by Xin Ping
The World Economic Forum Annual Meeting 2024 was convened amid changes and instabilities. Featuring the theme of “Rebuilding Trust”, Davos 2024 is asking every responsible country to provide more impetus for the recovery and growth of global economy.
Trust is built on credibility. All the major speakers in Davos know it clearly that speeches alone are not a guarantee of trust from his or her audience. Trust among nations, entities or individuals could only be rebuilt once credibility is manifested. Yet, some of the major economies are becoming less and less credible, their behaviour of “de-risking” towards other countries, disrupting global supply chains, building small yards with high fences, and so on, are actually creating division and distrust around the world. These countries might not be trustworthy partners for global growth. Even their domestic economy performance might not be as optimal as they claim it to be.
Take the United States for example. In the bigger picture, the U.S. economic data last year appears remarkably strong, with several accomplishments including continuous surge in stock market valuations, sustained decline in unemployment rates, and rapid GDP growth in the context of the Federal Reserve’s hiking rates. With these sounds-good results, the Biden administration seeks to crown itself as a creator of “economic miracle” in American history. But if we look carefully at the data, it’s easy to find some contradictions or even errors, which stained its credibility.
The “discrepancies”
Manufacturing is an important pillar of the U.S. emergence as a global economic power. When Biden took office, he signed a number of bills to support the revitalization of the domestic manufacturing industry. In 2023, the U.S. manufacturing industry ushered in the so-called “super cycle”. According to Federal Reserve Economic Data (FRED) statistics, the U.S. manufacturing investment increased from US$133.2 billion at the end of 2022 to US$194.3 billion in May 2023, generating approximately a growth rate of 0.4% in the first half of the year. Seemingly good enough!
But we all know that under current production conditions, economic growth, especially manufacturing expansion, is usually accompanied by increased electricity consumption. In the first half of 2023, the GDP of the U.S. increased by 2.3%, but national electricity consumption fell by 3%. According to the Short-Term Energy Outlook (STEO) released in September 2023, the U.S. electricity consumption is expected to decrease by 1.26% in 2023, from 4,048 TWh in 2022 to 3,997 TWh in 2023. Breaking it down by sectors, residential electricity usage is forecast to decline by 2.69%, commercial usage by 1.8%, and industrial usage by 1.39%. From this perspective, has the U.S. manufacturing industry really started the so-called “super cycle”? This is rather doubtful.
The logistics data in the U.S. also contradicts the notion of a swift economic rebound. Cathie Wood, CEO of ARK Invest, has highlighted concerns after analyzing UPS revenue, revealing a decline in daily delivery volumes despite stable market shares among major courier firms. This signals a broader shrinkage in the courier sector. FedEx has also predicted a substantial 25% year-on-year reduction in its national delivery volume for 2023.
The employment data should be questioned, too. The U.S. technology industry has been undergoing significant layoffs since the beginning of 2023, with large companies such as Google, Facebook, Walmart, and Amazon all laying off employees. Despite this, the employment data still shows a surprisingly good trend, with the unemployment rate continuing to fall and even hitting the lowest record in more than 50 years. The U.S. Bureau of Labor Statistics has reported that non-farm payrolls in September 2023 rose by 336,000, surpassing the expected 170,000. However, figures from the private firm Automatic Data Processing (ADP) indicated a modest 89,000 job increase in non-farm employment in the same month, well below the anticipated 153,000. Mark Zandi, chief economist for Moody’s Analytics, reckons that actual payroll gains are running an average of 150,000 to 200,000 per month, rather than the close to the 300,000 pace reported in the monthly jobs numbers.
The hidden truth
In statistics, deflection is allowed and data revision is a must. We cannot deny that some deviation or even calculating errors could affect the final result. However, if there is too much aberration without logical explanation, there are possibilities that the U.S. government might be manipulating data to secure its interests.
The first query comes from “discrepancies” in statistical methods. Since last year, the U.S. government has, for many times, significantly lowered employment data previously released: The data released for the first time are usually particularly good. After the Federal Reserve raises interest rates, the government makes “downward” revisions a few times. This is not a single case. It is becoming a practice that has occurred multiple times, which means either there are serious problems with the statistical method, or it is a “manipulation” aimed at guiding the market and managing expectations.
Some allude to a “hidden grand strategy”, aiming to mask deeper economic concerns, attract more capital to the U.S., and offset current account deficits with surplus capital. As the Federal Reserve continues to raise interest rates, the pressure on other countries’ overseas dollar debts has increased significantly. The U.S. has used its financial hegemony to divert domestic conflicts and plunder the wealth of other countries. At the same time, once the election season begins, the Biden administration’s focus is on superficial and eye-catching data, which might help win the majority of support in the presidential election.
It seems that the world cannot depend on the official data provided by the U.S. government to judge how its economic fundamentals are like. A discerning observer should see through the mirage of U.S. economy built on unreliable data or questionable statistics. Investors must keep vigilant not only about the spurious U.S. market, but more against the untrustworthy hand behind all this.
(The author is a commentator on international affairs, writing regularly for Xinhua News, CGTN, Global Times, China Daily etc. He can be reached at Xinping604@gmail.com.)
