This Inflation Can’t Last

Posted on December 20, 2021 by Popular Economics Weekly

FREDcpi

Why the feverish speculation that higher inflation could last beyond next year, and dampen economic growth, when the American economy should otherwise return to a semblance of normalcy? The COVID-induced recession of 2020 lasted just two months and caused one of the deepest economic contractions in history.

The recovery is also one of the fastest in history, so it is causing a temporary climb in inflation. Firstly, consumers and businesses are flush with cash for the holidays. Why wouldn’t they want to spend it now, regardless of the rising prices sure to follow? Expectations are usually high during the holidays.

In May 2020 the CPI, seasonally adjusted inflation rate for consumers was a mere 00.22 percent and in November 2021 had risen to 6.9 percent, seasonally adjusted. But there is usually a New Year drop off in spending because consumers want to pay down their credit bills and save for the April tax season. So prices should also subside substantially, as most retail businesses know after the holiday shopping splurge.

There are a few caveats to this forecast, however. The Biden administration is not helping to lower inflation by reducing the Trump trade tariffs. Raising tariffs made more sense when the economy was booming before the pandemic, and we wanted to repatriate U.S. businesses to our homeland to boost American jobs.

But if the supply-chain slowdown is to be improved, smart economic policy says that tariffs should be lowered to increase the flow of international trade, and ease the supply bottlenecks.

Also, Biden’s ‘Buy America”, and “Made in the USA” emphasis will certainly keep prices from falling faster with products made in the USA, as it’s more expensive to produce things in America, vs. overseas.

But is that a reason for markets to panic, so that the Federal Reserve may overreact by raising interest rates too soon next year? I don’t think so.

Economists such as Larry Summers worry about what is called “stagflation”, a holdover from the 1970s fast rising prices for oil and other commodities that caused unions to follow suit and the Federal Reserve to maintain policies (such as keeping interest rates low) that tolerated higher wages and salaries.

That’s not the case anymore, mainly because unions are much weaker so that wage and salary increases have been kept down, which is a large part of any inflationary spiral.

So the other causes of higher inflation—supply-chain bottlenecks and a shortage of workers—could still be problems.

Nobel Laureate Paul Krugman cites Biden’s Council of Economic Advisors in a recent NY Times Op-ed who believe that this bout of higher inflation most resembles that of 1946-48, when the American economy hadn’t yet geared up to meet soaring consumer demand when also flush with cash from WWII savings.

But there won’t be such a wholesale conversion from a wartime to a peacetime economy in the pandemic recovery. In fact, we will be fast forwarding to an enhanced digital economy with much more reliance on 5G networks and Artificial Intelligence, and less dependence on workers to produce things.

As if to presage such a future the Conference Board’s latest Index of Leading Economic Indicators predicts good growth ahead, with or without the availability of more workers.

“The Conference Board Leading Economic Index® (LEI) for the U.S. increased by 1.1 percent in November to 119.9 (2016 = 100), following a 0.9 percent increase in October and a 0.3 percent increase in September,” stated its latest press release.

“The U.S. LEI rose sharply again in November, suggesting the current economic expansion will continue into the first half of 2022,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Inflation and continuing supply chain disruptions, as well as a resurgence of COVID-19, pose risks to GDP growth in 2022. Still, the economic impact of these risks may be contained. The Conference Board forecasts real GDP growth to strengthen in Q4 2021 to about 6.5 percent (annualized rate), before moderating to a still healthy rate of 2.2 percent in Q1 2022.”

This prediction of a huge jump in future growth is based on 12 hard data indicators such as stock prices, interest rate spreads, and consumer credit flows, which lends more credence to its prediction of future trends—and to the fact that supply-chain disruptions and future employment trends may not be major factors affecting inflation next year.

So worrying about some kind of long-lasting inflationary spiral doesn’t make sense to me

Harlan Green © 2021

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Are Interest Rates Too Low?

Posted on December 11, 2021 by Popular Economics Weekly

The Mortgage Corner

Should home buyers worry about the record-low interest rates in the near or distant future?

Because interest rates are at post-World War II lows, the super cheap money is helping to drive up annual home price rates into double digits, resulting in a loss of affordability for many prospective homebuyers and even renters.

