, including the Euro and Pound Sterling, precisely because the Fed cannot borrow its way out of the current recession. U.S. Gross Domestic Product [GDP] dropped 34.5% in the Second Quarter, a whopping drop not seen since the Great Depression in the late 1930s. LaVorgna talked about “forward looking indicator of labor demand” referring to last months 4.8 million revision in jobs gains.
Trump finds himself in quicksand trying. on the one hand .to tout recent employment numbers but, on the other, realizing that “shelter in place” orders and government lockdowns have trashed what looked like one of the great pro-growth economies of all time. Democrats, whose campaign pivots on Trump’s mismanagement of the coronavirus and economic downturn, said things were worse than advertised by the Trump campaign. “The have given up,” said Democratic National Committee Chairman [DNC] Tom Perez, saying 5 million people are no longer counted in the 10.2% unemployment figure. Perez said to be counted in the Labor Department’s unemployment number you have to be looking for work. Trump touted last months 4.8 million increase in jobs added, proving “that our economy is roaring back, something not proven by any economic metrics.
Wall Street has done everything possible to keep the economy from crashing, continuing to churn stocks, ending Friday, Aug. 7 session at $27,433.48, roughly 2,000 points off its Feb. 12 record high of 29,551.42. When you consider the nearly 30 million jobs lost, dropping the unemployment rate from 3.5% to 10.2%, it’s a far cry from economic recovery. Confirming the deep recession, gold prices have continued to skyrocket, ending Friday at 2,046.10, down $23.30 from its record high. Rising gold prices indicate a weak future stock market where some investors have rotated out of equities into precious metals. With equities only 2,000 points off record highs, there’s a lot of room for a steep market correction, where equities could come down another 20%. When you look at the benchmark 10-year treasury bond, it ended Friday’s session at 0.5620%, almost a record lows.
Fed Chairman Jerome Powell said June 10 at the Open Market Committee meeting that rates would stay a zero until at least 2022. When the Fed commits to zero interest rates for two years, they see the recession, or possible depression, as far more likely than what the White House describes. While only Democrat blame the White House for the current downturn, Trump doesn’t have the luxury of a V-shaped recovery. Adding 1.8 millions jobs is certainly welcomed news but doesn’t begin to correct the some 30 million jobs lost in the last two months. Even the record 4.8 million jobs added in July doesn’t make a dent in the abysmal unemployment numbers. Trump said in July “that our economy is roaring back,” something clearly disputed by the Fed and practically every other nonpartisan economist. Without an end to Covid-19 crisis, the U.S. economy will continue to limp along.
As the White House and Congress wrangle over a new multi-trillion dollar stimulus bill, it hardly reflects a economy coming back anytime soon. If the White House and Congress really thought the economy was bouncing back, it wouldn’t be fighting over a new stimulus bill. “The economy is already jumpstarted,” LaVorgna said, expecting 20% GDP growth in the second half of 2020, still leaving the economy 14% negative. No matter how you slice it, the economy won’t be recovering the lost jobs anytime soon. Many small and large U.S. businesses, some icons like Brooks Brothers, J.C. Penny, Neiman Marcus, Hertz, California Pizza Kitchen, etc., have gone broke, closed their doors for good. While every economic down turn comes with bankrucptcies, it could take a decade for the U.S. economy to get back on track. Trump’s optimistic forecasts don’t match what’s happening on the street.
