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

“ok boomer ” or “gas all boomers”

(Dan here…see previous posts VSPS get their budget deal    2015 Econospeak and Gas all boomers or at least tax and cut    2015 Econospeak  Also see Millenials and baby boomers)

“ok boomer ” or “gas all boomers”

Within the last week or so there seems to have been an explosion of yattering over “ok boomer.” Over the last few years in various parts of the internet there was a self-righteous meme pushing “gas all boomers.”  Yeah. This never made it to the MSM, I suspect  because it was just too extreme for the MSM to publicize.  But now we have the MSM allover this milder “ok boomer” meme, now a big deal.  I think I have an original view of this,that the “gas all boomers”  is an idealistic millennial view, reflecting their boomer parents. This new milder meme reflects the view of the Gen-Z group, \

My view is that the former nastier “gas all boomers” meme was from the idealistic millennials, strongly rebutting their boomer parents,  We failed them, and them wanted us gassed for our  failures to deliver for them, especially in the Great Recession, which in their view at least of several years ago, was our boomer fault, although that is a pretty weak argument.

 

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Scenes from the October employment report: leading sectors remain poor

Scenes from the October employment report: leading sectors remain poor

Yesterday I discussed unemployment and labor force participation from last week’s jobs report, which with the significant exception that better wage growth would probably lead to more people deciding that they’d like a job, remains very positive. Today let’s look at the bad news, which is the same as last month’s: leading indicators for employment are weak to negative.

To begin with, in the last 9 months, per the more reliable establishment report, 1,358,000 jobs have been added, an average of 151,000 per month, including census hiring, a distinct slowdown from 2018’s pace of 205,000:


Next, let’s update the three leading sectors of employment that I have been tracking: temporary help (blue in the graph below), manufacturing (gold), and residential construction (red). Here’s what they look like compared with 2018, showing the slowdown this year (Note: the big decline in manufacturing last month was the GM strike, which will presumably be reversed in November):

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Weekly Indicators for November 4 – 8 at Seeking Alpha

by New Deal democrat

Weekly Indicators for November 4 – 8 at Seeking Alpha

 My Weekly Indicators post is up at Seeking Alpha.
The biggest story of the week was the move higher in long term interest rates. This means that the “yield curve inversion” you’ve read so much about in the past year is over. At the same time, long term interest rates (e.g., for mortgages) haven’t moved back high enough to pose a danger to the housing market. In other words, they’re at a “sweet spot.”
A note on the political implications: my specialty is telling you what the economy is likely to look like a year from now. And one year from now is the 2020 Presidential election. That all of the recent news in the long leading indicators has been improvement means that the economy is very likely to be doing better on Election Day than it is now. Which means that the incumbent candidate’s approval is likely to be higher then than it is now. That doesn’t necessarily mean that Trump wins, but it is fair to say that it does mean that if the Democratic candidate wins, it will be by a lower margin than the present polling suggests. (I owe you this in a much more detailed post, but I wanted to give you the Cliff’s Note version now.)
Anyway, as usual, clicking over and reading my post at Seeking Alpha should be educational for you, and reward me a little bit for my efforts.

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GDP, Manufacturing employment

David Zetland….”For years, I have complained that “nobody wakes up in the morning, looks at GDP statistics, and changes their plans for the day.” Listen to this podcast on mis-measuring productivity and manufacturing statistics, which may have given populists excuses to “fix” problems that never existed. (My impression is that many more people would be happier if they looked at their quality of life instead of a [random? inaccurate?] reference point that supposedly tells them how well they are doing compared to peers.”

(Dan here….I found the podcast hard to follow.   Go here for a cogent argument, start arround 17 minutes in to hear Susan Houseman explain:   I’LL QUICKLY REVIEW SOME OF THE RESEARCH. SO THIS CHART SHOWS MANUFACTURING SHARE OF PRIVATE INDUSTRY EMPLOYMENT AND GDP. AGAINST SINCE LATE ’40s. AND WHAT YOU CAN SEE THAT’S BEEN RATHER DECLINING RATHER STEADILY. AND MANUFACTURING’S OUTPUT SHARE IN THE PRIVATE SECTOR HAS BEEN TRENDING DOWNWARD PRETTY MUCH ALONG WITH EMPLOYMENT…)

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Mankiw’s Ideal Democrat (Bloomberg Alert)

Mankiw’s Ideal Democrat (Bloomberg Alert)

Greg Mankiw has always been a Never Trumper:

I just came back from city hall, where I switched my voter registration from Republican to unenrolled (aka independent). Two reasons: First, the Republican Party has largely become the Party of Trump. Too many Republicans in Congress are willing, in the interest of protecting their jobs, to overlook Trump’s misdeeds (just as too many Democrats were for Clinton during his impeachment). I have no interest in associating myself with that behavior. Maybe someday, the party will return to having honorable leaders like Bush, McCain, and Romney. Until then, count me out. Second, in Massachusetts, unenrolled voters can vote in either primary. The Democratic Party is at a crossroads, where it has to choose either a center-left candidate (Biden, Buttigieg, Klobuchar, Yang) or a far-left populist (Warren, Sanders) as their nominee for president. I intend to help them choose the former. The latter propose to move the country too far in the direction of heavy-handed state control. And in doing so, they tempt those in the center and center-right to hold their noses and vote for Trump’s reelection.

