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Financial FAQs

Calculated Risk

Job openings are plentiful as ever in the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) report for September. It gives the best picture of job growth, better than last Friday’s punk unemployment report (with just 194,000 new nonfarm payroll jobs), because it reports actual numbers rather than seasonally adjusted figures reporting changes that deviate from a typical month.

There were 10.5 million job openings (yellow line) in September. Employers are begging for workers because they see a rising demand for goods and services.

There were actually 6.3 million new hires, and 6 million separations, which means workers are leaving their current job in droves to find a better job. The so-called (voluntary) Quits rate, for instance, is up 43 percent YoY, an all time high.

The Calculated Risk graph shows that there was a slight drop in job openings and hires, but because Quits and Layoffs are increasing (light blue and red bars), it’s a sign of an improving jobs market.

As evidence, weekly jobless benefit claims sank to a new pandemic low and fell below 300,000 for the first time in a year and a half, amid a frantic effort by companies to hire more workers. New jobless claims sank by 36,000 to 293,000 in the seven days ended Oct. 9 from a revised 329,000 in the prior week, the government said Thursday. 

Much has been written about workers not returning to work because of the pandemic, but the out of work number is slowly declining as the vaccine mandates kick in that have brought down the infection rate.

Calculated Risk cites yesterday’s CDC report on the decline in infection rates: “…14 states and D.C. have achieved 60% of total population fully vaccinated: Connecticut at 69.6%, Maine, Rhode Island, Massachusetts, New Jersey, Maryland, New York, New Mexico, New Hampshire, Washington, Oregon, Virginia, District of Columbia,  Colorado, and California at 60.0%.”

Inflation has peaked at the moment with the Consumer Price Index above 5%, but U.S. wholesale prices rose in September at the slowest pace in ninth months, which means the supply-chain slowdown that has caused the spike in raw materials could be easing.

This reinforces my belief that we are about to enter a decade of very good growth with plenty of good, available jobs.

Some say that there could be a temporary slowdown if the Democrats can’t get their act together over the twin infrastructure and build back better social bills, or even a longer-term debt ceiling agreement past December.

But that’s hard to believe when it means so much for the party and our country; whatever the final dollar cost.

Harlan Green © 2021

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

Popular Economics Weekly

FRED/Calculated Risk

Retail and Food service sales, ex-gasoline, increased 0.7 percent in a month, and 15.1 percent above August 2020, per the US Census Bureau estimate, which is a sign that economic growth isn’t faltering due to the Delta variant.

U.S. retail sales unexpectedly increased in August, likely boosted by back-to-school shopping and child tax credit payments from the government, which could temper expectations for a sharp slowdown in economic growth in the third quarter, said Reuters.

Most school districts started their 2021-2022 academic year in August, with in-person learning resuming after last year’s shift to online classes because of the pandemic.

Economists and several Fed Governors had been predicting a slowdown in the third quarter and beyond because of the Delta variant-caused surge in infections, but consumers aren’t buying that, still flush with cash from the rescue packages.

Sales advanced in almost every major retail category in August, and they rose a much stronger 1.8 percent if autos are excluded, said MarketWatch. A widespread shortage of new cars and trucks has depressed sales at auto dealers due to the ongoing computer chip shortage.

This combined with the huge number of job openings, at a series high of 10.9 million on the last business day of July, means that businesses believe the 2021 economy is just beginning to roar.

BEA.gov

Predictions of Q3 GDP are all over the map at present because of uncertainty over the Delta variant. The Atlanta Fed’s GDPNow estimate for Q3 growth is 3.6 percent, though a consensus of Blue Chip economists predicts 5 percent Q3 growth.

I believe the Conference Board’s forecast is closest to reality. It predicts that US Real GDP growth will slow to 5.5 percent (annualized rate) in Q3 2021, vs. 6.6 percent growth in Q2 2021, and that 2021 annual growth will come in at 5.9 percent (year-over-year).

This is a huge increase, even though its forecast “…is a downgrade from our August outlook and incorporates the larger-than-expected impact that the COVID-19 Delta variant has had on the US economy. Looking further ahead, we forecast that the US economy will grow by 3.8 percent (year-over-year) in 2022 and 3.0 percent (year-over-year) in 2023,” said the Conference Board.

The National Retail Federation said the rise in sales despite the headwinds reflected the continued strength of the American consumer and the resilience of the nation’s retailers.

“We maintain our confidence in the historic strength of consumers and fully expect a record year for retail sales and a strong holiday season for retailers,” NRF President Matthew Shay said.

Why? Americans are sitting on at least $2.5 trillion in excess savings accumulated during the pandemic. And wages are rising as companies scrambled to fill the record 10.9 million job openings in July.

Harlan Green © 2021

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

Financial FAQs

FREDcpi

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in August on a seasonally adjusted basis after rising 0.5 percent in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.3 percent before seasonal adjustment.”

The above FRED cpi graph shows the most recent spike in retail inflation, but also its relative insignificance compared to past inflationary surges, especially in the 1970s and 1980s.

