- by New Deal democrat
There is a slew of economic data being released tomorrow, the most important of which will be personal income and spending, so I will likely defer some reporting on the other data until Friday.
But in the meantime, there’s no significant data today. So let me take this opportunity to show in the simplest terms why all of the economic chaos coming out of Washington, including Tariff-palooza, mass deportations, the Big Billionaire Bust-out Bill, and the gas price spike and all of the other disruptions arising from the war with Iran have not put the US economy into recession as of now.
First, here are stock prices for the last year:
One year ago, the S&P 500 was about 5900. Yesterday it closed at 7519.12, about a 27% increase in that one year period. That is an absolutely booming (or bubbly!) stock market, driven mainly by AI-related companies.
It is estimated that the top 10% of the wealth distribution owns about 90% of all stocks. The top 10% by income own about 70%.
By contrast, both personal income and average nonsupervisory earnings have grown about 3.7% YoY as of their respective latest readings:
This vs. the latest YoY growth of 3.8% in the CPI.
So while the lower parts of the income distribution are struggling, the uppermost elements are doing just fine, thank you.
And they are spending.
Here is the last three years’ of YoY weekly retail spending by Redbook. As of this week it showed a 9% YoY increase:
Not only has spending been positive YoY, but there has been a marked acceleration in that YoY spending beginning last autumn and accelerating even more this spring.
One of the very first things we could expect consumers to cut is the cost of dining out. That hasn’t been happening either:
Typically in 2024 and 2025, YoY growth in dining reservations was about 6%-8%. In the past 12 months it has accelerated to over 10% gains YoY.
So why isn’t the US in recession? Because gains by the uppermost in the income and wealth distribution have enabled such free spending that it has more than overbalanced the struggles of most of the rest.
