Call it pessimism. Or gloom. Or a feeling of being dispossessed. Or as Churchill labelled his periods of depression, Black Dog. Or, to be more modern, cognitive dissonance. It's palpable. Many businessmen here are peering into their always-clouded crystal balls and seeing a bleak future for America. They have lost the Republican party to a hostile takeover by a man who muses about giving holders of U.S. government bonds a haircut, interrupting markets and disrupting supply chains by erecting tariff walls against countries he doesn't like and corporations that invest overseas, decides increases in the minimum wages are a good idea after attacking them as job killers, and rampages across their television screens displaying his talent to abuse. For them, the political situation trumps all good economic news, and the game they are playing is "Yes, but."
* Yes, car sales continue to move along at a near-record clip, but that's only because dealers and manufacturers are offering credit terms much like those that banks were making available before the housing bubble burst.
* Yes, wages are finally starting to rise, but just wait until the job-killing effect of increases in the minimum wages take hold, and the skill shortages rising wages reflect create a supply-side bottleneck to faster growth.
* Yes, retail sales in April rose by 1.3 percent, the largest gain since March 2015, but retailers' costs are rising faster than the prices they can charge, squeezing profit margins, and the department store sector continues its downward plunge.
* Yes, consumer confidence is rising, but that's only because consumers have yet to notice last month's tepid jobs report, the recent rise in applications for unemployment insurance, and the foresee the spread of the "gig economy" that provides certainty of work on a daily gig-to-gig basis only.
* Yes, share prices are not doing badly, but just take a look at the latest report by Peter Boockvar of the Lindsey consulting group. He sums up what has some of the worriers worried, "I remain of the belief that the 2nd longest bull market of all time is running on fumes with excessive valuations that are being priced off an epic global bond bubble, falling profit margins and earnings, weak global growth and monetary policy that has hit a wall."
There are of course, the usual bits of bad news to mix in with the good, reinforcing unease about the political situation. Productivity continues its stubborn refusal to rise—it actually fell by 1 percent in the first quarter—as more and more workers manage only to produce the same amount of goods and services they did before the jobs market improved. Banks, fearing a commercial property bubble, are tightening standards for commercial and industrial loans. Corporate profits are in their longest fall since the financial crisis. "Small business owners remain extremely pessimistic about the economy … [and] think the current period is a bad time to expand," warns National Federation of Independent Business chief economist Bill Dunkelberg. State and local pension funds, built on a foundation of political promises now, with obligations left for other politicians to honor later, much later, are about $1 trillion short of meeting those obligations, meaning that bankrupt Puerto Rico might be a canary in the municipal coal mine.
Were the corpocracy not so unnerved by the loss of the Republican party to a man who makes it clear that he is not bound by the free trade, fiscally responsible, anti-regulation, conservative principles that businessmen generally support, or say they do, its members might be inclined to give greater weight to the good news. And to remarks by Bill Dudley, president of the Federal Reserve Bank of New York and a former partner in—you guessed it—Goldman Sachs. Dudley told an audience in Florida, "I don't see a lot of things that disturb me", and that the Fed is "still on track" for two modest rate increases this year, a view said to be shared by the increasing insistent inflation hawks. Dudley is a close adviser to Fed chairwoman Janet Yellen, but I can't help feeling that she does see things that disturb her, most importantly a labor market that still has considerable slack. Fed watchers are guessing that Yellen will give Dudley and friends half of what they want: a single increase in interest rates this year.
From what I can learn, Dudley's speech did not create waves of optimism in the business sector, in which politics now trumps economics, and where there is a strong belief that the underlying problems preventing the economy from achieving take-off are insoluble, at least by the two contestants for the nation's most powerful political position.
Neither candidate seems to have a feasible plan to get the economy off the nil-to-1 percent growth path on which it seems to be stuck. Donald Trump is promising somehow to "make America great again," Hillary Clinton to continue the Obama policies that have resulted in an almost stagnant economy, widening inequality of incomes, and a black unemployment rate more than double the rate for whites (8.8 percent vs. 4.3 percent). Clinton might have ideas that differ from those of the President, but she desperately needs him to deliver the black vote, and so is stifling any desire she might have to criticize Obama, while hoping the president will not take umbrage at her husband Bill's candid reference to "the awful legacy of the last eight years."
Trump's ever-changing plan produces a $10-12 trillion increase in the deficit over the next decade—Keynes on steroids—and on alternate days calls for lower and higher taxes for the wealthy, "In my plan [taxes for the wealthy are] going down but by the time it's negotiated, they'll go up." Clear? Hillary Clinton has a variety of microeconomic fixes in mind—free day care, free college and other goodies for the constituent parts of her progressive coalition—but no mention of a fiscal or monetary policy that might accelerate the current tepid growth rate.
The depth of many executive's despair is perhaps best measured by the absence of horror when its leaders contemplate a Clinton administration, with its plans for more government regulation, expanded entitlement programs, and higher taxes on the wealthy. It has become the fashion for speakers at posh business gatherings to begin their performances with, "The next president of the United States, whomever she may be …", as Senator Lindsey Graham did at the Milken Institute Global Conference recently. Audience generally finds the prospect of a left-pulled Democrat a joy to contemplate, given the alternative. And despite the recent outbreak of peace between Paul Ryan and Trump ("truce" might be a better word) the chances that The Donald will make a durable commitment to support reductions in entitlements, fiscal sanity, freer trade or any of the items on the agenda crafted by Ryan and his congressional colleagues whose combined constituents far out-number Trump's troops, and favored by the business community, are somewhere between slim and none.