Treece Blog: Economy showing signs of stagnationWritten by Ben Treece | | email@example.com
Readers may recall that I believe the U.S. economy is on the up and up and will see substantial growth going forward, given the proper regulatory environment. I still believe that the U.S. economy will only continue to improve — however that is not without a few hiccups along the way.
I have received several reports, many of which show signs that economic growth is slowing. Bloomberg reported that the Chicago Purchasing Managers Index fell below 50 for the first time since 2009, showing that activity is slowing. In the Consumer Confidence report, 37.1 percent of individuals polled said they felt jobs were hard to find. This is the worst reading since November. While motor vehicle sales continue to come in strong, the numbers are staying relatively flat as opposed to growing (15.3 million annual rate in March versus 15.4 million annual rate in February). The ADP National Employment Report also showed signs of weakness in the jobs market.
This economic slowdown can be attributed to regulations and costs of employment. My family’s stance on regulations in business is fairly well known through our writings; we believe in sound and effective regulation, but not ineffective rules that allow policymakers and regulators to play “gotcha” with business owners. Unfortunately, we live in a highly regulated world, but many businesses have fought back as much as they can.
I have written several times about corporations hoarding cash until they feel comfortable expanding operations and hiring new employees. Even large corporations would run as efficiently as they could with a smaller workforce but at some point they reach full capacity. Given current conditions, the U.S. economy may be operating at full capacity. This is not to say that things are bad, but things could always be better. Washington, D.C., politicking is playing a big part in holding back economic growth.
One thing that businesses like is certainty. I can honestly say with the strongest of convictions that the legislative and executive branches of our federal government have abjectly failed in doing their parts to encourage business and economic growth. I do not intend that as a partisan statement. Actions taken (or not taken) by Republicans in the House of Representatives have been as damaging to the economy as actions taken (or not taken) by Democrats in the Senate or the Obama administration.
At some point, optimism will begin to increase among business owners and cash will be deployed on property, plants, equipment, employees, etc. The ball is in the hands of our elected officials. They know what needs to be done, and if they cannot see the solution to the problem they have created, they need to start talking to business leaders.
It is maddening to see politicians scream and shout that the economy hasn’t fully recovered, yet they do nothing but write more rules to constrain growth. If we want to get the country back to work and get GDP growth back to 7-10 percent per year, businesses need to have a reason to spend their money. Right now, they have not been given an incentive to do so.
Ben Treece is a 2009 graduate from the University of Miami (Fla.). He is a partner with Treece Investment Advisory Corp. and a stockbroker licensed with FINRA, working for Treece Financial Services Corp. The above information is the express opinion of Ben Treece and should not be construed as investment advice or used without outside verification.