bullet edition number 14 - shadowstats.com · broad outlook for the u.s. economy and financial...
TRANSCRIPT
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 1
Bullet Edition Number 14
Public Debt and National Solvency, Faltering Economic Numbers,
Preview of Second-Quarter GDP and Revisions, Pending FOMC
July 25, 2019
____________
Congress and the White House Move to Expand Federal Spending, the
Federal Deficit and Debt Ceiling, as U.S. Economic Growth Falters
Federal Debt Outstanding in Excess of GDP Already Is Startling, and
That Excess Debt Growth Is About to Accelerate
Uncontained Federal Deficit and Debt Expansion Doom the Dollar
U.S. Economy Remains in Deepening Recession
Second-Quarter GDP Should Come in Below Expectations,
On Top of a Likely Downside Revision to First-Quarter GDP
Despite Hemming and Hawing of Some Fed Officials,
Major FOMC Easing Remains Likely by September
On the Brink of Perpetual Quantitative Easing?
____________
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 2
_________________________________________________________________________________
Note to Subscribers: Special Commentary No. 983-B provided extended coverage of the ShadowStats’
broad outlook for the U.S. economy and financial markets, updated in Commentary No. 984 and ALERT of
June 24th, along with all the subsequent Bullet Editions through today’s missive. The forecast of an
unfolding formal new U.S. recession remains intact. Today’s Overview section briefly reviews:
Deteriorating U.S. fiscal conditions, including a rather interesting graph in the Federal Debt section.
Deteriorating economic conditions, pending GDP reporting, and revisions, as expanded upon in
today’s Economic Conditions and Indicators section.
A still likely easing at next week’s regular FOMC meeting (announcement on July 31st).
As the economic contraction accelerates, the more negative will become the pressure on the U.S. Dollar, the
stronger the flight-to-safety in precious metals and the more dangerous the situation for domestic equity prices.
A rapidly weakening U.S. Dollar and rallying gold and silver prices are solid signs of impaired systemic and
market conditions that easily can mutate investor fears into concerns and actions in other markets.
The ShadowStats outlook has not changed, specifically including a rapidly deepening U.S. economic
downturn, reflected in mounting downside pressures on the U.S. dollar, flight-to-safety and upside
pressures on gold and silver prices, and increasingly high risk of heavy stock-market selling in the
weeks ahead. Your comments and suggestions are invited. Always happy to discuss what is happening.
Best Wishes — John Williams (707) 763-5786, [email protected]
_________________________________________________________________________________
ShadowStats Commentaries, Bullet Editions, Watches and Daily Updates:
The Daily Update posts regularly on the ShadowStats home page (www.ShadowStats.com),
covering major economic releases, usually within two-to-three hours of headline publication.
Unusual market circumstances and pending ShadowStats publications also are covered.
The Bullet Edition publishes multiple times per month, as dictated by economic and financial-market
developments. Simply put, the Bullet Edition conveys brief communications and analyses on topics
of particular near-term significance.
Regular Commentaries should publish every six weeks, or so, providing a more comprehensive
overview of general conditions, occasionally as a Special Commentary.
o Commentary No. 984 posted June 24th.
o Commentary No. 985 is planned for early next week, covering the July 26th GDP
benchmarking.
Hyperinflation and Consumer Liquidity Watches will update regularly, beginning shortly.
Telephone Consulting is part of the regular service for subscribers. If you have a question on the
ShadowStats outlook, or otherwise would like to talk, please call John Williams at (707) 763-5786.
All Current and Earlier ShadowStats Commentaries (back to 2004) are available here: Archives, otherwise
located in the left-hand column of the ShadowStats Home Page (www.ShadowStats.com).
