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SHADOWSTATS DAILY UPDATE – November 21st to 23rd [Nov 21, 2:30 p.m. ET] – Recent Economic, Inflation and Monetary details are reviewed in the LATEST NUMBERS and SYSTEMIC RISK – MONEY SUPPLY AND MONETARY BASE and - U.S. GOVERNMENT FISCAL CIRCUMSTANCES Sections. Keep scrolling down also for SHADOWSTATS BACKGROUND, BUSINESS CYCLE, PLANNED POSTINGS and Other Sections. Alternate-Unemployment, GDP, Money Supply and CPI series are found on their ALTERNATE DATA TABS (above)

Sampling of Economic, Inflation and Monetary Headlines:

• Inflation, Economic and Monetary Circumstances Remain Far from Stable

• October 2021 Consumer Inflation Broadly Jumped to a Four-Decade High, Highest Since the Days of Runaway Inflation in the Early 1980s • Headline Year-to-Year GDP Inflation Hit a 38-Plus Year High of 4.53%

• The October 2021 Producer Price Index, Finished Goods Commodity Inflation, Jumped to a New 41-Year Peak of 12.5%, While October Annual PPI Final-Demand (FD) Goods Inflation, and Annual and Monthly Construction Inflation Readings Set New Historic Highs (FD Series Created in 2009)

• “Advance” Third-Quarter 2021 Annualized Real GDP Growth of 2.02% Was Entirely in Increased Inventories, Where Final Sales Declined at an Annualized Pace of 0.07% (-0.07%), the First Such Decline Since the Great-Recession, Outside of the Initial Pandemic-Collapsed Quarters (4q2019 and 1q2020)

• University of Michigan’s Preliminary November 2021 Consumer Sentiment Plunged to a New Pandemic Trough

• October 2021 Housing Starts Continued in Deepening Downturn; October Industrial Production Was Spiked by a Hurricane, while Retail Sales Were Spiked by Surging Inflation

• Worst-Ever 12-Month, Quarterly and Monthly Real Merchandise Trade Deficits (Third-Quarter and September 2021) Continued Pummeling U.S. Economic Activity, Despite FOMC Happy Hype

• Despite Highly Questionable Headline Payroll-Employment Gains, October 2021 Payrolls Continued to Hold Well Shy of Economic Recovery

• How Can the U.S. Economy Be Recovered Minimally, With October 2021 Payroll Employment Still 2.8% (-2.8%) Shy of Recovering Its Pre-Pandemic/ Pre-Recession Peak? Except for the Severe 1981 and 2007 Recessions, and Despite Being Well Off Bottom, the Current Payroll Shortfall Remains Deeper Than Anything Seen at the Troughs of the Other Six U.S. Recessions Back to 1957

• September 2021 Money Supply Growth Surged to Historic Highs, with “Basic M1” - Currency plus Demand Deposits – Up by a Record 97.3% from Its Pre-Pandemic Trough, With the September Monetary Base Surging to Cycle-High Growth of 84.9%

• The Preliminary-October 2021 Monetary Base Growth Softened Minimally, but It Has Rebounded Sharply Through November 17th.

• November 2021 FOMC Announced It Would Taper Its Regular $120 Billion in Monthly Asset Purchases by $15 Billion in November and by Another $15 Billion in December 2021; Such Would Continue, Conditioned on the Problematic Assumption of No Further Economic Downturn, or That No “... Risks Emerge That Could Impede the Attainment of the [FOMC] Committee’s Goals”

• G E N E R A L .. H E A D L I N E S .. -- Pandemic-Driven U.S. Economic Collapse Continues to Harden in a Protracted “L”-Shaped Non-Recovery with a Potential Renewed Downturn

-- Key Economic Series Show Not Only That the Pandemic-Driven Economic Collapse Has Been Worse Than Headlined, But Also That the Still-Unfolding Recovery Has Been Much Weaker Than Indicated

-- Severe Systemic Structural Damage from the Shutdown Is Forestalling Meaningful Economic Rebound into 2023 or Beyond, Irrespective of the Advances in Coronavirus Vaccinations

-- Panicked, Unlimited Federal Reserve Money Creation and Federal Government Deficit Spending Continue and Likely Will Expand, Fueling Accelerating, Major Domestic Inflation

-- With Fundamental Dollar Debasement Intensifying, Holding Physical Gold and Silver Protects the Purchasing Power of One’s Assets, Irrespective of Any Near-Term Central Bank or Other Machinations to the Contrary.

Scroll down for the Latest ShadowStats Outlook, Headline Economic News and Background Information on the U.S. Economy, Financial System (FOMC), Financial Markets and Alternate Data, Also for Publicly Available Special Reports and Contact Information.

• L A T E S T .. N U M B E R S [Pending Catch-up Commentary No. 1461 provides expanded analysis and graphs of these various economic and inflation series] .. NEW RESIDENTIAL CONSTRUCTION - October 2021 Housing Starts continued in decline, on top of downside revisions, following successive quarterly contractions into Third-Quarter 2021 (November 17th, Census Bureau). In context of regular monthly reporting volatility, October 2021 Housing Starts contracted by 0.7% (-0.7%) in the month, following a revised 2.7% (-2.7%) drop [previously 1.6% (-1.6%)] in September. Year-to-year change was 0.4% in October 2021, versus a downwardly revised 5.7% [previously 7.4%] in September. Against the February 2020 Pre-Pandemic Peak, aggregate activity declined by 4.3% (-4.3%) in October 2021, compared to a revised, deepened drop of 3.7% (-3.7%) in September 2021. Previously reported, the Third-Quarter 2021 aggregate Housing Starts series contracted for the second consecutive quarter, while the dominant Single-Unit Housing Starts series, accounting for 69.5% of October Housing Starts activity, declined for the third consecutive quarter. The First, Second and Third-Quarter 2021 annualized quarterly contractions in Single-Unit Starts respectively were 19.4% (-19.4%), 15.9% (-15.9%) and 4.6% (-4.6%) [previously 5.7% (-5.7%)]. The initial reading for October 2021 Single-Unit Starts [down by 3.9% (-3.9%) from September] would generate a fourth consecutive quarterly decline of 18.5% (-18.5%) if it held flat for the remainder of Fourth-Quarter 2021. With growth patterns for Total Housing Starts muted by the more-stable Multiple-Unit Starts, First-Quarter 2021 activity gained at an annualized pace of 6.1%, with Second and Third-Quarter contractions respectively of 2.6% (-2.6%) and a revised 8.1% (-8.1%) [previously 5.6% (-5.6%)]. That said, the initial October 2021 Total Starts declined by 0.7% (-0.7%) in the month, which would generate a Fourth-Quarter 2021 annualized contraction of 8.7% (-8.7%) if the balance of Fourth-Quarter activity held even.

