Is a T—-p Tariff recession starting?
Angry Bear will continue to present my fellow writer and acquaintance who I met at Pomo’s Pizzeria in Phoenix while he was on vacation. Great pizza, wine, and conversation.
“Is a T—-p Tariff recession starting? My plan for real-time daily, weekly, and intramonth updates“
– by New Deal democrat
Normally on the Monday after the employment report, I do a deeper dig into its details. But today that seems a little quaint, sort of like rhapsodizing about the Roaring 20’s the week after the great Crash of 1929.
Lots of other people, e.g., Bill McBride, have looked into their crystal balls and seen a recession coming, or at least heightened risk. No doubt that is true. But I am a data nerd, and my mission is to pay attention to what the actual hard data says.
Over the weekend on Seeking Alpha I was asked if I could “reassure” people that the economic indicators – even high frequency ones – would telegraph a recession before it began. My response was that with exogenous events, in particular an event caused by a single human actor, nothing could be “assured.” For example, I wrote that “Given [T—-p‘s] mercurial record, I would give not more than 50% odds that these tariffs will remain substantially in place for more than a month or two;” but that the weekly data like new jobless claims and retail spending, and even daily updated “hard” data such as withholding tax payments and restaurant reservations would give almost instantaneous warnings that producers and consumers had started to pull back.
So, in view of the fast moving events, my plan is to add a focus on two general sources of information.
First, I plan to include daily updates on tax payments and restaurant reservations, as well as updates on Tuesday as to weekly retail spending, in addition to the Thursday updates on jobless claims that I already do.
Secondly, the five regional Feds that issue monthly manufacturing reports before the month is over – New York, Philadelphia, Richmond, Kansas City, and Dallas – also issue similar updates about the services economy. I have not written about these before because they appear to be coincident indicators, and you know I focus on what is ahead, not what has just happened. But at least for this month, I plan on highlighting these as well, because they will be among the very first “hard” indications that consumption of services is taking a hit. The NY Fed will be the first report, on the 16th, followed by Philly and Richmond on the 22nd, Kansas City on the 25th, and Dallas on the 29th.
Between the above daily, weekly, and intramonth reports, we should have as close to a real-time report of the tariffs’ effects on the economy as possible.
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Edited to Add: I happen to think the Roberts Court has handed potential plaintiffs challenging the legality of these tariffs a theory that is a very potent weapon. I hope to explain that tomorrow.
predicting recessions is beyond my pay grade, but i felt we we heading for a fall when Musk et al started firing entire departments of Federal workers….even if they don’t get fired, that’s two and a half million consumers who won’t be spending for anything they don’t absolutely need for a while…
but maybe i was wrong…scott bessent says the tariffs will solve all that…there will be plenty of new factory jobs for those ex-Federal workers to fill once companies set up their production stateside…
Realistically, the only manufacturing which the tariffs will bring back are sweatshops making clothing and shoes. Modern heavy manufacturing is largely done by machines and/highly skilled laborers. The days of making $50 an hour with benefits for tightening lug nuts on an auto assembly line are long gone no matter what the Mad King tells the rubes who vote for him. Besides I thought the tariffs were supposed to raise money so he could give the rich another tax cut without completely eliminating social programs. Either way, they are not something which can be negotiated. Nobody is going to build a factory in this country because of a tariff which may go away tomorrow and tariffs were never going to raise enough money to pay for tax cuts but particularly if they last a month or two. There is simply no reasonable explanation for what the Mad King has done except feed his ego when he bullies some country into what he will sell his base as a huge win for the US–the master of pyrrhic victories.
If we’re entering into a recession, shouldn’t we ask who it is affecting?
For years, GDP growth has been a pretty good measure of the wellbeing of the top 10 percent. Most of the recent “growth” of the economy has been attributable to the spending of the top 10%. Skyrocketing stock prices have bolstered their sense of wellbeing.
Now that we’re entering into recession, does the mean that the primary victims will be the top 10%? Certainly the flattening of real retail sales suggests that spending by the Top 10% has run out steam. Now the plunge in the stock market suggests that their net worth is getting whacked. And the drop in asset prices (reduced wealth effect) will likely get reflected in further declining retail sales. In reality, isn’t that what gets measured in GDP and reported as “a recession?”
Now what happen to the bottom 80%? Despite some gains in real wages over the past couple years, most have been in recession or on the edge of recession for the past fifty years. The vast majority will continue to muddle along, though several per cent of the workforce will face unemployment and reduced hours. Their pain, unlike that of the Top 10%, will be real. And that pain, which barely affects GDP, will be leveraged to reduce interest rates and quickly restore the wealth effect of the Top 10%, while jobs won’t get restored for years.
What we’re hearing now in the news is the squealing of the pigs who have benefited so mightily from neoliberal policies.
Instead of focusing just on macro indicators such as GDP, it would be nice for an economist to finally disaggregate the very different outcomes faced by the affluent, by ordinary workers, as well as those faced by the unemployed.
I’m sure that the $Trillions lost by the market are greeted with a certain schadenfreude by a huge share of Americans muddling through. It would be nice if an economist finally acknowledged that any recession in fact affects mainly the Top 10%, who are squawking because the good times have ceased to roll momentarily.