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SHADOWSTATS DAILY UPDATE (July 7th to 10th). IMPORTANT NOTE TO SUBSCRIBERS: ShadowStats has begun transitioning to its new website and communications system (the one we dealt with for so many years went out business with minimal notice). There have been some disruptions to the daily operations, yesterday and today, for which I apologize. Circumstances should be back to normal over the weekend. In the interim, an assessment of today’s June 2023 Employment and Unemployment reporting follows, with expanded detail in tomorrow’s Subscriber-only e-mail Update In the event you experience any service interruptions, again, they should be brief. Please call me at (707) 763-5786 with any problems or questions. All Subscribers should be receiving the regular Subscriber-only emails. If you are not, please send a note to shadowstats@hotmail.com , requesting them, or call me directly, at (707) 763-5786, and I shall remedy the circumstance. Always happy to talk. Thank you again for your business. Best wishes, John Williams. LATEST HEADLINES: -- The June 2023 Employment and Unemployment detail highlighted a weakening economy. -- The May 2023 Real Merchandise Trade Deficit narrowed in the month, but held on track for a deepening quarterly contraction, with negative implications for Second-Quarter GDP. -- May 2023 Real Construction Spending continued in annual decline, holding on track for its seventh consecutive quarter of year-to-year decline. -- University of Michigan’s full-June 2023 Consumer Sentiment gained 9% in the month, but still held shy by 36.2% (-36.2%) of ever recovering its February 2020 Pre-Pandemic level. -- The “Final” Estimate of Third-Quarter 2023 GDP revised higher to an annualized quarterly real growth rate of 2.0% (previously 1.3%), up year to year by 5.3% thanks to a downside revision to still strong inflation. -- Seasonally adjusted May 2023 Money Supply aggregate M2 showed renewed monthly expansion, including in its most-liquid component, “Basic M1” (Currency plus Demand Deposits) [See updated details and graph on the ALTERNATE DATA TAB, as well as in the later FEDERAL RESERVE and SYSTEMIC RISK -- MONEY SUPPLY AND MONETARY BASE Sections. Inflation pressures should continue to mount, with Systemic Liquidity still holding at a 53-year high. Noted previously, Fed easing appeared to continue in the weekly Monetary Base detail up to and including the June 28th numbers, on track for a monthly increase. Separately, inflation pressures continued surface, with the May 2023 Money Supply reflecting still-extreme flight to liquidity. The most-liquid “Basic M1” (Currency-plus-Demand Deposits) held 119.2% above its Pre-Pandemic Level and was increasing year-to-year with intensifying inflation pressure, versus the Aggregate M2 Money Supply holding up by 34.7%, but declining year-to-year, amidst no signs of an overheating economy. [Extended detail follows in the pending Subscriber E-Mail Update, including graphs, and an updated FEDERAL RESERVE Section (MONEY SUPPLY and MONETARY BASE). The Money Supply ALTERNATE DATA Tab and accompanying graphs are fully updated]. –- In the general economy, net of usual extreme monthly volatility in Commercial Aircraft Orders, May 2023 Real New Orders for Durable Goods held on track for a fourth consecutive year-to-year quarterly contraction. –- Usually unstable, the New Home Sales monthly gain of 12.2% in the May 2020 was just shy of being statistically significant (at a 90% confidence interval), but its 20.0% year-to-year gain, was significant. –- The usual, highly stable reporting of May Existing Home Sales declined year-to-year by 20.4% (-20.4%). -- May Building Permits and Housing Starts both continued on track for their fourth consecutive quarters of year-to-year decline. -- May Industrial Production declined 0.2% (-0.2%) in the month, gaining 0.2% year-to-year. –- May Real Retail Sales activity was on track for both quarterly and year-to-year contractions, consistent with patterns of contraction in the prior three quarters. -- The June FOMC paused in hiking Interest Rates, as promised, but Fed Chairman Powell indicated at least two more rate hikes are likely in coming months. -- Recent annual CPI and PPI inflation swings were tied to year-ago oil-price gyrations around the Russian Invasion of Ukraine –- May 2023 Producer Price Index (PPI) inflation dropped year-to-year to 1.09% from 11.09% in May 2022 thanks to collapsing gasoline prices. -- May 2023 Consumer Price Index (CPI-U) inflation slowed year-to-year to 4.05% from 8.58% in May 2022, with the ShadowStats Alternate CPI easing to 11.9% from 16.8% in the same period. –- Still hit by high Inflation and dropping Economic Activity, Non-Supervisory real average weekly earnings declined year—to-year by 0.9% (-0.9%) in May 2023, its 18th annual decline in the last 19 months. -- Not seasonally adjusted May 2023 Cass® Freight Index shipments declined year-to-year by a deepening 5.6% (-5.6%). (July 6th) U P D A T E D .. P O S T I N G .. S C H E D U L E .. Special Economic Commentary No. 1461 will publish subsequent to the current ongoing Site update, See today’s OPENING COMMENTS for details. In context of a rapidly evolving and deepening economic downturn, along with meaningful and still-pending, resurgent inflation, the pending new missive assesses the latest Money, Inflation and Economic details in context of the Federal Reserve’s conflicted approach to containing Inflation, hiking rates in an already faltering economy, while fueling its Banking System with enough liquidity to keep it from collapse or bank runs, during these difficult times. At the same time, where Uncle Sam had been playing Russian Roulette with the Federal Deficit and Debt Ceiling, that was partially “resolved,” simply by eliminating the Debt Ceiling. Yet, no action has been taken, and none appears likely in the foreseeable future, to contain unfettered Federal Government Deficit Spending, going forward or otherwise, let alone addressing the concept of establishing long-term solvency and/ or financial stability guidelines for U.S. Government’s fiscal operations. Again, broadly, the current U.S. Economy is in a rapidly deteriorating and intensifying economic downturn, amidst still unfolding, resurgent inflation pressures driven by Federal Reserve money creation. The Fed also is looking still to hike interest rates, which also would help to crash the economy