The otherwise problematic Aggregate Building Permits series gained 4.0% month-to-month in October, having declined by a revised 7.8% (-7.8%) [previously 7.7% (-7.7%)] in September. Gaining 3.4% year-to-year in October, versus a decline of 0.2% (-0.2%) in September. Where the Census Bureau announced today (November 17th) that it was overhauling its reporting methodology of Building Permits in January, ShadowStats will revamp its analysis of that series as the new information becomes available.

(November 16) INDUSTRIAL PRODUCTION - October 2021 Industrial Production jumped 1.6% in the month, to a 22-month high, but half that gain “reflected a recovery from the effects of Hurricane Ida” (Federal Reserve Board) If the effects of Ida were redistributed from October back into the hurricane month of September, the two months would have been even, at three-month lows in activity. As headlined, though, October 2021 monthly activity gained 1.63%, following a minimally revised monthly decline of 1.27% (-1.27%) [previously 1.29% (-1.29%)] in September. Against year-ago Pandemic depressed activity, year-to-year change in October 2021 production was 5.14%, up from 4.58% in September. Against its more-meaningful Pre-Pandemic/ Recession Peak (PPP), October Production regained a headline recovery growth level of 0.28% against that PPP, having been shy of same by 1.33% (-1.33%) in September. It also held shy by 2.45% (-2.45%) in October of ever recovering its August 2018 historical economic peak.

October 2021 MANUFACTURING gained 1.16% versus its PPP, versus a 0.07% gain in September, and against non-recovery levels in July and August. It also held shy by 2.10% (-2.10%) of ever recovering its August 2018 peak. Annual Manufacturing growth slowed to 4.45% in October from a downwardly revised 4.70% in September. Monthly activity rose by 1.24% in October, having declined by a revised, slightly narrowed 0.68% (-0.68%) in September. October 2021 MINING held shy of recovering its PPP by 8.47% (-8.47%), against a 12.09% (-12.09%) shortfall in September. Annual Mining growth surged to 11.85% in October, from a negligibly revised 6.92% in September 2021. Monthly activity gained 4.12% in October, versus a slightly revised, deepened decline of 2.33% (-2.33%) in September. Separately, the remaining UTILITIES Sector tends to be randomly volatile, subject to variable weather more than anything else. It gained 1.23% month-to-month in October, having declined by a minimally revised 3.68% (-3.68%) in September. The Production numbers discussed here are in context of a previously “not recognized” economic contraction revealed in the Federal Reserve’s extraordinary, May 28, 2021 multi-year major benchmark revisions, discussed previously in No. 1460a with an extended assessment in pending No. 1461.

(November 16) RETAIL SALES – Surging CPI inflation accounted for 56% of the headline 1.70% monthly surge in October 2021 Nominal Retail Sales (Census). Boosted by exploding inflation and a pickup in Auto Sales, seasonally-adjusted October 2021 Nominal Retail Sales gained 1.70%, on top of upwardly revised nominal monthly gains of 0.83% [previously 0.74%] and 1.16% [previously 0.91%] in September and August. In real terms, net of headline CPI-U inflation, respective monthly gains were 0.75% in October, 0.41% in September and 0.88% in August, with parallel respective real year-to-years gains of 9.48%, 8.43% and 9.97%, and respective real gains against the February 2020 Pre-Pandemic Peak of 13.52%, 12.68% and 12.22%. ShadowStats standardly removes growth due to inflation from the headline Nominal Retail Sales series, reporting it in Real, Inflation-Adjusted terms, deflated by the seasonally-adjusted CPI-U as otherwise calculated by the St. Louis Fed.

Third-Quarter 2021 Retail Sales contracted quarter-to-quarter, both before and after adjustment for inflation, at respective annualized and revised real quarterly contraction rates of 8.1% (-8.1%) [previously 8.8% (-8.8%)], compared with an annualized growth rate of 18.8% in Second-Quarter 2021. Before inflation adjustment, Third-Quarter 2021 Nominal Retail Sales contracted at an annualized pace of 1.9% (-1.9%) [previously 2.7% (-2.7%)], compared with an annualized growth rate of 28.7% in Second-Quarter 2021. That said, while initial reporting of October activity was stronger than both the real and nominal average levels in Third-Quarter 2021 Retail Sales activity, October activity remained well shy of recovering Second-Quarter 2021 activity, in parallel with the October 2021 Cass Freight Index®, with implications for related, pending Real GDP revisions and reporting.

(November 15) CASS FREIGHT INDEX® - The seasonally adjusted October 2021 Cass Freight Index® gained 2.8% in the month, having declined 5.0% (-5.0%) in September. Where October activity was 0.3% higher than the average Third-Quarter 2021 activity, it remained well below average levels of activity in both First- and Second-Quarter 2021 (CassInfo.com - See detail at https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/november-2021). Cass noted in its October Press Release that, “[f]reight volumes remain capacity-constrained...” That said, while the October 2021 unadjusted Index gained 0.8% year-year, vs. 0.6% in September and 12.3% in August, the adjusted October Index was up against its February 2020 Pre-Pandemic Peak by 5.2%, versus 2.4% in September and 7.7% in August. Still, as will be detailed in a pending Commentary, the October 2021 Index remained shy by 7.6% (-7.6%) of ever recovering its 2018 economic peak, which also marked the historic peak in Industrial Production series, as highlighted in the recent annual benchmarking of that series [see Nos. 1460a and 1460b]. A heretofore unrecognized, FOMC-triggered 2018 economic downturn/ slowdown was ongoing into the onset of the March 2020 Pandemic Shutdown. -- ShadowStats regularly follows and analyzes the Cass Freight Index® as a highest-quality coincident and leading indicator of underlying economic reality. We thank Cass for their permission to graph and to use their numbers in our Commentaries. ShadowStats sees the ongoing freight slowdown in the second half of the year as being consistent with other indications of a pullback in current economic activity.

(November 12) CONSUMER SENTIMENT - The University of Michigan’s Preliminary November 2021 Index of Consumer Sentiment fell to “... its lowest level in a decade, due to an escalating inflation rate ...” (University of Michigan - Go to http://www.sca.isr.umich.edu for details).

(November 10) CPI INFLATION – Annual October 2021 Consumer Inflation broadly was at the 40-year high “Runaway Inflation levels” of the early 1980s, not the otherwise, heavily hyped headline “31-Year High” CPI-U Peak of October 1990 (November 10th, Bureau of Labor Statistics - BLS). Depressed artificially over the years by reporting and definitional gimmicks, the October 2021 Annual CPI-U was stronger than consensus, up by 6.22%, against an expected 5.9% and up from the 13-year high of 5.39% in September. Once reported, the BLS and related Press coverage noted that the headline 6.2% was the highest since November 1990. Yet, while that 6.22% was just 0.05% shy of its 31-year (1990) high of 6.39%, it also was just 0.08% shy of its 39-year high of 6.44% in July 1982. As an side, the BLS confirmed once again, that its procedures remained well shy of regular inflation sampling (in effect since March 16, 2020), due to COVID disruptions, with implications that the full scope of rising prices is being missed in the headline numbers.

Separately, the less politicized (than the CPI-U) and more significantly functional October 2021 year-to-year inflation rate for the CPI-W (all Urban Wage Earners) jumped to 6.88%, the strongest inflation reading in 39-plus years, since 6.92% in June 1982, and up by 94 basis points from 5.94% in September 2021. The CPI-W is used to calculate the annual Cost of Living Adjustment (COLA) for Social Security recipients, based on the year-to-year change in the third-quarter CPI-W average, calculated last month at 5.9% for 3q2021. Accordingly, the 2022 COLA for Social Security was set at a 39-year high of 5.9%, while the ShadowStats Alternate CPI Measure indicated that a 13.9% adjustment would have been much closer to common experience. Nonetheless, the headline 2022 COLA topped the 5.8% prior high of 2008 and will be at a 39-year high, against an earlier peak of 7.4% in 1982.

Year-to-year, the October 2021 ShadowStats Alternate CPI Annual Inflation (1980 Base) jumped by 14.3%, its strongest reading since 14.4% in June 1980, when the headline CPI of the time still was identical to what would become the ShadowStats Series after January 1982. The October 2021 reading was up from 13.4% in September, having eased to 13.2% in August, from 13.4% in June and July, which then also matched what was the prior 13.4% peak of July 2008. Again, the 1980 readings are consistent with, but predate the ShadowStats series, when the headline CPI still was reported on a reasonably consistent basis. The ShadowStats Alternate CPI-U estimate restates current headline inflation so as to reverse the government’s inflation-reducing gimmicks of the last four decades, which were designed specifically to reduce/ understate annual Cost of Living Adjustments. Related graphs and methodology are available to all on the ALTERNATE DATA tab. Subscriber-only data downloads and an Inflation Calculator also are available there.

(November 9) PPI INFLATION – Both October 2021 Construction and Final-Demand Goods Sector Producer Price Index (PPI) Inflation Soared to Record Highs, Yet Aggregate PPI Remained Artificially Depressed by the Dominant Services Sector (BLS). The headline, unadjusted aggregate Final-Demand Producer Price Index (PPI-FD) showed year-to-year inflation at 8.62% in October 2021, effectively the same level as 8.59% in September 2021, understated, as often is the case, thanks to the intended depressant effect of a maldefined Services Sector. When the current PPI Series was created in 2009, covering both the Goods and Services Sectors, Services was structured to show theoretically lower inflation against rising gasoline prices, as an offset to related rising inflation in the Goods Sector, and vice versa. Accordingly, unlike the PPI-FD-Goods series, ShadowStats views the headline aggregate PPI-FD-Services detail as nonsensical. For October 2021, the PPI-FD-Services headline inflation rose year-to-year by 5.92%, down from 6.39% in September, while the PPI-FD-Goods headline annual inflation rose by a series record high 14.16% in October 2021, up from the prior record level of 13.32% in September 2021. Of greater historical substance, October 2021 year-to-year inflation, in the old-line PPI Commodity Series “Finished Goods,” jumped to a new 41-year high of 12.46%, the highest level seen since 13.04% in October 1980, supplanting the prior September 2021 high of 11.76% (then highest since 11.83% in December 1980).

Of Unusual Note, October 2021 Construction Inflation Soared at Record-High Levels of Annual and Monthly Gains. Surging Construction inflation likely will continue to boost headline Construction Spending, yet Real Construction Spending also should continue to remain heavily tempered by these soaring costs. Seasonally adjusted, monthly Construction Inflation jumped by a record 6.56% in October 2021, up from 0.15% in September, while unadjusted year-to-year Construction Inflation jumped to an all-time series high of 12.29% in October, up from 5.21% in September.

(November 5) PAYROLL EMPLOYMENT AND UNEMPLOYMENT - Questionable headline October 2021 Payroll Employment numbers suggested heavily skewed data (November 5th, Bureau of Labor Statistics - BLS). The BLS notes regularly in its monthly “Employment Situation” Press Release that the prior two months of headline Payroll Employment “... are routinely revised to incorporate additional sample reports and recalculated seasonal adjustment factors [emphasis added].” The problem with revising only the two prior months for new seasonal adjustments, but not the fully affected series, is that headline growth can be shifted from prior periods to the present, with the previous growth or activity still being reported as before, unrevised, effectively double counted, among other potential distortions. Consider the not seasonally adjusted August and September 2021 aggregate Payrolls, were revised lower by 16,000 (-16,000) and 23,000 (-23,000) jobs, given revised underlying data. Yet the seasonally adjusted payrolls in those months revised higher by 117,000 and 235,000, due to recalculated seasonal factors that shifted growth from earlier periods -- where the growth has not yet been revised lower in headline reporting -- to the present three months. On top of the revised jobs growth, 531,000 seasonally adjusted new jobs were added in October 2021, based on the latest surveying and seasonal factors. Similar revision patterns were seen broadly in subsidiary series such as Retail Trade, Leisure and Hospitality and Manufacturing. All that reporting should be caught up, and reported consistently, in the next annual benchmark revision to the series, tentatively set for the January 2022 “Employment Situation” release.

