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Angry Bear “Again” On List Of Top Economics Blogs For 2020

Angry Bear “Again” On List Of Top Economics Blogs For 2020

Intelligent Economist has again put out its annual list of the top 100 economics blogs, with some new ones and some gone, although two of those were due to retirements, especially the  Economists View of Mark Thoma.

Closely connected Econospeak , Bondadd blog ,  and Capital Ebbs and Flows also were named to the top 100 economic blogs.

Thanks all commenters, readers, and writers for your support.

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Might There Be A V-Shaped Economic Recovery After All?

Might There Be A V-Shaped Economic Recovery After All?

Maybe.

This is a matter where if it happens, I shall be proven wrong.  I have mostly emphasized how much uncertainty and lack of knowledge we face about the pandemic as well as the economy in this situation, and have as a result largely stayed away from making specific or definite forecasts on those matters.  However, here and in other places on the internet, I have made a lot of forecasts that the time path of GDP is likely to look like a “lazy J” or “whoosh,” a pattern of slow recovery after the very rapid decline, with a possible W if a second wave of the pandemic hits hard.  What I often dismissed, sometimes rather pompously to people who seemed to push it for blind political or ideological reasons was that there might be a rapid bounceback, a V-shaped recovery.  Now that it looks like it might happen, or at least a modest version of it, so I may be wrong on my past forecasts.

Curiously, as noted in a fairly recent post, I was one who was not surprised by the net increase in employment in May, given the evidence noted in still earlier posts of a likely turnaround in GDP that probably dates back even into late April and probably not later than early May, looking at figures on gasoline demand and carbon emissions.  It seemed not surprising that this turnaround would lead to some new hiring, even as further layoffs were clearly happening.  But most of this data seemed consistent with the Whoosh scenario, with these renewed increases occurring at rates much lower than the rates of preceding decline.  So the net increase in hiring in May was only 2.5%, large for normal time, but only beginning to offset the double-digit plunge that had happened before it.

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The Coronavirus Recession may already (technically) have ended: sales and production both increased in May

The Coronavirus Recession may already (technically) have ended: sales and production both increased in May

 – by New Deal democrat

Sales and production are two of the four things that economists look for in gauging whether the economy is in expansion or recession, and this morning both of them – retail sales and industrial production – were released for May.

So it’s true: as defined by the NBER, the Coronavirus Recession may have only lasted two months, from February through April. That’s because, just as February was the peak of economic activity before the coronavirus hit, April may well have been the trough. And recessions technically end, not when the economy becomes objectively “good” or “fair,” but simply when the level of activity is less awful than before. If the trajectory is positive, and activity goes from really awful, to slightly less really awful, the recession has ended, even if the economy is still, well, awful.

To the graphs! First, here are retail sales, both nominally and as adjusted for inflation:

Both increased 17.7% in May, after declining over 14% in April. Both are also slightly higher than their levels in March. Clearly the “reopening” of the economy in large portions of the country led to a splurge in spending.

 

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S&P PE NOW BACK ABOVE FAIR VALUE

After the recent market rebound the S&P 500 valuation has risen from below my estimated fair value to just over the top of the fair value band.

It is important to remember that much of the rebound in the S&P PE  is due to weaker earnings.  In the second quarter earnings are falling at double digit rates. But if second quarter real GDP is falling at a 40% to 50% rate earnings estimated are still too high.

Wall Street says do, not fight the Fed.  One measure of Fed policy is money supply growth and as the chart shows MZM ( zero maturity growth) is surging to near record highs.  This implies that the market PE is going to continue to rise and it should pull the overall market with it despite the fact that earnings estimates are probably too high.

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Weekly Indicators for June 8 – 12 at Seeking Alpha

by New Deal democrat

Weekly Indicators for June 8 – 12 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The short leading indicators have continued to improve, from awful, to less awful, to merely really bad.

But that the NASDAQ briefly made a new high last week, while the S&P was only 5% from one, while the coronavirus pandemic rages on, was simply insane.

As usual, clicking over and reading should bring you up to the moment on the economy, and reward me a little bit for my efforts.

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Coronavirus dashboard for June 12: the costs of recklessly reopening begin to come due

Coronavirus dashboard for June 12: the costs of recklessly reopening begin to come due

 – by New Deal democrat

It is pretty clear now that in general those States (but not all) which left lockdowns the earliest and with the most lax continuing restrictions are suffering renewed outbreaks of the coronavirus, *possibly* in several cases verging on exponential spread.

For the US in total, the 7 day average of deaths has continued to decline, now at 803 per day vs. 2,201 on the April 18 peak:

Among the 40 States that consistently report hospitalizations, the number has still also declined:

But new cases averaged over the past 7 days have started to rise again, now at 21,527 vs. the low of 20,658 on May 28:

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Initial jobless claims decline further, but continuing claims fail to make meaningful progress

Initial jobless claims decline further, but continuing claims fail to make meaningful progress

 by New Deal democrat

Weekly initial and continuing jobless claims give us the most up-to-date  snapshot of the continuing  economic impacts of the coronavirus to the average worker. Twelve weeks after calamity first struck, the theme remains “less awful.”

First, here are initial jobless claims both seasonally adjusted (blue) and non- seasonally adjusted (red). The non-seasonally adjusted number is of added importance since seasonal adjustments should not have more than a trivial effect on the huge real numbers:

There were 1.542 million new claims , which after the seasonal adjustment became 1.537 million. This is a -355,000 decline from last week’s number, and the lowest so far since the virus struck – but still almost twice as bad as the worst week during the “Great Recession.”Since we are more than a month after some States “reopened,” these new claims  primarily represent  spreading second-order impacts.

