US Economy Still Flying High

Today was a Roaring 2020s kind of day. The DJIA jumped to yet another record high. Stock prices rose even as Nvidia dipped after beating quarterly earnings expectations (which were widely expected to beat expectations). Once again: No recession in today's economic indicators.

For the past couple of years, many economists (and Jamie Dimon) have predicted that the consumer would soon be "tapped out" after exhausting pandemic-period "excess savings." A robust jobs market, rising real wages, increased productivity, and record corporate profits and cash flow suggest the bull market has room to run. Consider:

(1) Real GDP growth was revised from 2.8% q/q (saar) to 3.0% in Q2. Real final sales to private domestic purchasers increased from 2.6% to 2.9% (chart). In his July presser, Fed Chair Jerome Powell described it as "private domestic final purchases, or PDFP—which excludes inventory investment, government spending, and net exports and usually sends a clearer signal of underlying demand." It is sending a strong signal currently.

Consumer spending was revised from 2.3% to 2.9%, in part due to less personal saving. That makes sense considering stock prices, home prices, and interest income continue to boost wealth and income. Inflation was a touch lower than initially estimated, with Q2's PCED lowered from 2.6% to 2.5% y/y.

(2) Unemployment claims. The labor market continues to normalize. Initial jobless claims fell to 231,000 for the week ended August 24 (chart). Continuing claims rose slightly to 1.868 million.