Saturday, July 10, 2021

Weekly Indicators for July 5 - 9 at Seeking Alpha


 - by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

To the surprise of many, interest rates have gone down in the past few weeks, to the point where they have resumed being a positive in my long leading model.

Meanwhile, as the “delta wave” of COVID builds in the unvaccinated States, once again the pandemic will begin to assert control over the economy, at least as to those sections of the country, and may override the leading signals from the model.

As usual, clicking through and reading will bring you up to date, and bring me a penny or two for my efforts.

Friday, July 9, 2021

Scenes from last week’s June employment report


 - by New Deal democrat

With no significant economic data today, let’s take a look at some of the more salient numbers from the June employment report released one week ago.

Starting with the headline employment numbers, both the Establishment Survey and the Household Survey, while diverging in any given month, are in close agreement about the extent of the comeback from the worst of the pandemic, down -4.4% and -4.5% from February 2020, respectively:

This is about a 70% recovery from the bottom.

Comparing goods producing vs. service providing jobs, we see that the former are down -3.7% since February 2020, while the latter are down -4.6%:

Breaking jobs down further, comparing the less affected sectors of construction, manufacturing, professional services and education and health services all show modest recoveries, while the more severely affected temporary help, leisure and hospitality, and food and drink sectors have recovered more strongly - but are still lagging:

Jobs in the leisure and hospitality sector are still down -12.9% since February 2020.

Turning to the household report, we see that those who usually work part time were by far the hardest hit, and while they have recovered considerably, still lag full-time workers:

On the other hand, those who are working part time involuntarily (red in the graph below) have declined to near full-recovery levels. The number of those who are out of the labor force but want a job (blue) has declined, but is still near its previous record levels of 2012 and 2013:

This is about 2.5 million people who aren’t in the labor force at all, but would be in more normal times. It will take a further recovery of job prospects to draw them back into applying for jobs.

Finally, turning to pay, the YoY% gain for ordinary non-supervisory workers has risen back to 3.7%, which is in line with some of its best gains over the past 45 years:

This is good news since in the past few months many workers in typically low wage occupations have been rehired.

Another way of looking at this is comparing the 16 months just before the pandemic with the 16 months since. In the 16 months before the pandemic, wages rose 4.4% (or 3.3% annually). In the 16 months since, wages have risen 7.2% (or 5.4% annually):

Whether these kinds of gains will survive the further re-opening of the economy, particularly as emergency pandemic benefits end, is very much an open question.

Thursday, July 8, 2021

Trend in new jobless claims flattens: the virus remains in control in the unvaccinated States


 - by New Deal democrat

New jobless claims are the most important weekly economic datapoint with regard to the effects of vaccination progress. Four weeks ago I wrote, “I think we are going to see two tracks going forward from here, as near-normalcy does return to the more vaccinated parts of the country, while attempts to return to normalcy fail in the laggard regions.” Last week I elaborated to say, because progress in vaccinations had largely stalled in the past month, “that implies at least a stall in the decline in new claims, and - I actually suspect - an increase, perhaps to about 450,000 per week or so.”

This week showed evidence of continued progress, but only very slowly. New jobless claims increased by 2,000 from last week’s new pandemic low, to 373,000. The 4 week average of claims also declined by only 250 to a revised new pandemic low of 394,500. Here is the trend since last August:

At the peak of the pandemic lockdowns in spring 2020, new claims were running 6 million to 7 million per week. This year, from late February into May, claims had trended down an average of roughly 100,000 per month. This has slowed sharply over the last 4 weeks to a decline of only about 25,000. The less volatile 4 week average is only down 8,250 from 5 weeks ago.

Continuing claims, which are reported with a one week lag, and lag the trend of initial claims typically by a few weeks to several months, have only declined about 13% from roughly 3,800,000 over the past 4 months, reported today at 3,339,000 - which was, nevertheless, another new pandemic low:

At least some of this decline *may* be due to many States’ termination of all extended jobless benefits due to the pandemic.

A long term perspective shows that this week’s level is equivalent to early during the recoveries from most previous recessions, versus at 2,000,000 or below later in strong expansions:

My ultimate target for economic success from vaccinations is for claims to be an average of 325,000 or below, which would signify a return to normal expansion levels in the past 30 years. But with more than half of all States now showing increases in new cases, and deaths following in a few of them, the virus remains in control in those States - and how employers and potential customers will behave in response to that is very much open to question.

