JOLTS Survey Reports Increase in Hiring

Posted on September 10, 2019 by Popular Economics Weekly

Financial FAQs

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Calculated Risk

This Calculated Risk graph for the Labor Department’s Job Openings and Labor Turnover Survey says (almost) all of it. The yellow line signifying job openings is still soaring far above hires (blue line); so much so that there were still 1.2 million job openings left unfilled in July, the last month surveyed.

Yes, the U.S. economy is so big that there were 5.95 million hires, an increase of 237,000 jobs, and 5.8 million separations that were for a variety of reasons. Many of the separations were voluntary because those employees probably found better jobs.

It’s important to note that the blue columns in the graph show that Quits, or the number of voluntary separations, have been rising since 2010 and are at post-recession highs. Quits are up 3 percent in just the last 12 months.

So we are seeing a very strong job market with that substantial gap between 7.2 million job openings and 5.8 million hires. Hires are still increasing in this 11th year of the recovery from the 2017-19 Great Recession. I.e., there are no signs of weakness in hires that is usually a first sign of contraction.

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NFIB.com

Another jobs indicator, the NFIB Small Business Optimism Index, fell 1.6 points to 103.1, remaining within the top 15 percent of readings, per Calculated Risk, which is important because small businesses create some 80 percent of new jobs.

However, the NFIB reported job creation picked up in August, with an average addition of 0.19 workers per firm compared to 0.12 in July. Finding qualified workers is becoming more and more difficult with a record 27 percent reporting finding qualified workers as their number one problem (up 1 point).

But, “If the widely discussed slowdown occurs, a significant contributor will be the unavailability of labor–hard to call that a “recession” when job openings still exceed job searchers,” said the NFIB.

A further caveat to continued job growth was the Challenger, Gray & Christmas staffing report, which said U.S.-based employers ramped up the pace of downsizing in August, as companies announced plans to cut 53,480 jobs from their payrolls. This is up 37.7 percent from July’s total of 38,845, according to the latest report on job cuts released Thursday.

“Employers are beginning to feel the effects of the trade war and imposed tariffs by the U.S. and China. In fact, trade difficulties were cited as the reason for over 10,000 job cuts in August,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, Inc.

July was a good month for job formation, in other words, as well as the August unemployment report that showed 130,000 new payroll jobs. However, optimism is slipping among the small business owners that are saying they don’t expect better business conditions and real sales volumes in the coming months.

Harlan Green © 2019

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Why Fewer Jobs Created in August?

Posted on September 9, 2019 by Popular Economics Weekly

Popular Economics Weekly

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MarketWatch

The economy added just 130,000 new jobs in August, marking the smallest increase in three months and offering more evidence that hiring has slowed amid a broadening trade dispute with China that’s disrupted the U.S. and global economies, is the ‘lede’ story this Friday.

There were also downward revisions to the last 2 months, the BLS said. The change in total nonfarm payroll employment for June was revised down by 15,000 from +193,000 to +178,000, and the change for July was revised down by 5,000 from +164,000 to +159,000.

The soft employment figures should keep the Federal Reserve on track to cut interest rates later this month, even after another sharp increase in wages.

Longer term interest rates are already plunging and there is speculation that rates might even trend lower, particularly if the Fed continues to lower short term rates. It could boost home sales and prices, as well, if no recession looms due to the other factors (trade war?).

Harvard economics Professor Kenneth Rogoff said recently that it isn’t out of realm of possibility that more Central Banks might introduce negative interest rate yields to prevent another recession as is already the case in the EU and Japan, as I’ve been saying.

Average hourly earnings for all employees on private nonfarm payrolls rose by 11 cents to $28.11, following 9-cent gains in both June and July. Over the past 12 months, average hourly earnings have increased by 3.2 percent, said the Bureau of Labor Statistics (BLS), also.

Federal Reserve Chairman Jerome Powell said Friday afternoon that the most recent monthly gauge of the U.S. labor market fit into an overall picture of a healthy jobs market and economy.

In a question-and-answer session in Zurich, Powell said the outlook for the economy remains favorable, describing the future as one likely to reflect continued moderate economic expansion.

