On JOLTS, I continue to dissent
The only two significant items of data in the second week of the month typically had been the JOLTS report and the Labor Market Conditions Index.
I say, “had been” because the Fed has discontinued reporting the LMCI. Here’s their explanation:
Although the LMCI was reconstructed back 50 years, it was only published in real time for the last few. I am disappointed. Even if the Fed believes the LMCI was not giving them the accurate information they were looking for, I wish they had at least continued to publish it in real time for one full economic cycle, because it may have given other valuable information — e.g., being a valid long leading indicator for the economy as a whole — that wasn’t on their radar.
Turning to JOLTS, I have been a dissenter about this data series for the last year. The typical commentator has focused on job openings, which have been trending higher strongly (as they did in today’s report for June):
Thus even Bill McBride calls today “another strong report.”
But openings are the one aspect of the report that are not “nard” data. They can just as easily be skewed by employers trolling for resumes, perhaps laying the groundwork for visas for cheap immigrant labor, or simply refusing to offer the wage or salary that would call forth enough actual applicants to hire. Hence the disconnect between “openings” and “hires.”
Rather, I prefer to focus on the “hard” data series such as hires, quits, and layoffs. And here, the story hasn’t been nearly so strong.
July jobs report: across the board solid
- +209,000 jobs added
- U3 unemployment rate down -0.1% from 4.4% to 4.3%
- U6 underemployment rate unchanged 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 -11,000 from 5.431 million to 5.420 million
- Part time for economic reasons: down -44,000 from 5.326 million to 5.282 million
- Employment/population ratio ages 25-54: rose 0.2% from 78.5% to 78.7% (a new post-recession high)
- Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.06 from $22.04, to $22.10, up +2.4% 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 16,000 for an average of +5,500 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 fell by -200 for an average of +100 vs. the last severn years of Obama’s presidency in which an average of -300 jobs were lost each month
May was revised downward by -7,000. June was revised upward by 9,000, for a net change of +2,000.
The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.
Rasmussen poll shows GOP losing midterms in a wave
I like K.I.S.S. methods, and I have decided that the easiest K.I.S.S. guide to the midterm elections is likely to be Rasmussen’s “net strong disapproval” spread. The theory is that while voters who even weakly approve or disapprove of a President are likely to come out and vote in the Presidential election years, only those with strong opinion — a substantially smaller number — come out to vote in midterm elections.
Here’s what Rasmussen’s net disapproval and net strong disapproval looked like during the Obama years:
Obama had a 1:1 approval vs. disapproval spread on Election Day 2012 (vertical red line), and managed to win re-election.
But on Election Days 2010 and 2014, for every 100 adults who strongly disapproved of Obama, there were only 60-65 and 55 adults who strongly approved of his performance — enough for a GOP wave in each case.
Over three years ago HUD warned of “the worst rental affordability crisis ever,” citing statistics that
About half of renters spend more than 30 percent of their income on rent, up from 18 percent a decade ago, according to newly released research by Harvard’s Joint Center for Housing Studies. Twenty-seven percent of renters are paying more than half of their income on rent.
This is a serious real-world issue. I have been tracking rental vacancies, construction, and rents ever since. The Q2 2017 report on vacancies and rents was released last week, so let’s take an updated look.
After stopping for a year, in the second quarter median asking rents zoomed up over 5% from $864 to $910. Meanwhile, surprisingly weekly wages declined from $865 to $859.. The combined effect is that rent has become more unaffordable than ever.
The big jump in median asking rents in the second quarter can be easily seen in the below graph:
Here is an updated look at real. inflation adjusted median asking rents, showing that after abating a bit for a year after Q1 2016, rent pressures on household budgets spiked in the second quarter:
Since this year the Doomers haven’t even been able to rouse themselves up enough to call for OMG recession imminent!!!, they have had to settle for how slow the growth in the economy has been. Their favorite theme has been the alleged divergence between the “soft” consumer confidence and ISM survey data, and the “hard” data, like industrial production:
Oh, wait! Never mind …
Well, then, how about durable goods? Since it was just updated this morning, let’s take a look at that:
Of the two meanings of “Neoliberalism”
The use of the term “neoliberal” has recently been criticized as a meaningless epithet, a tabula rasa used to disparage anyone deemed unsatisfactorily conservative.
