Chinese Economic Slowdown

China’s latest quarter-over-quarter ‘real’ (i.e., after adjustment for inflation) gross domestic product (GDP) growth rate was its slowest since 1992. 2019’s second quarter advance, annualized, was only +6.2%. That level of increase anywhere else in the world would be greeted with celebration, but for China, it’s a relative crawl. While the +10% to +12% gains of the mid-00s have become a thing of the past, +7% or more has still been commonplace in the Middle Kingdom of late. The Chinese economy would greatly benefit from an end to its trade dispute with the U.S. which has seen sales to American consumers significantly curtailed by tariffs.

Meanwhile U.S. Economy Roars

At least with respect to employment, the U.S. economy continues to roar. One of the best indicators of the strength in the jobs market is the ‘weekly initial jobless claims’ data series. It measures first-time applications for unemployment insurance. The figure soars when the economy sinks. As Graph 1 shows, initial jobless claims in the middle of the 2008-2009 recession skyrocketed to 665,000. But they have now been less than 300,000 – i.e., the benchmark usually adopted to denote a solid jobs recovery – for 226 weeks in a row (i.e., more than four years). They even dropped below 200,000 twice in April of this year.

The length of time from high to low in the initial jobless claims curve has been 10 years, exactly corresponding with the duration of the current upbeat economic cycle. When searching for an early warning sign that the economy is faltering, be wary of initial jobless claims rising back to 300,000.

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