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

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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No, record job openings in JOLTS do not mean that everything is Teh Awesome!

No, record job openings in JOLTS do not mean that everything is Teh Awesome!

Once again most of the commentary on yesterday’s JOLTS report for April was that job openings jumped, so everything is Teh Awesome!

<  Sigh  >

To recap one more time…

In the one and only complete business cycle that we have for this data:

  • First, hires peaked. They started a long plateau in 2005, making a 3 month peak in late 2005, with no meaningful progress thereafter.
  • Second, quits peaked. They started to plateau in early 2006, making a 3 month peak in spring 2006, with no meaningful progress thereafter.
  • Finally, openings peaked in Q1 2007

Hires and quits are the only *hard* economic data in the series. “Openings” can be aspirational trolling for a future bank of resumes or, worse, designed to fail and lay the groundwork for cheap  H1-B foreign slaves.

So, here is the entire history of hires and quits:

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A Day in the Life of the jobs market, May 2017

A Day in the Life of the jobs market, May 2017
Fifty years ago, when I was a little teenybopper,  his album came out and blew me away:

Why bore you with this ancient Boomer reminiscence?
Because the unemployment rate has only been lower than last month’s 4.3% in only six of the last 50 years, and only two of them in the last 46 years:


Since February 1970, the only time the unemployment rate has been less than it is now is from 1999 into 2001.
That’s not trivial.  If you are under retirement age, then if you are unemployed, your odds of finding a job now are better than almost 90% of the entire time since you reached working age — or better.

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May jobs report: nothing more nor less than a decent late cycle report

May jobs report: nothing more nor less than a decent late cycle report

HEADLINES:

  • +138,000 jobs added
  • U3 unemployment rate down -0.1% from 4.4% to 4.3%
  • U6 underemployment rate down -0.2% from 8.6% to 8.4%

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 -146,000 from 5.707 million to 5.561 million
  • Part time for economic reasons: down -53,000 from 5.272 million to 5.219 million
  • Employment/population ratio ages 25-54: down -0.2% from 78.6% to 78.4%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.03 from $21.97 to $22.00,  up +2.5% 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 fell by -1,000 for an average of +2500 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 rose by +400 for an average of +300 vs. the last severn years of Obama’s presidency in which an average of -300 jobs were lost each month

March was revised downward by -29,000. April was also revised downward by -37,000, for a net change of -66,000.

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Gas prices on verge of turning negative YoY

Gas prices on verge of turning negative YoY

There are two important aspects to the inflation rate right now. One, as Dean Baker reminds us today, is that most of core inflation has been caused by housing, via “owners equivalent rent.”  Take that out, and inflation is only 1%:


The second important aspect is that almost all the variation in headline inflation is due to the price of gas.
At the beginning of this year, I thought one of the big issues would be whether gas prices would continue to increase off their January 2016 bottom at a similar rate as they did last year, or whether the increase would be more subdued. We have a pretty definitive answer at least for now, and it is the latter.

Here’s the graph of gas prices since the beginning of 2014:

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A thought for Sunday: no, Trump approval *still* isn’t imploding. BUT …

A thought for Sunday: no, Trump approval *still* isn’t imploding. BUT …

Democrats continue to delude themselves about Presidential approval polls — with one very big possible exception.

In the first place, can we all agree that Trump has had a particularly nasty last several weeks? Including firing Comey, blabbing secrets to the Russian ambassador, blabbing about our submarines to the Philippines’ now-dictator, compromising the intelligence sources of Israel (and then confirming it!) and later Britain, and reports of multiple occasions with multiple officials in which he blatantly appeared to be attempting to shut down a criminal investigation?

Can you imagine what the public opinion polling would look like after several weeks like that, for virtually any past US President, let alone if the president were Hillary Clinton?

Well, here is what Trump’s looks like as of today:


His approval stands at 41%, right in the middle of where it has been since he assumed office in January.

A variation of the Trump-support-is-imploding mantra showed up later in the week when FiveThirtyEight wrote that “Trump’s Base is Shrinking” based on strong vs. weak approval. Typically this is the graph that was shown:

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Of Memorial Day and Confederate statues

Of Memorial Day and Confederate statues

Memorial Day is a particularly fitting time to write about the issue of Confederate monuments. That’s because Memorial Day originated as a day set aside to honor the Civil War dead, not just those who fought for the Union, but those on both sides, including those who died in service of the Confederacy.  It was part of the process of magnanimous victory which enabled the country to heal, perhaps epitomized nowhere better than when both William Tecumseh Sherman and Joseph Johnston served as pallbearers for Ulysses S. Grant.

Part of that process was the erection of monuments in the South to honor their dead, at Civil War battlefields, and also at cemeteries throughout the South. For example, here is one in Foysth Park in Savannah:


I don’t remember if it this monument or not, but supposedly there was a mix-up in the deliveries of two civil war statues, and about 50 years later Savannahan’s learned that atop their monument was – a Union soldier!  A cemetery in Maine is supposedly watched over by a Confederate.  Go figure.

