(What’s Left of) Our Economy: The Latest Data Remain Full of Normalization Puzzles

Tags

Biden, CCP Virus, China, construction, coronavirus, COVID 19, Donald Trump, exports, goods trade, imports, inflation, inflation adjusted wages, labor shortages, leisure and hospitality, lockdowns, manufacturing, metals, non-oil goods trade deficit, non-supervisory workers, private sector, real wages, reopening, retail, services trade, shutdowns, tariffs, Trade, Trade Deficits, transportation, wage inflation, wages, Wuhan virus, {What's Left of) Our Economy

While I was away for a few days last week, two major U.S. government reports came out both giving off conflicting signals on on whether the economy has started to return to normal in critical ways as the CCP Virus subsides and reopening, along with consequent changes in consumer behavior, proceed.

The monthly trade figures (for April) showed a sequential decline, following a record surge, in America’s chronically huge gap between exports and much larger amounts of imports. Moreover the monthly drop took place as economic growth sped along at unusual rates after being shut down by government mandates and consumer caution. So maybe they’re an early sign that a return to immediate pre-virus conditions has begun?

Or is their most important message that these deficits, and especially the import levels, are still hovering near all-time highs in (the most widely followed) pre-inflation terms even though the economy as of the latest (first quarter) numbers is still a bit smaller in (the most widely followed) inflation-adjusted terms than during the last full pre-pandemic quarter (the fourth quarter of 2019)?

Indeed, the deficits are gargantuan even though President Biden has left former President Trump’s substantial tariffs on metals and goods from China practically untouched. 

The monthly inflation numbers (for May) are similarly confusing. They revealed that consumer prices (just one inflation measure published by Washington, but an important one) rose by 4.93 percent in seasonally adjusted terms. That was their fastest annual pace since September, 2008’s 4.95 percent. Surely, as widely claimed (including by the Federal Reserve, which wields so much influence over the economy, this upswing stems from a combination of bottlenecks resulting from (1) the sudden, widespread reopening; (2) the unusually low overall inflation numbers generated a year ago, when the economy was near the depths of its viruts- and shutdown-induced slump; and (3) the immense dose of stimulus injected into the economy by both elected politicians and the unelected Fed.

At the same time, the Fed has told us that its stimulus isn’t ending anytime soon, and although the Biden administration and Congressional Democrats are displaying some cold feet about approving more such levels of economic fuel (e.g., in the form of outlays on infrastructure, and a wide variety of income supports and enhanced unemployment benefits), it’s difficult to imagine that most or even much of this spending will actually be withdrawn even once a post-virus recovery is an indisputable reality.

But the biggest surprise of all: Despite the economy-wide inflation pressures, and by-now-routine claims that employers are dealing with nearly crippling labor shortages, wages overall adjusted for inflation keep going down.

Compounding the confusion over whatever conclusions can legitimately be drawn from these two reports: They cover two different months.

But let’s begin with the most important details from the April trade report. The ambiguity embodied in the data begins with the total deficit figure. The record March result was revised up from $74.45 billion to $75.03 billion but April’s $68.90 shortfall for goods and services combined, though the second worst monthly figure ever, was 8.17 percent smaller. That’s the biggest sequential drop since February, 2020 (8.39 percent), when China’s export-heavy economy was still largely closed because of the virus.

The same holds for the goods trade gap. The record March figure was revised up, too, from $91.56 billion to $92.86 billion. But April’s $86.68 billion result represented a 6.65 percent monthly decline, and this falloff was the biggest since the 8.39 percent plunge of January, 2019 – when American businesses were still adjusting both to Trump’s tariffs and anticipated tariffs.

Also still fueling the high U.S. deficits – a worsening of services trade balances. Here, U.S. trade has long been in surplus, but the surpluses keep shrinking because service sectors like travel are still suffering from the pandemic’s arrival and the consequent decimation of travel and othe transportation in particular. In fact, the April figure of $17.78 billion was the lowest since September, 2012’s $18.62 billion.

One key set of trade flows does, however, provide some evidence of Trump tariff effectiveness – U.S. non-oil goods trade, which encompasses those exports and imports whose magnitudes are most heavily influenced by trade policy (because, as known by RealityChek regulars, trade in oil is almost never the subject of any trade policy decisions and services trade liberalization remains at very early stages). In April, the monthly shortfall retreated 4.16 percent from its March record of $90.12 billion to $86.37 billion – which is only the fourth highest such total ever.

The import figures I focused on last month exhibit the same overall patterns: April saw big drops from record levels but the absolute numbers remain distressingly high. March’s initially reported record $274.48 billion in total imports was revised up considerably – to $277.69 billion. April’s total of $273.89 billion represented a 1.37 percent drop, but nonetheless was the second worst such figure on record.

March’s record monthly goods import figure was upgraded, too – from $234.44 billion to $236.52 billion. April’s total of $231.97 billion was a 1.92 percent drop but these purchases also still represented the second highest of alll time.

As for non-oil goods imports, the $215.33 billion April total was 1.98 percent down from an upwardly revised record $219.68 billion, and also the second biggest ever. Biggest drop since last April’s 10.91

Whether normalization is returning in manufacturing is more difficult to tell. Imports in March hit a record $207.59 billion, and did drop by 4.59 percent sequentially to $198.06 billion in April. That decrease, however, was a typical monthly move for manufacturing imports, and the April figure was still the third highest ever.