Then why the downward trend in hiring? Nobel economist Paul Krugman says that Trump’s trade policies are bad for productive business, in particular, which are businesses that must plan for the longer term. That excludes extractive businesses, like oil and coal mining that only think short term; which means until the oil and coal reserves run out.

“Trump’s trade war isn’t just that tariffs raise costs and prices,” said Krugman, “while foreign retaliation is cutting off access to important markets. It is that businesses can’t make plans when policy zigzags in response to the president’s whims.”

The gain in new jobs was even weaker if hiring tied to the upcoming U.S. Census is stripped out. In August, employment in federal government rose, largely reflecting the hiring of temporary workers for the 2020 Census. Private-sector employment was up by 96,000, with notable job gains in health care and financial activities and a job loss in mining.

There are other factors slowing job growth to consider, also. No national infrastructure bill has been passed, when that would be the surest way to jump-start employment in productive businesses. But it means spending government money, and the Trump administration only wants to spend taxpayers’ money on border walls; even attempting to take away some $3.4 billion from the defense budget to do so.

So this could just be the beginning of slower job growth, if the trade wars aren’t resolved soon, as I and many others have been saying. But who will resolve them in time to prevent that R word from surfacing, once again?

Harlan Green © 2019

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Where are World’s Most Livable Cities, and Why?

Posted on September 5, 2019 by Popular Economics Weekly

Answering Kennedy’s Call

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Noozhawk.com

I first attended the Goleta Dam Dinner on its 10th anniversary in 2019 that was held at Lake Los Carneros on a dam built long before the City of Goleta, California was formed. It made me realize what a livable city Goleta had become.

Here in this relatively new and still small city, founded in 2002 and nestled beside its famous neighbor, Santa Barbara, were families of all ages and stages happily celebrating not only their sense of community spirit, but the natural beauty of its surroundings that is a unique blend of mountains and ocean located on the central California coast.

It made me realize how successful was the formation of this new, very livable California city so loved by its residents, where I had been privileged to live and help establish, in spite of the many obstacles to the formation of new governmental entities in recent years.

It was a successful community because of the attention paid to both the environment and safety concerns of its citizens—especially the children.

I know it won’t make the list of The Economist Intelligence Unit’s annual Global Liveability Index that really only pays attention to larger cities, where we don’t see this community spirit and camaraderie.

Vienna was the top city on The Economists’ list, with Australia and Canada each having three cities in its top 10 listing of the better-known cities that made The Economists’ Liveability Index. .

  1. 1. Vienna, Austria
  2. 2. Melbourne, Australia
  3. 3. Sydney, Australia
  4. 4. Osaka, Japan
  5. 5. Calgary, Canada
  6. 6. Vancouver, Canada
  7. 7. Toronto, Canada
  8. 8. Tokyo, Japan
  9. 9. Copenhagen, Denmark
  10. 10. Adelaide, Australia

No U.S. city was in the top 20, with Honolulu ranking highest at No. 22. Atlanta came in 33rd place; Pittsburgh, 34th; and Seattle, 36th. New York was all the way down in the 58th spot, in part because of low scores for infrastructure, stability and possible crime issues.

That could be because it’s easier for the residents of smaller cities to confront city councils with their concerns—at least in the U.S. of A. It has to be why the City of Goleta became one of the 50 safest American cities in 2017, eleven years after its formation, according to a survey by Safewise, a security firm.

What then does “liveability” mean? The Economist is a UK Magazine, which might serve as a bias for a more European civic viewpoint, perhaps. But the issue of safety is certainly at the forefront of making any community liveable—especially for children.

And the rising tide of violence in American cities—so much so that in 1992 U.S. Surgeon General Everett Koop declared violence a public health emergency—means the situation in American cities hasn’t improved.

And now even more so when U.S. Surgeon General Vivek Murthy was fired by President Trump in 2017 after he spoke against gun violence, calling it a public health issue that needs public investment, and stood in support of the victims in Orlando, Florida, where one of the worst mass shootings in American history had just occurred.

It also has much to do with so-called Smart Urban Planning. Architect Suzanne Lennard, and Psychiatrist Henry L. Lennard have written extensively on what makes communities livable in books such as The Forgotten Child (2000, Gondolier Press, Carmel, CA).

