California and Semiconductor Companies Point to Continued Slowdown, Says Leading Economic Forecaster

Wed, Mar 9, 2016 - 3:45pm

Andrew Zatlin, a leading economic forecaster and the head of Moneyball Economics, sees a general slowdown in the world’s largest economy and says California and semiconductor companies are telling a very important story about where things are headed.

Here's some of what he had to say on Wednesday's podcast:

“Things are slowing down…things are peaking, and the growth is going to be harder to come by. Ultimately we are already in an environment where companies are revisiting their hiring plans, their capital spending plans, and they're starting to make those tough decisions. They're on the cusp of considering layoffs…

The first thing I would point to is jobless claims...jobless claims are pure unmolested data—someone had to go in and say I don't have a job and they're fairly comprehensive. The interesting thing in jobless claims is if you look at California as a standalone part of the jobless claims story, you'll note that for the past four months, week in and week out, for four months now, California jobless claims have been exactly the same as they were last year.

That means there's no economic growth in California…and let me explain why that really matters. First of all, California is the biggest contributor to jobless claims so they tend to drive the total jobless claims story. But California really encapsulates the US economy."

Scroll down to read more of his comments, or click to hear a preview of his interview below.

"If you want to talk about manufacturing, the biggest center of manufacturing in the US is in Los Angeles. You want to talk about hi-tech—San Francisco. You want to talk about agriculture, you're talking about the Central Valley. You want to talk about construction, tourism—every aspect of the US economy is in California and so if California is already in that place where they're not experiencing growth what does that say about the rest of the economy?...

[Also] every quarter I sit in on the earnings calls for the semiconductor companies—the entire food chain of semiconductors. And I do that for a really specific reason…they are the early components in the entire manufacturing process. They're fairly upstream in that whole process so if you can get an insight into what's going on in the world of semiconductors you're getting insight into what's going to be happening in manufacturing 2-3 months down the line.

In today's world everything has a semiconductor in it or touching semiconductors so this really is the best bellwether of what's going on. If oil and steel were the way you tracked the economy in the Industrial Economy, in the 21st Century Digital Economy you use silicon. So we just got through the 1st quarter of earnings calls and what was really interesting is everyone guided down. Every company that's on the semiconductor food chain said...we expect maybe zero percent growth…”

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