DAILY UPDATE (September 10th to 13th, See the POSTING SCHEDULE [Updated] / Keep Scrolling Down for SHADOWSTATS BACKGROUND, LATEST NUMBERS [Updated], BUSINESS CYCLE, SYSTEMIC RISK, MONETARY DATA [Updated] and Other Sections) • INFLATION – August 2021 Producer Price Index Inflation Continued Setting Historic Highs • MONETARY BASE – No Suggestion of Tapering Here, With Early Indications of a Continuing September 2021 Monetary Surge; August 2021 Numbers Showed Ongoing Explosive Growth at the Cycle High • MONEY SUPPLY – July 2021 “Basic M1” Soared to an Historic-High 91.7% Above Its Pre-Pandemic Peak, Up from the Prior-Record 87.6% in June [Money Supply Details Are Posted to the ALTERNATE DATA Tab (Above)] • July FOMC Policies Were Unchanged [See the SYSTEMIC RISK and MONETARY DATA for Details] • How Can the Economy (GDP) Be Recovered With No Full Recovery in Employment? • Against Its Pre-Recession Peak, the Percent Contraction in August 2021 Payrolls Remained Deeper than Anything Seen in the Last Seven Recessions, Back to 1957, Outside of the Great Recession [see BUSINESS CYCLE] • July 2021 Numbers Indicated the Real Merchandise Trade Deficit Holding at a Record Shortfall • With July Details in Hand, Third-Quarter 2021 Construction and Housing Sectors Continued in Early Trend for at Least a Second Consecutive Quarterly Decline, with Some Sectors Headed for Their Fourth Straight Drop [see LATEST NUMBERS] • COMBINED IMPACT: Reflecting the Surge in Money, Inflation Has Exploded, While Business Activity Has Begun to Pull Back Anew, at an Intensifying Pace

• G E N E R A L .. H E A D L I N E S .. -- Pandemic-Driven U.S. Economic Collapse Continues to Harden in a Protracted “L”-Shaped Non-Recovery

-- Key Economic Series Show Not Only That the Pandemic-Driven Economic Collapse Has Been Worse Than Headlined, But Also That the Still-Unfolding Recovery Has Been Much Weaker Than Indicated

-- Severe Systemic Structural Damage from the Shutdown Is Forestalling Meaningful Economic Rebound into 2023 or Beyond, Irrespective of the Advances in Coronavirus Vaccinations

-- Panicked, Unlimited Federal Reserve Money Creation and Federal Government Deficit Spending Continue and Likely Will Expand, Fueling Accelerating, Major Domestic Inflation

-- With Fundamental Dollar Debasement Intensifying, Holding Physical Gold and Silver Protects the Purchasing Power of One’s Assets, Irrespective of Any Near-Term Central Bank or Other Machinations to the Contrary.

Scroll down for the Latest ShadowStats Outlook, Headline Economic News and 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 pending No. 1460c for expanded coverage and graphs of the various economic and inflation series] .. PPI INFLATION – Monthly year-to-year Producer Price Inflation hit a fifth consecutive all-time high in August 2021 (September 10th, Bureau of Labor Statistics - BLS). The modern-series August 2021 Final-Demand Producer Price Index (PPI-FD) [the series was started in November 2009] jumped 0.71% in the month, by a record 8.27% year-to-year, with Final-Demand Goods up by 0.95% in the month and by a record 12.57% year-to-year, and with Final-Demand Services up by 0.71% month-to-month, a record 6.40% year-to-year. Those all-time record annual inflation rates were the fifth consecutive such monthly readings for all three series. In the side reporting of the old-series Finished Goods Inflation, annual growth hit a 40-year high of 10.3% (highest since June 1981). Where the headline July 2021 CPI-U held at a 13-year year-to-year high of 5.4% [5.37%], that was just shy by 0.2%-to-0.3% of setting a 40-year high [5.61%], which it easily could challenge in its August reporting on Tuesday, September 14th, irrespective of a current, relatively soft consensus outlook.