Incidentally, the April manufacturing deficit of $103.60 billion was 4.64 percent lower than March’s $108.66 billion. The March total was the second highest on record, but April’s figure was only the seventh all-time worst. The record, $110.20 billion, came last October, and it’s notable that the gap has narrowed on net despite the resilience shown during the pandemic period by manufacturing output.

More evidence of the Trump tariffs’ impact comes from the data on goods trade with China – whose products have attracted nearly all of these levies, and that cover hundreds of billions of dollars worth of products. The April figure of $37.59 billion was 6.56 percent lower than its March predecessor – a thoroughly unexceptional sequential decline and monthly level by historical standards. But the monthly dropoff was consideraby greater than the aforementioned 1.98 percent decrease for non-oil goods – the closest global proxy.

As a result of all these inconclusive developments, I’ll be awaiting the May trade report with even more interest than usual.

But despite all the uncertainties I mentioned at the start of this post, those May inflation figures have made me more confident than before in my previous contention that current price surges are anomalies by the extremely low inflation generated by the CCP Virus-battered economy of a year ago, and by the sudden reopening of so much of the economy following the long shutdowns and lockdowns. Even clearer, as I see it: Claims of significant, troubling wage inflation are especially weak.

After all, that 4.93 percent year-on-year May price increase followed a previous May-to-May rise that was just 0.22 percent. That was the feeblest such rise since September, 2015’s 0.13 percent. In addition, May’s month-to-month 0.64 price advance was smaller than April’s 0.77 percent. Two months do not a trend make, but these numbers certainly don’t point to raging inflation fires.

Nor do the wage data. Otherwise after-inflation total private sector wages wouldn’t be down more on-month in May (-0.18 percent) than in April (-0.09 percent). And the same couldn’t be said of constant dollar wages for non-supervisory workers (-0.20 percent in May versus flat in April).

Getting more granular, the price-adjusted wage trends are as bad or worse in construction; trade, transportation and utilities overall; retail trade; and education and health services.

The two big exceptions: the leisure and hospitality workforces that have been so decimated by the virus (and especially the non-supervisory group) and the transportation and warehousing sub-sector of the transportation and utilities industry category that contains a trucking sector unusually strained by the rapid reopening. In both cases, however, (and especially the leisure and hospitality industry), inflation-adjusted wages in absolute terms are well below the national private sector average. If anything, therefore, it seems like some wage inflation for these workers is long overdue.

Im-Politic: Why Fauci’s China Blind Spot Really Matters

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Anthony S. Fauci, CCP Virus, coronavirus, COVID 19, gain-of-function research, Im-Politic, lab leak, National Institutes of Health, national security, research, totalitarianism, virologists, Wuhan Institute of Virology, Wuhan virus

Looking at some of Dr. Anthony S. Fauci’s recent related comments about the renewed controversy over the CCP Virus’ origins and U.S.-China scientific cooperation, it’s easy to conclude that, when it comes to anything other than the science of infectious diseases, the anti-virus point man in this administration and its predecessor is pathetically naive. Easy and misleading – and above all, useless in terms of the imperative of reducing the odds that such deadly pandemics break out again.

Only a little less distracting are charges that Fauci and his boss, head of the National Institutes of Health (NIH) Dr. Francis Collins, have downplayed evidence that the virus escaped from a Chinese virology lab because they approved federal funding for research there. In this view, they’re trying to cover up having sent taxpayer dollars to a facility that either manufactured the virus or was operated carelessly enough practically to guarantee a leak.

Of course, if the two are covering up, they should be fired and investigated criminally (e.g., for violating federal guidelines governing the financing of such research, or for lying to Congress, or both).

But the most serious problem raised by actions we know about for sure is that they’re both scientists. Undoubtedly, they and their colleagues in these fields have invaluable contributions to make to help the country’s policymakers make the biggest calls when science-based problems threaten major, multidimensional damage to the nation’s well-being. Yet they’re utterly unqualified to make such calls, which entail major considerations outside their discipline, themselves. And this point applies these days particularly to Fauci, who has practically blanketed the new media since the virus’ potential to hit the United States became clear, and whose pronouncements on responses that have inevitably and profoundly impacted every corner of American life have been widely viewed as gospel – including by President Biden.

In this case, the reason is that one of the biggest features of this profession’s culture – the overriding value it places on knowledge sharing and collaboration – can be downright dangerous when scientists have to deal with the outside world, which of course contains ruthless and dangerous regimes like China’s. This powerful collaborative ethos – which is unquestionably has fostered much and even most vital scientific and technological progress, and which surely will continue to do so – in turn sheds light on a subject I wrote about at the end of last month: why Fauci and colleagues have acted so thoroughly oblivious to, and sometimes positively obtuse about, the risks of cooperating with China.

Both the naivete and corruption charges have been fueled by Fauci statements like the following:

>his February, 2020 contention that “early on in the outbreak it was clear that there was some muddling of information, but over the last several weeks, the Chinese authorities have really been very explicit that they were not going to tolerate any misinformation going out because it really was clear that no one was believing them, and they’re really very sensitive to that right now” and

>his June 3 claim that “It’s obviously in China’s interests to find out exactly what it is. And the ‘is’ of the natural theory would be to find that link. So you have to keep looking for it.”