Children are safest where there are neighborhood adults with ‘eyes on the streets’ that watch over them, as in many densely-packed European cities with their public squares. Children are also safer where streets are designed and neighborhoods zoned to allow children to roam and explore, rather than be dependent on the auto to transport them to school, for instance, as is the case in many poorly-planned American suburbs.

Such concerns were incorporated into the City of Goleta—that made it such a close-knit, ‘liveable’ community, in my opinion. It was also why attending the Goleta Dam Dinner’s 10th anniversary was such a special event.

Harlan Green © 2019

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What Happens When % Rates Go Even Lower?

Posted on September 2, 2019 by Popular Economics Weekly

The Mortgage Corner

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FRED

The NAR’s pending home sales index was softer than expected in July, thereby reversing nearly all of its June increase.  That left the index with a slight YOY decline of 0.3 percent.  Those results probably mean that at least part of the July rebound in existing home sales will be reversed in August, though any drop in August resales may be milder than the July decline in the pending index, says market observer ICAP, a Reuters subsidiary.

But interest rates are plunging and there is speculation that interest rates might even trend lower, I said in a recent column. It could boost home sales and prices higher, if no recession looms due to other factors (trade war?). Harvard economics Professor Kenneth Rogoff said recently that it isn’t out of realm of possibility that more Central Banks might introduce negative interest rate yields to prevent another recession as is already the case in the EU and Japan.

But lower interest rates also boost the value of housing as more borrowers become eligible to buy, increasing the demand for housing; unless builders are able to increase production. But that isn’t certain with the 25 percent increase in the Canadian lumber tariff, which has increased construction costs $8,000, according to estimates, and the severe construction labor shortage.

I also said the Guardian reports Jyske Bank, Denmark’s third largest, has begun offering borrowers a 10-year deal at -0.5 percent, while another Danish bank, Nordea, says it will begin offering 20-year fixed-rate deals at 0 percent and a 30-year mortgage at 0.5 percent.

There’s also another effect of lower rates. Barron’s economist Matthew Klein states the precipitous drop in interest rates “should have a big impact on refinancing activity. U.S. households owe roughly $9.4 trillion in mortgage debt, and a bit more than half of that takes the form of conventional home loans that conform to standards set by Fannie Mae and Freddie Mac. More than 90 percent of those 30-year mortgages have an interest rate above the current market rate.”

Not all will choose to refinance, of course. Black Knight, a mortgage research firm, calculates about 10 million mortgages would be candidates for refinancing, based on today’s market rate (3.6 percent), interest rates on existing mortgages (at least 4.25 percent), credit score (above 720), and loan-to-value ratios (below 80 percent).

Should market rates drop to 3.4 percent, Klein quotes Black Knight estimates that the number of potential refinancing candidates would jump to 13 million. Mortgage rates of 3 percent, which would represent a sharp decline from current levels, would translate into 20 million refi candidates.

This is now looking like a real possibility. We know what happened the last time there was a precipitous drop in interest rates; the housing bubble. Rates had dropped sharply after the 2001 recession, and then Fed Chair Alan Greenspan labored to keep interest rates too far below existing inflation rates to finance the War on Terror that frittered away 4 years of budget surpluses inherited by GW Bush.

This led to double-digit home price increases for several years, hence the housing bubble; which in turn led to immense overbuilding and the liar-loans pushed by lenders to sell as many homes as possible.

Today the biggest difference is that we don’t have inflation rates of 3-5 percent that existed in the early 2000s, therefore not as much fuel to boost housing prices. Values are currently on the down trend and in the 3 percent range, per the Case-Shiller Index as we speak.

“The economic impact would be noticeable under any of these scenarios,” says Klein. “According to Freddie Mac, households that refinanced in April through June, when mortgage rates averaged 4%, already have saved about $140 each month, or roughly $1,700 a year. For perspective, the typical U.S. homeowner with a mortgage spends $5,000 per year on groceries. Evercore estimates that the average borrower could save about $4,560 annually by refinancing into a new mortgage at 3.5%.”

