Category: Economic Policy

Saturday Soother – November 20, 2021

The Daily Escape:

Floyd Lamb Park, Las Vegas NY- November 2021 photo by Marcia Steen

The biggest, baddest news of the week was that Kyle Rittenhouse was found innocent on all charges in the Kenosha murders.

As bad as that is, there’s some good news to start the weekend. First, the House succeeded on Friday in their months-long quest to pass Biden’s social spending bill. It still faces a serious challenge in the Senate before it can become law.

Second, the Organization for Economic Co-operation and Development (OECD) reported that the US is the only G7 country to surpass its pre-pandemic economic growth. Employment is up. Wages are up. Goldman Sachs predicts by the end of next year the US unemployment rate will drop to a 50-year low, thanks to continuing red-hot demand for workers. Retail sales surged 1.7% in the month of October. American consumers spent $638 billion in October, a 16% increase from last year.

Meanwhile, slowly but surely, the supply chain bottlenecks that have plagued our economy for over a year appear to be easing. Imports through the ports of Los Angeles and Long Beach are up 16% from 2018, and in the first two weeks of November, those two ports cleared about a third of the containers sitting on their docks.

The Baltic Dry Index (BDI), a measure of global shipping rates and an inflation indicator, has plummeted 50% since peaking Oct. 7, another good sign for consumers. And the global chip shortage that was crippling the auto industry? GM said that the week of Nov. 1 was the first time since February that none of its North American assembly plants were offline due to a lack of chips.

All of this good news is going to waste because of the media’s hot takes on how bad Biden is doing. From Eric Boehlert:

“For weeks this fall, the Beltway press joined forces with the GOP to tell a hysterical tale about the state of the US economy. It was an alternate version of reality, where the stagnant, faltering economy was being driven to the precipice by runaway inflation, which stood poised to demolish middle-class savings across the board. All while an ineffective president stood by and watched cash-strapped households suffer.”

Boehlert says that recent press coverage suggests the economy is an albatross around Biden’s political neck, while in reality, it’s booming.

Biden got elected to bring a return to normalcy. Since there’s no normalcy in sight, his poll numbers (along with Democrats generally) have plummeted. David Brooks in the NYT addresses Joe Biden’s efforts at meeting the needs of people in “left behind” places of the country that did not vote for him: (parenthesis by Wrongo)

“If (noted economist) Larry Summers thinks lifting wages at the bottom will cause inflation…so be it. The trade-off is worth it to prevent a national rupture.”

Democrats have to get beyond the victory laps when they pass a bill, and let America know what the bills are for. Propaganda is a tool that shouldn’t be used to yammer on about defunding the police. Here’s Wrongo’s list of what Dems should say they’re for:

  • The Bill of Rights
  • One person, one vote
  • A world-class ideology-free education for all American kids
  • Jobs for more Americans
  • Universal health insurance
  • No more foreign interventions
  • More police funding and more police accountability
  • Reduce carbon emissions
  • Zero potholes

That last one is facetious, but it’s political gold in Wrongo’s town, and is funded in the recent infrastructure bill.

The Democrats’ gamble is whether their efforts and their successes will be rewarded politically less than a year from now, in November 2022. Remember that despite what the pundits say, passing the items on Biden’s platform shouldn’t be primarily to woo swing voters. They’re to shore up enthusiasm among your base, something that Dems didn’t have in the recent elections in Virginia and New Jersey.

Right now, things look grim. If you let your mind wander to what might happen if there’s a Republican House and Senate in January 2023, you should be happy not sad, that the Dems aren’t repealing the filibuster.

Let’s take a break and try for some normalcy in our weekend. Wrongo recommends that you start by not watching the Sunday pundit shows. Here on the fields of Wrong, we’re still engaging in our fall clean-up, trying to take advantage of the few warmer days to work outside. Also, there’s some menu planning for Thanksgiving underway.

So, settle into your Saturday Soother, where we leave the chaos behind for a few moments. Let’s start by grabbing a chair near a large window, and listening to the Prague Cello Quartet play an atmospheric version of the theme from “The Phantom of the Opera”:

Facebooklinkedinrss

Increased Demand is Causing Price Inflation

The Daily Escape:

Pueblo Bonito, Chaco Canyon, NM – November 2021 photo by James C. Wilson. It’s difficult to hire stone masons this good today.

