July Housing Sales Stay Strong

Posted on August 25, 2021 by Popular Economics Weekly

The Mortgage Corner

Calculated Risk

WASHINGTON (August 23, 2021) – Existing-home sales rose in July, marking two consecutive months of increases, according to the National Association of Realtors®. Three of the four major U.S. regions recorded modest month-over-month gains, and the fourth remained level.

New-home sales also increased, signaling that soaring home prices haven’t discouraged buyers who are migrating to the suburbs and hinterlands as more work from home in the new gig economy. We have seen digital workers migrating from their offices in Seattle and other major cities to smaller towns in the Midwest and New England to live in more comfortable surroundings, thanks to the Internet.

FREDCaseShiller

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering existing-home sales in all nine U.S. census divisions, reported a 16.6 percent annual gain in May, up from 14.8 percent in the previous month.

The median existing-home pricetallied by the NAR for all housing types in July was $359,900, up 17.8 percent from July 2020 ($305,600), which differs from Case-Shiller because CS uses a 3-month trailing average to make it more statistically valid. Each region saw prices climb. This marks 113 straight months of year-over-year gains, say the Realtors.

Total existing-home sales,1 https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.0 percent from June to a seasonally adjusted annual rate of 5.99 million in July. Sales inched up year-over-year, increasing 1.5 percent from a year ago (5.90 million in July 2020).

“We see inventory beginning to tick up, which will lessen the intensity of multiple offers,” said Lawrence Yun, NAR’s chief economist. “Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.”

The months of supply increased in July to 6.2 months from 6.0 months in June, with inventories returning to normal levels. The all-time high was 12.1 months of supply in January 2009. The all-time low was 3.5 months, most recently in October 2020.

There is still not enough housing to meet soaring demand. Total existing-home housing inventory at the end of July totaled 1.32 million units, up 7.3 percent from June’s supply and down 12.0 percent from one year ago (1.50 million). Unsold inventory sits at a 2.6-month supply at the present sales pace, up slightly from the 2.5-month figure recorded in June but down from 3.1 months in July 2020, a historic low.

The housing market is so hot that individual investors or second-home buyers, who account for many cash sales, purchased 15 percent of homes in July. All-cash sales accounted for 23 percent of transactions in July, and up from 16 percent in July 2020.

But first-time buyers purchased just 30 percent of existing sales, which means the rest of the young adults leaving school and/or their parents may find rental housing to be a more viable option for the foreseeable future. How long is that—who knows?

Harlan Green © 2021

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

Posted in COVID-19, Housing, housing market | Leave a comment

Strong July Retail Sales

Posted on August 18, 2021 by Popular Economics Weekly

Financial FAQs

FREDretailsales

The DOW plunged more than 400 points at Tuesday’s opening, because retail sales were “weaker” say the pundits. But it was in large part because of lower new car sales, due to a shortage of computer chips.

In fact, the demand for both new and used cars is soaring, and retail sales are holding up. The average new car price hit a record $38,255 in May, according to JD Power, up 12 percent from the same period a year ago, and the cost of used cars and trucks has soared by 32 percent in the first six months of 2021. By contrast, their prices fell by an average of 0.6 percent a year from 2009 to 2019.which is a better way to look at sales activity, says MarketWatch.

And if the pundits looked just a bit further, they would know that auto manufactures are racing to meet the demand by not taking the normal summer factory shutdown to retool for new models. So it is really good news that demand is running so high for autos, and restaurants and gasoline products, as consumers are traveling more in the summer months.

Overall U.S. industrial production rose a seasonally adjusted 0.9 percent in July, the Federal Reserve reported Tuesday, and manufacturing activity alone rose 1.4 percent in July, boosted by an 11.2 percent jump in output of those motor vehicles and parts.

Even then auto production remains about 3.5 percent below its recent peak in January. It will take several months to play catchup, when additional computer chips used in autos are manufactured. US chip manufacturers such as Intel are part of the chip shortage caught by the surprise surge in demand.

But as the long-term FRED graph shows, retail sales are still far above the historical five percent annual increase.

“Advance estimates of U.S. retail and food services sales for July 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $617.7 billion, a decrease of 1.1 percent from the previous month, but 15.8 percent above July 2020, reported the US Census Bureau.

