The September 2019 Manufacturing ISM® Report On Business® isn’t pretty, to say the least.
The overall index, new orders, and production are all negative. Export orders are in severe contraction, down for the third month.
Trade-War Comments by Manufacturers
- “Continued softening in the global automotive market. Trade-war impacts also have localized effects, particularly in select export markets. Seeing warehouses filling again after what appeared to be a short reduction of demand.” (Chemical Products)
- “Chinese tariffs going up are hurting our business. Most of the materials are not made in the U.S. and made only in China.” (Food, Beverage & Tobacco Products)
- “Economy seems to be softening. The tariffs have caused much confusion in the industry.” (Electrical Equipment, Appliances & Components)
Placing the Blame
OK, that’s not good. ISM manufacturing index. Important contrast with 2015-16 slump, which was due to nonpolicy factors (mainly slump in oil prices and hence energy investment). This is all about Trump’s trade war pic.twitter.com/Riy6T0aHR2
— Paul Krugman (@paulkrugman) October 1, 2019
Here’s how @IanShepherdson framed his note today: “If consumers’ confidence seriously falters, the U.S. could tip into the first recession ever caused directly by the actions of the President rather than the action of tight monetary policy on an overstretched private sector.”
— Nick Timiraos (@NickTimiraos) October 1, 2019
This surely is not “all” Trump’s doing.
The percentage is debatable and a recession was due anyway. But Trump definitely exacerbated global problems that were already building.
No one wins trade wars.
Mike “Mish” Shedlock
Conviction in Senate still unlikely – but now possible
Russia was a joke – This is serious
This is not Mueller
Far more serious
My company will be laying off a bunch of people this month. we got the first guess of what health care costs will be next year, plus the $15/hr nonsense… it just doesn’t make sense to keep people on the payroll when they don’t add $15/hr in value, never mind the healthcare costs.
The Dems do everything they can to price US workers out of a job, while the Fed makes it dirt cheap to replace marginally productive workers with automation.
Most people have too much “stuff” already, and most of the demand now is replacing old stuff. Demand is stable, no longer artificially growing from credit bubbles, but also not contracting either. A bit of automation and a bit of productivity growth, we can easily meet stable demand.
Meanwhile, the education system continues to pour out garbage. I doubt kids are inherently smarter or dumber at birth, but they don’t learn self discipline, they don’t learn basic math, they don’t learn to operate basic tools … Instead, they are taught gender neutral bathrooms and climate fraud and participation trophies.
That just makes them unemployable. Its not China’s fault. Its not Trumps fault either. Its some combination of parents and schools, and its been building for decades.
Throwing more money at teachers unions (most of which goes to administrators, not teachers) won’t fix the rotten foundation.
Stop wasting everyone’s time with political indoctrination. There are too many robots capable of asking if you want fries with that.
Sorry for the layoffs. I’ve thought for years that no one should be allowed to take public office without the personal experience of having been put in capitalism’s barrel to run an intensely competitive product group for at least 6 months and personally had to fire a grown man and watch him break down and cry as the shock of going home to tell the family hits him.
I am heartily tired of pretty boys and cheerleader dumb shits in both parties catering to ignorant kids who can’t spell bell curve, much less spot the only 5 sigma outlier in a 10 point data set.
I am the guy who has to sit these grown men down and tell them they are being laid off. I know several of them will struggle to get a job that pays even half as much. They have decent work ethic, which might give them a leg up over recent college grads applying to work at Starbucks. But they can’t support a family or pay a mortgage on that.
Every time one of these -sshole politicians goes on TV and promises free sh!t for everyone, they don’t mention who is going to pay those costs.
Its impossible for politicians and college professors, neither of whom deal in reality, to understand what meeting payroll means.
In the real world, you can’t just say “Oh well, just raise tuition double digits again”.
In the real world, you don’t get to ignore gasoline taxes like a politician because taxpayers provide you with both a car and a driver.
You are right. From what I’ve observed, most of my kids’ teachers have TDS and are eager to push an agenda of white-hatred and environmentalism whenever they can. It is intellectual child abuse against Gen Z. They are “learning” to respect one thing above all else: the feeling of being a victim. I suspect that over the next few decades they will vote away their own rights without having ever learned that there is such a thing.
Sounds like your company was employing too many people if they could be automated out anyway. Demand wont be stable as mass layoffs increase. Recessions are good things because they clear out excesses and promote efficiency. My company is creating products that will put a mobile data center in a smartphone. The power, performance and cost of everything is only going to get better and it will unleash more innovation that isnt possible.
I don’t see any demand problems this year, next year or the year after.
I see an on going shortage of skilled labor — that has actually been the limiting factor for our growth. Too many wokesters who call themselves “idea men”, and spend their time complaining about the lack of coconut milk for their latte. Not enough workers with the skills to actually execute ideas.
We try not to layoff anyone, if possible. Historically, its been much more cost effective to fly in experts from machine suppliers to train the staff we already have. We haven’t found a college that has the courses our staff needs, and even when such a professor exists, the professors don’t teach what we ask them to.
In this month’s case, we bought another company two years ago. Their staff doesn’t have the foundational skills that we can build from.
When you (or@[Mish Editor] ) talk about layoffs and unemployment — it is a useless discussion by itself. It makes a huge difference who is being laid off. For many years, there have been lots of layoffs in unskilled jobs. This isn’t new
I haven’t heard of any skilled workers being laid off. I hear stories of those people quitting voluntarily to take better jobs. I hear employers complaining how difficult skilled labor is to find.
All the while, the Fed is making it cheaper to automate more and more unskilled jobs.
Hate to break it to you bob but even skilled labor is no longer as skilled as you think. I’m in the business of creating things that will replace skilled labor. The truth is we dont need as many people to do things with each successive innovation that occurs.
Sorry to break it to you@Casual_Observer , but you and everyone else in “Silicone” Valley (boobs, not chips) are in the IPO business. That is where your money actually comes from, despite all the gossip about life changing (money losing) technologies.
Google is in the advertising business. Their profitable tech enables advertising, although P&G seems to think it is not effective advertising.
Apple used to make designer products under Steve Jobs — “designer” as in they look pretty, not they have more functionality. PCs have always been more profitable than Macs, but Versace is more profitable than Fruit of the Loom. But Apple and Versace are both niche products.
And the more you tell us about your business, the more it sounds like all the other CA unicorns — money losing “story” stocks gearing up to be aquired and/or go IPO.
Far less difference between you and Uber/Lyft than you admit
Already been acquired CB. Unlike your stereotypical tech companies these days we still build hardware that companies have no choice but to use. The cloud is still made of hardware. Good old fashioned blocking and tackling. We don’t sell the sizzle. Just the steak.
Great points all around. The real structural problem with the American economy are educational priorities. For 20-30 years now, the focus has been to get as many kids into universities as possible. The high schools have been told to encourage it, Sally Mae helps finance it, and society increasingly sends the message that white-collar jobs are the only jobs worthy of respect.
The result? Sky-rocketing tuition bills, mountains of student debt, and a labor force totally mismatched with what our economy actually needs. Obama did the most damage here, but it’d been going on for years before he came along and Trump has done almost nothing to fix it.
What America really needs is investment in our trade schools and community colleges, and recognition that a plumber wins economically compared to your average liberal arts college graduate, and once you factor in student debt its a landslide.
The American economy needs fewer smart kids (who aren’t academically inclined) to be expensively steered into a 4-year college, when everyone would be better off if they became aircraft mechanics instead of drifting aimlessly into Sociology majors.
American industry needs more skilled tradesmen and fewer debt-laden college grads.
From the great depression to the Obama greater depression to now the Trump greatest depression…….all that money printing ain’t getting itdone…not even close!
At some point Trump will think about resigning and declaring victory should a full blown recession ensue. Also if he knows he has no chance and is a compromised by next summer then I wouldn’t rule anything out. I was laughed at by Mish and others for even saying impeachment was a possibility after the Mueller probe closed. I said then once Trump’s full transgressions with Putin and others are revealed he would be in trouble before in the end of 2019. I voted for the guy but he did it to himself. He could have been like Reagan or Clinton and gone out on a high but it looks closer to Nixon now.
We are still laughing at you.
Pelosi is making a desperate attempt to wrestle back control of the democrat party. Not sure if it will work for her or not.
But in the end, this ongoing effort to manufacture a case when there isn’t one is helping Trump. Might as well have Pelosi go on TV and say Trump was right about fake news all along.
