US Economy, part 2

[lawdog77]

Goose, serious question: You know lots of business owners and execs; does every single one of them think the economy is no good?

I'm sure I don't know as many as you do, but those I have talked to ... some say the economy is working very well for their industry, and some say the economy's not working all that well for their business right now. The one thing every one of them agrees on is that things are a hell of a lot better now than it was 4 years ago.

But maybe in your case, everyone you deal with is in "look out below!" mode. Interested to know. Thanks.

I would hope one's business is doing better now than in the middle of Covid.

[Hards Alumni]

People still go to box stores? Lol

And chain restaurants too, shockingly.

[Pakuni]

I would hope one's business is doing better now than in the middle of Covid.

My neighbor in the mask and ventilator business is getting crushed these days.

[The Sultan]

I live 5 min from a Home Depot and the parking lot is almost ALWAYS crowded.  On the weekends its a zoo

What's great about Menards is that if I have questions, which I always do because I am not handy at all, the people there are very helpful at patient.

[MU Fan in Connecticut]

In addition, I walked a trade show (Mohegan Sun) yesterday and spoke to other wire manufacturers as well as wire equipment manufacturers and industry supply companies and they universally said business was better than 2023 and on a definite and noticeable upward trajectory.
6 months ago it was 2Q2024: you'll see upward increase in orders and in the 2Q everyone is confirming including my new company which has seen the same.

[lawdog77]

My neighbor in the mask and ventilator business is getting crushed these days.

Tell him, hang in there,bird flu is coming

[MU Fan in Connecticut]

My neighbor in the mask and ventilator business is getting crushed these days.

In 2020 and 2021 I talked to everyone who suddenly was getting into the mask business.  My company makes aluminum flat wire and we made oodles for the nose wire on masks.
Automotive companies, Milwaukee Tool - Walmart was actually my biggest customer and despite reputation they couldn't be easier to work with.

A lot of these companies contracted with Curt G Joa in Sheboygan Falls, Wisconsin.

I knew everything was dead in early 2022 when a potential customer (worlds largest mask manufacturer) wanted the nose wire less than the cost of the aluminum raw material. 

[Goose]

82

Our clients are across the board on the economy and their specific business conditions. Our business is up a good deal this year and I happy with that. If I had to sum up the overall sentiment of our clients, it would be cautiously optimistic. Almost all of them say they are shocked by the strength of the consumer but concerned that it cannot last forever.


I can 1000% say that I have never asked or been told on the economy being better or worse than four years. While I do not talk politics with my clients as a rule, I would estimate the owners/C Suite guys are 70% R's. Not sure if they would agree on the year argument, but have not discussed. Will add, virtually every client has complained about higher interest rates, higher labor cost, higher trucking costs, higher insurance cost and tighter margins. Right now shipping container costs are rising like crazy again and that has some clients concerned.

[Goose]

Wags

Not disputing HD stores being a zoo, but revenues and sales are down in 2024. They are a great success story, but revenues are down, even with an increase in price for many products.

[The Sultan]

Whenever Goose posts on the economy, this is what I see:

[MU82]

82

Our clients are across the board on the economy and their specific business conditions. Our business is up a good deal this year and I happy with that. If I had to sum up the overall sentiment of our clients, it would be cautiously optimistic. Almost all of them say they are shocked by the strength of the consumer but concerned that it cannot last forever.


I can 1000% say that I have never asked or been told on the economy being better or worse than four years. While I do not talk politics with my clients as a rule, I would estimate the owners/C Suite guys are 70% R's. Not sure if they would agree on the year argument, but have not discussed. Will add, virtually every client has complained about higher interest rates, higher labor cost, higher trucking costs, higher insurance cost and tighter margins. Right now shipping container costs are rising like crazy again and that has some clients concerned.

Thanks for your response, Goose. I was genuinely worried that everyone you know was in the dumper based on your responses in this and previous economy-related threads.

"Cautiously optimistic" is a darn good thing to be - no matter which "side" is proclaiming whatever they're proclaiming.

[GOO]

One thing I know will end up being true is that unemployment rates will go up and the economy will slow.  The Fed will have it no other way; dual mandate apparently includes higher unemployment this time.  I think they needed to raise rates higher, but that lever won't get pulled. So current rates persist longer than expected for the Fed to achieve its goals, is my very uneducated hunch. 

I understand that historically the Fed waits too long to lower rates. This time could be different, I have no idea and we shall see, but history tends to be a guide that says they will get it wrong.  But we are not starting with high rates to begin with so maybe not. 