Market investors in particular should take a step back from the unrelenting news headlines that react to every piece of bad and good news without looking between the lines.

The U.S. economy grew at a blistering pace in the spring and repaired most of the damage caused by the pandemic thanks to widespread coronavirus vaccinations and a nearly full reopening of the economy, as I said recently.

The Q2 GDP report verifies that the American economy is capable of easily accomodating the Biden administration’s proposed infrastructure and American Family plan spending of some $4 trillion in additonal government investments should they be passed in their present form.

We still cannot ignore the soaring hospitalizations from the Delta variant that will slow down some economic activity through the fall. We won’t know until school openings how the Delta variant will affect school children and teaching staff, for starters. And many essential workers are hanging back because of the variant’s surge as well.

Covid Tracker

The CDC says, “The current 7-day moving average of daily new cases (114,190) increased 18.4% compared with the previous 7-day moving average (96,454). The current 7-day moving average is 66.3% higher compared to the peak observed on July 20, 2020 (68,685). (But) The current 7-day moving average is 65.0% lower than the peak observed on January 10, 2021 (254,023).”

So we can only hope that the latest rise in vaccinations and addition of a third booster shot for the most vulnerable that is already widely available in pharmacies will prevent further damage.

Harlan Green © 2021

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

Posted in Consumers, COVID-19, Economy | Leave a comment

Job Openings At Record High

Posted on August 12, 2021 by Popular Economics Weekly

Popular Economics Weekly

Calculated Risk

The number of job openings increased to a series high of 10.1 million on the last business day of June (yellow line on CR graph), the U.S. Bureau of Labor Statistics reported on Monday.

It seems many working-age adults aren’t ready to return to work for several reasons, based on early data from Ziprecruiter, an online employment agency. About 13 million Americans are currently receiving unemployment benefits. In some states, they stand to lose them if they don’t actively search for work. That’s because some states have reimposed work search requirements that were waived in the early days of the Covid-19 pandemic.

Ziprecruiter lists which states are terminating unemployment benefits early. “Early indications are that (unemployment) benefits have had some effect on job search,” says Julia Pollak, chief economist at Santa Monica, California-based Ziprecruiter, “but the effect is likely rather small because there are other things that are keeping people out of the labor force,” cited in a MarketWatch article.

She also lists some obvious reasons: The pandemic, which is resurgent in much of the country, and childcare, which has caused droves of workers — largely women — to stop working. Data from the Federal Reserve Bank of Dallas puts this number at 1.3 million. 

The Dallas Fed says 31 percent of workers are reluctant, for whatever reason, to return to their previous job. It’s a data point that has increased slowly but steadily for more than a year.

Hires rose to 6.7 million and total separations edged up to 5.6 million in the JOLTS report, which tells us there were one million new hires in July, which then is seasonally adjusted to give the actual unemployment report. Within separations, the quits rate increased to 2.7 percent. The layoffs and discharges rate was unchanged at 0.9 percent, matching the series low reached last month, which tells us that employers are reluctant to lay off anybody with the current labor shortage.

Could record high consumer confidence be another reason employees are reluctant to return to work during the ongoing pandemic? They feel flush with the $4 trillion in pandemic aid already flowing through the economy, so they can afford to look for better job choices with higher pay and benefits.

The Conference Board’s jobs-plentiful index increased to a 21-year high of 54.9, for starters, and wages and salaries at the bottom end of salaried workers are rising at the fastest clip since the pandemic.

“Consumers’ appraisal of present-day conditions held steady, suggesting economic growth in Q3 is off to a strong start,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ optimism about the short-term outlook didn’t waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve.”

American workers are perhaps in the best place in decades to take advantage of this economic recovery.

Harlan Green © 2021

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

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

Another Strong Jobs Report

Posted on August 6, 2021 by Popular Economics Weekly

Popular Economics Weekly

MarketWatch.com

This was another very strong unemployment report by the Bureau of Labor Statisticss (BLS) with 943,000 new nonfarm payroll jobs added in July and most of it in the service industries. Leisure/Hospitality, Government, Education/Health, and Professional/Business added 767,000 of those jobs.

