Expert: Economic conditions mixed, weaker than portrayed

Greg Sweeney

The U.S. economy is weaker than portrayed through unemployment numbers and by public officials, said Bell Bank Chief Investment Officer Greg Sweeney on April 29. 

Sweeney’s presentation during the Bank Holding Company Association’s spring seminar came as unemployment remains historically low at under 4 percent. However, Sweeney doesn’t see the unemployment rate as the top indicator of economic conditions. The number of employed Americans is a better barometer, he said, with the number of employed Americans rising by 2 million to 161 million from 2022-23. The labor force participation rate is at 62.5 percent, down 1 percent over the past five years. 

Consumer earnings have been below inflation for three of the last four years as consumer debt has grown to more than $5 trillion. The personal savings rate is down as consumers tap their savings to keep up with rising costs. Credit card and auto loan delinquencies both have increased.

Sweeney doubts inflation will fall to 2 percent anytime soon, and inflation has historically rarely been much below that number. His lack of optimism differs from JPMorgan Chase CEO Jamie Dimon, who said last week the U.S. economy is robust and backed by healthy consumer finances and strong employment. Retail sales are growing and much higher than average. GDP is at a record high. 

Sweeney said S&P 500 year-to-date returns are deceptively high and have been sparked by the “magnificent seven stocks” — Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla. Excluding those seven firms, S&P 500 year-to-date returns have only increased 3.93 percent. Sweeney recommended investors make decisions based on the best current information rather than predicting the best allocation or asset class in six months. 

The ratio of U.S. federal debt to GDP is 130 percent, which adds up to $34.5 trillion when counting Social Security. China and Japan are selling U.S. debt, and federal government interest expenses have more than doubled over the past three years to more than $1 trillion. 

Discussing the current state of commercial real estate, Sweeney said the industry is struggling following the pandemic due to the onset of work-from-home policies and as corporations have a hard time attracting workers back to the office five days a week. He attributed the loss in CRE demand to people feeling unsafe in major cities due to authorities not enforcing laws.