_________________________________________________________________________________
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 3
____________________
Contents – Bullet Edition No. 14
Overview 5
Budget Deficit and Federal Debt Ceiling Crises Threaten Financial and Economic Stability 5 Underlying Economic Numbers Still Show an Unfolding and Deepening Recession 5 GDP Should Begin to Catch Up With Tomorrow’s July 26th Reporting and Revisions 5 Second-Quarter 2019 GDP Expectations of 1.3% to 2.6% Should Be Disappointed 5 Real Quarterly GDP Contraction Remains Likely, At Least by the Second Revision 5 First-Quarter 2019 GDP Growth of 3.1% Should Revise Lower 5 Economy Cannot Resume Stable, Positive Growth Without an Active, Healthy Consumer 5 Major Fed Easing Looms; Renewed Quantitative Easing Could Be in Place by September 5 FOMC Easing Now Could Mark Onset of Perpetual Quantitative Easing 5
Federal Debt 7
Graph 1: Nominal U.S. GDP Minus Total U.S. Public Debt Outstanding ................................................................................ 8
Graph 2: Nominal Gross Federal Debt versus Gross Domestic Product .................................................................................. 8
Economic Conditions and Indicators – Preview of GDP 9
Durable Goods and Trade Deficit Details Likely Just Dampened the GDP Consensus Outlook 9
Graph 3: Real New Orders for Durable Goods (2000 to Date) ............................................................................................... 9
Graph 4: Real New Orders for Durable Goods – Ex-Commercial Aircraft (2000 to Date) .................................................. 10
Graph 5: Real New Orders, Ex-Commercial Aircraft, Yr-to-Yr Percent Change (2000 to Date) .......................................... 10
Graph 6: Real Merchandise Trade Deficit (1q1994 to 2q2019) ............................................................................................. 11
Graph 7: Net Exports of Goods and Services (GDP Accounting) 1q1994 to 1q2019 ............................................................. 11
Industrial Production and the CASS Freight IndexTM
Have Signaled Recession 12 Construction Spending and New Residential Construction Have Signaled Recession 12 Real Retail Sales Contracted in 4q2018 and 1q2019, but Rallied in 2q2019 12
Graph 8: Capacity Utilization 2000 to Date .......................................................................................................................... 13
Graph 9: CASS Freight IndexTM
2000 to Date ........................................................................................................................ 13
Graph 10: CASS Freight IndexTM
2000 to Date (Year-to-Year Percent Change) ................................................................... 14
Graph 11: Industrial Production Payroll Employment Year-to-Year Change, January 2000 to June 2019 ........................... 14
Graph 12: Industrial Production Payroll Employment, January 2000 to June 2019 ............................................................. 15
Graph 13: ShadowStats-Corrected Industrial Production (Compare with Graph 12 and Graph 14) .................................... 15
Graph 14: Industrial Production, 2000 to Date ...................................................................................................................... 16
Graph 15: Industrial Production, Year-to-Year Percent Change, 2000 to Date ..................................................................... 16
Graph 16: Manufacturing, 2000 to Date ................................................................................................................................. 17
Graph 17: Manufacturing, Year-to-Year Percent Change, 2000 to Date................................................................................ 17
Graph 18: Consumer Goods Manufacturing, 2000 to Date .................................................................................................... 18
Graph 19: Consumer Goods Manufacturing, Year-to-Year Percent Change, 2000 to Date ................................................... 18
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 4
Retail Sales 19 Construction and Housing 19
Graph 20: Real Retail Sales, January 2000 to June 2019 ...................................................................................................... 20
Graph 21: Real Retail Sales Year-to-Year Change, January 2000 to June 2019 .................................................................... 20
Graph 22: Retail Sales Payroll Employment, January 2000 to June 2019 ............................................................................ 21
Graph 23: Retail Sales Payroll Employment Year-to-Year Change, January 2000 to June 2019 .......................................... 21
Graph 24: Construction Payroll Employment, January 2000 to June 2019 ........................................................................... 22
Graph 25: Construction Payroll Employment Year-to-Year Change, January 2000 to June 2019......................................... 22
Graph 26: Index of Real Total Value of Construction Put in Place, January 2000 to May 2019 ........................................... 23
Graph 27: Year-to-Year Change in Real Construction Spending, January 2000 to May 2019 ............................................... 23
Graph 28: Single-Unit Building Permits vs. Housing Starts, 2000 to Date ............................................................................ 24
Graph 29: Year-to-Year Change in Real Construction Spending, January 2000 to May 2019 ............................................... 24
Current Labor-Market Stress Is Common to the Depths of a Recession, Not to Record-Low Unemployment 25
Graph 30: Civilian Employment-Population Ratio, January 1994 to June 2019 .................................................................... 25
Graph 31: Headline U.3 Unemployment Rate, Inverted Scale, January 1994 to June 2019................................................... 26
Graph 32: ShadowStats-Alternate Unemployment Rate, Inverted Scale, January 1994 to June 2019 .................................... 26
Some Likely Benchmarking Detail 27
Table 1: Likely Impact of Trade Deficit Benchmarking on the GDP Revisions ..................................................................... 28
____________________
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 5
Overview
Budget Deficit and Federal Debt Ceiling Crises Threaten Financial and Economic Stability
Underlying Economic Numbers Still Show an Unfolding and Deepening Recession
GDP Should Begin to Catch Up With Tomorrow’s July 26th Reporting and Revisions
Second-Quarter 2019 GDP Expectations of 1.3% to 2.6% Should Be Disappointed
Real Quarterly GDP Contraction Remains Likely, At Least by the Second Revision
First-Quarter 2019 GDP Growth of 3.1% Should Revise Lower
Economy Cannot Resume Stable, Positive Growth Without an Active, Healthy Consumer
Major Fed Easing Looms; Renewed Quantitative Easing Could Be in Place by September
FOMC Easing Now Could Mark Onset of Perpetual Quantitative Easing
U.S. Fiscal Conditions, U.S. Economic Activity and Federal Reserve Policy All Are in Turmoil, with
Domestic Financial Markets and the U.S. Dollar Eventually Taking Related Major Hits. Likely
weaker-than-expected second-quarter GDP should have negative implications for domestic financial-
market and fiscal stability.
