The U.S. Economy is Far Worse Than Data Suggests, According To Former Fed Advisor
2min read Over the past few months, while the majority on Wall Street have been optimistic about the prospects of a soft landing for the U.S. economy, Danielle DiMartino Booth, former economic advisor to the Dallas Federal Reserve and a veteran economist, has been warning of the risk of recession.
She stated that despite the U.S. GDP data seemingly continuing to grow in 2023 and 2024, the U.S. economy has fallen into a recession, with the most evident manifestation being the continued weakness in the job market.
As the U.S. employment data has shown weakness in recent months, Booth warned that the development of the labor market indicates that the foundation of the U.S. economy is not as solid as it seems.
Clues of a Weak U.S. Economy
She highlighted several key economic areas in the U.S. that are currently showing signs of weakness.
Firstly, it is taking longer for the unemployed in the U.S. to find new jobs, leading to an increasing number of workers who were eligible for unemployment insurance now losing their benefits.
Most states in the U.S. offer 26 weeks of paid unemployment relief, but according to data from the U.S. Bureau of Labor Statistics, 21% of workers now take more than 27 weeks to find a new job, an increase of 3% from last year. U.S. government data shows that the average duration of unemployment across the country climbed to 21 weeks in September.
The second factor is the number of part-time workers in the U.S., which has climbed to an all-time high, indicating that the recruitment situation is not as strong as it seems.
Data from the U.S. Bureau of Labor Statistics shows that in August of this year, the number of employees working part-time climbed to 28.2 million, the highest level since the government began recording the data in the 1960s.
Booth attributed the significant increase in part-time employment to the so-called gig economy phenomenon, where more unemployed Americans, unable to secure stable jobs, turn to platforms like Uber to maintain their income.
Employment Issues Turning into Consumption Issues
Booth predicts that the weakness in the U.S. job market may turn into weak consumer spending, which is one of her main concerns about the economy.
According to the latest Beige Book from the Federal Reserve, Fed economists have started to pay attention to the weakness in consumer spending, with consumption declining or remaining flat in most Fed regions.
The decline in U.S. consumption seems to have already impacted key industries. Data from the Institute for Supply Management shows that the U.S. manufacturing industry has contracted for 21 out of the past 22 months, while inventories have increased. Data from the National Association of Realtors shows that the U.S. real estate market has been suppressed for the past two years, continuing this trend in August, with existing home sales in the U.S. declining by 2.5% again that month.
Booth predicts investors may see more signs of economic weakness from U.S. GDP data. Booth pointed out that recent GDP data shows that in the year ending March 2024, the U.S. economy added nearly a million fewer jobs than expected.