Homeownership Expands Again

Posted on March 11, 2019 by Popular Economics Weekly

The Mortgage Corner

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Washington Post

“New data indicate that in 2016, in defiance of myriad prognostications, the decade-long decline in the homeownership rate abruptly reversed. Once-rapid growth in renter households stalled, and the long-stagnant number of owner-led households began rising,” says the Washington Post’s Andrew Van Dam.

The homeownership of American households peaked at the height of the housing bubble at 69 percent, and only now has returned to post-recession levels. This is confirmed by several other indicators, including the big jump in household formation by the millennial generation, children of the baby boomers, in particular who are now 22 to 38 years of age. It took them this long to buy because of the Great Recession that depressed incomes and huge amount of college debt.

And builders are beginning to realize that fact, as housing starts jumped back to historical levels in January to a 1.230 million annual rate. After falling 28 percent in December, starts in the West jumped 29 percent in January, as California began to recover from the record number of wildfires. The biggest region for home builders is the South where January starts rose 14 percent to more than reverse December’s nearly 8 percent decline, which were also weather-related.

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Econoday.com

Another reason for the rise in homeownership has to be steadily rising rents since they hit bottom in 2008, and mortgages rates still at almost record lows. “In the middle of 2015, rents nationally rose more than 6 percent from a year earlier — easily their fastest growth since the real estate data experts at Zillow began keeping track. It is one of the few times on record that rents rose faster than home prices,” said Van Dam.

The last piece of the housing puzzle is the moderation of housing prices that no longer rise at 5 percent per year. The Case-Shiller same-home index year-on-year prices were up only 4.2 percent in the month which missed expectations by a very sharp 6 tenths. This is the lowest growth rate since November 2014 and compares with FHFA’s 5.6 percent rate for December which was a 3-year low.

The surge in new households, as well as record low mortgage rates, have helped new-home sales as well. New home sales jumped 3.7 percent in December to a 621,000 annual rate that is on the high end of expectations, though December’s year-on-year rate is still minus 2.4 percent.

We therefore see a steady improvement for home sales in 2019, since I predict interest rates could stay this low for the foreseeable future. Why? Economic growth is slowing, while consumer incomes are rising above inflation rate, and there is still a housing shortage.

Harlan Green © 2019

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Why Smallest Jobs Increase in 17 months?

Posted on March 8, 2019 by Popular Economics Weekly

Popular Economics Weekly

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MarketWatch.com

Is US economy running out of available workers? Just 20,000 nonfarm payroll jobs were created in February, per the Labor Department’s Bureau of Labor Statistics, the lowest total in 17 months. But it may have been because there aren’t enough workers that want to work. That has to be part of the reason for the sharp drop from January’s 311,000 new payroll jobs—that was also revised up from 304,000 jobs!

“The unemployment rate declined by 0.2 percentage point to 3.8 percent in February, said the BLS, and the number of unemployed persons decreased by 300,000 to 6.2 million. Among the unemployed, the number of job losers and persons who completed temporary jobs (including people on temporary layoff) declined by 225,000. This decline reflects, in part, the return of federal workers who were furloughed in January due to the partial government shutdown.”

Note that workers returning from the “partial government shutdown” accounted for some of the 300,000 decrease in unemployment, but that was in the Household Survey, a telephone survey of a smaller number of respondents that includes the self-employed.

The larger and generally more accurate Establishment survey of actual business payrolls showed a much larger decrease of 31,000 fewer construction workers (vs. 53,000 hired in January), with smaller drops in retail and government employment as well. So the two surveys don’t usually match.

That rate fell because of a sharp rise in the number of those employed (up 255,000) and a sharp fall in the number of unemployed, as I said, which makes for an unexpected 2 tenths dip in the unemployment rate to 3.8 percent.

The bottom line is there aren’t enough workers for hire. The number of job openings reached a series high of 7.3 million on the last business day of December due to the looming scarcity of hires. This means businesses must find more creative ways to hire and hold their employees—such as continue to raise salaries.