U.S. Debt Versus the GDP. The Trump Administration and Congress reportedly have reached a deal on
U.S. fiscal policy to go beyond the 2020 election, with expanded deficit spending and an increased debt
ceiling. While there may be some needed economic stimulus in that package, the effects will intensify the
long-range solvency issues for the U.S. Government, with resulting mounting stress on the domestic
financial markets and particularly on the exchange-rate value of the U.S. Dollar and the U.S. Dollar
versus precious metals. The Federal Debt section expands upon these issues, including a rather startling
graph of the GDP minus Federal Debt (Graph 1).
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 6
Economic Conditions and GDP Preview. Second-Quarter 2019 GDP likely will come in below
expectations tomorrow, July 26th, with annual benchmark revisions to the GDP series back to First-
Quarter 2014 likely to show some downside revision to First-Quarter 2019 activity, as the current
deepening (albeit not yet formally recognized) recession continues to unfold. Consensus expectations for
second-quarter GDP growth now range from 1.3% to 2.6%, with the Atlanta Fed having just lowered its
―final‖ estimate from 1.6% to 1.3%, based on today’s headline reporting of June 2019 New Orders for
Durable Goods and the ―advance‖ estimate of the June trade deficit in goods (see later Graphs 3 to 7).
Nonetheless, headline Second-Quarter 2019 Real GDP activity should show a quarter-to-quarter
contraction, if not in its initial reporting, then by its second revision of September 26th, with Third-
Quarter 2019 also likely in contraction.
ShadowStats contends that the U.S. economy already has entered a recession, which should be timed
eventually from Fourth-Quarter 2018 (November), with real quarterly GDP contractions beginning in
First-Quarter 2019, although that may not be seen fully in the initial Second-Quarter 2019 GDP nor the
benchmark revised First-Quarter 2019. Fourth-Quarter 2018 and First-Quarter 2019 data disruptions from
the partial government shutdown could take another year of benchmarking to resolve, where key annual
benchmarkings did not take place this year due to budget constraints or the shutdown. The economic
background is reviewed in the Economic Conditions and Indicators – Preview of GDP.
FOMC Preview. The financial markets broadly are expecting an interest-rate cut from the Federal
Reserve’s Federal Open Market Committee (FOMC) at the July 31st conclusion of the pending regular
Committee meeting. Some easing indeed is likely.
The economy is weak enough that the banking industry should be beginning to see mounting systemic
stresses by September. That is circumstance that could trigger renewed Quantitative Easing (QE), which
openly is allowed for in the FOMC minutes. If circumstances indeed are that weak, and they appear to be
so, a return to QE could be the onset of effectively Perpetual Quantitative Easing (PQE). PQE would
have dire consequences for the long-term stability of the U.S. economy and financial markets. Greater
analysis will follow here should that circumstance begin to solidify,
[The “Federal Debt Section” begins on the next page.]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 7
Federal Debt
Unhappy and Deteriorating Fiscal Circumstances. My friend, Economist and Energy Analyst Jay
Morse, suggested Graph 1 to me, which he had found on the Saint Louis Federal Reserve’s website.
Fully updated detail in my plot shows the difference between the seasonally adjusted, annualized level of
quarterly U.S. Gross Domestic Product, in nominal terms—not adjusted for inflation—minus the quarter-
end level of the unadjusted, nominal total U.S. Public Debt Outstanding. Since the Great Recession, the
level of and growth in total U.S. Federal Debt has exceeded the level of and growth in the total GDP,
where the GDP presumably will generate the funding needed to cover and service the exploding debt
levels. The purported new budget deal between the Administration and Congress will be reflected in
further rapid deterioration of the GDP/Debt coverage.
