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

The GOP has crossed the Rubicon

The GOP has crossed the Rubicon

 – by New Deal democrat

In the Roman Republic, military leaders automatically lost their legal authority to command at the Rubicon River in northern Italy. When Julius Caesar crossed the Rubicon with his legions, it was an act of war against the Republic. With the filing of their  Amicus brief in the Supreme Court this past week, the GOP as represented by their Congressional delegation similarly finally broke with the idea of American democracy itself. 


For the first several weeks after Trump’s railing against the election results, the GOP simply took the position that he was entitled to pursue legal remedies if he believed he was wrong. The mask was ripped off, and that pretense abandoned, when in their brief, the GOP took the core position  not just that there were allegations of errors which were entitled to be explored, but rather ***asserted as a fact*** that millions of votes in 4 swing States were invalid and should not be counted. Not because dead people voted, or people not properly registered had voted, but rather simply on the flimsiest of assertions that actions by Courts and Executive officials carrying out their respective States’ election laws rendered all of the votes cast in good faith reliance upon the law by millions of voters in those States null and void.


Here’s the “Summary of Argument” from the GOP Brief:

November inflation tame again, with the economy weak, but real wage gains strong

November inflation tame again, with the economy weak, but real wage gains strong

Consumer prices rose 0.2% in November on a seasonally adjusted basis, but declined -0.1% unadjusted:


As shown in the above graph, a November decline in prices is typical. This year’s decline was less than either of the past two years.
On a YoY basis, consumer prices were only up 1.2%:

JOLTS report for October: similar to previous 2 recoveries, but a decline in actual hiring may be a warning

JOLTS report for October: similar to previous 2 recoveries, but a decline in actual hiring may be a warning

This morning’s JOLTS report for October showed a jobs market recovery that, for one month at least, paused. Openings and quits were up (good), but layoffs and discharges were also up (bad) while hires were down (bad).

While the JOLTS data is a deep dive into the dynamics of the labor market, since it only dates from 2001, there are only 2 previous recoveries with which to compare the present. Nevertheless it is worthwhile to make the comparison.

In the two past recoveries:

  • first, layoffs declined
  • second, hiring rose
  • third, job openings rose and voluntary quits increased, close to simultaneously

Let’s examine each of those in turn. In each case, I break out 2001-19 in a first graph and then this year in a second.


What appears below is that, although there has been some variation, the past several months have recapitulated the pattern from the last two early recoveries: the first two data series to turn – layoffs and hires – has indeed turned, while the last two – job openings and voluntary quits – have appeared to bottom but have had a much less dramatic rise.

This first graph compares layoffs and discharges (blue) with the 4 week average of initial jobless claims (red):


You can see that, by the end of the recessions, layoffs were already declining, and continued to decline steeply over the next 3-8 months before reaching a “normal” expansion level.

Jobless claims rise: a break in the trend?

Jobless claims rise: a break in the trend?

This week’s new and continuing jobless claims all rose off of last week’s pandemic lows, but while I suspect the downward trend has broken, I don’t think we can say so decisively yet.

On an unadjusted basis, new jobless claims rose by 228,982 to 947,504. Seasonally adjusted claims rose by 137,000 to 853,000. These were the worst readings in 4 and 2 1/2 months, respectively. The 4-week moving average also rose by 35,500 to 776,000, the highest reading in a little over a month. Here is the close up since the end of July (for comparison, remember that these numbers were in the range of 5 to 7 million at their worst in early April):

Before proclaiming DOOOM, let me point out that the YoY changes have barely budged higher in the adjusted claims, and *unadjusted* claims had their best week yet since the start of the pandemic:

Four measures of labor market losses in the pandemic

Four measures of labor market losses in the pandemic

Below is a graph of 4 ways of measuring the downturn in the labor market due to the pandemic:

1. Payrolls (blue) – this is the headline jobs number from the establishment survey
2. Civilian employment (green) – this is the equivalent number from the household survey.
3. Aggregate hours worked (red) – tracks hours rather than jobs.
4. Aggregate payrolls (gold) – tracks total payrolls rather than jobs.


