The Big Picture
Thursday, May 16, 2019
At least one time a year my wife and I plan a family vacation. If all my children can make it our group has a total number of seven people traveling. I must admit it is getting harder since my oldest four children are all over the age of 21 and have internships and jobs which makes scheduling very difficult. This year we are planning on spending a few days in Utah with some planned hikes, national parks, and various other outdoor items planned. When I look at our agenda it seems very ambitious and I can already see that I am going to have to step back a few times and stop and look at the big picture. I once heard it said that you can take a long hike up a mountain, and there’s plenty to appreciate along the way. However, sometimes you must stop and enjoy the view.
I want you to just step back and look at the big picture. The last two weeks of economic news has been dominated by China, President Trump and talk of trade wars. Don’t get me wrong it’s an important issue and has been one for many years. However, the actual economic news that our government published in late April was that the unemployment rate dropped to 3.6%, the lowest level since 19691. When you breakdown the unemployment numbers the Hispanic unemployment rate has averaged 4.6% in the last year and the African American unemployment rate has averaged 5.6%, both of those numbers are at record lows. The unemployment rate for those with less than a high school education has averaged 5.6% in the last twelve months2. In addition, wage growth has accelerated with the average hourly earnings up 3.2% from a year ago3. Our local privately funded economic development corporation is Southwest Michigan First. The motto of this dynamic organization is “The most powerful force for change is a well-paying job”. It looks like that metric is being met on a national scale.
Let me go back to the news of the day. Since hitting new all-time highs two weeks ago, the S & P 500 has fallen about 4% as trade negotiations with China had a bump in the road.4 There is no doubt in my mind that tariff increases will not help the US economy. Back to the big picture. In 2018 the United States exported $180 billion in goods and service to China, which is 0.9% of our GDP. China exported $559 billion to the United States, which is 4.6% of their economy.5 If this turns into an extended US-China trade battle please know that US companies will shift their supply chains out of China into other countries such as Vietnam, Mexico or even back “Made in the USA”. It may be a small hit to our economy, but it will have a huge impact on China’s economy. I have been hearing our government officials and business leaders for the last twenty years telling us that China has been violating trade rules, stealing intellectual research to the toon of hundreds of billions of dollars. Now that our current President is trying to do something about it, the same people are now crying foul.
In my humble opinion, China is more dependent on the United States and our economy than we are on China’s economy. Just step back and look at the big picture. Does China want to trade with the West or does China want to trade with North Korea, Russia and Venezuela? Don’t let the hysteria of the “Financial News Networks” or the media drive your decision-making process when it comes to the long term.