further, but not to contain the money-supply driven inflation. The Administration and Congress appear to be absent from providing meaningful help, having just exacerbated the circumstance by eliminating the Debt Ceiling. The next Subscriber-Only E-mail Update should be sent out om Saturday, July 8th, reviewing the June 2023 Employment and Unemployment details, among other recent reporting details, including the May Real Merchandise Trade Deficit and Construction Spending. Today’s July 7th DAILY UPDATE is being posted at 10:00 p.m. ET. EARLIER HEADLINES AND FOMC ISSUES: Continued broad reporting of faltering economic activity puts the lie to the FOMC’s continuing “Overheating Economy” Fairy Tale: -- Again, the high-quality reporting of May 2023 Existing Homes Sales gained 0.2% in the month, but held down by 20.4% (-20.4%) year-to-year. May 2023 New-Home Sales were positive, as usual, and close to being statistically meaningful, which is extraordinarily unusual. Those headline details commonly revise sharply lower into negative territory in the second estimate. Consider that monthly and annual declines continue Existing Home Sales, Real Retail Sales, Industrial Production and Freight Activity. At the same time, on the inflation front, GDP Inflation -- the Implicit Price Deflator –- still is running at a 42-year high, with First-Quarter 2023 holding at an annual gain of 5.3%, still an at a multi-year high in the current cycle against recent history, with annualized quarterly inflation up by 4.1% in 1q2023, versus 3.9% in 4q2022. Recent FOMC rate hikes have been slowing the Economy and Payroll Employment growth, again, with the continuing Money Supply creation fueling and exacerbating inflation pressures, along with a new and continuing early signal the FOMC is easing anew, not tightening. -- The Administration’s further depletion of the Strategic Petroleum Reserve (SPR) in January 2023 gave a temporary, albeit short-lived boost to First-Quarter 2023 GDP (again, First-Quarter 2023 GDI took the GDP/ GDI combination negative for a second consecutive-quarter, following the politically engineered pre-election GDP boost in Third-Quarter 2022, which followed two consecutive quarterly contractions of Real GDP in First- and Second-Quarter 2022. The Administration continued Strategic Petroleum Reserve (SPR) depletion in First-Quarter 2023, taking advantage of earlier, Obama-era legislation aimed at gimmicked reduction of the Federal Debt, irrespective of the extreme and unprecedented depletion already in place from the prior two quarters and from mounting systemic-security concerns. That action helped to narrow the First-Quarter 2023 Real Merchandise Trade Deficit and drove gasoline prices lower, once again, at least temporarily. Otherwise, the Administration’s SPR depletion and related political gimmicks had ended in December 2022. The effect of the 2023 depletion again was to dampen headline inflation and to boost, artificially, an otherwise moribund economy, as seen once again, with “improved” Net Exports, now with First-Quarter 2023 GDP. Such SPR depletion continued at the cost of increasing National Security risks tied to maintaining an adequate Petroleum Reserve. That said, separately, although the June 14th FOMC left Federal Funds Rate unchanged, as expected, further rate hikes were indicated as likely in the FOMC Meetings ahead. Such was amidst rapidly increasing indications of tanking U.S. Economic activity and increasingly serious Inflation issues. Addressing multiple, evolving developments, today’s missive remains in two parts: -- (Part I) --BOTTOM LINE ECONOMIC REALITY – Although rates were held steady at the June 14th FOMC, the May 2023 FOMC hiked its targeted Federal Funds Rate by the expected quarter-point, which has had continuing negative impact on the already struggling U.S. Economy, as designed by the FOMC. Yet it and already planned later rate hikes will do little to contain inflation, which otherwise remains fueled by heavy Money Supply and Liquidity growth, not by the FOMC’s Overheating-Economy Bogeyman. -- (Part II) --REGULAR ECONOMIC DEVELOPMENTS/ ALERTS - Continuing 30-day rotating review of the latest ECONOMY, MONEY SUPPLY and INFLATION news: Broad Economic activity continues in renewed downturn, amidst spiking Inflation risks. PART I – RELATIVELY BRIEF BOTTOM LINE COVERAGE: The ninth, consecutive FOMC Meeting Interest Rate hike on May 3rd was as expected and promised, at a quarter-point, with a pause in rate hikes following at today’s June 14th meeting. Yet the U.S. Economy already was and remains in intensifying Recession. Where current inflationary pressures continue from excessive Monetary stimulus out of the Fed, not from any semblance of an overheating economy, still higher interest out of the next couple of meetings will do little to contain inflation. At the same time, higher interest rates from recent FOMC activity increasingly are slowing economic activity, meaningfully. May’s pause in consecutive FOMC rate hikes was temporary, where, again, Fed Chairman Powell indicated likely rate hikes for at least the next two FOMC meetings. The U.S. Central Bank appears intent on using surging interest rates to drive the U.S. economy into the ground. Yet, as often discussed here, the “problem” inflation largely is and has been driven by the FOMC’s still explosive Money Supply and System Liquidity growth, not by an overheating economy. Consider that the May 2023 “Basic M1” (Currency plus Demand Deposits [Checking Accounts]) increased to eased slightly in April to 119.2% (previously 118.1%) above its February 2020 Pre-Pandemic level, albeit shy of its August 2022 peak of 123.2%. Separately, the inflation issue is complicated at present by independently fluctuating gasoline prices, not by an overheating economy. PART II - REGULAR ECONOMIC ALERTS Again, as noted after the February 2023 rate hike, despite Fed Chairman Jerome Powell’s continued downplaying risks for the FOMC’s “hoped-for” imminent Recession, which otherwise ostensibly is why he was raising rates, that downturn already was and continues in play. Underlying headlines of better-quality U.S. economic numbers, reviewed here in Part II [see Points (1) to (17)], suggest that the United States has been in a post-Pandemic “Recovery” Recession since at least First-Quarter 2022, allowing for the political games played with Strategic Petroleum Reserve (SPR) depletion, which otherwise