Graph 2 reflects basically the same information, by fiscal year and comparative level as opposed to the
difference in levels, as previously published and discussed in Special Commentary No. 983-B and
Commentary No. 984. Beginning on page 41 of No. 984 is an extensive discussion of the unfolding
crises and resulting, eventual insolvency of the U.S. government, or a more likely Hyperinflation
circumstance that has the same general effect. This assumes the underlying issues are not addressed,
which remains the most likely outcome. Detail updated for Second-Quarter 2019 GDP and related
benchmark revisions will follow for both Graphs 1 and 2 in pending Commentary No. 985.
[Graphs 1 and 2 follow on the next page.]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 8
Graph 1: Nominal U.S. GDP Minus Total U.S. Public Debt Outstanding
Graph 2: Nominal Gross Federal Debt versus Gross Domestic Product
0
10
20
30
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-2,000
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Bil
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U.S Gross Domestic Product Minus Total Public Debt Outstanding
Level in Billions of Nominal Dollars 1q1965 to 1q2019 [ShadowStats, U.S. Treasury, Bureau of Economic Analysis, St. Louis Fed]
0.0
2.0
4.0
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Gross Federal Debt versus Nominal U.S. GDP Fiscal-Year-End Debt versus Fiscal-Year GDP to FY2018
Adjusted for Year-End Debt-Ceiling Distortions [Sources: ShadowStats, U.S. Treasury, BEA]
GDP
Gross Federal Debt
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 9
Economic Conditions and Indicators – Preview of GDP
Durable Goods and Trade Deficit Details Likely Just Dampened the Consensus Outlook
The Atlanta Fed Just Dropped Its Second-Quarter GDP Estimate to 1.3% from 1.6%, Based on
Today’s Reporting of the June Trade Deficit and Durable Goods Orders. The Atlanta Fed’s model
of where headline GDP growth will come out is the best one in terms of the mimicking Bureau of
Economic Analysis (BEA) official estimates. Where headline weakening in June 2019 New Orders for
Durable Goods and the quarterly deterioration indicated by the ―advance‖ June Trade Deficit in Goods
knocked the Atlanta model estimate lower, consensus forecasts likely dropped some, today, too.
Plots of those two series follow in Graphs 3 to 7. The unfolding recession is evident, where levels of
activity have turned lower, quarter-to-quarter, as seen in Graphs 3 and 4 of Real New Orders for Durable
Goods, and where both Real Total New Orders and New Orders Net of the Volatile Commercial Aircraft
Orders in Second-Quarter 2019 contracted quarter-to-quarter for the third consecutive quarter, along with
year-to-year change turning negative in Second-Quarter 2019, as seen in Graph 5.
Graph 3: Real New Orders for Durable Goods (2000 to Date)
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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t 2009 D
oll
ars
Real New Orders for Durable Goods Billions of Constant $2009, Deflated by PPI Durable Manufactured Goods
To June 2019, Seasonally-Adjusted [ShadowStats, Census, BLS]
Six-Month Moving Average
One-Month Reported
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 10
Graph 4: Real New Orders for Durable Goods – Ex-Commercial Aircraft (2000 to Date)
Graph 5: Real New Orders, Ex-Commercial Aircraft, Yr-to-Yr Percent Change (2000 to Date)
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Bil
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oll
ars
Real New Orders for Durable Goods (Ex-Commercial Aircraft) Billions of Constant $2009, Deflated by PPI Durable Manufactured Goods
To June 2019, Seasonally-Adjusted [ShadowStats, Census, BLS]
Six-Month Moving Average
One-Month Reported
0
0.1
0.2
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-40%
-30%
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-10%
0%
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30%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year-
to-Y
ear
Perc
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t C
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e
Real New Orders for Durable Goods (Ex-Commercial Aircraft) Year-to-Year Percent Change, Deflated by PPI Durable Manufactured Goods
Monthly to June 2019, Seasonally-Adjusted [ShadowStats, Census, BLS]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 11
Graph 6: Real Merchandise Trade Deficit (1q1994 to 2q2019)
Graph 7: Net Exports of Goods and Services (GDP Accounting) 1q1994 to 1q2019
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2012 D
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ars
Real U.S. Merchandise Trade Deficit (Census Basis) Quarterly Deficit at Annual Rate, 1q1994 to "Advance" 2q2019
Seasonally-Adjusted [ShadowStats, Census]
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2012 D
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ars
Real U.S. Net Exports of Goods and Services (GDP) Quarterly Deficit at Annual Rate (1q1994 to Third-Estimate 1q2019)
Seasonally-Adjusted [ShadowStats, BEA]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 12
Graph 6 of the Real Merchandise Trade Deficit through Second-Quarter 2019 showed a net deterioration
(an economic negative) in the second–quarter deficit. Graph 7 shows the Net Export Account of the GDP
through First-Quarter 2019, where it had narrowed. It should deteriorate now in tandem with the Real
Merchandise Trade Deficit in the headline second-quarter GDP detail.
