The August jobs report smacked of late cycle deceleration

As promised, here is my abbreviated and late take on this morning’s employment report.

While the additions to temporary positions (a leading indicator for jobs overall), and construction, and manufacturing jobs were welcome, this report sure looked like late cycle deceleration.

The YoY% growth in jobs – a very un-noisy metric – declined again slightly:

The number of people not in the labor force who want a job shot back up:

Those who are involuntarily part-time went sideways:

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Trickle-down, with the emphasis on “trickle”

Since the turn of the Millennium, a torrent of corporate tax cuts has resulted in a trickle of investment growth.

This morning Dean Baker objects to:

the argument … that reducing corporate taxes will lead to more investment and thereby greater wage growth in the future. The data from the last seventy years show there is no relationship between aggregate profits and investment.

As can be seen, there is no evidence that higher corporate profits are associated with an increase in investment. In fact, the peak investment share of GDP was reached in the early 1980s when the after-tax profit share was near its post war low. Investment hit a second peak in 2000, even as the profit share was falling through the second half of the decade. The profit share rose sharply in the 2000s, even as the investment share stagnated. In short, you need a pretty good imagination to look at this data and think that increasing after-tax profits will somehow cause firms to invest more

I was a little puzzled why Dean didn’t differently scale the two series so it would be easier to see any leading/lagging relationship.  Further, since corporate profits are a long leading indicator, and nonresidential fixed investment is more of a coincident indicator, I was pretty sure that there would be a correlation.

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Notes on Harvey: if Karma could bring her litter to visit the Texas GOP

First of all, as many of you already know, the M.I.A. proprietor of Bonddad blog, Hale Stewart, resides in the Houston area.  I traded messages with him on Saturday, and as of then, he was doing OK.

Secondly, when Superstorm Sandy hit New Jersey and New York, Texas Republicans were prominent among those who opposed aid.  Ultimately aid was provided — but not until 75 days after the storm.

There were two Sandy-related aid bills.

The first bill granted FEMA a $9.7 billion increase to borrow for the National Flood Insurance Program. It passed the Senate on a voice vote, but the following Texas GOP Members of Congress voted against the aid:

Mike Conaway (Midland)
Bill Flores (Bryan)
Louie Gohmert (Tyler)
Kenny Marchant (Coppell)
Mac Thornberry (Clarendon)
Randy Weber (Pearland)
Roger Williams (Austin)

The second bill provided $17 billion emergency funding to the victims and to affected NY and NJ communities.  Both Texas Senators Ted Cruz and John Cornyn voted agains the bill.  In addition to all of the above Representatives, the following Texas GOPers also voted against this aid:

Ted Poe (Humble)
Sam Johnson (Plano)
John Ratcliffe (Heath)
Jeb Hensarling (Dallas)
Joe Barton (Arlington)
Kevin Brady (The Woodlands)
Michael McCaul (West Lake Hills)
Kay Granger (Fort Worth)
Lamar Smith (San Antonio)
Pete Olson (Sugarland)
Michael Burgess (Lewisville)
Blake Farenthold (Corpus Christi)
John Carter (Round Rock)
Pete Sessions (Dallas)

Now that it is Texas suffering a catastrophe, of course some of these same politicians will be at the front of the line braying for help. While with the GOP in control of the entire federal government, Karma will not be paying a visit with her litter, in a just world aid would be provided immediately — on the same day they all visit NY and NJ, apologize, and abjectly beg forgiveness.

Of course, the “better angels” will prevail this time. But rest assured, the next time a disaster befalls anywhere in the Northeast, these same Texas politicians will once again vote against aid. In the meantime, above is the Roll Call of Shame for posterity.

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An economy on autopilot between Scylla and Charybdis

Interest rates are a vital determinant of longer term growth. While the economy has remained on autopilot for the last several years, with almost no political stimulus or disruption — though that may well change next month — the Fed has to steer a course between the Scylla of an interest rate spike and the Charybdis of an inverted yield curve.  The Presidential election spike in long term interest rates has been enough to cause growth in the housing market, whether measured by permits, starts, new or existing home sales, to stall out. Meanwhile the several hikes in the Fed funds rate has cause a slight flattening of the yield curve.

So while it is somewhat welcome that longer term interest rates have fallen back below 2.20%f and mortgage rates below 4%:

that just means that there is less of a spread between longer term and shorter term yields.

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(Update…Dan here…I erroneously posted this post under Barkley”s name but it is NDd.)

On the erection of Confederate memorials: in which I have to get this off my chest

Below is a photograph of the World War Two Memorial on the National Mall in Washington, D.C.

