As a long-time confirmed, congenital optimist when it comes to America, I hate bad news, of any kind really, but especially bad economic news. To be sure, we’ve always suffered through cyclical recessions — 13 recessions (counting the one-quarter COVID recession) since World War II, but recoveries were far more powerful than downturns and actually, over long 50-year periods, our free enterprise economy has usually maintained a 3.5% annual growth rate, even after taking account of inflation. Though recently, in the last 20 years, this has not been the case.
No other country in history comes even close to our long-run prosperity trend. In other words, economic freedom works. Lately, however, the economy has turned down. We’re either in recession or on the front end of a recession.
The principal cause of this slump, in my view, is the inflationary policies of the Biden administration: too much spending, taxing, regulating, green new dealing and money printing. President Trump’s supply-side policies created a boom. Unfortunately, it was too short and Biden’s big government socialism has led to the bust.
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The first half of the year saw a decline in GDP. Recently, we’ve seen an enormous downturn in housing, which is frequently a leading indicator of the overall economy.
For example, today’s report on new home sales showed a huge 30% decline over the past year and a 54% annualized drop in just the past three months. Last week, existing home sales similarly collapsed by 20% over the year, and 46% over the three months. Before that, July single-family housing starts fell 19% on the year and 43% annualized over the past three months. This is not good.
One more stat worth thinking about is the rise in weekly jobless claims, which have increased over 80 thousand in the past seven weeks. That’s often a leading indicator of monthly employment reports. Then you could look at headlines, like “Layoffs are in the works at half of companies,” according to a PricewaterhouseCoopers survey or “Number of Americans who are suffering hits all-time high” according to a Gallup poll or “Ford says it’s cutting about 3,000 white collar jobs.”
Here’s my favorite, “Wall Street CEOs warn recession is likely even as their own economists waffle.” Plus, “The IPO market faces its worst year in more than two decades.”
Then, there is some goofy stuff like a little left-wing soviet council inside Apple that don’t want to return to the office because it would make Apple’s workforce “younger, whiter, and more male-dominated.” Really? Layoffs are on the way and you all don’t want to go to work? Do I have that right?
Believe it or not, Facebook Meta CEO Mark Zuckerberg, anticipating what he calls “might be one of the worst downturns that we’ve seen in recent history” told a group that “realistically there are probably a bunch of people at the company who shouldn’t be here.”
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You may recall Elon Musk telling Twitter workers that if they didn’t like his free speech policies they could look for work elsewhere. Not long ago, Elon also said that his workers at Tesla and elsewhere should be putting in 40-hour weeks at the office or the plant.
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Sounds to me like Zuckerberg and Musk understand something about capitalism and market incentives. Sounds to me like that little Soviet-style group at Apple wants to bring down our market system.
My thoughts? We’re in for some temporarily tough times. There is going to be more belt-tightening, but America is a great and resilient country. I’ll just bet that regular working folks throughout the country will keep their nose to the wheel and their shoulder to the grindstone. America has a great work ethic. The cavalry is coming. Things will get better.
This article is adapted from Larry Kudlow’s opening commentary on the August 23, 2022, edition of “Kudlow.”