In some parts of the economy, liquidity isn’t exactly rampant.
Whether due to caution on the part of banks or their corporate clients, commercial and industrial loans have continued to shrink at an alarming pace, as a percentage of U.S. GDP.
John Mauldin: Banks, as I have written, are buying US government debt in an effort to shore up their balance sheets. Lending to small business, the real engine of job creation, is sadly decreasing each month.
The chart below, taken from the excellent site Econompic, shows that this trend actually appears to be getting even worse, despite other signs of improvement in the economy. Econompic used data from the Bureau of Economic Analysis (BEA) and the St. Louis Fed.
We would venture to say that we need to see this trend improve before we’d get too hopeful on the employment front. Companies that either aren’t confident enough to take out loans or aren’t able to access capital are hardly in a position to expand their work force.