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

The John Bates Clark Award And Me Getting Old

The John Bates Clark Award And Me Getting Old

Yes, this is going to all be about me! 🙂

So, before getting to me, me, me, let me congratulate Emi Nakamura of the UC-Berkeley economics dept for receiving the John Bates Clark Award. It seems to be well deserved for her innovative and influential work on looking at high frequency detailed micro data sets to get more accurate estimates of macro variables, including both inflation rates and fiscal multipliers.  At 38 she is young enough (one must be under 40).  She is also now a coeditor of the American Economic Review.  I have seen some grumbling that her frequent coauthor and husband, Jon Steinnson, did not share in it or get it himself.  He is now too old at 42, and while her three most cited papers are coauthored with him, many others of hers are not, and several important papers of hers are sole authored.

As for how this relates to me, the really important part of this post, :-), I have never met her.  However, I know her mother, Alice Orcutt Nakamura, an economist at the University of  Alberta, who just happens to be the first woman ever to publish in the American Economic Review back in 1979. She was also the first woman president of the Canadian Economics Association in 1994-95.  She has done  lots of work on econmetrics, labor markets, and, interestingly, in the sort of micro studies of price changes that have since become a major focus of her daughter’s highly influential research.

 

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FoxConn, Jakarta, and Refugees

FoxConn, Valerie Bauerlein. Microsoft News

“Six miles west of Lake Michigan in Mount Pleasant, Wisconsin lies a cleared building site half again as big as Central Park and ready for Foxconn Technology Group’s $10 billion liquid-crystal-display factory. Contractors have bulldozed about 75 homes in Mount Pleasant and cleared hundreds of farmland acres. Crews are widening Interstate 94 from Milwaukee to the Illinois state line to accommodate driverless trucks and thousands of employees. Village and county taxpayers have borrowed around $350 million so far to buy land and make infrastructure improvements, from burying sewer pipes to laying storm drains.”

The only thing missing to make this site a reality is “Foxconn.” In what could still turn out to be one of the biggest fraud ever, Foxconn has backed away from the table and then came back.

“President Trump and Foxconn Chairman Terry Gou hatched the factory plan in 2017. Both participated in last summer’s gold-shovel groundbreaking in Mount Pleasant located just 20 miles south of Milwaukee.”

As of December 2018, the Taiwanese based supplier to Apple has spent 1% of its promised investment in the new US manufacturing facility . . . $99 million. Along with the disappearing promised investment could go the 2080 jobs planned for 2019. The same as any Township Planning Commission might do, Mt. Pleasant is waiting for the factory building plans to be supplied by the hard to find Foxconn contractors. Meanwhile the Mt Pleasant and Racine County are far out on a financial limb in supplying the necessary land needed and other requirements to make the site viable.

“In January, Foxconn said it was backing out of the plan to build an LCD factory in the village, citing high U.S. labor and material costs. Days later, after a phone call between Mr. Trump and Mr. Gou, Foxconn reversed course and said it would go ahead with the facility making small screens, adding some other functions.”

The local population of 27,000 remain skeptical it will ever be completed.

The first of Many to Come? As Indonesia plans to move its Capital, Yessenia Funes, Microsoft News

On several occasions, I have been to Jakarta to conduct meetings at a plant just outside of the city. The area is beautiful and tropical near the plant. We did not stay but two days at a time as Jakarta is not a friendly place for Americans in general. Monetarily, the exchange rate is relatively high with regards to Rupiahs to the dollar. We elected to use credit cards as we would never be able to get rid of the local money.

Indonesia has decided to move its capital from Jakarta as the city is slowly sinking and will be overwhelmed by the ocean by 2050. Jakarta has dropped 13 feet in the last 30 years and the ocean is expected to rise 20 inches by 2050. The city is home to 10 million people, is congested as many of the cities in Asia are today, and suffers from pollution and global climate change. The drawing of fresh water for human use has caused the land to drop and compact over the years also.

The expected cost of moving the capital from Jakarta will be $33 billion. Jakarta will remain as a city while the capital moves inland.

The US has a history of turning people away whose lives are endangered in their home lands.

A State Department telegram to the people on MS St. Louis: “passengers must “await their turns on the waiting list and qualify for and obtain immigration visas before they may be admissible into the United States.” The message to people fleeing for their lives from terrorism and the threat of death has not changed much over the years. During WWII, the Nazis exploited the unwillingness of other nations to admit large numbers of Jewish refugees to justify their anti-Jewish goals and policies both domestically in Germany and in the world at large. The MS St. Louis returned to Europe and landed in Antwerp. The Jews aboard ship were split amongst 4 countries. Many succeeded in getting US Visas or were able to hide from the Germans. 254 did die in concentration camps.

The man depicted in the picture is Otto Richter who was deported from the US after illegal entry. Protesting a return to Germany, it was reported he either went to Belgium or Mexico. He was fleeing persecution by the Nazi.

11 months earlier the Trump administration separated Byron Xol from his father David after they arrived from Guatemala. It was done under the zero tolerance program. David Xol was deported back to Guatemala despite requesting asylum. Byron was left in the United States and in custody due to not having any relatives or known sponsors. A lengthy court fight ensued with the Sewell family hiring an attorney to represent their interests in Bryon. The Sewells talked with David (father) and both he and his wife agreed to allow the Sewells sponsor Bryan in the US.

As it was Byron’s father David was an evangelical Christian. He had requested asylum for both he and Bryon. According to a court document, David Xol was attacked and tortured and Byron’s life was threatened by MS-13 gang members in 2017 because Xol preached to his co-workers about his religious beliefs and against leading a life of crime.