“The unemployment rate declined by 0.5 percentage point to 5.4 percent in July, and the number of unemployed persons fell by 782,000 to 8.7 million,” said the BLS Household Survey. “These measures are down considerably from their highs at the end of the February-April 2020 recession. However, they remain well above their levels prior to the coronavirus (COVID-19) pandemic (3.5 percent and 5.7 million, respectively, in February 2020.”

This is why consumers remain so optimistic, even with alarm bells ringing that economic activity may slow due to the pandemic’s latest surge, as I said last week. Because July’s unemployment report confirms it’s not hurting the jobs market with the 6 million plus job vacancies and employers practically begging their employees to return to work.

Another reason for consumers’ optimism is that average hourly pay rose 4.0 percent and is now above the pre-pandemic level. No wonder, with the 8.7 million still unemployed, many of which maybe holding out for better pay and working conditions!

“At the current rate of hiring, the U.S. won’t regain all the lost jobs at least until early 2021 — and it could even take a lot longer than that,” says MarketWatch’s Jeffry Bartash.

How much longer it will take might depend on COVID-19, and the Delta Variant, which is causing a fourth surge in infections, overwhelming some hospitals in Texas, Florida, and other red states that aren’t enforcing a mask mandate.

CDC

“The current 7-day moving average of daily new cases (66,606) increased 64.1% compared with the previous 7-day moving average (40,597),” reports the CDC. “The current 7-day moving average is 73.8% lower than the peak observed on January 10, 2021 (254,063) and is 480.1% higher than the lowest value observed on June 19, 2021 (11,483). A total of 34,722,631 COVID-19 cases have been reported as of July 28.”

That is huge, folks, and even throws into doubt just when and how schools will open this fall. To see the level of community transmission in your county, visit COVID Data Tracker.

Harlan Green © 2021

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

Posted in Consumers, COVID-19, Economy, Weekly Financial News | 1 Comment

Can We Have a Soft Landing?

Posted on August 2, 2021 by Popular Economics Weekly

The Mortgage Corner

CBO

Fed Chair Alan Greenspan in early 2000 convinced GW Bush that he could finance GW’s war on terror without raising taxes by borrowing money at ultra-low interest rates. America’s sovereign debt had AAA credit rating at the time, and still does with two of the three major accreditation agencies. Greenspan maintained we could have a “soft landing” if the US economy overheated by tightening credit gradually without causing a recession.

Problem was the Fed under Greenspan held rates down too long with too easy credit as inflation began to rise and the economy overheated, resulting in too much irrational exuberance by banks and lenders that resulted in the Great Recession.

Does that sound familiar? Economists are beginning to wonder if the Fed under Jerome Powell to making the same mistake in financing our recovery from the COVID-19 pandemic.

However, the US economy is in a much better place now to tame economic activity—i.e., can create a soft landing without causing an ensuing recession—if the Biden administration and congress will pay for the investments we are making in our public improvements with the current infrastructure and family plan bills working through congress.

This is in addition to the already passed $trillions to pay for the pandemic. The new legislation will increase productivity by giving Americans earning wages and salaries better working conditions, and families a better education, including paid childcare and family leave that will lift many families with young children out of poverty.

The benefits of putting Americans back on a footing with other developed countries in the 38-member Organization of Economic Co-operation and Development (OECD) are almost incalculable, most of whose citizens work fewer hours for the same or better pay while producing the same amount of goods and services.

The bipartisan infrastructure deal reached by President Joe Biden and a group of senators would not only add to economic growth, but also lower the national debt, according to a new study from the University of Pennsylvania’s Wharton School.

“Over time, as the new spending declines, IRS enforcement continues, and revenue grows from higher output, the government debt declines relative to baseline by 0.4 percent and 0.9 percent in 2040 and 2050 respectively,” said Wharton team as cited by CNBC in June.

The problem has never been what policies would improve the lives on America’s Main Street, but how to pay for them, and it will take additional legislation under the budget reconciliation process to boost taxes. Over the past 40-odd years government-is-the-problem policies instigated in 1980 by conservative Democrats and Republicans had cut taxes and whittled down government programs that would benefit Main Street.

The solution is more progressive taxation enacted that would divert profits from corporations and investors not investing in America’s future to where it will do the most good—in our sadly neglected infrastructure and social safety net.

There are many more safeguards in place that should cushion a soft landing if inflation becomes worrisome because of safeguards put in place since the Great Recession; such as requiring banks and other lending institutions to maintain higher reserves.

