A Thousand Opinions…but No Answers

Recession - to be or not to be, that is the question. While it is interesting to follow all the tea leaves floating in the tempest, no one has a crystal ball about whether a recession will occur. It seems that the Fed will remain on course to crush inflation, which usually also crushes economic expansion. The banks, at least some, have been caught in a bond yield problem and are having to sell their 2-year bonds at a discount to cover their short-term deposit withdrawals or loan losses.

When one leg of your stool is wobbly, it is annoying; when two are wobbly and the third is questionable, people tend to look for more solid ground without landing on it as the stool collapses. The next person won’t use that stool, and may feel wobbliness in theirs, whether real or imagined. They ask the person next to them seeking reassurance. Suddenly, everybody wants a nice, solid chair.

Recessions are often caused by fear factors, and the pundits are doing their very best to pump those into the conversation on mainstream media. But most of manufacturing isn’t feeling any serious wobble in their sector of the economy. They are becoming cautious, with more emphasis on invoice collection and less on extended payment terms, but their order books are still fairly solid. And they continue to hold onto employees, which flies in the face of the very thing that signals to the Fed that their strategy is becoming effective – rising unemployment. The target – about 5% unemployment.

That doesn’t seem like a far stretch from 3.4%, but it means millions of Americans will lose their jobs. They won’t have the funds to spend. Demand will fall. Order books will suddenly contract. More layoffs will begin, and before the Fed can stop the derailment, the economic train comes off the tracks. Getting it back up and running then becomes the Fed focus, but in the meantime, there is an economic mess that will have unpleasant impacts for everyday Americans for years to come, trying to recover from their personal downturn.

Inflation is cooling, albeit, slowly, and not fast enough for the Fed. The Fed is moderating its interest rate hikes, with the latest being just a quarter of a point, but the problem is knowing when you have gone a few basis points too far. Unfortunately, the Fed often doesn’t know when the train cars will begin jumping the rails. And when it happens, it is rapid-fire and too late to prevent. They don’t slow the train – it is crash or no crash.

Manufacturing Outlook continues to be encouraged by the resilience in the manufacturing sector. Keep in mind that the manufacturing industry has been the canary in the coal mine going into every recession, and the breath of fresh air coming out of every recession. We encourage our readers to observe it carefully and closely. At any moment in 2023, some action by the Federal Reserve Bank or the federal government could create the chain reaction of an economic derailment.

Tune in to the Manufacturing Talk Radio Podcast and listen to the ISM Report on Business® recorded on Monday, April 3rd with Manufacturing Committee Chair, Mr. Tim Fiore, and the episode recorded on Wednesday, April 5th with the Services Committee Chair, Mr. Anthony Nieves. These two discussions are the most in-depth analysis presented by the Institute for Supply Management on any media platform, and contain signals about economic conditions ahead. Keep a close eye on employment in this report, which showed its first reading below 50 in March, 2023, in the manufacturing sector. Will this become a trend, as the Fed wants, or was this an errant blip on the radar?

Be sure to listen to the Manufacturing Talk Radio episode with Dr. Chris Kuehl around the ASIS report, or Armada Strategic Intelligence System for manufacturing. It is showing an almost eerie 95%+ accuracy rate in its economic projections for the next several months. Dr. Kuehl joins hosts Lew Weiss and Tim Grady about mid-month to provide the latest strategic update in a tightly packed 23-minute discussion.

There is always more, including the development of solar power that we highlight in this issue, including the reshoring of this technology and manufacturing to U.S. shores and its heartland. n

Lewis A. Weiss, Publisher

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