October 2021 Payroll Employment held shy by 2.8% (-2.8%) of recovering its Pre-Pandemic/ Recession Peak, while the Unemployment Rate declined to 4.6% from 4.8%, amidst a continuing low Labor Force Participation Rate. Stronger than Consensus Expectations for a 450,000 monthly jobs increase, October 2021 payrolls gained 531,000 on top of the upwardly revised August and September numbers. October 2021 Payroll Employment, in aggregate and in major business sectors, continued to hold shy of recovering February 2020 Pre-Pandemic/ Pre-Recession levels of peak employment activity, with Manufacturing still down by 2.1% (-2.1%), Construction down by 2.0% (-2.0%), Retail Trade down by 0.9% (-0.9%) and Leisure & Hospitality down by 8.2% (-8.2%). Confirming the continuing economic stall and lack of full recovery in U.S. Economic Activity, again, total October 2021 Payroll Employment held shy of recovering its Pre-Pandemic Peak by 2.8% (-2.8%), narrowed from a revised 3.1% (-3.1%) [previously 3.3% (-3.3%)] in September. Except for the 1981 Recession and 2007 Great Recession, that magnitude of shortfall in recovering Pre-Recession Peak Activity is deeper than in any trough of the last six Recessions, back to 1957. Payroll Employment remains one of the most fundamental and basic measures of broad economic activity, and the current measures of related jobs activity suggest that the U.S. economy is far from recovering healthy pre-Pandemic labor conditions. That aggregate 2.8% (-2.8%) shortfall is against the set level of February 2020 employment, yet payrolls normally increase by about 200,000 jobs per month. Those people who have not been entering the Labor Force are still out there needing work, which leads to an estimated 5.2% (-5.2%) shortfall in recovering a normal level of jobs and economic activity. Full recovery here still is not likely before late-2022 or early-2023 [See the later BUSINESS CYCLE Section].

Headline October 2021 U.3 Unemployment eased to 4.60%, from 4.76% in September, yet, after 20 months of Pandemic surveying the BLS still cannot count the number of Unemployed. The BLS acknowledges continuing misclassification of some “unemployed” persons as “employed,” in the Household Survey, where the count of the understated unemployed held at an “upside limit” of 191,000 persons in October, against 190,000 in September. The difference would be potential headline rates for U.3 of 4.7% in October against 4.9% in September. Fully adjusted for COVID-19 disruptions, based on BLS side-surveys of Pandemic impact, and with roughly 6.5 million people still missing from the headline U.S. labor force, realistic headline U.3 unemployment would be around 10%, the highest unemployment rate since before World War II. Broader October 2021 headline U.6 unemployment declined to 8.29% in October from 8.51% in September, reflecting the underlying decline in U.3.

The ShadowStats Ongoing Unemployment Estimate of 25.1% for October 2021 reflects an increasing, continued migration of short-term discouraged workers to the nether world of the long-term discouraged workers (those no longer counted by the BLS, subsequent to the allotted one year of permissible discouragement). Including those long-term discouraged/ displaced workers, on top of U.3 and U.6, the October 2021 ShadowStats Alternate Unemployment Rate held at 25.1%, the same as in September 2021. The latest Unemployment Rates are posted and graphed on the ALTERNATE DATA tab (above).

(November 4th) U.S. TRADE DEFICIT - The inflation-adjusted Real September 2021 Merchandise Trade Deficit widened in the month, not only to a record monthly shortfall, but also it pushed the Third-Quarter 2021 Real Merchandise Trade Balance to a record quarterly deficit (Census Bureau and Bureau of Economic Analysis - BEA). Such was consistent with the recently reported record shortfall in Real Net Exports and its related negative hit to Fourth-Quarter 2021 GDP Accounting (October 28 paragraph). The net Nominal Balance of Payments Deficit in Goods and Services also deepened to a record $80.9 billion monthly deficit in September 2021, widening from a revised $72.8 [previously $73.3] billion shortfall in August 2021, broadly widened by continued monthly deepening of the Goods Deficit and by continued shrinkage of the heavily gimmicked and maldefined Surpluses in the Services Sector.

(November 1) CONSTRUCTION SPENDING - Third-Quarter Real Construction Spending contracted sharply for the second-straight quarter (Census). Net of surging Construction Inflation, and sharp downside revisions to July and August activity, September 2021 Real Construction Spending declined for the seventh month of the last eight, with Third-Quarter 2021 activity showing a second consecutive quarterly decline. After two quarters of strong growth, Second-Quarter 2021 Real Construction Spending declined at an annualized pace of 8.1% (-8.1%), followed by an initial, annualized Third-Quarter 2021 drop of 9.1% (-9.1%), a pattern that mirrored New Residential Construction activity (see the October 19 paragraph).

Nominal September 2021 Construction Spending declined by a headline 0.5% (-0.5%) month-to-month, on top of downwardly revised monthly activity in August and July now up a revised 0.1% [previously unchanged] in August, a revised 0.1% [previously 0.3%] in July, all were negative in real terms, net of inflation. September 2021 Real Construction Spending declined by 0.8% (-0.8%) month-to-month, by 1.1% (-1.1%) year-to-year and held shy by 5.9% (-5.9%) of regaining its February 2020 Pre-Pandemic Peak.

