Category: Economy

The Overs Win

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The US economy U.S. added 850,000 jobs in June, well over the consensus estimate of  706,000.

One fly in the ointment though, long term unemployment numbers continued to rise:

The U.S. labor market recovery is accelerating after a spring lull.

Employers added 850,000 jobs in June—the biggest gain in 10 months—and workers’ wages rose briskly, the government said Friday, both signs of robust demand for workers.

The unemployment rate, derived from a separate survey of households, rose to 5.9% last month from 5.8% in May. That was in part because of a positive development: A modest number of Americans came off the sidelines and entered the job search, expanding the labor pool. A broader measure of unemployment that takes into account workers stuck in part-time jobs and those too discouraged to look for work fell sharply last month.

Job growth lagged behind broader economic growth earlier this spring, with the economy adding 583,000 jobs in May and 269,000 in April. But big hurdles to hiring are starting to clear away. Rising vaccination rates, easing government restrictions on businesses and the expiration of unemployment benefits in many states are stoking the latest growth.

That last phrase is a bit of editorializing by the writer.  There is still no evidence that extended unemployment benefits are keeping people off of the job markets, but it’s dogma at places like the WSJ.

We are still not over the hump.

Initial Jobless Claims Went Up

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Initial Unemployment Claims rose by 37,000 to 412,000, though the 4-week moving average continued its downward trajectory:

Worker filings for initial unemployment benefits rose last week for the first time since late April but remained near a pandemic low as the labor market continues to heal from the impact of Covid-19.

Initial jobless claims rose by 37,000 to 412,000 in the week ended June 12. Despite the increase, the four-week moving average, which smooths out week-to-week volatility, reached a new pandemic low of 395,000. This was the lowest average level since March 2020, when the pandemic first took hold in the U.S. 

………

Thursday’s claims report also showed unemployment rolls shrank late last month. The number of ongoing benefit claims—a proxy for those receiving payments—fell by more than 500,000 to 14.8 million the week ended May 29. That includes those tapping benefits through pandemic-specific programs introduced last year, including those for self-employed workers.

I wonder how much all the news about ‘Phant governors terminating benefits might be behind the drop in ongoing claims.

The stimulus from extended employment benefits are tapering off, and this will adversely effect the recovery.

The only question is how much this will effect the recovery.

It’s Jobless Thursday!

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Initial unemployment claims fell from fell to 376,000 from 385,000 last week, which is obviously good news, but year over year inflation jumped to 5%, which means the the usual suspects are going to start screaming for austerity.

As always, I’ll note that with 20+ states rolling back unemployment benefits, stimulus is going away sooner rather than later in those states, and in all 50 states at the end of September, so I will expect back-sliding when that happens.

As to the inflation, the core rate, which excludes food and energy is a lower at 3.8%, and it is dominated by a spike in used car prices, which are in turn driven by a massive shortage of new cars, which is in turn driven by an even more massive shortage of computer chips that go into new cars.

It’s a recovery, and inflation will spike, and quite honestly, with wages going up for people at the bottom end of the scale, it’s a good thing.

I’m waiting for the “Very Serious People” to try to start to screwing things up.

Moron

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I’m not a big fan of the people that Barack Obama appointed when he was President, Timothy “Eddie Haskell” Geithner particularly comes to mind, but generally they were light-years ahead of anyone that Trump appointed.

There is one exception though, and it’s a big one, because Jerome Powell, who Donald Trump appointed as Chairman of the Federal Reserve to replace Janet Yellen, is immeasurably better than the now Treasury Secretary.

Much as she did as Fed Chair, Secretary Yellen is reacting to non-existent inflation, and calling for rate hikes.

Powell, the first non-economist Fed Chair in Decades, gets it in a way that economists don’t: 

Starting in 2018, President Trump harangued and hammered Fed Chair Jerome Powell to end Quantitative Tightening and to cut interest rates, and Powell buckled and did his infamous “180.” And now suddenly – unless this gets walked backed again tomorrow – we’ve got the opposite. Treasury Secretary Janet Yellen said in an interview with Bloomberg News on Sunday that higher interest rates would “actually be a plus for society’s point of view and the Fed’s point of view.”