Not helpful either: remarks like “The idea, I think, is quite far-fetched that the Chinese deliberately engineered something so that they could kill themselves, as well as other people. I think that’s a bit far out” – which on top of being an obvious absurdity, ignores the possibility that the virus was being stored in a naturally occuring form at one of the facilities of the Wuhan Institute of Virology (WIV) and leaked out because of shoddy safety practices.

In addition, given that he’s the (very) long-time head of the U.S. agency within the NIH that specializes in infectious diseases like coronaviruses, Fauci seems surprisingly ill-informed about conditions at the WIV. Last week in another interview, he called it “a very well known, highly qualified laboratory.”

Yet as early as January, 2018, State Department officials reported after an inspection tour that the Institute’s single supposedly world-class lab was plagued with safety issues. And the WIV’s top bat coronavirus expert (and a Fauci grant recipient) admitted shortly after the pandemic’s outbreak that she performed much of her most dangerous research – the gain-of-function work that seeks to heighten natural virus’ most dangerous qualities to assess their potential to infect humans – at WIV facilities which maintained considerably lower fewer safety standards.

Further, Fauci seems to have been curiously unaware that China’s military was closely involved with the WIV’s work, or that in China, the military is entitled to learn the results of any research performed by officially civilian scientists. In the second above-linked June interview, he took great pains to argue there’s a bright line between the two sectors – even after hearing that the U.S. armed forces’ top official declared these categories to be distinctions without differences.

But the recent Vanity Fair investigation linked above reports that “U.S. government virologists” themselves had found an April, 2020 WIV study in which eleven of the 23 listed authors worked for the Chinese military’s medical research institute. In addition, by that time, U.S. National Security Council officials had “tracked collaborations between the WIV and military scientists—which stretch back 20 years, with 51 coauthored papers.” Author Katherine Eban also writes that by mid-January, 2020, “a team of military scientists led by China’s top virologist and biochemical expert, Major General Chen Wei, had set up operations inside the WIV.” And as I documented in my post late last month, President Biden’s own chief national security adviser publicly confirmed this relationship in February. 

None of this necessarily means that the WIV was trying to create a coronavirus-based bio-weapon, as some have suggested. But all of it underscores Beijing’s policy of treating everything produced or discovered by Chinese entities, and especially of course by any formal Chinese government agencies, as resources that must be put at the disposal of the leadership to be used in any way it sees fit.

And then of course there’s Fauci’s jumble of inconsistent statements, including under oath to Congressional committees, about whether any of his agency’s grants to the WIV were spent on gain-of- function research, on how much realistically could have known about how the monies were spent once they were out the door, and whether he tried to evade government restrictions (although not an outright ban) on supporting such experiments. (See my post last month for examples.) 

Look more carefully at Fauci’s recent remarks, however, and you’ll find evidence of beliefs that more convincingly represent his ultimate bottom line, and whose fatal flaws must be recognized if Washington is to prepare for future pandemics more effectively. Having lived all his professional life in the collaborative culture of science, Fauci has become incapable of admitting first, that fellow scientists can be untrustworthy and even nefarious if they come from untrustworthy, nefarious governments; and second, that even those governments themselves need to treated with extreme caution.

Indeed, as with so many in his profession, Fauci has become infatuated enough by the promise of unfettered international scientific cooperation to mistakes the ideal as the reality – or as a reality eminently and imminently attainable if not for paranoid or shortsighted laymen. Nothing, therefore, is more instinctive to him than taking for granted the good will and sense of global responsibility of the Chinese government, or insisting that its totalitarian rulers – whose obsession with controlling every significant aspect of their people’s lives must be apparent to any thinking person – leave their scientists free to pursue the truth whatever the political or geopolitical consequences.

Why else, for example, would he tell Fox News talker Laura Ingraham (in the above-linked February, 2020 appearance on her show), that his Chinese counterparts are credible on the virus’ origins and biology because

“there’s Chinese officials, party people, and there’s Chinese scientists. The Chinese scientists we’ve dealt with, I’ve dealt with myself personally for years, if not decades, many of them have trained here in the United States – now, today, when we communicate with them, which we do almost on a daily basis – I’m gonna be on a conference call tomorrow with a couple of them – I have faith that they are not distorting things. Now what the party leaders do, I can’t address. That’s not what I do. But at a medical-to-medical level, I can believe my colleagues there, and what they’re telling me now, I think, is the truth.”

Why else would he add that

“I cannot say that I am satisfied with every single bit of information [coming from China about the virus’ trajectory and origin]. But I can tell you in my direct interaction with Chinese scientists and Chinese health officials, not party politics people, but medical people and scientists, that I can believe what they’re telling me”?

Why else would he make virtually the same point in one of those June, 2021 interviews:

“The scientists in the Wuhan lab for years and years among credible, trusted scientists in China – we’re not talking about the Communist Chinese Party. We’re not talking about the Chinese military. We’re talking about scientists we’ve had relationships for years.”?

In the same session, a related characteristic of the scientist caste came through loud and clear as well: Its clubiness. In a detailed look at the virus origin debate last month former New York Times science reporter Nicholas Wade observed that:

“Virologists around the world are a loose-knit professional community. They write articles in the same journals. They attend the same conferences. They have common interests in seeking funds from governments and in not being overburdened with safety regulations.”

He emphasizes the latter point and the disaster it might have created:

“Virologists knew better than anyone the dangers of gain-of-function research. But the power to create new viruses, and the research funding obtainable by doing so, was too tempting. They pushed ahead with gain-of-function experiments. They lobbied against the moratorium imposed on Federal funding for gain-of-function research in 2014 and it was raised in 2017.”