To the contrary, I think the term “neoliberal” is fairly precise, but much like the term “liberal” itself, it has two quite different meanings depending on whether the definition descends from its original European or American incarnation. The first variety is very right-wing. The second is centrist.
A good description of right-wing neoliberalism can be found in this article in Al Jazeera this past weekend on a right-wing awakening in Latin America:
[N]eoliberalism is … a means to an end. The state is purposefully reduced in its scope of action to a minimum – by way of policies associated with fiscal austerity, financial deregulation, free trade and the privatisation of public assets, among others – so nothing can prevent the market and its profit-oriented agents from reaching a fair point of equilibrium between demand and supply. According to those who advocate such perspective, the state is nothing but a “necessary evil”.
Similarly, Brad DeLong has said:
[R]ight-neoliberalism is the claim that social democracy was one huge mistake–that it created a North Atlantic of takers who mooched off the makers. It holds that if we got rid of social democracy, we would have a utopia because the makers wouldn’t have to carry the takers on their backs and the takers would shape up ….
This right-wing meaning, of “neoliberalism” is a reincarnation of European-style 19th Century laissez-faire liberalism, a belief that the ideal state should operate and be limited by the rule of law, and administered by neutral officials selected on merit, with the economic markets left to themselves without interference by government. Nineteenth century liberals had no problem with, for example, government promotion of infrastructure, including things like sanitation and education. Right-wing neoliberals, by contrast, see all government bureaucracy as inherently evil — even, as we saw in the case of Flint, Michigan, in the case of basic sanitation.
Note that right-wing neoliberalism is similar to, but not quite the same as, “libertarianism.” Libertarians believe the state also has no business in the private sphere of people’s lives. Thus it should stay out of the bedroom as well as the boardroom. Not necessarily for right-wing neoliberalism. Right wing liberalism is agnostic as to whether foreign policy is passive or imperialistic, and whether or not government intervenes in the social sphere, so long as it stays out of the economic sphere.
The second type of “neoliberalsim,” centrist neoliberalism, originates from the US meaning of liberalism, and is once again defined pretty well by Brad DeLong:
1. Most of the time the best way to accomplish social-democratic ends will be to get the money to the people who maximally want those ends accomplished, and then let them spend it.
2. Most of the time the best way to correctly manage the market system so that it doesn’t rain destruction upon the land is to impose the appropriate anti-destruction-raining Pigovian taxes (and subsidies).
3. Most of the time command-and-control is strictly dominated by other modes of government intervention that are less vulnerable to naked rent-seeking by the politically influential.
Elsewhere he quotes John Quiggin:
Today marks half a year since Donald Trump took the Oath of Office as President. I just wanted to note that, so far, absolutely nothing of significance has been enacted to affect the economy. It’s still basically Barack Obama’s expansion.
Of note, where have all the Doomers gone? Zero Hedge has turned into a Trump + Putin fanboi club. The left-wing purists who were sure that everything stunk and the next crash is right around the corner have moved on to other things. The writers who had been bleating about imminent recessions – almost every year since 2009 – are now just talking about very slow GDP growth. I’m almost tempted to become a contrarian!
Basically, everything of note is positive, although much has been or is decelerating. Over the next 6-12 months, if Washington leaves the economy alone, I expect job growth to continue, the unemployment rate to decline a little, prime age labor force participation to increase, and nominal wage growth to remain steady if participation increases a lot, and maybe increase more if participation only increases a little, although the positivity of most of these things will probably decelerate.
One eighth of the way through Trump’s presidency, Obama’s autopilot is still engaged.
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:
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.