(October 28 [Updated Nov 3]) GROSS DOMESTIC PRODUCT – Amidst surging inflation, the “Advance” Estimate of Third-Quarter 2021 Gross Domestic Product softened to an inflation-adjusted, annualized “real” growth of 2.02%, down from 6.73% in Second-Quarter 2021, yet all that GDP “growth” was in inventory buildup, not in sales (BEA). “Final Sales,” which measures actual net consumption within GDP activity, as opposed to net unsold inventory buildup, showed a Third-Quarter 2021 annualized real contraction of 0.07% (-0.07%), following an 8.06% Second-Quarter 2021 gain. Outside of the Pandemic-collapsed first two quarters of 2020, that was the first quarterly decline in Real Final Sales since 2009, late in the Great Recession. Keep in mind that this is just the first go-round for the Third-Quarter GDP, with likely downside revisions in the next two months. The Consensus GDP outlook, which by its nature usually is on the optimistic side, finished at 2.8%, before the initial Third-Quarter 2021 GDP reporting, while the Atlanta Fed’s GDPNow™ Model, which mimics the reporting structure of the Bureau of Economic Analysis GDP Model finishing at 0.2%. The Third-Quarter 2021 GDP’s inflation measure, the year-to-year Implicit Price Deflator (IPD), rose to a 38-plus year high of 4.53%, the highest since 4.58% in First-Quarter 1983. The annualized quarterly IPD of 5.70% was down from its 40-year high 6.23% in Second-Quarter 2021, but otherwise was the highest since Second-Quarter 1982.

Only the Gross Domestic Product (GDP) is reported in the initial estimate of a quarter’s economic activity. Related income-side Gross Domestic Income (GDI) and the original Gross National Product (GNP) series details follow along with the two subsequent GDP revisions. Where, again, Third-Quarter 2021 GDP showed annualized, inflation-adjusted real growth of 2.02%, following 6.73% in Second-Quarter 2021, 2q2021 annualized real growth rates in the GDI and GDP respectively were 2.35% and 6.51%. Heavily disrupted by pandemic conditions, real year-to-year change in 3q2021 GDP 2021 was 4.87%, down from 12.23% in 2q2021; 2q2021 year-to-year real growth rates for the GDI and GDP respectively were 12.80% and 12.38%. Getting around Pandemic disrupted reporting, real 3q2021 GDP was up by 1.37% against its 4q2019 Pre-Pandemic Peak, where 2q2021 was up by 0.86%. Against 4q2019 Pre-Pandemic Peaks, 2q2021 GDI and GDP respectively were up by 1.96% and 0.68%. In contrast the ShadowStats Corrected Alternate GDP, corrected for the understatement of headline inflation used to deflate the headline GDP, which otherwise overstates real growth, showed an annualized real quarterly contraction of 0.05% (-0.05%) in 3q2021, versus a 4.57% gain in 2q2021. Real year-to-year change in 3q2021 ShadowStats GDP was 2.75%, down from 9.96% in 2q2021, down by 2.19% (-2.19%) against its 4q2019 Pre-Pandemic Peak, where 2q2021 was down by 2.18% (-2.18%).

(October 27) NEW ORDERS FOR DURABLE GOODS - In context of surging inflation and declining, irregularly volatile Commercial Aircraft orders, September 2021 nominal New Orders for Durable Goods declined by 0.4% (-0.4%) in the month, having gained a downwardly revised 1.3% [previously 1.8%] in August and an unrevised 0.5% in July (Census). Net of inflation, September 2021 Real New Orders for Durables declined by 0.9% (-0.9%) in the month, having gained a revised 0.7% [previously 1.2%] in August and having declined by an unrevised 0.2% (-0.2%) in July. Net of an extreme nominal monthly September drop of 27.9% (-27.9%) in the regularly volatile Commercial Aircraft orders [having gained a revised 63.9% in August [previously plus 77.9%], September Real New Orders gained 0.8%, having declined by an unrevised 1.6% (-1.6%) in August and having gained 1.9% in July. Such also reflected a continuing nominal monthly decline of 2.9% (-2.9%) in September Motor Vehicle orders, on top of a revised 3.9% (-3.9%) [previously 3.1% (-3.1%)] monthly decline in August’s activity.

(October 26, 21) HOME SALES – The September 2021 New-Home Sales Series (NHS) Showed Its Usual Extreme and Meaningless Volatility (October 26th, New-Home Sales [NHS] Census). Noted here frequently, the Census Bureau would do well to delay publication of its New-Home Sales numbers until they can be reported at a meaningful level of accuracy. September 2021 New-Home Sales jumped by 14.0% in the month, but that was not meaningful at the 90% confidence level, and it was on top of downside revisions of 5.1% (-5.1%) to the prior statistically meaningless August number, and of 2.3% (-2.3%) and 0.3% (-0.3%) to the previously revised July and June activity. Third-Quarter 2021 showed a meaningless annualized quarterly gain of 0.4%, having declined at an annualized pace of 54.2% (-54.2%) in Second-Quarter 2021. Year-to-year, September Sales declined by a meaningful 17.6% (-17.6%), versus a revised 28.1% (-28.1%) in August. September activity was up by 9.8% from its February 2020 Pre-Pandemic Peak, having been down by 3.8% (-3.8%) in August.

Existing-Home Sales (EHS) showed a Positive Third-Quarter 2021, after Contractions in First- and Second-Quarter 2021 (EHS - National Association of Realtors® - NAR® [Released October 21]). Coming off record-strong levels of sales activity in late-2020, both New-Home Sales (Census) and Existing-Home Sales (NAR®) activity pulled back in the first half of 2021, but Existing-Home Sales activity gained meaningfully in Third-Quarter 2021 at an annualized pace of 3.8%, showing a strong 7.0% monthly gain in September 2021, following a monthly decline of 2.0% (-2.0%) in August and a 2.2% gain in July. September 2021 Sales were down by 2.3% (-2.3%) year-to-year, following a 1.5% (-1.5%) decline in August, against the Pandemic-driven volatility of a year ago. Against the February 2020 Pre-Pandemic Peak, however, September activity gained 10.4%, following August’s unrevised gain of 3.2%.

(September 14) ANNUAL SURVEY OF INCOME AND POVERTY – Measuring the Pandemic’s Toll on Household Income - In Context of Extreme, Pandemic-Driven Disruptions to Economic Activity and Coincident Census Bureau Surveying Quality, the 2020 Poverty Rate Surged and Real Median Household Income Plunged (Census). The Census Bureau’s annual survey of “Income and Poverty in the United States: 2020” was published September 14th, with full recognition by Census Bureau that its surveying quality in both March 2020 and 2021 was disrupted and skewed heavily by the vagaries of the Pandemic’s disruptions. That said, Census went through extensive modeling, using prior, established Household characteristics to adjust the 2020 surveying for skewed reporting.