And the Federal Reserve is reluctant to raise interest rates, fearing it will collapse the recovery with COVID variants not yet vanquished.

FRED30yrmortgage

The 30-year conforming fixed mortgage rate favored by most home buyers has been declining since the early 1980s, and has hovered around 3 percent since the start of the pandemic, per the above Federal Reserve Bank of St. Louis (FRED) graph.

It is a major reason the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index of single-family, same home, price changes reported a 19.5 percent annual gain in September 2021, though slightly down from 19.8 percent in August. The S&P Index is a 3-month average for 20 metropolitan areas, so in some cities home prices are rising even faster.

“It’s unprecedented for us to get a massive run-up in home prices during a recession,” says Freddie Mac’s chief economist, Sam Khater. “It’s clear that [mortgage] rates matter even more than unemployment rates.”

Another reason for the price run-up is that inflation is soaring as well. The retail Consumer Price Index, seen below in the 2nd FRED graph, is up 6.8 percent in November Y-o-Y when it has averaged just 2 percent since the Great Recession.

FREDcpi

And if said inflation remains much higher than interest rates (3 percent vs. 6.8 percent inflation), it means in effect negative interest rates since higher inflation reduces the value of the loan principal over time. And that pours gas on the exploding home prices.

This is not an easy concept to understand, but it happened during the housing bubble when housing prices were also rising in the double digits annually.

Soaring inflation is the other problem, and that probably won’t decline until the labor and supply-chain shortages subside sometime next year.

So should home buyers wait for this housing price bubble to subside to buy a home? The National Association of Realtors hasn’t much helping advice.

“Home sales remain resilient, despite low inventory and increasing affordability challenges,” said Lawrence Yun, NAR’s chief economist. “Inflationary pressures, such as fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”

Is there any good news? The Federal Reserve released the Q3 2021 Flow of Funds report on Thursday: Financial Accounts of the United States. It stated that American households’ net worth is at a record high as a percentage of GDP (more than 600 percent of GDP), increasing $2.3 trillion in Q3, thanks to government spending for the COVID pandemic that is approaching $5 trillion to date with more to come when the Build Back Better Act finally passes.

MarketWatch’s Steve Goldstein cites James Knightley, chief international economist at ING, who put a positive spin on the latest report. From the low point of the first quarter of 2020, household wealth has surged by $35.5 trillion. Combine this wealth rise with employment growth, and wage gains, and the U.S. consumer looks to be in good shape.

The “further massive accumulation of wealth only adds to the potential spending ammunition of the household sector, which gives us more confidence that the U.S. economy can expand by more than 4% in 2022,” says Knightley.

But there’s still a housing shortage that some economists predict could last 10 years. So this has happened before, and only a concerted effort of governments and builders will lessen the housing crunch we are currently experiencing.

Harlan Green © 2021

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Posted in Consumers, COVID-19, Economy, Housing, housing market, Weekly Financial News | Leave a comment

Has COVID-19 Made US Richer?

Posted on December 8, 2021 by Popular Economics Weekly

Financial FAQs

FREDdisposalbleincome

More Americans are richer, thanks to the COVID-19 pandemic, believe it nor not. The pandemic has spurred congress and the Biden administration to act as if we are coming out of another Great Depression.

The U.S. is growing faster than other developed countries that haven’t invested as much in the recovery. And those investments are going to Americans that need it the most.

Just since the American Rescue Plan passed in March 2020, 4.3 million more people have found employment. Wages and real disposable income are up, especially for low-wage workers, who are disproportionately women and people of color and who have experienced consistent wage growth since April 2021, say Rose Khattar and Andres Vinelli of the Center For American Progress, a progressive think tank.

It’s the New Deal all over again, but instead of the 1930s and a looming World War Two, congress and the Biden administration have acted to save the U.S. economy from the worst pandemic since the Spanish flu pandemic of 1918.

FREDgdp

“The U.S. is the only leading advanced economy to have exceeded its pre-pandemic levels, according to the Organization for Economic Co-Operation and Development,” say Khattar and Vinelli. “In fact, data from the most recent quarter shows that our real GDP—which is GDP adjusted for inflation—is around 13% larger than the end of the COVID-19 recession.”