accounted for the headline boost in Second-Half 2022 (Third- and Fourth-Quarter 2022) GDP, as well as some repetition in First-Quarter 2023. As previously reviewed, the March 2023 Federal Open Market Committee (FOMC) raised its targeted Fed-Funds Rate by a minimal 0.25%, to 5.00%, citing hopes that the Banking-System Crisis would dampen the Economy and the FOMC-driven Inflation. Yet, with the subsequent May Fed Funds Rate hike to 5.25% at a 15-plus-year high (since July 2007), the earlier FOMC rate hikes already were pummeling the economy, but, again, not relieving inflation. Surging prices still reflect the extraordinary Money Supply stimulus following the Pandemic-driven collapse. -- Extended Fed coverage follows in the later SYSTEMIC RISK SECTION -- FEDERAL RESERVE, with a comprehensive review of Federal Reserve Monetary Policies and Federal Government Fiscal Policies in the imminent, pending Commentary No. 1461. PENDING DAILY UPDATES AND DEVELOPMENTS IN THE WEEK AHEAD: -- June 2023 Unemployment and Payroll Employment, Friday, July 7th, 8:30 a.m. ET (Bureau of Labor Statistics). HEADLINE ECONOMIC, INFLATION AND MONETARY COVERAGE OF THE LAST 30 DAYS AND OTHER KEY NUMBERSK (1) July 7th (Bureau of Labor Statistics). June 2023 reporting showed a narrowing headline U.3 unemployment rate, declining from 3.65% in May 2023 to 3.57% in June, but the FOMC-driven collapsing economy drove the broader U.6 unemployment rate higher, from 6.74% in May to 6.88% in June (including discouraged workers and all other people marginally attached to the labor force, plus total unemployed part times for economic reasons). On top of the deteriorating, broader headline unemployment picture, the ShadowStats Alternate Unemployment Rate, encompassing the long-term discouraged workers, those not counted by the BLS after a year, rose to a 21-month high of 24.9% in June 2023, from 24.7% in May. The ShadowStats Unemployment ALTERNATE DATA Tab and graph have been updated for the June 2023 headline detail (see the above links ribbon. In line with the FOMC’s rate hikes, annual Payroll Growth has been slowing broadly for the last sixteen months, from 5.3% in February 2022 to an initial 2.4% in June 2023, down from a downwardly revised 2,6% in May. Where recovered monthly jobs growth in the key Manufacturing, and Construction Sectors has been holding in line with broad year-to-year payroll growth, plus-or-minus, Retail Sales are flat, while the Leisure and Hospitality Sector has shown continued strong, albeit slowing monthly growth, but still shy by 2.2% (-2.2%) in June 2023, of ever recovering its pre-Pandemic level of activity. (2) July 6th(Census Bureau, Bureau of Economic Analysis). The May 2023 Real Merchandise Trade Deficit narrowed to $89.2 (-$89.2) billion, from a negatively revised $96.2 (-$96.2) billion in April 2023. Yet that early Second-Quarter 2023 indication averaged a still broadly deteriorating $92.7 billion for the two months, against a monthly average of $85.4 billion in the three months for First-Quarter 2023. If that pattern holds, such would be a major negative contribution to Second-Quarter 2023 Real GDP growth, following three-quarters of Administration numbers games that boosted the headline inflation-adjusted GDP numbers. (3) July 1st (Census Bureau). In context of upside annual benchmark revisions back to 2016, May 2023 Real Construction Spending declined year-to-year for the 20th consecutive month, on track for its seventh straight quarter in decline, despite showing nominal month-to-month gains on top of upside nominal monthly revisions to recent history. The problem remains that year-to-annual growth in headline Construction Inflation continues to be stronger than the year-to-year nominal growth in Construction Spending. ShadowStats contends that this pattern of current activity remains consistent with an ongoing, albeit not yet formally recognized Economic Recession. (4) June 30th (University of Michigan). June 2023 Consumer Sentiment held shy by 36.2% (-36.2%) of ever recovering its February 2020 Pre-Pandemic level. –- In its full-month June survey report, the University of Michigan noted: “Consumer Sentiment rose 9% this month, a consensus improvement across all demographic groups. … Overall, this striking upswing reflects a recovery in attitudes generated by the early-month resolution of the debt ceiling crisis, along with more positive feelings over softening inflation. Views of their own personal financial situation were unchanged, however, as persistent high prices and expenses continued to weigh on consumers.” [Go to http://www.sca.isr.umich.edu for full details.] (5) June 29th (Bureau of Economic Analysis). A September 8th Bure3u of Economic Analysis (BEA) benchmarking will revise all headline Gross Domestic Product (GDP) and related Gross Domestic Income GDI), Gross National Product (GNP) numbers and related National Income Accounts back for 10 years, to 2013, with some series and components revising back 44 years, to 1979. Today’s e-mail also graphs the unusually sharp upside revision to the “Final Estimate” of First-Quarter 2023 Gross Domestic Product (GDP). [Hint: Last month, the average of the Real Gross Domestic Income (GDI) and the GDP (theoretical equivalents) showed a First-Quarter 2023 annualized quarterly contraction of 0.5% (-0.5%), following a Fourth-Quarter 2022 decline of 0.4% (-0.4%), which had the Bureau of Economic Analysis (BEA) talking “Recession.” That disappeared today, where the average First-Quarter 2023 Real GDI and GDP revised to the positive, higher from down by 0.4% (-0.4%) to a minimal, albeit positive, 0.1%. In contrast, the ShadowStats Corrected Alternate-GDP estimate, adjusted for the continual understatement of headline GDP Inflation, and the corresponding continual overstatement of growth in the Real GDP, showed a “corrected” revised 1q2023 real annualized quarterly contraction of 0.06% (-0.06%) [previously 0.78% (-0.78%)], against a 0.50% 4q2022 gain, with an annual contraction of 0.26% (-0.26%) in 1q2023, against an annual drop of 1.16% (-1.16%) in 4q2022. That also was in context of a continuing shortfall against its Pre-Pandemic Peak by 1.23% (-1.23%) in 1q2023, versus a 1.22% (-1.22%) shortfall in 4q2022. The data and graph on the GDP ALTERNATE DATA Tab have been updated. (6) June 27th (Federal Reserve Board, ShadowStats) -- Headline U.S. May 2023 Money Supply and Monetary Base details showed a continuing creation