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

Retail Sales

The Census Bureau had a press release this morning announcing that nominal retail sales fell -0.6% in February, the third consecutive fall.

Wall Street economists,analysts, strategists and managers have been watching these weak retail sales reports and speculating on why the drop in oil prices has not lead to the boost in consumer spending that virtually everyone expected.

The problem is that the nominal data can be misleading. Few know that the Bureau of Economic Analysis (BEA) as part of its GDP calculation also creates an unpublished series on retail sales that will be available later this month.  The BEA also estimates  deflators for the various components of retail sales and an estimate of monthly real retail sales by category.

The BEA data is much better than the series of nominal sales deflated by the CPI available in FRED ( the St. Louis Fed. public data base).

Over the previous three months –November, December and January –both Census and BEA estimated that nominal retail sales fell 1.3%.
But the BEA data also showed that over these three months the retail deflator fell -3.34%. Consequently, the -1.3% drop in nominal sales
is actually a 2.15%increase  in real retail sales, or almost 9% at an annual rate.

I expect when the BEA deflator becomes available the – 0.6% drop in February nominal sales will actually be a real increase.

The  sharp decline in the retail deflator is not just oil.  Almost every segment of retail sales except food stores and restaurants is showing a sharp drop in prices.  In 2013 and  2014 the change in the retail deflator  bounced around zero.  But as of January the year over year change in retail sales prices fell to -3.3%.  While the Fed is worrying about inflation and the Cassandras who have seen inflation right around the corner for years continue to forecast a massive inflationary surge, the data implies that deflation may be much more likely.






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The opponents of Obama-care just will not give up. Just because all of their claims of disaster over the last few years have been proven wrong they continue to repeat every claims that they think does not make them look foolish.

The latest example is John R. Graham of the Independent Institute who claims that Obama-care is hurting employment because of rising part time employment.

But I would suggest he really ought to look at the data.  Part time employment has a very strong cyclical pattern.

It’s share of employment rises sharply in recession and declines in recoveries.

A major part of this cyclical swing is driven by changes in employment in different sectors.  For example, the average workweek in retail is 30.1 hours, almost exactly where it has been for decades. In leisure and hospitality it is 25.2 hours and in education it is 32.0 hours, where they have been for decades.  But in manufacturing the average workweek  is 42.1 versus 39.7 at the recession bottom. In construction it is now 39.6 hours as compared to 38.8 hours at the recession bottom. So when the cyclical downturn causes employment in the strongly cyclical like manufacturing and construction while employment in the industries that traditionally use a lot of part time employes remains relatively stable the share of part time employees in total employment rises sharply.  This is why the chart shows that part time employment’s share of total employment rose sharply in the Reagan and Bush recessions.  It is also why part time employment share of total employment has fallen under Obama — it is a perfectly normal cyclical economic pattern.

(chart below the fold)

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1970s stagnation

I keep seeing references to the 1970’s stagnation that reflect a consensus belief that real GDP growth in the 1970s was significantly lower in the 1970s than in the 1980s.


But this is contrary to the data:


















Yes, the 1970s had a serious problem with inflation, but that does not negate the fact that real GDP growth was actually higher in the 1970s than in the 1980s. We need  a different term to  correctly  describe the  1970s rather than stagnation.

So why do knowledgeable economist like Krugman not recognize that applying the stagnation term to the 1970s creates a false impression about our economic history.

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Greg Mankiw thinks the VA is having problems.

I can not believe the nerve of  Greg Mankiw posting a blog about the Veterans Administration having problems.

He suggests giving Vets a voucher.

I suggest that he should apologize to all the Vets  for the War and Tax cuts policies that were implemented while he was at the White House that created the problem he is referring to.

But I guess Republicans do not believe they ever have to take the blame for the problems they create.






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Real State Per capita Income

The Bureau of Economic Analysis has been working on creating state and metro cost of living indices for several years and they have just published a new set of them that can be used to create real per capita income comparisons between states.

In their press release they show a map comparing real growth in 2012 that ranged from plus 12.7% in North Dakota and minus -2.3% in South Dakota.

But I found the ranking of the states real per capita income much more interesting.

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Capacity Utilization Telling a Strange Story

Capacity utilization is telling a very unusual story. Information technology –computers & peripherals, communication equipment and semiconductors — is operating at recession levels. Part of the story is import tablets and smart phones displacing personal computers. But there has to be more to the story.


Meanwhile, the rest of industry appears to be operating at near full operating rates. Manufacturing excluding info tech capacity is only a few percentage points below its 2007 peak. Given the long run downward slope of capacity utilization this is probably effectively full utilization


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Greg Mankiw on Bond Returns

Greg Mankiw had an interesting post today pointing out that bond returns calculated by the economist were incorrect.

Mankiw wrote:

Here is a question for students who are learning about compounding.  What is wrong with the following passage from The Economist magazine?

Investors who bought Treasury bonds in 1946, when yields were around current levels, did not suffer a formal default. But over the following 35 years they lost money in real terms at a rate of 2% a year. The cumulative real loss was 91%. By that standard, Greek creditors, who recently suffered a 50% loss via default, were lucky.

Answer: The second number is inconsistent with the first.  Note that .98^35=.49, so we get only a 51 percent cumulative loss.

In fact, the price level from 1946 to 1981 rose by a factor of about 5, so holding currency with a zero nominal return led to a real loss of only about 80 percent.

But Mankiw forgot one important element of calculating bond market returns.  Much of the total return for bonds is the interest on the annual interest payments and in a period of rising rates the returns will rise  as the interest payments  are reinvested at higher yields.  It is a bond market convention to assume that all the interest payments will be reinvested at the current yield.  They do that so they can actually calculate a valid price for the bond. But that is just a convention, and in a period of rising rates the returns will be higher than Mankiw calculates.

By omitting this point Mankiw is making just as serious an error as he is accusing the Economist of making.



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Obama-care and part time employment –Part 2

I’m seeing all types of comments on the 2013 rise in part time employment that blame it on Obama-care and that is just plain wrong.

Based on unpublished BLS data so far this year federal employes forced to work part time because of the sequester account for over 100% of the increase in part time employment.

So far this year private part time employment is actually some one million jobs lower than in the same 8 months of last year.  Because the data is not seasonally adjusted ( NSA ) the correct comparison to make is the year over year change because frequently the month-to-month changes can be misleading.

Time after time I’m seeing people observe the jump in part time workers and just jumping to the conclusion that it is Obama-care.  That is what they want to believe, so they do not bother to check  if their is another explanation. Economist generally call this  the omitted variable problem.  But I suspect it is just more Republican disinformation.  All it takes to get the data showing that the jump in part time  employment is all federal employes is just one simple phone call or email to the BLS . But it appears that people do not want to be confused by the facts.

(See table after the read more)

Clipboard01 PART





Disinformation was the old Cold War practice of both the CIA and KGB of planting false information in the press for propaganda purposes or to fool each other.The KGB actually had an entire Disinformation Division.Now it just seems to be the conservatives-liberaterians trying to fool themselves.


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