But the purely social ties of this community’s members matter also in assessing its judgment, and in his numerous interviews, Fauci makes clear not only their strength but their incestuousness. For when asked why he trusted his Chinese colleagues’ honesty and good faith, his consistent answer amounted to “Because I know them so well.”

There’s the above June interview statement that

“The scientists in the Wuhan lab for years and years….we’re not talking about the Communist Chinese Party. We’re not talking about the Chinese military. We’re talking about scientists we’ve had relationships for years.”

In addition,

:The Chinese scientists we’ve dealt with, I’ve dealt with myself personally for years, if not decades, many of them have trained here in the United States – now, today, when we communicate with them, which we do almost on a daily basis – I’m gonna be on a conference call tomorrow with a couple of them – I have faith that they are not distorting things.”

Moreover,

“[W]e have very many years of experience of productive interaction with Chinese scientists. For example, Dr. George Gao, who’s the director of the Chinese CDC [Centers for Disease Control], has been a colleague for many years. He’s a member of the United States National Academy of Sciences….”

In other words, “Trust us. We trained lots of them. And George Gao – we initiated him into the fraternity.”

In Laura Ingraham appearance, right after vouching for all the Chinese scientists he’s long known, added that “what the party leaders do, I can’t address. That’s not what I do.” And he’s absolutely right. It’s not his job to be an expert on the Chinese political system (though you’d think he might have learned a thing or two after all those decades dealing with the scienists).

But for precisely that reason, federal government scientists like him (and surely other subject-specific specialists) clearly need their international activities much more tightly supervised by political appointees directly representing an accountable to the administration in power, and that goes double for their interactions with China, which raise so many political, national security and, as the pandemic has made so clear, economic, social, and cultural questions.

It’s long been a cliché that war is too important to leave to the generals. The pandemic and Fauci’s record on scientific collaboration are unmistakably teaching the imperative of recognizing that America needs to be just as mindful that this activity is too important to leave to the scientists.

(What’s Left of) Our Economy: Springtime Blahs for U.S. Manufacturing Jobs

Tags

aerospace, aircraft, appliances, automation, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Employment, fabricated metal products, Jobs, Labor Departent, machinery, manufacturing, masks, metals tariffs, non-farm business, non-farm payrolls, pharmaceuticals, PPE, productivity, protective gear, regulatory policy, tariffs, tax policy, vaccines, Wuhan virus, {What's Left of) Our Economy

In contrast to the mixed set of signals I saw being given off by last month’s official monthly U.S. jobs report (for April), today’s May figures are pretty clearly indicating that manufacturing hiring is in a weak patch. In fact, the patch has been weak enough to turn the sector from a national employment creation leader to a laggard. Just as important, the short-term outlook at least seems somewhat dimmer than it had been.

The main reason for confusion over the previous data had to do with the disconnect between the automotive-heavy losses of April (which accounted for more than all of that month’s initially reported 18,000 net job decrease) and the positive revisions for the preceding months. Another very encouraging sign – the second straight month of strong jobs gains for the machinery sector, whose products are used widely not only in the rest of manufacturing, but in other major parts of the economy like agriculture and construction.

May’s results were almost a mirror image – and not in a good way.

For example, whereas in April, the 27,000 sequential automotive job losses exceeded total manufacturing job loss of 18,000 (leaving the rest of industry’s hiring performance pretty subdued, to be sure), in May, automotive payrolls rose by 24,800. But overall manufacturing job gains totaled only 23,000 – so the rest of the sector shed workers on net.

In addition, revisions are now negative. April’s manufacturing employment is now judged to have fallen by 32,000 month-to-month, not 18,000. That’s largely because that month’s automotive layoffs were much bigger than first reported – 37,700 rather than 27,000. Even March’s very good upwardly revised monthly hiring surge of 54,000 has now been revised down again to 51,000.

As for machinery, that crucial industry lost 4,700 jobs on net in May – its worst results by far since April, 2020 – at the depths of the CCP Virus-induced downturn and the first negative number since January. Moreover, this April’s 3,700 monthly jobs increase has now been revised down to 1,900, and March’s last upgraded 5,400 figure is now pegged at only 3,500.

In all, manufacturing has now regained 876,000 (64.27 percent) of the 1.363 million jobs it lost at the pandemic’s height in the spring of 2020. That’s now well behind the 69.74 percent employment recovery of the private sector and even the 65.88 percent rebound of the total economy (defined as the non-farm sector by the U.S. Labor Department, which compiles and categorizes the data).

The manufacturing sectors with the biggest sequential May jobs gains were the overall transportation equipment sector (where a 9,000 hiring improvement was propped up by the automotive increases), miscellaneous non-durbable good makers (up 4,100), fabricated metals products (up 3,500) miscellaneous durable goods manufacturing (a catch-all category including everything from surgical equipment – like facemasks and other personal protection equipment to gaskets to jewelry – where payrolls were up 3,400), and computer and electronics products and electrical equipment and appliances (up 2,800 each).

The hiring in fabricated metals and appliances was noteworthy given that companies in both industries have been complaining loudly about the pain they’ve been suffering from higher metals prices stemming in part from ongoing U.S. tariffs on these materials. (See, e.g., here and here.)

