Falling Manufacturing and Oil Demand, Inventory Build-ups, Out of Sync with Job Numbers Report

Falling Manufacturing and Oil DemandAfter last Friday’s U.S. jobs report, the mainstream media is telling us that the U.S. economy is back on track once again, because U.S. unemployment has gone down.

The media is telling us that all the key indicators of economic growth are suggesting we are not going in the right direction. My dear reader, you need to know that the majority of those reporting on economic news know very little about finance. Case in point, instead of focusing on the underemployment rate, which sits close to 15% and includes the people who have given up looking for work and those who can only get part-time work, the media focuses on the standard unemployment rate, which doesn’t include the aforementioned!

Right now in the in the U.S. economy, key indicators like crude oil, manufacturing orders, shipments, and inventories are suggesting there is no economic growth in the U.S.; they are all moving in the opposite direction of economic growth.

Crude oil is a key indicator that indicates demand in an economy, as oil is used in almost every industry some way or another. If there is economic growth, more crude oil is used by various industries, and vice versa in troubled economic conditions.

Right now, the demand for crude oil is falling. In late September, it fell to the lowest level since April of this year, down to 18.3 million barrels a day compared to 19.5 million barrels a day at the end of August—this means demand for oil has gone down. (Source: Bloomberg, October 3, 2012). That’s why oil prices have been falling as of late. In economic growth, demand for crude oil would be increasing.

The amount of new manufacturing orders, another key indicator, has decreased as well. New manufacturing orders witnessed their biggest decrease since January of 2009 in August. New orders decreased 13.2% in August after seeing an increase of 3.3% in July. (Source: U.S. Department of Commerce, September 27, 2012).

Shipments of durable goods also decreased by three percent, with transportation equipment shipment losing almost eight percent.

When there is economic growth, business inventories don’t build up, because goods are being consumed. But in the current U.S. economy, inventories are building up quickly. Inventories increased by 0.6% in August, the biggest inventory build-up in years.

While the key indicators suggest U.S. economic problems, the mainstream media continue to focus on the unemployment rate getting under eight percent, the first time that’s happened since President Obama took office.

The harsh reality is that the U.S. economy is facing various troubles and struggling to find economic growth. If you look at the stock market, it will show you a rosy picture, but other key indicators are giving warnings. Don’t let small pieces of good news change your view on the economy. If there is economic growth, the key indicators will confirm them and that’s simply not the case right now.

I’m not in the same boat as Jack Welch, the former CEO of General Electric Company (NYSE/GE), who insinuated on Friday that the U.S. job numbers report for September was cooked. But I will see that the negativity of the majority of U.S. economic key indictors does not jive with the declining official unemployment rate.