Then why so much worry about its recent spike? Because Wall Street investors like cheap money, and bond holders’ low inflation, and they worry that the Federal Reserve might react too soon to such an inflationary surge by tightening credit, when it’s primary goal should be to keep people employed and consumers happy.

Is inflation one of the major problems facing the US economy today? You would think so listening to major commentators and some economists. Zanny Minton Bedoes, Editor in Chief of The Economist, said it was the major problem for sustainable economic growth if prolonged on Fareed Zakaria’s Sunday TV cast recently.

Consumers and businesses also like cheap money to buy homes and things, but they aren’t so worried at present because lots of COVID-19 recovery money is available and in circulation.

Therefore, it’s a little early to be worrying about what I call real inflation—prices rising faster than wages for more than a few months. The August CPI index showed its first decline in 8 months from 5.5 to 5.3 percent in August.

Economists have little to say about what causes long term inflation in the US. They only have the 1970s as an example. The FRED cpi graph shows when it really peaked. It was during the 1975 and 1980 recessions largely because the 1973 Arab oil embargo cut off Middle Eastern oil on our very oil dependent, auto-driven economy—before we began switching to renewable energy sources and more energy efficient regulations on homes and businesses.

Labor unions in the 1970s were able to push their wage demands to keep up with skyrocketing prices; oil was more than $100 per barrel, and there were long lines at gas stations—those stations that still had gas to sell. It was a hectic time, but is hardly the problem today, even with fewer workers and disrupted supply chains to meet the surging economic recovery.

The Fed’s Jerome Powell has said they will be vigilant if it remains high for too long, but that would mean labor costs, which are approximately two-thirds of product costs, continue to increase as they have since the end of this pandemic-induced recession in April, 2020.

FREDwagessalaries

Wages and salaries rose 10.1 percent annually in July 2021, per the latest available data on the above FRED graph, an uncomfortable level if prolonged. It reached its highest level in the 1970s, per the FRED graph on wages and salaries that dates from 1960. But as the Federal Reserve tightened inflation controls in 1980 by initially raising interest rates to double digits, and labor lost much of its bargaining clout as union membership declined, inflation began its long descent to the 2 percent average that has pretty much prevailed since the 1990s.

In fact, it has declined so much that the problem since the end of the Great Recession has been how to keep a healthy level of inflation. This was motivated by the fear of a repeat of Japan’s decades long era of deflation when its economy was shrinking.

So what inflation should we worry about? When businesses and government aren’t investing in productive enterprises, which has been the case in recent decades—with a strong safety net that makes consumers feel safe and not on the verge of bankruptcy with every unexpected downturn; such as the Biden administration has proposed; and investments in infrastructure and future technologies that will insure there are good jobs for all of US

Harlan Green © 2021

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

Popular Economics Weekly

Calculated Risk

The number of job openings increased to a series high of 10.9 million on the last business day of July, the U.S. Bureau of Labor Statistics reported today. Job openings increased in several industries, with the largest increases in health care and social assistance (+294,000); finance and insurance (+116,000); and accommodation and food services (+115,000).

Health care job openings surged because the Covid-19 Delta variant is filling hospitals again, while surging consumer spending on leisure and travel is creating a higher demand for jobs in finance, accommodation and food services.

And now we have looming school openings, which could foster even more job openings, if teachers are reluctant to return to work because of conflicting mask mandates in red states, which I reported last week, and induces classroom shutdowns with quarantines affecting those not vaccinated or wearing masks.

As of September 2, over 5 million children have tested positive for COVID-19 since the onset of the pandemic, reports the American Academy of Pediatrics. Although a lower percentage of them are hospitalized, it is putting a burden on school openings.

The number of children and teens suffering from the coronavirus-borne illness COVID-19 exceeded 250,000 for the first time since the start of the pandemic in the week through Sept. 2, a worrying trend coming just as they return to school in person.

The current 7-day moving average of daily new cases (153,246) increased 4.9% compared with the previous 7-day moving average (146,087), said the CDC. The current 7-day moving average is 123.6% higher than the value observed approximately one year ago (68,533 new cases on July 20, 2020).

It really looks like there is too much uncertainty keeping many workers from returning to work. Total hiring slipped for the first time this year. Job hires fell by 160,000 to 6.7 million, with hiring in the retail sector down sharply. This is while separations rose 174,000 to 5.8 million. This includes those fired and those who left the job.

What will bring them back? More vaccinations and mask mandates will be most effective, according to experts, with CNN saying President Joe Biden will push for vaccine mandates and testing programs as part of a revamped approach to ending the pandemic.

As American students return to classrooms, battles over masks and vaccine requirements for older children have erupted in school districts around the country, as I’ve said. Health officials say they expect vaccines to be authorized for children under 12 in the next several months, but parents have become frustrated at the pace with which the process is unfolding.

So, although the huge number of job openings show economic activity speeding up, some of the country still needs convincing that the coronavirus pandemic must be vanquished for any return to normal activity.

Harlan Green © 2021

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