Keep it in the back of your mind. I’ll return to it.

I am a data nerd, and leaping to conclusions about data is a pet peeve of mine. I really hate it when anyone, and particularly my own side, falls for groupthink, jumping to instant conclusions which then become the only acceptable opinion. In the last 48 hours, without consideration of other possibilities, or looking for contrary vs. corroborating data, it seems that just about everyone on the center and left has become an instant expert on the fact that Confederate statues were erected because of Jim Crow.

In support of that, a number of graphics, such as this one, have been used:

So, has it occurred to nobody that there might be a more straightforward reason why there would be a huge spike in Memorials (cough, cough, hint, hint) ***50*** and ***100*** years after the Civil War?

Yes there were a number of racial incidents that occurred in the 1910s.  But before the last 48 hours, the general consensus was that there was a resurgence in violence associated with white supremacy in the 1920s, not the 1910s.

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Real retail sales disappoints . . . the Doomers

This morning’s report on July retail sales once again belies the claim that “hard data” and “soft data” are divergent..

Not only did July come in at a strong +0.6% (+0.5% ex-autos), but June was revised up as well. Given basically non-existent inflation, this means that real retail sales made two more new records for this expansion:

In fact, real retail sales look like they are right in line with a multi-year trend.

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One tiny little ray of hope

After the Charlottesville, VA white supremacy violence, and his failure to explicitly condemn it, Donald Trump’s Gallup approval rating has fallen to a new low of 34%, and his disapproval to a new high of 61%:

This puts him below the lowest ratings during their entire term of Lyndon Johnson, Ronald Reagan, and Bill Clinton. Only Truman, Ford, Carter, and George W. Bush ever scored lower.

So far, alas Rasmussen has not followed suit.

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“The Changing of the Guard:” the prescient 1980 book that foretold neoliberalism

About a month ago I read the synopsis of an interview in which Thomas Frank described the near evisceration of the Democratic Party.  Here’s his simple version:

“[T]he Democrats have, what happened is that some years ago they decided they didn’t want to be the party of the people anymore. They didn’t want to be the sort of traditional Democratic Party that I grew up with, the party of Roosevelt, Truman, Kennedy, Johnson. That’s not what they wanted to be.

“They wanted to be something different. This involved … It was an enormous transition in the Democratic Party all through the seventies, all through the eighties, all through the nineties until they are what we see them as today. They are a party that represents a group of very affluent white collar professionals. That’s who leads the party. That’s who they speak for. That’s whose issues they care about. That’s really who they are….

“[T]he Democrats, as they moved away from their old working class base and they treated them very poorly and they did the same with other essential elements of their constituent groups, minorities for example … [W]hen they did things like got NAFTA passed which was really hard on working class people, when they did those things they used to have a saying. They’d say, ‘Well you know we don’t have to worry about that. Those people have nowhere else to go.’ Nowhere else to go. This was a Democratic saying in the 1990s.

“Trump gave those people somewhere else to go.”

This critique rang a bell, not because I have read similar requiems before, but because I read it as a foretelling nearly 40 years ago, in the late David Broder’s “Changing of the Guard.”  Broder described the worldviews of a bunch of technocratic Democrats — and some Republicans — then in their 30s and 40s, people like Gary Hart, Jerry Brown, and a guy named Bill Clinton, who … well, let me turn the mike over to the right-wing  Commentary Magazine, which said in its review at the time:

“For anyone still perplexed by the Democratic party’s recent [in the early 1980s] misfortunes, a careful look at these interviews … suggests that the much-heralded collapse of liberal ideology is a more serious problem than even the election debacle would indicate. The conventional analysis is that liberalism’s dilemma stems from a failure to advance beyond the policies and attitudes embodied in the career of Hubert Humphrey: a reliance on economic growth as the principal means of curbing poverty, a generous and ever-expanding system of social-welfare benefits, and a foreign policy stressing containment of the Soviet Union and aid to the developing world. But it is important to keep in mind that many new-generation liberals have consciously rejected the Humphrey tradition. “We are not a bunch of little Hubert Humphreys,” Gary Hart declared upon winning election to the Senate in 1974 ….

“They speak with pride of having promoted more open and efficient government, of being more accessible to the public, of maintaining their “independence” from the established party organizations, and of their opposition to the spoils system.”

 

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In which I (partially) disagree with Dean Baker about the stock market

Dean Baker complained yesterday about pundits who talk about the stock market in terms of economic well-being:

As someone who routinely considers both corporate profits and stock prices in terms of economic well-being, I disagree — somewhat.

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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.

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