(September 3) LABOR NUMBERS [Also see the discussion in the later BUSINESS CYCLE Section] - Much weaker than expected, August 2021 Payrolls showed a continuing monthly jobs loss in Retail Sales, a monthly contraction in Construction payrolls and zero growth in Leisure & Hospitality jobs (BLS). Confirming an intensifying economic stall and lack of full recovery in U.S. Economic Activity, August 2021 Payroll Employment held shy of recovering its Pre-Pandemic and Recession-Depression Peak by 3.50% (-3.50%), narrowed from a revised 3.65% (-3.65%) [previously 3.74% (-3.74%)] in July 2021, and a revised 4.34% (-4.34%) [previously 4.43% (-4.43%)] in June 2021. Except for the 2007 Great Recession, that magnitude of shortfall in recovering Pre-Recession Peak Activity is deeper than the troughs seen in the last seven recessions, back to 1957. Payroll Employment remains one of the most fundamental and basic measures of broad economic activity, and the current measures of related jobs activity suggest that the broad U.S. economy is far from recovering healthy pre-Pandemic labor conditions. The 3.50% (-3.50%) shortfall is against the set level of Payroll Employment at the February 2020 Pre-Pandemic Peak, yet Payrolls normally increase by about 200,000 jobs per month. Those people who have not been hired are still out there needing work, which leads to an estimated 5.5% (-5.5%) shortfall in recovering a normal level of jobs and economic activity, which still is not likely before late-2022 or early-2023.

The headline August 2021 U.3 Unemployment Rate dropped to 5.19%, from 5.39% in July, yet, at the same time, the potential number of “Unemployed Misclassified as ‘Employed’” in that same Household Survey continued to surge, rising to 464,000 in August. After 18 months of Pandemic surveying the BLS still cannot count the number of Unemployed. The BLS acknowledges continuing misclassification of some “unemployed” persons as “employed,” in the Household Survey. The count of the understated unemployed had an “upside limit” of 464,000 persons in August 2021, up from 420,000 persons in July and 336,000 in June, against 478,000 in May 2021, 558,000 in April 2021 and 636,000 persons in March 2021. The difference would be potential headline rates for U.3 of 5.5% in August and 5.7% in July, instead of respective actual headlines of 5.19% in August and 5.39% in July. Fully adjusted for COVID-19 disruptions, based on BLS side-surveys of Pandemic impact, and with roughly 6.3 million people still missing from the headline U.S. labor force, actual headline U.3 unemployment should be around 10%, the highest unemployment rate since before World War II. Broader August 2021 headline U.6 unemployment declined to 8.85%, from 9.23% in July, reflecting the underlying decline in U.3, and a continuing decline in short-term discouraged workers, reflecting some hiring as well as an increasing, continued migration of short-term discouraged workers to the nether world of the long-term discouraged workers (those no longer counted by the BLS, subsequent to the allotted one year of permissible discouragement). The long-term “discouraged” otherwise still are accounted for in the ShadowStats Ongoing Unemployment Estimate.

Including the long-term discouraged/ displaced workers, the August 2021 ShadowStats Alternate Unemployment Rate held at 25.4%, same as in July, down from 25.8% June 2021 and against 26.0% in May 2021 and 25.5% in April 2021. The August 2021 ShadowStats Alternate Unemployment Rate held even on top of the lower U.6, again, reflecting the continuing shift from short-term discouraged (in U.6) to long-term discouraged workers (in the ShadowStats Alternate). The latest Unemployment Rates are posted on the ALTERNATE DATA tab (above).

(September 2) TRADE DEFICIT – The U.S. Real Merchandise Trade Deficit Is on Track for Its Continuing Record Shortfall Holding in Place for a Third Straight Quarter (Census Bureau, Bureau of Economic Analysis - BEA). The nominal Balance of Payments Deficit in Goods and Services narrowed sharply in revisions to the January to June 2021 numbers, due solely to upside revisions in the heavily gimmicked and maldefined Surpluses in the Services Sector. The Deficits in the Goods Sector deepened minimally in revisions in the same period. The July 2021 nominal Goods and Services deficit was $70.1 billion, somewhat deeper than the average monthly deficit of $69.1 billion seen in the first six months.

That said, the Real Merchandise Trade went through its six-month revisions last month, and given a narrowing revision to the June 2021 Deficit in today’s reporting, both the First- and Second-Quarter 2021 Real Merchandise Trade Deficits are tied at an historic record annualized deficit of $1,220.9 billion. The headline July 2021 Real Merchandise Trade Deficit narrowed to an annualized pace of $1,201.6 billion, but that was well within range of settling in around that record level of the first two quarters, given the volatility of regular month-to-month reporting and revisions to this series. For comparison purposes, the Fourth-Quarter 2020 Deficit was a then-record $1,141.2 billion, with a 2020 record annual average of $1,043.5 billion, up from the Pre-Pandemic 2019 then-record annual average of $995.2 billion.