It is largely due to Biden’s American Rescue Plan of last March that especially raised the lowest income brackets. Economist Gene Sperling, its White House Coordinator, says such growth not only helps lower-income folk, but children most of all with the child tax credit that alone has halved the child poverty rate.

And don’t forget the $1400 payments sent out to most Americans at a time when the pandemic lockdowns were in full force.

More evidence of the record post-pandemic growth is that service-oriented businesses making up two-thirds of economic activity—such as banks, retailers and drug stores—grew in November at the fastest pace on record, even as companies grappled with major shortages of labor and supplies.

The Institute for Supply Management’s services PMI climbed to 69.1 percent last month from 66.7 percent in October, when 50 percent is break-even growth, marking the biggest increase on record.

In a rarity, all 18 of the service sectors tracked by ISM said they grew in November. The biggest problem is supplying all the services that customers want. Companies can’t find enough people to fill a near-record number of open jobs. They’ve also struggled to obtain badly needed supplies.

“It goes back to the pent-up demand,” said Anthony Nieves, Chair of the Institute for Supply Management® Services Business Survey Committee. “You can look at other tangible things such as mall traffic and online distribution increasing, which are contributing factors to business activity being up. Many people are going back to work, and consumer confidence is up.”

And if the newest Omicron variant proves less deadly, as initial test results are showing, then there’s nothing to hold back consumers and businesses from building America back better than ever.

Harlan Green © 2021

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Are We Nearing Full Employment?

Posted on December 3, 2021 by Popular Economics Weekly

Popular Economics Weekly

Calculated Risk

Are we nearing full employment, at least among of those that want to return to work? That may be a strange question to ask when the just-arrived Omicron COVID variant is creating more uncertainty about future US job growth.

But the latest unemployment surveys out today showed that the unemployment rate dropped to 4.2 percent from 4.6 percent, and 537,000 more workers joined the labor force.

I like the Calculated Risk graph above that portrays where we are in the job recovery from 2020 peak employment (red line). We are fast approaching what was full employment then, as opposed to the slow job recovery from the 2007 Great Recession (blue line).

However, just 210,000 new payroll jobs were added to payrolls in the separate Establishment survey, which is seasonally adjusted, and means 210,000 more jobs were created above what is normal for this time of year.

“Total nonfarm payroll employment rose by 210,000 in November, and the unemployment rate fell by 0.4 percentage point to 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in professional and business services, transportation and warehousing, construction, and manufacturing. Employment in retail trade declined over the month.”

But the change in total nonfarm payroll employment for September was revised up by 67,000, from +312,000 to +379,000, and the change for October was revised up by 15,000, from +531,000 to +546,000, so employment in September and October combined is 82,000 higher than previously reported.

We are nearing full employment because most of the job increase was in leisure and hospitality, which had lagged job creation in the durable goods sector earlier in the recovery.

The leisure and hospitality sector gained 23,000 jobs in November. In March and April of 2020, leisure and hospitality lost 8.22 million jobs, and are now down 1.33 million jobs since February 2020. It has now added back about 84 percent of the jobs lost in March and April 2020, says BLS.

MarketWatch

Construction employment increased 31,000, and manufacturing also added 31,000 jobs. State and Local education lost 16,000 jobs, seasonally adjusted, which was a major reason fewer Establishment survey jobs were created.

Nonfarm employment has increased by 18.5 million since April 2020 but is down by 3.9 million, or 2.6 percent, from its pre-pandemic level in February 2020.

So which of the two Labor Department’s surveys—the Establishment vs. the Household surveys—is the most accurate picture of U.S. employment? The Household survey also showed a much larger 1.14 million people found work in November, though it is a smaller survey than the Establishment survey and isn’t seasonally adjusted.

The Labor Department also reported that In November, 3.6 million persons had been unable to work because their employer closed or lost business due to the pandemic–that is, they did not work at all or worked fewer hours at some point in the four weeks preceding the survey due to the pandemic.

So COVID-19 is still putting a big dent in the employment picture, and we must now wait to see what happens this winter with any new variants, to see if the COVID-19 pandemic is tamed and we are able to return to full employment.

Harlan Green © 2021

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Americans are Returning to Work

Posted on December 1, 2021 by Popular Economics Weekly

Financial FAQs

FREDselfemployed

Why aren’t more Americans returning to their old jobs? Many are becoming self-employed, thanks to the pandemic that encourages more work from home, and the Internet with its many marketing opportunities.