Under Fed Chair Yellen, the Fed hiked interest rates five times, starting in December 2015. Yellen departed in February 2018 as Trump had refused to reappoint her, and instead replaced her with Powell. At the time, the sixth rate-hike was already baked in for the March 2018 meeting. She is no stranger to rate hikes.

Now Yellen – presumably with the backing of President Biden – is supporting Powell on rate hikes, which is a dramatic shift from the prior administration.

I will reiterate something that I have said many times, “If you have a problem, the conventional wisdom is ALWAYS wrong, because if it were right, the problem would already have been fixed.”

Janet Yellen is relentlessly conventional, which means that she is relentlessly wrong.

And the Unders Win

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Job growth in May was less than the consensus forecast, 559,000 as versus the consensus prediction of 671,000.

We are in a recovery, one just wonders how fast, and when the benefits will start accruing to the top 1% again.

I would note that the progress of the recovery illustrates an important point:  A world wide pandemic is less capable of doing lasting damage to our society than does business of usual in global finance:

U.S. employers boosted hiring in May, but not enough for the labor market to keep pace with an overall economy that is heating up as the pandemic continues to ease.

Payrolls grew by 559,000 last month, the Labor Department reported Friday, up from a revised 278,000 in April, which marked a sharp drop from March’s figure. The unemployment rate fell to 5.8% in May from 6.1% the prior month.

While the gains marked an uptick from April, they were lower than economists predicted and reflected businesses struggling to fill job openings as potential workers remained on the sidelines. The labor recovery has slowed from earlier in the year—in March, the economy added 785,000 jobs—a development economists say could delay a full labor recovery to well into next year.

That mixed picture cheered investors, who bet the numbers weren’t strong enough to change the Federal Reserve’s course on its easy-money policies. U.S. stocks rose, while the yield on the U.S. 10-year Treasury fell.

Why yes, the stock market is COMPLETELY disconnected from the well being of society, why are you asking? 

We need to stop coddling Wall Street at the expense of Main Street.

One Study, but Not a Surprise

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The San Francisco Fed has issued a report that the labor market is throwing out thoroughly conflicting signs, which means that the current main employment numbers may be overstating the recovery:

U.S. labor market signals are conflicting to an “unprecedented” degree, but those suggesting labor market slack should be given more weight than those pointing to tightness, according a paper published Monday by the San Francisco Federal Reserve Bank.

The paper looked at 26 labor market measures that typically move in tandem and found that during the current recovery they are giving wildly divergent signals about the health of the job market.

The job openings rate, for instance, suggests the job market is much tighter than the unemployment rate; the labor force participation rate points to much more slack than detected in the unemployment rate.

Because the pandemic has forced so many people out of the workforce, “negative signals such as the low labor force participation rate provide a better read than do the positive signals,” the researchers argued. “Overall, our findings reveal that the labor market situation is worse than some headline numbers suggest.”

That’s what my gut says as well, but my gut does not routinely access finer granularity employment and economic data.

Another Improvement in Initial Jobless Claims

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Initial claims have fallen to a new post pandemic low of 406,000.

Better news, but not exactly good news until the number falls below 300K:

Worker filings for jobless benefits fell again to a fresh pandemic low, extending a steady downward trend and adding to signs of a healing labor market and a broader, though uneven, economic recovery.

Initial unemployment claims for regular state programs, a proxy for layoffs, fell last week to 406,000 from 444,000 the prior week, the Labor Department said Thursday. That level represents the lowest levels of claims since the coronavirus pandemic’s onset last year and the fourth consecutive week claims have reached a new pandemic low. Economists surveyed by The Wall Street Journal had forecast there were 425,000 new claims last week.

A separate report from the Commerce Department showed orders for cars, appliances and other long-lasting, or “durable,” goods fell a seasonally adjusted 1.3% in April from March—the first monthly decline in demand for such products in a year. The decline was concentrated in the automotive sector, where a semiconductor shortage has caused disruptions, and the defense industry, which tends to be very volatile. Shipments of motor vehicles and parts fell sharply as well, while shipments of defense capital goods rose.

