“The industrial environment is in a recession – I don’t care what anybody says,” Fastenal CFO Daniel Florness exclaimed in frustration back in October when William Blair analyst Ryan Merkel dared to suggest that the US economy wasn’t in fact in the doldrums on the company’s Q3 call.
No matter where you look there are signs that Marc Faber is correct to suggest that the US is already in a recession. Plunging oil prices have wreaked havoc on the country’s oil boom towns and America’s beleaguered manufacturing sector – which exists as but a shadow of its former self – is set to suffer mightily under the strong dollar. Just this morning we got a fresh warning about the the health of the manufacturing sector when US factories reported the worst business conditions in three years.
Last month we learned that in November, US freight volumes fell for the first time in three years and before that, the recession.
That’s consistent with what we’ve seen in the trucking industry, where Class 8 sales growth is in freefall, which just last week cost 1,250 people their jobs at Daimler in North Carolina. “Everybody around here’s been hurting, and it’s going to hurt even more,” one convenience store clerk told the local media in the wake of the layoffs.
“Over the last 30 years, the bad times last longer and the good times are shorter,” Minnesota lawmaker Tom Anzelc, whose House district includes the city of Iron Junction, which has suffered in the face of China’s acute excess capacity problem and the slump in global growth said earlier this month. “This particular time is the worst I have ever seen.”
Against this backdrop, consider that four states are already officially in a downturn: Alaska, North Dakota, West Virginia and Wyoming.
“Job gains and losses are key factors that the National Bureau of Economic Research uses to chart U.S. expansions and recessions,” Bloomberg writes. “Even as U.S. employers added 2.7 million workers in 2015, job cuts last year totaled 18,800 in North Dakota, 11,800 in West Virginia and 6,400 in Wyoming, according to the U.S. Labor Department.”
Likewise, things aren’t going so well in Louisiana, New Mexico and Oklahoma which are all at risk according to Moody’s. And then there is of course Texas, which is also struggling to cope with the Saudi war of attrition on US oil producers.
“For every 25 percent drop in oil prices, employment could be expected to decline 0.6 percent in Texas and 0.8 percent in Louisiana, while Wyoming stands to lose 2.1 percent of its jobs and North Dakota and Oklahoma about 1 percent each,” Bloomberg goes on to note, citing research by Stephen Brown, an economist at the University of Nevada, Las Vegas, and Mine Yücel, director of research at the Dallas Fed.
Amusingly, we’re supposed to believe that the consumer is going to keep things afloat. “Whether the weak links break the entire U.S. economy will hinge largely on a group that’s benefited from the energy price collapse: American consumers,” Bloomberg concludes. Of course as we’ve said too many times to count, Americans simply aren’t spending their savings at the pump. If they were, you’d think GDP growth wouldn’t be bumping along at a paltry 0.69% clip.
And about all of that net job creation, don’t forget this indelible chart:
But as lower for longer continues to break the back of the US oil patch and as the soaring dollar further imperils the dying manufacturing sector, just remember, Janet Yellen doesn’t think the malaise will spread. “But with respect to employment, although there really are very severe losses [in energy], it’s a pretty small sector of the work force overall.”
Dan Oxley, a West Virginia homebuilder who spoke to Bloomberg doesn’t share Yellen’s assessment. “Everyone is going to have to tighten their belts. The next couple of years are going to be difficult.”
Stop “peddling fiction” sir.
via Zero Hedge http://ift.tt/1oDF2Ia Tyler Durden