The Wall Street Journal reports that 10.2 million workers in October, seasonally adjusted, have become self-employed.

“That is the highest total since the financial-crisis year 2008, except for this summer. The total amounts to an increase of 6% in the self-employed, while the overall U.S. employment total remains nearly 3% lower than before the pandemic,” says WSJ.

So maybe the problem isn’t so much that many Americans are retiring, or holding out for better jobs, but that many are finding different career paths. More than 50 percent of Millennials aged 18-22, for instance, have begun their careers self-employed, according to Upwork, Inc.

The use of remote freelancing has also dramatically increased because of the pandemic and will continue to rise in the future, says Upwork. The change to fully remote workforces has led to changes across organizations, far beyond where their workforce is located.

In fact, 67 percent of businesses reported that there were more changes to long-term management practices than a normal year, excluding temporary pandemic-led changes.

“Remote work has become, what economists call, a general-purpose technology,” says Upwork Chief Economist Adam Ozimek. “It has a wide range of uses that is embraced across the economy and creates a variety of spillover effects and we are already seeing the signs of these effects. The embrace of a more fully remote workforce has enabled businesses to embrace new technology, reimagine how they onboard and train, and even allowed hiring managers to embrace the use of freelancers.”

FRED

And today’s ADP payroll report said private sector employment increased by 534,000 jobs from October to November according to the November ADP® National Employment ReportTM.

This could be a predictor of the official Labor Department report on nonfarm payrolls out this Friday. The above graph show there hasn’t been much variance between the ADP and BLS government reports. If Friday’s BLS report is similar, it is more good news for the recovery.

“The labor market recovery continued to power through its challenges last month,” said Nela Richardson, chief economist, ADP. “November’s job gains bring the three-month average to 543,000 monthly jobs added, a modest uptick from the job pace earlier this year. Job gains have eclipsed 15 million since the recovery began, though 5 million jobs short of pre-pandemic levels. Service providers, which are more vulnerable to the pandemic, have dominated job gains this year. It’s too early to tell if the Omicron variant could potentially slow the jobs recovery in coming months.”

All-in-all, contrary to the pundits that are predicting another downturn because of rising inflation (or the latest Omicron variant), more American workers are returning to work, either as employees or self-employed.

And supply chains are easing, according to various reports, with anchored shipping waiting to offload to the LA and Long Beach ports down more than 20 percent in just the last week, according to the White House, which will ease supply-chain and inflation worries as well.

Harlan Green © 2021

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Does America Care Again?

Posted on November 23, 2021 by Popular Economics Weekly

Financial FAQs

PEW Research

The American Rescue Plan, The Infrastructure Investment and Jobs Act, and the soon to pass Build Back Better Plan show that the American ‘can do’ spirit is alive, the innate generosity and optimism that is so much a part of the American spirit is returning.

Will a revival of that spirit last, in spite of the ongoing pandemic, red vs. blue state civil war, and still record joblessness?

The truest expressions of Americans’ character have come out during past catastrophes, such as the Great Depression and World War Two. And almost 10 years of unparalleled growth followed the horrors of World War One and the 1918 Spanish Flu pandemic. 

The coronavirus pandemic is bringing about a similar transformation of character and culture that was always there but sometimes hidden when times were good.

Record economic growth is also following this pandemic; with Q1 and Q2 2021 GDP up more than 6 percent, and the fourth quarter possibly growing at the same pace after the third quarter pause due to the Delta variant surge.

Americans are showing that they care for each other with these bills—that lifting children and the poorest out of poverty also lifts themselves. That renewing our roads, bridges, energy grids, and confronting the greatest threat to our future, climate change, will ensure a country that our children can be proud of and prosper in.

It’s obvious that the American Rescue Plan saved many lives and livelihoods, and the Infrastructure bill means caring for the planet as well as each other with its $billions spent on climate change and improving health and sanitation.

It’s less obvious what spending on social infrastructure does. Investing in children, improved healthcare, and paid family leave strengthens families, something both political parties should be for, but conservatives have opposed since FDR’s New Deal.