I know psychologically people will not understand that they pay more and earn more (for most people). They will just see that a bag of chips goes for $5.99 and it used to cost $3.50. And they will talk about that $3.50 bag of Doritos for decades.  But will instead buy the Meijer brand and pay $2.99 and realize it's just as good (oh wait, that's me, sorry)

One odd thing is that rates are pretty much at historical norms, so the Fed thinks they can achieve a slower economy and thus higher unemployment at what is pretty normal rate levels. That is interesting and I don't know what that means.  Except maybe the bond play won't have as MUCH bang even if the economy slows. So buying longer term bond funds might not be the right move even though history says it is. And with the deficits, there are a lot of bonds to sell, so maybe 10 year bonds don't fall as much as they should even with a mild recession. And add in if the election goes the way it appears it will, we could end up with lower taxes longer and continued high spending and thus even bigger deficits to fund. More pressure on bond prices and rates stay higher. But history says allocate more to longer duration treasuries, so personally that's what I've started doing with an etf. I'm very heavy equity for my age, intentionally, and will so continue, but history says to fatten up on bonds.

[TSmith34, Inc.]

Tell him, hang in there,bird flu is coming

I like your optimism, lawdog

[JWags85]

Whenever Goose posts on the economy, this is what I see:

Not to ride in like a white knight for Goose, but knowing the business he is in and contrasting his economic gloominess with otherwise positivity, I actually get it.  A large number of people I know in very global/international facing businesses and roles can be pretty gloomy.  There is A LOT of information and data out there, and unless its a superstar success story in an emerging economy or industry, often times the negative noise is what is the loudest.  It doesn't necessarily mean that a disaster is coming, but it makes you a bit overly cautious to others.  Add to that his expertise and exposure to China, and it makes even more sense cause there are so many toxic pits of danger there and even less transparency/outlook than you'd normally expect.

Amusingly enough, globally focused people I know from developing or struggling/chaotic economies (India, some African countries, parts of SE Asia) are actually the opposite.  The negativity and headwinds in their own country get washed out to some extent by the success and upside they see in better markets (yes, even like the US) so they have a more positive outlook than their peers.

[Skatastrophy]

Some of you live in a very different world than I do. Pretty interesting how different everyone's experience is.

There are very few big box stores around me these days. I figured they went the way of the dinosaur everywhere in the US.

Business owners I work with all have very aggressive growth goals that they're hitting. The ones in Europe are hitting them by targeting the US, but it's a global economy so you just sell where there's an outsized economic boom. Makes sense, though, that some sectors struggle.

[MU82]

I would hope one's business is doing better now than in the middle of Covid.

Exactly.

The vast majority are doing better, obviously, but some lie for political reasons.

[MU82]

Not to ride in like a white knight for Goose, but knowing the business he is in and contrasting his economic gloominess with otherwise positivity, I actually get it.  A large number of people I know in very global/international facing businesses and roles can be pretty gloomy.  There is A LOT of information and data out there, and unless its a superstar success story in an emerging economy or industry, often times the negative noise is what is the loudest.  It doesn't necessarily mean that a disaster is coming, but it makes you a bit overly cautious to others.  Add to that his expertise and exposure to China, and it makes even more sense cause there are so many toxic pits of danger there and even less transparency/outlook than you'd normally expect.

Amusingly enough, globally focused people I know from developing or struggling/chaotic economies (India, some African countries, parts of SE Asia) are actually the opposite.  The negativity and headwinds in their own country get washed out to some extent by the success and upside they see in better markets (yes, even like the US) so they have a more positive outlook than their peers.

Nobody with a brain would dispute any of that Wags.

My overriding point has been that's the way it's been for a long, long time, regardless of which party has occupied the White House or Congress.

[Goose]

Wags

Our business in India is growing like crazy, as well as Cambodia and Pakistan. While 82 and others like to point out that I am gloomy, I am simply offering my perspective. While I think things are less rosy than others, does not mean I think the sky is falling. That said, I do think there have been warning signs for quite some time that give me reason to watch and listen closely.

In all seriousness, I could not be happier that 82 has done great with his AAPL and MSFT holdings, I am not sure that is great barometer of the overall economy. Whatever the case, I appreciate your post.

[JWags85]

Nobody with a brain would dispute any of that Wags.

My overriding point has been that's the way it's been for a long, long time, regardless of which party has occupied the White House or Congress.

Of course, I guess I didn't necessarily see anything overwhelmingly political to his "gloominess" specifically.

Business owners I work with all have very aggressive growth goals that they're hitting. The ones in Europe are hitting them by targeting the US, but it's a global economy so you just sell where there's an outsized economic boom. Makes sense, though, that some sectors struggle.

Ive said it a few times, but its a fairly bizarre economy right now, very sector by sector.  Higher cost items that a very irregular purchases (aka every few years, if not longer) are struggling due to a lot of demand getting gobbled up by COVID money/lack of places to spend over the last few years.  So you have people who are getting whacked a decent bit by that, even if the overall economy is good.

Then I think looking at only sales/revenue can be tricky given then inflationary environment recently, as well as logistical supply chain challenges the last 18-24 months.  I know people who have had sales grow of 15-20% from 2022 now, but had margins slashed by a third or more.  Contrary to what people think, you can't always just jack up prices immediately cause your costs have increased, especially in a B2B environment.

