There is growing evidence that the fundamental underpinnings of the U.S. economy are weak.
The indicators are significant. The Federal Reserve reports that Industrial production declined 0.4 percent in December. The decrease for total industrial production in November was larger than previously reported. For the fourth quarter as a whole, industrial production fell at an annual rate of 3.4 percent. Manufacturing output edged down in December. Mining production decreased 0.8 percent in December for its fourth consecutive monthly decline. At 106.0 percent of its 2012 average, total industrial production in December was 1.8 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in December to 76.5 percent, a rate that is 3.6 percentage points below its long-run (1972–2014) average.
The Bureau of Economic Analysis disclosed that the latest numbers for the U.S. Balance of Trade in goods and services indicated a deficit of $42.4 billion, meaning that foreign nations sold far more to the U.S. than America sold to them. “Year-to-date, the goods and services deficit increased $25.2 billion, or 5.5 percent, from the same period in 2014. Exports decreased $99.0 billion or 4.6 percent. Imports decreased $73.7 billion or 2.8 percent…Year-over-year, the average goods and services deficit increased $1.2 billion from the three months ending in November 2014.
The poor performance of the economy is reflected in the jobs picture. According to the Bureau of Labor Statistics the seasonally adjusted number of Americans 16 and over filing for unemployment in Dec. 0f 2014 was 147,190, but in December of 2015, it was 149,929. In addition, initial jobless claims increased by 10,000 in the January 10—January 16 period, the highest level in half a year. Marketwatch notes that “initial claims have risen more than 14% after touching a post-recession low of 256,000 in early October.”
Writing in the Washington Times, Donald Lambro warns that the U.S. is headed for another recession. “Much of the major economic data suggests we’re moving in that direction…Clearly our economy is slowing down and economists are forecasting that fourth quarter growth in 2015 will be down significantly…All the telltale signs are there. Consumers aren’t buying as they used to, even with rock bottom oil prices and a gas tank of regular costing less than $2 a gallon. Yet retail sales fell in December at the height of the Christmas buying season. A New York Times headline last week put it this way: ‘Retail Sales Were Lackluster in December, Signaling Fragile Economy.’
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Bloomberg notes that “Investment managers are warning that markets probably have further to fall …The Standard & Poor’s 500 Index will drop another 10 percent to 1,650.” That projected is mirrored by the International Business Times Projections for 2016 are cloudy, with some prominent economists warning of an imminent U.S. recession and others predicting smooth sailing ahead.”
There is little reason to believe that direct Washington spending can or will stimulate the economy. President Obama’s $831 billion stimulus package–The American Recovery and Reinvestment Act of 2009—accomplished little, and the nearly bankrupt federal government doesn’t have the resources for another attempt. The national debt, which skyrocketed under the Obama Administration, is nearing $19 trillion, and will grow even larger. The Congressional Budget Office predicts that the federal budget will also be severely stressed in the coming year. “In 2016, the federal budget deficit will increase… If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years… Debt held by the public would also grow significantly from its already high level.”
The central question is how the generally robust American economy descended to its current condition, and why it continues to exhibit weakness. Similar to the 2007 recession, which was caused by decades of a misguided government legislation that mandated high-risk loans which eventually caused serious harm to key financial institutions, the looming—perhaps better described as ongoing– crisis results from federal policies.
American employers face severe disadvantages. Tax rates are the highest of any developed nation, and regulations are more extreme. Bad trade deals continue to allow nations to sell relatively unhindered to U.S. consumers, while Washington does little to address discriminatory treatment of American productions sold overseas. In many cases, the intellectual property produced in the U.S., including software, entertainment features, and new/advanced technological techniques and goods are outright stolen through industrial espionage and other means, with little response from the U.S. government.