Relevant and even prescient commentary on news, politics and the economy.

Trump: the endgame (op-ed)

Trump: the endgame

There was some economic news last week which is important for the long term, and I’ll try to post about it later today or tomorrow, but in the meantime …
I’m as interested in the latest Trump-Russia tidbit as the next person, but really, don’t we all already know the endgame?

Remember during the campaign, no matter what devastating gaffes Trump made, he always rebounded into the low 40%’s? Well, about the same thing has been true for the last 5 months.  No matter what the news, Trump’s approval rating is 38% +/-3%:

So here, as a public service, to save you all the sturm und drang of the next 3 years, I present you in narrative form with the endgame:

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A thought for Sunday: Trump voters and the “peasant mentality”

A thought for Sunday: Trump voters and the “peasant mentality”

I am currently reading a comprehensive tome on 19th century European history, “The Pursuit of Power,” by Richard J. Evans.
One episode that made a big impression on me was the decision by Otto von Bismarck (no conservative he) upon the establishment of the German Confederation, to eschew property qualifications for the franchise for the Reichstag and embrace universal male suffrage (p. 257).  Why? In so doing, he “bypass[ed] the liberal middle classes to appeal to what he assumed were the loyal and conservative masses in the countryside.”

I was reminded of Bismarck’s shrewd insight upon reading a post by Dietrich Vollrath:  “The return of the peasant mentality.”

Discussing the outcomes of recent research, Vollrath writes:

[W[hen people move from rural to urban, or urban to rural places in these countries, do their wages change?....
The combination of facts tells you that there is selection out of rural/agricultural work and into urban/non-agricultural work for people with lots of human capital. There is not some distortion that prevents rural people from moving to higher wage positions, apparently, its just that all the really skilled or smart people move off the farm.

….

What’s really interesting is that this pattern shows up in the Raven’s Z-scores …. a crude, but effective, proxy for IQ….  So it’s not just that people who are lucky enough to get an education in an urban area stay there, and people unlucky enough to miss out on schooling in rural areas stay there. People with better measures of inherent smarts tend to end up in the city, or are in cities to begin with.

Perhaps we should take seriously the idea that peasants are really different, not just in their constraints (which the development literature …, but in their underlying preferences as well ….

One sees the pattern repeating over and over, across all sorts of societies, from the Spanish Civil War of 1937 to most of Mexican history. A decade or so I read that many of the Chinese immigrants to the U.S. in the late 20th century were Fujianese.  What distinguished the leavers from the stayers?  More than anything else, it was the propensity for risk-taking.

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June jobs report: great headline, but once again where are the wages?!?

June jobs report: great headline, but once again where are the wages?!?

HEADLINES:

  • +222,000 jobs added
  • U3 unemployment rate rose +0.1% from 4.3% to 4.4%
  • U6 underemployment rate rose +0.2% from 8.4% to 8.6%

Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates

  • Not in Labor Force, but Want a Job Now: down -130,000 from 5.561 million to 5.431 million
  • Part time for economic reasons: up +107,000 from 5.219 million to 5.326 million
  • Employment/population ratio ages 25-54: up +0.1% from 78.4% to 78.5%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 from $21.99,  to $22.03, up +2.3% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

Holding Trump accountable on manufacturing and mining jobs
Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?

  • Manufacturing jobs rose by +1,000 for an average of +2000 vs. the last severn years of Obama’s presidency in which an average of 10,300 manufacturing jobs were added each month.
  • Coal mining jobs were unchanged for an average of +200 vs. the last severn years of Obama’s presidency in which an average of -300 jobs were lost each month

April was revised upward by +33,000. May was also revised upward by +14,000, for a net change of +47,000.

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Reality begins to sink in for GOPer economic confidence

Reality begins to sink in for GOPer economic confidence

While we are waiting for tomorrow’s employment report, here’s a little something to chew on. In the immediate aftermath of the Presidential election — as in, by the end of that week — Gallup’s measure of economic confidence soared, from its 2016 average of roughly -10 to a positive number and to nearly +10 by the end of November: In fact, while the confidence of Democrats sank, the confidence of GOPers skyrocketed even more. Since I have very little faith in the GOP agenda to deliver any uptick in growth, I have been watching and waiting for this confidence to ebb.  It did somewhat beginning in March, but never to the point of coming close to that in the final year of Obama’s term. (For the doubters, consider George W. Bush’s economic policies.  Despite being the most right-wing since the 1950s, we had the weakest post-War jobs and wage growth on record, and a weak GDP to boot. Where was the trickle-down?) Until last week.  Last week Gallup’s economic confidence index fell to -7:

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Happy 8th Independence Day, economic expansion!

Happy 8th Independence Day, economic expansion!

In lieu of a more traditional Independence Day post, in view of the fact that the economic expansion turned 8 years old this week, I thought I would take a moment to highlight how far we have come.  Because as mediocre as some things are, we have come a long, long way since the dark days of June 30, 2009.
Unemployment has fallen from a high of 10.0 to 4.2%, and underemployment has fallen from 17.1% to 8.4%:


Over 16 million jobs have been added since the bottom in February 2010:

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Five graphs for 2017: mid year update

Five graphs for 2017: mid year update

– by New Deal democrat

At the beginning of the year, I identified 5 trends that bore particular watching, primarily as potentially setting the stage for a recession next year.  Now that we are halfway through the year, let’s take another look at each of them.

#5 Gas Prices

One potential pressure point on the economy was gas prices, which appear to have made a long- bottom in January of 2016. As they began to rise, consumer inflation has increased from non-existent to almost 3%. So the issue was, will they rise even further and drive inflation even higher?
And the answer so far this yeear has been a resounding “No!”  Typically it has taken a 40% YoY increase in gas prices to shock the consumer.  Gas price increases did briefly approach that point early in the year, but since then they have retreated all the way to being negative YoY:

This has actually helped boost real wages, as we will see further below.

#4 The US$

Another potential pressure point on the economy was a big increase in the relative value of the US$, which was part of the shallow industrial recession of 2015.  The $ started to rise again after the November election.  Here too after an initial spike, the data has calmed down again:

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May industrial production: no change in trend

May industrial production: no change in trend

This was a post I meant to put up Friday, but was pre-empted by the important housing news.

May industrial production came in unchanged. But that didn’t stop Doomers, who had been silent about April’s big increase in manufacturing, from trumpeting its 0.4% decline (go ahead, just try to find their acknowledgement of April’s good number. You won’t.).

So, let’s put industrial production in perspective. First, here is the overall stat:


The uptrend since a year ago is still intact.

Next, let’s break it down by manufacturing (blue) and mining (red):

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This is a Big Deal: housing permits and starts now a long leading negative

This is a Big Deal: housing permits and starts now a long leading negative

I’ll have more to say next week, but let me just drop this right now: this morning’s housing report was a Big Deal. FRED doesn’t have the graphs yet, but here are the numbers from the Census Bureau cite.

Graph of starts and permits:


Note both have turned down significantly this year.

Table of housing starts:

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Sunday thoughts on how awful

It’s Sunday, so I take a break from nerdy econ analysis and speak my mind.

Last November 9 we woke up to a living nightmare. The next four years were bound to be awful. The only question was, how awful?

The very tiny silver lining as of now is that, so far, it has been about as limited an awful as it could reasonably be.

The simple fact is, those things that the Executive could worsen all on his own, he is doing so. But those things that require Legislative action or Judicial approval have either not materialized or have been stopped in their tracks.

The Executive has almost unlimited freedom of action in foreign policy, so it was a foregone conclusion that China and Russia were going to seize the opportunity to expand their power and influence, and they are doing so. Taiwan is already suffering diplomatically, and it isn’t a good time to be one of the Baltic States either. The EU is looking aghast at Trump’s view of NATO, and will probably vivify their moribund “European Defense Force” at least until 2021.

It is also pretty clear that Trump means to erase Obama from the history books, if for no other reason than Obama humiliated him at the 2011 White House correspondents dinner. So every Executive Order or program undertaken by Obama is being systematically obliterated. This includes deferral of action against illegal immigrants/undocumented workers. There’s not much that can be done there, but even so, the Courts have occasionally stepped in, and Trump himself seems to want to allow the Dreamers to stay.

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Retail sales disappoint — but don’t hyperventilate about it

Retail sales disappoint — but don’t hyperventilate about it

There certainly is a  lot of information to unpack from this morning’s retail sales and inflation reports, and what they mean for wages and jobs.  I’ll address them in separate posts.

First, retail sales.  They certainly were a disappointment, coming in at -0.3% nominally and -0.2% in real terms.  That being said, the monthly reports are somewhat noisy.   We commonly get several of these a year, as shown in this graph of the monthly change in real retail sales for the last 7 years:


There have been 9 worse monthly reports than this just over the last 3 years!

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