of Money, and an increasing shift or flight to liquidity, all of which tend to fuel inflation [See Note (11) on the June 14th Monetary Base detail]. Monthly Money Supply and Monetary Base detail follows in the later FEDERAL RESERVE Section and its SYSTEMIC RISK -- MONEY SUPPLY AND MONETARY BASE coverage (just keep scrolling down), along with expanded material in conjunction with the updated Money Supply numbers and graphs posted on the ALTERNATE DATA Tab of www.shadowstats.com (see the link above). Separately, extended full coverage and graphs of both the Money Supply and Monetary Base follow in the pending Commentary with a preview in today’s Subscriber-only Daily Update E-mail. [E-Mail Updates are available to you as part of both new and existing regular subscriptions; just request it by e-mail from johnwilliams@shadowstats.com .] (7) June 27th (Census Bureau). Net of the usual, continuing extreme monthly volatility in Commercial Aircraft Orders, May 2023 Real New Orders for Durable Goods remained on track for its fourth consecutive annual quarterly decline. Such is in context of recent benchmark revisions. May’s Real New Orders for Durable Goods gained 1.5% in the month, up from 1.3% in April, but net of the extreme volatility in Commercial Aircraft Orders, that was a monthly decline of 0.3% (-0.3%), versus a drop of 1.5% (-1.5%) in April. Extended detail follows in the pending Commentary. (8) June 27th (Census Bureau). Although the usually unstable May 2023 New Home Sales monthly gain of 12.2% was shy of being statistically significant (at a 90% interval), its 20.0% year-to-year gain was significant, for once. Actual near-term activity commonly is indeterminate for this unstable series. Noted regularly here, New Home Sales likely is the least-reliable, least-meaningful, least-significant and most heavily revised headline series published by the Census Bureau). Census might do well to delay these releases by a month, for purposes of putting out more accurate numbers. That said, the aggregate series quarterly sales, after initial reporting, have been in annual decline for each of the last seven quarters, up through the most recent 1q2023, in an otherwise deepening housing recession, despite all the headline gains. (9) June 22nd (National Association of Realtors – NAR). Per the NAR Press Release, “Existing-home sales rose 0.2% in May 2023, with gains in the South and West and declines in the Northeast and Midwest regions of the United States. Sales in all four regions fell year-over-year.” The May sales were at a seasonally adjusted annual rate of 4.30 million, down by 20.4% from one year ago. That annual decline was the tenth straight month of annual contraction deeper than minus 20% (go to https://www.nar.realtor/existing-home-sales for details). (10) June 20th, (Census Bureau). May 2023 New Residential Construction broadly continued in massive, statistically significant annual year-to-year collapse for both Building Permits and Housing Starts. Both Permits and Starts have seen three, going on four consecutive quarterly year-to-year contractions. Effectively fully surveyed, May 2023 Permits dropped year-to-year by a seasonally adjusted 12.7% (-12.7%), which narrowed from unrevised annual declines of 21.1% (-21.1%) in April and 24.3% (-24.3%) in March. In contrast, the usually more unstable Housing Starts series gained a headline year-to-year 5.7% in May, which could have been a plus or a minus, given its 90% confidence interval of +/- 10.8%, having declined year-to-year by a statistically meaningful 22.3% (-22.3%) in April 2023, following a 20.0% (-20.0%) drop in March 2023. (11) June 15th (Federal Reserve Board). The May 2023 Industrial Production declined by 0.2% (-0.2%) in the month, hit by declining Oil and Gas Production in the Mining Sector, and in context of a continually revised aggregate Series that hit the index level of 103.0, once again, which it has hit repeatedly in recent months, as seen, for example, in the initial headline reporting of January 2023, which currently stands at 102.5, in context of the continual monthly revisions. That said, the Series is taking on the aura of something of a system approaching perpetual stagnation and decline. Details and related graphs follow, along with extended review and coverage of this long-standing, regular pattern of initial upside reporting and later downside revisions to this series, pending in Commentary No. 1461. (12) June 15th (Census Bureau, Bureau of Labor Statistics, St. Louis Fed, ShadowStats). April and May 2023 Real Retail Sales held on early track for Second-Quarter 2023 to show a third consecutive quarterly year-to-year decline, and the third quarter-to-quarter contraction seen in the last four quarters. The patterns of headline activity seen with both Real Retail Sales here and Industrial Production (also neutered for inflation impact), increasingly are consistent with a broad economic contraction (Recession) in place. -- Previously, the April 2023 Retail Sales Annual Benchmark Revisions lowered historical levels and growth estimates for the inflation-adjusted series back to January 2021, likely foreshadowing some downside revisions to headline GDP in its later 2023 benchmarking. The revisions did not change quarterly patterns meaningfully, but did show that broader headline activity generally had been some somewhat slower than previously estimated in the last two years [graphs were plotted in the Subscriber-only e-mail of April 14th, coincident with the pre-benchmark headline release of the March 2023 numbers]. Full detail follows in No. 1461. (13) The Federal Reserve’s June 14th FOMC Meeting held interest rates in place, a “pause,” as Fed Chairman Powell had indicated previously. He also suggested that the markets could expect a couple of rate hikes ahead at the next two FOMC Meetings. [See the later FEDERAL RESERVE Section with the June FOMC Statement]. (14) June 8th (Federal Reserve Board – FRB / ShadowStats). Early indications of renewed Federal Reserve easing that were implied in the full month’s reporting of the FRB’s May 2023 Monetary Base, continued to expand in the week ended June 7th, but pulled back some in the June 14th week. That said, these numbers are not seasonally adjusted, and the headline detail through mid-June details continue on track to show some further Monetary expansion for the month of June 2023 against headline May 2023 detail, along with some upside