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The Great American Comeback Will Be Huge

The opinions expressed by columnists are their own and do not necessarily represent the views of
AP Photo/Patrick Semansky

America is open for business! Many experts predicted the end of the world. 25% unemployment. A lost decade. A Japanification of the United States. Endless economic agony. But wait! None of that has happened, and in fact, the data suggests that if anything, the US economy is roaring back to life. Of course, this will panic democrats who have been desperately hoping for an economic collapse headed into November. They know that voters have put faith in Trump's economic management, and as such, he lives and dies by the health of the US economy. Trump led the way to what was the best - most beautiful - economy in American history, just a few short months ago. 


If Trump oversees another American revival, the game is over for far-left radicals and socialists. This dynamic explains why the media has been cheerleading lousy news and have tripped over themselves peddling in hysteria. So, what’s the real story? The hard facts and data are painting a remarkable picture. Here it is, broken down. 

Commodities are a useful bellwether for global supply and demand. They are not paper assets inflated by monetary policy (that said, the monetary policy in the long term does affect commodity prices as inflation returns). Oil is one of the more straight forward commodities concerning global activity. It wasn’t long ago that supply outstripped demand by so much that oil prices turned negative as space for inventory completely dried up. 

Since COVID hit, oil has been devastated, but as a sign of recovering activity it has rebounded vigorously, up roughly 100% from the lows of late March and April. In addition to oil, copper, often considered the canary in the coal mine for the economy has taken off, rallying 77.8%. This activity is a clear signal that industry is coming back to life along with demand. Another commodity tied to industrial production is aluminum, which has rallied an impressive 10.2%. 

Expanding on commodity demand, manufacturing, and industry activity is also seeing signs of a quick rebound to previous peak level activity. The United States Purchase Manager’s Index registered 43.1 (indicating contraction below 50), up 4% from the lows of April. It's important to remember that vast amounts of the economy were still in a state of lockdown, so any increase in activity or dissipation of weakness is very positive news, especially so early on. The United States ISM, or Institute for Supply Management, includes survey commentary from market participants. On computer-related goods, “Despite the COVID-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” In the machinery sector, participants are looking at their relationship with China, “Getting out from under several suppliers being closed worldwide. Also, looking at what needs to be in China.” Finally, in mineral production, comments have been very promising, “We see a lot of positive signs, despite what's going on. People seem to continue to be building and looking to projects for the fall of 2020 and beyond. There is good optimism out there.” It’s important to remember these products are the lifeblood of a modern industrial economy.


Taking a look at the strength of the consumer, a great starting place is the level of employment in the economy and the number of Americans on the unemployment rolls. As COVID broke out and the media went into full-blown hysteria, “experts” were making dire predictions, claiming that we wouldn’t see a recovery in the labor market until way after a vaccine. This hasn’t been representative of reality. Just recently, the Bureau of Labor and Statistics released the Household Labor Survey, which registered in at roughly two million jobs added. It’s important to remember that the Survey is just that, a survey that can often seem out of sync with unemployment claims, the figure releasing every Friday. Each week for the last few months, we have seen millions added to unemployment, with the picture of 40 million jobs being touted across the airwaves. The reality is that number is a weekly snapshot of labor activity, and not indicative of overall employment. 

That headline figure is representative of the number of folks that have claimed unemployment in the preceding week, but the more critical factor is continuing claims, which represents the number of people who remain on the unemployment rolls and is currently at about 20 million. Considering we are net adding jobs, and barely an abbreviated month passing since states began to open, the labor market is sending very positive signals for a robust recovery.

One caveat to the job data - while the labor market is sending encouraging signals, the battle will be a tough one, especially returning to 3.5% unemployment. The incredible strength of the previous economic expansion actually presents a difficulty in that the hurdle we need to clear to return to pre-COVID levels is quite high. Jobs are returning, but it would be foolish to think all will return. Many companies have found that they can operate with fewer hands and fewer personnel overhead costs. Another dragging factor: many companies are using the COVID shut down to shed union members and others with generous benefits. It’s a trend to keep an eye on, and companies should be called out for this behavior. 


In addition to the labor market, consumer confidence, wages, and savings rates play very important roles in a consumer-driven economy come back. The United States is largely consumer-driven, which is why we often diverge from our European and Asian counterparts. Consumer Sentiment in May clocked in at 72.3 vs. an April print of 71.8. While not a tremendous increase, its key to note that consumer sentiment spent most of the 2010’s below the current sentiment level. On personal income, April saw a 10.5% growth in income. Hard to overstate the significance of that in regard to the consumer economy. Finally, savings by American consumers rocketed up 33% in May after registering 13.1% in April. Historically the savings rate ranges from 6-7%. The American consumer balance sheet is healthy enough to fuel a substantial recovery. Don’t ever bet against the American consumer.

The data above is encouraging for the economy's outlook on the short to medium term. This is not to say it’s not going to be a hard fight; it certainly will be. There are large structural wounds that need to be repaired, and that’s purely a function of time. The green shoots instill confidence, but it’s a fragile situation and needs to be treated as such for the foreseeable future, hence the Fed outlook that rates will remain unchanged for at least a year and likely into 2022. 

Overall economic activity should be picking up significant steam in the tail end of the Third Quarter. However, one thing to be sure of: A Democrat winning the White House will be a death kiss. It’s important to remember that a significant component of this recovery is the tailwind provided by the Trump administration’s previous and continuing rollback of regulations and a massive overhaul to the tax code. Supporting the Republican ticket is critical to continuing the Great American Recovery. 


I will conclude with a brief comment from the Democratic Nominee, Joe Biden, on his plans for the economy:

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