Lower interest rates could give a big boost to the longest economic recovery on record, putting more money in consumers’ pockets, should the downward interest rate spiral that Professor Rogoff predicts become a reality. It could also create another housing bubble; take your pick!

Harlan Green © 2019

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Q2 GDP Growth Slowing—What Else?

Posted on August 30, 2019 by Popular Economics Weekly

Popular Economics Weekly

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BEA.gov

The 2nd estimate of second quarter Real Gross Domestic Growth slowed to 2 percent, from 3.1 percent in January. It looks like GDP is slowing to the average rate that has prevailed since the end of the Great Recession.

Consumers are reacting to the slowdown in the U. of Michigan sentiment survey of 600 telephone respondents, which was well below expectations and the lowest reading since October 2016. The expectations component also fell more than 10 points in the month with the current conditions component down more than 5 points.

“The report cites consumer apprehension over rising tariffs which, for this phone sample, were spontaneously mentioned by 1/3 of the respondents” said Econoday.

There have been other signs of slower growth as well. The Economist reports US Steel announced earlier in August it would lay off 200 workers in Michigan. Sales of camper vans dropped by 23 percent in the 12 months ending in July, threatening the livelihoods of thousands of workers in Indiana, where many are made. Factory workers are not the only ones on edge. Lowes, a retailer, recently said it would slash thousands of jobs. Halliburton, an oil-services firm, is cutting too.

Why the slowdown now? Consumers are still spending (brown line), as the BEA’s Disposal Personal Income graph shows—but it’s a lot more than they are earning (blue line).

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BEA.gov

This means they could stop spending if any more shocks occur, such as the possibility that China might wait until after the 2020 election to make a deal on tariffs. Exports and residential investments also declined from Q1.

Manufacturing is the mainstay of exports. Employment in durable-goods manufacturing peaked in June 2006, about a year and a half before the onset of recession. This year has been another brutal one for industry. An index of purchasing managers’ activity registered a decline in August.

Since last December manufacturing output has fallen by 1.5 percent. Hours worked—considered to be a leading economic indicator—are declining. Some of this is also linked to President Donald Trump’s trade wars, which have hurt manufacturers worldwide.

Last Friday China said it would increase existing tariffs from 5 percent to 10 percent on more than 5,000 U.S. products, including soybeans, oil and aircraft. A 25 percent duty on American-made cars would also be reinstituted. The value of these products is estimated by the Chinese Commerce Ministry to total around $75 billion.

Trump responded after financial markets closed by saying he would raise current U.S. tariffs. A 10 percent duty on $300 billion in Chinese goods will be raised to 15 percent in September while a 25 percent tariff on $250 billion in imports would be increased to 30 percent in October.

And on Wednesday, MarketWatch’s Robert Schroeder reported a coalition of 161 manufacturers, farmers, retailers, natural gas and oil companies as well as other business groups, as well as other business groups, sent a letter asking Trump to postpone tariff rate increases on Chinese goods slated to take effect this year.

Does that look like they are any closer to making a deal?

Harlan Green © 2019

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Budget Deficits With the Laffer Curve

Posted on August 26, 2019 by Popular Economics Weekly

Financial FAQs

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Wikipedia

There is an economic theory of sorts that helps us to understand why our political parties can’t agree on how to grow an economy that benefits most Americans. It’s called the Laffer Curve, reputedly first drawn on a napkin by doctoral student Arthur Laffer in a meeting with Dick Cheney, President Ford’s Chief-of-Staff in the 1970s.

Laffer basically claimed that raising taxes was harmful to economic growth, and his pretty picture convinced conservatives who didn’t like taxes of any kind. His ‘claim’ isn’t true, though it had always been behind conservatives’ call to shrink government spending by cutting taxes. It was the higher maximum tax rates of the 1950s and 60s that enabled the US to build our Interstate highway system and land on the moon, for starters.

But cutting taxes just to enrich certain income brackets, without cutting comparable spending has always resulted in burgeoning deficits, as conservatives certainly know, even if they won’t admit it.