The bottom line is I was right. Even if nothing happens I told Mish and others impeachment would be front and center before the end of the year and it has proven to be true. I feel bad for the country as it was totally avoidable. Trump did it to himself with poor policies on trade and trying to negotiate with dictators. What we are seeing is just the tip of the iceberg. I wouldn’t rule out that Trump will spend his final years living in exile in Russia however he ends his stay in the White House. The real joke is on the American citizen and Trump is laughing at his supporters too. Sadly this has little to do with anyone but Trump. It is like a movie now.
There is no impeachment CO. There is yet another “investigation”.
If Pelosi thought there was anything actionable, she wouldn’t hand it off to a nutcase. She would be leading the investigation herself, taking the credit and ‘glory’ for herself.
Schiff is Pelosi’s target. Biden is collateral damage. Pelosi wants control of her party. Trump isn’t even involved
A note to zombie corps with anything like half your revenue coming from Europe who have been limping along betting things would get better: You just lost the bet. The dollar didn’t weaken in time this time.
To paraphrase Yogi: There’s a fork up ahead; Take it. One road leads to an M&A scene you won’t like, the other to bankruptcy court.
Excellent point by HMK – I thought about that last week, then forgot about that today.
Perhaps it explains the difference between Markit and ISM (Markit US PMI rose today). But Europe was abysmal across the board.
What do you mean, Mish? This is the greatest economy ever, in the longest expansion ever. Things are great! Debt is freedom!! /sarcasm off.
All over the G7 (its not just the UAW) — socialists are raising the costs of labor, while central bankers are lowering the costs of automation.
In the USA, the education system was restructured to provide cushy jobs to bureaucratic overhead — administrators, political activists in drag, social workers who are not educators, janitor unions, lunchroom unions, etc, etc etc. Purchasing fraud — buying overpriced garbage for schools from suppliers who give political kickbacks — is rampant in most large cities.
So the USA has the added problem that workers are getting less productive while the costs are going up (and the Fed is lowering costs of automation).
It’s a fact. If you raise the cost of labor, and decrease the cost of automation, you get more automation, and soon.
Can any of this be attributed to the UAW strike? I live in MI and we usually are at the forefront of any economic slowdown and the biggest complaint I hear from business owners is a lack of decent labor. Also anecdotally I was at a GMC dealership on Saturday and speaking with the salesman he related that they took delivery of three 70-80k HD pickups on Friday and they were sold by Saturday. This seems to be a proxy for business conditions in general and I don’t see any reason to believe there is a recession on the horizon.
Without a trillion dollar deficit we would already be in a recession.
Trump, the grand Keynesian.
I know this never seems to be mentioned in the media. Living on an unproductive debt induced economic expansions will go on until it can’t and usually its suddenly.
Do you really think that Trump could make the deficit go away if he even wanted to (which he doesn’t)? Congress controls the purse, not the President.
Look, you can’t really blame Trump for calling out the Fed. As stupid as these policies are, the USD can’t compete against negative rates in the EU/Japan, etc.
And how come this nitwit Krugman still holds high positions in academia and media?
“And how come this nitwit Krugman still holds high positions in academia and media?”
Because he is a leftist.
Ghehe….can’t counter that argument!
This surely is not “all” Trump’s doing – The percentage is debatable and a recession was due anyway. But he definitely exacerbated the problems
“Important contrast with 2015-16 slump, which was due to nonpolicy factors (mainly slump in oil prices and hence energy investment). This is all about Trump’s trade war”
…
All?
Hardly. A factor. Sure. A big factor. Sure.
How about one of the longest (and poor quality leveraged enhanced) business cycles FINALLY ending? Payback will be a b!tch as the past few years debt quality will prove to be just as bad as 2006 stuff. A lot of write offs / write downs on the horizon.
One more thing Krugman … the only reason O got bailed on 2015 / 2016 was a massive credit response from China which kept the entire house of cards from collapsing THEN.
There has also been QT that operates with a lag and QT plus other Fed action at the same time has had an impact.
US broad true money supply growth has declined to a fresh 12-year low in August. It now stands at just 1.8% y/y. Down from an interim peak of 11.3% in the month Trump won the election….
drip drip drip