Wages in today’s report are another indication of the labor shortage, jumping 0.4 percent in the month which is outside expectations for a year-on-year rate of 3.4 percent that is at the high end of expectations.

It should also mean more job creation this year, since many of those 6 million still out of work are simply waiting for wages to return to pre-recession levels, according to various sources. This is measured by the voluntary ‘Quits’ component of the Job Openings and Labor Survey that has been rising. Many of those having to work during and after the Great Recession had to take steep reductions in pay.

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Wrightson-ICAP

So getting back to an equivalent breakeven for those workers holding out means taking into account the pay losses from the downturn even with a fully employed economy.  The gap between openings and hires is now 1.428 million, a new record and up from 1.304 million in November. It’s a very good number for growth prospects in 2019, as employers don’t look for this many new employees while continuing to raise wages, unless they see a better future. 

Harlan Green © 2019

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Why the Record 2018 Trade Deficit?

Posted on March 7, 2019 by Popular Economics Weekly

Financial FAQs

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BEA.gov

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $59.8 billion in December, up $9.5 billion from $50.3 billion in November, revised.

This was not good news. The nation’s trade deficit shot to a 10-year high last year despite Trump White House attempts to reduce the gap, reflecting both the strength of the U.S. economy and other factors, including the Trump trade wars that have disrupted international trade flows.

The increase pushed total for the full year to $621 billion, the highest mark since the U.S. posted a $709 billion deficit in 2008 during the middle of the last recession.

For all of 2018, the goods and services deficit increased $68.8 billion, or 12.5 percent, from 2017. Exports increased $148.9 billion or 6.3 percent. Imports increased $217.7 billion or 7.5 percent.

Because the difference between imports and exports is negative, it subtracts from GDP growth, which economists have said is why full year GDP growth was slightly less than 3 percent (2.9 percent), as forecast.

The trade wars are a dumb way to attempt to correct the imbalance of manufactured products, as I said in my last post, because so many goods that Americans use are manufactured in cheaper climes, so the only way to protect American workers from cheaper foreign labor is to either invest heavily in new technologies or set up trade barriers.

The Trump team chose trade protections, which harks back to pre-Great Depression days; the era of mercantilism no longer viable in today’s closely knit world of commerce. Big Business over the past decade chose to buy back stock, rather than invest in new technologies that would enhance labor productivity.

Trade protections won’t work for several reasons. Chinese imports are at their highest level in years, and “…in a year in which Mr. Trump imposed tariffs on steel, aluminum, washing machines, solar panels and a variety of Chinese goods, the overall trade deficit grew 12.5 percent from 2017, or nearly $70 billion, to $621 billion, the Commerce Department said Wednesday,” reports the New York Times.

In fact, if the Trump administration and Republicans were really serious about rebalancing the budget and reducing the $1 trillion annual deficit predicted per the CBO by 2020, they wouldn’t have passed the 2017 corporate tax cut; or dropped out of trade alliances like the Trans-Pacific Partnership, which weakens their negotiating position.

The bottom line is no one seems to be interested in reducing either the trade or budget deficits, which is ok during good times, but will probably hasten the bad times.

We will have to watch for sharply rising interest rates, if we want to know when the next economic downturn happens. Interest rates are at record lows because foreign and domestic investors are still happy to invest their excess cash in US securities—including Treasury bonds at this time. It’s the safest haven for those that don’t have a more productive use for their accumulated wealth.

Harlan Green © 2019

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Can US Service Sector Boom Reduce Our Deficits?

Posted on March 6, 2019 by Popular Economics Weekly

Popular Economics Weekly

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Econoday.com

All 18 non-manufacturing industries reported growth in February, according to the ISM’s non-manufacturing index, which gives a monthly overview of service sector activity. This is huge and says the service sector that makes up two-thirds of US business activity will continue to power growth this year.

In fact, a growing US service sector is keeping the trade and budget deficits from worsening at a time when fiscal policy (the tax cuts) and trade policy (the tariffs) are slowing economic growth in 2019.

