It Just Shouldn’t Matter

By David Stockman  |  September 23, 2019

Main Street would be better served if the Federal Reserve simply did headstands rather than pursue its Humphrey-Hawkins statutory mandates with its interest-rate and balance-sheet tools.

In fact, Fed headstands would be far preferable than monetary central planners fiddling with the federal funds rate and/or doing stuff like “quantitative easing.”

They wouldn’t have the collateral effect of destroying honest price discovery on Wall Street, inflating massive bubbles that inevitably collapse and taking down the real economy in the process.

The Numbers That Really Matter

The proof that the Fed’s 10-year run of negative money-market rates and massive bond-buying programs did nothing for the Main Street economy is overwhelming.

Certain indicators, like the unemployment rate, always falls to historically low levels at the very end of an extended business cycle. And, at month No. 121, we’re now in never-before-charted waters.

The Donald, clueless, points to numbers like these and tweets about the “greatest economy ever.” But calendar- and momentum-driven cycle gains don’t matter.

What really counts is whether there’s been any acceleration in the U.S. economy’s modest trend during the Donald’s stewardship. And there hasn’t been.

The Donald has now received 32 Bureau of Labor Statistics report cards. The average monthly gain in nonfarm payrolls computes to 190,000. By contrast, the average monthly gain on Barack Obama’s last 32 report cards was 223,000.

Likewise, the Donald has had 10 quarterly gross domestic product (GDP) reports. But real final sales have averaged just 2.7% annualized compared to 2.9% for the 10 last quarterly reports posted during Obama’s watch.

There’s been no break in momentum, just a slowing into cyclical old age.

Fools Think Alike

The point, of course, is that neither the Donald nor Obama has or had much to do with the delivery of these impaired economic performance measures.

Overwhelmingly, they reflect the strivings of the workers, businesspeople, investors, savers, entrepreneurs, etc., who comprise our $21 trillion economy. It’s these folks who inch it forward, day after day, as they seek to sustain and improve their own economic circumstances.

The Donald’s incessant and crude boasting about an economy that’s about to fall out of bed is a useful wake-up call. In only slightly more sophisticated form, the arrogant tools domiciled in the Eccles Building, amplified by Wall Street and Bubblevision, make the same unwarranted claims.

Fedheads never cease to gum about the “strong” labor market they’ve generated. But there’s less “there” there than meets the eye…

This is Not a Strong Labor Market

To wit, the total nonfarm payrolls count when Bill Clinton was packing his bags to leave the White House in January 2001 was 132.7 million. That figure had grown to 151.54 million as the Bureau of Labor Statistics’ report on the employment situation for August.

So, we’ve seen a gain of 18.8 million jobs over the last 18.5 years. That represents a distinctly unimpressive 0.72% annual gain, just one-third of the 2.3% per year job gain recorded during the previous 40 years.

And that’s not the half of it.  Full-time, full pay “breadwinner” jobs generating an average of about $50,000 per year in cash wages represented fully 55% of the BLS nonfarm payroll count in January 2001.

We’ve seen a miniscule 2.57 million gain in “breadwinner” jobs over the past 18.5 years. They accounted for just 13.6% of the reported total job growth, or merely 11,500 net new jobs per month over the period.

In short, the U.S. labor market is the opposite of “strong.” The Fed’s massive stimulus, in fact, has generated the lowest quantity and worst quality of job gains since the 1930s.

The taxpayer-funded health, education, and social services complex accounted for 24.8 million jobs in January 2001. That figure reached 34.8 million in August 2019. So, in this case, a sector that accounted for 18.5% of the nonfarm payroll jobs count in January 2001 accounted for 53% of the jobs gain since then.

The Fed’s massive stimulus during that two-decade period had exactly nothing to do with the explosive growth of output and employment here. It was all the doings of politicians in the fiscal sphere and, more precisely, the irreducible problem of relentless entitlement growth.

Another way of saying it is we could have furloughed the entire FOMC and the thousands of staffers who support the Federal Reserve System and its 12 regional branches and it would have made zero difference on Main Street.

After “Peak Trump”: Charting Uncharted Waters

It’s my pleasure to be delivering the Keynote Address at the 2019 Irrational Economic Summit.

Please join me October 10-12 at the Gaylord Resort & Convention Center at National Harbor, Maryland – right outside Imperial Washington – for what promises to be three days rich with ideas about how to protect and grow your wealth.

The stakes are already high heading into 2020. The U.S. presidential campaign is already underway. And the Tweeter-in-Chief is tied up in the day-to-day movements of the major stock indexes like no president before him.

And the increasingly desperate incumbent will do anything he must to hold the White House.

That’s why I’ve titled my Keynote Address, “After ‘Peak Trump’: Charting Uncharted Waters”.

Leviathan gets bigger, Wall Street gets richer, and Main Street… well, Main Street gets more and more little every day.

We’re rapidly approaching the end of the oldest, weakest economic “recovery” in American history. At this major tipping point, there’s no telling what the Donald’s great disruptions could do to your wealth.

The 2019 Irrational Economic Summit is fast approaching too. To reserve your spot today, simply click here, email our team at, or call 866-765-7506.

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David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR