Tuesday, January 19, 2021

“Those who cannot see must feel:” a retrospective on the Trump presidency

 

 - by New Deal democrat

Four years ago I wrote “Those Who Cannot See Must Feel,” which is

the translation of an old German saying that I used to hear from my grandmother when I misbehaved.  It is pretty clear that, over the next four years, the American public is going to do a lot of feeling ....  The results will range somewhere in between bad, disastrous, catastrophic, and cataclysmic, depending on how badly foreign affairs are bungled and how much basic norms of republican government irreversibly give way to despotism.  

... every [other] country in the world which has a Madisonian presidential system ... ha[s] [ ] somewhere along the line fallen into despotism.  I believe that the answer until now has been that the US is the only country which had not succumbed ....

I have some hope as to the former because both China and Russia are smart enough to figure out that they can get what they want by bribing Trump without resorting to armed conflict.  As to the latter, unfortunately, I hold out little hope.... there is not the slightest reason to believe Trump will allow himself to be constrained by, well, anything.

.... I have no illusion that we can do anything to prevent what is now directly in front of us.

I touched somewhat on economics, noting that 

demand side economics which target ordinary Americans works better to improve their lot.  In simple terms, give a wealthy man money and he will hoard most of it.  Give an ordinary person money and they will spend it. Spending has a bigger multiplier effect than hoarding.

And aside from the $1200 stimulus payment in early 2020, spearheaded by Democrats in Congress, Trump’s economy coasted on record low long term interest rates created in the aftermath of the 2016 Brexit vote; while his only noteworthy economic law was the gargantuan giveaway to the wealthy in the 2018 tax cut, with exactly the (lack of) results predicted.

But, as quoted above, mainly I focused on the political repercussions.

Four years later, the best that can be said is that we avoided cataclysm. Trump didn’t launch a nuclear war, and he didn’t start any other conflagration, although he did commit an act of War against Iran, which is almost certainly going to retaliate now that Trump is out of office (the most likely target being in the Trump family, but also possibly one or more senior military officials). 

We have also gotten pretty lucky as to the deterioration in the international situation. The US alliances with NATO and Japan have held; Biden is set to rejoin the Paris climate accords immediately. China did effectively subsume Hong Kong without a peep from the US, but has not made any irreversible moves on Taiwan. The Big Unknown is Russia, where, although it didn’t militarily take over Belarus or Ukraine,  every single arms agreement has been terminated, almost certainly in accordance with a plan by Putin, and even more alarming, the US should assume at this point that Trump and his cronies have compromised the entire US defense apparatus aside from anything the Pentagon has managed to conceal from him.

But the events of January 6 showed that the internal US system has sustained grave damage. It held, due mainly to the independence of the Judiciary (which Trump never expressly disobeyed), and due to the integrity of a few crucial local and State GOP election officials. But Congressional oversight utterly failed. Trump contemptuously ignored subpoenas and legal mandates without consequence. He ignored Congressional spending restraints, invoking a State of Emergency that Congress failed to overrule (with a 2/3’s vote of both Houses being necessary). With GOP Senate backing, one impeachment and conviction attempt has already failed. 

In short, Trump effectively showed that, so long as a President has the backing a majority of the House, or 1/3+ of the Senate, he can do whatever he wants without fear of being held to account in any fashion. Put that together with effective control over the prosecutorial system and the nearly absolute pardon power, and he can behave with complete impunity. Finally, he established on January 6 that, in the future, with the backing of a majority in Congress, the will of the Electorate, even as expressly confirmed and certified by the Electoral College, can be overruled and he can continue in office. And he might even be able to pardon the perpetrators.

In other words, the last successful Madisonian system has almost certainly been fatally wounded.

Because for decades I have been a voracious reader of history, and because I believe that learning principles from psychology can be applied to society as a whole, here is some lessons about where we are in the cycle:

1. Stability breeds instability - Economist Hyman Minsky famously theorized that stability breeds instability in economic systems. It is clear that the same is true in political systems. For example, it is clear that the peace and stability in Europe in the 19th Century after 1815 bred complacency in its governing aristocratic elites. As a result, the ruling monarchies proverbially pushed on the edge of the envelope in ever more extreme fashion. And for decades, the system held. Until in 1914, it didn’t, with catastrophic effects. Stability had bred instability.

Similarly, for the past 40 years, the Right in America has become ever more radicalized, as norm after norm has been breached. And yet - until January 6 at least - the system held. Ironically the fact that the system held up for so long only encouraged more rule-breaking, more “Constitutional hardball.” After all, if the system is impregnable, why worry?

And now the fabric of the system is finally tearing.

2. The rise of brownshirts. One specific way in which the fabric of the system is tearing is the rise of brownshirts. Before Trump, it was very much a fringe problem. But first with Charlottesville, then with the Second Amendment militias appearing in State capitals like Richmond VA early in 2020, then spreading to the anti-lockdown and anti-mask movements in other State capitals like in Michigan, armed brownshirts are now regularly appearing on American streets to physically threaten and intimidate those with whom they disagree. The January 6 putsch attempt in the US Capitol, with the intention to lynch the Vice President, the Speaker of the House and others, shows that the problem is now fully-formed.

In ancient history the use of brownshirts during the times of the Gracchii Brothers in the Roman Republic was the clarion sounding for a fatal wound being inflicted on the Republic, even if it took another generation until, with Sulla’s proscriptions, the Republic was dead on its feet. In the Weimar Republic and in other fascist uprisings in Europe after WW1 the widespread appearance of brownshirts similarly hailed the beginning of the end of Constitutional government.

Borwnshirts also plagued the flailing medieval city-state Republics, particularly Genoa and Florence. And we need only mention the 20th century example of the Weimar Rebpuclic, but also armed fascist uprisings in other 20th century European States.

Now we have a pattern of right-wing brownshirts on the streets of the US. Between no left-wing counterpart, and meeting force with left-wing force, the latter is the least worst option - but in either case the Republic is failing. The only other possibility is that with ruthless and unrelenting prosecutions for threats and violence the inflorescent movement might be brought to heel.

3. The right wing has learned that it has near impunity. This brings up a more general point about learning. If you ever watched the reality show “Supernanny,” you saw parents whose households were completely ruled by young children and even toddlers, because temper tantrums had always proven effective, as one or both parents always ultimately gave in. Supernanny never advocated using force, nor any punishment worse than being forced to stand or sit in a “quiet corner.” But the system had to be used relentlessly. Any time one or both parents abandoned it, the child had simply learned that throwing a tantrum long enough was successful. Thus the longer the coddling had gone on, the longer the tantrum and the more arduous the first application of the new system had to be in order finally to break the child’s will.

Similarly, right-wing extremism has been coddled in the US for over a generation - at very least since Gingrich’s 1994 conservative revolution in Congress. The center and the left have been hoping that half-measures and indulgence will make the problem go away. Instead the problem has gotten worse and worse - because the right-wing tantrums have almost always ultimately been successful.

The Biden Presidency may be liberal democracy’s last chance in the US. Like the parents in Supernanny, Biden and the Democrats must be prepared to “flood the zone” with changes, and be unrelenting for a long time in their application, to demonstrate to the right-wing that extremist tantrums will no longer be successful. Because the right-wing extremists probably have to be successful in only one more Presidential election.

4. Finally, and most fundamentally, as David Frum wrote, “If [a faction] become[s] convinced that they can not win democratically, they will not abandon conservatism. They will reject democracy.” 

This was just as true back in Ancient Rome. The patricians who dominated the Senate, moreso than their adversaries, the plebeians and the Italian allied states, in order to prevent the dilution of their vast wealth in the latifundia (huge rural plantations), were willing to compromise and ultimately shred the entire fabric of the Republic in order to avoid that loss. Similarly, in medieval Florence, the Medicis and their allies believed they would be better off if the Republic was subverted than if it was allowed to continue. The same held true in in the faction-riven Republic of Genoa, and the partisans of Prince Willliam in the Dutch Republic.
  
Similarly, whether we call them conservative evangelicals, social conservatives, or the White Herrenvolk, there is a large minority in the US that believes that its fundamental worldview is in danger of being permanently overturned. There is also another minority of the wealthy who believe that taxation for any government programs to improve the condition of the vast lower middle and working classes is a permanent and fundamental assault on their right to sequester their (often inherited) wealth. Both of these groups have been showing, and are continuing to show, that they are prepared to overturn the US’s representative democratic system itself if that is what it takes to maintain their position.

In sum, the Trump Presidency has shown that the US representative democratic Republic is under grave assault, and has sustained near-mortal damage unless it is reversed quickly and thoroughly. Those who could not see in 2016 have been and are feeling.

Monday, January 18, 2021

NFIB small business optimism vs. reality

 

 - by New Deal democrat

This is a really slow news week - on the economy!  My retrospective on the Trump Presidency is nearly complete and will be published tomorrow morning.

In the meantime, here is a brief note on the Small Business Optimism index which was updated for December last week, showing a steep decline across the board. Here it is:



What happened? Was there some earthshaking economic news? A hidden cataclysm of supply or demand?

Hardly.

What happened is that it became apparent to the small businessmen who primarily make up the National Federation of Independent Business that Biden had been elected to the Presidency.

As has been noted from time to time, Trump’s core constituency is not the white working class, but rather white small businessmen. When Trump shockingly won the 2016 election, their outlook soared - as is easily seen on the graph. Now that Trump has lost in 2020, their viewpoint has returned to where it was under Obama (note: the other big downward spike was March and April, when the COVID lockdowns went into effect).

