Monday, January 17, 2022

Fox News and white grievance

 - by New Deal democrat

In his recent book “Kill Switch,” Adam Jentleson, a former aide to the late Senator Harry Reid, persuasively argues that the Senate filibuster arose by accident, when a rule revision in 1805 failed to include the “previous question” resolution, which would require a vote on the issue pending, because it was thought superfluous. He also shows by overwhelming evidence that for the past 200 years, by far the single most common use of the filibuster was to defeat civil rights legislation benefiting Blacks.

And in the past week, it has become apparent that Senators Manchin and Sinema would join GOPers to uphold a filibuster against voting rights legislation once again. 

Which brings me to a couple of recent graphs posted by Kevin Drum. He is the sort of commentator I read, even though I frequently disagree with him, because his arguments are worthy of thinking through, and sometimes he finds genuine gold nuggets.

An example of the former is when he argues,  as he did today  , that “the progressive wing of the party [“blew it” by] insist[ing] on pushing voting rights laws that had zero chance of passing. Biden knew this from the start and said so. Then Bernie Sanders insisted on an insane BBB bill that would have been unprecedented in the history of the country,” and as a result is responsible for “Joe Biden's disastrous approval rating and the chaotic shape of the Democratic Party.”

I am trying to think of the counterfactual situation where the progressive wing of the Democratic Party simply allowed the infrastructure bill to pass and then sat back somnolently while nothing else happened. Somehow I fail to see that Joe Biden’s approval rating would be any better. Hmmmm . . . I rather think that, whether they articulate this blame or not, the public is really pissed off at being governed by John Roberts’ reactionary 6 on the Supreme Court, with an assist by co-Presidents Manchin and Sinema, and that the attempt by progressives to get more done has not worsened this perception.

But, as an example of the latter, Drum has shown very persuasive data many times showing that the decline in the crime rate since the early 1990s correlates really well with the abatement of lead paint beginning 20 years before. Less lead poisoning in boys leads to less crime in young men 20 years later. Q.E.D. And it really does seem to be true.

Anyway, that brings me to the point of today’s post. Because recently Drum has also been arguing that the main source of the US’s turn to proto-fascism has overwhelmingly been Fox News (much moreso than even Facebook). Below are a couple of graphs he has posted over the past several months to that point.

First, commitment to democracy in the US by political party:

Second, anger or dissatisfaction with the direction of the country in the United States:

While correlation is not causation, it is certainly true that Fox News’s almost entire worldview of white grievance overlays quite well with both the collapse of commitment to democratic institutions by GOPers, and anger at the direction of the country.

Saturday, January 15, 2022

Weekly Indicators for January 10 - 14 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

In addition to Omicron, commodity prices and interest rates are having an impact across the board on the long and short term forecasts and the nowcast. (Just for spite, two weeks ago some RW nut jobs had a fit about my including a meteor as the image for the article, so this week I including an even more graphic representation of the Giant Flaming Meteor of Death).

As usual, clicking over and reading will not only bring you fully up to date, but will pay my pizza tab for the week.

Friday, January 14, 2022

December real retail sales tank; industrial production also declines; consumer slowdown seems nearly certain


 - by New Deal democrat

Two days ago, in connection with consumer inflation, I reiterated that “we certainly are at a point where a sharp deceleration beginning with the consumer sector of the economy is more likely than not.”

I didn’t expect to have it show up so soon! Retail sales, one of my favorite “real” economic indicators, took a nosedive in the month of December, declining -1.9% for the month even before inflation. After inflation, “real” retail sales declined -2.4%. Ouch! 

Thus real retail sales are down -5.1% from their April peak: 

Recall that real retail sales rose 1.8% in October. So I suspect a large part of the decline is that, fearing shortages on the shelves at Christmastime, many consumers advanced their purchases of Christmas gifts by several months. Still, the net decline since September has been -2.2%

Nevertheless they remain 9.2% higher than one year ago. In the past 70+ years before the pandemic hit, real retail sales were only higher YoY briefly in the early 1980s, as well as for about 16 months during the 1940s, 50s, and 60s.

Next, let’s turn to employment, because real retail sales are also a good short leading indicator for jobs.

