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

Bellwether Bullard versus Sirenic Summers

Bellwether Bullard versus Sirenic Summers

 So this is about the now getting to be passe topic of what will happen to inflation this year, with Larry Summers having gone out of his way to make a lot of noise in criticizing the expansionary fiscal policy partly passed but partly still under consideration in Congress as threatening a possible outbreak of 60s-70s style inflation at an entrenched much higher rate than we are seeing now.  He has put the probability of that at about a third, but considers this to be high enough to call for the Biden fiscal policy to be cut back in order to avoid that one third chance of a serious increase in the rate of entrenched inflation.

This forecast has not been accepted by the leading economic policymakers, notably Treasury Secretary Janet Yellen and Fed Chair Jerome Powell, as well as the various lesser lights at the CEA and elsewhere in the Biden administration.  Their official line is that it looks like we shall see an increase in the rate of inflation, and the latest monthly report does have it over 2 percent now, but with this likely to come back down later in the year or by early next year. This is seen to be due to much of the uptick aggravated by supply issues related to pandemic, especially in global shipping, although also with some specific sectors hitting bottlenecks, with all this crashing against rising demand with GDP growth projected at over 6 percent for the year.  But they see the supply issues becoming resolved with the fading of the pandemic and there not being mechanisms in place to entrench the higher rate of inflation, with those at the Fed even hoping that inflation expectations might end up “centered around the 2 percent target rate,” which the Fed has not been able to get to on a sustained basis.

A housing market quandary

A housing market quandary: two completely contradictory reports on renting vs. ownership

There are three potential areas of concern for the economy in the next 12 to 24 months that I see:


1. Inflation – this looks temporary to me. Demand side effects will probably fade by the end of summer, and supply side bottlenecks should fade within the year.


2. Stock price evaluations – I strongly suspect these are near secular highs and are subject to a serious pullback in the next several years.


3. Housing – The biggest reason I don’t see this as being in a bubble is the lack of “fog-the-mirror” mortgages being originated. Take away reckless lending spurring short-term speculative demand, and there is only so much that the market can deviate from the norm. This means that any downturn would probably be closer to the 4% downturn between 1990 and 1992:

Why March’s big jump in real retail sales augurs well for big employment gains through summer

Why March’s big jump in real retail sales augurs well for big employment gains through summer

Yesterday I wrote that the steep decline in new jobless claims in the past 4 weeks likely presages another big monthly employment gain, on the order of 1 million or more jobs.


Another very big positive for the next few months in employment is the massive, stimulus-fueled jump in retail sales.


As I have pointed out many times, real retail sales (blue in the graph below, /2 for scale) tend to lead employment (red) by about 3-4 months. Here’s the long term YoY look from 1993 on, averaged quarterly to cut down on noise:
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’ve also included aggregate hours (gold) in the above. Hours tend to be cut more than jobs in recessions and increase faster in recoveries. The pandemic has been somewhat unique in that, for obvious public health reasons, jobs were cut entirely rather than just hours. Note also the “China shock” in the first few years after 1999, when both jobs and hours continued to be cut, even after sales had rebounded.

How Redistribution Makes America Richer

By Steve Roth (originally published at Evonomics)t https://evonomics.com/how-redistribution-makes-america-richer/

You hear a lot about bottom-up and middle-out economics these days, as antidotes to a half-century of “trickle-down” theorizing and rhetoric. You’re even hearing it, prominently, from Joe Biden:

They’re compelling ideas: put more wealth and income in the hands of millions, or hundreds of millions, and you’ll see more economic activity, more prosperity, and more widespread prosperity. To its proponents, it seems deeply intuitive or even obvious, a formula for The American Dream.

March housing permits and starts – don’t get too excited

March housing permits and starts – don’t get too excited

Don’t get too excited about this morning’s big jump in housing starts for March. In the first place, it wasn’t confirmed in either total or single-family permits, which both remain down from December and January, and the latter of which is the least of all housing numbers:



Also, the big jump in starts is mainly a rebound from February’s Big Texas Freeze. February and March starts together average 1599 annualized, which is significantly below the December and January pace.

Industrial production for March disappoints – but only on the surface

Industrial production for March disappoints – but only on the surface

As an initial note, retail sales for March blew out to the upside, but as expected due to cosnumers’ spending their latest pandemic stimulus checks. This does have implications for future jobs reports, but I will report on that tomorrow. But to the main point . . . 


Industrial production rose in March, but disappointingly – on the surface at least – did not recover to its level in January, as shown below in the graph of total production (blue) and the manufacturing. component (red):

Jobless claims break on through – 1M+ jobs report for April looks likely

Jobless claims break on through – 1M+ jobs report for April looks likely

As I have said for the past few weeks, new jobless claims are likely to the most important weekly economic data for the next 3 to 6 months. With the number of those vaccinated continuing to increase, I have been expecting a big increase in renewed consumer and social activities, with a concomitant gain in monthly employment gains – as we saw in the March jobs report.Four weeks ago I set a few objective targets: new claims to be under 500,000 by Memorial Day, and below 400,000 by Labor Day. 
This week was a major advance towards those targets.


On a unadjusted basis, new jobless claims declined by 152,833 to 612,919. Seasonally adjusted claims declined by 193,000 to 576,000 (with last week’s number being adjusted upward by 25,000). The 4 week average of claims also declined by 42,250 to 683,000. 

Here is the close up since last August (recall that these numbers were in the range of 5 to 7 million at their worst in April of last year): 

Weekly Indicators for April 12 – 16 at Seeking Alpha

 – by New Deal democrat

Weekly Indicators for April 12 – 16 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The big call I made last year is that conditions were setting up for a Boom this year, once the pandemic started to be overcome. Well, almost half of all Americans have received at least one dose of vaccine, and all the signs are that the Boom is well and truly upon us.

So the nowcast and short term forecast is all about chronicling the Boom, while the long term forecast is about what happens as the Boom begins to fade.

As usual, clicking over and reading will bring you up to the virtual moment about the economy, while rewarding me just a little bit for my efforts.

That Prices were up the most since 2012 is probably also noteworthy . . .

CPI Rose 0.6% in March on Higher Prices for Energy and Transportation Services, R.J.S, MarketWatch 666

The consumer price index rose 0.6% in March, the largest monthly increase since August 2012, as higher prices for fuel, utilities, transportation services, financial services, and used vehicles were only slightly offset by lower prices for clothing and for communication commodities…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.6% higher in March, after rising by 0.4% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in September, 0.4% in August, by 0.5% in July and by 0.5% in June, but after falling by 0.1% last May, by 0.7% last April and by 0.3% in March of last year….the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 263.014 in February to 264.877 in March, which left it statistically 2.6198% higher than the 258.678 reading of March of last year, which is reported as a 2.6% year over year increase, up from the 1.7% year over year increase reported a month ago….with higher prices for energy a major factor in the overall index increase, seasonally adjusted core prices, which exclude food and energy, were only up by 0.3% for the month, as the unadjusted core price index rose from 270.696 to 271.713, which left the core index 1.6464% ahead of its year ago reading of 267.268, which is reported as a 1.6% year over year increase, up from the 1.3% year over year core price increase that was reported for February, but still little changed from the 1.6% the year over year core price increase that was reported for December of 2020 . . .

What the Future Holds

It was a warm October evening, back in 1957, when we heard the news and began looking anew toward the night skies. The Union of Soviet Socialist Republics (USSR) had just launched a satellite that they called Sputnik into orbit; an event that changed the world forever. A whole new concept; actually, a couple, maybe more, new ones. Thenceforth everyone knew what a satellite was; well, most everyone. Took us awhile longer though to wrap our heads around the orbit bit.

That launch into orbit started a space race that pretty much defined the next 12 years. Actually, it was more of a technology race, a how to do and how to do it first race. How to get a rocket with a man onboard into orbit and on into outer space; how to do all sorts of things in a weightless, atmosphereless, environment? One small step for man, lots of giant leaps for technology. Care for some silicone grease on that silicon chip? How about a wafer with your eggs? All in all, not all that much was learned about space itself that we didn’t already know.