A similar effect shows up in the same survey’s index for hiring plans:


What actually happened, according to ADP’s index of small business hiring, is that it tapered off dramatically after 2017, and after surging the most from 2011-15:


Gee, small businessmen didn’t actually hire more workers in response to bog-standard GOP economic policies. Hoocoodanode?

Sunday, January 17, 2021

The Federalist Papers #74 on insurrections, treason, and the pardon power: an argument that such pardons would be invalid as “arising in a case of impeachment”


 - by New Deal democrat

The Insurrectionists from January 6 are already asking Trump for pardons. Probably the only thing that would hold him back from doing so is his innate selfishness: what would be the benefit to *him*?

The thought that Trump could issue Got Out of Jail Free cards to the very people he incited to riot is mind boggling.

But it’s at least possible that he might not have the right to do so. 

Article III, Section 2 of the Constitution provides that “The President ... shall have the power to grant] reprieves and pardons for offenses against the United States, EXCEPT IN CASES OF IMPEACHMENT.'' 

That last bit isn’t just my emphasis. It’s also the emphasis placed on the quote in the discussion of the President’s pardoning power in The Federalist No. 74, which also discusses the right of the President to issue pardons in the cases of sedition and treason. Below is the entirety of the relevant discussion: 

Humanity and good policy conspire to dictate, that the benign prerogative of The expediency of vesting the power of pardoning in the President has, if I mistake not, been only contested in relation to the crime of treason. This, it has been urged, ought to have depended upon the assent of one, or both, of the branches of the legislative body. I shall not deny that there are strong reasons to be assigned for requiring in this particular the concurrence of that body, or of a part of it. As treason is a crime leveled at the immediate being of the society, when the laws have once ascertained the guilt of the offender, there seems a fitness in referring the expediency of an act of mercy towards him to the judgment of the legislature. And this ought the rather to be the case, as the supposition of the connivance of the Chief Magistrate ought not to be entirely excluded. But there are also strong objections to such a plan. It is not to be doubted, that a single man of prudence and good sense is better fitted, in delicate conjunctures, to balance the motives which may plead for and against the remission of the punishment, than any numerous body whatever. It deserves particular attention, that treason will often be connected with seditions which embrace a large proportion of the community .... In every such case, we might expect to see the representation of the people tainted with the same spirit which had given birth to the offense. And when parties were pretty equally matched, the secret sympathy of the friends and favorers of the condemned person, availing itself of the good-nature and weakness of others, might frequently bestow impunity where the terror of an example was necessary. 

 

On the other hand, when the sedition had proceeded from causes which had inflamed the resentments of the major party, they might often be found obstinate and inexorable, when policy demanded a conduct of forbearance and clemency. But the principal argument for reposing the power of pardoning in this case to the Chief Magistrate is this: in seasons of insurrection or rebellion, there are often critical moments, when a well-timed offer of pardon to the insurgents or rebels may restore the tranquillity of the commonwealth; and which, if suffered to pass unimproved, it may never be possible afterwards to recall. The dilatory process of convening the legislature, or one of its branches, for the purpose of obtaining its sanction to the measure, would frequently be the occasion of letting slip the golden opportunity. The loss of a week, a day, an hour, may sometimes be fatal. If it should be observed, that a discretionary power, with a view to such contingencies, might be occasionally conferred upon the President, it may be answered in the first place, that it is questionable, whether, in a limited Constitution, that power could be delegated by law; and in the second place, that it would generally be impolitic beforehand to take any step which might hold out the prospect of impunity. A proceeding of this kind, out of the usual course, would be likely to be construed into an argument of timidity or of weakness, and would have a tendency to embolden guilt.


On the one hand, the above passage would seem to support the right of Trump to pardon the seditionists of January 6. But I think there is an important distinction.

Federalist No. 74 envisions the President intervening in moments of societal peril so that “a well-timed offer of pardon to the insurgents or rebels may restore the tranquillity of the commonwealth.” While certainly not exactly on point, this is akin to Jimmy Carter’s blanket pardon of Vietnam War draft dodgers - an attempt to heal a festering rift in society. In the hypothetical noted by the Federalist papers, it defuses an imminent rupture.

But that is exactly opposite to the case where the sedition has occurred precisely *because* of incendiary actions of the very President himself. In this case, take out Trump’s own incitement, and there is no riot or sedition.

Further, Trump has in fact *been impeached* by the House, whether or not he is ever convicted by the Senate. So the criteria for the exception - “except in cases of impeachment” - while they may specifically be meant to exclude pardons for those civil officers who have been impeached, nevertheless may apply here. Literally, textually (for those who are devotees of textualism, as current members of the Supreme Court allegedly are), the acts for which the insurrectionists are seeking pardons exactly gave rise to this “case of impeachment.” Further, had the Founders chose to do so, they could have said that the exception only applies “in cases of impeachment *and conviction.*” They didn’t include that qualification, and in other cases, e.g., theSlaughterhouse Cases concerning the 14th Amendment, the Supreme Court has held such omissions to be meaningful. 

In short, even if Trump does issue pardons to the insurrectionists, I think prosecutors should argue that the pardons are invalid under the Constitution. The cases would surely be taken to the Supreme Court, where both the textualists and those looking to the spirit of the law, surely aware that these cases are “sui generis” (I.e., in a class all by themselves, extremely unlikely ever to be repeated), might decide that the pardons arose “in a case of impeachment” and hold that the proffered pardons are null and void.


 

Saturday, January 16, 2021

Weekly Indicators for January 11 - 15 at Seeking Alpha

 

 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

While initial jobless claims have continued to worsen, there is no sign of a generalized downturn in the coincident data, and the upturn in long term interest rates isn’t enough to change their fundamental positive impact on the economy.

As usual, clicking over and reading is rewarding just a little bit for me, and brings you up to the virtual moment as to what is happening in the economy.

Friday, January 15, 2021

Good news (industrial production) and bad news (retail sales)

 

 - by New Deal democrat

This morning’s two reports on industrial production and retail sales for December were a case of good news and bad news.

Let’s do the good news first. Industrial production, the King of Coincident Indicators, rose 1.6% in December. The manufacturing component rose 1.0%. Needless to say, these are a strongly positive numbers. As a result, overall production is only -3.3% below its February level, while manufacturing is only down -2.4% since February:


Manufacturing has consistently been one of the biggest bright spots in the economy ever since April. 

Now on to the bad news.

Nominal retail sales declined -1.0% in December. Excluding the food services sector which has been especially hard hit by the pandemic and lockdowns, sales were nevertheless down -0.3%. Total sales are down -2.7% since September; excluding food sales they are still down -1.5%:


In real terms, retail sales declined -1.0%, and are down -2.7% since September:


The silver lining is that this type of decline doesn’t necessarily mean a steep decline back into recession lows. Similar declines happened several times during the last expansion. And they are still up 1.5% since February.

As I have pointed out many times, consumption leads employment. It’s even a better match for aggregate hours worked in the economy, as shown in the long term graph below:

And here’s what it looks like YoY compared with aggregate payrolls:


Last month I wrote that “I continue to expect employment to continue to rise - with a lag, and quite possibly a pause during this winter as the pandemic continues to rage - to match the level of sales.” Well, we certainly got the “pause” in December’s employment report, and if we get more initial jobless claims reports like yesterday’s, a further downturn. But I still expect employment to rise to meet sales once the winter surge in cases and shutdowns of outdoor activities including dining both abate.

Thursday, January 14, 2021

Jobless claims highest in three months - but seasonality still playing a huge role

 

 - by New Deal democrat

On a unadjusted basis, new jobless claims rose by 231,335 to 1,151,015. Seasonally adjusted claims also rose by 181,000 to 965,000. The 4 week moving average rose by 18,250 to 834,250.

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

There is now a 2+ month trend of YoY% increases in initial claims. Further, by rising to over 900,000, seasonally adjusted claims hit one of my two markers for a fundamental change of trend. But the 4 week average, which is still under 850,000, did not.

For the last couple of months, I have been cautioning that the holiday season plays havoc with seasonality even in normal years, let alone a year when the pandemic is causing changes in weekly numbers by an order of magnitude. That was especially so this week. Typically in the weeks after Christmas and New Years’, claims go up by 25,000 to 50,000 on an unadjusted basis. This year claims went up by up to 10x as much.

But when we look at the YoY% change in all of the above metrics, which washes out those outsized seasonal affects, the picture is not nearly so negative:

While weekly seasonally adjusted claims have risen 366% - a YoY comparison last seen in August, non-seasonally adjusted weekly claims, and the 4 week average are still in the YoY range they were in October, at +240% and +290% respectively. In fact the non-seasonal trend looks more sideways than increasing.

In other words, this was one bad week of data, but we are clearly above November lows, but nothing awful (or at least, not materially *more* awful than before) has happened yet.


Turning to seasonally and non-seasonally adjusted continuing claims, which historically lag initial claims typically by a few weeks to several months, the former rose by 199,000 to 5,271,000, and the latter rose by 474,180 to 5,856,230:


Because these lag initial claims, I have suspected that we would see an upward reversal, and it appears to have arrived.

Finally, as I usually note, a reminder that both initial and continued claims remain at or above their worst levels from the Great Recession.

Bottom line: renewed partial lockdowns and increased consumer caution due to the out of control pandemic have caused increased layoffs. Should we get another week like this one in the next couple of weeks, that will probably mark the decisive break of trend. At the same time, it isn’t quite as bad as I would have thought several months ago. Further, since I expect Biden to tackle COVID as his very first priority (even before prosecutions for the January 6 putsch attempt), hopefully we will see the worst within 4 to 8 weeks.

Wednesday, January 13, 2021

December inflation: real aggregate wages fall as real average wages rise due to compositional effects

 

 - by New Deal democrat

Consumer inflation typically rises as expansions continue, and declines once recessions start. Once a recovery begins, inflation typically steadies again. While the pandemic has affected both consumer demand and the supply chain, overall the paradigm should still apply. With that in mind, let’s take a look at December’s report.

For the past 40 years, recessions had typically happened when CPI less energy costs (red) had risen to close to or over 3%/year. As of this month that number is exactly 2%: 


In other words, there is no troublesome price pressure outside of the pandemic. Because pandemic affects are probably influencing seasonality, I also show non-seasonally adjusted inflation below (red):


Typically inflation increases in the first few months of the year, and abates in the latter part. The unusual 0.4% seasonally adjusted increase for December appears to have been primarily driven by a 0.3% increase in food prices. I expect that price pressure to pass in the next few months.

Now let’s take a look at how inflation has affected real wages. Because wages are “stickier” than prices, typically as recessions beat down prices (or at least price increases), in real terms wages rise, either during or just after a recession. That has been the case for the coronavirus recession as well. It is the “real” buying power of wages among those still securely employed during a recession that is one of the engines that usually restarts growth. 

Also as a result, real hourly wages for non-supervisory workers have exceeded their previous 1973 peak by 1.6%:


Finally, one of the most telling metrics of the overall health of the middle/working class is that of real aggregate wages. After declining -13.8% from February through April, they recovered to -3.1% below their peak in November, before declining -0.2% last month. Here is comparison of the YoY changes in average (blue) vs. aggregate (red) wages, showing the outsized upward skew in average wages vs. the huge hit to aggregate wages - even bigger than during the Great Recession:


While average wages have risen by over 5% in the past year - the best showing since the inflationary 1970s - this is due to compositional effects, as the pandemic has resulted in outsized layoffs to lower paid service workers. 
 

What we want to see is the red line above zero, and the blue line at least not declining further. All of this is at the mercy of the course of the pandemic. 

Tuesday, January 12, 2021

November JOLTS report shows renewed impact of pandemic, partial lockdowns

 

 - by New Deal democrat

This morning’s JOLTS report for November (remember - a month in which there were total job gains) showed a jobs market recovery that at least paused due to the increasing effects of the out of control pandemic. Hires were up (good), while quits were unchanged, openings declined (bad) and layoffs and discharges rose (bad).

While the JOLTS data is a deep dive into the dynamics of the labor market, since it only dates from 2001, there are only 2 previous recoveries with which to compare the present. Nevertheless it is worthwhile to make the comparison.

In the two past recoveries:
  • first, layoffs declined
  • second, hiring rose
  • third, job openings rose and voluntary quits increased, close to simultaneously

Let’s examine each of those in turn. In each case, I break out 2001-19 in a first graph and then this year in a second.

What appears below is that, although there has been some variation, the year 2020 through November recapitulated the pattern from the last two early recoveries: the first two data series to turn - layoffs and hires - have indeed turned, while the last two - job openings and voluntary quits - have appeared to bottom but have had a much less dramatic rise. With increased pandemic restrictions and consumer caution, several renewed negative readings in November, but not enough to significantly change the trend.

This first graph compares layoffs and discharges (blue) with the 4 week average of initial jobless claims (red) prior to this recession, for reasons of scale since March and April would be “off the charts”:


You can see that, by the end of the recessions, layoffs were already declining, and continued to decline steeply over the next 3-8 months before reaching a “normal” expansion level. The turning point coincides exactly with the much less volatile, but more slowly declining, level of initial jobless claims.

The same had been the case this year up until October. Layoffs and discharges already declined to their “normal” level in May, while initial jobless claims peaked one to two months later, and continued to decline (slowly) through November. We already know, however, that the rise in JOLTS layoffs in November and December absolutely showed up  in initial jobless claims in December: 


The continued rise in layoffs in December suggests that initial claims will continue elevated over their November lows through this month.

Next, here is the entire historical relationship between hires (red) and job openings (blue) through 2020:


In the past two recoveries, actual hires started to increase one to two months before job openings.

Both made troughs in April, but hires have rebounded more sharply ever since May compared with job openings, although both have essentially leveled off at those levels, and openings slightly declined in November and may even have a slightly declining trend:


Next, here are quits (green) vs. job openings (blue): 


In the past two recoveries, openings started to rise slightly before quits made a bottom. After that, both rose more or less together (suggesting it is openings that leads to the increase in voluntary quits).

This year, both made a trough in April. Since then, openings appears to have continued to slightly led quits, with both flattening out in the past several months:


Because seasonal adjustments might not be giving us a true picture because of the enormous moves during this pandemic year, here are job openings (blue), hires (red), and voluntary quits (green), measured YoY without seasonal adjustments for the entirety of the series up through the present:


We can see that, even taking out the seasonal adjustments, hires rebounded first following the 2001 and 2008-09 recessions. Quits and openings moved generally in tandem with a slight lag. The same pattern generally appeared in 2020, with quits perhaps slightly lagging.

Finally, I have broken out layoffs and discharges separately below, because the their level in April and May of this year would obliterate all other variations (note: inverted so that fewer layoffs shows as positive):


This metric returned to normal almost immediately after both of the past two recessions, and did so again by July of this year. But its gain decelerated in October, and turned negative YoY in November (which, since the line is inverted, means higher total layoffs and discharges:


To sum up:

1. The JOLTS report continues to show a pattern generally consistent with the past 2 recoveries, with layoffs having returned to normal levels, then hiring having increased, and finally quits and openings increasing as well; but

2. We are seeing the results of the out of control pandemic in the increasing layoffs and separations in November, likely due to renewed partial lockdowns and increasingly cautious consumer behavior as well as consumers pulling back on “al fresco” activities in the cold winter weather.

Monday, January 11, 2021

Scenes from the December jobs report

 

 - by New Deal democrat

Friday’s December jobs report saw the first decline in employment since the lockdowns of March and April. Let’s take a closer look.


As I pointed out Friday, the losses were concentrated in the food and dining (restaurant) and amusement and recreation sectors, both of which are shown below normalized to 100 as of February:


The two sectors are down 20% and 30% from their February peaks.

By contrast, the leading job sectors of manufacturing, residential and overall construction, and temporary help positions all continued with gains, and are close to if not completely recovered from their pandemic losses. Below I show these YoY in two time periods for easier comparison (note two of the series did not begin until the 1980s).

1955-1982:


1983 - present:


This is one of the many signs pointing to a strong rebound in the overall economy once the pandemic is brought under control.

Another important way to look at employment is via the differential impact of the pandemic on the goods-producing vs. service-providing sectors of the economy. Below are the YoY% changes also broken down into two time periods for easier comparison.

1955-1982:


1983 - present:


Up until the Great Recession, the goods-producing sector always bore the brunt of layoffs. In fact the worst YoY losses in service jobs was 1.4% in 1949 and 1.3% in 1958, respectively. In 2009, by contrast, the worst losses were 3.2%. Last year, there were 13.8% losses in April, improving to their “best” reading of 6.3% losses in November.

Finally here are the breakdowns in YoY job gains and losses between men (blue) and women (red), divided into the same two time periods:




Because women have disproportionately been employed in the lower paying service sectors, they did not suffer layoffs *relatively* as bad as men during recessions prior to the turn of the Millennium. This got worse during the Great Recession, and in this pandemic recession they have been hit the worst of all historically.

Programming note

 

 - by New Deal democrat

Four year ago I wrote a valedictory piece about the Obama Administration, and separately wrote of my fears of what the Trump Administration would wreak.


Needless to say, especially in light of events of the past week, I intend to do the same retrospective as to Trump and the current state of the GOP and the Republic. Much of what I have to say is in agreement with disparate threads I have read on twitter, but I want to weave those strands together into one cohesive piece. Hint: I keep thinking about old episodes of Supernanny, where a toddler’s behavior was allowed to get worse and worse without consequence. The longer it went on, the more forceful and resolute the parents’ response ultimately had to be.

Hopefully this will be a long-form piece next Sunday.

Saturday, January 9, 2021

Weekly Indicators for January 4 - 8 at Seeking Alpha

 

 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

Although yesterday’s employment report was negative, there is still no sign of any broad-based downturn in the broader economy. Rather, losses appear contained to the dining and entertainment sectors.

As usual, clicking over and reading should bring you up to the moment, and brings me a tiny jingle in my pocket.

Also ... in the conclusion, I make reference to the improvement in the daily average of people being vaccinated against COVID-19. Here is the graph with the information I am referring to:

Friday, January 8, 2021

December jobs report: I told you so - jobs actually declined in December; BUT employment primed for takeoff once pandemic abates

 

 - by New Deal democrat

Important: There was a huge amount of seasonality in this report. This is common for December, but the issue was greatly exacerbated because of the outsized impact of the pandemic. Take the large changes in some of the data with many grains of salt.

I have been warning for almost 4 weeks that the December employment report might have a negative number. It did. At the same time, the internals are not nearly so bad as the headline.

HEADLINES:
  • -140,000 million jobs lost, 95,000 of which were in the private sector and 55,000 were in government. Comparatively, there were 22.1 million job losses in March and April. The alternate, and more volatile measure in the household report indicated a gain of 21,000 jobs, which factors into the unemployment and underemployment rates below.
  • U3 unemployment rate was unchanged at 6.7%, compared with the January low of 3.5%.
  • U6 underemployment rate fell -0.3% from 12.0% to 11.7%, compared with the January low of 6.9%.
  • Those on temporary layoff increased 277,000 to 3,039,000.
  • Permanent job losers decreased by -348,000 to 3,370,000.
  • October was revised upward by 44,000. November was also revised upward by 95,000 respectively, for a net gain of 135,000 jobs compared with previous reports.
Leading employment indicators of a slowdown or recession