Who will get most of the good jobs in construction from rebuilding our physical infrastructure? Some 80 percent go to less-then-college-educated workers, says the White House in its initial announcement of the Infrastructure Investment and Jobs Act.

In part because of the recovery money already distributed during the pandemic, median household income has resumed its climb for the first time since 2000, as shown in the above PEW research graph. It had dropped from $70,800 in 2000 to $65,100 after the Great Recession.

In 2018, the median income of U.S. households stood at $74,600. This was 49 percent higher than its level in 1970, when the median income was $50,200. (Incomes are expressed in 2018 dollars.)

The pandemic is bringing about a whole transformation of America that will last because it is bringing Americans together again in common cause, and history shows this brings out the best in us.

Harlan Green © 2021

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Why are So Many Quitting?

Posted on November 17, 2021 by Popular Economics Weekly

Popular Economics Weekly

Calculated Risk

Several headlines last Friday screamed 4.4 Million Workers Quit Their Jobs, as if that was the most important takeaway from the Labor Department’s October JOLTS report.

But there were also 6.5 million hires (dark blue line in graph) and 10.4 million separations (yellow line).

In fact, many of those quitting were shifting to better jobs, not leaving the workforce. Quits were up 34 percent year-over-year to a new record high. These are voluntary separations that generally mean they are finding better jobs. (see light blue columns for “quits”).

Another indication job formation is heading in the right direction is that 4th Quarter GDP growth predictions are between 6 to 8 percent, up from the Q3 growth slowdown to 2 percent, due largely to the expectation that Delta infection rates are falling.

This is huge and predicates many more job hires as producers race to stock their shelves in the face of shortages. They had better stock up soon, as consumers are buying like never before. Retail and trade sales surged 1.7 percent last month, the government said today, and are up 16.3 percent YoY.

That’s the biggest gain since the government last doled out billions of dollars in stimulus money to families with the American Rescue Plan in March that kept many families and businesses solvent. It delivered $1400 to millions of American families, extended enhanced unemployment benefits and boosted funding to ramp up vaccine distribution and reopen schools.

Retail sales rose 4 percent last month at internet retailers, 3.8 percent at electronics and appliance stores and 2.2 percent at department stores to lead the way in October, all strong numbers. Sales also climbed 1.8 percent at auto dealers, but partly because of record prices. Automakers can’t make enough cars to satisfy demand due to a global parts shortage. Gas prices also surged 3.9 percent last month because of higher oil prices.

If autos and gas are set aside, U.S. retail sales rose a smaller 1.4 percent last month. Those two categories often exaggerate ups and downs in consumer spending and aren’t always good indicators of how much households are willing to spend.

Nor is it a reliable indicator of inflation, as retail sales are not inflation-adjusted. Consumers are pushing up prices because they have so much money to spend, and the supply bottlenecks won’t subside until next year; after the holidays when consumers traditionally become stingier.

So now isn’t the time to fret about inflation.

CDCCovidTracker

Another pandemic surge is much more worrisome, as infection rates are declining more slowly at the start of cold weather when Americans go indoors, which is a real reason to worry about what may happen next year.

“The current 7-day moving average of daily new cases (70,431) decreased 1.4% compared with the previous 7-day moving average (71,450). A total of 46,180,190 COVID-19 cases have been reported as of November 3, 2021.”

So the best holiday wish for this week is that we all stay as healthy and wealthy as possible!

Harlan Green © 2021

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Where are the Truck Drivers?

Posted on November 15, 2021 by Popular Economics Weekly

Financial FAQs

@PaulKrugman

If one picture can save 1,000 words, then maybe Nobel Laureate Paul Krugman’s citing of the huge decline in average hourly wages of Production and Non-supervisory Employees in Transportation and Warehousing since the 1970s goes a long way to explaining the current supply-chain bottleneck and concurrent inflation surge.

It explains even more—why so many Americans are refusing to return to their workplaces. The COVID pandemic has exposed the consequences of the overall decline in working Americans’ wages and standard of living that has shrunk the middle class and endangered our democracy.

Of course, the coincidence of declining wages and truck-driver shortages doesn’t necessarily spell causation, but at a time of soaring demand by consumers and producers for the products they deliver, they have one of the most demanding 24/7 jobs for less than college-educated workers.

And there is much anecdotal evidence from independent truckers that confirms the existing pay scale is not worth it. In October, the American Trucking Association said the U.S. needed 80,000 more truck drivers.

Shauntai Robinson, an owner operator out of the ports in South Carolina, in a post on Medium cited by Yahoo News, said that after 16 years in the industry, she was beginning to question the viability of a career as a truck driver.

“There are thousands of valid class A CDL holders, across the United States, who have elected to not drive a truck anymore,” Robinson wrote. “These people have not relinquished their credentials. Instead, these valuable people have been forced to seek alternative forms of employment in order to be able to provide for their families.”

On average, truck drivers working full time, year-round, earn about $43,252 annually, lower than the median for all full-time workers ($47,016), but exceed those of other blue-collar jobs, says the US Census Bureau.

FREDwages

The huge decline in transportation and warehousing wages actually mirrors the sharp decline in average hourly wages of all production and non-supervisory workers that began in 1980, as can be seen from the above FRED graph (gray bars are recessions).

That was when Big Business began its lobbying campaign to influence economic policies—morphing into what came to be known as trickle-down economic policies with the election of President Ronald Reagan in 1980.

Reaganomics accelerated the deregulation of whole industries that began in the 1970s, with directly suppressing the collective bargaining rights of workers to such an extent that there are now 26 so-called right-to-work (red) states that say a worker can work in a company employing unionized workers, and enjoying its benefits, without having to pay union dues!

So the millions of workers holding back from reentering the workforce because of the worst pandemic in 100 years has perhaps awakened more than truck drivers to the need to hold out for a better economic system that has impoverished them since the 1980s, when conservative economic policies took away workers’ rights as well as drastically reduced their incomes.

President Biden’s $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) was passed just in time to make a difference for working families by providing jobs that can support families.

“The bill is a significant down payment on the $2.5 trillion infrastructure investment gap that was identified in the 2021 Report Card and will benefit American businesses and families for years to come,” according to the American Society of Civil Engineers (ASCE), as I reported last week.

The COVID pandemic is bringing about a wholesale transformation of American capitalism, including an opportunity for American workers to have a voice in transforming it.

Harlan Green © 2021

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“It’s the COVID Pandemic, Stupid!”

Posted on November 10, 2021 by Popular Economics Weekly

Financial FAQs

FREDcpi

Why the supply-chain bottlenecks and soaring inflation? “It’s the COVID pandemic, stupid.” say many economists.

President Biden’s $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) was passed just in time to slow the inflation climb and make for a merrier Christmas.

Consumers and producers are worried because the consumer price index jumped 0.9% last month, the government said Wednesday. The pace of inflation over the past year marched to 6.2% in October from 5.4% in the prior month. That’s triple the Federal Reserve’s 2% target and is the highest rate since November 1990.

But even the latest price spike following last year’s pandemic-induced recession was barely higher than that following the 2007-9 recession (gray bar), per the above FRED graph of CPI inflation rates.

Economists such as Obama’s chief economic advisor, Austin Goolsby, are saying this is a one-of-a-kind slowdown caused by the pandemic. “The most important thing to watch if you want to understand the economy is, as has been the case for a year and a half now, the progress made against the virus,” said Goolsby in a recent NYTimes Op-ed.

Why will the new infrastructure bill create a merrier holiday season? Because it jump-starts a renewal of public investment in America’s future with the largest spending programs since Roosevelt’s New Deal.

The bill provides $110 billion to repair the nation’s aging highways, bridges and roads. According to the White House, 173,000 total miles of America’s highways and major roads and 45,000 bridges are in poor condition. And the almost $40 billion for bridges is the single largest dedicated bridge investment since the construction of the interstate highway system, according to the Biden administration.

“The bill is a significant down payment on the $2.5 trillion infrastructure investment gap that was identified in the 2021 Report Card and will benefit American businesses and families for years to come,” says the American Society of Civil Engineers (ASCE).

“The bill represents a historic, once-in-a-generation investment in our roads, bridges, water and wastewater networks, ports, electric grid, dams, and more. It increases funding, makes smart improvements to policy such as streamlining permitting, and it creates new programs targeted at almost all 17 categories in the 2021 Report Card for America’s Infrastructure, according to the ASCE.

