By nearly 20 percentage points, a WSJ Survey of Economists said Biden would be better for the economy.

Unfortunately, the Journal did not ask the economists why. The answers would likely have been humorous.

Federal Funds Rate

Roughly one-third of respondents in the most recent survey predicted that rates would end the year at 4.75% or higher, implying just two cuts—up from 11% in January.

Labor Market

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Economists have a tendency to project current trends well into the future. Jobs were better than expected last month, so economists project that into the future.

Core PCE Inflation

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How Inflation Predictions Work

Economists want the Fed to get inflation under control, so that is what they predict.

The Fed operates exactly the same way, perpetually predicting what they want. Hubris applies.

The result is a goldilocks prediction.

Probability of Recession

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I am kicking myself for this one. It was a huge warning sign when I was with the consensus.

Where’s the Recession?

When Industrial Production Peaks, recession soon follows. The only exceptions were the lengthy lead time ahead of the Covid recession, and now.

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Industrial Production data from the Fed, chart by Mish.

Industrial Production fell steeply from September of 2022 to December of 2022. The dive in manufacturing started a month later and was steeper.

Recession Lead Time After Industrial Production Peak

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Recession Lead Times, Mish Calculation Based on Fed Data

Yesterday, I asked Industrial Production Peaked 18 Months Ago, Where’s the Recession?

Not only did IP peak, but housing crashed, real Gross Domestic Income was -3.0 percent in the 4th quarter of 2022, and retail sales took a dive.

Synopsis

• Housing Starts: -25.7%Real Retail Sales: -4.1%Industrial Production: -1.9%Real Gross Domestic Income 2022 Q4: -3.0 Percent

Allegedly, there was no recession. And I don’t think the NBER will call one either.Everything started to stabilize at the beginning of 2023. Why?

Two big things happened

1. President Biden signed the IRA on August 16, 2022. On April 27, 2023 I noted The Inflation Reduction Act Price Jumps From $385 Billion to Over $1 Trillion
2. On February 28, 2023 I explained Huge tax cuts on Jan 1, 2023 coupled with big minimum wages hikes in over half of the states.

I left off a third one. The massive surge in immigration led to a binge of government social work hiring.

On March 8, 2024, I noted Jobs Up 275,000 with 52,000 More Government Jobs, Employment Down 184,000

The economy continues to add a high percentage of government and social assistance jobs. Part time employment rose by 691,000 as full time employment fell by 6,000.

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Nonfarm payrolls and employment levels from the BLS, chart by Mish.

Nonfarm Payroll Change by Sector

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Government and Health Services are related to the surge of illegal immigrants and the need to address them. Social assistance jobs rose by 30,000 in January and another 24,000 in February.

On April 5, 2024, I noted Jobs Up 303,000 Full Time Employment Down 6,000 in March

Payrolls vs Employment Gains Since March 2023

• Nonfarm Payrolls: 2,927,000
• Employment Level: +642,000
• Full Time Employment: -1,347,000

Full Time employment is down by 1.35 million since March.

Inflation has kicked back up. And economists are predicting rosy soft landings.

This time, I am not with the overwhelming majority. I prefer it this way.

Finally, economists may think the Fed has everything under control, but I don’t and neither does gold.

Gold vs Faith in Central Banks

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Chart courtesy of TradingEconomics, annotations by Mish

That chart more than anything else explains the movement in gold.

For discussion, Gold’s Strongest Move In a Year Was When the Dollar Was Rising

Economists have huge faith in Biden and the Fed. Gold does not have much faith and neither do I.

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