(September 1) CONSTRUCTION SPENDING – Net of surging Construction Inflation, July 2021 Real Construction Spending was on early track for a second, consecutive, quarter-to-quarter decline for activity in Third-Quarter 2021 (Census). After two quarters of strong growth, Second-Quarter 2021 Real Construction Spending declined at a revised annualized pace of 9.4% (-9.4%) [initially 11.2% (-11.2%)], on early track for an annualized drop of 7.7% (-7.7%) in Third-Quarter 2021, patterns that appear to be following Home Sales (see the August 24th paragraph) and New Residential Construction (see the August 18th paragraph).

July 2021 Construction Spending gained a nominal 0.3% month-to-month, on top of upside revisions to May and June, with June unchanged at 0.0% [previously a 0.1% gain], and May up by 0.7% [previously down by 0.2% (-0.2%)] –- all negative in inflation-adjusted real terms. Net of surging Construction Inflation July 2021 Real Construction Spending declined by 1.1% (-1.1%) month-to-month, gained 1.7% year-to-year and held shy by 5.1% (-5.1%) of regaining its February 2020 Pre-Pandemic Peak. That was against June Real Construction Spending declining by 1.3% (-1.3%) month-to-month, gaining 1.7% year-to-year and holding shy by 4.0% (-4.0%) of recovering its Pre-Pandemic Peak.

(August 26) GROSS DOMESTIC PRODUCT – Net of 40-year high GDP Inflation, annualized Real Second-Quarter 2021 GDP Growth revised Higher to 6.56% [previously 6.50%], with the initial estimates of 2q2021 Gross Domestic Income (theoretical GDP equivalent) and Gross National Product up respectively at annualized growth rates of 1.58% (GDI) and 6.62% (GNP) BEA. Each of the headline GDP, GDI and GNP regained its Fourth-Quarter 2020 Pre-Pandemic Peak in Second-Quarter 2021, but the ShadowStats Alternate GDP, adjusted for the understatement of headline GDP inflation [see the ALTERNATE DATA (GDP) Tab above] held shy by 2.22% (-2.22%) of recovering its Pre-Pandemic Peak, more in line with headline Payroll Employment activity [see the BUSINESS CYCLE section]. Even so, the headline GDP Implicit Price Deflator was at a revised 40-year high annualized inflation rate of 6.22% [previously 6.11%] with a 32-year high rate of 4.03% year-to-year inflation. The divergence in the annualized GDP (6.6%) and GDI (1.6%) quarterly real growth rates is tied to the timing and handling of the government stimulus checks, which feed directly into the GDI measure.

(August 25) DURABLE GOODS ORDERS – Real New Orders for Durable Goods declined for the second month amidst surging inflation and slowing orders (Census). In context of a sharp downside revision to surging Commercial Aircraft orders in June and a 48.9% (-48.9%) drop in July, and a strong upside revision to June Motor Vehicle orders and a July gain of 5.9%, nominal New Orders for Durable Goods declined by 0.1% (-0.1%) in July 2021, having gained an unrevised 0.8% month-to-month in June. Net of surging inflation Total Real New Orders declined month-to-month by 0.9% (-0.9%) in July and by 0.5% (-0.5%) in June, having gained 2.1% in May. Net of Inflation and the irregularly volatile Commercial Aircraft Orders, headline July 2021 New Orders gained 2.0% in the month having declined by a revised 0.5% (-0.5%) in June. Real Orders ex-Commercial Aircraft were up year-to-you by 2.8% in July, down from an upwardly revised 8.6% in June, given year-ago Pandemic disruptions. Against their February 2020 Pre-Pandemic Peak levels, those July 2021 and June Orders were up respectively by 3.1% and 2.0%.

(August 24) HOME SALES – July 2021 Homes Sales gained in the month, but with New-Home Sales (NHS) on early track for its fourth-consecutive quarterly decline in Third-Quarter 2021, while Existing-Home Sales (EHS) were on early track for a positive Third-Quarter 2021, after contractions in 1q2021 and 2q2021 (NHS - August 24th Census, EHS - August 23rd National Association of Realtors® - NAR®). Coming off record-strong levels of sales activity in late 2020, both New-Home Sales (Census) and Existing-Home Sales (NAR®) activity pulled back in the first half of 2021.

