Dow Jones Cycle Update And Are We There Yet?

The $64,000 dollar question is next.

Question: Is the above cycle a mid or late-cycle event?

A late-cycle event is when inflation trickles down to masses. In other words wage inflation is a late-cycle event. Unfortunately, since Nixon went off the gold standard it is a consistent situation just as the masses gain a wider wage increase a deflation event (recession) crushes the hard-won pay increases. 

The next two charts confirm the late-cycle event of wage inflation is occurring now.

CHART 3: When YOY% wage inflation is greater than GDP the labor element within the economy is becoming very expensive. This is because labor is scarce and hence wages increases. If labor is scarce and expensive it is unlikely the economy will enjoy high levels of production and hence GDP will continue to suffer and be very venerable to a recession. The chart below supports the cycle is in the late stages.

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Wage1

CHART 4: When YOY% wage inflation is greater than employment mass, the employment mass will continue to suffer. CEO's watching the bottom line will trim costs, capital expenditure and labor to ensure the company maintains profitability. The chart below supports the cycle is in the late stages.

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Wage2

Question: How long to go with the current cycle?

Ref: Consumers Are Keeping The US Out Of Recession? Don’t Count On It.

This extract answers the question exactly

Just recently, Jeffry Bartash published an interesting article for MarketWatch.

“Like a stiff tent pole, consumers are keeping the U.S. economy propped up. And it looks like they’ll have to do so for at least the next year.

Strong consumer spending has given the economy a backbone to withstand spine-tingling political fights at home and abroad. Households boosted spending by 4.6% in the spring, and nearly 3% in the summer, to offset back-to-back drops in business investment and whispered talk of recession.”
That statement is correct, and considering the consumer makes up roughly 70% of economic growth, this is why you “never count the consumer out.”

The most valuable thing about the consumer is they are “financially stupid.” But what would expect from a generation whose personal motto is “YOLO – You Only Live Once.”

This is why companies spend billions on social media, personal influencer's, television, radio, and internet advertising. If there is an outlet where someone will watch, listen, or read, you will find ads on it. Why? Because consumers have been psychologically bred to “shop till they drop.”

As long as individuals have a paycheck, they will spend it. Give them a tax refund, they will spend it. Issue them a credit card, they will max it out.

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