I know none of this is new or abnormal to you, but I find an annoying amount of people who think "rising tide lifts all boats" in a hot economy means people are crushing it or else they suck at business.

Purely anecdotal, but I know a mid sized retail chain who filed for bankruptcy in Q1 who actually had sales growth from 2022-2023 and similar to start 2024.  But their supply chain was torched, a majorly supplier left the market they supplied and others were raising prices AND doubling lead times, plus some staffing issues.  They made a few mistakes and probably leaned on some suppliers too much (due to 10 year+ relationships) but it wasn't simple gross negligence or mismanagement that did them in.

[MU82]

Of course, I guess I didn't necessarily see anything overwhelmingly political to his "gloominess" specifically.

Nor was I suggesting there was. If it looked like that's what I was suggesting, I apologize. For many others, however, politics do enter into it. Plenty of people are actively rooting for the economy to fail right now.

Ive said it a few times, but its a fairly bizarre economy right now, very sector by sector. 

And what I've said a few times is that this isn't that bizarre. Pretty much always there are sectors doing better or worse than other sectors.

What would be bizarre would be if there actually was a recession despite the employment data and consumer activity we've had.

In all seriousness, I could not be happier that 82 has done great with his AAPL and MSFT holdings, I am not sure that is great barometer of the overall economy.

The subject of AAPL came up, and I mentioned that I'm glad I've been a shareholder - and that I wasn't dissuaded years ago by at least one other Scooper calling AAPL doomed.

In general, I think the stock market is a rather poor barometer of the economy, and I've never said otherwise.

Of course, anecdotes aren't the greatest barometer of the overall economy, either. That's obvious just in today's posts, where one Scooper has pointed to anecdotes suggesting that the economy might be very good and another has pointed to anecdotes suggesting that the economy might be struggling.

Thanks for the kind words, Goose, and I wish you and yours good fortune, too.

[jesmu84]

https://www.politico.com/news/2024/06/07/biden-has-an-economic-story-to-tell-and-yet-00162338#:~:text=On%20Friday%2C%20the%20nation%20got,housing%20and%20high%20interest%20rates.

The economy is great! Voters are just dumb!

Inside Biden's orbit, the fear is that there's little new the administration can do to change the perceptions of a stubborn electorate that's living through an upswing — yet simply refusing to believe it.

I'm wrong

[TSmith34, Inc.]

https://www.politico.com/news/2024/06/07/biden-has-an-economic-story-to-tell-and-yet-00162338#:~:text=On%20Friday%2C%20the%20nation%20got,housing%20and%20high%20interest%20rates.

IMO, the reality is that inflation over the last 4 years has significantly outpaced wage growth - especially for the bottom 50%.

That might be perception, but not reality

Fastest wage growth over the last four years among historically disadvantaged groups
Low-wage workers' wages surged after decades of slow growth

https://www.epi.org/publication/swa-wages-2023/#:~:text=Real%20wages%20of%20low%2Dwage,the%20prior%20four%20business%20cycles.

"Real wages of low-wage workers grew 12.1% between 2019 and 2023. Wage growth among low- and middle-wage workers over the pandemic business cycle has outpaced not only higher wage groups over the same period, but also its own growth compared to the prior four business cycles.

Wage rates remain insufficient for individuals and families working to make ends meet. Nowhere can a worker at the 10th percentile of the wage distribution earn enough to meet a basic family budget.

Black men, young workers, and working mothers experienced particularly fast wage growth over the last four years. After growing for many groups in the prior forty years, key wage gaps narrowed between 2019 and 2023, but still remain large."

[jesmu84]

That might be perception, but not reality

Fastest wage growth over the last four years among historically disadvantaged groups
Low-wage workers' wages surged after decades of slow growth

https://www.epi.org/publication/swa-wages-2023/#:~:text=Real%20wages%20of%20low%2Dwage,the%20prior%20four%20business%20cycles.

"Real wages of low-wage workers grew 12.1% between 2019 and 2023. Wage growth among low- and middle-wage workers over the pandemic business cycle has outpaced not only higher wage groups over the same period, but also its own growth compared to the prior four business cycles.

Wage rates remain insufficient for individuals and families working to make ends meet. Nowhere can a worker at the 10th percentile of the wage distribution earn enough to meet a basic family budget.

Black men, young workers, and working mothers experienced particularly fast wage growth over the last four years. After growing for many groups in the prior forty years, key wage gaps narrowed between 2019 and 2023, but still remain large."

12% wage growth 2019-23

What's the inflation on various categories important for daily living (housing, food, gas, utilities) in that same time?

[rocky_warrior]

https://www.stlouisfed.org/on-the-economy/2024/apr/how-big-mac-index-relates-overall-consumer-inflation

[TSmith34, Inc.]

12% wage growth 2019-23

What's the inflation on various categories important for daily living (housing, food, gas, utilities) in that same time?

No, 12% real wage growth, i.e., net of inflation