Inflation risk. (Reserve Balances held by Federal Reserve Banks, a key device in adjusting Monetary Liquidity, peaked at $3.438 trillion in the week ended March 28, 2023, tightened down to $3.088 trillion in the week ended May 3rd, spiked back to $3.309 trillion as of May 31st, with a further gain to $3.350 trillion as of June 7th, but backed off to $3.325 in the just reported week-ended June 14th. These moves continue to reflect aggregate easing pressures subsequent to recent liquidity and solvency issues seen with some major banks. Discussion and graphs of the major turnaround from draining Reserves, to increasing them, follow with expanded coverage pending in Commentary No. 1461. (15) June 14th (Bureau of Labor Statistics). May 2023 Producer Price Index (PPI) – May 2023 Final Demand Goods Sector PPI declined year-to-year by 2.4% (-2.4%), following a revised slowing annual gain of 0.7% [previously 0.8%], down from an unrevised 1.9% in March, softened again by easing annual inflation against surging year-ago monthly Energy prices tied to Russia invading Ukraine. In PPI areas that will continue to hit real economic growth hard, (net of headline inflation), consider that Construction Inflation was up 10.9% year-to-year in May, albeit softened from 11.2% in April and 15.6% in March 2023, and Durable Goods Inflation was up 3.2% year-to-year (albeit softened from 3.7% in April), all largely due to comparisons with surging inflation in April/ May 2022. Designed as an offset to the Final Demand Goods Sector is the broadly meaningless, PPI Final Demand Services Sector, structured so as to have an offsetting, inverse relationship to Gasoline prices, gained 2.7% year-to-year in May 2023, down from 2.9% in April 2023. (16) June 13th (Bureau of Labor Statistics). Dominated once again by volatile (declining) gasoline prices, May 2023 Consumer Price Index (CPI-U) inflation slowed year-to-year to 4.05% from 4.93% in April, with the ShadowStats Alternate CPI moving in parallel, down to 11.9% from 12.9%. Those details have been updated, graphed and posted on the Alternate Data Tab [see the LINKS Ribbon above]. Hit again by high Inflation and dropping Economic Activity, Real Average Weekly Earnings (Non-Supervisory) resumed its year-to-year downtrend, down by 0.9% (-0.9%) in May 2023, its 18th annual decline in the last 19 months. That continuing earnings collapse suggests no “Overheating Economy” at hand, despite wishful thinking at the rate-hiking FOMC. (17) June 13th (CassInfo.com). -- The May 2023 Cass Freight Index Press Release noted that, “The shipments component of the Cass Freight Index rose 1.9% m/m in May, but fell 0.8% m/m in seasonally adjusted (SA) terms and fell 5.6% y/y. While it was a softer than normal seasonal increase from April, it was nonetheless an increase.” We thank Cass Information Systems for sharing their survey information. Go to https://www.cassinfo.com/freight-audit-payment/cass-trans7ortation-indexes/may-2023 for full detail. GENERAL COVERAGE: Again, on the Inflation front, it is the bloated Money Supply and gasoline price disruptions that are driving or affecting higher inflation, not an overheating economy. Ongoing rate hikes at each of the last several FOMC Meetings to ‘reduce inflation,’ remain counterproductive in the context of an already deepening Economic Recession and resurgent gasoline prices. Gasoline prices having been in an upswing since January 2023, gaining 10.8% since December 2022, as of the just-released early July 2023 numbers [EIA]. FOR SUBSCRIBERS – Beyond the pending Commentary, graphs covering the latest numbers and most other economic, inflation and monetary detail, are available to you by e-mail, as part of your existing, regular subscription. If you are a Subscriber and are not receiving, but would like to receive those e-mails, please send a note to johnwilliams@shadowstats.com along with the desired e-mail address. If you are not a Subscriber, and wish to be, see the next paragraph. SHADOWSTATS SUBSCRIPTIONS – Economic and financial issues raised here are reviewed more extensively, along with exclusive graphs, and expanded economic, financial market and monetary assessment in subscriber-only Commentaries [targeted roughly every 90 days, going forward], with more frequent subscriber-only e-mails of daily changes in the DAILY UPDATE, a couple of times per week, as news breaks. For those looking to subscribe, please go to the SUBSCRIPTION LINK at the upper left-hand corner of this Web page). For all readers, in general, if you have any questions or otherwise would like to communicate, please e-mail johnwilliams@shadowstats.com or call (707) 763-5786. Best Wishes -- John Williams • G E N E R A L .. H E A D L I N E S .. -- Contrary to the happy political and financial media hype, the Pandemic-driven and FOMC-exacerbated U.S. Economic Collapse continues to harden in protracted non-Recovery, amidst mounting evidence of renewed Economic Downturn and recent excessive Inflation, which is about to re-accelerate, and still vulnerable to evolving Russia-Ukraine War risks and other global instabilities, seriously conflicted FOMC monetary policies, and increasingly dangerous Congressional and Administration fiscal activity/ policies. -- Irrespective of recent GDP Benchmark Revisions and current gimmicked reporting, key Economic Series show not only that the Pandemic-driven Economic Collapse was worse than headlined, but also that the still-unfolding, evolving Recovery has been much weaker than headlined. Signals of renewed, faltering activity increasingly are taking on the mantle of a new Recession. -- Severe Systemic structural damage and distortions from the Pandemic-driven Shutdown continues to forestall a meaningful 2023 Economic Rebound, and beyond, despite a the “reopened economy,” in context of increasingly flummoxed Fiscal and Monetary Policies and the evolving Russia-Ukraine War. -- The Fed’s Balance Sheet Reduction formally began in June 2022 and should have begun to relieve some Money Supply pressures on Inflation at that time, in theory. Yet hard Money Supply numbers through the deliberately slow release of the May 2023 detail, continue to show minimal impact, presently with still expansive money in the most-liquid, inflation-driving “Basic M1” (Currency and Demand Deposits). Announced FOMC policies are little more than jawboning and targeted financial-market hype, until put into actual full effect. That said, expanded