Populareconomicsblog

Financial FAQs

CDC.gov

This is really all we need to know about Americans’ State of the Union’ that President Biden touted last Tuesday in his annual address. Just look how low COVID infection rates have fallen in the CDC’s most recent data graph.

The CDC reported “As of February 23, 2022, the current 7-day moving average of daily new cases (75,208) decreased 37.7% compared with the previous 7-day moving average (120,761).”

Those Americans still holding back from work because they are caring for children or elderly parents, or for a myriad of other reasons due to fears from contagions, need no longer to do so. The Omicron variant has been tamed, and there are no other variants on the horizon at the moment.

The latest initial unemployment claim stats confirm that work is the best place to be now that the US economy is roaring again, wages are rising and almost 11 million job openings beckon.

FREDinitialclaims

New applications for unemployment benefits fell by 18,000 to a two-month low of 215,000 in the last week of February, pointing to a pickup in hiring and declining layoffs as the economy rebounded from an omicron-induced lull.

The 10-year FRED graph of initial unemployment claims shows just how normal the claims’ numbers have become. Initial jobless claims declined from a revised 233,000 in the prior week,  the Labor Department said Thursday.

Now that serious sanctions are in place, what will happen? Oil prices will surge

And inflation may be prolonged, which is another reason unemployed workers won’t remain on the sidelines much longer.

And what about the Russian Oligarchs support of Putin’s war with Ukraine? How much longer can they hold out? France just announced the first seizure of an Oligarch’s yacht In Marseille, and Treasury Secretary Yellen just announced she will be doing the same.i

“We have made it a priority to go after oligarchs or Russian elites who are key to President Putin’s corrupt power,” Yellen said. She added that Treasury, along with the Justice Department and U.S. allies, plans to “uncover, freeze and seize their wealth around the world.”

Inflation won’t recede soon with soaring oil prices, but that is also a sign that higher economic growth is in the cards for the New Year, as consumers and business continue to spend their excess savings.

Both Institute of Supply Management surveys for the U.S. service and manufacturing sectors are still in the mid-fifties, signaling that they could even go higher if it wasn’t for the supply and labor shortages.

So let’s see how long Putin’s oligarchs can hold out and support his killing of Ukrainians, which seems to be the only thing that could stop him? My guess is not for long.

Harlan Green © 2022

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Financial FAQs

BEA.gov

We now have a looming Cold War with Russia due to its invasion of the Ukraine, as well as inflation to worry about this year. What will it do to economic growth and jobs?

Inflation won’t recede soon with soaring oil prices, but higher economic growth is in the cards for the New Year. The Fed’s favorite indicator of consumption, the Personal Consumption Expenditure price index (PCE) gained 6.1 percent year-over-year in January, the largest gain since 1982, and consumer spending in January rose 2.1 percent month-over-month, better than the expected forecast of 1.5%.

“At least for now, consumers aren’t pulling back much on their spending in light of high inflation,” said one commentator.

Other indicators of growth aren’t slowing, either. according to the flash IHS Markit flash surveys of the manufacturing and service sectors. Both surveys have risen to the mid-50s, a strong sign of future growth in both sectors.

And Q4 GDP growth was revised slightly higher in its second estimate to 7 percent, the highest growth rate in 40 years. Job creation will also continue to grow as the Omicron variant recedes.

There is more good news on jobs. Initial jobless benefit claims fell by 17,000 to 232,000 in the week ended Feb. 19, the Labor Department said Thursday. The number of people already collecting jobless benefits fell by 112,000 to 1.48 million in the week ended Feb. 12. These so-called continuing claims are at their lowest level since March 1970, which means new job creation exceeds those being laid off or quitting.

The main issue is what all this does to continuing job growth, with the Omicron variant infections returning to pre-Omicron levels. The CDC news is also good on that front.

CDC.com

The CDC said, “as of February 16, 2022, the current 7-day moving average of daily new cases (121,665) decreased 43.0% compared with the previous 7-day moving average (213,625). A total of 78,060,327 COVID-19 cases have been reported in the United States as of February 16, 2022.

The elephant in the room that could cancel the good news is effects from the invasion of the Ukraine, of course, especially sanctions that might prolong the high inflation numbers.

Excluding volatile gas and vehicle sales, the PCE price index quoted above rose 5.2 percent, and consumers in the latest University of Michigan sentiment survey don’t see prolonged inflation.

So with the Omicron variant receding, the duration of higher inflation will depend on what is happening in the Ukraine. That will be hard to predict with a Russian dictator who seems to have lost touch with reality. Does he really want to start another Cold War with the Western world united against him?

I don’t think so.

