The current economic expansion is 10 years and five months old and showing little signs of ending. The U.S. Department of Commerce announced Wednesday that the third quarter grew at a 2.1% annual rate vs. the previously estimated 1.9%. Preliminary data from the fourth quarter looks steady as well.
The good economic news comes amid widely expressed fears over negative factors, such as ongoing tariffs and trade tensions with the People’s Republic of China and a slowdown in the Chinese economy as well as internationally. In addition, major media talking heads continue to look for opportunities to badmouth the economy as another avenue of undermining President Trump. Even comedian Bill Maher, with a net worth of about $100 million, is openly wishing for the pain of a recession to be visited upon his fellow Americans, saying last August that, “…you should be (wishing for a recession), because that will definitely get him (Trump) unelected.”
So, why does the economy keep humming along? Consumers drive the U.S. economy, with consumer spending comprising 68% of the nation’s economy. With record low unemployment (the number of the Labor Department said that the number of Americans applying for first-time unemployment benefits fell last week) and wages rising faster than inflation, which remains tame, personal consumption was up a robust 2.9%.
Meanwhile, China is showing continued weakness, as global supply chains, led by the U.S., begin shifting operations elsewhere. Industrial profits in the PRC fell 9.9% in October to about $61 billion, accelerating from the pace of September’s decline of 5.3%.
Durable goods orders—those things, like cars, computers, and furniture that should last three years or more—rose 0.6% in October vs. consensus estimates from economists for a 0.9% decline. Non-defense capital goods orders (excluding aircraft) were also up 1.2% in October vs. expectations of a 0.2% decline.
This unexpected strength in manufacturing, which had been flat since the beginning of the year, was presaged in early October in a survey of 1,067 manufacturing executives and hiring managers conducted by QuickBooks in its Manufacturing Skills Gap Index. The people who make decisions regarding hiring were in the market for more employees, with 78% of manufacturers indicating that they planned to hire additional skilled workers over the next 12 months. Further, manufacturers reported that 49% of their hourly employees clocked in for overtime from May 2018 to May 2019, with 42% of managers saying it was difficult to find qualified workers. Two of the most wanted job openings were for production supervisors and machinists, with it taking three months to find employees capable of doing the work.
Employers frequently complain that job candidates lack problem-solving and critical thinking skills, with the widespread skills deficit being blamed on a weak American STEM education system. With barely more than 1 in 5 high school seniors reaching benchmark STEM levels, manufacturers are increasingly turning towards on-the-job-training, apprenticeships and partnerships with nearby schools.
But even these challenges can’t hide the clear facts about the economy—it’s going strong.