Have you ever driven a car with a manual transmission? If so, you know that second gear isn’t the gear you want if cruising speed is your goal.
Yet, second gear is how I would describe today’s economy. Not just today, but over much of the expansion.
I could point to plenty of data, but let’s look at two closely followed indicators that span across the private sector.
During August, both the ISM Manufacturing Index and the ISM Non-Manufacturing Index came in well below expectations.
Not to worry, the September releases, which were out on Monday and Wednesday, suggested an acceleration in growth, especially for the service sector. At a reading of 57.1, the broad-based service sector has kicked into gear! Right?
Well, not quite so fast.
Let’s compare the readings to a baseball game. The outsized jump in the service indicator would be the equivalent of a home run. But in today’s subpar recovery, the occasional home run is mixed in with singles, doubles, and a fair number of strikeouts.
While the latest readings are encouraging, let’s not get too excited. Digging into the underlying trends and several months worth of data, it’s safe to say the economy is growing, but it’s far from robust growth.
In other words, we’re still stuck in second gear.