Industrial Production and the CASS Freight IndexTM
Have Signaled Recession
Construction Spending and New Residential Construction Have Signaled Recession
Real Retail Sales Contracted in 4q2018 and 1q2019, but Rallied in 2q2019
The June 2019 CASS Freight Index™ Fell Year-to-Year by 5.3% (-5.3%), Following an Annual
Decline of 6.0% (-6.0%) in May, Parallel to the Deepening Annual Declines at the Onset of the
Great Recession. The Index’s 12-month moving average declined month-to-month for the seventh
straight month. Those year-to-year and 12-month-moving-average metrics neutralize seasonality in this
unadjusted series, and both are signaling a new recession and deepening Second-Quarter 2019 Economic
Contraction. The last time annual growth in the series declined to a year-to-year drop of 6.0% (-6.0%)
was at the onset of the Great Recession in 2008.
Recession Signals Abound from the June 2019 Production Series:
Aggregate Second-Quarter 2019 Industrial Production showed a second consecutive quarterly
downturn, at an annualized 1.18% (-1.18%, versus 1.91% (-1.91%) in first-quarter 2019.
Having shown no economic expansion for 11½ years, a record period never before seen in the
100-plus year history of the series, otherwise 44-straight quarters or 138-continuous months
without activity recovering the December 2007 pre-recession peak, the dominant Manufacturing
Sector also dropped for a second straight quarter at an annualized 2.25% (-2.25%) in second-
quarter 2019, versus 1.86% (-1.86%) in first-quarter 2019.
Reflecting FOMC-induced, stressed consumer liquidity conditions, Consumer Goods Production
fell at an annualized 3.67% (-3.67%) pace in second-quarter 2019, versus 4.15% (-4.15%) in first-
quarter 2019.
While the randomly volatile Utilities Sector also contracted for a second quarter, the Mining
Sector picked up sharply in the second quarter, at an annualized quarterly pace of 8.88%,
dominated by increased Oil and Gas production.
Graphs of Production and Freight Activity Related to the Unfolding Recession. The following
pages of graphs tell a story of unfolding recession, first as to Industrial Production and the CASS Freight
IndexTM
, followed by indicators tied to the Construction Sector and to Retail Sales. Consider first Graphs
8 and 9 of Industrial Production Capacity Utilization and the Cass Freight Index, where a downturn in
Capacity Utilization is a traditional marker of the onset of recession. Both plots reflect a the likely shaded
recession period for the current onset, they also reflect the 2014/2015 mini-recession that never was
recognized formally, largely because it was masked for a number years, until it fell out of annual
benchmark revisions, as detailed in Bullet Edition No. 3.
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 13
Graph 8: Capacity Utilization 2000 to Date
Graph 9: CASS Freight IndexTM 2000 to Date
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Perc
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.S. In
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Capacity Utilization: Total U.S. Industry to June 2019 With An Alternate Recession Definition
Percent of Capacity, Seasonally-Adjusted [ShadowStats, FRB]
Alternate Definition and ProspectiveRecession
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Ind
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evel,
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000 =
100
Cass Freight Index™ (Jan 2000 = 100) To June 2019, Not Seasonally Adjusted
[ShadowStats, Cass Information Systems, Inc.]
Alternate Definition - Prospective Recession
Monthly Level, Not Seasonally Adjusted
12-Month Trailing Average
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 14
Graph 10: CASS Freight IndexTM 2000 to Date (Year-to-Year Percent Change)
Graph 11: Industrial Production Payroll Employment Year-to-Year Change, January 2000 to June 2019
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-30%
-25%
-20%
-15%
-10%
-5%
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5%
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15%
20%
25%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year-
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Cass Freight Index™ (Year-to-Year Percent Change) Monthly to June 2019, Not Seasonally Adjusted [ShadowStats, Cass Information Systems, Inc.]
