KEMPNER CAPITAL MANAGEMENT, INC.
2nd QUARTER ECONOMIC NEWSLETTER
July 10, 2024
By Harris L. Kempner, Jr., President
Reality bites. So do the extended, high, interest rates that have been generated by the Fed. In our opinion, we are now beginning to clearly see that these months of Fed-generated inverted yield curves and high rates are resulting in the economic slowdown we have been predicting. It is beginning to show up most particularly in weaker employment statistics. Continuing claims of 4-week unemployment’s latest reading was 239,000, but the important point is that this is up over 140,000 over the last six months. The latest unemployment rate has jumped from 4% to 4.1%. The most striking indicator of a slow-down in our opinion is that the services index, which measures the growth or contraction of the most important part of the U.S. economy, dropped last month from 53.8% to 48.8%. This is a negative reading since it is below 50%. And finally, as a result of some of this, the real retail sales, as suggested for inflation, are flat for the year, which is also an indication of an economic slow-down.
Along with the clear, detailed effects of the tightness of the Fed, comes a lot of political uncertainty. The Israel and Hamas/Hezbollah conflict continues as well as the war in Ukraine. France looks as if it will have a significantly changed government, which is much less Europe-oriented.
In the U.S., the unfortunate display by President Biden in his debate with ex-President Trump has led to a greater likelihood of Mr. Trump winning the presidential election. His economic policies, as recently stated, have considerable potential downside in our opinion. Any attempt to massively increase tariffs, as he claims he wishes to do, coupled with his stated desire to weaken the ability of the Federal Reserve to act independently could very well lead to high inflation and economic dislocation in this country.
All in, the economy looks to be in a clear slow-down path toward the recession we have been discussing for the last several quarters, a matter which is compounded by political difficulties world-wide.
2nd QUARTER ECONOMIC NEWSLETTER
July 10, 2024
By Harris L. Kempner, Jr., President
Reality bites. So do the extended, high, interest rates that have been generated by the Fed. In our opinion, we are now beginning to clearly see that these months of Fed-generated inverted yield curves and high rates are resulting in the economic slowdown we have been predicting. It is beginning to show up most particularly in weaker employment statistics. Continuing claims of 4-week unemployment’s latest reading was 239,000, but the important point is that this is up over 140,000 over the last six months. The latest unemployment rate has jumped from 4% to 4.1%. The most striking indicator of a slow-down in our opinion is that the services index, which measures the growth or contraction of the most important part of the U.S. economy, dropped last month from 53.8% to 48.8%. This is a negative reading since it is below 50%. And finally, as a result of some of this, the real retail sales, as suggested for inflation, are flat for the year, which is also an indication of an economic slow-down.
Along with the clear, detailed effects of the tightness of the Fed, comes a lot of political uncertainty. The Israel and Hamas/Hezbollah conflict continues as well as the war in Ukraine. France looks as if it will have a significantly changed government, which is much less Europe-oriented.
In the U.S., the unfortunate display by President Biden in his debate with ex-President Trump has led to a greater likelihood of Mr. Trump winning the presidential election. His economic policies, as recently stated, have considerable potential downside in our opinion. Any attempt to massively increase tariffs, as he claims he wishes to do, coupled with his stated desire to weaken the ability of the Federal Reserve to act independently could very well lead to high inflation and economic dislocation in this country.
All in, the economy looks to be in a clear slow-down path toward the recession we have been discussing for the last several quarters, a matter which is compounded by political difficulties world-wide.
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