The Biden administration wants to pay for future, more equitable economic growth by raising taxes on the wealthiest and corporations, rather than borrowing more that would increase the federal debt. The problem will be to refute the reigning economic orthodoxy that says higher taxes inhibit growth and investment.

However, the lower tax rates that have prevailed since 1980 have increased income inequality rather than boosting long term growth rates,

The best ways to deal with inflation and any possible overheating is to invest in the health and economic security of future generations rather than those of past generations that haven’t done enough to pay for the future.

Harlan Green © 2021

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

Posted in Consumers, COVID-19, Economy, Politics, Weekly Financial News | Leave a comment

Second Quarter Economic Growth Explodes

Posted on July 29, 2021 by Popular Economics Weekly

Financial FAQs

BEA.gov

The U.S. economy grew at a blistering pace in the spring and repaired most of the damage caused by the pandemic thanks to widespread coronavirus vaccinations and a nearly full reopening of the economy.

The Q2 GDP report verifies that the American economy is capable of easily accommodating the Biden administration’s proposed infrastructure and American Family plan spending of some $4 trillion in additional government investments, should they be passed in their present form.

“Real gross domestic product (GDP) increased at an annual rate of 6.5 percent in the second quarter of 2021, reflecting the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic,” according to the Bureau of Economic Analysis (BEA).

This is huge after the first quarter’s 6.3 percent growth and shows both consumers and businesses are spending enough to boost GDP growth past the pre-pandemic level.

The increase in real GDP in the second quarter reflected increases in personal consumption expenditures (PCE), nonresidential fixed investment, exports, and state and local government spending that were partly offset by decreases in private inventory investment, residential fixed investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Such growth should continue in the third quarter with agreement being reached on the $1 trillion national infrastructure plan after weeks of fits and starts, once the White House and a bipartisan group of senators agreed on major provisions of the package that’s key to President Joe Biden’s agenda.

The package includes $110 billion for highways, $65 billion for broadband and $73 billion to modernize the nation’s electric grid, according to a White House fact sheet. Additionally, there’s $25 billion for airports, $55 billion for waterworks and more than $50 billion to bolster infrastructure against cyber attacks and climate change. There’s also $7.5 billion for electric vehicle charging stations.

Government assistance payments in the form of loans to businesses and grants to state and local governments increased in Q2, while social benefits to households, such as the direct economic impact payments, declined. In the first quarter of 2021, real GDP increased 6.3 percent (revised), as I said.

“The $1.2 trillion Bipartisan Infrastructure Framework is a critical step in implementing President Biden’s Build Back Better vision,” said the White House fact sheet. “The Plan makes transformational and historic investments in clean transportation infrastructure, clean water infrastructure, universal broadband infrastructure, clean power infrastructure, remediation of legacy pollution, and resilience to the changing climate. Cumulatively across these areas, the Framework invests two-thirds of the resources that the President proposed in his American Jobs Plan.”

Inflation is running hot, as was expected from the sudden surge in demand that has GDP growth exceeding its pre-pandemic level. The PCE price index that the Fed prefers to measure inflation increased 6.4 percent, compared with an increase of 3.8 percent (revised). Excluding food and energy prices, the PCE price index increased 6.1 percent, compared with an increase of 2.7 percent (revised).

This level of inflation is worrisome if prolonged, but the Federal Reserve believes supply bottlenecks are causing the price rises that should subside once industry activity returns to normal and the 7 million workers still unemployed due to the pandemic return to work.

This is the biggest investment in America’s future since the Eisenhower and Kennedy days more than two generations ago when our tax monies were spent on real things; like our interstate highway system, moon landings, and development of the Internet.

These new government spending initiatives will find new ways to benefit workers in this new economy as other developed countries are doing—i.e., with governments working to pay it forward for future generations.

Harlan Green © 2021

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

Posted in Consumers, COVID-19, Economy, Politics, Weekly Financial News | Leave a comment

Why Are Consumers So Confident?

Posted on July 28, 2021 by Popular Economics Weekly

Popular Economics Weekly

Conference Board

Rather than retreating mildly this month as expected, the Conference Board’s consumer confidence index edged up slightly from an upward-revised June level to stand at 129.1,” said Reuters.  That was a new pandemic-era high, although still slightly below the pre-pandemic (February 2020) level of 132.6. 