May’s big manufacturing jobs losers aside from machinery were non-metallic mineral products (down 2,200), paper and paper products (down 2,100), and the big chemicals sector, which is another big supplier of a wide variety of products to the entire economy (down 1,100).

More encouragingly, when it comes to industries closely related to the fight against the pandemic, job creation seems picking up, although the relevant data are one month behind the rest of the jobs figures. Specifically, in the surgical appliances and supplies sector that includes the protective gear, March’s employment increase was unrevised at 900, and hiring accelerated to 1,200 in April – the best monthly performance since September’s 1,600. This sector’s payrolls are now 10,400 (9.89 percnt) higher than in February, 2020 – the last pre-pandemic month.

For pharmaceuticals and medicines overall, March’s 1,500 sequential jobs increase was revised up to 1,600, and April hiring surged to 2,700 – its best performance by far of the CCP Virus period. Its payrolls are up by 12,500 (4.01 percent) since pre-pandemicky February, 2020.

For the pharmaceuticals subsector containing vaccines, March’s initially reported employment increas of 500 is now judged to be 800, and net hiring grew by 1,300 in April – a solid improvement by this industry’s recent standards. As a result, its workforce has now increased by 9,200 (9.30 percent) since February, 2020.

The same unfortunately can’t be said for the aerospace industry, and continuing and even mounting troubles for Boeing presage ongoing woes for the foreseeable future. March’s initially reported 1,800 monthly job loss for aircraft has now been revised for the worse to 1,900, and the sectors workforce fell by another 200 in April. Meanwhile, following sequential March losses in aircraft engines and parts, and in non-engine aircraft parts, employment flatlined in these two sectors combined in April.

Continued strength in the overall recovery of the U.S. economy should provide strong tailwinds for domestic manufacturers and for industry’s jobs figures, and continuing tariffs should help by keep much foreign competition (especially from China) out of the market.

Vaccine production will likely keep expanding – and requiring more workers – as well, mainly to supply immense foreign demand. But the sector is so small that its employment performance can’t move the manufacturing jobs needle much.

Boeing’s problems, however, can be expected to cast a big shadow not only over the big aerospace industry, but over its big domestic supply chain as well. And although the global semiconductor shortage that has hit the automotive sector especially hard may be starting to ease, the damage appears likely to take considerably longer to overcome. Manufacturers face big questions about the future of U.S. tax and regulatory policy, too.

Recently, moreover, some data’s come out pointing to a development that might wind up strengthening domestic industry in toto, but weakening its employment potential, at least in the short run. Labor Department figures show that, from the depths of the pandemic through the first quarter of this year, U.S.-based manufacturing has boosted its labor productivity much faster than the non-farm economy generally — and much faster than it has since its recovery from the last recession.  In other words, manufacturers lately been improving their ability to turn out product more than they’ve increased hiring. 

Whether this is a secular change or whether industry will revert to its recent mean is anyone’s guess. Also highly uncertain is whether better productivity growth (including of course more use of labor-saving technologies) will wind up destroying jobs on net, or increasing them by supercharging production. So far history seems to teach that such advances are net employment creators, but is that inevitable going forward? And is it inevitable for manufacturing specifically? All I can say is “Stay tuned” and “Be patient.”          

Im-Politic: The U.S. Still Isn’t Even Running in the Global Semiconductor Supremacy Race

Tags

appropriations, authorization, Chuck Schumer, Congress, Defense Department, House of Representatives, Im-Politic, innovation, Intel, microchips, semiconductors, Senate, subsidies, Taiwan Semiconductor Manufacturing Company, technology, TSMC

In a week, the United States will mark an anniversary that no American should want to celebrate: It was last June 10 and 11 that companion bills were introduced in both the House and Senate to increase greatly the U.S. government’s support for domestic semiconductor manufacturing. Since I’m a strong backer of such efforts, why am I so downbeat? Because despite the importance of strengthening the American footprint in this sector for both national security and future prosperity, and despite seemingly strong bipartisan support for this effort (at least in principle) nearly a year later, not a single penny has been been spent.

It would actually be reasonable to argue that the federal government took way too long to take even that preliminary step. After all, as I documented in this article last October, America’s global leadership in producing (as opposed to designing) the microchips increasingly crucial to so many defense-related and civilian products and services – and indeed, entire industries – had been waning for decades, and was finally lost in 2017. That’s the year when U.S.-owned Intel became unable to keep up with Taiwan’s Taiwan Semiconductor Manufacturing Company in turning out semiconductors featuring the world’s smallest circuit sizes – the main indicator of a chip’s capabilities.

So it’s not terribly impressive that American political leaders took two years to begin responding in a serious way. (And P.S. – the executive branch, under President Trump, clearly wasn’t johnny-on-the-spot, either, in using the bully pulpit to sound the alarm and generate support for action.)

Still, the bipartisan nature of the legislative effort – at a time of heated partisanship on virtually every other national issue – seemed cause for encouragement. Even better: Just a month later, the House and Senate passed their respective semiconductor bills.

Since then, however, progress has been sluggish. The Representatives and Senators didn’t manage to get their acts together before that session of Congress ended in order to draft and pass the consensus bill needed to go to the President’s desk for signing. Therefore, the measures died, and work needed to begin all over again this past January, when the new Congress convened.