Harlan Green © 2022

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Popular Economics Weekly

FREDretailsales

The New Year brought in another surprise. Sales at U.S. retailers such as Amazon and Best Buy jumped 3.8 percent in January. Americans bought more things: cars, furniture, consumer electronics in a sign that consumers are no longer fazed by the Omicron variant.

Why? The Omicron infection rate is fast returning to pre-Omicron levels.

Retail sales have tracked the pandemic, per the FRED graph. It plunged from May to November 2020 as the coronavirus did its worst, up and down with the Delta variant, then plunging again in March 2021 as Omicron hit. Sales began to recover again in December 2021.

The January increase in sales was the largest since last March, when Americans spent a good chunk of their stimulus money from the government.

Auto sales rose sharply for the second month in a row, the government said Wednesday. Auto sales account for about one-fifth of overall retail spending. Other than autos, retail sales still advanced a strong 3.3 percent last month. Sales also rose sharply at internet retailers (14.5 percent), furniture stores (7.2 percent), department stores (9.2 percent) and home centers (4.1 percent).

CDC

And the CDC reported as of February 9, 2022 in its weekly update that the current 7-day moving average of daily new cases (215,418) decreased 42.8% compared with the previous 7-day moving average (376,855). A total of 77,179,255 COVID-19 cases have been reported in the United States as of February 9, 2022.

The surge in industrial production was another good sign. It increased 1.4 percent in January, largely because of unusually cold weather that boosted the output of utilities, reports the Federal Reserve. At 103.5 percent of its 2017 average, total industrial production in January was 4.1 percent higher than its year-earlier level and 2.1 percent above its pre-pandemic (February 2020) reading.

This could be a surprising year and the beginning of a surprising decade, I said last week; if President Biden, the EU, and Vladimir Putin work out their differences.

We should still worry about emerging signs of irrational exuberance in the financial markets and with consumers, that former Fed Chair Greenspan also worried about more than two decades ago. It is pushing the inflation rate to uncomfortable levels.

But can we blame Americans for wanting to celebrate the looming end of more than two years of uncertainty due to the worst pandemic in 100 years?

Harlan Green © 2022

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Financial FAQs

Calculated Risk

The Labor Department’s JOLTS report showed the labor market as tight as ever in January, which could be bad news for new job creation in Friday’s Labor Department unemployment report.

Employers can’t hire enough employees in several industries, with the largest increase in openings in accommodation and food services (+133,000), information (+40,000), and nondurable goods manufacturing and state and local government education (+31,000 each). Job openings decreased in finance and insurance (-89,000) and in wholesale trade (-48,000).

It means there is still a huge gap between the supply of workers willing to work and what businesses have been able to hire in many industries.

“The number of job openings was little changed at 10.9 million on the last business day of December, the U.S. Bureau of Labor Statistics reported today. Hires and total separations decreased to 6.3 million and 5.9 million, respectively. Within separations, the quits rate was little changed at 2.9 percent. The layoffs and discharges rate was little changed at 0.8 percent, a series low.”

The growing demand for workers in leisure activities, however, is a good sign that consumers are beginning to venture out as the Omicron variant wanes.

This is while manufacturing activity has slowed ever so slightly per the ISM’s Institute for Supply Management Manufacturing Index, slipping to a 14-month low of 57.6 percent in January from 58.8 percent because of the Omicron variant and ongoing shortages of labor and supplies that have slowed production.

The index of new orders dropped 3.1 points to 57.9 percent, the lowest level in a year and a half, and reflecting higher costs. The supply bottlenecks are reflected in the index of prices paid that rose to 76.1 percent from 68.2 percent in December, erasing some of the big decline at the end of 2021.

The U.S. economy is glowing red-hot now, and maybe overheating with soaring prices if supplies don’t catch up to demand soon. GDP grew 5.6 percent last year, the fastest growth rate in 40 years, and predicted to grow as much as 4 percent in 2022. This is far above the 2 percent average growth rate that prevailed since the end of the Great Recession in 2009.

AtlantaFed

The worker shortage is boosting workers’ wages, per the Atlanta Fed, as mentioned recently by Nobel Laureate Paul Krugman. A 3-month average of hourly wages has been growing at 4.5 percent, more than double the 2 percent rise that prevailed since 2010.

Will inflation cool because consumers spend less in the New Year as the pandemic aid dries up, and supply chains speed up deliveries, or must the Fed raise interest rates in the hope of taming it?

So what happens next?

Today’s ADP private payrolls report showed -301,000 jobs were lost in its January survey that precedes Friday’s unemployment report, with most losses in leisure activities due to the Omicron variant. This will surely downgrade current estimates of an additional 150,000 nonfarm payroll jobs in Friday’s report.

Harlan Green © 2022

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen