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

Jobless claims continue to show a sideways to an upward trend

Jobless claims continue to show a sideways to an upward trend

New jobless claims declined this week, but are still significantly above their recent pandemic lows, while continuing claims, seasonally adjusted, made a new pandemic low. The downward trend in claims has clearly ended for now, although whether the current trend is sideways or upward remains unclear. In particular, there is a sizable but by no means certain likelihood that December’s jobs number will be negative.

On an unadjusted basis, new jobless claims declined by 71,512 to 869,398. Seasonally adjusted claims also declined by 89,000 to 803,000. The 4-week moving average rose by 4,000 to 818,250. All of these are above their recent lows. 

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): 


Figure 1

Because of the huge distortions caused by the pandemic in seasonally adjusted numbers, and because we are at a time of year when seasonality causes the most distortions, in any event, let’s also take a look at the YoY changes in all of the above metrics:

Bubble Bubble Toil And Trouble?

Bubble Bubble Toil And Trouble?

 Or maybe not.

So recently there has been a lot of buzz that we may be seeing a variety of speculative bubbles in the US and indeed world economy.  Many asset markets have risen in the last few months, with several of them either reaching new highs or getting close to doing so, with some of them rising very sharply quite recently, with all of this making many eyebrows rise to noticeable degrees and mumble about possible crashes, which could well happen in any of these markets. But probably not in all of them.

One is of course the US stock market, which has hit new record highs recently for most of its indices, with the Dow, in particular, making headlines when it passed 30,000, where it still is, if not at a record high level at this very moment.  It is ironic that President Trump spent so much time and effort focusing on the stock market, apparently engaging in stupid and ultimately deeply deadly policies regarding the pandemic out of a silly effort to affect favorably almost daily stock market movements.  People were not to be told how serious things were because, wow, the stock market might go down tomorrow and his reelection chances would be damaged!  Well, of course, when how serious things finally became clear in March, we did see a massive plunge of world stock markets, but a combination of Federal Reserve policy actions and a fiscal stimulus, along with the passing of the first wave of the pandemic, led the markets to recover quite rapidly from their horrific fall.  They generally continued to do not too bad even as we had another increase in the pandemic in the summer, which was probably just the spreading of the first wave into parts of the country that did not get it in March and April, especially parts where governors followed Trump in not enforcing masks and social distancing.

The 2004-2020 political red/blue shift:

The 2004-2020 political red/blue shift: the intersection of geography, the economy, and ethnic migration

It’s a very slow, holiday-shortened economic week. We’ll get new home sales, plus personal income and spending Wednesday, and jobless claims as usual Thursday.


In the meantime, here is something I found revealing. It’s a map, created by Nathan Jordan,  a college student from Alabama (I think), showing the county-level change in Presidential voting countrywide (except Alaska) from 2004 through 2020:



What was fascinating to me (because I am a nerd) is how closely the changes track some geographical features. The spine of the Appalachians stands out clearly, plus the Ozark mountains, and the red-shaft also appears to closely follow the Mississippi-Missouri-Ohio River valley system.
On the first pass, this certainly looks like an “It’s the economy, stupid!” story. But it’s more complicated than that.

Housing permits and starts for November: yet more evidence of an economy primed for takeoff in 2021

Housing permits and starts for November: yet more evidence of an economy primed for takeoff in 2021

If there was bad news yesterday in the further increase of initial jobless claims, there was also good news in the 10+ year highs in new housing permits.

Here’s the graph of permits (blue), single-family permits (red, right scale), and housing starts (green):


Not only total permits but also the much less noisy single-family permits made 13-year highs. While the much noisier starts didn’t, the only months in the past 13 years that were better were last December through this February.

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.

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.

Social Security Trustees Update 2020 Report To Include Effects of Covid Recession

Reader and poster Coberly updating Angry Bear readers on recent Social Security findings in the 2020 report. Reader Bruce Krasting had alerted Angry Bear to the publication by the Social Security Trustees of a “revised baseline” that includes effects of the Covid recession on their projections otherwise from the 2020 Trustees Report.Updated Baseline for Actuarial Status of the OASI and DI Trust Funds, Reflecting Pandemic and
Recession Effects

The Trustees have better information than I have and assumed a lower unemployment rate with effects of the recession lasting over several years, but returning to “normal” by the year 2029.  Their new projections bring the Trust Fund exhaustion date one year closer, but the ultimate 75 year deficit remains at about 4% of payroll.

Using their revised baseline, and attendant projected changes in some of the parameters they use for their projections, I was able to replicate their calculations, giving me confidence that my own findings regarding necessary payroll tax changes are consistent with their projections.

The necessary payroll tax changes amount to an average tax increase of less than one tenth of one percent (each) per year.  This is different from my pre-covid findings only in that the tax increases would need to be a bit larger in the first years than previously estimated.

PRC busts the price cap, lawsuits sure to follow

Fact: Contrary to what President Trump claims, the Postal Service can’t solve its financial problems by raising “the price of a package by approximately four times.”

Steve Hutkins at Save The Post Office discusses the financial issues facing the United States Postal Service and why the Postal Regulatory Commission  new plans to increase prices may be problematic. By no means is this a new topic. It has been brought up repeatedly by members of Congress and this administration as well as earlier administrations. The USPS was not meant to be profitable and its present situation is the result of the Postal Accountability and Enhancement Act.

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The Postal Regulatory Commission has spent the past four years working on a revision of the rate system for Market Dominant products. Yesterday the Commission issued its final rule on the changes. The order is here. The PRC’s press release is here. The media kit contains a useful FAQ.

The process of reviewing the rate system involved the Commission, the Postal Service, and an extensive list of stakeholders and commenters.  And even though it’s been going on since December 2016, it’s not over yet, not by a long shot. Given that many of the mailers have fought the changes that were finally approved, it’s widely expected that some stakeholders will appeal the PRC’s order to the D.C. Circuit.

Yellen And Akerlof Or Akerlof and Yellen?

Yellen And Akerlof Or Akerlof and Yellen?

 I have already posted about the nomination of Janet Yellen to be Treasury Secretary, a historic first and most duly deserved.  She is great and totally appropriate, and I have already bloviated at length on that.

I am now going to discuss a more obscure and odd matter, the view of her and her Nobel-Prize-winning husband, George Akerlof, in the eyes of the public.  This is triggered by various media stories that have sort of downplayed or dismissed him while praising her and lifting her up, which I am all for and have done myself here and elsewhere on numerous occasions.  I note that I may be in a special position to comment on this as I have known George for 60 years, which might make me concerned about how people view him, although as someone frequently described as “the nicest person in the economics profession” who is also genuinely humble, he does not mind or care about any of this at all.

Mostly I want to reaffirm his important role both in her work and more broadly his importance to the economics profession and more broadly the history and development of economic thought. While she published papers on her own and with others, her most important and influential papers have been coauthored with him, including the one getting mentioned in the news reports about efficiency wages.  They have had a long joint research program studying labor market behavior taking into account such things as social interactions effects such as workers taking seriously whether they are being treated fairly.  They also contributed to the lit on the downward stickiness of nominal wages, which is an important macro fact, with Yellen bringing this into the policy discussion at the Fed when she was first a gov there under Greenspan, with this playing a role in her helping him to move from focusing on a zero inflation target to a positive one.  A major paper by George with Dickens and Perry at Brookings would support this and help pin down what is now the nearly universal 2% target that most central banks use, for better or worse.  They have had an enormous influence on global central banking that is not all that well understood or recognized.

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.