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-8%
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Year-
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Industrial Production Payroll Employment Year-to-Year Percent Change to June 2019
Not Seasonally Adjusted [ShadowStats, Census Bureau]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 15
Graph 12: Industrial Production Payroll Employment, January 2000 to June 2019
Graph 13: ShadowStats-Corrected Industrial Production (Compare with Graph 12 and Graph 14)
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Industrial Production Payroll Employment to June 2019 Seasonally-Adjusted [ShadowStats, BLS]
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evel,
Jan
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ry 2
000 =
100
ShadowStats-Corrected Industrial Production Hedonic-Adjusted Inflation Understatement Removed, Index Jan 2000 = 100
Through June 2019, Seasonally-Adjusted [ShadowStats, FRB]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 16
Graph 14: Industrial Production, 2000 to Date
Graph 15: Industrial Production, Year-to-Year Percent Change, 2000 to Date
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2012 =
100
Index of Industrial Production (2012 = 100)
Level to June 2019, Seasonally-Adjusted [ShadowStats, FRB]
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1
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-18%
-12%
-6%
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Year-
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e
Industrial Production (Year-to-Year Percent Change) To June 2019, Seasonally-Adjusted [ShadowStats, FRB]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 17
Graph 16: Manufacturing, 2000 to Date
Graph 17: Manufacturing, Year-to-Year Percent Change, 2000 to Date
0
1
2
3
4
5
6
7
8
9
10
84
88
92
96
100
104
108
112
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Ind
ex L
evel,
2012 =
100
Industrial Production - Manufacturing (SIC) (2012 = 100) Level to June 2019, Seasonally-Adjusted [ShadowStats, FRB]
0
1
2
3
4
5
6
7
8
9
10
-20%
-16%
-12%
-8%
-4%
0%
4%
8%
12%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year-
to-Y
ear
Perc
en
t C
ha
ng
e
Industrial Production - Manufacturing (Yr-to-Yr Percent Change) To June 2019, Seasonally-Adjusted [ShadowStats, FRB]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 18
Graph 18: Consumer Goods Manufacturing, 2000 to Date
Graph 19: Consumer Goods Manufacturing, Year-to-Year Percent Change, 2000 to Date
0
1
2
3
4
5
6
7
8
9
10
96
100
104
108
112
116
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Ind
ex L
evel,
2012 =
100
Production - Consumer Goods (2012 = 100) Level to June 2019, Seasonally-Adjusted [ShadowStats, FRB]
0
1
2
3
4
5
6
7
8
9
10
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year-
to-Y
ear
Perc
en
t C
han
ge
Production - Consumer Goods (Year-to-Year Percent Change) To June 2019, Seasonally-Adjusted [ShadowStats, FRB]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 19
Retail Sales
Second-Quarter Real Retail Sales Gained Sharply in the Quarter, but Annual Growth Still Held
Within Traditional Recession Territory, Along With Retail Trade Employment in Annual
Contraction. In the context of the June 25th downside benchmark revisions to the Retail Sales series,
(see Bullet Edition No. 12), nominal June Retail Sales gained an above-consensus 0.42% in the month,
although the increase was not statistically different from 0.0% (unchanged) at the 90% confidence
interval, as reported by the Census Bureau on July 16th. Annualized real second-quarter growth was a
strong 4.46%, against negligible first-quarter growth of 0.33%. That said, real year-to-year growth in
second-quarter 2019 was 1.53%, versus 1.14% in first-quarter 2019. While real annual growth below
2.0% rarely is seen outside of formal recessions, the initial, strong quarterly estimate likely will boost
second-quarter GDP growth and expectations for same. Still, a variety of indicators, such as employment,
suggested there might be some downside revisions pending (Graphs 20 to 23 begin on page 20).
Construction and Housing
May Construction Spending Showed Deepening Nominal Year-to-Year Declines, Last Seen at the
Onset of the Great Recession, With Second-Quarter Real Construction Spending on Track for a
Fourth Consecutive Annual Decline (see Graphs 24 to 27 on page 21; see Bullet Edition No. 13).
Second-Quarter 2019 New Residential Construction: The Dominant and Statistically Stable Single-
Unit Building Permits Series Showed Its Fifth-Consecutive Quarter-to-Quarter and Third-
Consecutive Quarterly Year-to-Year Declines. More-stable Building Permits, which lead Housing
Starts, showed statistically meaningful aggregate monthly and annual declines of 6.1% (-6.1%) and 6.6%
(-6.6%), dominated in June by highly irregular swings in the Multiple Unit Permits category. The unit-
count-dominant and most-stable series, though, is Single Unit Permits, which gained 0.4% in the month,
and declined 4.7% (-4.7%) year-to-year, with 2q2019 Single Unit activity declining quarter-to-quarter at
an annualized pace of 6.2% (-6.2%), and year-to-year by 6.2% (-6.2%). Again, those were the fifth
consecutive quarterly and third consecutive annual declines, a pattern consistent with a continuing
recession in housing activity (see Graphs 28 and 29 on page 24).