Inflation-adjusted 2020 Real Median Household Income of $67,521 [in 2020 dollars] dropped by a statistically significant 2.9% (-2.9%) from 2019, the first decline since 2017, the first statistically significant decline since 2011. In that context, the total number of people with earnings in 2020 versus 2019 dropped by about three million. At the same time, the number of people employed full-time, year round dropped by about 13.7 (-13.7) million.

The number of people Living in Poverty in the United States in 2020 was estimated at 37.3 million, up by about 3.3 million or 9.7% from 2019. The official Poverty Rate in 2020 was 11.4%, up from 10.5% in 2019. As noted by the Census Bureau, “This is the first increase in poverty after five consecutive annual declines.” As an aside, the Census Bureau uses the lowest possible inflation rates (CPI-U Research Series) for deflating economic activity in its annual report. That means the resulting, inflation-adjusted detail here shows significantly overstated (overly positive) economic and income numbers). ShadowStats will publish a separate and extended analysis in a later Commentary.

• B U S I N E S S .. C Y C L E -- RECESSION-DEPRESSION TIMING – UPDATED October 25th - The 2020 Economic Collapse Remains Far from Recovery. The 2020 Pandemic-Driven Recession has been timed by the defining National Bureau of Economic Research (NBER), from Peak-to-Trough, as from February 2020 to April 2020 [2 months, the shortest on record] and from Fourth-Quarter 2019 to Second-Quarter 2020 [2 quarters]. That said, an economic downturn traditionally has been known as a “Depression,” which has two components the “Recession” and the “Recovery.” After the economic terror of the Great Depression, economic downturns took on the more-euphemistic “Recession” nomenclature. The NBER called an end to the 2020 Recession on July 19th, again, just the first leg of the Depression. Recessions are measured only from Peak-to-Trough, while Recoveries are measured from Trough-to-Regaining-the-Pre-Recession-Peak (timing not formally called by the NBER), which is far from being at hand despite strength in some major numbers such as the GDP. Thereafter, an “Expansion” is in place until the next formal “Peak,” which, the NBER does time [Expanded coverage follows in No. 1461 (formerly 1460c)].

(Updated November 12) Consider -- Despite significant Recovery, the October 2021 Payroll Employment current shortfall against its February 2020 Pre-Pandemic/ Recession Peak remained weaker than the Payroll Employment Troughs of the last six Recessions, back to 1957, excluding the 2007 Great Recession and the 1981 Recession, as reviewed in the earlier coverage of October Payrolls (November 5th paragraph). Reviewed in pending No. 1461 [formerly No. 1460c], aside from short-term reporting gimmicks, Payroll Employment probably is the highest-quality economic statistic published by the U.S. Government, in the current data- and reporting-compromised circumstances of the evolving Pandemic. The Employment series is based on actual Payroll Taxes paid by Employers, as opposed to irregular (Pandemic-induced, telephone-only) impaired surveys of the Public as to Unemployment. While Payroll Employment has recovered meaningfully from its April 2020 bottom, October 2021 activity still was shy by 2.8% (-2.8%) of recovering its Pre-Recession (Pre-Pandemic) Peak activity. Putting that in perspective, other than for the Great Recession of 2007 and the 1981 Recession, such still was deeper than all the troughs of Payroll activity in the other last six Recessions back to 1957. With other indications of the economy stalling or turning down anew, such remains a major economic issue for an FOMC looking to continue its “Tapering” beyond December 2021 and for the Federal Government looking to reduce its “Deficit Spending.” Significant anecdotal evidence suggests that business activity has slowed or is slowing anew, with intensifying early indications of an unfolding multiple-dip downturn (Recession/ Depression). Consider reports of flattening activity in areas like Florida, which had been booming recently, to quarterly contractions in Construction and Real Retail Sales, to the University of Michigan’s Preliminary November Consumer Sentiment Index plunging to a new decade low, let alone a new Pandemic trough, and to Third-Quarter 2021 “Final Sales” (GDP net of inventory buildup) showing its first quarterly decline since the Great Recession, other than for the initial Pandemic Collapse.

Economic, FOMC, financial-market, political and social circumstances all continue to evolve along with the Pandemic and unfolding political circumstances. COVID-19 vaccines and improved treatment have helped to stabilize a relatively low level of economic activity, again far from full recovery, yet new Pandemic issues, including new variants and vaccination mandates, continue to unfold. At present, full economic recovery is not likely until 2023 or after. Many segments and regions of the U.S. economy, and individual, personal circumstances have suffered severe structural damage from the shutdown, areas that likely will take years to recover fully. Accordingly, ongoing massive Fiscal and Monetary Stimuli will be needed, and they likely will expand into 2022, per the ongoing ShadowStats assessment. Irrespective of the just announced, two months of minimal FOMC “Tapering” of its Monetary Stimulus, that stimulus broadly will remain in play, as targeted by the FOMC to prevent a Banking System Collapse.

• S Y S T E M I C .. R I S K -- FEDERAL RESERVE [See also the later updated MONEY SUPPLY and MONETARY BASE Sections for the headline monthly Monetary averages and details] – Per the November 3, 2021 FOMC Statement, “In light of the substantial further progress the economy has made toward the Federal Open Market Committee’s [FOMC] goals, since last December [ShadowStats note: but not since June 2021], the Committee decided to begin reducing the monthly pace of its net asset purchases by $10 billion for Treasury Securities [from the usual level of $80 billion] and by $5 billion for agency mortgaged-back securities [from the usual levels of $40 billion].”

Yet, as confirmed and clarified by Federal Reserve Chairman Powell at his November 3rd Press Conference, the FOMC “Tapering” could be limited to just November and December 2021, if the Economy continues to falter, as seen in its recent headline weakness. The FOMC Statement continued, “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.” Keep in mind that the Fed’s dominant concern here remains the health of the U.S. Banking System, which owns and controls the U.S. Central Bank, not inflation and not economic growth, per se.