Federal Government Deficit Spending continues, no longer temporarily stymied by the Debt Ceiling. Such can only help to accelerate the pace of domestic Inflation. -- With fundamental U.S. Dollar debasement (inflation) intensifying, irrespective of short-lived games with reduced oil prices, and especially in the context of the Fed and related entities having to balance, bail out or backstop an increasingly troubled Financial System, holding physical Gold and Silver protects the purchasing power of one’s assets, irrespective of any near-term Central Bank or other precious metals’ price machinations to the contrary. Scroll down for the latest ShadowStats Outlook, Background Information on the U.S. Economy, Financial System (FOMC), Financial Markets and Alternate Data, also for publicly available Special Reports and contact information. • L A T E S T .. N U M B E R S -- See the later SYSTEMIC RISK SECTION -- FEDERAL RESERVE for the current FOMC coverage and available detail of May 2023 Monetary Conditions. The latest Economic and Inflation releases were covered earlier in the Opening Section of this DAILY UPDATE. B U S I N E S S .. C Y C L E -- RECESSION-DEPRESSION TIMING – [Limited updates here, since September 21, 2021, with extended full review and update pending in No. 1461] -- The 2020 Economic Collapse still remains far from full Recovery. The 2020 Pandemic-Driven Recession was timed by the defining National Bureau of Economic Research (NBER), from Peak-to-Trough, as from February 2020 to April 2020 [2 months, the shortest on record] and from Fourth-Quarter 2019 to Second-Quarter 2020 [2 quarters]. That said, in Business Cycle definitions, an economic downturn traditionally has been known as a “Depression,” which has two components the “Recession” and the “Recovery.” After the economic terror of the Great Depression, economic downturns took on the less-frightening “Recession” nomenclature. The NBER called an end to the 2020 Recession on July 19th, again, just the first leg of the Depression. Recessions are measured only from Peak-to-Trough, while Recoveries are measured from Trough-to-Regaining-the-Pre-Recession-Peak (timing not formally called by the NBER), which is far from being at hand, despite relative strength in some major numbers such as the GDP. Thereafter, an “Expansion” is in place until the next formal “Peak,” which, the NBER does time. [See the earlier headline Payroll discussions and later FOMC comments.] Consider -- Despite significant Recovery off the Pandemic-Driven Economic Trough of April 2020, the February 2023 Payroll Employment has recovered its February 2020 Pre-Pandemic/ Recession Peak, despite indications of renewed slowdown or stagnation. Current employment/ economic conditions will be assessed and reviewed shortly in the pending No. 1461. Aside from some short-term reporting issues and gimmicks, Payroll Employment probably still is the highest-quality economic statistic published by the U.S. Government, at present, given current data and the reporting-compromised conditions of a still-evolving Pandemic/ post-Pandemic environment, and in context of later benchmark revisions. Eventually, the Employment series ultimately is based on actual Payroll Taxes paid by Employers, as opposed to irregular (Pandemic-induced, telephone-only) impaired surveys of the Public as to Unemployment. That said, there have been numerous stories in recent months of increasing misreported, near-term headline employment gains. Despite numerous, separate indications of the economy stalling or turning down anew (see the earlier GDP, Consumer Sentiment, New Orders for Durable Goods, Industrial Production, and Construction Spending), such broadly is ignored at present. That said, in practice, such should be a major economic consideration for the FOMC and the Administration, going forward, as they hike Interest Rates, “reduce” their Balance Sheet and look to explode Budget Deficit, without further concern of breaking the now nonexistent Federal Debt Ceiling. Economic, FOMC, financial-market, political and social circumstances all were impacted by and continue to evolve along with the Pandemic and its aftermath in still-unfolding, extraordinary political circumstances. COVID-19 vaccines and improved treatment helped to stabilize a still-disrupted level of economic activity, again, still well shy of a fundamental, full recovery. At present, full economic recovery to “normal” is not likely until well into 2024 or after. Many segments and regions of the U.S. economy, and individual, personal circumstances have suffered, and continue to suffer severe structural damage from the shutdown, areas that likely will take years to recover fully. Accordingly, ongoing massive Fiscal and Monetary Stimuli will be needed, and likely will expand into 2024/2025, irrespective of the FOMC’s pronounced “tightening.” As demonstrated in recent decades, FOMC stimulus likely will remain in play, as targeted by the FOMC, primarily, in order to prevent a collapse in the Banking System, or to magnify liquidity in the Banking System, which owns and controls the Federal Reserve, not to stimulate the Broad Economy, per se. • S Y S T E M I C .. R I S K -- FEDERAL RESERVE –-See the Opening Section for the June 27th headline details on the May 2023 Money Supply. Expanded detail follows in the updated MONEY SUPPLY AND MONETARY BASE Section, subsequent to this FOMC Section. June 2023 FOMC (coverage also is discussed in the OPENING COMMENTS.) –- The Federal Reserve’s June 2023 Federal Open Market Committee (FOMC) held rates in place. In context of a “pause” in FOMC Rate Hikes at the June 14th FOMC Meeting, Chairman Powell indicated at least two rate hikes are likely at coming FOMC Meetings. It remains ShadowStats contention that the surging headline inflation is due to FOMC-triggered massive growth in the Money Supply and Monetary Liquidity, as reflected in the highly liquid “Basic M1” (Currency plus Time Deposits / Checking Accounts), not due to an Overheating Economy. Separately, circumstances are exacerbated directly, at present, by spiking, weekly gasoline prices, as seen since January June 2023. While shifting focus to the troubled banking system, FOMC hopes and activities still are concentrated on some way of triggering a Recession, again, ostensibly to help contain inflation otherwise being driven by a non-existent “overheating economy,” where the mounting inflation pressures primarily