Uncovering the hidden truths behind US economic data

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By Song Xiaojun, Yu Xiang (People's Daily Online) 10:54, December 20, 2023

The U.S. economy showed impressive performance in the first three quarters of 2023, despite continuous interest rate hikes by the Federal Reserve. This performance included record-breaking stock market valuations, a sustained decrease in unemployment rates, and rapid GDP growth.

The Biden administration aims to be recognized for creating one of the great “economic miracles” of U.S. history. However, a closer examination reveals certain issues.

Manufacturing, once a vital pillar for the U.S.' rise as a global economic powerhouse, has been gradually marginalized with the rise of financial capital.

According to data from the Federal Reserve Economic Data, investment in U.S. manufacturing rose from $133.2 billion at the end of 2022 to $194.3 billion in May 2023, marking an 80 percent increase in investment in manufacturing facilities.

Despite a 2.3 percent year-on-year increase in U.S. GDP in the first half of 2023, national electricity consumption decreased by 3 percent during the same period. While it's possible that an increase in industrial electricity consumption was offset by decreases in the residential and commercial sectors, in reality, electricity consumption declined across all three sectors.

The U.S. Energy Information Administration's (EIA) Short-Term Energy Outlook, released in September 2023, forecasted a 1.26-percent decline in total U.S. electricity consumption for the entirety of 2023. This reduction is expected in the residential, commercial, and industrial sectors.

Despite efforts by the Biden administration to revitalize manufacturing, the sector has seen little change in job numbers since January 2023, with only a modest increase of about 200,000 jobs compared to early 2020.

Furthermore, the U.S. Institute for Supply Management's (ISM) manufacturing index has remained below the 50-point threshold since December 2022, signaling ongoing contraction for 11 consecutive months.

These facts raise questions about whether the U.S. manufacturing sector is truly experiencing a sustained period of growth.

Data from Texas, a major manufacturing hub, also points to challenges.

Factory activity in Texas contracted again, as indicated by surveys released at the end of August 2023. The production index fell to -11.2, the lowest since May 2020. Other key indicators also showed declines: the new orders index remained negative at -15.8 in August 2023, the capacity utilization index dropped to -3.7, the shipments index decreased to -15.8, and the capital expenditure index hit a three-year low at -8.6.

Cathie Wood, a renowned U.S. investor and CEO of ARK Invest, has expressed concerns about the courier market. Analyzing UPS revenue data, she found that although the market share of major courier companies has remained relatively stable, UPS's average daily package volume has decreased, suggesting a contraction in the overall courier market.

Additionally, FedEx has projected a 25 percent year-on-year decrease in its total logistics volume in the U.S. for 2023.

Despite significant layoffs in the U.S. technology industry since early 2023, employment data has shown a surprising positive trend. The unemployment rate has consistently decreased, reaching its lowest level in more than 50 years.

In October 2023, two sets of employment data were released in the U.S., revealing noticeable discrepancies. The U.S. Bureau of Labor Statistics reported a substantial increase of 336,000 jobs in the non-farm sector in September, far surpassing market expectations of 170,000 jobs.

However, data from Automatic Data Processing (ADP) indicated a much lower increase of only 89,000 jobs. This significant difference between the two data sets is highly unusual.

Mark Zandi, chief economist at Moody's Analytics, suggested that actual monthly job growth may be between 150,000 and 200,000, significantly lower than the official figure.

Some discrepancies between economic data and the actual situation can be attributed to statistical margins of error, while others cannot.

The first explanation implies that statistical methods may have a margin of error.

According to 2022 data from the Brookings Institution, approximately 2 million to 4 million workers in the U.S. were unable to continue working due to the long-term effects of COVID-19.

Since 2023, the U.S. government has repeatedly revised downward its initially announced employment data. These data releases are typically positive, followed by interest rate hikes by the Fed, and then subsequent downward revisions by the government.

If this pattern occurs occasionally, it might be chalked up to statistical error. However, if it becomes a recurring event, it may point to serious issues with the statistical methods or even deliberate manipulation aimed at guiding the market and managing expectations.

The second explanation posits that data may be inflated to secure government subsidies. Under the guise of revitalizing manufacturing, some companies may falsely obtain federal subsidies, investing minimally in actual manufacturing, and focusing primarily on short-term gains.