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Marginalized populations and employment during expansions

Marginalized populations and employment during expansions

Dean Baker ran a graph over the weekend showing an apparent conundrum: namely, that in the last several years there has been an increase in the percentage of those employed who only have a high school diploma vs. a slight *decrease* in employment among those with a college degree.  Here’s his graph:


This caught my attention, because I actually don’t think this is such an anomaly.  So I went back and checked.

The data posted by Prof. Baker has only been published since 1992, so we don’t have a long track record.  But it is interesting to note that a similar pattern asserted itself in the 1990s.  Take a look:

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Real aggregate wage growth finally overtakes Reagan expansion

Real aggregate wage growth finally overtakes Reagan expansion

In my opinion the best measure of how average Americans’ situations have improved during an economic expansion is real aggregate wage growth.  This is calculated as follows:

  • average wages per hour for nonsupervisory workers
  • times aggregate hours worked in the economy
  • deflated by the consumer price index

This tells us how much more money average Americans are taking home compared with the worst point in the last recession.
Let me give you a few examples why I believe that this is the best measure of labor market progress:

First, compare an economy that creates 1 million 40 hour a week jobs at $10/hour, with an economy that creates 2 million jobs at 10 hours a week at $10/hour.  If we were to count by job creation, the second economy would be better.  But that’s clearly  not the case.  The second economy is paying out only half of the cold hard cash to workers as the first.

Next, let’s compare two economies that both create 1 million 40 hour a week jobs, but one pays $10/hour and the other pays $12/hour.  Clearly the second economy is better.  It is paying workers 20% more than the first.

Finally, let’s compare two economies that create 1 million 40 hour a week jobs at $10/hour.  In the first economy, there are 3% annual raises, but inflation is rising 4%.  In the second, there are 2% annual raises, but inflation is rising 1%.  Again, even though the second economy is giving less raises, it is the better one — those workers are seeing their lot improve in real, inflation-adjusted terms, whereas the workers in the first economy are actually losing ground.

In each case, the economy creating more jobs, or more hourly employment, is inferior to the economy  that pays more in real wages to its workers,  In other words, the best measure of a labor market recovery is that economy which doles out the biggest increase in real aggregate wages.
In short, people work for the cold hard cash that is put in their pockets, and real aggregate wage growth measures how much more of that they’ve received.

With that introduction, here is an updated graph of real aggregate wages for the entire past 53 years:


So how does the current expansion compare with past ones?  Here is a chart I created several years ago showing the real aggregate wage growth in every prior economic expansion beginning with 1964:

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A thought for Sunday: the Left is winning the battle of ideas. The right’s own man says so

by New Deal democrat

A thought for Sunday: the Left is winning the battle of ideas. The right’s own man says so
Prof. Arnold Kling, a conservative neoclassical economist who has taught at George Mason University and been affiliated with the Cato Institute, has a post up this morning in which he  reflects upon whether he has changed his mind about anything in view of developments over the last sum of years. His reply is a notable bellwether:

I think that in general I have become more pessimistic about American political culture ….

…. What has [ ] transpired …… from college campuses [is a] view that capitalism is better than socialism, which I think belongs in the mainstream, seems to be on the fringe. Meanwhile, the intense, deranged focus on race and gender, which I think belongs on the fringe, seems to be mainstream…..

…. The Overton Window on health policy has moved to where health insurance is a government responsibility. The Overton Window on deficit spending and unfunded liabilities has moved to where there is no political price to be paid for running up either current debts or future obligations. The Overton Window on financial policy has moved to where nobody minds that the Fed and other agencies are allocating credit, primarily toward government bonds and housing finance. The Overton Window on the Administrative State has moved to where it is easier to mount a Constitutional challenge against an order to remove regulations than against regulatory agency over-reach.

I would call that a good start.

That being said, as usual I expect progress will be made one funeral at a time, as the deep, deep red Silent Generation (and primary Fox News demographic) passes this mortal coil.

__________

A postscript. Kling concludes by writing:

Outside of the realm of politics, things are not nearly so bleak. Many American businesses and industries are better than ever, and they keep improving. Scientists and engineers come up with promising ideas.

I wonder if it occurs to him that these sentences completely undercut his ideology.  After all, if evil government regulation kills innovation, well, obviously, despite the shifts in the Overton Window to the left, that obviously isn’t happening, is it?

Furthermore, if that innovation has been happening during the period of time that the Brookings Institution found, via comprehensive Social Security wage data, that workers from 1983 on made only 1% more in real terms over their entire 30 year prime age careers than the workers who entered their prime earnings age in 1957, then that innovation has not translated into *any* significant increase in the well-being of average Americans over virtually their entire working lifetimes. That is a thoroughgoing and decisive failure, well worth being replaced.

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