As I have written many times over the past 10+ years, real retail sales YoY/2 has a good record of leading jobs YoY with a lead time of about 3 to 6 months. That’s because demand for goods and services leads for the need to hire employees to fill that demand.  The exceptions have been right after the 2001 and 2008 recessions, when it took jobs longer to catch up, as shown in the graph below, which takes us up to February 2020:

Now here is the same graph since just before the pandemic hit:

Note the two have been right in line for over half a year. I have written for the past several months that this “argues that we can expect jobs reports in the next few months to average out about even with those from one year ago, which averaged about 500,000 per month.” Although the last two jobs reports started out poor, November followed the pattern of upward revisions, and I expect more such revisions when next month’s jobs report is released. But comparisons will be very difficult YoY beginning in March, which means - to be consistent - that a big slowing of employment growth seems likely by about summer this year.

Finally, real retail sales per capita is one of my long leading indicators. Here’s what it looks like for the past 30 years:

With a -5.3% decline since April, this is a decidedly negative signal. Frankly, it’s recessionary looking out to midyear and beyond. Since it is only one indicator among the array, it isn’t a big concern yet. But it absolutely adds to the evidence that a big consumer slowdown as we go forward this year looks likely.


Before I go, let’s also briefly take a peek at industrial production, which also declined, by -0.1%, this morning. Manufacturing production declined -0.3%. Additionally, November was revised downward for both total and manufacturing production. Here’s the current view:

Both are still higher than they were just before the pandemic. While this isn’t good news, it is within the range of noise, but on the other hand, it is one more bit of evidence for a slowing expansion.

Thursday, January 13, 2022

Continuing unemployment claims make new 45+ year low


 - by New Deal democrat

New claims increased 23,000 last week to 230,000. The 4 week average of new claims increased 6,250 to 210,750:

The big increase is likely affected by seasonality. It’ll be another week or two before we can tell if there is any real change in trend. If there is, it is likely to be a flattening in new claims rather than any significant increase. 

Continuing claims for jobless benefits, meanwhile, declined by 194,000, to 1,559,000:

This is a new 45+ year record low. There haven’t been continuing claims this low since 1974, when the US population was half of what it is now, as shown in the graph below that subtracts 1,559,000 from the actual number:

Last week I wrote: “I don’t know if initial claims will go any lower, but I suspect continuing claims will continue to decline to or even below their 2018-19 levels.” Wow! Only one week later and the forecast is already correct. I expect even further declines in continuing claims, until the extreme tightness in the labor market brought about by the pandemic starts to loosen its hold.

Wednesday, January 12, 2022

Consumer inflation lessens in December; real wages increase, but a consumer slowdown remains likely


 - by New Deal democrat

Consumer prices increased 0.5% in December, a deceleration from the past several months. But this is still well above the typical monthly increase in prices pre-pandemic: 

On a YoY basis, at 7.1% consumer inflation is the highest since the big Reagan recession of 1981-82. My favorite measure, CPI ex energy, is also up 5.6% YoY, and tied for the worst since the 1981-82 recession as well:

Inflation in new and used vehicle prices has risen again to over 20% YoY; and gas prices YoY are still up at levels that in the past have been associated with economic slowdowns or recessions:

As I have been forecasting for months, house price increases have fed through into rents and “owners equivalent rent,” which has continued to increase:

Interestingly, in both prior cases where owners equivalent rent surged after house prices did - 2001 and 2006 - the surge in overall consumer prices (gold in the graph below) quickly ended and went into reverse:

In both cases, however, the Fed had aggressively raised interest rates in the meantime, helping to cause a slowdown (2006) or recession (2001), which in turn led to lower inflation.

The bond market fully expects the Fed to do the same thing this year. Below I show the yield on the 10 year Treasury (blue), 2 year Treasury (red), and Fed funds rate (black):

Note that in recent decades bond market investors have almost always anticipated the Fed’s move, bidding up yields on the 2 year bond in advance of Fed interest rate hikes. There have been some false positives (1996, 2002, 2011) but more often the bond market has been right.

Now let’s talk about “real” wages. To cut to the chase, this month the news was positive.

Average real hourly wages increased in December by 0.2%, although they are still -1.2% below their interim peak last December:

Additionally, real aggregate payrolls, an overall measure of consumer health, also increased 0.3% in December, and returned to equal their peak from September:

For the past 50+ years, when aggregate real wages have retreated from peak for 3 to 9 months, a recession has typically followed:

To sum up, while real wage growth has slowed down or halted, depending on which measure we use, they have not gone into reverse. This is consistent with taking a near term recession off the table for now. On the other hand, as I wrote last month, “we certainly are at a point where a sharp deceleration beginning with the consumer sector of the economy is more likely than not.” While perhaps I would modify that by dropping the descriptor “sharp,” a deceleration in the consumer sector remains supported by December’s inflation report.