For instance, it purportedly convinced Cheney as GW Bush V.P. that “deficits don’t matter”. Laffer’s claim gave Republicans the cover to lower taxes while increasing spending for President GW Bush’s War on Terror after 9/11, because Laffer asserted it would pay for itself with faster growth. Instead, the Bush tax cuts and increased spending has added a cumulative $4 trillion to the federal debt since then.

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Washington Monthly

A short spurt of growth happened in 2018 after the 2017 Republican tax cut, but GDP growth is settling back to the 2 percent range that has prevailed since the end of the Great Recession. And there is another consequence—an upcoming $1 trillion budget deficit.

Growth had flagged since 2008 because so many Americans weren’t put back to work, as happened during the Great Depression. Spending was erratic amid continual budget wars between the two political parties impeded productive investments, such as in our badly outmoded infrastructure.

One example: more than one-third of America’s 600,000 plus bridges are badly in need of repair; our energy grid is more than 70 years old and subject to power failures; our drinking water systems are becoming health hazards—Flint, Mich and Newark, NJ are the latest examples; and we have a K-12 educational system that ranks near the bottom of developed countries.

So the Laffer Curve has really done no one good, except to give conservatives talking points with which to maintain the low tax rates of today that have resulted in record federal debt levels.

“There is a strong correlation between cuts in top tax rates and increases in top 1 percent income shares since 1975,” said economists Thomas Piketty, Emmanuel Saez, and Stefanie Stantcheva in a 2011 NBER Working Paper. “But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model.”

The resulting record income inequality from the Laffer-Curve inspired tax cuts has finally reached the same level that prevailed in 1928, and we all know what happened next—the Great Depression.

Harlan Green © 2019

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Housing Sales Higher, % Rates Plunging to Zero?

Posted on August 22, 2019 by Popular Economics Weekly

The Mortgage Corner

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Calculatedriskblog

Total July existing-home sales, https://www.nar.realtor/existing-home-sales that include single-family homes, townhomes, condominiums and co-ops, rose 2.5 percent from June to a seasonally adjusted annual rate of 5.42 million in July, according to the National Association of Realtors (NAR). Overall sales are up 0.6 percent from a year ago (5.39 million in July 2018).

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FRED

It might be that sharply lower interest rates are reviving the housing market. The 30-year conforming fixed rate is now just 3.25 percent for a one point origination fee, the lowest since the Great Recession. This is bringing back more housing in the affordable range for middle-income buyers, but not yet for first-time, entry-level buyers. And there are predictions that interest rates could go lower.

“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” said Lawrence Yun, NAR’s chief economist. However, he added that the supply of affordable housing is severely low. “The shortage of lower-priced homes have markedly pushed up home prices.”

The Pending Home Sales released earlier, www.nar.realtor/pending-home-sales, is a more important indicator of sales’ trend. It is a forward-looking indicator based on contract signings that moved up 2.8 percent to 108.3 in June in the NAR’s pending sales index, from 105.4 in May. Year-over-year contract signings jumped 1.6 percent, snapping a 17-month streak of annual decreases.

Lawrence Yun said the 2.8 percent increase in pending sales can be attributed to the current favorable conditions and predicted the rise is likely the start of a positive trend for home sales.

“Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing. When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases,” he said.

Home price appreciation has been much stronger in the lower-price tier compared to homes sold in the upper-price tier, says the NAR, based on the analysis of proprietary deed records data from Black Knight, Inc. and Realtors Property Resource®.

“Homes are selling at a breakneck pace, in less than a month, on average, for existing homes and three months for newly constructed homes,” Yung continued. “Furthermore, homeowners’ equity in real estate has doubled over the past six years to now nearly $16 trillion. But the number of potential buyers exceeds the number of homes available. We need to see sizable growth in inventory, particularly of entry-level homes, to assure wider access to homeownership.”

There is speculation that interest rates might even trend lower, which could continue to boost housing sales, if no recession looms. Harvard economics Professor Kenneth Rogoff said recently that it isn’t out of realm of possibility that more Central Banks might introduce negative interest rate yields, as is already the case in the EU and Japan, to prevent another recession

The Guardian reports that Jyske Bank, Denmark’s third largest, has now begun offering borrowers a 10-year deal at -0.5 percent, while another Danish bank, Nordea, says it will begin offering 20-year fixed-rate deals at 0 percent and a 30-year mortgage at 0.5 percent.