Why are consumers so optimistic with alarm bells ringing that economic activity may slow due to the pandemic’s latest surge? Because it’s not hurting the jobs market with the 6 million plus job vacancies and employers practically begging their employees to return to work.

The Conference Board’s jobs-plentiful index increased to a 21-year high of 54.9, for starters, and wages and salaries at the bottom end of salaried workers are rising at the fastest clip since the pandemic.

“Consumers’ appraisal of present-day conditions held steady, suggesting economic growth in Q3 is off to a strong start,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ optimism about the short-term outlook didn’t waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve.”

Consumers have been spending like there’s no tomorrow since January, as I’ve said. The question remains just how long can that continue with the coronavirus Delta variant causing infection rates to soar among the unvaccinated, but rising prices aren’t fazing consumers with so much disposable income at their disposal to spend.

Short-term inflation expectations eased slightly but remained elevated., said Franco. “Spending intentions picked up in July, with a larger percentage of consumers saying they planned to purchase homes, automobiles, and major appliances in the coming months. Thus, consumer spending should continue to support robust economic growth in the second half of 2021.

The IMF among other authorities believes worldwide GDP will expand 6 percent this year. That is huge, up from 2-3 percent in recent years.

Households are still buying plenty of goods, but they have shifted their spending toward services they avoided during the pandemic, “dining out, entertainment, travel, vacation trips and so forth,” reported MarketWatch in last week’s retail sales report.

And this is where any future super-spreader events will occur. It is why the US Surgeon General is saying masks should again be worn in crowded indoor locations with poor ventilation—such as bars and restaurants. This may certainly cause consumers to take notice, but not yet per consumer confidence surveys.

COVIDTracker

Take bars and restaurants, the only category in the monthly retail report that involves services. Retail sales jumped 2.3 percent in June, the government said Friday, and rose sharply for the fourth month in a row. And through the first six months of 2021 receipts are up almost 38 percent.

We know consumers also would have bought more new cars and trucks last month, but automakers cannot produce enough of them because of a shortage of computer chips. Semiconductors are now a critical component in modern vehicles.

There is still a reluctance for some workers to return to work. I reported last week that the job-listing site Indeed did a 5,000 person survey that gave an additional reason why workers are reluctant to return to work.

“Among the unemployed, concern about COVID-19 is the most commonly cited reason for a lack of urgency in looking for work,” wrote Nick Bunker, the economic research director for North America at the Indeed Hiring Lab, in a blog post on the survey results. Some 23% of unemployed people said fear of the virus was keeping their job search “non-urgent.”

This doesn’t seem to have dimmed consumer confidence or spending habits now. But the current 7-day moving average of daily new cases (40,246) increased 46.7% compared with the previous 7-day moving average (27,443), says the CDC(see graph). The current 7-day moving average is 84.2% lower than the peak observed on January 10, 2021 (254,052) and is 250.6% higher than the lowest value observed on June 19, 2021 (11,480). 

Although pundits some economists are concerned about the Delta variant and rising prices, it has not dented consumers’ confidence in their future.

Harlan Green © 2021

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

Posted in Consumers, COVID-19, Economy, Uncategorized, Weekly Financial News | Leave a comment

Can We Fix the Housing Shortage–Part II?

Posted on July 26, 2021 by Popular Economics Weekly

The Mortgage Corner

Calculated Risk

WASHINGTON (July 22, 2021) – Existing-home sales increased in June, snapping four consecutive months of declines, according to the National Association of Realtors®.

But it’s not enough to bridge the supply-demand gap, especially for those entry-level homebuyers in their thirties with families that have lower incomes and credit scores. Lenders haven’t reduced the very stringent credit standards in place since the Great Recession and busted housing bubble that would allow more first-time homebuyers to take advantage of record-low interest rates.

“Total existing-home sales,1 https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 1.4% from May to a seasonally adjusted annual rate of 5.86 million in June. Sales climbed year-over-year, up 22.9% from a year ago (4.77 million in June 2020).”

Will housing construction be able to bridge the huge gap between what is needed and what is available? Not in the near term, as there are too many labor and material shortages, say the homebuilders. Demand is so hot for housing with a limited supply that homes typically sold within 17 days (24 days one year ago), say the Realtors in the NAR’s most recent Buyer Traffic Index.