(October 26) MONEY SUPPLY – September 2021 Money Supply Growth Continued to Explode, With All Major Money and Monetary Measures at New Peak Levels of Activity and at Historic or Cycle-High Levels of Growth Against Their February 2020 Pre-Pandemic Troughs (Federal Reserve Board – FRB, ShadowStats). The regular Historic Money Supply Tables and Graphs through September 2021 have been updated and posted on the ALTERNATE DATA TAB (see the Menu Bar above). Where the Pandemic hit the U.S. economy and financial system hard in March and April 2020, the Federal Reserve responded with massive expansion of the Money Supply -- Systemic Liquidity. Accordingly, comparative year-to-year change in the various March 2021 to September 2021 Money Supply measures against the heavily spiked year-ago activity tend to be depressed, against what otherwise would be the change versus the February 2020 Pre-Pandemic Trough (PPT), effectively the “Base Circumstance,” before the emergency liquidity surge. Accordingly, the March 2021 to September 2021 growth rates here are shown against the PPT. Background definitions and related detailed discussion, historical data and graphs for each of the Money Supply Series were covered in Benchmark Commentary No. 1459, with updated details pending in No. 1461 [formerly No. 1460c]. The Fed’s release of October 2021 Money Supply details is scheduled for November 23rd.

Here is how the September 2021 Money Supply numbers shaped up. ShadowStats “Basic M1” (Currency plus Demand Deposits [83% of the “old” pre-May 2020 M1]) surged by an historic 97.3% in September 2021, against the February 2020 Pre-Pandemic Trough, up from a revised 96.2% [previously 96.1%] in August 2021. In contrast, the Pandemic-distorted year-to-year change declined to 53.3% in September 2021, versus a revised 57.6% [previously 57.8%] in August 2021. In like manner for the broader Money Supply measures, September 2021 activity versus the February 2020 Pre-Pandemic Trough for the newly redefined headline M1 (now including Savings Deposits, at about 92% of M2) was up by an unprecedented headline 393.1%, against 388.6% [previously 388.5%], but such is on a nonsensically inconsistent definitional basis. Separately, all as measured against their pre-Pandemic troughs, M2 (not redefined) was up by a record 35.6% in September, versus a 34.6% [previously 34.4%] gain in August. The broadest ShadowStats Ongoing-M3 Estimate was up by a record 29.1% in September 2021, versus 28.2% [previously 28.1%] in August 2021. The flight of cash to relatively greater liquidity and safety continues, unabated.

(November 18 - Updated) MONETARY BASE [Mid-November Indications] – The September 2021 Monetary Base Surged to Record Levels and Cycle-High Growth of 84.9% Against Its Pre-Pandemic Trough; Despite Some Softening Growth in Preliminary-October Unadjusted Reserves and the Monetary Base, Mid-November Reporting Has Shown a Rebound (FRB, ShadowStats). Based on reported weekly numbers through November 17th, ShadowStats still estimates that Preliminary-October 2021 Monetary Base growth, against its February 2020 Pre-Pandemic Trough, slowed to 83.3%, from its cycle-high 84.9% formally reported for September 2021 by the FRB on October 26th, reflecting growth in Preliminary-October Reserves slowing to 149.1% from 153.1% in September, but with Currency growth picking up to 22.6% from 22.2%. Unlike the earlier, headline Money Supply reporting, these numbers are not seasonally adjusted. The dip in October growth was similar to that seen in the May and June 2021 period. That said, weekly reporting through November 17th showed the Monetary Base on track for a new record monthly high, with growth on track for a new cycle high.

Where the Monetary Base broadly moves on a parallel basis with the Money Supply, it is not close to the record annual growth levels of the 2007-2008 Banking System Collapse, which at the time exploded Reserve Balances (up 5,000 percent year-to-year, but which never reversed in parallel in a post-Crisis movement). Based on the latest formal headline reporting just through September 2021, the current headline monthly patterns of change in the aggregate Monetary Base reflected parallel changes in the Reserve Balances at Federal Reserve Banks component surging from 138.0% in July 2021 to new Cycle-Highs of 149.9% in August 2021, and 153.1% in September, suggestive of some mounting Banking-System liquidity concerns within the FOMC. The Currency in Circulation component continued hitting successive, historic all-time high dollar levels and record-high growth rates against the Pre-Pandemic Trough, again, at 22.2% in September, up from 21.8% in August 2021. Further detail and graphs follow in No. 1461 [formerly No. 1460c].

Systemic Turmoil is just beginning, with both the Fed and U.S. Government driving uncontrolled U.S. dollar creation, between unconstrained Money Supply growth and uncontained Deficit Spending. Again, with the recovery from the Pandemic-driven collapse retrenching, continued extraordinary Monetary and Fiscal Stimulus will continue at least into 2022, quite likely into 2023, despite the current COVID-19 vaccines and despite Financial-Market huffing and puffing to the contrary. Indeed, likely leading into accelerating inflation or hyperinflation, current extreme Monetary and Fiscal stimuli likely will be expanded. Discussions on the inflation threat and re-accelerating money growth are found in Special Hyperinflation Commentary, Issue No. 1438, subsequent missives including particularly No. 1451No. 1454No. 1460b and pending No. 1461 [formerly No. 1460c].

(November 8th - Updated) U.S. GOVERNMENT FISCAL CONDITIONS/ CRISES – Temporarily delaying what would have been a Fiscal Year-End 2021 shutdown of the U.S. Government, the Congress enacted and President Biden signed a late-night (September 30th) stopgap funding Bill that pushed the Crisis out to December 3rd. Separately, Congress also delayed a potential Debt Ceiling breach, until December. What had been a Biden Administration $3.5 trillion dollar spending package continues to evolve. A $1.2 trillion Infrastructure Bill just passed Congress, with roughly another $2 trillion in spending [closer to $3 trillion aggregate] pending in the Administration’s proposed Welfare and Climate Change packages. Any solid developments in the ever-deepening U.S. Government Fiscal Crisis will be covered here in the SYSTEMIC RISK Section. That said, Fiscal Year 2021 (FY2021) circumstances deteriorated meaningfully from conditions at the end of FY2020 (see the next paragraph), and already are exploding anew in FY2022.