What is the service sector economy? It’s the financial services, trade, transportation, construction, education and health industries, for starters. It has become the dominant sector because most US consumers and businesses consume manufactured goods now made overseas. Hence the trade imbalance between imports and exports that Trump wants to ‘rebalance’ with his trade wars on allies and adversaries alike.

The trade wars are a dumb way to attempt to correct the imbalance of manufactured products, needless to say, because said ‘imbalance’ is offset by foreign investors eager to buy safe and secure US stocks and bonds. If the Trump administration and Republicans were really serious about rebalancing the trade imbalances, it would seek more trade alliances (such as the Trans-Pacific Partnership) and work to reduce the looming $1 trillion annual deficit, instead of passing the 2017 corporate tax cut.

The non-manufacturing sector’s growth rate rebounded after cooling off in January. Respondents said they are concerned about the uncertainty of tariffs, capacity constraints and employment resources; however, they remain mostly optimistic about overall business conditions and the economy.

“The NMI® registered 59.7 percent, which is 3 percentage points higher than the January reading of 56.7 percent,” said Anthony Nieves, Chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee. “This represents continued growth in the non-manufacturing sector, at a faster rate. The Non-Manufacturing Business Activity Index increased to 64.7 percent, 5 percentage points higher than the January reading of 59.7 percent, reflecting growth for the 115th consecutive month, at a faster rate in February.”

Particularly robust was the New Orders Index that registered 65.2 percent, 7.5 percentage points higher than the reading of 57.7 percent in January. The Employment Index decreased 2.6 percentage points in February to 55.2 percent from the January reading of 57.8 percent.

What about the manufacturing sector that is made up of durable goods; like machinery, computers and transportation; and non-durable goods such as furniture, chemicals and petroleum products? The ISM’s February manufacturing survey reported a 2.4-point drop to 54.2 in February that was above low estimates. There was also a 2.7-point drop in new orders, a 3.2-point drop for employment, and a 5.7-point slide for production.

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Council On Foreign Relations

The trade wars have to be part of the problem, since Trump has focused on tariffs for manufactured products only, whereas China is also stealing information technology. Hence the Hauwei networking ban that the US fears might have implanted Chinese spyware.

“Demand remains healthy at the beginning of 2019,” said one respondent. “However, growing concerns for what could be another round of tariffs in March are further escalating price increases of already constrained electronic components.”

The total US trade imbalance was minus $550B last year, with service sector trade showing a net trade surplus of around $250B, since we export much of our information technologies, and approximately $800B net deficit in manufactured goods that are more cheaply made overseas.

“So we can’t “win” a trade war,’ says Nobel economist Paul Krugman. “What we can do is start a cycle of tit-for-tat, and when it comes to trade, America — which accounts for 9 percent of world exports and 14 percent of world imports — is by no means a dominant superpower. A cycle of retaliation would shrink overall world trade, making the world as a whole, America very much included, poorer.”

Therefore it’s not such a good idea to expend too much of our energy in attempting to correct the manufacturing imbalance, when there are better ways to cure deficits that are of our own making.

Harlan Green © 2019

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Q4 Real GDP Growth Still Good

Posted on March 1, 2019 by Popular Economics Weekly

Popular Economics Weekly

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BEA.gov

Real gross domestic product (GDP) increased at an annual rate of 2.6 percent in the fourth quarter of 2018 (table 1), according to the “initial” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.4 percent. Due to the recent partial government shutdown, this initial report for the fourth quarter and annual GDP for 2018 replaces the release of the “advance” estimate originally scheduled for January 30th and the “second” estimate originally scheduled for February 28th. See the Technical Note for details.

The fourth-quarter GDP estimate surprised many analysts. Consumer spending rose 2.8 percent, despite the sharp drop in December retail sales, which is down from outsized rates of 3.5 and 3.8 percent in the prior two quarters but still good.

So why do jittery stock and bond investors keep waiting for the ‘other’ shoe to drop with growth so good? We know a major reason for the record low interest rates is the huge amount of excess liquidity not being invested in productive assets, but chasing inflated stock values, which makes buying long term sovereign debt in particular such a safe investment.