U.S. home builders started construction on homes at a seasonally-adjusted annual rate of 1.64 million in June, representing a 6.3 percent increase from the previous month’s downwardly-revised figure, the U.S. Census Bureau reported this week. Compared with June 2020, housing starts were up 29 percent, though the year-over-year comparison is skewed somewhat by the effects of the COVID-19.

FREDhousestarts

But that is nowhere near the 2 million residential units under construction in the mid-2000s (see FRED graph), which brought on the housing bubble. But times are much different today, as housing construction almost ground to a halt from the housing bubble and Great Recession that followed. Population growth continued, however, so growth today’s builders are playing catchup.

The June reading of 1.64 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months, says the National Association of Home Builders. Within this overall number, single-family starts increased 4.2 percent to a 1.10 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 2.4 percent to a 474,000 pace.

So how can we increase production? “We’ll need to do something dramatic to close this gap,” said Yun in a press release. And that gap is mainly affordability, as housing prices are increasing in double-digits, while real personal income has averaged some five percent per year.

First-time buyers accounted for just 31 percent of sales in June, also even with May but down from 35 percent in June 2020. This is far below past history when 40 percent were first-timers. Part of the problem is that entry-level buyers tend to have lower credit scores when lenders have maintained very high credit score criteria, averaging above 750 at last report, whereas homebuyers with scores between 680-720 were considered good credit borrowers before the Great Recession and housing bubble.

Realtors have proposed increasing the housing supply by creating or expanding tax credits, loans or grants for builders who renovate or build new housing in low-income areas and who convert old malls and factories into homes. They also asked for incentives for cities to allow denser zoning, an approach that President Biden included in his infrastructure proposal, Reuters reported, as I said last week.

But pressure has to be put on lenders to reduce their sky-high credit standards, as well, to allow those entry-level homebuyers with less available cash and slightly lower credit scores back into the housing market.

Harlan Green © 2021

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

Posted in Uncategorized | 2 Comments

How Do We Ease our Workload?

Posted on July 20, 2021 by Popular Economics Weekly

Financial FAQs

occupydemocrats.com

Why do Americans worker harder with longer hours than in other developed countries? And why is America’s income inequality the worst in the developed world?

Both questions can be quickly encapsulated by NYTimes’ columnists Bret Stephens and Gail Collins in a back and forth Q&A opinion column.

To Gail Collins question whether Stephens was still enthusiastic about Joe Biden’s big spending initiatives, he said he liked most of them, but:

“…the program I most oppose is the child tax credit, which sounds like liberal nirvana but would be difficult to administer and has no work requirements, which effectively reverses the gains the country made after Bill Clinton’s welfare reform. I’m also not too fond of the huge Medicare expansion, another noble-sounding effort that will further push a financially strained program toward insolvency.”

Stephens in this case repeats the conservative mantra that government-paid benefits strain the taxpayers’ coffers, and discourage work. But in reality, he is parroting conservatives’ opposition to any public spending that grows government programs, which is the reason Americans have been deprived of the welfare benefits of other developed countries—e.g., universal health care, paid family leave, a livable minimum wage, and nationally mandated paid vacations.

Denmark is probably the best example of what modern technology has enabled to ease the workloads of working folk, with its $20 per hour minimum wage and 33-hour average work week.

Whereas, according to NYTimes guest columnist Bryce Covert, “Prepandemic, nearly a third of Americans clocked 45 hours or more every week, with around 8 million putting in 60 or more. While Europeans have decreased their work hours by about 30 percent over the past half century, ours have steadily increased.”

EPI.org

There is no secret where the increased wealth generated by modern technology has gone in the US; to the owners of capital—stock holders, CEOs, and financial entities that hold their debt—rather than wage-earning employees.

Why? It has been outright wage suppression since the 1980s, at least, as the Federal Reserve under Paul Volcker fought any form of incipient inflation by tightening credit, which largely suppressed wage growth while Big Business began its lobbying campaigns to enact anti-labor legislation that weakened unions’ collective bargaining efforts.

Much of the anti-government rhetoric came under the guise that government was less efficient in producing overall wealth than the private sector. The pandemic is also bringing another problem to light that requires more government oversight—more work from home in an expanded ‘gig’ economy.

