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Weekly Indicators for April 29 – May 3 at Seeking Alpha

by New Deal democrat

Weekly Indicators for April 29 – May 3 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The trend in the past couple of months across all timeframes has been very much to the positive. It is either a signal of a renewed boom, or else a countertrend bounce back from the December-January government shutdown + residual seasonality due to a late Easter. Because I do not think that the tail wags the dog, my vote is for the latter.

But I report, you decide!

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Fiscal Policy and GDP 2019 update

I think it might be time for an update on the crudest of tiny sample reduced form analysis of fiscal policy and the current recovery.

One reason for my continued interest is that there was a rather large tax cut enacted in 2017. Trump critics tend to argue that it failed to encourage investment, but did affect aggregate demand. I wonder if the noticeable increase in GDP growth is due to the tax cut or the spending increase from the 2017 omnibus spending bill.

So I look at GDP and G (government consumption plus investment) again. Both are annual changes in billions of 2012 dollars (Not logs). I subtracted 400 billion from the change in quarterly GDP (multiplied by 4 to give an annual rate). Also I multiplied G by 1.5 which is a common estimate of the multiplier (say by Blanchard and Leigh or Nakamura and Steinsson). Here an effect of the tax cut would appear as an anomaly — an increase in GDP not fit by the change in G times the multiplier (or the $ 400 Billion and year trend).

I do not see an anomaly either when the tax bill passed in 2017 or in 2018 when tax witholding changed. As I mentioned back in 2014 I don’t see an anomaly in either growth or government consumption plus investment when sequestration started in 2013 q1. The anomalies are high growth from 2014 q 1 to 2015 q 1 then low growth from 2015 q1 and q2 to 2016 q1 and q2, that is a level anomaly at a time when there weren’t policy shifts.

I notice again that theory and data both suggest that changes in G are more important than changes in taxes. Nonetheless the practice is to measure the fiscal stance with the full employment budget deficit, that is, to assume that the balanced budget multiplier is zero.

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April jobs report: great headlines, signs of fraying around the edges

April jobs report: great headlines, signs of fraying around the edges


  • +263,000 jobs added
  • U3 unemployment rate declined -0.2% to 3.6% (new expansion low)
  • U6 underemployment rate unchanged at 7.3%

Leading employment indicators of a slowdown or recession

I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were strongly positive on a m/m basis, but several showed deceleration YoY.

  • the average manufacturing workweek was unchanged at 40.7 hours. This is one of the 10 components of the LEI. It is down -0.6 hours from its peak during this expansion.
  • Manufacturing jobs rose by 4,000. YoY manufacturing is up 204,000, a big deceleration from last summer’s pace.
  • construction jobs rose by 33,000. YoY construction jobs are up 256,000, also a big deceleration from last summer. Residential construction jobs, which are even more leading, however, actually declined by -2500, a signal that the housing slowdown from last year has finally bled through into jobs.
  • temporary jobs rose strongly by 17,900. YoY these are up +53,500.
  • the number of people unemployed for 5 weeks or less declined by -222,000 from 2,126,000 to 1,904,000.  This is a new post-recession low.

Wages and participation rates

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Senate Democratic Jackasses and Elmer Fudd

The Blue Dogs suddenly have remorse over supporting the nomination of what’s-his-name . . . Elmer Fudd or was it William Barr?

Sen. Doug Jones (D-Ala.) The most vulnerable Democratic Senator up for reelection next year, said he is “’greatly, greatly’ disappointed in what I am seeing in the attorney general.” While Barr did follow through on releasing a redacted version of the Mueller report and did not quash the investigation, Jones now has much deeper concerns.

“I thought he would bring this institutional stability to the Department of Justice — and not be the president’s personal lawyer. And he seems like he is moving and has moved toward a less independent role. That bothers me for the 12 remaining investigations out there.”

He is a Republican and for Republicans it is party over country blinkity, blink you frickin hmmmm fool.

Does he regret his vote? “I’m getting close to that. I haven’t said that yet. But it sure is so disappointing. I’m getting close. You might want to check tomorrow”

So disappointing Senator Jones . . .