are due otherwise, to continuing, extreme levels of Money Supply creation and growth. As repeated here frequently, raising interest rates sharply only pummels further an already moribund economy, it does little to contain the Fed’s current monetary inflation problem. Separately, though, the Fed also purportedly has been reducing its balance sheet assets, which should slow or cut the Money Supply growth and inflation. Yet, the May 2023 Money Supply reporting still showed an actual increase in “Basic M1,” following a small April 2023 dip, with a still 53-year peak flight to systemic liquidity in May 2023, as posted and reviewed in later paragraphs. Explored in the pending Commentary, the U.S. economy is and has been much weaker than advertised, not overheating, and the soaring inflation, which is much worse than headlined, again, primarily is being driven by the Fed’s excessive Money and Liquidity creation, not by an overheating economy, in a policy conundrum previously noted here by ShadowStats. • The FOMC announced in its June 14th Press Release: “Recent indicators suggest that economic activity has continued to expand at a modest pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated. “The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks. “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5 to 5-1/4 percent. Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective. “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. “Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Christopher J. Waller.” MAY 2023 MONEY SUPPLY AND MONETARY BASE -- (June 28th, Federal Reserve Board [FRB], with ShadowStats Supplement [June 2023 numbers will be available July 25th]). May 2023 Money Supply activity reflected a continuing 53-year record-high flight to liquidity in “Basic M1” (Currency plus Demand Deposits), with May 2023 “Basic M1” holding at 34.8%, the same as in April, which had notched lower to 34.8% from a downwardly revised 34.9% [initially 35.0%] of the aggregate headline Money Supply M2 of March 2023, still at its highest proportion since the same level in April 1970, again, a 53-year high. Notching higher to 119.2% in May 2023, from 118.1% of its Pre-Pandemic Level in in April, “Basic M1” still was shy of its August 2022 unrevised record level of 123.2%. While the now-headline-broadest aggregate Money Supply M2 declined year-to-year by 4.0% (-4.0%) in May 2023, after a 4.6% (-4.6%) in drop in April 2023, the highly liquid and inflation driving “Basic M1” was up by 2.0% year-to-year in May 2023, following a 2.9% year-to-year gain in April. May 2023 Money Supply numbers and historic tables have been posted and graphed to the ALTERNATE DATA TAB (see the Menu Bar above), with more extensive analysis, graphs and coverage following in today’s pending DAILY UPDATE e-mail and in Commentary No. 1461. Please note with the ALTERNATE DATA Tab numbers, that the Money Supply “annual” growth rates after February 2021 instead are against the February 2020 Pre-Pandemic Level not year-to-year (although both measures are plotted in the subscriber-only e-mail graphs). ShadowStats contends that it is the extraordinary liquidity surge after the February 2020 collapse that is driving the inflation, and which needs to be worked down in order to bring the inflation circumstance under control. Again, full detail follows in the DAILY UPDATE e-mails and in pending No. 1461. Here is how the May 2023 Money Supply numbers shaped up. Against its Pre-Pandemic Trough (PPT), ShadowStats May 2023 “Basic M1” (Currency plus Demand Deposits [83% of the “old” pre-May 2020 M1]) rebounded to 119.2%, from 118.1% in April, but still down from 120.5% in March, still shy of its historic peak of 123.2% in August 2022. At the same time, the Pandemic-distorted and disrupted year-to-year gain for May 2023 “Basic M1” eased to 2.0%, from 2.9% in April and 4.8% in March. When the Pandemic hit the U.S. economy and financial system hard in March and April 2020, the Federal Reserve responded with massive expansion of the Money Supply (eventually the equivalent of 23-years-worth of regular “Basic M1” stimulus -- Systemic Liquidity). Accordingly, comparative year-to-year change in the various March 2021 to March 2022 Money Supply measures against the heavily spiked year-ago activity tended to be depressed, against what otherwise would be the change versus the February 2020 Pre-Recession or Pre-Pandemic Trough (PPT), effectively the “Base Circumstance,” before the Pandemic emergency liquidity surge. Accordingly, the March 2021 to May 2023 growth rates here generally are shown against that February 2020 PPT, instead of year-to-year. Background definitions and related detailed discussion, historical data and graphs for each of the Money Supply Series were covered in Benchmark Commentary No. 1459, again, with updated and expanded details pending in the Subscriber-only e-mails and No. 1461. The Fed will release the headline June 2023 Money Supply and Monetary Base data at 1:00 p.m. ET, July 25, 2023. For the most-liquid “Basic M1” Money Supply measure in May 2023, dollar levels and growth levels notched somewhat higher from the recent upside moves against the Pre-Pandemic Trough, still suggestive of massive mounting, not easing inflation pressures. May 2023 activity versus the February 2020 Pre-Pandemic Trough for the newly redefined (post-May 2020) headline M1 (now including Savings Deposits, at about 92% of M2) was up by a headline 367.3%, albeit on a nonsensical, noncomparable and inconsistent basis, down from 367.9% in April. That, again was indicative of systemic flight to liquidity, again, where the most-liquid “Basic M1” component of the new, redefined “M1” increased from 118.1% to 119.2%. Separately, all as measured against Pre-Pandemic Troughs, traditional M2, which has not been redefined, was up by 34.7% in May 2023, versus readings of 33.8% in April and 34.9% in March, while the broadest ShadowStats “Ongoing-M3” Estimate also notched higher in May 2023 to 30.9%, from 30.0% in April and from 30.4% in March. The flight of cash to relatively greater liquidity and safety in the narrower Money Supply measures, specifically in “Basic M1,” saw May and April 2023 relative liquidity holding still at a 53-year high (Basic M1/M2) of 34.8%, other than for the 34.9% [initially 35.0%] in March 2023, otherwise all at that 53-year level, since September 1970. The May 2023 Monetary Base average showed a