 

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May inflation steadies: meanwhile, an artificial all time high in “real” wages

May inflation steadies: meanwhile, an artificial all time high in “real” wages


 by New Deal democrat

In May, overall consumer prices declined by -0.1% (blue in the graph below), while consumer prices excluding energy (gas) rose +0.1% (red):

Note that in 2015 when gas prices collapsed, prices otherwise continued to increase, showing the underlying strength of the economy. But in March and April of this year, even prices outside of gas declined, showing underlying weakness. This is a typical recessionary scenario. May’s increase in prices ex-energy may be a good sign.

 

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Stephen Miller’s Racist Fix for Race Relations

Word is circulating that Stephen Miller is writing Donald Trump’s speech on race relations. I’m going to go out on a limb and predict that Trump’s “solution” to the current malaise in the U.S. will involve extending a ban on immigration and expanding enforcement and expulsion of undocumented individuals. This seems like a safe bet to me because Miller really is a one-trick pony and Trump relishes rehashing his greatest hits. Maybe Miller will toss in some “enterprise zones” or other ornamental trivia but the meat will be anti-immigration.

They playbook for this will be Miller’s Immigration Handbook for a New Republican Majority that he wrote for Jeff Sessions in 2015. Footnote 21 of that handbook states that, “Amnesty and uncontrolled immigration disproportionately harms African-American workers, and has been
described by U.S. Civil Rights Commission member Peter Kirsanow as a ‘disaster.'” The handbook also cites a poll commissioned by Kellyanne \Conway, one finding of which was that “86% of black voters and 71% of Hispanic voters said companies should raise wages and improve working conditions instead of increasing immigration.”

Two years ago, I posted a couple of pieces discussing Miller’s handbook in more detail: The Lump That Begot Trump and Goebbels or Gompers?: A Closer Look at Stephen Miller’s Immigration Manifesto. I hope these pieces provide some insight into just how dangerous and effective Miller’s and Trump’s anti-immigration rhetoric can be, especially given the hypocrisy of neo-liberal promotion of immigration as exemplified by Tony Blair’s and Gerhard Schroeder’s “Third Way” advocating “a new supply-side agenda for the left“. To put it bluntly, “Third Way” immigration policy was intended to create jobs by keeping wages low through an abundant supply of labor. The transfer of income from the working class to the wealthy would provide ample funds for “investment.”

In short, Miller’s and Trump’s anti-immigrant rhetoric is dangerous and effective because Blair and Schroeder (and Clinton and Obama) enacted right-wing, supply-side economic policies in the name of “the [‘responsible’] left.”

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May jobs report: a welcome positive shock

May jobs report: a welcome positive shock

–  by New Deal democrat

HEADLINES:

  • 2,509,000 million jobs added. This makes up about 12% of the 22.1 million job losses in March and April.
  • U3 unemployment rate improved 1.4% to 13.3%, compared with the January low of 3.5%.
  • U6 underemployment rate improved 1.6% to 21.2%, compared with the January low of 6.9%.
  • March and April were both revised further downward, by -492,000 and 150,000 respectively, for a net of -642,000 more jobs lost 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 uniformly very positive:

  • the average manufacturing workweek rose 0.8 hours from 38.1 to 38.9 hours. This is one of the 10 components of the LEI and will be a positive.
  • Manufacturing jobs rose by 225,000. Manufacturing has still lost 1.145 million  jobs in the past 3 months, or close to 10% of the total.
  • construction jobs rose by 464,000. Even so, in the past 3 months -596,000 construction jobs have been lost, or about 8% of the total.
  • Residential construction jobs, which are even more leading, rose by 65,600. Even so, in the past 3 months there have still been -58,800 lost jobs, or about 7% of the total.
  • temporary jobs rose by 41,300. Since February, there have still been -852,800 jobs lost, or over 1/4 of all temporary help jobs.
  • the number of people unemployed for 5 weeks or less declined to 3.875 million, compared with April’s total of 14.283 million. This is similar to the “less awful” readings of the weekly initial jobless claims.
  • Professional and business employment rose by 127,000, which is still 2.156 million, or about 10% below its February peak.

Wages of non-managerial workers

  • Average Hourly Earnings for Production and Nonsupervisory Personnel: declined $0.14 from $25.14 to $25.00, which is still a gain of over 3% in 2 months. This reflects that job losses were primarily among lower wage earners.

Aggregate hours and wages:

  • the index of aggregate hours worked for non-managerial workers rose by 4.9%. In the past 3 months combined this has nevertheless fallen by about 10%.
  •  the index of aggregate payrolls for non-managerial workers rose by 4.4%. In the past 3 months combined this has nevertheless fallen by about 11%.

Other significant data:

  • Full time jobs were responsible for 2.2 million of the gains.
  • Part time jobs were responsible for 1.6 million of the gains.
  • The number of job holders who were part time for economic reasons declined  by 254,000 million to 10.633 million. This is still an increase since February of   6.315 million.

SUMMARY

This report was a positive shock. Rehiring in May outweighed the continuing and spreading layoffs. At first blush it appears this was primarily among the retail and leisure and hospitality sectors which were more than decimated in March and April.

A few sectors have recovered more than half of the jobs that were lost, but most have only regained 10% or 20% of their losses. Further, because average hourly wages have maintained over 80% of the increase in April – because lower wage jobs were primarily lost – this strongly suggests that the job recalls were relatively speaking tilted towards higher paying jobs as well.

Most importantly, aggregate payrolls are still down more than 10% from their recent peak. Unless a miracle happens and a huge majority of the job losses are reversed in the next 45 days, when the enhanced unemployment insurance passed by Congress runs out in July, there is going to be a major knock-on shock to the economy.

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