It’s called running for cover when the geopolitical situation worsening and a US administration that cannot live without drama, ballooning trade wars and massive federal debt now predicted to reach 100 percent of GDP per the Congressional Budget Office by 2023.

The flight to quality syndrome keeps investors buying up sovereign government debt in particular, thereby keeping interest rates in line with the very low inflation rate, which is a good time to invest in public education, infrastructure, and the general welfare.

In fact, the 10-year Treasury yield has not been this low since the 1950s, when money was plentiful and U.S. economic growth was phenomenal, reaching 6 and 7 percent GDP growth rates after WWII, as I said in my last blog.

This is the reverse of conditions that led to the housing bubble bust. Housing prices became inflated in the early 2000s because inflation was rising faster than interest rates that Fed Chair Alan Greenspan kept reducing to pay for GW’s wars on terror.

What more drama can happen this time? There was little damage to date from the record 35-day government shutdown and loss of business activity, though the BEA says it kept the annual growth rate at 2.9 percent rather than 3 percent. But we can’t see yet how much this will affect 2019 growth.

Let’s hope we find a better way to invest the excess liquidity, if we want to maintain full employment and rising wages in 2019. January’s 304,000 new payroll jobs is a good start. The US has to be investing much more in productive enterprises, as I’ve said.

Business investment rose 6.2 percent for nonresidential fixed investment in Q4, back near the high single-digit increases of the first half of last year when the corporate tax cut was driving spending. Residential investment, however, was weak, down 3.5 percent for the fourth straight quarterly decline that offers definitive evidence of how weak the housing sector has become.

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However, former chief economic advisor Jason Furman isn’t so optimistic about 2019 growth. “I’m not seeing a sustained supply-side expansion in the wake of the (2017) tax cuts,” he says.

That means productive investments haven’t been increased enough, and probably won’t, unless there’s more agreement on Capitol Hill about what’s really needed to keep this virtuous business cycle, and the financial markets, from collapsing in 2019.

Harlan Green © 2019

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Why the Record Low Interest Rates?

Posted on February 26, 2019 by Popular Economics Weekly

The Mortgage Corner

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fred.stlouisfed.org

The 30-year fixed rate conforming mortgage rate fell to a 1-year low, according to Freddie Mac, the GSE still in government conservatorship, and major purchaser of conforming conventional mortgages. The 30-year fixed-rate averaged 4.35 percent in the February 21 week, mortgage giant Freddie Mac said last Thursday. That was down from 4.37 percent in the prior week and the lowest since early February 2018.

In fact, the 10-year Treasury yield on which mortgage rates depend has not been this low since the 1950s, when money was plentiful and U.S. economic growth was phenomenal, reaching 6 and 7 percent GDP growth rates after WWII.

What will this do for the housing market, which has shown signs of life after last year’s marked slowdown? It will depend on interest rates remaining at this record level over the longer term, which shouldn’t be happening at this late stage of the current recovery. I discussed its effect on the rise in construction and new-home sales last week.

“After two lackluster months, new home sales surged…in January to the fastest pace in our survey, dating back to 2013,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Despite the jitters potential homebuyers felt in December from the volatility in the financial markets, the healthy job market and wage growth, moderating price gains and lower mortgage rates all helped home sales recover. Additionally, builders seem to be seeing improvement in their labor shortages, as recently released government survey data showed increases in construction hiring and openings in December.”

Not enough attention is being paid to why interest rates are at this level again at a time of full employment and last year’s growth spurt, which should put a strain on the available money supply, but hasn’t done so. It could be a sign of slowing growth.

There is almost no sign of incipient inflation, in other words, which has caused the Fed to back off on further rate increases. Or put another way, there is a disinflationary environment affecting many of the worlds’ developed economies today that have zero or negative sovereign debt yields. This has brought back memories of the Great Depression when so-called aggregate demand—the demand by consumers, government and foreigners for U.S. products—fell into negative territory, memories that caused recent Fed Chairman ‘helicopter’ Ben Bernanke to shower the U.S. economy with cash by buying up U.S. securities in various QE programs to mitigate the effects of the Great Recession.

This had the desired effect of keeping interest rates at post-WWII lows, aiding in the recovery from the Great Recession and housing bust. But why has it also kept inflation at multi-decade lows? Many conservative economists and deficit hawks predicted runaway inflation at the time.

Japan experienced outright deflation during several lost decades under similar circumstances—of falling wages, as well as prices. This meant that Japanese consumers’ purchasing ability also shrank drastically, which caused economic growth to decline into several recessions in recent decades.

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Tradingeconomics.com

Then, as now, the real culprit must be the lack of household income growth, which has remained static since the 1970s, after inflation. It should be a truism that if consumers’ incomes don’t rise faster than inflation, then there isn’t sufficient demand to boost inflation, which in small doses actually aids economic growth.

That brings up the other cause—a worldwide savings glut that isn’t being invested productively. What would be the best use for some of those savings? Repair and replace the $2.25 trillion in ageing U.S. infrastructure that hasn’t really been upgraded in 75 years, according to the American Society of Civil Engineers. It would boost incomes as well as the productivity of future generations.

What is its worst use? The Trump tax cuts, which haven’t increased either capital expenditures or wages, but went instead into the pockets of stockholders and corporate CEOs, where it does nothing except add to the savings glut, and overpriced stock values.

Nobelist Paul Krugman in a recent NYTimes Op-ed has perhaps best said why there has been no infrastructure spending over the past two years with Republicans controlling government. “The truth is that modern conservatives hate the idea of any kind of new public spending, even if it would make Americans better off — or perhaps it would be more accurate to say especially if it would make Americans better off, because a successful spending program might help legitimize a positive role for government in general. And while Trump may not fully share his party’s small-government ideology, all his limited energy is going into finding ways to punish people, not help them.”

So we see that the real reason for record low interest rates and inflation is the outright refusal of conservatives, in particular—both here and in the Eurozone—to make the investments that would bring more prosperity to those working households that need it the most.

Harlan Green © 2019

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Housing Market Still Alive and Well!

Posted on February 20, 2019 by Popular Economics Weekly

The Mortgage Corner

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Calculated Risk

The Mortgage Bankers Association said last week its Builder Applications Survey data for January showed mortgage applications for new home purchases jumped by 43 percent from December, though was unchanged from a year ago.  This should silence the doomsayers who predict labor shortages and higher tariffs are sure to kill the housing market.

“After two lackluster months, new home sales surged…in January to the fastest pace in our survey, dating back to 2013,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Despite the jitters potential homebuyers felt in December from the volatility in the financial markets, the healthy job market and wage growth, moderating price gains and lower mortgage rates all helped home sales recover. Additionally, builders seem to be seeing improvement in their labor shortages, as recently released government survey data showed increases in construction hiring and openings in December.”

Mortgage interest rates have indeed come down with a vengeance since December. The 30-year conventional fixed rate guaranteed by Fannie Mae and Freddie Mac is now 3.75 percent for a one-point origination fee, and the so-called high-balance conventional rate is 4.0 percent with one origination point for the most credit-worthy borrowers.

That’s why home builders’ confidence index jumped 4 points to 62 from 58 (percent of those surveyed), according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which is also good news.

So housing construction isn’t about to die, which is a sign economic growth isn’t gasping for air either in this full employment, low-interest rate environment. February marked the second consecutive month in which all the HMI indices posted gains. The index measuring current sales conditions rose three points to 67, the component gauging expectations in the next six months increased five points to 68 and the metric charting buyer traffic moved up four points to 48.

“Builder confidence levels moved up in tandem with growing consumer confidence and falling interest rates,” said NAHB Chief Economist Robert Dietz. “The five-point jump on the six-month sales expectation for the HMI is due to mortgage interest rates dropping from about 5 percent in November to 4.4 percent this week. However, affordability remains a critical issue. Rising costs stemming from excessive regulations, a dearth of buildable lots, a persistent labor shortage and tariffs on lumber and other key building materials continue to make it increasingly difficult to produce housing at affordable price points.”

There is more to the jump in builder confidence and new-home construction. The millennial generation is forming more new households this year, and at least 50 percent have historically wanted to buy a home. Researchers at the San Francisco Federal Reserve have been finding such an increase.

“The shares of young adults heading households now are similar to rates seen at the start of the housing boom,” said SF Fed researchers. “Moreover, while more young adults are living at home longer, data suggest they are continuing to transition to higher headship rates as they get older…Given current 12-month annual headship rates by age group, the Census Bureau projections imply household formations averaging on the order of 1.4 to 1.5 million per year through 2020. That is much better than an average of a little less than 900,000 annually over the past five years.”

MBA estimated new single-family home sales at a seasonally adjusted annual rate of 713,000 units in January, based on data from the BAS, an increase of 29.2 percent from the December pace of 552,000 units. On an unadjusted basis, MBA estimated 54,000 new home sales in January, an increase of 45.9 percent from 37,000 new home sales in December, a whopping increase.   

Conventional loans composed 68.7 percent of loan applications, FHA loans composed 18.6 percent, RHS/USDA loans composed 0.5 percent and VA loans composed 12.2 percent. The average loan size of new homes decreased from $334,944 in December to $334,532 in January.

The jump in finance applications and home building in January shouldn’t be surprising. The U.S. economy continues to perk along, seemingly ignoring any bad news, such as the just-released FOMC minutes of the December meeting that sees cloudier skies ahead for the U.S. and world economies this year.

Harlan Green © 2019

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What If No Brexit Deal?

Posted on February 20, 2019 by Popular Economics Weekly

Popular Economics Weekly

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Equalitytrust.org

We know why the UK voted to exit the EU—UK working class anger at not gaining many of the benefits from joining the EU, while experiencing its downside with the influx of eastern EU citizens that displaced domestic workers. But leaving the EU without a negotiated treaty will make it even worse for all Brits, rich and poor. It could spell another recession like the Great Recession, or even worse.

Both the Great Depression and Great Recession were caused by excessive speculation in the financial markets that created massive asset bubbles—whether in overpriced stock values or housing—which then burst. And middle and lower income- earners suffered the most.

But there was another reason. Record income inequality underlay both Great Downturns when these earners continued to borrow beyond their means to spend.

There are no asset bubbles at present, but a high level of debt exists because of the various QE programs that kept interest rates low to enable consumers to keep borrowing. So European and U.S. stock markets aren’t anywhere near Great Depression or Great Recession P/E ratio levels. And there’s no housing bubble caused by excessive overbuilding (Too few dwellings being built—so much so that California’s new governor, for instance, has pledged to add 3.5 million residences to California’s housing stock during his term).

However, the EU’s Great Recession was made worse by misplaced austerity policies that cut welfare spending and taxes when it should have increased public subsides as Ben Bernanke’s Federal Reserve did in 2009 that mitigated some of its effects, and enabled a quicker U.S. recovery.

Can you imagine what could happen if the UK doesn’t beat an orderly retreat from the EU? The UK chancellor, Philip Hammond, has warned of a “bad-tempered scenario” in which neither side acts in their own best economic interests, said the Guardian recently:

“Many Europeans regard the dispute over money not as an early round of bargaining but as a matter of good faith. If the Brits cannot be trusted to settle their past promises, why bother striking future deals? Walking out could therefore be treated as a legal default, with litigation in the international courts and even asset confiscation. Never mind free trade talks, such an atmosphere could make it impossible to agree a replacement for all manner of existing arrangements governing travel, immigration and customs.”

This is while the UK and EU economies are already slowing, and President Trump’s looming trade wars with allies and enemies alike will cut back growth even further.

So it’s vital that the UK and EU find an amicable divorce. What would that look like? The Guardian reports that Brexiters believe the UK can use WTO rules to trade perfectly successfully with Europe, as does Britain when trading with non-EU members. Though WTO tariffs are high for food and cars, most manufactured goods would see little change in export duties. “Over time, the hope is that Britain could return to the negotiating table to agree on rules that would facilitate EU trade in services and find other ways to compensate for lost agricultural markets by looking to faster-growing markets abroad,” says the Guardian

But there is so much more to cross-border agreements, such as custom unions, citizenship barriers, and the like. The real lesson is that U.S. and European economies are too fragile to allow anything but an amicable Brexit divorce; or better yet, no divorce at all.