………

U.S. gross domestic product, a broad measure of the economy’s output of goods and services, rose in the first quarter at an annual rate of 6.4%, unrevised from the initial estimate, according to another Commerce Department report. Consumer spending, the economy’s key driver, was revised up to an annual rate of 11.3% in the first three months of the year.

It’s clear that the first quarter numbers, while quite good, are not sustainable.  It’s a rebound from the economic contraction of the past year.

I would expect GDP growth numbers to return to trend, around 2½%.

Our Government Needs to Stop Hiring Psychopaths

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The Biden Administration has announced that it will be appointing Richard Nephew as assistant envoy to Iran.

He’s kind of a classic foreign policy sadist, particularly as he is a former Obama Administration sanctions expert, but he’s written a book where he brags about hurting ordinary citizens through the sanctions that he devised.

Colloquially, it’s called saying the quiet part out loud. Legally, it’s called a crime against humanity:

The Joseph Biden administration has named Richard Nephew as its deputy Iran envoy. As the former principal deputy coordinator of sanctions policy for Barack Obama’s State Department, Nephew took personal credit for depriving Iranians of food, sabotaging their automobile industry, and driving up unemployment rates.

Nephew has described the destruction of Iran’s economy as “a tremendous success,” and lamented during a visit to Russia that food was still plentiful in the country’s capital despite mounting US sanctions.

Nephew’s appointment to a senior diplomatic post suggests that rather than immediately returning to the JCPOA nuclear deal, the Biden administration will finesse sanctions illegally imposed by Trump to pressure Iran into an onerous, reworked agreement that Tehran is unlikely to join.

Doubling down on bad policy and ignoring agreements that have been signed because ……… American Exceptionalism.  Great policy there.

You see, he wrote a book:

………

Entitled “The Art of Sanctions: A View From The Field,” the book’s cover image features two Caucasian hands drawing a rope for a noose, presumably to strangle some insufficiently pliant Global South government. Its contents read like a list of criminal confessions, detailing in chillingly clinical terms how the sanctions Nephew conceived from inside an air-conditioned office in Washington immiserated average Iranians.

With his candor, Nephew has shattered the official US rhetoric about “targeted sanctions” that exclusively punish “bad actors” and their business cronies while leaving civilian populations unharmed.

………

Nephew also patted himself on the back for tripling the price of chicken “during important Iranian holiday periods,” thereby “contribut[ing] to more popular frustration in one bank shot than years of financial restrictions.”

Next, he boasted of more sanctions targeting civilians to prevent Iranians from obtaining the assistance they needed to repair their cars. “Iran’s manufacturing jobs and export revenue were the targets of this sanction,” Nephew wrote.

………

In response to online criticism, Nephew has claimed that “the main target” of the sanctions regime he designed was “the oligarchs.” But his book on “The Art of Sanctions” tells another story.

Nephew fondly recalls how he structured sanctions to sabotage Iranian economic reforms that would have improved the purchasing power of average people. The Obama administration destroyed the economic prospects of Iran’s working-class majority while ensuring that “only the wealthy or those in positions of power could take advantage of Iran’s continued connectedness,” he wrote. As “stories began to emerge from Iran of intensified income inequality and inflation,” Nephew pronounced another success.

Rather unsurprisingly, the government of Venezuela has submitted Nephew’s books and articles as evidence of war crimes to the ICC

Yesterday, we officially submitted before the International Criminal Court the book “The Art of Sanctions” and the article “Evaluating the Trump Administration’s Approach to Sanctions: Venezuela”, both by @RichardMNephew, advisor to Obama and Biden for the imposition of sanctions pic.twitter.com/lW9d3V4bRW

— Jorge Arreaza M (@jaarreaza) May 18, 2021

Richard Nephew’s books and articles are also evidence that he is too stupid, and too criminal, to hold a security clearance, much less hold a senior position in the any Presidential administration.

Now I Understand the Full Court Press against AMLO

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There has been a steady drum beat of accusations against Mexican President Andrés Manuel López Obrador, in places like the New York Times.

My assumption is that AMLO is taking actions that generally favors the “Have Nots” over the “Haves”, and this is why we see alarm from the usual suspects.

I haven’t followed this closely, but his recent decision to replace the Bank of Mexico governor with one who favors people over finance is a very good indicator of where he intends to go:

President López Obrador said Friday that he will replace the current central bank governor with an economist who supports a “moral economy” — an economy in which the well-being of everyone is prioritized over the wealth of the few.

Speaking at his regular news conference, López Obrador said he won’t nominate current Bank of México Governor Alejandro Díaz de León for a second term after it concludes at the end of November.

López Obrador, a fierce critic of the neoliberal economic policies he says were implemented by successive governments during the 36 years preceding his arrival in the National Palace, said he would instead nominate an economist with “a lot of prestige” who is better attuned to Mexico’s social needs.

It’s Jobless Thursday

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Last week, initial unemployment claims fell to 444,000, down 34,000 from last week.

Once again, it’s an improvement, but with the rush of the stupid states to roll back unemployment benefits, I expect the pace of improvement slow down in those states: 

The number of workers seeking and receiving unemployment benefits through state and federal programs has reached pandemic lows ahead of this summer, when 22 states plan to end a $300 federal benefit early.

Initial unemployment claims through regular state programs dropped to 444,000 last week, marking a new low level since the pandemic hit in mid-March 2020.

The number of people claiming benefits through state and pandemic-related programs also declined in the week ended May 1 to a pandemic low of 16 million people from 16.9 million a week earlier, the Labor Department said on Thursday. That includes benefits through one of several programs, including regular state aid and federal emergency programs put in place in response to the pandemic.

………

Though jobless claims are on a downward trend, April’s job gain of 266,000 fell far short of the one million economists had forecast, fueling concerns about the recovery. Republicans also are concerned that enhanced federal unemployment payments are discouraging people from seeking work.

The low job creation numbers are a fly in the ointment.

States have announced dates ranging from mid-June to mid-July for when they will stop processing pandemic-related benefits. That means nearly 3.7 million individuals could lose the $300 weekly benefits—which were set to expire in early September—beginning in mid-June, according to estimates by forecasting firm Oxford Economics.

Of those, about 1.45 million will also lose pandemic benefits for gig work, and about 1.31 million will no longer have access to extended benefits that kick in after claimants exhaust their regular state benefits.

This is the whole Brood X Cicada emergence in the ointment.

This recovery is driven by government spending, and because they fetishize being cruel, they are knocking the pins out from underneath the recovery.

Sadism as policy is never a good thing.

I Slept Through This

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For about the 5th or 6th time since I started blogging in 2007, I did not blog.I was completely wiped than evening.

So I missed commenting on Thursday’s initial unemployment claims report, which hit another pandemic low.

Jobless claims continued a several-week slide to new pandemic lows, in a sign hiring is primed to strengthen as workers return to the labor market.

Worker applications for unemployment benefits fell to 473,000 last week from a revised 507,000 a week earlier, the Labor Department said Thursday. Claims remain above pre-pandemic levels but are now at the lowest point since mid-March 2020, when the pandemic shut down the economy and triggered widespread joblessness.

The four-week moving average, which smooths out volatility in the weekly numbers, also reached a new pandemic low of 534,000.

………

Higher vaccination rates, fiscal stimulus and easing business restrictions are converging to support stronger spending across the U.S. But job growth isn’t keeping pace. U.S. employers added a modest 266,000 jobs in April, far short of the one million that economists had forecast and the weakest monthly gain since January.

Many employers say they can’t find enough workers to meet surging demand, in turn limiting production. Economists cite several factors keeping workers on the sidelines, including individuals’ fear of contracting Covid-19, child-care burdens from school closures, and expanded unemployment benefits.

Though benefits applications are on a downward trend, the number of people claiming benefits each week through regular state programs remains elevated. So-called continuing claims have stagnated between 3.6 million and 4 million since March.

I think that a recovery is underway, the questions are whether it will involve the rest of us, as the 2009 recovery did not, whether we are opening up too soon, and whether new variants of Covid-19 will take us back to lock-down.

Not this Sh%$ Again!

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The stupid people in economics have been bleating about inflation since, well, forever, and last month’s CIP numbers will only elicit more wankerhood from the pundits:

US consumer prices soared in April as post-lockdown demand and shortages drove up the cost of a wide range of goods, from used cars and home furnishings to airline tickets.

The news triggered a further slide in markets unsettled this week by the threat of rising prices, which could force central banks to abandon zero0-interest rate policies that have helped stoke share prices. The Dow Jones index fell 1.3% in early trading and the tech-heavy Nasdaq lost 2.5%.

The Consumer Price Index (CPI) climbed 4.2% during the month from a year earlier, the labor department said, the biggest 12-month increase since September 2008, the height of the financial crisis. The figure was significantly higher than economists had predicted.

CPI measures the prices consumers pay for goods and services, including clothes, groceries, restaurant meals, recreational activities and vehicles. This month’s rise saw increases across the board and was driven by many factors.

The Biden administration’s economic stimulus package has pumped money into the economy just as it reopens from coronavirus lockdown measures. Fresh demand for goods and services has also outpaced supply, which is still recovering from the lockdowns at the start of the pandemic, leading to shortages for a broad range of goods from lumber and steel to ketchup.

Speaking of wankers, the Sultan of Schmuck, the Patron of Pissants, the Don of Dickheads, the ……… Never mind, enough alliteration, Lawrence “Larry” Summers has weighted in:

Others are more concerned. Former treasury secretary Larry Summers has warned the US could face a period of high inflation unseen since the 1970s. Talking to Bloomberg TV he said it was “plain wrong” to suggest that inflation cannot surge unexpectedly.

“It may be that a way will be found to bring it under control,” he said. “But as I look at $3tn of stimulus, $2tn of savings overhang, a major acceleration coming from Covid in the rear-view mirror, rates expected by the Federal Reserve to be at zero for three years even in a booming economy, record growth this year, major expansion of the Fed balance sheet, and much new fiscal stimulus to come – I’m worried.”

It’s nice that you are worried, Larry, but you have been wrong about everything since  ……… Well ……… Forever, so how about a nice hot cup of shut the f%$# up!

But now we will hear the wankers wanking about inflation for at least 18 months, and they will be on you teevee and your editorial pages.

And, It’s Under Estimates

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The Scariest Jobs Chart Ever

They were expecting a million new jobs in April. They got just 266,000, and the unemployment rate ticked up by 1%.

After some good news yesterday, we got some bad news today:

Hiring in the U.S. unexpectedly slowed in April, a sign the nation’s recovery from the pandemic still faces challenges as many businesses struggle to find workers or remain cautious about the economic outlook.

U.S. employers added a modest 266,000 jobs in April, a report Friday by the Labor Department showed, far short of the one million that economists had forecast and the weakest monthly gain since January. The deceleration came after payrolls rose a downwardly revised 770,000 in March and left total employment down by 8.2 million from its pre-pandemic level.

The unemployment rate ticked up to 6.1% in April from 6% a month earlier, partially reflecting an increase in people entering the workforce.

………

Signs of labor-market tightness also emerged in Friday’s report, aligning with many companies’ complaints that they can’t find workers to meet demand. Wages for workers rose in April as some employers appeared to lift pay to attract or retain employees. Average hourly earnings for private-sector employees rose by 21 cents to $30.17 in April. The gain is notable because strong hiring in the lower-wage hospitality sector—which occurred in April—would typically put downward pressure on average earnings.

Given that the hospitality sector is one of the most dangerous sectors from a Covid perspective, people are simply no longer willing to die for minimum wage, and this is a good thing. ™

The average workweek increased to 35 hours in April, an indication some employers added worker hours to compensate for the lack of labor.

………

Friday’s report adds to the likelihood that the Federal Reserve’s easy-money policies will remain in place in coming months, something financial markets reflected in price movements on Friday.

………

The leisure and hospitality sector, including restaurants, accounted for the bulk of employment creation in April, adding 331,000 jobs. The Labor Department said that reflected an easing of pandemic-related restrictions in many parts of the country.

Meaning that other sectors of the economy lost 60,000 jobs.   

When you undershoot your prediction by 74%, and the previous month’s jobs report was revised down by 146,000, you are not having a good jobs report.

Under 500,000!

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Initial jobless claims fell below 500,000 last week, the first time that this has happened since the pandemic:

Worker filings for unemployment benefits in the U.S. reached a new low since the Covid-19 pandemic began more than a year ago—the latest sign that the labor-market rebound is gathering force.

Jobless claims, a proxy for layoffs, fell 92,000 last week to 498,000, the Labor Department said Thursday. That brings the four-week average of initial claims, which smooths out volatility in weekly data, to the lowest point since the pandemic took hold, though still well above pre-pandemic levels.

………

While the number of new applications has been declining, the level of Americans receiving unemployment benefits remains elevated and businesses can’t find enough people to hire. 

I will note again, “Unable to find enough people to hire,” means, “Unwilling to pay enough for the job.”

………

This improvement will likely be captured in the Labor Department’s April employment report, which the department will release Friday. Economists forecast that the U.S. economy added one million jobs last month, compared with a gain of 916,000 in March, and project that the jobless rate ticked down to 5.8% from 6% a month earlier.

However, the pandemic’s impact was so severe that economists expect employment to close out this year 1.6% lower than in the fourth quarter of 2019, despite the swift pace of hiring they anticipate in coming months. The number of new jobless claims peaked at more than six million in the spring of 2020. After falling sharply, it then plateaued between 700,000 and 900,000 throughout the fall and winter.

I’ll go with the under, because I always go with the under.

Still, this is undeniably good news.

About that “Labor Shortage”

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Service Workers Aren’t Lazy — They Just Don’t Want to Risk Dying for Minimum Wage

—Jacobin

As I have noted before, “If only there were some sort of proxy for value that we could offer workers. 

We have seen more than a few examples of this: 

As March drew to a close, Klavon’s Ice Cream Parlor in the Strip District found itself without enough workers for the upcoming spring and summer rush, and it certainly did not have enough workers to open the shop to its desired seven days a week schedule.

Then, on March 30, the parlor announced it would more than double the starting wage for the roles, going from $7.25 an hour to $15 an hour, a scoop that seemed to captivate workers throughout the region and one that earned a significant amount of local media coverage.

“It was instant, overnight. We got thousands of applications that poured in,” Maya Johnson, general manager of Klavon’s, said. “It was very overwhelming, very. People were coming in by the next day that it broke on the news, they were coming in, filling out paper applications. I was doing on-the-spot interviews.”

If you cannot find workers, just pay them more, and you will find them.

I See the Problem

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 Look at this graph:

It might not look like much, but it shows how our economy has been taken over  by rent seekers.

IP, which only makes money to the degree that it is subsidized through government action, has increased by a factor of 5.

Even considering the rise in software as a product, it’s clear that an increasing portion of our economy has been diverted to unproductive rent seeking.

It’s a drag on our economy, and contributes to inequality.

Good News on Initial Jobless Claims

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Initial jobless claims have finally fallen below their pre-pandemic record.

Well, that only took 13 months: 

Unemployment claims declined to the lowest level since the coronavirus pandemic struck last spring, adding to signs the U.S. economic revival is picking up speed.

Jobless claims, a proxy for layoffs, fell to 576,000 last week from 769,000 a week earlier. That is the lowest weekly figure since March 2020. Claims remain higher than the pre-pandemic levels of around 220,000, but economists expect they will continue to drop as the recovery accelerates.

“We are seeing both a strong reopening and rehiring in the economy at this time,” said Kathy Bostjancic, economist at Oxford Economics. “It’s been faster than most economists expected.”

Several factors are converging to boost growth across the economy. Vaccination rates are powering consumer spending, governments are relaxing restrictions on businesses, and federal-stimulus funds are flowing through the economy.

………

The total number of people receiving unemployment assistance is declining as the labor market heals. About 16.9 million people were collecting unemployment benefits through state and federal programs in the week ended March 27, down from 18.2 million a week earlier.
More on the Economy

The labor market still has a long way to go before achieving a full recovery. As of March, U.S. payrolls remained 8.4 million below their level in February 2020.

It’s unalloyed good news though the current situation remains pretty dire.