We have come a long way from 1981 when the inflation rate reached 14 percent, and 30-year mortgage rate soared to 18 percent, believe it or not. It is very good news for the U.S. housing market—if our economy continues to perform, that is.

Harlan Green © 2019

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Will Corporations Become More Responsible?

Posted on August 21, 2019 by Popular Economics Weekly

Popular Economics Weekly

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Tradingeconomics

It is a sea change in economic thinking when corporate CEOs that belong to the Business Roundtable sign a Statement of Purpose to consider more than maximizing their profits, when maximizing corporate profits at the expense of their employees, social responsibilities, environment, and the public-at-large has been their reigning mindset until now.

They have just announced a Statement on the Purpose of a Corporation, in which they “share a fundamental commitment to all of our Stakeholders”.

“The American dream is alive, but fraying,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable. “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

  • · Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
  • · Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
  • · Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
  • · Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
  • · Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

It was in the 1970s that conservative economist Milton Friedman led the charge against Keynesian economics and government regulation that had rescued America from the Great Depression. The New Deal happened because Americans were willing to try anything to bring back jobs during the Great Depression, for fear that capitalism no longer worked.

A 2016 Forbes article described the Roundtable as comprised of 192 CEOs, and one of the most prominent lobbying groups in Washington, D.C. In 2015, the group spent $19.3 million on lobbying, making it the eighth biggest spender that year, according to the Center for Responsive Politics.

Corporate profits have been on a tear for years, reaching a record share of GDP and Gross National Income in 2018 with the corporate tax cuts. What did they do with those profits? Invested it mainly in buybacks to boost share price and CEO incomes.

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FRED

The result was has been record income inequality, as many manufacturing and other high-paying jobs were exported overseas via the growth of multinational corporations in the name of globalization. The FRED graph above illustrates the growth of corporate profits (blue line) over wages and salaries (red line), particularly since the last two recessions (gray columns).

But now income inequality and corporate social responsibility is in the headlines with the upcoming presidential campaign. Senators Sanders and Warren have been the loudest in calling out corporate “corruption”, a code word for using their power to enrich Wall Street and their stockholders, rather than Main Street.

Is this scaring Big Business enough to fulfill their commitment to serve Main Street, as it did during the Great Depression? The tide seems to be turning, as it is becoming increasingly evident that the record income inequality is causing corporations to rethink the role of capitalism in creating jobs that make America a better place to work and live.

Harlan Green © 2019

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United We Stand, Divided We Fall

Posted on August 19, 2019 by Popular Economics Weekly

Answering the Kennedys’ Call

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The day after last Thursday’s DOW Index plunged 800 points, President Trump Tweeted a request that Israel’s Prime Minister Netanyahu block Congresswomen Ilhan Omer and Rashida Tlaib’s visit to Israel and the West Bank.

His action was more than an attempt to distract from economic policies that might be adversely affecting the financial markets. It was just his latest attempt to promote a fear of dark-skinned immigrants, in order to divide and conquer his real or imagined adversaries.

He wanted to stir up as much anti-Islamic sentiment as possible by painting them as the face of the Democratic Party, and Republicans the supporter of Israel, when both political parties staunchly support Israel, the only Democracy in the Middle East.

He is following the precedents of autocratic rulers everywhere that attempt to weaken those that oppose their autocratic behavior. But the United States was founded on the principle that we are equal, regardless of race or creed (though not always in practice).

Patrick Henry, the Revolutionary War patriot, was an early supporter of the United States as a delegate to the Confederate Congresses, though not the Constitutional Convention. His last public speech given in March 1799 said, “Let us trust God, and our better judgment to set us right hereafter. United we stand, divided we fall. Let us not split into factions which must destroy that union upon which our existence hangs.”

The actual proverb, United we stand, divided we fall, is said to originate from an Aesop’s fable of a lion stalking oxen for his dinner, who realize they are only safe by herding together.