I am still highlighting these because of their leading nature for the economy overall.  These were generally positive: 
  • the average manufacturing workweek was unchanged at 40.2 hours. This is one of the 10 components of the LEI.
  • Manufacturing jobs increased by 38,000. Manufacturing has still lost -543,000  jobs in the past 10 months, or -4.2% of the total. About 60% of the total loss of 10.6% has been regained.
  • Construction jobs increased by 51,000. Even so, in the past 10 months -226,000 construction jobs have been lost, -30% of the total. About 80% of the worst loss of 15.2% loss has been regained.
  • Residential construction jobs, which are even more leading, rose by 8,900. Since February there have now been actual job *gains,* to the tune of 6,400 jobs, to a new 10 year+ high.
  • temporary jobs rose by 67,600. Since February, there have still been -213,500 jobs lost, or -7.3% of all temporary help jobs.
  • the number of people unemployed for 5 weeks or less rose by 849,000 to  million, compared with April’s total of 14.283 million.
  • Professional and business employment rose by 161,000, which is still -858,000, or about 4% below its February peak.

Wages of non-managerial workers
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.20 from $24.89 to $25.09, which is a gain of 5.2%(!) in the 10 months since the pandemic began. As with last March and April, these gains reflect that job losses occurred primarily among lower wage earners, who since May had been disproportionately recalled to work.

Aggregate hours and wages:
  • the index of aggregate hours worked for non-managerial workers declined by -0.1%. In the past 10 months combined this has nevertheless fallen by about  -6%.
  •  the index of aggregate payrolls for non-managerial workers rose by 0.7%. In the past 10 months combined this has nevertheless fallen by about -1.6%. Still, about 90% of the loss from February to April has been made back up.

Other significant data:
  • Full time jobs gained 397,000 in the household report.
  • Part time jobs declined -471,000 in the household report.
  • The number of job holders who were part time for economic reasons decreased by -332,000 to 4.891 million. This is still an increase since February of 1,772,000.

SUMMARY

While the headline was a negative number, this was almost entirely due to huge declines of -372,000 in food and beverage establishments, and another -92,000 in amusement and recreation. Private education lost -63,000, and there were also sizable losses in local and state government.

In contrast, all of the leading job groups showed equally sizable gains, and residential construction employment made a new decade-plus high. Among leading employment indicators, only the increase in short term unemployment was a negative.

Full time jobs also showed gains, while part time jobs showed losses. Aggregate and average payrolls also rose sharply. While the average hourly wage increase can be put down to the heavily skewed nature of the new job losses, the aggregate increase which includes the total from all jobs, is a big positive, probably reflecting some annual raises.

This is an absolutely poor report as to current conditions, particularly 10 months into the pandemic. On the other hand, the leading sectors once again show that the economy - including employment - is primed for takeoff once the pandemic is brought under control.

Thursday, January 7, 2021

Jobless claims start 2021 continuing flat to increasing trend; negative December jobs number increasingly likely

 

 - by New Deal democrat

On a unadjusted basis, new jobless claims rose by 77,400 to 922,072. Seasonally adjusted claims declined by 3,000 to 787,000. The 4 week moving average declined by 18,750 to 818,750. All of these are above their recent lows. 

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

At the same time, neither of these has hit my established markers of renewed upward trend of seasonally adjusted new claims rising to over 900,000 and the 4 week average to over 850,000.

Because of the huge distortions caused by the pandemic in seasonally adjusted numbers, and because we are at a time of year when seasonality causes the most distortions in any event, here are the YoY changes in all of the above metrics:

There is now an 8 week trend in the seasonally adjusted data of YoY% increases, and a less pronounced upward trend for the past 6 weeks in the 4 week average. Interestingly, the YoY trend for unadjusted claims - especially important in this case - has continued to decline. 

Both seasonally and non-seasonally adjusted continuing claims, which historically lag initial claims typically by a few weeks to several months, on the other hand, remain in a slightly downward or flat trend. Seasonally adjusted continuing claims declined again by 126,000 to a yet another new pandemic low of 5,072,000. On an unadjusted basis, they rose by 145,844 to 5,382,459, over 100,000 above their recent pandemic low:

Because these lag initial claims, I continue to suspect we will see an upward reversal in the next few weeks. 

Both initial and continued claims remain at or above their worst levels from the Great Recession.

Finally, tomorrow we will get the December jobs report. For the last 3 weeks, I have been warning that it is likely to be the weakest since April, very likely under a 200,000 gain, and quite possibly and actual loss. Yesterday the ADP reported that by their calculations, there was indeed an actual decline in jobs in December. We’ll see shortly.