 “If Americans are feeling glum, they sure are engaging in some retail therapy.”— WSJ’s “Heard on the Street” columnist Justin Lahart

We’re in a period of unclear signals. Every poll says that Americans believe inflation is high and the economy is bad. But unemployment is low, GDP growth is high, and people are buying things like crazy:

“The Commerce Department…reported that sales at stores, restaurants and online rose 1.7% in October from a month earlier, better than the 1.5% economists expected. Additionally, estimates of August and September retail sales were revised upwards. Sales were broadly higher across most categories, with gains at department stores, electronics and appliance stores and online retailers in particular…”

This led economists to revise their fourth-quarter GDP estimates higher. JPMorgan Chase now forecasts GDP will grow at a 5% annual rate in the fourth quarter, versus its previous 4% estimate. The news wasn’t all terrific, as restaurant and bar sales were flat in October versus a month earlier. That might be an indication of cooler weather keeping diners at home as outdoor seating arrangements became less comfortable.

Overall, this dynamic growth in retail sales stands in contrast to the University of Michigan’s consumer sentiment survey that fell in early November to its lowest level in a decade.

How to explain what’s going on? People have some savings. Some people have higher wages, and both seem to be having a greater influence on how much people are willing to spend than price increases are having on how they feel about Biden’s job performance.

Claudia Sahm argues that some of the savings are due to government checks, and it was worth it:

“2021 began with economists arguing about $1,400 stimulus checks. Americans got them, but they got higher inflation too. Even so, the checks were very good policy.”

She compares the government’s reaction in the Covid crisis to their reaction during the Great Recession. This time, Congress went big:

“In 2008, Congress enacted one round of stimulus checks, totaling about $110 billion. During the first year of Covid, it sent out three rounds at close to $1 trillion dollars. A family of four got $11,400, which is about 20% of median family income.”

Here’s a chart showing the difference between the two policy approaches. Sahm plotted the value of the payments against the trend of personal income during both recessions:

The three rounds of stimulus checks provided relief to the families whose lives Covid disrupted and it helped bolster the economic recovery by creating jobs. The Covid relief paid the bills. Stimulus helped bring back paychecks.

Most people spend most of the money they make. With smaller take-home money during the crisis, many Americans made a dramatic cut in their spending. And big cutbacks in spending in an economy driven by consumers, led to big layoffs. So, the policy decision to put money in people’s bank accounts was key to keeping the Covid recession as short-lived as possible.

Clearly, the fast recovery came with a cost. Inflation is higher today than it has been in 31 years. But don’t let the inflation doom-sayers fool you: consumer spending, even after taking inflation into account, has been increasing even as millions are out of work.

New Deal Democrat shows us that total activity through the big Southern California ports is breaking records, and yet as we know, they still can’t keep up with the increased import demand:

Despite increased container handling capacity, this explains a great part of the current supply chain bottleneck since the global supply chain is incapable of handling a sudden jump in consumer demand. It partially explains why goods shortages and price pressures have mounted. That, in turn, is pushing up prices. The NYT quoted Aneta Markowska, chief financial economist for Jefferies, an investment bank:

“It’s the demand in the first place that’s causing prices to move higher…There is a supply shortage, but it’s not because of bottlenecks. It’s because we’ve had this big shock to aggregate demand and supply can’t respond quickly enough.”

There are still plenty of logistics bottlenecks. Yes, we’re buying much more stuff, and paying more for it. But households were sitting on a collective $2.5 trillion in savings built up during the pandemic. And millions of jobs have come back, so spend they will.

The Covid recession was a sharp and steep one, the deepest since the Great Depression. But the speed of recovery has been very fast, due in large part to the policy decision to put checks in people’s pockets.

This time, government worked for us.

Let’s have a Thursday tune. Everyone has heard 1981’s “Under Pressure” a masterpiece by Queen and David Bowie. It was covered by Fall Out Boy as part of ABC’s Queen Family Singalong on Nov 4. Lead vocalist Patrick Stump tries to sound like both Freddie Mercury and Bowie. Read the words and you’ll understand why Wrongo offers it today:

Facebooklinkedinrss

Can Biden Whip Inflation?

The Daily Escape:

Lone Rock, Lake Powell – November 11, 2021 photo by Ron Broad. This shows how dramatic the loss of water has been in the lake. One commenter said it was possible to boat completely around the Rock in July 2021!

The country is facing a series of problems that, if unresolved, point towards a bloodbath for Democrats in the 2022 mid-term election. An ABC poll, released this weekend should be a wake-up call. Here’s a chart showing early mid-term voting preferences by Party:

On a generic ballot, it shows that the Democrats and Republicans have swapped places since 2017. Today the Dems are supported by just 41% of those surveyed, down from 51% in 2017.

It’s true that relying on polls conducted of just 882 registered voters via landlines, as this poll was, isn’t the only thing Democrats should build their political strategy on. But ABC’s result is similar to others.