(April 6) U.S. Government 2020 Financial Statements. -- The deepening deficit net worth of the U.S. Government’s financial condition hit a record shortfall – negative net worth – of $113.8 trillion in Fiscal Year 2020 (year-ended September 30), widening from a $103.4 trillion negative net worth in 2019. That 2020 shortfall reflected an operating deficit “Net Position” or operating negative net worth of $26.8 trillion in 2020, widening from a Net Position deficit of $23.0 trillion in 2019, plus deepening unfunded Social Security and Medicare net liabilities (Closed Group) of $87.0 trillion in 2020, versus $80.4 trillion in 2019. As did her predecessors, Treasury Secretary Janet L. Yellen described the current “Fiscal Path” as “Unsustainable,” with the government’s current Debt-to-GDP ratio at 100% in 2020, predicted to go to 623% before the end of the Century. Those indications are overly optimistic in the extreme. Allowing for the “Unfunded” Liabilities, the Debt-to GDP ratio was 531% in fiscal 2020. The 2020 Financial Report is available here: https://www.fiscal.treasury.gov/reports-statements/financial-report/ -- ShadowsStats will provide extended analysis in the pending updated Hyperinflation Commentary.

SHADOWSTATS ALERT: In context of the still-evolving Coronavirus Pandemic and related economic disruptions and crises, near-term financial-market risks from negative economic, liquidity and political issues, are intensified by potential Hyperinflation, long viewed by ShadowStats as the ultimate fate of the U.S. Dollar. That said, irrespective of recent relative weakness in gold prices and related Central Bank or other market machinations, the ShadowStats broad outlook in the weeks and months ahead remains for: (1) A continuing and renewed deepening (potentially hyperinflationary) U.S. economic collapse, reflected in (2) Continued flight to safety in precious metals, with accelerating upside pressures on gold and silver prices, (3) Mounting renewed selling pressure on the U.S. dollar, against the Swiss Franc and other stronger currencies, and (4) Despite recent extreme Stock Market volatility and current record or near-record high levels in the popular U.S. stock-market indices, high risk of major instabilities and heavy stock-market selling continues, complicated by ongoing direct, supportive market interventions arranged by the U.S. Treasury Secretary, as head of the President's Working Group on Financial Markets (a.k.a. the “Plunge Protection Team”), or as otherwise being gamed by the Federal Reserve.

• P L A N N E D .. P O S T I N G S .. (Updated November 21) Posting of catch-up Economic Commentary No. 1461 [formerly named No. 1460c] remains pending, potentially by the post-Thanksgiving Weekend. A definitive posting date will be advised in the opening paragraph of this DAILY UPDATE, at such time as that date is set. No. 1461 will provide a broad review of the general economic outlook, including specific coverage of the GDP and the U.S. Business Cycle, Employment, Inflation, Fiscal Conditions and Federal Reserve Policy (with the related latest Monetary Measures). Subsequent Commentaries in the month ahead will update Financial-Market conditions through November 30th, as well the latest economic and monetary details, along with a detailed review of the ShadowStats Alternate-Inflation Methodology, which remains in place and is solid in its theoretical backing. The ShadowStats Commentary publication schedule remains fluid, with actual postings advised directly to Subscribers by a coincident e-mail, along with a direct link to the newly published Commentary.

POSTINGS OF PENDING ECONOMIC NUMBERS AND DEVELOPMENTS: On November 23rd, the Federal Reserve Board will post October Money Supply numbers (at 1:00 p.m. ET). On November 24th, the Bureau of Economic Analysis will post its second estimate of Third-Quarter GDP, with the Census Bureau posting October new Orders for Durable Goods and New-Home Sales (GDP and Durables at 8:30 a.m., New-Home Sales at 10:00 a.m. ET). ShadowStats coverage of scheduled economic releases, FOMC news, etc. usually posts in the DAILY UPDATE by late day on the day of release, usually within several hours of the event, unless otherwise indicated here.

• ARCHIVES - VIEWING EARLIER COMMENTARIES. ShadowStats postings of June 2021 and before - back to 2004 - are open to all, accessible by clicking on “Archives,” at the bottom of the left-hand column of this ShadowStats homepage.

• ALTERNATE DATA TAB (above) provides the latest headline numbers and exclusive ShadowStats Alternate Estimates and related Graphs of CPI Inflation, GDP, Unemployment, Money Supply and the ShadowStats Financial-Weighted U.S. Dollar. Data downloads and the Inflation Calculator are subscriber only.

Best Wishes -- John Williams


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Some Biographical & Additional Background Information

Walter J. "John" Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth's Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies.

Although I am known formally as Walter J. Williams, my friends call me “John.” For 30 years, I have been a private consulting economist and, out of necessity, had to become a specialist in government economic reporting.

One of my early clients was a large manufacturer of commercial airplanes, who had developed an econometric model for predicting revenue passenger miles. The level of revenue passenger miles was their primary sales forecasting tool, and the model was heavily dependent on the GNP (now GDP) as reported by the Department of Commerce.  Suddenly, their model stopped working, and they asked me if I could fix it. I realized the GNP numbers were faulty, corrected them for my client (official reporting was similarly revised a couple of years later) and the model worked again, at least for a while, until GNP methodological changes eventually made the underlying data worthless.

That began a lengthy process of exploring the history and nature of economic reporting and in interviewing key people involved in the process from the early days of government reporting through the present. For a number of years I conducted surveys among business economists as to the quality of government statistics (the vast majority thought it was pretty bad), and my results led to front page stories in 1989 in the New York Times and Investors Daily (now Investors Business Daily), considerable coverage in the broadcast media and a joint meeting with representatives of all the government's statistical agencies.  

Nonetheless, the quality of government reporting has deteriorated sharply in the last couple of decades. Reporting problems have included methodological changes to economic reporting that have pushed headline economic and inflation results out of the realm of real-world or common experience.

Over the decades, well in excess of 1,000 presentations have been given on the economic outlook, or on approaches to analyzing economic data, to clients—large and small—including talks with members of the business, banking, government, press, academic, brokerage and investment communities. I also have provided testimony before Congress (details here).

An old friend—the late-Doug Gillespie—asked me some years back to write a series of articles on the quality of government statistics.  The response to those writings (the Primer Series available at the top-center of this page) was so strong that we started ShadowStats.com (Shadow Government Statistics) in 2004.  The newsletter is published as part of my economic consulting services. — John Williams