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 20
Graph 20: Real Retail Sales, January 2000 to June 2019
Graph 21: Real Retail Sales Year-to-Year Change, January 2000 to June 2019
0
1
2
3
4
5
6
7
8
9
10
150
155
160
165
170
175
180
185
190
195
200
205
210
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Bil
lio
ns
of
1982
-1984 D
oll
ars
(C
PI-
U)
Real Retail Sales Level (Deflated by CPI-U) To June 2019, Seasonally-Adjusted [ShadowStats, Census, BLS]
0
1
2
3
4
5
6
7
8
9
10
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Ye
ar-
to-Y
ea
r P
erc
en
t C
ha
ng
e
Real Retail Sales Year-to-Year Percent Change To June 2019, Seasonally-Adjusted [ShadowStats, Census, BLS]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 21
Graph 22: Retail Sales Payroll Employment, January 2000 to June 2019
Graph 23: Retail Sales Payroll Employment Year-to-Year Change, January 2000 to June 2019
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
14.0
14.5
15.0
15.5
16.0
16.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Mil
lio
ns
of
Jo
bs
Retail Trade Payroll Employment to June 2019 Millions of Jobs, Seasonally-Adjusted [ShadowStats, BLS]
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year-
to-Y
ear
Perc
en
t C
ha
ng
e
Retail Trade Payroll Employment Year-to-Year Percent Change to June 2019
Not Seasonally Adjusted [ShadowStats, Census Bureau]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 22
Graph 24: Construction Payroll Employment, January 2000 to June 2019
Graph 25: Construction Payroll Employment Year-to-Year Change, January 2000 to June 2019
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
5.2
5.6
6.0
6.4
6.8
7.2
7.6
8.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Mil
lio
ns
of
Jo
bs
Construction Payroll Employment to June 2019 Seasonally-Adjusted [ShadowStats, BLS]
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
-20%
-15%
-10%
-5%
0%
5%
10%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year-
to-Y
ear
Perc
en
t C
ha
ng
e
Construction Payroll Employment Year-to-Year Percent Change to June 2019
Not Seasonally Adjusted [ShadowStats, Census Bureau]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 23
Graph 26: Index of Real Total Value of Construction Put in Place, January 2000 to May 2019
Graph 27: Year-to-Year Change in Real Construction Spending, January 2000 to May 2019
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
60
70
80
90
100
110
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Ind
ex L
evel,
Jan
ua
ry 2
000 =
100
Index of Real Total Value of Construction Put in Place
To May 2019, Inflation Adjusted (Jan 2000 = 100) Seasonally-Adjusted [ShadowStats, Census Bureau]
Reflects all forms of U.S. construction spending, public and private, ranging from residential and office buildings, to highways and water systems. Inflation-adjustment is based on the ShadowStats Composite Construction Deflator (using weighted industry cost surveys and related GDP deflators).
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
-20%
-15%
-10%
-5%
0%
5%
10%
15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Real Y
ear-
to-Y
ear
Perc
en
t C
ha
ng
e
Real Value of U.S. Construction Put in Place Year-to-Year Percent Change to May 2019
Seasonally-Adjusted [ShadowStats, Census Bureau]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 24
Graph 28: Single-Unit Building Permits vs. Housing Starts, 2000 to Date
Graph 29: Year-to-Year Change in Real Construction Spending, January 2000 to May 2019
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Th
ou
san
ds
of
Un
its
Single-Unit Building Permits vs. Housing Starts (Monthly Rate) To June 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]
Recession
Single-Unit Housing Starts
Single-Unit Building Permits
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
-60%
-40%
-20%
0%
20%
40%
60%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year-
to-Y
ear
Perc
en
t C
ha
ng
e
Single-Unit Building Permits and Housing Starts Year-to-Year Percent Change
To June 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]
Recession
Housing Starts
Building Permits
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 25
Current Labor-Market Stress Is Common to the Depths of a Recession,
Not to Record-Low Unemployment
[Excerpted from Bullet Edition No. 13.] The major issue with the historically low U.3 headline
unemployment rate remains that it still runs counter to Labor-Market Stress (Employment-Population
Ratio), which continued to hold at levels consistent with a recession, reflected in Graph 30. Under
normal economic circumstances, the high levels of employment stress seen at present, usually would be
consistent with high levels of unemployment and recession, not near-record low unemployment, as seen
in the comparative inverted-scale Graphs 31 and 32 of the current, low-level headline U.3 unemployment
rate and the high-level ―recessionary‖ ShadowStats Alternate measure.