England was the predator ‘lion’ at the time that Patrick Henry believed could only be successfully opposed by a United States of America. Modern nations have avoided major conflicts and been kept safe by the same credo since WWII because they were united by alliances.

Any predator—whether a person or country—can only succeed in weakening the U.S. by exacerbating our divisions, whether between Red and Blue states, or white and dark races, or the rich and poor.

And we now have a predator in our White House that wants to instill a fear of immigrants to divide us.

But we can take comfort in what results from predatory behavior. Autocrats seldom last long in the modern world because they lack the one major element in human behavior that has evolved to create modern civilizations—empathy, or the understanding of others that comes from the realization we are all in this together.

Autocracies are considered pariahs by a civilized world, says Stephen Pinker in The Better Angels of Our Nature—Why Violence Has Declined.

In spite of modern populist movements that oppose the migration of darker-skinned populations to more prosperous (light-skinned) countries, the number of democratic countries has risen sharply to more than 90, while the number of autocracies has declined to just 10 in countries with more than 500,000 in population, cites Pinker from a 2009 Marshall & Cole study.

There is a good reason for the growth of modern democracies, continues Dr. Pinker. “Not only are democracies free of despots, but they are richer, healthier, better educated, and more open to international trade and international organizations.”

Democracies make their citizens more prosperous by inducing them to cooperate peacefully rather than quarrel amongst themselves. Patrick Henry’s cry, United We Stand, Divided We Fall, was a plea to oppose any behavior that threatens to weaken the United States of America—whether it is by fomenting trade wars, or culture wars.

Harlan Green © 2019

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Retail Sales, Consumers Healthy For How Long?

Posted on August 15, 2019 by Popular Economics Weekly

Financial FAQs

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Consumers now power more than 70 percent of economic activity with the slowdown in manufacturing. Consumers are keeping this economic recovery afloat. There is no question this is because rising incomes and plenty of available jobs have raised consumer confidence, which has now reached skyscraper levels.

“After a sharp decline in June, driven by an escalation in trade and tariff tensions, Consumer Confidence rebounded in July to its highest level this year,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers are once again optimistic about current and prospective business and labor market conditions. In addition, their expectations regarding their financial outlook also improved. These high levels of confidence should continue to support robust spending in the near-term despite slower growth in GDP.”

The consumer held up second-quarter GDP posting robust and inflation-adjusted annual spending growth of 4.3 percent, according to Econoday, “a mark that would be difficult to match let alone exceed in Q3 but that’s a possibility given the strong jump out of the gate for July retail sales.”

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Bloomberg

Manufacturing isn’t helping, as the trade wars have hurt exports that are the mainstay of manufactured products. The Federal Reserve report on industrial production showed a weakening in factory output for the fifth time this year, according to Bloomberg:

“It is the latest sign of fragility in the manufacturing sector as goods producers face the persistent headwinds of the U.S.-China trade war and tepid global demand. The latest escalation of U.S. trade tensions with China and renewed recession fears may further depress manufacturing output in the coming months.”

Consumers might continue to spend for the rest of this year if consumer sentiment holds up, as I said last week. The latest JOLTS report (Job Openings and Labor Turnover Survey) says there were 1.65 million more job openings (7.35 million) than the 5.7 million new hires in July.

It’s hard to see this recovery continuing into next year, however. Both consumers and corporations will rush to load up on goods and services during the holiday season with Trump’s postponement of the 10 percent additional tax (oops, I meant tariff) on $300 billion of China’s imports until December 15.

But after December? The rest of the world is hurting with the disruption of world trade from the trade wars and growing protectionism. Erecting barriers to trade is the one surefire way to bring on another recession, as we learned in 1930 with the enactment of the Smoot-Hawley tariff act. Germany’s export-led economy is already teetering on the edge of recession, as is Great Britain with its Brexit stalemate.

Another sign of hurt is the continuing plunge of the 10-year US Treasury bond yield to 1.57 percent this morning, while former Fed Chair Greenspan recently said there is no limit to how low it can go.

It is not a sign that investors are confident about future growth when lenders come begging to borrowers—are in fact willing to pay borrowers in the case of negative interest rates, rather than be paid.

Harlan Green © 2019

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

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