People are frustrated with the economy, because they see how everything is getting much more expensive, and they’re blaming the government and politicians. They’re not blaming the Federal Reserve’s expansive policies, because the polls never ask about the Fed, and because most people don’t understand how it works.

Consider this: 62% said the Democrats were out of touch with the concerns of most Americans. One dimly positive note was that Americans didn’t rate Republicans much better, with 58% considering them out of touch. The economy was among the key factors: 70% said the economy is in bad shape, up from 58% in the spring. About half blamed Biden for inflation. And his approval rating of handling the economy plunged to 39%, with 55% disapproving.

Biden doesn’t control prices, but try telling that to consumers. People who make a living by selling their labor have seen recent wage increases get eaten up by higher rents, home prices, food prices, gasoline prices and higher new and used-vehicle prices.

But you can always find an economist or a political writer who minimizes an impending political problem. That’s the kind of thing that Wrongo said yesterday was a bad strategy for Democrats. Here’s Dean Baker: (emphasis by Wrongo)

“The October Consumer Price Index data has gotten the inflation hawks into a frenzy. And, there is no doubt it is bad news. The overall index was up 0.9% in the month, while the core index, which excludes food and energy, rose by 0.6%. Over the last year, they are up 6.2% and 4.6%, respectively. This eats into purchasing power, leaving people able to buy less with their paychecks or Social Security benefits….While the stretch of high inflation has gone on much longer than many of us anticipated, there are still good reasons for thinking that inflation will slow sharply in the months ahead.”

Needless to say, if inflation continues at rates not seen since the 1970s until the 2022 election, no voter will see it as transitory and that won’t be good for Democrats.

Biden has signed his $1 trillion infrastructure bill, hoping that the legislation will help jump-start a Democratic political recovery. His infrastructure plan may not add to inflation, but inflation in the most important things that consumers either notice and care about – food, gasoline,  cars, and houses – doesn’t seem transient.

Biden has a few tools at his disposal. He’s doing what he should to address the microeconomic aspects of inflation: trying to increase capacity at ports, expanding microchip production and he’s considering a release of raw materials from the National Defense Stockpile. The biggest lever he hasn’t pulled is a tariff reduction, especially on goods from China.

Richard Nixon instituted price controls in 1971, They were the first and only peacetime wage and price controls in US history. After a 90-day freeze, increases would have to be approved by a “Pay Board” and a “Price Commission,” with an eye towards lifting controls, conveniently for Tricky Dick, after the 1972 election. His action led to greater inflation, not something any of us should want to see.

From Jason Furman in the WSJ:

“Ultimately inflation is a macroeconomic problem. It’s the Fed’s job to keep it under control….Policy makers at the Fed need to recognize that tools like asset purchases can’t solve the supply-side problems constraining US labor markets and output. They have a dual mandate. They have to take inflation into account even if the economy isn’t yet at maximum employment.”

Biden can pick a different Fed Chair, and there’s an additional vacant seat on the Fed’s board.

Biden can also be jawboning America’s CEOs about gas and food prices. Otherwise, he has no cards to play. All he can do is wait for supply and demand to turn back toward equilibrium, and hope that it happens in the next six months. If inflation turns around, Biden will get some credit.

If it doesn’t, you could see President Trump waddle back into the White House in 2024.

Facebooklinkedinrss

The Climate Summit

The Daily Escape:

Fall colors near Smugglers Notch, VT – October photo by Montanus Photography

Representatives from 200 countries will meet in Glasgow, Scotland later this week to try once again to iron out an approach to heading off the disaster that will occur as global warming continues.

While this is a political gathering, the real focus should and must be on businesses. They are the primary sources of carbon emissions. And they are very concerned about their future should governments agree to serious efforts to limit global warming to 1.5°-2.0°C.

A real commitment would send shock waves through the business models of all corporations.

Corporations don’t like being forced by governments to do much of anything. With climate change, they prefer to make voluntary gestures, just enough to keep governments off their backs. One problem is that many have become more sophisticated in their soft climate denialism, as opposed to the 87-year old Oklahoma Senator who brought a snowball to the floor of the Senate.

If we’re serious about global warming, governments need to force corporations to pay for the damage they do to the planet. That should take at least two forms.

First, a global carbon tax. For big emitters, this would be an immediate threat to profitability. They will fight carbon taxes with all the weapons at their disposal. Reporters have exposed well-funded misinformation campaigns sponsored by them. More about carbon taxes below.

Second, corporations can’t be allowed to walk away from the pollution they create. Bloomberg reports that old oil and gas sites are a climate menace:

“There are hundreds of thousands of…decrepit oil and gas wells across the US, and for a long time few people paid them much mind. That changed over the past decade as scientists discovered the surprisingly large role they play in the climate crisis. Old wells tend to leak, and raw natural gas consists mostly of methane, which has far more planet-warming power than carbon dioxide.”

Bloomberg focuses on one company, Diversified Energy Co., owner of 69,000 wells throughout the US, making them America’s largest well owner. Diversified has alarmed some regulators and environmental advocates:

“State laws require that every well be plugged with cement after it runs dry, an expensive and complicated chore. At the rate Diversified is paying dividends to shareholders, some worry there will be nothing left when those bills come due. If a company can’t meet its plugging obligations, that burden falls to the state…”

Diversified’s business model is partially built on abandoning its played-out wells. If Diversified is allowed to walk, states are likely to be stuck with a $ billions mess. The only way to deal with this and similar problems is to change our bankruptcy laws so that liability for environmental damage isn’t expunged in bankruptcy. That change will require substantial political courage.

Back to a potential carbon tax: The Economist reports: (brackets and parenthesis by Wrongo)

“Even business[es]…realize that the best way to apply pressure is by imposing a global system of carbon taxes, with some form of redistribution to ease the pain on the poorest….The trouble is that only about one-fifth of global emissions is covered by a price on carbon. As a result, the global average price is just $3 per ton of carbon dioxide.

[But] To meet the ambitions of the Paris agreement, the IMF says the global carbon price needs to rise to $75/ton….For some heavy emitters covered by the European Union’s emissions-trading system, it is already above €60 ($69). In China’s new (limited) scheme, by contrast, it is a pittance. America has no federal (carbon tax) scheme of any kind.”

The first thing governments must do is to go after the big emitters like utilities, oil and gas firms, steel, and cement makers. A high carbon tax will cause price increases and thus force changes in consumer behavior. Tourist locations would see fewer tourists because flights would be more costly. Supermarkets would provide more local foods. Amazon might need to rethink their distribution strategy. Life as we know it for consumers would change, while for big emitters, this would be an “adapt or perish” moment. All the more reason why it won’t happen.

The largest problem will be trying to energize collective governmental action.

Self-interest leads every country to do as little as possible to solve this giant global problem. The only way to move these governments is for their citizens to care enough about the world 50 to 75 years from now. They must be willing to make significant sacrifices today for the sake of the future.

There are 30 US Senators who refuse to acknowledge human-caused climate change. That’s 30% of the Senate. As Greta Thunberg says to those not going to Scotland:

“Hope comes from people, from democracy, from you…It’s up to you and me…No one else will do it for us.”

Thunberg is saying that saving the planet will take better politicians. She’s correct. The necessary changes require a global political movement. That means there’s zero reason to be optimistic about the trajectory of global warming.

And like in our domestic politics, it’s another reason why we shouldn’t have 80-year olds in charge of our future.

Facebooklinkedinrss

Sunday Cartoon Blogging – October 24, 2021

Last Friday, Wrongo and Ms. Right got their Covid booster shots. It’s a sample of one, but at our local drugstore here in a very conservative part of Connecticut, there was a line to get shots. Some were there for their first vaccinations, but most were waiting for a booster. There’s never a line around here for anything, except when the lobster food truck rolls into town.

But sadly, this isn’t the story for the rest of the country, particularly for cops and heath care workers. Some are saying that the vaccine mandates do little. But health workers who don’t really believe in science are leaving the job. And cops who don’t really care about public safety are leaving policing. Sounds like mandates are working just fine. On to cartoons.

Mandates are nothing new:

Most Republicans want boosters:

Texas got two new districts. Then the GOP redrew urban districts so that incumbent minority congresspeople are now running against each other:

One of our two political parties thinks that elections shouldn’t be the basis for choosing our representatives. That means democracy doesn’t matter to them anymore. They say it’s because there’s too much voter fraud, and no one can trust the result of any election now, anywhere.

So, the Dems think the next step is to change the Senate rules, modifying the filibuster. That would pave the way to pass the Protect the Vote Act. But there’s real danger that when the Republicans inevitably regain the majority, they will change that law to whatever the next Trump-like Republican leader wants voting rights to be. Could it be that Republicans are blocking the bill, not just to deny voting rights to minorities, but to lure the Democrats into changing the filibuster?