July 2021 New-Home Sales (Census) activity gained 1.0% in the Month, amidst its usual lack of statistical significance yet it continued in a broad pattern of collapsing activity After respective annualized quarterly contractions of 53.8% (-53.8%) in 2q2021, 12.1% (-12.1%)in 1q2021, and 18.2% (-18.2%) in 4q2020, Third-Quarter 2021 New-Home Sales started with 1.0% monthly gain in July [setting an early trend for a 3q2021 annualized contraction of 15.8% (-15.8%)]. That headline July 2021 1.0% monthly gain to a one-month high, was in context of a monthly year-to-year decline of 27.2% (-27.2%) and a 3.0% (-3.0%) drop below its February 2020 Pre-Pandemic Peak.

More-Stable and Positive Reporting of July 2021 Existing-Home Sales (NAR®) reconfirmed a second consecutive quarterly contraction for Second-Quarter 2021, but with July activity bouncing by 2.0% to a four-month high. July 2021 Existing-Home Sales gained 2.0% in the month, following a revised 1.6% [previously 1.4%] gain in June, and an unrevised decline of 1.2% (-1.2%) in May. July activity was by up 1.5% year-to-year, slowing from 23.1% in June, against Pandemic-driven volatility of a year ago. Against the February 2020 Pre-Pandemic Peak, July 2021 gained 5.1%, up from 3.0% in June. With Third-Quarter 2021 activity in an early positive trend, 2q2021 activity contracted at a revised annualized pace of 7.3% (-7.3%) [previously 7.5% (-7.5%)], following a contraction of 5.3% (-5.3%) in 1q2021 and a gain of 9.1% in 4q2020.

(August 18) NEW RESIDENTIAL CONSTRUCTION - July 2021 Housing Starts declined by 7.0% (-7.0%) and Building Permits gained 2.6% in the month, with both series on early track for second consecutive quarterly contractions in Third-Quarter 2021 activity (Census). In context of July 2021 headline monthly details and prior-period revisions, 2q2021 New Residential Construction - Building Permits and Housing Starts - showed revised respective annualized quarterly declines of 23.9% (-23.9%) [previously 23.7% (-23.7%) and 3.2% (-3.2%) [previously 7.6% (-7.6%)]. Given initial July reporting, the early 3q2021 trend is for annualized contractions of 8.1% (-8.1%) for Permits and 12.5% (-12.5%) for Starts. Despite the regular nonsense-reporting volatility in the New Residential Construction series, these quarterly contractions broadly are in line with slowing growth in Construction Employment, which slowed sharply to annualized growth of 0.9% in 2q2021 and is on early track for an annualized contraction of 5.2% (-5.2%) in 3q2021.

That said, the 7.0% (-7.0%) monthly decline in July Housing Starts was shy of being statistically meaningful, and followed a downwardly revised 3.5% [previously 6.3%] monthly gain in June. Year-to-year, the 2.5% gain in July 2021 Housing Starts was not statistically significant, particularly as measured against the ongoing, extreme volatility in Pandemic-driven activity of one-year ago. In terms of a consistent benchmark, the July 2021 Housing Starts activity was down by 3.5% (-3.5%) from its February 2020 Pre-Pandemic Peak. Building Permits are a non-indicator, at present, given data issues that surfaced in April’s benchmarking, where a large number of Building Permits ended up lapsed or expired due to COVID-19 disruptions.

(August 17) INDUSTRIAL PRODUCTION - July 2021 Industrial Production gained 0.9% in the month, spiked by a seasonal-adjustment phenomenon created by inventory-strapped Auto Manufacturers canceling usual July plant closures (Federal Reserve Board - FRB). July 2021 Industrial Production gained 0.93% in the month [1.02% net of prior-period revisions], topping Consensus Expectations for a 0.5% gain. That relative monthly surge should reverse in August, since it primarily reflected a one-time seasonal-adjustment spike to July, designed to accommodate the usual Automobile Manufacturer shutdowns in the month. Those shutdowns were curtailed sharply, due to needed inventory building, and the resulting, headline seasonally adjusted Manufacturing Sector, which dominates the Industrial Production, spiked sharply.

In context of the previously “not recognized” economic contraction revealed in the Federal Reserve’s extraordinary, May 28th, multi-year major benchmark revisions to the Industrial Production series (see details in No. 1460a and in pending No. 1460c), a hitherto “unrecognized” downturn in Industrial Production has come into play, timed from its historic August 2018 Peak. The July 29th GDP Benchmarking revised related growth slightly lower. Yet, that “New Production Recession” still was deepening, going into the February 2020 Pre-Pandemic Peak and the ensuing Pandemic-driven collapse.