Some things just never change when it comes to refugees and freedom.

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Median wage and salary growth stalls in Q1, while overall positive trend remains intact UPDATE: real household income declined

Median wage and salary growth stalls in Q1, while overall positive trend remains intact UPDATE: real household income declined

The Employment Cost Index is a median measure of wages, and also total compensation, for the 50th percentile worker. Thus it escapes the “Bill Gates walks into a bar” issue with average measures. Sunday I wrote that “It has been improving for several years now, and I am expecting it to continue.”

Not quite. While both the wage and total compensation indexes, measured nominally,  improved by +0.7% In the first quarter, on a YoY basis they declined slightly from +3.1% to +2.9%, and from +2.9% to +2.8%, respectively.  Here’s the YoY graph:

A quarterly look shows that the reason for the YoY deceleration is the outsized gains in Q1 last year, which were the best in over ten years:

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Expect a core CPI of 2% this year.

My discovery that half the annual increase in the not seasonally adjusted core CPI occcurs in the first quarter and that simply doubling the first quarter increase gives you an amazingly accurate estimate of the December to December reading work again in 2018.

In 2019 it is saying the annual increase in the core CPI will be about 2% — the same as the widely accepted consensus.

Figure 1

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What I’m watching for this week

What I’m watching for this week

This week is going to be a really busy one for economic data. I’m not going to be able to do detailed posts on everything. But because in the past couple of months most of the data has gone against my “2019 slowdown” scenario, I thought both in the interests of transparency, and to put down a few benchmarks to anchor my analysis, I’d write down what I am looking for in each release.

Monday – personal income for March; personal spending for February (!) and March. Yes, we’re still playing catch-up in data releases delayed by the government shutdown. Both of these are important to my “mini-recession” hypothesis. The February spending number might still be punk, but I am expecting spending in particular to come roaring back in March, especially after the blowout March retail sales report. Basically, I think the last 45 days of Q1 pulled the economy back from a brief downturn in the first 45 days:

Tuesday – Q1 Employment Cost Index. This is a median measure of wages and benefits. It has been improving for several years now, and I am expecting it to continue. The Case-Shiller house price index also comes out Tuesday. The question will be whether house prices continue to outpace income, which I think is the case, and is one reason why the economy may be slowing, as $$$ paid on the mortgage or rent can’t be spent elsewhere. And finally, I’ll be checking to see if the weekly temporary staffing index continues to be negative.

 

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Weekly Indicators for April 22 – 26 at Seeking Alpha

by New Deal democrat

Weekly Indicators for April 22 – 26 at Seeking Alpha

My “Weekly Indicators” post is up at Seeking Alpha.

The data has been improving since the beginning of March, and continued to improve this week. Although at the moment the prevailing sentiment, based on new stock market highs, and yesterday’s surprise 3.2% Q1 GDP, seems to be “happy days are here again!”, my suspicion is that the intermediate and lagging data is going to fade.

One reason for my suspicion is that most of the long leading data (except for interest rates) continues to point down, as in the two leading components of yesterday’s GDP report, as to which my post is also up at Seeking Alpha, here.

As usual, clicking over and reading helps reward me with a $ or 2 for my efforts.

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New home sales suggest housing bottom is in

New home sales suggest housing bottom is in

New home sales are extremely volatile, and extremely revised, but they do have the advantage of probably being the single most leading housing statistic, ahead of permits and starts.

So it is noteworthy that new home sales for March rose to 692,000, below only one month in late 2017 when they hit their expansion high of 712,000:

I have been looking for the bottom in housing, as mortgage interest rates have fallen in the past 5 months, and purchase mortgage applications have risen to new expansion highs:

 

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Commercial and industrial loans: another sign of a slowdown?

Commercial and industrial loans: another sign of a slowdown?

There are lots of cross-currents in the economy right now. At the absolute tip of the spear is the decline in interest rates since November, which has led to an improvement in some of the housing market metrics. In the shorter-term outlook, a simple quick-and-dirty metric of initial jobless claims (new 49 year lows) and the stock market (just made new all-time highs) suggests all clear. But there are contrary signs as well. For example, the weekly measure of temporary jobs by the American Staffing Association just fell to -1.8%, its worst YoY comparison since the 2015-16 shallow industrial recession.

Here’s one other little tidbit. Yesterday I read an article elsewhere about how a near-term recession isn’t in the cards, citing among other things a declining delinquency rate for commercial and industrial loans. Here’s their accompanying graph:

True enough, although if you look carefully, in the lead up to both the 1990 and 2008 recessions there were only two quarters of significant increases off the bottom before the recessions began. Since the latest data in the graph is for Q4 2018, a similar pattern wouldn’t rule out a recession beginning as soon as Q3 of this year, i.e., July.

 

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How increasing local oligopolization has distorted the housing market

How increasing local oligopolization has distorted the housing market

Earlier this week new home sales for March were reported, soaring to a new expansion high bar one month (November 2017). Something else that a few other writers picked up on: the median *prices* for new homes fell to a level not seen in the past two years, off -11.8% from their peak, also in November 2017:

With mortgage rates also down at approximately where they were in January 2018, the carrying cost of a new house has declined by over 10% overall, enticing lots of new potential buyers into the market.

All well and good. But my reaction went a little beyond that: “Holy crap! Builders can slash their prices by almost. 12% and still make a profit?!?” 

 

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