Weekly numbers: GDP, Consumer Confidence, Jobs, Income, the PCE, Consumer Debt, and the Budget
So, This Past Week…
Revised numbers were in for the fourth quarter Gross Domestic Product, and… nothing changed. It confirmed the initial measurement of 2.3%. There was some fear it would be pushed down. All good, folks.
Consumer confidence was at 98.3. Unfortunately, it’s not a percentage; it’s more of a barometer of consumer sentiment, and last month, it was at 105.3. That’s a big drop – no bueno, folks.
New home sales dropped to an annualized rate of 657,000, down from 734,000 in December.
Not a big surprise, given the higher interest rates.
Well, it's higher than two years ago, but 6.76% for 30 years is still pretty good, but not what many people are used to.
“Dagnab it! Back in ’89, I was the first on my block to get 9.875%, and I wa----” That’s enough, boomer; drink your Ensure.
Jobless claims came in higher than expected. Last week, it was 220,000; this week, it was 242,000, and expectations were set at 225,000.
Sometimes, you want to exceed expectations, but not this number.
Zowie! Personal income was up by 0.9%. In a month. 0.4% was expected. That’s awesome if you are a worker, not so much if you are an employer. This is mostly good news because if people are making more money, they may spend it, but then prices may go up… just sayin’.
Possibly the best news was the PCE and the Core PCE – the personal consumption expenditure index for us Joes – had good numbers.
The PCE is the preferred measurement of inflation for the Fed, so people pay attention.
The annual full PCE came in at 2.5%, down from 2.6% the month before.
Even better, the core PCE – expenditures less food and fuel – came in at 2.6%, down from 2.9%.
This week, no big reports are coming out. The usual jobs numbers – gains and losses, manufacturing confidence, factory orders and hourly wages.
Layoffs
Starbucks announced last week that it would be cutting 1100 of 16,000 corporate jobs and eliminating hundreds of open positions.
They also did this back in 2018.
They are not the only ones in corporate America.
Southwest Airlines is laying off 15% of its corporate staff, or about 1750 workers.
Forever 21 isn’t, but it is taking a trip to the bankruptcy court – do not pass go, do not collect $200.
Going with them is the CFO, 21 California stores and up to 400 workers, starting April 21.
Chevron will be cutting its global workforce by up to 20%.
That’s as many as 9000 employees out of 46,500 total workers. Ouch.
It’s looking at cost reductions of up to $3,000,000,000 by 2026.
That used to be a significant California employer, but it’s in Houston now.
If you are a shareholder, that’s a good reason to hold on to that stock. Note: this is not a solicitation or an offer to sell, and historical performance is not an indicator of future perf---
Sorry, the compliance folks got to the keyboard.
Consumer Debt Delinquency
You may have heard that delinquency on consumer debt has increased steadily.
Total household debt – mortgages, student loans, auto loans, credit card balances – rose 0.5% to a record $18,000,000,000,000.
That’s three times what the federal government spends a year.
The share of auto loans that went 90 days or more past due, rose to 3%, the highest since 2010. Another ouch.
7.2% of credit card debt went into the 90+ days past due territory, the highest since 2011.
The 2023 Federal Budget – A Quick Tutorial Part 1
In 2023, the Federal government brought in a total of $4,400,000,000,000. If you count all the zeros, that’s $4.4 trillion.
It spent $6.1 trillion.
That’s $1.7 trillion that went on the credit card. Or the HELOC, depending on how you look at it.
How can it do that? It issues debt, which is to say, the US Treasury announces that it will be issuing, for example, a three-year treasury note on March 6. It then takes bids, and put simply, the best bid wins. Next week, I’ll tell you what the rate was.
The problem is that rates have gone up, and every time Uncle Sam has to refinance, he pays more interest.
Let’s look at how big our mortgage is.
$36.2 trillion as of last month.
I’m sure the loan-to-value is low, but the debt service is starting to increase.
For 2023, the net interest expense was $659 billion, or 10.8% of spending.
That makes our average interest rate 1.82%. That’s great, but every time a note comes due, we have to pay the noteholders and issue new debt.
At higher rates.
Next week: let’s break down the budget.
Folks, we are on the downside of Q1. There’s a lot going on and it’s easy to get lost in the noise. Most successful business owners have a knack for tuning out the static and focusing on their business, but for many employees, it’s not so easy. Business owners, what I reported on this week is what your employees are hearing in the static. Be cognizant of that. Communicate to them what you are doing to make sure their jobs are safe and you are not Southwest, Chevron or Forever 21. That will help keep you focused as well and performing on your plan.
Make it so.
