Is the US Economy Really Recovering or Just a Mirage?

Tough Times Ahead: Biden and the Economy Under Scrutiny

Welcome to today’s episode of the Peter Schiff Show, recorded in Istanbul, Turkey. We begin with a special mention of our sponsor, NetSuite, the cloud-based business management software. I am excited to share my thoughts on recent travels and significant economic updates. Today, we will delve into the June jobs report, the current state of unemployment, and the broader economic implications. Let’s start with a brief overview of my recent visit to Gdansk, Poland, before we dive into the numbers.

First Impressions of Gdansk, Poland

Gdansk, Poland, is a city that exceeded my expectations. Known for its shipyards and beautiful architecture, it offers a rich historical experience. I initially visited Gdansk to collaborate with Sunreef Yachts on the design of a boat. However, the city’s charm and vibrancy left a lasting impression. If you find yourself in Europe, Gdansk is a destination worth exploring.

Analyzing the June Jobs Report

The June jobs report released by the Labor Department appeared positive at first glance, with 206,000 jobs added, exceeding the expected 189,000. However, a closer examination reveals a different story. The revisions for April and May show a significant reduction of 111,000 jobs, turning what seemed like a beat into a miss. The report highlights a concerning trend: the creation of low-paying, part-time jobs while losing 1.55 million full-time jobs over the past year.

Government Jobs and Economic Impact

A third of the jobs added in June were government positions, which do not contribute to economic productivity. These roles often lead to increased borrowing and inflation, further straining the private sector. The birth-death model’s assumptions and manufacturing job losses underscore the weakness of this report.

Unemployment Rates and Historical Context

The labor force participation rate remains at a low 62.6%, with the unemployment rate rising to 4.1%. The broader U6 rate, which includes discouraged and part-time workers seeking full-time employment, stands at 7.4%. Historically, this figure matches the unemployment rates of the late 1970s and early 1980s, challenging the narrative of a strong labor market.

Comparing Historical Unemployment Data

To understand the current unemployment rate in context, it’s essential to compare it to historical data. The U6 rate today would have been considered extremely high in the 1950s and 1960s. Even during the economic struggles of the 1970s and early 1980s, unemployment rates were often lower than what we see today.

The Illusion of Low Unemployment

The government redefined unemployment metrics in 1994, excluding discouraged and part-time workers from the official U3 rate. This change artificially lowered the reported unemployment rate, creating a misleading perception of economic health. By using the pre-1994 definitions, it becomes clear that unemployment under the Biden administration is historically high.

Economic Data and Market Reactions

Other economic indicators, such as the ISM Manufacturing and Services indexes, also point to a weakening economy. Factory orders and trade deficits continue to grow, further complicating the economic outlook. Despite these challenges, Wall Street remains optimistic, with stocks and gold performing well.

Stock Market and Gold Performance

The stock market, led by big tech companies, reached new highs, while gold prices also saw significant gains. Gold stocks, in particular, present an excellent investment opportunity, given their current undervaluation and the strong performance of physical gold.

Bitcoin Market Analysis

Bitcoin experienced a volatile week, with significant price fluctuations. Despite recovering slightly, it remains well below its peak. The ongoing release of Mt. Gox Bitcoins and institutional skepticism indicate potential further declines. Investors might consider shifting from Bitcoin to gold or silver as a more stable investment.

Biden’s Re-election and Mental Fitness

President Joe Biden’s cognitive health has become a topic of concern. His refusal to take a cognitive test raises questions about his ability to lead. If Biden is unfit to run for re-election, Vice President Kamala Harris could become the Democratic nominee, which may impact the upcoming presidential race.

Political Shifts in the UK

Recent political changes in the UK, with the Conservative party suffering a major defeat, reflect broader economic dissatisfaction. Similar trends in the US suggest that voters are seeking change, favoring new leadership to address economic challenges.

Conclusion

The US economy faces significant challenges, with high unemployment, rising inflation, and a weakening labor market. Historical comparisons reveal that current unemployment rates are higher than many realize. As we navigate these economic uncertainties, it’s crucial to critically examine government reports and consider the broader context.

Thought-Provoking Questions

1. How do you perceive the current state of the US economy compared to historical periods?
2. What measures can be taken to address the high unemployment and underemployment rates?
3. How might political changes in the US and abroad impact economic policies and recovery efforts?
4. Are stock market performances and gold prices reliable indicators of economic health?
5. What alternative investments should be considered in light of the volatile Bitcoin market?