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Tradingeconomics.com

How do we judge the fragility of any economy? By its underlying growth factors. The EU and UK are both suffering serious slowdowns, with just 0.2 percent GDP growth rates in the latest quarters. The Euro area’s overall unemployment rate has declined to just 8 percent since the end of the Great Recession, with Italy’s unemployment stuck at 10 percent and Spain’s at 14 percent.

The question then is how much support would the US give to the UK, if the UK economy collapses, and the EU is unable or unwilling to come to their aid?

Harlan Green © 2019

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Modern Infrastructure A Must for Climate Change

Posted on February 18, 2019 by Popular Economics Weekly

Answering the Kennedys Call

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World Economic Forum

There is something we can do as a country to mitigate the catastrophic changes that global warming is already wreaking on whole populations. Accelerate development of a modern for-the-22nd Century infrastructure. It will create badly needed jobs, energy efficiencies that mitigate greenhouse gases, and better manage the international conflicts already arising from massive droughts and rising oceans.

That infrastructure must include new digital pathways, such as 5G networks, modern energy grids, modern transportation systems, and better planning for uncertain outcomes to changing climates. This is turn will assist resolutions to conflicts that are sure to pop up when populations are pressured to move, as they have in just the last decade.

There is actually no alternative. We are already seeing the rise of populist, anti-democratic governments in Europe, Africa, and the United States. Scared native populations are building walls and fences to protect themselves from the influx of darker-skinned strangers ousted by unlivable climates from the poorest regions.

The World Economic Forum has said, “A global focus on sustainable infrastructure can boost growth, reduce poverty, improve air quality and create jobs, while building low-carbon, climate-resilient economies. This transition could entail economic gains worth $26 trillion over the next 12 years compared to business-as-usual, according to a report by the New Climate Economy.”

The New Climate Economy was commissioned in 2013 by the governments of seven countries: Colombia, Ethiopia, Indonesia, Norway, South Korea, Sweden and the United Kingdom. “The Commission has operated as an independent body and has been given full freedom to reach its own conclusions. Lead by its global commission, it has disseminated its messages by engaging with heads of governments, finance ministers, business leaders and other key economic decision-makers in over 30 countries around the world,” said its website.

And what has been proposed by other countries is just now reaching our shores. The Green New Deal resolution by Massachusetts Sen. Ed Markey (D-MA) and Rep. Alexandria Ocasio-Cortez (D-NY) is already being denounced by so-called ‘moderate’ politicians and pundits as too draconian. Columnist David Brooks has characterized it as a massive government takeover of the private sector; socialism in its most extreme form that has been a failure in competition with modern capitalist-based economies.

Yet, why must it be an either/or proposition? The various reports on climate change mitigation maintain it will take centralized planning to create a necessary private/public partnership—yes, central planning in some form—to coordinate the incredible complexities that must be navigated in modeling multi-factor planning that takes into account many different outcomes. It’s playing three-dimensional chess with the survival of our planet at stake.

Then what kind of Central Planning? It has to resemble Roosevelt’s New Deal that brought us out of the Great Depression and enabled the U.S. to turn the tide in WWII. Global warming as a result of climate change is just such an emergency. And the longer governments wait to mitigate its affects, the more expensive it becomes—both in financial and geopolitical terms. The U.S. Pentagon has said it now poses a danger to our national security.

The critics of better coordination between the private and public sectors obviously miss the point. It is what is lacking from any suggested solutions to the climate crisis, because it entails massive improvement in the social structures as well, as is envisioned in the Green New Deal—such as some form of more universal health care, better labor laws, and a much improved social safety net that would mitigate much of the red-vs-blue states’ conflicts that have stymied bringing infrastructure improvements into this century, much less planning for the next.