The economic ship sails on, and 40 years later, there’s zero thought to changing the message:

Biden compromises on the social spending bill. Still, it’s not certain to pass:

If only there was a solution to our supply chain problems:

Facebooklinkedinrss

We’d Better Build Back

The Daily Escape:

Sunset, Herring Cove, Provincetown MA – October 18, 2021, photo by Karen Riddett

“Men must either govern or be governed.”   ̶  Elihu Root, 1912 Nobel Peace Prize Winner

Wrongo has never cared for Biden’s “Build Back Better” slogan. He prefers “We’d Better Build Back.” The focus should be on what could happen if we remain on the track favored by Sens. Manchin and McConnell, along with McConnell’s Republican colleagues.

We’d better build back from the wreckage of the Trump presidency. We’d better build back from the wreckage caused by Congressional inaction for the past 20+ years.

Wrongo is currently reading “Wildland, The Making of America’s Fury” by Evan Osnos, journalist at the New Yorker. Osnos says in the Prologue, (pg. 13) that September 11, 2001, and January 6, 2021, were two cataclysmic events in American history, and that the intervening 20 years was: (emphasis by Wrongo)

“…a period in which Americans lost their vision for the common good, the capacity to see the union as larger than the sum of its parts. A century and a half after the Civil War, America was again a cloven nation. It’s stability was foundering on fundamental tensions over the balance between individual freedom and the protection of others, over the reckoning with injustice, and over a basic test of any political society: Whose life matters?”

Umair Haque makes the importance of building back clear in a way that only someone living abroad can:

“America has the rich world’s lowest quality of life, by a long way — after all, Americans will die 5–10 years younger than Spaniards or Germans, but even that understates the issue. It is uniquely a dismal life: nowhere else do we see opioid epidemics, kids massacring one another at schools, having “active shooter drills…”

Haque points out that the fundamentals of a decent life: A living wage, universal access to healthcare, affordable education and housing, and a secure retirement are no longer within reach for the average American.

That’s why we’d better build back.

Step one is to deal with the threats to democracy. We will soon know if the Democrats can actually rouse themselves from their Republican-lite slumbers to pass the Freedom to Vote Act to help get this done.

Step two is to pass the Build Back Better Act, Biden’s social spending bill. It’s now clear that the bill will need to shrink in order to pass. And like the House and Senate, America doesn’t agree on which of its big-ticket items are most important, but shrinkage is on the agenda.

The bill has remained popular in the polls. One thing that’s clear from public surveys: People want to pay for the bill by taxing the rich.

A Vox and Data for Progress poll, conducted between October 8-12, found that 71% of voters support raising taxes on the wealthiest 2% of Americans to pay for the bill. Eighty-six percent of Democrats and 50% of Republicans back that idea. Other tax provisions that could be included in the bill, like tax increases on corporations and capital gains, were supported by more than 65%. Increasing corporate taxes is Wrongo’s preferred policy approach to raising revenues.

Vitally important to the job of building a better country is the proposed new spending on health care, long-term care, childcare, and clean-energy jobs. These ideas are supported by 63% of voters in the poll.

The wisdom of the framers has given us an unrepresentative Senate. That unrepresentative Senate has given us the filibuster, which can be changed, but apparently not by our current Democratic Senators.

And despite its popularity, Biden’s social spending bill won’t be passed in its present form until Joe Manchin and Krysten Sinema get what they want removed from it. A real question is whether we have moderate Democrats or just mediocre Democrats who are willing to kill democracy as we know it for some phony principle.

But you can bet it’s not just Manchin and Sinema. There are at least 8-10 other Democratic Senators with substantial bases of wealthy contributors who feel the same pressures and are perfectly happy to have the whole package scaled down, delayed, and possibly killed.

This brings us to step three. Elect better Senators, but how? We were taught in school that in a democratic republic, you get the politicians that the voters (or at least those people who are allowed to vote) want.

This means we need better voters.

How do we get them? It’s hard to know how to do that, except you know, PASS THE FREEDOM TO VOTE ACT!

Facebooklinkedinrss

Saturday Soother – October 16, 2021

The Daily Escape:

Sunset paints a Truro barn and marsh – October 2021 iPhone photo by Wrongo

Following on Wrongo’s article about the missing people who economists say should be looking for jobs in what is otherwise a vibrant economy, comes the news that there is a huge and sustained explosion of new businesses being launched in America.

This means that many individuals are striking out on their own. From Wolf Street:

“New business formations, based on applications for an Employer Identification Number (EIN) with the IRS, exploded in June and July last year…then this year exploded again and remained far above the historical range.”

In September 2021, 431,381 EIN applications were filed with the IRS, 49% above September 2019, according to data released by the Census Bureau. For the first nine months of the year, EIN applications were up by 58% from the same period in 2019. Here’s a chart:

These are monthly totals! We seem to be forming a ton of start-up companies since 2020, way above the historical trend. These new businesses surely must reduce the total number of people looking for work as reported by the Department of Labor.

More from Wolf Street: (parenthesis and brackets by Wrongo)

“…the historic high level of new business formations every month is part of the bizarre puzzle that this economy has become: The strange phenomenon of labor shortages, the enormous stimulus payments that went out, the federal unemployment payments that are now ending, the $800 billion in forgivable PPP loans (Paycheck Protection Program loans) that went [out] earlier this year, the 3.2 million people who still haven’t returned to the labor force
”

Some commentators felt that last year, EIN applications were spiking because fraudsters were creating businesses to try to get their hands on those forgivable PPP loans. But a quick check would have shown that an EIN wasn’t required for PPP loans. Further, businesses had to have been “in business” for some time to qualify. And while the PPP ended in May, business applications have continued to be strong every month since then.

Most new businesses create at least one job for the owner and maybe a few for other people, but most never become large employers. Even though many new businesses eventually fail, the number of new business formations seems to be large enough to explain the puzzling numbers on job participation rates, unemployment and job quits that we’ve been seeing since the pandemic started.

That’s something to think about.

It’s Saturday, and time to kick back and forget about whether Steve Bannon will ever see justice. It’s time to spend a few moments contemplating Wrongo’s Saturday Soother.

Here at our temporary (and rented) global headquarters for the Mansion of Wrong in Truro on Cape Cod, we’ve had a busy week. Several family members live on the Cape, and we’ve had family from off-Cape come and stay for a few nights, so it’s been a busy and rewarding time with family.

But even Wrongo needs some downtime, so let’s all settle back and grab a comfy chair by a big window. Now, listen to Fauré’s “Cantique de Jean Racine” performed with a large choir that is conducted by Sofi Jeannin, and recorded in October 2016, at the Auditorium of Radio France.

This composition based on Jean Racine’s poem, won FaurĂ© a prize before he was twenty. If you watch the video, the choir is a perfect mix of adult and young voices.

Facebooklinkedinrss

Our Curious Job Market

The Daily Escape:

Cranberry harvest, Carver, MA – October 2021 photo by Sarah Stiles Cabe

Robert Reich commented to Newsweek about the unexpectedly low US employment figures, that American workers are engaged in, “the equivalent of a general strike.”

He was referencing Bureau of Labor Statistics (BLS) numbers that showed US employment increased 194,000 in September, nearly 300,000 jobs shy of estimates. Despite a record level of job openings and 7.7 million out of work, many employers report difficulty filling positions. From Reich:

“In reality, there’s a living wage shortage, a hazard pay shortage, a childcare shortage, a paid sick leave shortage, and a health care shortage – and American workers are demanding an end to all these shortages. Or they won’t return to work.”

So, the question is: are Americans saying “take your shit job and shove it” to corporate America?

Reich may have a point, but the current employment situation is both good and bad, and it’s a lot less political than he thinks it is. The numbers make clear that ending unemployment benefits wasn’t as effective in generating new employment as conservative politicians said it would be.

The inability to find childcare, or concerns about the safety of the available jobs, and the possibility that people saved some amount of their former emergency benefits and it’s providing them with a cushion, are all possibly contributing to the current jobs situation.

There are other factors at work. The data also show a record number of people voluntarily quitting their jobs (meaning they are not eligible for unemployment benefits). The number of quits (to work for another company offering higher wages and benefits, change careers, or stay home and take care of the kids) spiked by 242,000 people to a record of 4.27 million in August, up 19% from August 2019.

A historically high number of quits suggests a tight and competitive labor market that’s encouraging workers to switch jobs. The highest quit rate was in leisure and hospitality (6.4%), a sector that includes accommodation and food services (6.8%), retail (4.7%), and professional and business services (3.4%):

In total, 892,000 workers in accommodation and food services quit in August, equal to 6.8% of all workers in that sector. Quits are usually high in this sector. In August 2019, during that pre-Covid tight labor market, 5.1% quit.

The Labor Department also reported that there were 10.4 million job openings in August, up by 46% from August 2019. A high number of job openings pushes employers to offer higher wages, better benefits, signing bonuses, and similar enticements to help bring qualified people on board.

Despite what Robert Reich says, workers now seem to have some pricing power. When they leave a job for better wages and working conditions at another company, they create a headache for their old employer who now has to find a new employee by also offering a better deal.

But it all doesn’t quite add up. On the one hand, there are tons of jobs going begging. On the other hand, the labor force participation rate is well below pre-pandemic levels. In September, the civilian non-institutional population in the US was 261.8 million. That includes all people 16 and older who did not live in an institution, such as a prison, nursing home or long-term care facility.

Of that civilian non-institutional population, 161.3 million were participating in the labor force, meaning they either had a job or were actively seeking one during the last month. This resulted in a labor force participation rate of 61.6% in September, down slightly from the 61.7% in the prior two months, but 0.2 points higher than the 61.4% when Biden took office.

The number of Americans counted as not in the labor force, meaning they didn’t have a job and were not looking for one, rose in September to 100.4 million, up 338,000 from August.

If the job market is so good, why are so many people staying on the sidelines? That’s not consistent with a tight labor market, so there has to be something missing from the data. We do know that a big chunk of employees have taken early retirement. The number of retirees shot up by around 3.6 million during the pandemic, according to the Federal Reserve Bank of Kansas City. At the usual pace, that figure would have been around 1.5 million.

Are people just working off the books more now? Is it people who can’t get/afford childcare?  Or is it simply a mismatch of skills and jobs? We don’t need as many people staffing tourist jobs, but we need more people working at the docks and driving trucks?

Whatever is going on, there are millions of people doing it.

Facebooklinkedinrss

More Shortages Are Coming

The Daily Escape:

Fall, Longfalls Dam road, Carrabassett, ME – October photo by Laura Casey

The NYT reported on how the German economy is being slowed by product shortages:

“More than 40% of German companies said they had lost sales because of supply problems in an August survey….Europewide, exports would have been 7% higher in the first six months of the year if not for supply bottlenecks, according to the European Central Bank.”

And it isn’t just Germany. Since the onset of Covid, US consumers have been experiencing disruptions in the supply chain. Wrongo has once again noticed empty shelves are back in our local chain supermarkets.

The bad news is that many think it’s going to get worse.

It’s no longer a matter of fixing one problem. A cascade of sourcing failures in raw materials, production, shipping, staffing, labor, along with weather disasters, may mean these shortages are around for several years. From Shelley Fagan:

“The US has 20 container ports located along the East and West coasts as well the Gulf of Mexico. Ports are where 70% of all US-international trade enters, accounting for 26% of…GDP.”

Even if the goods get to America, we’re at the mercy of our system of rails, barges, and trucks that  transport goods to factories, distribution centers, stores, and consumers. Trucking moves 71% of all this freight in America, and there’s a shortage of drivers.

But our transportation infrastructure is also vulnerable, and our politicians have yet to lift a finger to help. Maybe next month.

Moving cargo by sea is historically cheap and efficient, so most of our imports from Asia arrive via cargo vessels. But now there’s a shortage of shipping containers. This has caused an immense spike in the cost of shipping. From Scott Galloway:

“Until 2020, the cost of shipping a 40-foot container along the world’s major trade routes never exceeded $2,000. Then Covid hit, and shipping firms reduced their fleets in expectation of low consumer demand. Instead, demand went up. This has upended the global supply chain. Shipping costs are now up 5 times to a record high: $10,000.”

The largest ships can carry more than 10,000 of these and when things run smoothly, about 25 million containers are in use on some 6,000 ships sailing around the globe.

The supply chain disruptions are causing backlogs in transporting all this cargo. About 40% of all US container traffic flows through the ports of Los Angeles and Long Beach. Currently, there are 65 ships waiting to unload thousands of containers. Again, that’s complicated by too few drivers in the trucking industry.

Flying into San Francisco last week, Wrongo saw about 30-35 ships also stacked up there. And China’s current forced reduction in energy consumption has hurt many high-tech producers. Wolfstreet reports that:

“…suspensions or reductions of industrial electricity supply that manufacturers in numerous industries are hit with, including key facilities that produce components for Apple, Tesla, Intel, NVIDIA, Qualcomm, NXP, Infineon, and ASE Tech….They’re now under orders to temporarily halt production…”

And supply chain issues go beyond tech products. Currently, 119 million Americans use prescription drugs, of which 25% are imported. These drugs start out as APIs (active pharmaceutical ingredients) — chemicals like hydrochloric acid and caustic soda. And China accounts for 80% of total raw materials for making medicine.

India is the largest producer of generic pharmaceuticals. They fulfill 40% of the demand in the US generic market. And shortages linked to this vulnerability aren’t a new problem. From Pharmaceutical Outsourcing:

“The average drug shortage in the US lasts for 14 months and some last for years when based on a high-risk supply chain. Before COVID-19, the FDA had already placed 145 pharmaceutical products on its drug shortages list.”