In a way I get this and a lot of other centrist Republicans are saying similar things. Enter Michael Bloomberg:

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Scenes from the October employment report: full employment?

Scenes from the October employment report: full employment?

Last Friday the household jobs report – the one that tells us about unemployment, underemployment, and labor force participation – has been particularly strong in the past three months. This has driven some impressive gains in labor force participation and the unemployment rate.

To begin with, gains in employment as measured by the household survey (red in the graphs below), as opposed to the larger (and, yes, more reliable) payrolls survey (blue), have totaled 1,222,000 in the last three months:

One month ago this gave us the lowest unemployment rate in the past 50 years, and the U6 underemployment rate is also at its lowest level, save for one month, since the series began in 1994. Each ticked up by +0.1% in October. In the below graph, both metrics are normed to zero at their lowest levels:

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S&P 500 BY PRESIDENTIAL TERMS

With the presidential election still a year away, Wall Street is starting its normal analysis that if a democrat is elected it will cause a devastating stock market crash.  One would think that after all these years of such claims being proven dead wrong that the street would finally give up on it. In the post WWII era from Truman to Obama it is 70 years and each party has had bad candidates in office for half that time.  Truman was only President for seven years and five months so the Democrats only had 35.4 years in office while the Republicans had 36 years in office.  Over these years the average annual S&P 500 gains was 15.9% for Democrats and 6.6% for Republicans. If you look at the actual returns, you would think if anything; Wall Street analyst would be warning about the dangers of a Republican President for the stock market.

Because the chart is already so cluttered I left Truman and Ike off.  But it seem so obvious that the record shows that it is Republican Presidents that investors should fear.  Just to clearly show that stock market gains have been more that double under Democrats versus Republicans I’ve also presented the data in a table.

 

 

 

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The Changing Nature of FDI

by Joseph Joyce

The Changing Nature of FDI

The OECD has published its data on flows of foreign direct investment (FDI) for the first half of 2019. They reveal how multinational firms are responding to the slowdown in global trade and the U.S.-Chinese tariffs. They may also reflect longer-term trends in FDI as multinationals reconfigure the scope of their activities.

Overall global FDI flows fell by 20% in the first half of the year as compared to the previous half-year. Much of the decrease was due to lower investments in the OECD economies, including the U.S., the United Kingdom, and the Netherlands, and disinvestments in Belgium and Ireland. FDI inflows to the non-OECD members for the Group of 20 countries, on the other hand, increased, with higher investments recorded in Russia, China and India.

Some of the decline can be linked to the slowdown in international trade. The World Trade Organization forecasts growth in trade this year of 1.2%, the weakest since 2009, and lower than the IMF’s expected global economic growth of 3%. But the disinvestment in Belgium and other countries may also be due to the decline in the use of Special Purpose Entities for routing FDI through low-tax jurisdictions before reaching their ultimate destination. The OECD has sought to limit the spread of Base Erosion and Profits Shifting (BEPS) activities.

The OECD also reported a large drop in Chinese FDI in the U.S., from a peak of $14 billion in the second half of 2016 to less than $1.2 billion. The decline shows the impact of the tariffs imposed by the U.S. and Chinese governments, as well as the overall uncertainty of relations between the two countries. Moreover, the Chinese government has cracked down on outward FDI while the U.S. government scrutinizes Chinese acquisitions more carefully.

The changes in the allocation of FDI may also reflect longer-run factors in the development of global supply (or value) chains. Multinational firms used information and communications technology in the 1990s and 2000s to organize production on a worldwide bases, linking together suppliers and assembly plants in many countries. The OECD has estimated that about 70% of global trade now involves such chains.

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Stock Buybacks are a problem

(Dan here….written last year, still relevent)

By Steve Roth  (originally published at Evonomics)

Bernie Sanders and Chuck Schumer’s New York Times op-ed, “Limit Corporate Stock Buybacks,” has thrown internet gasoline on the buyback debate. The left is waving the flag, and the right is trying to tear it down.

The core Sanders/Schumer argument: buybacks extract money from firms, money that could be used to pay workers more, and fund productive investment (including worker training and upskilling).

The counterargument: how are buybacks any different from dividend distributions that way? Both transfer cash from firms to households. We don’t hear people complaining about dividend distributions stealing money from workers and investment.

That counterargument is absolutely right, even while it’s completely wrong. Because both sides miss the overwhelming effect of stock buybacks (vs dividends). Buybacks are a massive tax dodge for shareholders.

 

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