“Even with these caveats in mind, a global climate action scenario prepared for this (New Climate) Report using the E3ME model that combines a range of opportunities including the wide scale use of appropriate carbon prices and phasing-out fossil fuel subsidies, seizing energy and industrial energy and resource efficiency gains, halting deforestation and restoring degraded lands, accelerating the penetration of electric vehicles, and integrating intermittent renewables into the power system—was found to deliver significant benefits. Transitioning to this low-carbon, sustainable growth path could deliver a direct economic gain of US$26 trillion through to 2030 compared to business-as-usual, according to analysis for this Report,” says the Guardian.

There is no reason that such complexities might overwhelm the planning process, in other words. Even AI will contribute in some form. If IBM’s Big Blue and newer iterations can win chess matches and defeat a top S. Korean champion in the ancient game of go, then we know Artificial Intelligence will be needed to help overcome those complexities.

Shouldn’t saving our planet take precedence over going to Mars, a barren planet and prime example of what could happen on earth? North America and all countries will suffer greatly from the looming climate crises, if we aren’t able to perfect our union in some way.

Harlan Green © 2019

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

Posted in Economy, Keynesian economics, Politics | Tagged , , , | Leave a comment

More Job Creation Coming

Posted on February 14, 2019 by Popular Economics Weekly

Popular Economics Weekly

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Wrightson-ICAP

The number of job openings reached a series high of 7.3 million on the last business day of December, the U.S. Bureau of Labor Statistics reported yesterday. Over the month, hires and separations were little changed at 5.9 million and 5.5 million, respectively.

This means more job creation this year, even with January’s 304,000 new payroll jobs in the BLS unemployment report.  The gap between openings and hires is now 1.428 million, a new record and up from 1.304 million in November. It’s a very good number for growth prospects in 2019, as employers don’t look for this many new employees, unless they see a sunny future.

And the gap is likewise high between openings and those who were actively looking for work, at 1.041 million and next only in the record book to November’s 1.098 million.

Year-on-year comparisons further underscore the yawing gap with openings up 29.4 percent vs only a 7.1 percent gain for hires. Given how difficult it is for employees to fill openings, the number of layoffs & discharges in the month fell 3.2 percent to 1.697 million.

And the number of employees who quit rose 1.0 percent to 3.482 million in what hints at worker mobility and the pull from higher paying rivals. This is the reason workers’ pay is also rising faster—with real, after tax wages up 2 percent.

There was a slide in business optimism that is temporary, in my opinion, since the NFIB Small Business Optimism Index slipped 3.2 points in January, as owners continued hiring and investing, but expressed rising concern about future economic growth. The 101.2 reading, the lowest since the weeks leading up to the 2016 elections, however remains well above the historical average of 98, but indicates uncertainty among small business owners due to the 35-day government shutdown and financial market instability. The NFIB Uncertainty Index rose seven points to 86, the fifth highest reading in the survey’s 45-year history.

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NFIB.com

“Business operations are still very strong, but small business owners’ expectations about the future are shaky,” said NFIB President and CEO Juanita D. Duggan. “One thing small businesses make clear to us is their dislike for uncertainty, and while they are continuing to create jobs and increase compensation at a frenetic pace, the political climate is affecting how they view the future.”

Another ‘blip’ that could be temporary was the fall in December retail sales, down 1.2 percent. But that may also be due to the December ‘uncertainties’—a lousy stock market, lousy weather, and the record government shutdown. Republicans got the message, which is why the “no wall” budget compromise just voted on will pass White House muster this time with no government shutdown.

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Econoday.com

Another reason for optimism this year is less than 2 percent inflation in both the wholesale and retail sectors should keep consumers buying. Wholesale producer prices in the Producer Price Index were pulled down by a 3.8 percent drop in energy that follows 4.3 and 5.1 percent monthly declines in December in November, the latter the month when oil collapsed from $70 to $50.

And happy consumers amid lots of available jobs means they also see a sunny economic future and will act accordingly.

Harlan Green © 2019

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

Posted in Consumers, Economy, Weekly Financial News | Tagged , , , , | Leave a comment