Semiconductor work was proceeding along another track in late 2020, and resulted in key provisions of the expired bill being incorporated into legislation authorizing the Defense Department’s levels and kinds of spending for this fiscal year. That bill became law this New Year’s Day (over a Trump veto for unrelated reasons), but according to Congress’ procedures, authorizing bills can’t trigger any spending. That requires an appropriations bill – which also must be passed in identical form by both chambers before enactment.

Six months later, there’s still no money flowing. The story is excrutiatingly difficult to follow, but it appears that Senate Majority Leader Chuck Schumer of New York tried to speed up the process in May with an emergency funding measure. Passage seemed likely at month’s end, before the Senate’s scheduled Memorial Day recess, but was stymied at the last minute by a sadly typical array of political shenanigans from both the minority Republicans (whose support was needed because of the Senate’s filibuster provision requiring super-majorities to pass most legislation) and Democrats. (See here and here for good accounts.)

Passage of a similar measure by the House looks to be easier, because of the Democrats’ slightly bigger majority. But there the process is less advanced, since the House Democrats’ own technological competitiveness proposals were only introduced in committee May 25.

It’s not like the U.S. private sector has been standing still. Intel, most significantly, seems determined to reemphasize manufacturing again, and has committed to put lots of money where it’s mouth is. But without a major helping hand from Washington, this campaign is sure to be swamped by the massive amounts of foreign government subsidies for promoting advanced semiconductor manufacturing that have been announced lately. (Here’s a useful summary.)

I’m generally a fan of the cautious approach to policymaking fostered by the U.S. Constitution’s separation of powers and checks and balances principles. And I wouldn’t be so fast, like so many Democrats, to junk the Senate’s filibuster rule (which is not found in the Constitution). Yet time is not America’s friend when it comes to regaining lost ground in a fast-moving industry like semiconductors, and if Washington continues its business-as-usual approach on this issue, history will likely conclude that the American political system failed a big test.

Full disclosure:  I own a not-trivial number of shares of TSMC common stock.

Those Stubborn Facts: A Coming Boom in Free Lunches?

Tags

Germany, Those Stubborn Facts, UBI, universal basic income

Number of recipients slated to get no-strings income grants for three

years regardless of financial need from a German foundation’s pilot

program: 122

 

Number of applicants to this program: “More than 1.5 million.”

 

(Sources: “Money for nothing: Germany starts basic income experiment,” by Andreas Becker, DW.com, June 1, 2021, Money for nothing: Germany starts basic income experiment | Business| Economy and finance news from a German perspective | DW | 26.08.2020 )

 

(What’s Left of) Our Economy: Wage Inflation? Seriously?

Tags

CCP Virus, construction, coronavirus, COVID 19, housing, inflation, inflation-adjusted wages, labor shortages, leisure and hospitality, private sector, real wages, recession, recovery, wage inflation, wages, Wuhan virus, {What's Left of) Our Economy

Reports keep abounding that U.S. businesses can’t find enough workers to match their needs amid an ongoing rapid reopening of the economy from its lockdowns-induced slump, and that companies are therefore being forced to attract employees with ever higher – and even alarmingly higher – pay offers.

All of that makes perfect sense except for one critical detail: The official U.S. wage figures show precious few signs of soaring wages whatever. In fact, when you adjust for the inflation that has been recorded in Washington’s statistics, you see that workers’ hourly pay generally keeps falling behind, not racing ahead, of rising prices in the economy.

First let’s look at the pre-inflation figures for the entire economy (except for government, where pay levels mainly reflect politicians’ choices, not economic fundamentals).

When it comes to the entire private sector, hourly earnings in April (the latest figures available, which are still preliminary) grew by 0.33 percent year-on-year. That result, though, is somewhat misleading, since the previous April’s level was artificially high. That month, remember, was the depth of the CCP Virus-induced recession, and companies were largely laying off their least experienced (and cheapest) staffers. So the wage number for retained workers rose (and strongly) simply because their pay levels remained relatively lofty, and they accounted for a much bigger percentage of employment. Therefore, perhaps that misleadingly high April, 2020 figure was the main reason that the 2020-2021 improvement is misleadingly low?

Unfortunately, the data shoot down that hypothesis, too. For example, between “normal” April, 2018 and 2019, economy-wide pre-inflation wages jumped by 3.30 percent. That’s ten times the 2020-2021 increase. And in fact, the April, 2019 to 2020 pay hike was by far the smallest since 2006 (when this particular data series began).

But maybe the biggest wage inflation only began this calendar year – when overall inflationary pressures have arguably become visible?  Between January and April, current dollar hourly wages for the entire U.S. private sector did climb by 0.84 percent, and that advance was more than twice as fast as the April year-on-year change. Moreover, this 2021 wage growth was faster than that for “normal” January-April, 2019 (0.76 percent). Indeed, it was the fastest since 2008, another recessionary year when layoffs heavily concentrated among the least experienced, lowest-paid employees rendered the 0.90 percent result artificially high.

But aside from 2008, the January-April increase wasn’t that much higher than that seen in many recent years. For example, the January-April result for “normal” 2019 was 0.76 percent. For 2018, it was 0.71 percent. Just as important – does anyone think that those years, or any time lately, has been a golden age of wage increases?

There’s another possibility to consider: that strong wage inflation has taken place only among the production and other non-management workers, who both tend to be the lowest-paid and who in principle therefore are likeliest to be kept out of the job market by unusually generous unemployment benefits.

