The Little Economy That Coudln't

"Malaise" is how I will forever describe the economy under the Obama administration.  Not because he's a socialist, and not because of any ideological difference, but just because that's what it's been.  Malaise.  RGDP growth has averaged 1.8% under Obama which is less than half of what it used to be during those evil and hated 40's-60's.  Even that hated Bush Jr., with the lion's share of The Great Recession's economic contraction in his figures, posted a 2.0% average growth rate.  But then I decided to pull up one of those old, boring economic charts I occasionally like to look at:

Inventory to sales.

And you just can't help but toss your hands up into the sky, for it looks like the malaise will continue.

Inventory to sales, though boring, is a ratio I like to look at because it's telling about what you might be able to expect in our economic future.  Specifically, it is the ratio of corporate inventories to their sales and this ratio shows how much "stuff" corporations have on hand relatively to how quickly they're selling it (sales). 

A decreasing ratio is a good omen for the economy in that if sales are up, that means there's demand for more goods.  Additionally, if sales are high relatively to low inventories, that is doubly good in that it implies corporations will have to hire more people to make more goods. 

An increasing ratio however, is a bad sign.  That means either sales are low, inventories are high, or a combination of both which means low demand AND companies are likely to lay people off to eat through excess inventories.

Historically, you'll notice two things about the inventory to sales ratio.  One, you can see it spike right before recessions, and, two, a general downward trend (as inventory management techniques have constantly been lowering the amount of inventory relative to sales).  But during pretty much ALL of the Obama administration this ratio has been going up, especially so these past two years.

This isn't to say that I'm going to predict recession starting tomorrow.  Nor, is this to say employers are going to start cutting back on employees next week.  The truth is since the TARP bail outs, QE-X, and the fact the US has the world's reserve currency, neither our markets nor economy is functioning how they should, and predicting them is even more laughably impossible than it was before.  But I will take one huge gamble.  There isn't going to be any booming economic growth nor massive hiring sprees we experienced under Reagan in 1983 or Clinton in 1998 in the near future.  The malaise will continue until Obama leaves the presidency, and even then no real recovery will happen unless President Trump and an agreeable congress decide they want to aggressively pursue policies that result in a booming economy. 

Regardless, for any of you millennials or young Gen X'ers that wanted that white picket fence, a nuclear family, and a stable career that could provide for them all, think again.  That American dream will not be available to you.