LARRY KUDLOW: This is a recession warning sign

Following the release of the June jobs report, President Biden called it “Bidenomics in action.” Well, I guess it was, because it was a very soggy and underwhelming report.  

Nonfarm payrolls came in well below expectations, rising 209,000. Even that was the lowest since December 2020, but hang on a second – the prior two months were revised down by 110,000.  So, actually, we saw only 99,000 new jobs in June and that is a very poor number. Plus, when you look under the hood of this report, private payrolls increased 149,000 – itself a very soft number, but 98,000 private jobs were revised lower in May and April. So, actually, there are only 51,000 private sector jobs created in June, a very poor performance. 

Mr. Biden, of course, skips over these factoids when he talks about “growing the economy by creating jobs.” Also, Biden’s much heralded manufacturing boom showed up as a meager 7,000 job gain in June, after falling 3,000 in May, for a grand total of 4,000 new manufacturing jobs.   

In fact, over the entire past year, manufacturing jobs have only increased 14,000. As noted earlier, manufacturing production has turned negative over the past three months. Plus, the ISM manufacturing survey has fallen for eight consecutive months. Plus, business investment is falling, and that’s a surefire recession warning. In fact, the entire jobs report is a recession warning.   

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The household employment survey, from whence the unemployment rate is derived, did rebound 273,000 following last month’s 310,000 drop, but over the past three months, that survey has gained only 34,000.   

So, we’re in the double digits now for corporate payrolls, private jobs, small businesses and we’re in the single digits for manufacturing. Notwithstanding Biden happy talk, it’s a recession warning sign.  Meanwhile, average weekly earnings are up only 3.7% year-to-year, continuing below the 4% CPI and the 5.3% core CPI and while the White House and even Wall Street keep telling us about a strong economy, the fact remains we have been in a slump for the last six quarters, or 18 months.  

Even penciling in 2% for the second quarter, which we don’t have officially yet, growth over the past year and a half is a stagnant 1.3% at an annual rate. That’s with sticky inflation. That is more than twice the Federal Reserve target. Politics aside, this is not really a brag-worthy performance and here’s distinguished economist Douglas Holtz-Eakin last night commenting on the Bidenomics story. Take a listen to this:   

DOUGLAS HOLTZ-EAKIN: “This is a messaging exercise. I don’t know what bottom up, middle out means either, but I do know this – when they say he inherited an economic catastrophe, that is not true. He inherited an economy that was growing at 6.3% and at 1.4% inflation. That was great and I’m particularly irked as a former CBO director that he continues to assert that he cut the deficit by 1.7 trillion when the Washington Post of all people gave him a Bottomless Pinocchio for this.”  

Yes, indeed, a Bottomless Pinocchio. I would say Mr. Biden inherited a boom and turned it into a bust. That’s Bidenomics and the president also managed to stick in his press release a line about making smart investments in America.  I think he means several trillion dollars to subsidize the Green New Deal, but along comes physicist, climate expert and former Obama Energy Department chief scientist Steven Koonin, who argues in a Wall Street Journal op-ed that the economic impact of even a 4% global warming trend in the next hundred years would be miniscule.   

Heck, even Biden’s own CEA is cited by Professor Koonin with an honest report on this subject, but Koonin argues, “The rest of the Biden administration and its climate activist allies, should moderate their apocalyptic rhetoric and cancel the climate crisis accordingly.”  

Well, gee whiz, I’d love to cancel the last couple of trillions of dollars of climate spending. That might end the debt crisis, lead to a balanced budget, bring down the inflation rate and raise blue-collar middle-class living standards. A little honesty goes a long way. I wish it percolated all the way up to President Biden.  Otherwise, I still say Bidenomics is baloney.   

This article is adapted from Larry Kudlow’s opening commentary on the July 7, 2023, edition of “Kudlow.”