The Current US Economic Recovery Is Drawing To A Close.

The US economic growth rate reached 2.9% in the 3 quarter, the fastest growth rate in the last 2 years, while China's manufacturing PMI rose to 51.2% in October.

Under the optimistic expectation of economic recovery, many people have expectations for the end of the year, and feel that the current economic stability, price recovery and improvement of corporate profits are good times to eat meat and drink soup.

However, we want to pour out the cold water out of season, because the so-called economic recovery can not last at all, and the shadow of economic recession has emerged.

If we simply look at the quarterly economic growth in the US, the rebound in the 3 quarter of GDP is indeed very high, because the United States has only about 1% GDP growth for 3 consecutive quarters, and suddenly jumped to 2.9% in the 3 quarter of 16.

But if we decompose the composition of this 2.9% GDP growth, we find that the most important consumption contribution is only 1.5%, or even lower than the average of 1.8% in the past 3 quarters.

The growth rate of GDP is mainly dependent on two other factors.

Two is investment.

Export recovery is difficult to continue.

In the 3 quarter, US net exports contributed 0.8% of the economic growth rate. However, as a consumer country, the United States imports larger than its export scale, so net exports are negative contributors to the long term economic development.

In the 3 quarter, the export sector's outstanding performance was inseparable from the contribution of the US dollar's short-term weakness: the US dollar index at the end of last year was still around 100, but in the 2 and 3 quarters of 16, the US dollar index fell to 95, thus promoting the short-term improvement of the US export sector in the 2 and 3 quarters.

But the dollar index has rebounded to around 98 at the end of the year's strong interest rate increase, and the stronger dollar means that the export sector in the 4 quarter is likely to drag back economic growth.

Inventory is only recovering in the short term.

There are three main investments in the United States: non residential investment (mainly enterprise equipment investment, infrastructure investment), residential investment and inventory investment.

The top two investments in the 3 quarter of this year did not change much, and the contribution of inventory investment to economic growth jumped from -1.2% to 0.6%.

The problem is that the contribution of inventory changes to the economy is cyclical. It is a positive contribution when replenishment is made, but it is negative when it goes to inventory.

Commodity prices have risen sharply in the past few months, pushing companies to replenishment. But after the stock has risen sharply, can the contribution of inventory investment continue if commodity prices can not continue to rise?

Therefore, from the structural analysis, the sharp rebound in the US economy in the 3 quarter was mainly contributed by short-term factors, including the depreciation of the US dollar, the improvement of exports, and the increase in commodity prices, which promoted the redevelopment of enterprises' stocks. However, the growth of consumption as a foundation is still slow. If the short-term factors disappear in the future, the growth rate of the US economy will probably slow down again.

However, we believe that the future of the US economy is not going to slow down again, but it may be another recession.

First of all, from the perspective of time, the current US economic recovery is coming to an end.

From the experience of the US economic cycle over the past 100 years, the average duration from recession to recovery is about 50 months, the longest not more than 120 months, and only 3 times in history have been recovered for more than 90 months.

The current round of economic recovery from the recession in June has continued to recover for 90 months in 09 years. In theory, the recovery cycle has reached the end and is likely to end any time.

Second, the current round.

The unemployment recovery is fragile.

In the past 16 years, the average employment rate in the United States has been 178 thousand, the lowest in the past 5 years, far below the average of over 220 thousand in the past two years.

Moreover, the employment data of the United States also have great defects, because the employment data only count the newly created job opportunities, but there is no statistical disappearing job opportunities.

Since the financial crisis, the United States has created 100 thousand jobs every month, which has increased about 9 million jobs.

But at the same time, the number of non labor force in the United States increased from 80 million to 94 million, which means 14 million people had completely withdrawn from the labor force.

This means that every time the United States creates a new job opportunity, it also eliminates 1.5 jobs, so more and more people are unemployed.

At present, the labor participation rate in the United States has dropped from 66% at the end of 08 to about 63% now, which means that only 6 of the 10 working age people are looking for a job, while the other 4 officials have already been financially free to find jobs, but they may have been unable to find jobs for a long time, so they have to give up.

There are many reasons for the downturn in employment, including the low end of globalization.

The pfer of machinery to human resources is caused by the shift from developing countries to the developing countries.

The reason why the US election is so fierce is that Hilary, the Democratic Party, represents the elite politics and is supported by the large enterprises, the working and educated elites. While Trump of Republican Party is supported by the masses without working background and low educational background, his tit for tat reflects the huge defects behind the US economic growth. Only half of them enjoy the fruits of economic growth, while the other half do not have jobs.

If Hilary is to come to power in the future, the current policy will continue, and it will have little impact on the US economy.

But if Trump comes to power, then the policy of anti globalization and isolationism it supports will have a huge negative impact on the US and the global economy.

Finally, the interest rate increase at the end of the year is the last straw.

In our view, from the current employment in the United States, it is the worst performance in the past 5 years, and does not support the Fed's interest rate increase at all.

But judging from market expectations, the futures market now expects the fed to raise interest rates by 70% in December, which means that the Fed's rate hike is a big probability at the end of the year.

The strong rebound in US economic growth in the 3 quarter provided ample justification for raising interest rates at the end of the year.

The problem is that if the 3 quarter economic rebound is only a short-term contribution, if the Fed increases its interest rate at the end of the year in order to prove its credit, then the interest rate upward will lead to the deterioration of investment and consumption. Then the superimposed strength of the US dollar will lead to a fall in exports, and the price of goods will reach the top and lead to a decline in the contribution of stocks. It is very likely that the US economy will fall into recession in 17 years.