Sen. Joe Manchin (D-W.Va.) “Absolutely, I have buyer’s remorse. I would have made a big mistake.” In retrospect, Democratic mannequin Manchin may think he will lean on Senate Judiciary Chairman Lindsey Graham (R-S.C.) to bring Mueller in for a hearing even though Graham has said he has no plans to do so.

Do not hold your breathe Manchin. Graham is not going to do squat and as a result you will walk. Another faux Democrat . .

“It’s troubling, absolutely. The difference between the interpretation between what Mueller really meant and what he intended. And he thought he didn’t present it properly. And Barr said he basically did represent properly,

“We’ve got to get that cleared up. And I would encourage my friend Lindsey Graham to bring Mueller in as quickly as possible.”

Graham is a wuss and afraid of Trump.

Sen. Kyrsten Sinema of Arizona, Senator Sinema has requested a meeting with Barr about the discrepancies between his view of the special counsel’s report and Mueller’s. She is new. One can only hope. Maybe she can show the other two how this is done.

Barr was only the man who blessed the Contra-Affair as the AG for Bush I.

“In August 1992, Safire wrote about Barr’s refusal to appoint an independent counsel to investigate what he (Safire) called Iraqgate – the shadowy diversion of funds that Saddam Hussein used to build up his military after the Iran-Iraq War. It is now a nearly forgotten chapter of history, but Safire lasered in on what he thought was ‘the Bush Administration’s fraudulent use of public funds, its sustained deception of Congress and its obstruction of justice.’”

U.S. Attorney General William Barr, in rejecting the House Judiciary Committee’s call for a prosecutor not beholden to the Bush Administration to investigate the crimes of Iraqgate, has taken personal charge of the cover-up.

The document that will be Exhibit A in a future prosecution of obstruction of justice is an unsigned 97-page apologia that accompanied Mr. Barr’s unprecedented refusal to recognize a “political conflict of interest,” as called for in the law.

Read it for yourself; though intended to explain in detail why Congress does not understand the intent of Congress, Barr’s Apology does the opposite: its strained defensiveness will cause any objective reader to say “something smells fishy here.”

Safire: “Barr’s clear strategy has been to stall past Dec. 15, when the law authorizing independent counsel expires; Republicans recently filibustered its extension to death.” Whoever won the 1992 election, “no autonomous prosecutor could then be named; Iraqgate might then become a matter between departing and incoming Presidents, and bygones could be bygones, and that is pretty much what happened.”

Continuing Barr had one more misadventure left. He was one of the driving forces behind what Safire called the “Christmas eve massacre” of the Iran-contra probe. Barr pushed hard for last minute pardons for six individuals caught up in the investigation which included former defense Secretary Caspar Weinberger. The dramatic move on December 24, 1992, aborted Weinberger’s trial, which was slated to begin the next month, “virtually decapitating what was left of Mr. Walsh’s effort, which began in 1986.”

Walsh denounced the pardons as part of the cover-up that “has continued for more than six years.” The decision to issue pardons, he said, “undermines the principle that no man is above the law. It demonstrates that powerful people with powerful allies can commit serious crimes in high office, deliberately abusing the public trust without consequences.”

Barr is going down the same road. Thank you Blue Dogs.

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Construction spending, manufacturing, and temp jobs all decelerate further or decline

Construction spending, manufacturing, and temp jobs all decelerate further or decline

On Sunday I said, “Construction spending … should follow housing permits and starts with a delay of several months. But, oddly, even though starts in particular have continued to languish, spending has come back strongly since last November. I’ll be looking to see if that anomaly continues, or whether construction spending reverts to its historical pattern.” I also wrote that “The Fed regional indexes have turned up in the last couple of months, so I am expecting [ISM manufacturing] to improve as well.”

Let’s take these in turn.

That anomalous increase in residential construction spending since last November got almost entirely erased in revisions, and it declined another -1.8% in March (blue in the graph below, compared with residential construction employment, red):

On a YoY basis, whenever residential construction spending has been this negative, residential construction employment has also declined:


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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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