Latest Data Show Recovery Faltering
Peter Bernstein, Chief Economist, pbernstein@rcfecon.com, 312-431-1540 x1515
The October RCF Recovery Scorecard stood at 95%, down from a revised reading of 96% in September. Eleven of our 16 metrics improved in the last month but weakness in industrial production and exports led to a lower overall recovery percentage. Vehicle sales improved but have still only recovered about half of their recession decline.
On the positive side, the October employment data showed gains across all six of our labor market variables, while real wages and real consumer spending both hit post-pandemic highs. The housing market continues to be strong with new building permits and existing home sales above their pre-recession levels.
The slowdown in the recovery was also seen in the Q3 GDP data which showed the economy growing at only a 2.0% annualized rate, a sharp deceleration from the 6.5% rate the economy averaged in the first two quarters of the year.
Notes and methodology: All data are seasonally adjusted monthly values. Variables 4 through 9, and 13 are data from October; all others are from September. Example calculation for economic variable #1, real income less government transfers fell 8.0% from its February 2020 value to its low point in April 2020. In the latest available report, the variable was 0.1% below its peak value. Therefore, it has recovered 99% of the loss. Data Sources: #1, 2, 3, 12, 13: Bureau of Economic Analysis; #4, 5, 6, 7, 8: Bureau of Labor Statistics; #9: U.S. Employment and Training Administration; #10: Federal Reserve; #11: Bureau of the Census; #14, 15: Bureau of the Census and U.S. Department of Housing and Urban Development, #16: National Association of Realtors.
Trade Deficit Increases
U.S. imports have recovered more than U.S. exports resulting in a near-doubling of the monthly trade deficit from $45 billion in January 2020 to $80 billion in September 2021. The supply chain problem, which has typically been viewed from the standpoint of Americans’ ability to get goods from abroad, is also hampering American exporters’ ability to ship goods to other countries. Given the strength in consumer spending and the increase in inflation it appears the supply-chain problems are mostly pushing up prices. But for U.S. exporters, it is causing exports to falter, hampering the economic recovery.
Source: U.S. Bureau of Economic Analysis
Appendix – Recent History of Recovery Scorecard
Note: Historical data are often revised so comparisons with earlier RCF Scorecards may reflect the impact of revisions.