Steven Hill in an article for Project Syndicate, says “According to an April 2020 survey in the United States, 74% of companies are planning to “shift some employees to remote work permanently.” Similarly, a May 2020 analysis by researchers at the Federal Reserve Bank of Atlanta found that companies expect the share of working days spent at home to increase threefold, with many employees operating remotely 1-3 days per week.”

Working from home or other sites away from the office will hurt employees in so many ways without a government that clearly defines these new working conditions—because it blurs the line between regularly employed workers with clearly defined benefits and independent contractors that must provide their own safety net (e.g., healthcare, hours worked), for starters.

What does all this ultimately lead to? More work will be performed by algorithms and robots, of course, which can easily be trained to perform repetitive, predictable tasks.

“Historically, researchers have found that automation is adopted faster during economic downturns, and the COVID-19 recession was no exception. At the height of the crisis in advanced economies, the bots appeared to be making major advances,” says Hill.

“The net effect of this technological adoption over time will be to render more humans obsolete. Yes, some experts predict that new jobs will be created to service the robots and artificial-intelligence (AI) systems. But whether those jobs will be as numerous, pay as much, or be of the same quality as previous jobs remain open questions.“

So we have it in a nutshell. America will have to find new ways to benefit workers in this new economy, as other developed countries are doing—i.e., with the help of their governments working for them, rather than for Big Business.

Harlan Green © 2021

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

Posted in Consumers, COVID-19, Economy, Keynesian economics, Weekly Financial News | Leave a comment

Retail Sales Splurge Won’t Last

Posted on July 19, 2021 by Popular Economics Weekly

Calculated Risk

“Advance estimates of U.S. retail and food services sales for June 2021, adjusted for seasonal variation and holiday and trading-day differences, according to the US Census Bureau, but not for price changes, were $621.3 billion, an increase of 0.6 percent from the previous month, and 18.0 percent above June 2020.”

Consumers have been spending like there’s no tomorrow since January, but how long can that continue with the coronavirus Delta variant causing infection rates to soar among the unvaccinated?

COVIDTracker

Retail sales should continue to decline from current nosebleed levels, since surveys show that consumers are most worried about a COVID-19 resurgence.

The CDC reports that “the current 7-day moving average of daily new cases (26,306) increased 69.3% compared with the previous 7-day moving average (15,541). The current 7-day moving average is 89.6% lower than the peak observed on January 10, 2021 (251,880) and is 129.3% higher than the lowest value observed on June 20, 2021 (11,472). A total of 33,797,400 COVID-19 cases have been reported as of July 14.”

Households are still buying plenty of goods, but they have shifted their spending toward services they avoided during the pandemic, “dining out, entertainment, travel, vacation trips and so forth,” reported MarketWatch.

And this is where any future super-spreader events will occur. That is why the US Surgeon General is saying masks should again be worn in crowded indoor locations with poor ventilation—such as bars and restaurants. This will certainly cause consumers to take notice.

Take bars and restaurants, the only category in the monthly retail report that involves services. Sales jumped 2.3 percent in June, the government said Friday, and rose sharply for the fourth month in a row. And through the first six months of 2021 receipts are up almost 38 percent.

We know consumers also would have bought more new cars and trucks last month, but automakers cannot produce enough of them because of a shortage of computer chips. Semiconductors are now a critical component in modern vehicles.

Another hit to higher retail sales could be a reluctance for more workers to return to work. I reported last week that the job-listing site Indeed did a 5,000 person survey that gave an additional reason why workers are reluctant to return to work.

“Among the unemployed, concern about COVID-19 is the most commonly cited reason for a lack of urgency in looking for work,” wrote Nick Bunker, the economic research director for North America at the Indeed Hiring Lab, in a blog post on the survey results. Some 23% of unemployed people said fear of the virus was keeping their job search “non-urgent.”

So it may be that retail sales return to the five percent average that has prevailed since the early 1990s (see Calculated Risk graph), as the pandemic stimulus payments subside.

Retail sales comprise roughly 50 percent of consumer spending, so its trend may mirror how long this post-pandemic prosperity will last, which will be dependent on how quickly product shortages end, and the uncertainty of future job prospects in an economy that is vastly changed since January of last year.

Harlan Green © 2021

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

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