Wednesday, January 6, 2021

Coronavirus dashboard for January 6, 2021: new infections vastly outpacing vaccinations

 

 - by New Deal democrat

Total confirmed COVID-19 infections: 21,046,195*

Infections last 7 days average: 219,253
Total deaths: 357,258
Deaths last 7 days average: 2,670
Total vaccinations: 4,836,489

*A study just released, based on random blood samples, suggests that as many as 50,000,000 Americans may have already been infected. Because some of the positive tests may be based on exposure to other coronaviruses, I do not think the number is that high. But my own guess is that the “true” number might be about 30,000,000, or 1 in every 11 Americans.

Today I want to focus on comparing this winter’s breakout with last spring’s and summer’s, by comparing the top and bottom 25 States with the “poster children” for each of the past breakouts.

Seven day average of new infections
Bottom 25


Top 25


Not only do *all* of the top 25 now exceed the infection rate of the 2 poster children for the previous breakouts, but many of the bottom 25 are in the same ballpark as well. Among the 50 States, only Vermont and Hawaii have some semblance of control.

Seven day average of hospitalizations
Bottom 25


Top 25


So far, only about 6 of the States have hospitalization rates equivalent to those of the past 2 outbreaks. But because hospitalizations lag infections by about 2 weeks, we can expect over half of all the States to have hospitalization rates at or near emergency conditions by the time Biden becomes President on the 20th.

Seven day average of deaths
Bottom 25


Top 25


Many States are already showing a rate of deaths that is roughly half of that of the peak during the summer outbreak. About a dozen have already exceeded it. Note the inclusion of South Dakota as a recent prior peak - it wasn’t broken out separately for infections or deaths because, in view of subsequent data, it doesn’t stand out there. In other words, if deaths follow a similar trajectory, by Valentine’s Day we should expect to see a death rate for most States on par with South Dakota’s recent experience, and roughly 2/3’s of that of NY and NJ during the early spring outbreak. 

This is utterly ghastly, and it is already “baked in the cake.”

Finally, here is the 7 day rate of new infections (finer line) vs. 7 day rate of vaccinations (heavier line)(note separate scales):


New infections so far are completely outrunning vaccinations, by close to a 4:1 pace.  Less than 175,000 vaccinations are taking place daily as of the most recent data point. We need to get that up to 1,000,000 per day if not more just in order to have the population vaccinated by the end of 2021.

Tuesday, January 5, 2021

December ISM manufacturing index: manufacturing, like housing, is “on fire”

 

 - by New Deal democrat

Data for December 2020 started out this morning with the ISM manufacturing index.


The bottom line is: it was excellent. The overall reading, at 60.7, was only 0.1 below its 20 year peak of 60.8 in 2018. The even more leading new orders subindex rose to 67.9, also equivalent to its 20 year highs:


There has been some deceleration in the positive readings from the Regional Fed manufacturing indexes. But it is nowhere evident in this report.

Simply put, manufacturing along with housing, are both “on fire.” This is one more piece of evidence that the economy is ready to soar once it is no longer held back by the pandemic.

Monday, January 4, 2021

November construction spending confirms building surge

 

 - by New Deal democrat


One of my consistent themes in the past few months has been how the housing market is priming the economy for strong growth in 2021 as soon as the pandemic is brought under control. In that vein, November construction spending surged, confirming what we have already been seeing in housing permits and starts.


First of all, here are both total and residential construction spending for the past 15+ years:


Note that in raw, non-inflation-adjusted terms, both are close to their all-time highs, and definitely at 10+ year highs.

Of the two, residential construction is the more important because it is more leading, indicator. Commercial and government construction, which are included in the total, relatively speaking lag.

Because permits have to be taken out before construction can begin, typically these lead construction spending (although in fairness that really hasn’t been true in the past 2 years). Below I show the YoY% change in both, which helps take care of the fact that residential construction spending isn’t adjusted for inflation:


With the exception of the brief lockdown periods last March and April, residential construction spending is increasing at a pace equivalent to its best in the past 5 years, just as permits have done even better.

Saturday, January 2, 2021

Weekly Indicators for Dece3mber 28 - January 1 at Seeking Alpha

 

 - by New Deal democrat


My Weekly Indicators post is up at Seeking Alpha.


In a sparse data environment, it continues to stand out how surprisingly well - under the circumstances - the economy is doing, and how primed it is to really take off once the pandemic is brought under control.

As usual, clicking over and reading brings you up to the virtual moment, and puts a penny or two in my pocket.

Friday, January 1, 2021

Happy New Year 2021!

 

 - by New Deal democrat

Wishing all of my readers a happy, healthy, and better 2021!

I started writing online 17 years ago, and have been here over a decade. This past year was easily the worst of all of them, and at least tied with 1968 if not worse for the worst year historically of my entire life.

The pandemic upended everything, so this year for the first time in a long time there’s no point in taking a look back to see how the year-ago economic forecast panned out, and only limited value in a new forecast even now, although I agree with Paul Krugman that once the pandemic has been brought under control, the economy looks likely to spring back strongly.

In the meantime, here is one last chuckle about 2020, The Year From Hell - in this ad from match.com, literally!