Siegel Business Valuations On The Economy
Following three largely upbeat months, the U.S. economy performed more modestly in June, July and August. Most notably, after rising by a strong 3.1% in Q1 2019—the best start to a year since 2015—the U.S. Gross Domestic Product (GDP) grew by an initially announced 2.1% in Q2 2019, the economy's weakest growth pace since Q1 2017. The Q2 rate was revised downward to 2.0% in the Department's second (July) estimate, and held there in August. Still, the current expansion, which began in June 2009, is now in its 122nd month, making it the longest economic expansion in U.S. history. Similarly, after a strong rebound in June, the U.S. job market yielded weaker job growth in July and then again in August. According to the U.S. Labor Department, U.S. employers added just 130,000 new jobs in August, well below market expectations of 150,000 new jobs. At the same time, June's already pared-down jobs growth was revised further downward to 178,000, while June's initially reported 164,000 new-jobs figure was cut to 159,000. The unemployment rate, which rose to 3.7% in June, stayed there in July and then in August.
Other concerns remain. The U.S. national debt jumped to $22.460 trillion in August, while the Federal budget deficit for the first 11 months of FY 2019 hit $1.067 trillion. In other areas, on the positive side, industrial production rose, the trade gap narrowed, auto sales edged up, the housing market improved, hourly wages were up, personal income and consumer spending both gained, retail sales increased, inflation was moderate, and crude oil and gasoline prices declined. On the negative side, stocks fell back, consumer confidence retreated, and small-business confidence deteriorated.
Weakened job numbers and uncertainty regarding U.S. tariff policies continue to show doubt in the marketplace. Additionally, the interest rate for the 3-month U.S. treasury bill has been greater than the 10-year U.S. treasury bond for almost 3 months. Known as a Yield Curve Inversion, this indicator has preceded the last seven recessions.
Still, many economists predict that the current expansion will continue for at least the next two quarters.