small turnaround, from a seasonally unadjusted gain in April to a contraction in May. Yet early weekly data in June showed some renewed expansion, with some late month pullback, with a net unadjusted increase in June. The aggregate Monetary Base often moves broadly on a parallel basis with the Money Supply, but it also can vary widely with the Money Supply, tied to the dominance of its movements triggered by Bank Reserves held by Federal Reserve Banks. Unlike the Money Supply at present, even before the onset of “Tapering” and “Balance Sheet Reduction,” the Monetary Base was and is not close to record annual growth levels, previously seen during the 2007-2008 Banking System Collapse of the “Great Recession,” which at the time exploded Reserve Balances (up 5,000 percent year-to-year, but never reversed much in parallel in a post-Crisis movement). Nonetheless, systemic Turmoil is still evolving, with both the Federal Reserve and U.S. Government continuing to drive uncontrolled U.S. dollar creation, between unconstrained Money Supply growth (irrespective of “Balance Sheet Reduction”) and uncontained Deficit Spending, with U.S. Treasury Debt “no longer in crisis”, since the Debt Ceiling was eliminated. Again, with the recovery from the Pandemic-driven collapse still flub-a-dubbing, continued extraordinary Monetary and Fiscal Stimulus likely will continue well into late 2023, despite Financial-Market huffing and puffing to the contrary, and bi-furcated FOMC happy hype. Indeed, setting up accelerating inflation or hyperinflation, current extreme Monetary and Fiscal stimuli likely will be expanded, not reduced. Discussions on the inflation threat and re-accelerating money growth are found in Special Hyperinflation Commentary, Issue No. 1438, subsequent missives including particularly No. 1451, No. 1454, No. 1460b and will be detailed in pending No. 1461. EXPANDED SHADOWSTATS ALERT: -– Intensifying Risks of a Highly Inflationary, Major U.S. Economic Downturn. [May 29th]. Given mounting U.S. Banking System instabilities, the Federal Reserve has spiked systemic liquidity with excessive, inflation-driving Money Supply creation, which exacerbates the inflation problem. The FOMC has begun to ease back on the aggregate Money Supply only temporarily, with the effect of an increasing flight to Monetary System safety -- liquidity -- to cash and demand deposits, which tends to fuel consumption inflation pressures directly. At the same time, the FOMC has kept raising hiking interest rates, despite a one-FOMC-Meeting pause, in order to kill economic activity that is neither overheating nor driving the inflation, despite the publicly expressed claims of the FOMC and its Fed Chairman to the contrary. Separately, the Russia-Ukraine War continues to supply near-term uncertainty for and volatility to the domestic and global financial and commodity markets, amidst intensifying global political instabilities, all exacerbating systemic risks for related economic and financial market disruptions and crises. Accordingly, the FOMC’s near-term financial-market policy conundrum of creating Money Supply to support the financial system, while trying to kill inflation at the same time, has no happy resolution. In the end, the Fed has little choice but to support the banks and to let inflation run its course. Given a moribund, underlying U.S. Economy, raising rates further [as had been heavily jawboned and promised by the Fed Chairman, among other FOMC members, until the most-recent March 2023 FOMC] likely will only exacerbate deteriorating economic conditions, without providing any meaningful inflation relief. Current liquidity and political risks and issues are intensified by potential Hyperinflation, long viewed by ShadowStats as the ultimate fate of the U.S. Dollar. Shy of a near-term happy resolution to the Russia-Ukraine War, the circumstance only has exacerbated the ShadowStats Hyperinflation pre-Russia-Ukraine War outlook of the last year or so, where: Despite recent relative weakness or volatility in gold prices and related Central Bank or other market machinations, the ShadowStats broad outlook in the weeks and months ahead has remained for: (1) A continuing and renewed deepening (potentially hyperinflationary) U.S. economic collapse, reflected in (2) Continued flight to safety in precious metals, with accelerating upside pressures on gold and silver prices, (3) Mounting renewed selling pressure on the U.S. dollar, against the Swiss Franc and other traditionally stronger currencies, and (4) Despite recent extreme Stock Market volatility and current near-record high levels in the popular U.S. stock-market indices, high risk of major instabilities and heavy stock-market selling continues, complicated by ongoing direct, supportive market interventions arranged by U.S. Treasury Secretary Yellen, as head of the President's Working Group on Financial Markets (a.k.a. the ‘Plunge Protection Team’), or as otherwise being gamed by the Federal Reserve. • P E N D I N G .. P O S T I N G S .. Posting of Special Economic Commentary No. 1461 will in the near future, subsequent to updating of the ShadowStats.com Website in the next week or two, in a direct e-mail to Subscribers [See today’s (July 6th) OPENING NOTE. P E N D I N G .. E C O N O M I C .. D A T A .. PENDING DAILY UPDATES AND DEVELOPMENTS: –- June 2023 Consumer Price Index, Wednesday, July 12th, 8:30 a.m. ET (Bureau of Labor Statistics). Thursday, July 13th, June 2023 Producer Price Index, Friday, July 13th, 8:30 a.m. ET (Bureau of Labor Statistics). Early July 2023 Consumer Sentiment, July 14th, University of Michigan, 10:00 a.m. ET. The Cass Freight Index® likely also will post in the week ahead. • ARCHIVES - VIEWING EARLIER COMMENTARIES. ShadowStats postings of the June 2021 Commentary and before - back to 2004 - are open to all, accessible by clicking on “Archives,” at the bottom of the left-hand column of this ShadowStats homepage. • ALTERNATE DATA TAB [See the Menu Bar ribbon above] provides the latest headline numbers and exclusive ShadowStats Alternate Estimates and related Graphs of CPI Inflation [June 13], GDP [June 29], Unemployment [July 7], Money Supply [June 27] and the ShadowStats Financial-Weighted U.S. Dollar [June 6]. Data downloads and the Inflation Calculator are Subscriber only. Best wishes -- John Williams ©2023 Shadow Government Statistics, Walter J. Williams.
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