First of all, note that the two jobs measures from the two component surveys track similarly. They are currently down -5.7% and -6.5% respectively from their February peaks.

The libertarian vs. populist trade-off in the 2020 election and beyond

The libertarian vs. populist trade-off in the 2020 election and beyond

A few weekends ago I wrote that  “the Democratic ‘brand’ is ‘socially liberal, economically moderate,’ while the US electorate as a whole is socially moderate and economically progressive” citing a scatterplot graph of the 2016 electorate; and that:

The path forward is to embrace, and pass, some simple economic fixes … that materially improve – and are *seen* to materially improve – average Americans’ lives, while allowing for some flexibility on issues that people perceive as ones of morality (and hence are hard to compromise about) in such a way that nobody’s ox gets gored too much.

This past week that scatterplot diagram was updated and improved for the 2020 electorate. Here it is:

Biden got about 93% of the economically and culturally progressive vote. (Democratic congressional candidates got 91%.) 

November jobs report: the “least positive” report since April

November jobs report: the “least positive” report since April

HEADLINES:

  • 245,000 million jobs gained. The gains since May total about 55% of the 22.1 million job losses in March and April. The alternate and more volatile measure in the household report indicated a loss of -74,000 jobs, which factors into the unemployment and underemployment rates below.
  • U3 unemployment rate fell -0.2% from 6.9% to 6.7%, compared with the January low of 3.5%.
  • U6 underemployment rate fell -0.1% from 12.1% to 12.0%, compared with the January low of 6.9%.
  • Those on temporary layoff decreased -441,000 to 2,764,,000.
  • Permanent job losers increased by 59,000 to 3,743,000.
  • September was revised upward by 39,000. October was revised downward by -28,000 respectively, for a net gain of 11,000 jobs compared with previous reports.

Leading employment indicators of a slowdown or recession

I am still highlighting these because of their leading nature for the economy overall.  These were generally positive: 

November data starts out strong with a very positive ISM manufacturing index

November data starts out strong with a very positive ISM manufacturing index

 

The first November data point, the ISM manufacturing index, was reported this morning, and while it declined from last month, it remained very strongly positive.

The overall index declined from 59.3 to 57.5, and the more forward-looking new orders index declined from 67.9 to 65.1:

Since any reading above 50, however, indicates expansion, these were positive readings. The overall index is at levels equivalent to where it was during the strongest parts of the last decade’s expansion, and this month, like 3 of the last 4 months, the new orders component is equal to its strongest levels of the past 16 years.

 

Coronavirus dashboard for November 30

Coronavirus dashboard for November 3

Total US confirmed infections: 13,383,320*

Average US infections last 7 days: 162,365 (vs. latest low of 34,354 on Sept 12)
Total US deaths: 266,873
Average US deaths last 7 days: 1,430 (vs. latest low of 701 on Oct 16)

*I suspect the real number is 18-19,000,000, or between 5 to 6% of the total US population
Source: COVID Tracking Project

Infections are out of control over much, if not most, of the country. North and South Dakota, the 2 worst States, now have had confirmed infections in over 10% and over 9% of their entire populations (and probably much worse than that since many asymptomatic cases go undetected):

While the earliest hard hit States, NY and NJ, still have had the highest death tolls, 8 more States have suffered fatalities in excess of 1 in 1000 of their total populations:

October personal income declines, but still well above pre-pandemic peak; increased likelihood of negative pandemic reversal in jobless claims

October personal income declines, but still well above pre-pandemic peak; increased likelihood of negative pandemic reversal in jobless claims

Before I turn to this week’s report on jobless claims, a brief word first about October’s personal income and spending.

Although personal income declined in October compared with September, more importantly depending on how you measure it, real personal income is still 2.6% to 3.4% *higher* than it was at its peak in February just before the onset of the pandemic:

Much of that is the emergency pandemic aid passed by Congress. When you take out such “government transfer receipts,” personal income actually continued to improve in October, but is still -0.8% below its February peak.