Specifically, the IIJA includes a reauthorization of our surface transportation programs, the Drinking Water and Wastewater Infrastructure Act, as well as an additional $559 billion in new spending that is a combination of targeted funds for overdue state of good repair projects, but also forward-looking programs and policy to make our infrastructure more resilient, said ASCE.

These funds include:

  • $110 billion for roads, bridges, and major projects;
  • $66 billion for passenger and freight rail;
  • $65 billion for broadband internet;
  • $46 billion for resilience to help states and cities prepare for droughts, wildfires, climate change, and more;
  • $39 billion for public transit; and
  • $17 billion for ports and waterways.

This is just a down payment on what needs to be done to bring the American economy into the 21st century, according to the Federal Reserve Chair Janet Yellen: “We are now engaged in the most important economic project in recent history: Repairing the broken foundations of our economy, and on top of them, building something stronger and fairer than what came before.”

Consumers will continue to worry about inflation as much as the pandemic in the coming months. But the inflation rate is tied to COVID the infection rate. How? Supply-chain shortages are causing the price hikes. And when millions more return to work (such as truck drivers) once the pandemic subsides sufficiently, this should in turn loosen the supply-chain constrictions, bringing down prices.

So, instead of saying, “It’s the economy, stupid.” we can say, “It’s the pandemic, stupid” that’s holding up the recovery.

Harlan Green © 2021

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Payroll Employment Roars Back

Posted on November 5, 2021 by Popular Economics Weekly

Popular Economics Weekly

MarketWatch

Who said the labor shortage is holding back job gains? Not for the moment. It looks like the roaring 2020s are beginning to roar in earnest this fall as we slowly exit the pandemic.

Total nonfarm payroll employment rose by 531,000 in October, and the unemployment rate edged down by 0.2 percentage point to 4.6 percent, the U.S. Bureau of Labor Statistics reported today.

“Job growth was widespread, with notable job gains in leisure and hospitality, in professional and business services, in manufacturing, and in transportation and warehousing. Employment in public education declined over the month.”

People are returning to work, in part because 9 million lost jobless benefits in September as the federal extended unemployment insurance program was terminated.

The government revised the number of new jobs created in September to 312,000 from 194,000, based on new information from the businesses surveyed, said MarketWatch. And the job gains in August were raised to 483,000 from 366,000.

A total of 5.6 million payroll jobs have been created this year to date and average hourly wages have increased 4.6 percent. President Biden touted that these numbers showed that the U.S. now had the fastest job growth in the developed world.

Leisure and Hospitality, Education & Health, and Professional/Business added 320,000 jobs, manufacturing and construction added 104,000 jobs, while governments lost 73,000 jobs (from a loss in public education).

The service sector is roaring back, in other words, as restaurants, hotels, theaters and other companies in the hospitality business created 164,000 new jobs last month.

The jump in payroll employment was presaged by a recent poll of senior business executives in service-oriented companies, such as retailers and banks that rebounded to a three-month high of 58.2 from 54.9 in September, IHS Markit said Friday.

A similar survey of manufacturing activity slipped to 59.2 from 60.7, but it was still quite high. Any reading over 50 signals growth and numbers are above 55 are exceptional.

CDC.gov

Another reason for the payroll surge is the COVID infection rate continues to decline. This is in part because 70 percent of Americans have been fully vaccinated, a total of 193 million Americans

“The current 7-day moving average of daily new cases (68,793) decreased 7.4% compared with the previous 7-day moving average (74,290). A total of 45,655,635 COVID-19 cases have been reported as of October 27, 2021,” reported the CDC.

And there is reason to believe even more workers will return to their jobs this fall and winter—especially moms as their children return to schools and become vaccinated with the new children’s’ vaccines.

What could dim this optimistic prediction? Very little, in my opinion. Euro area economies are also roaring back with a 9 percent annual growth rate last quarter, according to Nobel Laureate Paul Krugman.

And the rest of the world is slowly recovering from the pandemic. It’s really a matter of continuing to vaccinate the un-vaccinated worldwide, which means restoring the supply-chains in this deeply interconnected world.

Is there anything that could prevent it from being restored? Maybe another war with…? Let’s hope not.

Harlan Green © 2021

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

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