Here’s how July 2021 Industrial Production shaped up: (1) July 2021 Aggregate INDUSTRIAL PRODUCTION gained 0.93% in the month versus a revised 0.20% [previously 0.44%] in June. Year-to-year July Production gained 6.56%, versus 9.90% in June. July still held down by 0.21% (-0.21%) of ever recovering its February 2020 Pre-Pandemic Peak (PPP), and by 2.93% (-2.93%) of ever recovering its August 2018 All-Time High (ATH). (2) Dominant MANUFACTURING gained 1.35% in July, versus a revised 0.29% (-0.29%) [previously 0.07% (-0.07%)] decline in June. Year-to-year July Manufacturing gained 7.36%, versus 10.21% in June, with July recovering its PPP by 0.83% [likely temporary], but still shy by 2.42% (-2.42%) of ever recovering its August 2018 ATH. (3) July MINING gained 1.17% in the month versus a revised 0.52% [previously 1.39%%] gain in June. Year-to-year July Mining gained 12.15%, versus 16.62% in June, with July remaining shy of ever recovering its PPP by 8.43% (-8.43%), and shy by 7.05% (-7.05%) of ever recovering its August 2018 ATH. (4) Randomly volatile UTILITIES declined by 2.11% (-2.11%) in July, versus a revised 3.07% [previously 2.65%] gain in June. Year-to-year July Utilities declined by 3.80% (-3.80%), versus a gain of 1.84% in June, with July shy of its PPP by 0.29% (-0.29%) and its ATH by 3.76% (-3.76%), having regained both measures in earlier months.

(August 17) RETAIL SALES – Real Retail Sales are on early track for a Third-Quarter 2021 contraction (Census). Boosted by a continuing surge in CPI Inflation, and by regular upside revisions to the prior two months of sales activity, July 2021 Nominal Retail Sales declined by 1.1% (-1.1%) in the month, against a monthly gain of 0.7% in June and decline of 1.4% (-1.4%) in May; Real Retail Sales, net of Inflation, dropped for the third month, with both Nominal and Real Retail Sales in July at their weakest readings since February 2021. Against financial-market expectations for a monthly decline in Nominal July Retail Sales of 0.3% (-0.3%), headline Sales dropped in the month by 1.1% (-1.1%) [down by 0.6% (-0.6%) net of prior-period upside revisions].

ShadowStats standardly removes growth due to inflation from the headline Nominal Retail Sales series, reporting it in Real or Inflation-Adjusted terms, deflated by the seasonally-adjusted CPI-U as otherwise calculated by the St. Louis Fed. Headlined above, the monthly change in Real Retail Sales moved from a gain of 0.1% in April 2021, to successive month-to-month contractions of 2.0% (-2.0%) in May, 0.2% (-0.2%) in June and 1.6% (-1.6%) in July. Year-to-year changes in Real Sales, against year-ago Pandemic disrupted activity, were 47.3% in April, 22.0% in May, 12.0% in June and 10.0% in July. Against the Pre-Pandemic Peak activity of February 2020, the gain in Real Retail Sales had slowed from 16.0% in April 2021, to 13.7% in May, 12.5% in June and 11.7% in July. Major factors at work here include surging Auto Sales into April, which have been in sharp monthly decline since, and increased re-openings of Restaurants and related facilities. Unfortunately, underlying employment detail for Retail Sales (Retail Trade plus and the Leisure and Hospitality Industries) still does not support the headline surge in the commercial activity reported here.

(August 12) CASS FREIGHT INDEX® - The July 2021 Cass Freight Index® declined in the month by 3.1% (-3.1%), having dropped by 4.2% (-4.2%) in June, falling to its lowest level since September 2020 (CassInfo.com - See detail at https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/july-2021 and scroll down). The July 2021 Cass Freight Index® declined for a second consecutive month, down by a seasonally adjusted 3.1% (-3.1%), following a 4.2% (-4.2%) drop in June and a 5.9% monthly gain in May. That said, July dropped to a 10-month low. Year-to-year, the Index gained 15.6% in July, but the gain was 2.6% from the February 2020 Pre-Pandemic Peak. Yet, as will be detailed in pending No. 1460c, the Index still was shy by a deepening 9.9% (-9.9%) from ever recovering its 2018 pre-downturn peak, which marked the historic peak in Industrial Production, as highlighted in the recent annual benchmarking of that series. That heretofore-unrecognized, FOMC-triggered 2018 economic downturn/ slowdown was ongoing into the onset of the March 2020 Pandemic Shutdown. Where Cass attributed much of the recent weakness in activity to “...equipment and driver capacity constraints,” Retail Sales and Industrial Production likely still will see some continuing impact. -- ShadowStats regularly tracks and analyzes the Cass Freight Index® as a highest-quality coincident and leading indicator of underlying economic reality. We thank Cass for their permission to graph and to use their numbers in our Commentaries.

(August 11) CPI INFLATION - Updated (August 12) - The July 2021 CPI-U surged by the consensus-expected 0.5% month-to-month, holding its 13-year high annual inflation rate of 5.4% for a second month; still shy of its 41-year peak, while the July ShadowStats Alternate CPI held at 13.4%, for a second month, also matching its 2008 Peak, otherwise its highest reading in 41 years (BLS). The July 2021 Consumer Price Index (CPI-U) gained 0.47% in the month, following a 0.90% jump in June, with the unadjusted 13-year high monthly year-to-year growth in July 2021 holding at 5.4% (5.37% versus 5.39%) for the second month, just shy of a 41-year high. The BLS indicated the headline CPI gain was relatively muted somewhat by the slowing of price increases for used cars and trucks, which “... rose by 0.2 percent in July after rising at least 7.3 percent in each of the last 3 months.” Annual “Core” Inflation (net of Food and Energy) hit a 30-year peak of 4.47% in June 2021, up from its 3.80% reading in May, but it backed off to 4.27% in July 2021. That July reading would have been a 30-year high, but for the June surge. Once again, the BLS confirmed that it remains well shy of conducting regular inflation surveying (in effect since March 16, 2020), due to COVID disruptions, with implications that the full scope of rising prices is being missed in the headline numbers.

Of continuing note to those on Social Security, and to those estimating Federal Government outlays, going forward, the latest annual Cost of Living Adjustment (COLA) for Social Security, based on year-to-year Third-Quarter 2020 CPI-W (all Urban Wage Earners) was 1.3%. The annual CPI-W continued to spike into June 2021 at 6.12%, versus 5.65% in May. Coming into the base Third-Quarter 2021 COLA calculation period, the annual reading for initial the third-quarter month of July 2021 CPI-W notched lower to 6.00%. Accordingly, the 2021 COLA easily could be a 39-year high.

Year-to-Year July 2021 ShadowStats Alternate CPI Annual Inflation (1980 Base) continued at 13.4% for the second straight month, also matching the prior 13.4% peak in July 2008, otherwise against a 13.4% peak in June 1980. That earlier reading predates the ShadowStats series, when the headline CPI still was reported on a reasonably consistent basis. The current monthly annual peaks were up from 13.0% in May 2021, 12.1% in April, 10.4% in March 2021, 9.4% in February 2021 and against 9.1% in January 2021. The ShadowStats Alternate CPI-U estimate restates current headline inflation so as to reverse the government’s inflation-reducing gimmicks of the last four decades, which were designed specifically to reduce/ understate annual Cost of Living Adjustments. Related graphs and methodology are available to all on the updated ALTERNATE DATA tab above. Subscriber-only data downloads and an Inflation Calculator also are available there, with extended details following in No. 1460c.

• (UPDATED September 3) B U S I N E S S .. C Y C L E -- [See pending No. 1460c for expanded coverage] RECESSION-DEPRESSION TIMING – The 2020 Economic Downturn Remains Far from Recovery. The 2020 Pandemic-Driven Recession has been 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, 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 more-euphemistic “Recession” title. 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 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.

Despite significant recovery, the August 2021 Payroll Employment current shortfall against its February 2020 Pre-Pandemic/ Recession Peak remained weaker than the payroll troughs of the last seven Recessions, back to 1957, other than for the Great Recession. Reviewed in pending No. 1460c, Payroll Employment is one of the higher-quality economic statistics published by the U.S. government, and while it has recovered meaningfully from its April 2020 bottom, August 2021 activity still was shy by 3.50% (-3.50%) of recovering its Pre-Recession (Pre-Pandemic) Peak. Putting that in perspective, other than for the Great Recession, such still was deeper than all the troughs of activity in the last seven Recessions back to 1957. If the economy is slowing anew, as indicated by mounting headline reporting, those labor numbers present a continuing, major economic issue for the FOMC and the Federal Government. Some anecdotal evidence suggests that activity has slowed or is slowing, with early signs of a double-dip downturn. Consider reports of flattening activity in areas like Florida, which had been booming recently, to quarterly contractions in Construction, to the University of Michigan’s August Consumer Sentiment Index collapsing to a new Pandemic trough.

Economic, FOMC, financial-market, political and social circumstances all continue to evolve along with the Pandemic and unfolding political circumstances. COVID-19 vaccines and improved treatment have helped boost the economy, which, again remains far from full recovery, yet new Pandemic issues appear to be unfolding. Full economic recovery is not likely until 2023 or after. Many segments and regions of the U.S. economy, and individual, personal circumstances have suffered 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 well into 2023, per both the current FOMC outlook and the ongoing ShadowStats assessment, irrespective of hints of FOMC “Tapering” being floated at present.

• S Y S T E M I C .. R I S K -- [See MONEY SUPPLY and MONETARY BASE Sections for the August 24th Benchmarked Money Supply Details and the September 3rd publication here of the Preliminary August 2021 Monetary Base, and today’s (September 10)look at early-September] The July 2021 FOMC Held Existing Policies in Place, as Expected (July 28th, Federal Reserve Board’s Federal Open Market Committee [FOMC] Statement and Federal Reserve Chairman Jerome S. Powell’s Press Conference). At his Press Conference, and in context of unchanged Monetary Policy, Chairman Powell discussed the “... prospect that inflation could turn out to be higher and more persistent than we expect.” He went on to explain that should the FOMC become convinced of such a circumstance, it would take appropriate monetary action to bring that inflation issue under control. The formal economic, inflation and interest rate forecasts, which roiled the markets after the June meeting, are quarterly and will not be updated until the September 21st/22nd FOMC Meeting.

The July 28th Federal Reserve Press Release repeated, as usual, its reconfirmation that: “The Committee [FOMC] seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.”

(August 24) MONEY SUPPLY – In Context of Ongoing Benchmark Revisions, July 2021 Money Supply Annual Growth Continued to Explode, With All the Major Money and Monetary Measures at New Peak Levels of Activity and at Historic or Cycle-High Levels of Growth [No Signs of Tapering] (Federal Reserve Board – FRB, ShadowStats). The regular Historic Money Supply Tables and Graphs through July 2021 have been posted on ALTERNATE DATA TAB, linked above, fully updated for the August 24th continuing Benchmark Revisions of the Money Supply, back to 1996. Where 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 -- Systemic Liquidity. Accordingly, comparative year-to-year change in the various March 2021 to July 2021 Money Supply measures against the heavily spiked year-ago activity tend to be depressed, against what otherwise would be the change versus the February 2020 Pre-Pandemic Trough, effectively the “Base Circumstance,” before the emergency liquidity surge. Background definitions and related detailed discussion, historical data and graphs for each of the Money Supply Series were covered in Benchmark Commentary No. 1459, with updated details pending in No. 1460c The Fed’s release of the August 2021 Money Supply details is scheduled for September 28th.

Here is how the July 2021 Money Supply numbers shaped up. ShadowStats “Basic M1” (Currency plus Demand Deposits [83% of the “old” pre-May 2020 M1]) surged by an historic 91.7% in July 2021, against the February 2020 Pre-Pandemic Trough, up from a revised 87.6% [previously 87.8%] gain in June 2021 [in contrast, Pandemic-distorted year-to-year change rose to 56.7% in July 2021, versus a revised 55.9% [previously 56.1%] in June 2021]. In like manner for the broader Money Supply measures, July 2021 activity versus the February 2020 Pre-Pandemic trough for the newly redefined headline M1 (now including Savings Deposits, at about 92% of M2,) was up by a new “consistent-reporting” record annual growth of 39.2% versus 38.0% in June. Separately, M2 was up by a record 32.7%% in July, versus 31.7% in June, against the Pre-Pandemic Trough, while the ShadowStats Ongoing-M3 Estimate was up by a record 26.7% in July 2021, versus 26.1% in June 2021. The flight of cash to relatively greater liquidity continues.

(September 10) MONETARY BASE – UPDATED – Early numbers in September 2021 show a continuing Monetary Base Surge, where the ShadowStats “Preliminary” Estimate of the August 2021 Monetary Base showed that it gained a Cycle-High 83.0% against Its February 2020 Pre-Pandemic Trough, Up from the prior high of 77.5% in July 2021. (FRB, ShadowStats). The “Preliminary” August Estimate was imputed from weekly data available through the week-ended September 1st. ShadowStats “Preliminary” July Estimate based on the weekly data was 77.3%, prior to the Fed’s monthly release of 77.5%, some weeks later. The Monetary Base broadly moves on a parallel basis with the Money Supply, but the Monetary Base now will not hit the record annual growth levels of the 2007-2008 Banking System Collapse, which at the time exploded Reserve Balances (up 5,000 percent year-to-year, but which never reversed in parallel in a post-Crisis movement). Nonetheless, those current patterns of change in the aggregate Monetary Base reflected parallel changes in the Reserve Balances at Federal Reserve Banks component surging from 138.0% in July 2021 to a new Cycle-High of 149.4% in August 2021. The Currency in Circulation component has continued hitting successive, historic all-time high dollar levels and record-high growth rates against the Pre-Pandemic Trough, at 21.7% in August 2021, up from 21.6% in July 2021. Just-released weekly reporting by the Fed through September 8th, shows continuing expansion of the Monetary Base. Further detail and graphs follow in No. 1460c.