Since disruptions of the supply chain cause big price increases for goods that are difficult to get, it’s a threat to America’s economic health. And for medical and pharmaceuticals, it’s also a threat to public health.

Government knows about the problem but can’t fix it. After the PPE shortages at the onset of the Covid pandemic, you’d think we would develop a detailed plan to address the areas of greatest disruption. But all that happened was a 100-day review, making recommendations to shore up vulnerabilities sometime in the future. The proposals are sound, but they won’t help end our current shortages. Consumers can expect the current supply chain issues to persist well into 2022, and possibly beyond.

The geniuses in the multinational corporations who sold us globalization and just-in-time supply chains as the way to our best future are now telling us we just have to get used to shortages.

Economies can’t always just fix themselves. That’s a fantasy of capitalist utopianism.

Facebooklinkedinrss

It’s a Big Week for Democrats

The Daily Escape:

Early fall foliage, Long Pond, Rutland, MA – September 2021 photo by Jurgen Roth Photography

Charlie Sykes, talking about what will be a jam-packed week in Washington DC:

“This is going to be a helluva week. Democrats in Congress may not be able to save the Biden presidency, but they can destroy it
”

There are clear differences among Democrats on social spending priorities and the correct size of the pending human infrastructure spending bill. Several Democratic House members have vowed not to support both of Biden’s bills, unless they get what they want included. Along with threats by Sens. Sinema and Manchin not to stand with Democrats in the Senate, both House Speaker Pelosi and Senate Majority Leader Schumer can’t be happy trying to lead their fractious caucuses.

And among these efforts to thread the needle, are the twin crises of a Thursday cut-off of federal spending and a subsequent (possible) default on the nation’s debt.

Funding for the federal government is set to run out on Thursday at midnight. Senate Democrats will move a stopgap spending measure forward to position for a vote on the House-passed short-term funding bill. That would keep federal agencies open until Dec. 3, while suspending the debt limit until Dec. 2022.

Suspending the debt limit for another year is a great idea, but Senate Republicans are certain to tank that proposal. The likely scenario is that Senate Dems will remove the debt-limit provision and pass the bill with bipartisan support. Then, the House passes the bill, Biden signs it, and a government shutdown is averted for another two months.

But that leaves the debt-limit problem unresolved. We will reach that in early-mid October.

Mitch McConnell and Senate Republicans won’t support an increase in the debt limit. They say that Democrats should lift the cap on government borrowing on their own, as a part of their reconciliation package. But that creates a political advantage for the Republicans. And besides, it could take weeks, enough time to bring the country close to defaulting on its obligations. And it isn’t certain that Schumer has the votes to pass it without Republican help.

Only one thing’s certain: No one knows what’s really going to happen.

On infrastructure, Pelosi announced that debate on the Senate-passed bipartisan infrastructure bill would start on Monday. A House vote on it is slated for Thursday. House Democrats are also trying to make progress on the big reconciliation package.

Pelosi’s challenge is to keep progressives from walking away from the big bill and tanking the infrastructure bill. Democratic leadership also must appease Senate centrists about the size of the big infrastructure bill, which they say is too large.

House Democrats will meet late on Monday, (shortly after Wrongo posts this). Pelosi wants the members who’ve drawn lines in the sand about the human infrastructure bill (and who haven’t shown up for caucus meetings lately) to be there. From Politico:

“I urge the fullest participation of Members and hope that as many of us can be there in person as possible…”

These are strange days for Democrats. As a Sunday WaPo article said, “Political Suicide is not a Strategy”. In addition to the obsessive focus on securing the necessary votes in the House and Senate, the focus on the human infrastructure’s price tag is the essence of bad political messaging. Few Democrats stand up to say that the $3.5 trillion will be spent over 10 years, amounting to only 1.2% of GDP over that period.

Worse, focusing on the dollar amount takes attention away from the value in the bill for children, families, education, health care, housing, and climate. From Rep. Jim Himes (D-CT):

“When Democrats allow a debate to be only about a number, it’s like talking about a Christmas party and only discussing the hangover.”

The WaPo quotes Sen. Chris Van Hollen (D-MD) as saying that the discussion is getting things exactly backward:

 “We should work from what policies we want to enact, rather than an arbitrary number.”

No one can forecast how this will all work out. It would be dandy if Republicans supported the debt ceiling increase.

It would also be dandy if they accepted the results of the 2020 election, got vaccinated and stopped passing voter suppression laws. A rational and patriotic Party would do those things. But those are a bridge too far for today’s Republican Party.

So, Democrats are on their own. We’ll soon see if they can stand together as a team to avoid disaster and deliver on Biden’s promises.

Facebooklinkedinrss