Wednesday, July 7, 2021

May JOLTS report continues to show a jobs market out of equilibrium


 - by New Deal democrat

This morning’s JOLTS report for May continued all of the trends we saw in April - a huge amount of unfilled job openings, a comparatively weak level of actual hiring, an enhanced number of people quitting their jobs, and record low layoffs and discharges.

To begin with, on a month over month basis, all 4 of the metrics above, plus total separations, declined:

As noted above, headline job openings (blue) (which declined a slight -16,000) persisted at their record high levels over 20% above any prior reading, while hires (gold)  languished, relatively speaking, at normal levels:

Voluntary quits also declined from last month’s record high, but remained higher than any other prior month except for July 2019:

The record number of people voluntarily quitting their jobs (meaning they are not eligible for unemployment benefits) flouts the idea that job openings can’t be filled because of those benefits.

Finally, while total separations (green, right scale) are at normal levels, layoffs and discharges (red, left scale) declined to yet another all time low:

This is a market that is out of equilibrium. Almost nobody is getting laid off, but lots of people are quitting. There are record openings, but only a normal number of hires to fill those openings. The market will not get back into equilibrium until more people decide they want to fill those job openings. While undoubtedly for some of those people not entering the job market continued pandemic jobless benefits are an issue, for many more the lack of COVID safety in the locale where they live, the unavailability of reasonable-cost child care, or the general low pay for the labor required, are keeping them on the sidelines.

Tuesday, July 6, 2021

Coronavirus dashboard for July 6: bad news and *relatively* “good” news about the Delta Wave


 - by New Deal democrat

In the near future, there appears to be bad news and *relatively* “good” news for the US. The bad news is that the “delta wave” is spreading, and we should expect a real outbreak on the order of last summer’s by early August. The *relatively* “good” news is that the death rate is likely not to be nearly so bad, if the experience in the UK is any guide.

First, here’s the bad news, graphically. Of the 25 US States with the highest rate of infections, only 5 do not show an increase: declines in CO, NM, OR, and WA, and steady cases in DE:

Of the 25 States + DC with the lowest rate of infections, 5 have started to trend significantly higher:

In other words, the uptrend in new cases has spread to 1/2 of all US States so far.

The *relatively* “good” news is founded on the experience of the UK with its “delta wave.” The U.K. experience is a bellwether for where the US is going to be in about 4 weeks. There, the outbreak is now the worst except for last winter’s, and has quintupled in that time. BUT, while deaths typically lag cases by 4 weeks, even a quintupling in the rate of deaths in the UK would put it at perhaps only 10% (!!!) of the level during the first wave of spring 2020:

Here is the same graph for the US as a whole:

If the US follows the same trajectory as the UK, the daily death count might “only” go up to about 600 or 700 cases by Labor Day or so, compared with 1000 or more during most of 2020.

Monday, July 5, 2021

No, liberals are not to blame for political polarization


 - by New Deal democrat

Over the long weekend, Kevin Drum picked a fight by saying that you should “blame liberals” for culture wars, arguing that liberals have shifted their positions much more over the past two decades than conservatives.

This has provoked some strong counter-arguments, but what has struck me - as usual - is how little people have actually looked at the data. When you do so, there are at least three very important contradictions or limitations to Drum’s argument.

Drum’s decisive evidence is this graph from a 2018 report by the Pew Research Center on partisanship:

And indeed, Democrats have moved much further to the left than the median GOPer has to the right.

Except. Except he left out the fact that Pew did an identical study in 2014, and here’s what the same graph looked like then:

Oh. Notice that the differences aren’t nearly so asymmetrical in 2014 as they were in 2017. So what happened in between those two years that made Democrats more sharply break from the center?

Pew has been polling using the same or similar questions for about 2 decades. There were roughly 20 questions polled, with the results shown, in their 2018 report. About half dealt with economic issues, a little less with social issues, and a few with international issues like diplomacy and the military.

While I won’t show all of the results, Pew itself put together the below set of responses to 10 of the questions, which are pretty representative of the overall sample:

I created a spreadsheet of the differences in responses between Democrats and Republicans since the inception of all 20+ questions, and also from 2014 (or sometimes from 2012 or 2010 if that result was called out numerically by Pew). While I won’t post the entire chart, suffice it to say that with the exception of government help for the needy, and whether environmental regulation hurts the economy, in which the GOP moved further off center since 2000, as to virtually all other issues Democrats did move further from center during the 2 decades, and in about half of the issues, moved considerably further from “median” positions since 2012 or 2014 than the GOP.