Graph 30: Civilian Employment-Population Ratio, January 1994 to June 2019
0
1
2
3
4
5
6
7
8
9
10
58%
59%
60%
61%
62%
63%
64%
65%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Civ
ilia
n E
mp
loym
en
t-P
op
ula
tio
n R
ati
o
Civilian Employment-Population Ratio To June 2019, Not-Seasonally-Adjusted [ShadowStats, BLS]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 26
Graph 31: Headline U.3 Unemployment Rate, Inverted Scale, January 1994 to June 2019
Graph 32: ShadowStats-Alternate Unemployment Rate, Inverted Scale, January 1994 to June 2019
0
1
2
3
4
5
6
7
8
9
103.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
U.3
Un
em
plo
ym
en
t R
ate
(S
cale
In
vert
ed
)
U.3 Unemployment Rate (Inverted Scale) To June 2019, Seasonally-Adjusted [ShadowStats, BLS]
0
1
2
3
4
5
6
7
8
9
1010%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
21%
22%
23%
24%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sh
ad
ow
Sta
ts U
ne
mp
loym
en
t R
ate
(S
cale
In
vert
ed
)
ShadowStats-Alternate Unemployment Rate (Inverted Scale) Long-Term Discouraged/Displaced Workers Included (BLS Excluded Since 1994)
To June 2019, Seasonally-Adjusted [ShadowStats, BLS]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 27
Some Likely Benchmarking Detail
Limited Benchmarking. Initial reporting of Second-Quarter 2019 GDP and accompanying GDP
benchmark revisions back to First-Quarter 2014 will be published on July 26th. GDP Headline First-
Quarter 2019 GDP real growth of 3.1% remains heavily overstated against underlying economic reality,
still reflecting likely government-shutdown distortions and disruptions to underlying headline data.
Unusually large and sharp downside revisions to first-quarter GDP remain a fair bet, given the patterns of
reporting in, and major revisions to those underlying series, as could be seen in tomorrow’s
benchmarking.
Whether or not the GDP annual overhaul turns the headline series negative for First-Quarter 2019,
intensifying quarterly contractions still should follow in both Second- and Third-Quarter 2019, in the
context of headline economic reporting broadly having continued to deteriorate, as discussed earlier in
this section.
What normally would have been negative annual benchmark revisions to Industrial Production, New
Orders for Durable Goods and Construction Spending were canceled, due to budget constraints or delayed
by the December/January Partial Government Shutdown. Nonetheless, the impact of any existing survey
catch-ups or corrections from those delays should be reflected in the GDP revisions. Otherwise, the
corrections should show up in next year’s benchmarkings.
Headline Benchmark Revisions that Took Place Should Have Minimal Near-Term GDP Impact.
-- Retail Sales. Detailed in Bullet Edition No. 12, Retail Sales were revised lower by roughly 0.2%
(-0.2%) to 0.3% (-0.3%), but the changes largely were in 2016 and 2017, which means that the near-term
GDP quarters should see minimal revisions in terms of quarter-to-quarter or year-to-year percent change.
-- Trade Deficit. 2019 benchmark revisions to the Trade Deficit (see Bullet Edition No. 1) likely will
reduce aggregate 2018 GDP annual real growth from 2.9% to 2.8%, with shifting growth by quarters as
reflected in Table 1.
[Table 1 follows on the next page.]
Shadow Government Statistics — Bullet Edition No. 14 — July 25, 2019
Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 28
Table 1: Likely Impact of Trade Deficit Benchmarking on the GDP Revisions
Estimated Impact of December 2018 Revisions to the
Real Merchandise Trade Deficit on Real GDP Growth
Period Current Adjusted Current Adjusted
Headline for Trade Headline for Trade
Growth Revisions Growth Revisions
Yr/Yr Yr/Yr Yr/Yr Yr/Yr
2017 2.2% 2.2% 2.2% 2.2%
2018 2.9% 2.8% 2.9% 2.8%
Qtr/Qtr Qtr/Qtr Yr/Yr Yr/Yr
4q2017 2.3% 2.3% 2.5% 2.5%
1q2018 2.2% 2.0% 2.6% 2.5%
2q2018 4.2% 4.2% 2.9% 2.8%
3q2018 3.4% 3.3% 3.0% 2.9%
4q2018 2.6% 2.7% 3.1% 3.0%
Sources: Census Bureau, Bureau of Economic Analysis (BEA), www.ShadowStats.com (ShadowStats)
# # #