Average hourly earnings before inflation for this group have actually risen much more strongly year-on-year in April than for the overall workforce – by 1.15 percent versus 0.33 percent. And this 2020-2021 result, as with wages for the entire workforce, does seem to have been artificially depressed by the equally artificially high (7.84 percent!) figure for 2019-2020.

But historically, the 2020-21 wage increase not only looks anything but exceptional. It’s positively pitiful – by far the weakest April-April rise on record. Just to compare, from April to April in “normal” 2019 and 2018, current dollar wages for these “blue collar” workers were up 3.46 percent and 2.83 percent, respectively. .

Are the trends much different for January-April periods – which in principle should reveal whether wage inflation has waited till this calendar year to take off? For 2020 so far, pre-inflation blue collar hourly pay has improved by 1.23 percent – more than the 0.84 percent increase for all private sector workers.

That’s much slower than the comparable 5.36 percent jump last year, but we agree that last year was weird. The 2021 results are faster than those of normal 2019 (0.91 percent), but the gap doesn’t seem gargantuan to me. At the same time, current dollar January-April pay increases of one percent or greater for blue collar workers have been experienced five times since 1998, and before then, you need to go back to the late-1980s for a period when they were routine.

So describing the January-April, 2021 results as wage inflation-y could be justified. But that’s a far cry from reasonably concluding that this inflation will have much in the way of legs, since the economy, as widely noted, has never seen this kind of sudden stop-start transition in peacetime.

There’s another set of numbers, though, that needs to be examined to put the wage inflation issue in full perspective – recent wage changes after taking into account inflation across the entire economy. And in these real terms, hourly pay has actually been going down lately.

That’s true for all private sector workers between last April and this past April (down 3.66 percent).

It’s true for these workers between January and April of this year (down 0.88 percent).

It’s true for private sector blue collar workers between last April and this past April (down 3.37 percent).

And it’s true for these workers between January and April of this year (-0.71 percent).

Moreover, the “2020 effect” caused by that year’s artificially high baseline doesn’t seem to account fully for this wage deterioration. It’s definitely been apparent for all private workers (for whom average real wages soared by 7.81 percent between 2019 and 2020), and for private sector blue collar workers (whose inflation-adjusted average hourly pay surged by 7.68 percent).

In addition, since 2006, (when real wages for the whole private sector workforce began to be tracked), these wages have fallen on an April-April basis five other times. But they’ve never fallen by remotely as much as in 2021. And this year, employers are supposed to be desperate for workers. Much the same holds for private sector blue collar workers during this period.

Looking at the January-April periods, the 2021 decrease of 0.88 percent for all private sector workers is the second biggest since 2006 (trailing only 2011’s 0.97 percent). Further, this four-month stretch has only seen one other instance of constant dollar wage decrease (2019’s 0.37 percent). And the 2021 result is all the more strange given the strangely strong and sudden nature of the recovery.

When it comes to their blue collar counterparts, 2021’s 0.71 percent drop in after-inflation wages between January and April is also the second biggest since 2006 (trailing only the 1.24 percent fall-off suffered, again, in 2011). Pay declines during this period for these workers has been more frequent than for the private sector overall. (They’ve occurred five times all told before 2021.) Again, however, 2021’s has been puzzlingly steep given the economy’s unusually fast recovery this year and all the labor shortage claims that have resulted.

More convincing signs of out-of-the-ordinary wage inflation can be seen in sectors like construction and leisure and hospitality, especially during the first four months of this year. In the former, which has enjoyed strength in residential housing throughout the pandemic period, pre-inflation wages have increased by 1.24 percent. That’s the most since 2006 (again, the earliest data available) – though not outlandishly so. But after accounting for inflation, real construction wages have dropped by 0.49 percent between January and April of this year.

For blue collar construction workers, pre-inflation wages have improved by 1.75 percent during the first four months of 2021 – another post-2006 high. But even though their real wages have dipped during this period by only 0.17 percent, that’s still a dip.

The leisure and hospitality industries are of course coming out of a disastrous pandemic period, and with Americans now flocking to restaurants and bars and resuming travel, it’s not surprising that January-April current dollar hourly pay has risen by 3.71 percent – far and away a post-2006 record. The post-inflation number is up nicely, too (1.98 percent), and also a performance that’s smashed previous records. So this sector so far is telling a stronger wage inflation story.

Non-supervisory blue collar leisure and hospitality workers have fared even better, with pre-inflation wages zooming up by 5.87 percent between January and April of this year, and real hourly pay better by 3.98 percent.

Will these healthy pay hikes continue? That’s a big question for these parts of the economy. But even though wage figures don’t capture the entire compensation picture (in particular, they leave out non-wage benefits and all the signing bonuses employers are reportedly offering to lure workers off the sidelines), with wage and salary income representing more than 80 percent of total employee compensation throughout the economy (including in the public sector), they capture lots of the picture. And the overall message is that, like a famous economist once said about computers being everywhere but in the productivity statistics, wage inflation worth worrying about, and related worker shortage claims, to date are everywhere but in the wage statistics.

Following Up: Welcome Shrinkage of China’s Ties with U.S. News Organizations

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Boston Globe, Chicago Tribune, China, China Daily, ChinaWatch, Following Up, Houston Chronicle, journalism, Mainstream Media, news media, propaganda, The Los Angeles Times, The New York Times, The Wall Street Journal, The Washington Free Beacon, The Washington Post, transparency

Since Memorial Day is – or at least should be – a remembance and tribute to what’s best about America, it seems appropriate to report some good news: Some of the nation’s leading news organizations have cut some not-at-all-trivial ties with China.

