Multiple Economic Indicators Point to a Structural Decline in U.S.

A structural decline in the American economy looms as several economic indicators weaken significantly at the same time.  In November, the United States trade balance weakened by $42.4 billion, with exports falling to $182.2 billion.

A structural decline in the American economy looms as several economic indicators weaken significantly at the same time.  In November, the United States trade balance weakened by $42.4 billion, with exports falling to $182.2 billion.

Analysts expected a steep decline in exports, as a continually strengthening U.S. dollar has made American goods and services less competitive around the world. On a month-over-month basis, the trade deficit fell 4.9 percent.  A decline in demand for American goods drove the deficit. Product demand fell $2.3 billion versus just a $100 million decrease in demand for American services from abroad.

While exports fell, imports also fell, although at a slower rate. In total, imports fell to $73.7 billion, which constitutes a 2.8 percent rate of decline.

Job Creation Weakens

In another report, Gallup noted that job creation is weakening, with the Job Creation Index (JCI) falling by a point to 30 in December. While the decline defied expectations for improvement, Gallup remained upbeat, noting that the index remains “strong” and pointing out “Gallup has reported on other indicators showing that Americans increasingly see the state of the labor market as improving.”

However, the 30 reading is near the lowest point in 2015 while another study shows economic confidence has fallen by 9 points.

Behind the index is a sign of growing stagnation in the workforce, with the amount of respondents saying employers are not hiring rising to the highest level since the first quarter of 2015. Gallup said in a statement that “42 percent of employees [say] their employer is hiring workers and expanding the size of its workforce, and 12 percent [say] their employer is letting workers go and reducing the size of its workforce.”

Mortgage Applications Plummet

A new study by the Mortgage Bankers Association sees mortgage applications falling sharply, with the purchasing index down 15 percent and the composite index down 27 percent.

At the same time, interest rates across the board rose, with 30-year fixed rate mortgages rising to 4.2 percent, the highest level since July 2015. Analysts expect mortgage rates to continue to rise.

The rise in interest rates hurts refinancing activity most markedly, with the MBA’s refinance index falling 37 percent from two weeks prior. Some analysts have nonetheless argued that 2016 will be a strong year for housing, as an improvement in job growth and lower unemployment rates will encourage Millennials to buy houses.

However, some economists have noted that price-to-median-income ratios have worsened significantly over the last seven years, and continued price growth will make homes even that much more expensive for young Americans.

Pricier loans through higher interest rates could make houses even less affordable for Millennials, keeping them as renters even longer.