But the three most important issues by far, all of which are shown in the Pew graphs above, were racial discrimination (as to which Democrats shifted 13% further than GOPers since 2000, and 36% since 2010), government help for the needy (17%) - which many respondents undoubtedly viewed as a proxy for aid to racial minorities, and most of all immigration (23% and 29% in two variations of the issue).

Drum also cites several polls on whether respondents are “satisfied with” laws on guns and taxes, as to which, unsurprisingly, in 2017 GOPers were much more satisfied than Democrats compared with a decade or more earlier. 

Why? A bunch of state laws were passed easing gun restrictions, and the GOP Congress and Trump passed the “Tax Cuts and Jobs Act of 2017.” Since Democrats were very *dissatisfied* with those same new laws, the polls artificially make the Democrats’ response appear more extreme, because the responses are calibrated against a moving target.

There is pervasive evidence that while the US population skews heavily towards economic populism, on social issues there is virtually a 50/50 split. The main drivers of Democrats’ move to the left since 2014 have been on perceptions of racial discrimination and on the issue of immigration. The former is likely largely due to the whole “black lives matter” movement that stated out with the killing of Trayvon Martin in 2012, and picked up steam after shootings like those of Tamir Rice near Cleveland and Michael Brown in Ferguson, MO, in 2014. The latter has been heavily impacted by the plight of “Dreamers” who the GOP in Congress, and President Trump, consistently refused to protect.

On the broader issue of immigration, it is clear that it has been a problem for liberals not just in the US, but throughout Europe as well, and is in great degree responsible for driving the right wing authoritarian response in both places. In the past I have supported the idea of Democrats’ moderating their stance on that broad issue, employing a dual strategy of “the rule of law” as well as “the rule of equity” to minimize illegal immigration while granting full rights to Dreamers.  

I’ve also written in favor of making use of  a“K.I.S.S.” approach to new government programs, arguing that methods like Social Security and Medicare, which use FICA taxes in which everyone pays in, and everyone can take out, enjoy much broader support than programs that specifically pay out to the needy and phase out at working class incomes.

But to the extent that Drum is saying it is Democrats’ fault that they support Dreamers and Black Lives Matter - partly *in reaction to* more extreme actions by right wingers - I  strongly disagree. 

Sunday, July 4, 2021

For Independence Day 2021

 - by New Deal democrat

The Declaration of Independence, 1776:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. 

Frederick Douglass, July 4, 1852:  

Pride and patriotism, not less than gratitude, prompt you to celebrate and to hold [July 4] in perpetual remembrance. I have said that the Declaration of Independence is the ring-bolt to the chain of your nation’s destiny; so, indeed, I regard it. The principles contained in that instrument are saving principles. Stand by those principles, be true to them on all occasions, in all places, against all foes, and at whatever cost. 
From the round top of your ship of state, dark and threatening clouds may be seen. Heavy billows, like mountains in the distance, disclose to the leeward huge forms of flinty rocks! That bolt drawn, that chain broken, and all is lost. Cling to this day — cling to it, and to its principles, with the grasp of a storm-tossed mariner to a spar at midnight.....
Fully appreciating the hardship to be encountered, firmly believing in the right of their cause, honorably inviting the scrutiny of an on-looking world, reverently appealing to heaven to attest their sincerity, soundly comprehending the solemn responsibility they were about to assume, wisely measuring the terrible odds against them, your fathers, the fathers of this republic, did, most deliberately, under the inspiration of a glorious patriotism, and with a sublime faith in the great principles of justice and freedom, lay deep the corner-stone of the national superstructure, which has risen and still rises in grandeur around you.Of this fundamental work, this day is the anniversary....  
Allow me to say, [ ] notwithstanding the dark picture I have this day presented of the state of the nation, I do not despair of this country. [  ] “The arm of the Lord is not shortened,” and the doom of slavery is certain. I, therefore, leave off where I began, with hope. While drawing encouragement from the Declaration of Independence, the great principles it contains, and the genius of American Institutions, my spirit is also cheered by the obvious tendencies of the age.

Abraham Lincoln, 1863: 

Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal. 
Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure.... 
.... It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we here highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth.

The struggle to make the aspirational words of Thomas Jefferson contained in the Declaration of Independence nearly 250 years ago a reality applicable to all, and not just the privilege of a select herrenvolk, continues.