Systemic Turmoil is just beginning, with both the Fed and U.S. Government driving uncontrolled U.S. dollar creation, between unconstrained Money Supply growth and uncontained Deficit Spending. Again, continued extraordinary Monetary and Fiscal Stimulus will be needed at least into 2022, quite likely into 2023, irrespective of the nature of the COVID-19 vaccines. Indeed, likely leading into accelerating inflation, Hyperinflation, both extreme Monetary and Fiscal stimuli are underway. 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 pending No. 1460c.

(April 6) U.S. GOVERNMENT FINANCIALS - U.S. Government 2020 Financial Statements. -- The deepening deficit net worth of the U.S. Government’s financial condition hit a record shortfall – negative net worth – of $113.8 trillion in fiscal year 2020 (year-ended September 30), widening from a $103.4 trillion negative net worth in 2019. That 2020 shortfall reflected an operating deficit “Net Position” or operating negative net worth of $26.8 trillion in 2020, widening from a Net Position deficit of $23.0 trillion in 2019, plus deepening unfunded Social Security and Medicare net liabilities (Closed Group) of $87.0 trillion in 2020, versus $80.4 trillion in 2019. As did her predecessors, Treasury Secretary Janet L. Yellen described the current “Fiscal Path” as “Unsustainable,” with the government’s current Debt-to-GDP ratio at 100% in 2020, predicted to go to 623% before the end of the Century. Those indications are overly optimistic in the extreme. Allowing for the “Unfunded” Liabilities, the Debt-to GDP ratio was 531% in fiscal 2020. The 2020 Financial Report is available here: https://www.fiscal.treasury.gov/reports-statements/financial-report/ -- ShadowsStats will provide extended analysis in a pending Benchmark Commentary.

SHADOWSTATS ALERT: In context of the still-evolving Coronavirus Pandemic and related economic crises, near-term financial-market risks from negative economic, liquidity and political issues, are intensified by potential Hyperinflation, long viewed by ShadowStats as the ultimate fate of the U.S. Dollar. That said, irrespective of recent relative weakness in gold prices and related Central Bank or other market machinations, the ShadowStats broad outlook in the weeks and months ahead remains 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 stronger currencies, and (4) Despite recent extreme Stock Market volatility and current record or 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 the U.S. Treasury Secretary, 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 FOMC.

• .. P O S T I N G .. S C H E D U L E .. UPDATED (September 10th) Economic Commentary No. 1460c will post over the Weekend. A particularly important, extensive and fully updated issue, No. 1460c covers the latest reporting of and revisions to Inflation, Money Supply, Employment, Production, Retail Sales, Construction, GDP and recast Recession-Depression graphs, all in context of an updated review of, and outlook for the still evolving U.S. Economic Downturn and Business Cycle. It also reviews ongoing FOMC actions and the outlook for rapidly intensifying Inflation, including the latest CPI, PPI, GDP Deflator and Alternate Measures. The ShadowStats.com reporting schedule remains fluid, with actual postings advised to Subscribers by a coincident e-mail, along with appropriate links.

PENDING ECONOMIC NUMBERS AND EVENTS: On Tuesday, September 14th, the Bureau of Labor Statistics will publish its August 2021 Consumer Price Index (CPI) (at 8:30 a.m. ET), and the Census Bureau will publish its annual Poverty and Household Income Survey (at 10:00 a.m. ET). ShadowStats review of the new material will be post here late-day.

• ARCHIVES - VIEWING EARLIER COMMENTARIES. ShadowStats postings of May 2021 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 (above) provides the latest headline data and exclusive ShadowStats Alternate Estimates and related Graphs of Inflation, GDP, Unemployment, Money Supply and the ShadowStats Financial-Weighted U.S. Dollar. Data downloads and the Inflation Calculator are subscriber only.