These ties concern their decision to stop distributing with their print editions and posting on their websites a Chinese government propaganda vehicle called ChinaWatch. As I wrote more than two years ago, their decision to present ChinaWatch and the form of this presentation created two problems. First, although the Constitution’s First Amendment should authorize giving even possibly genocidal, increasingly hostile dictatorships the right to present their material in the United States, journalistic ethics and (I believe) the law should require the clear labeling of any such material as foreign government products.

I argued that neither the Chinese government nor the news organization’s carrying their material met these obligations.

Second, since ChinaWatch was paid advertising, it became a source of revenue for the news organizations that featured it, and because these news organizations covered the Chinese government, its appearance raised conflict of interest questions that at least should have – but weren’t – have been forthrightly acknowledged. Importantly, some news organizations have received millions of dollars from Beijing – not decisive sums in terms of the overall finances of some of them, but not trivial, either.

Happily, these problems have now been reduced, although not eliminated. The New York Times said about a year after my post that it had stopped accepting such material from all state-run media. According to this Tibetan dissident publication, the same goes for The Wall Street Journal. The Washington Post says it has not run or distributed ChinaWatch specifically since 2019.

Official U.S. government lobbying records show, however, that multi-million dollar relationships still exist between several major U.S. news organizations and Beijing’s propaganda machine. As reported last week by the Washington Free Beacon, over the last six months,

“China Daily [the parent organization of ChinaWatch] paid more than $1.6 million for advertising in Time magazine, the Los Angeles Times, Financial Times, and Foreign Policy magazine, according to disclosures filed with the Justice Department. The Beijing-controlled news agency paid another $1 million to American newspapers, including the L.A. Times, Chicago Tribune, and Houston Chronicle, to print copies of its own publications.”

And unlike the The New York Times, the Post, and the Journal, the Free Beacon observes,

“Many of the newspapers [still] working with China Daily face severe financial problems. The Los Angeles Times furloughed workers last year as advertising revenue cratered during the coronavirus pandemic. Papers like the Chicago Tribune and Boston Globe have failed to turn a profit for years.”

The nation’s news organizations have more than enough credibility problems these days (see, e.g., here and here). Severing all official ties with Chinese and other foreign government media, or at least making every effort to publicize them to their readers, could only help them regain some of that trust.

Im-Politic: Big Neglected Questions About Washington and the Virus’ Origins

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Anthony S. Fauci, Biden administration, bio-weapons, CCP Virus, China, coronavirus, COVID 19, Francis Collins, gain-of-function research, Galveston National Laboratory, Im-Politic, Josh Rogin, National Institutes of Health, NIH, perjury, State Department, The Washington Post, Trump administration, Wuhan Institute of Virology, Wuhan virus

There’s been lots of commotion in recent weeks about the decision by chief Biden medical adviser Anthony S. Fauci and National Institutes of Health (NIH) chief Francis Collins to use federal government moneys to fund research on dangerous coronaviruses at labs in China – and that’s good. As I wrote in January, there’s enough compelling circumstantial evidence that these resources helped create the CCP Virus to warrant detailed investigations and possibly their firings.

What’s less good is that much of the commotion is missing or obscuring other problems with the Fauci-Collins approach to scientific cooperation with China that are at least equally serious, and that could constitute comparable grounds for their dismissal.

To be sure, the current emphases on this matter aren’t exactly trivial. Clearly, if federal funding helped pay for research at one of the two major virology labs in the Chinese city of Wuhan, where the first virus cases have been reported, and that this research created the pathogen that has caused so much illness, death, and economic distress in America and around the world, that would represent one of the worst scandals in American history. There are also the questions of whether the feds funded what’s called gain-of-function research (which is unmistakably capable of producing such deadly pathogens) to begin with, and whether they’ve told Congress the truth about these programs in sworn testimony.

But however grave each of these potential offenses, the figurative jury is still correctly out on each. First, it’s not yet at all certain that the virus even came from either lab, as opposed to some form of natural origin. In addition, since there’s no hard-and-fast scienitific consensus on defining gain-of-function research (here’s an official federal summary of the debate), it’s not yet known whether such activity was actually financed by the federal government. It’s true that there’s a U.S. government definition that applies specifically to grants for such activity. But Washington has also given itself wiggle room in applying it.

As a result, it’s far from obvious that Fauci specifically perjured himself in telling Congress that he’s innocent of such accusations. More frustrating, because the term is so fuzzy, a fair and just conclusion may be genuinely impossible to reach. This holds in principle despite Collins’ claim (not under oath) that NIH has never “approved any grant that would have supported ‘gain-of-function’ research on coronaviruses that would have increased their transmissibility or lethality for humans” – which of course raises the question of what kind of gain-of-function work might have been approved.

Moreover, even if Fauci and Collins did actually approve gain-of-function research in China, that doesn’t necessarily mean that the particular project they subsidized produced the virus in question. And that may never be finally determined, either, because China may well have destroyed the evidence needed to provide a definitive answer.

When it comes, however, to making sure that U.S. international science cooperation policy adequately safeguards America’s health and security going forward, some crucial questions are being neglected so far.

For example, just before its term ran out, the Trump administration stated publicly that even though the Wuhan Institute of Virology (WIV – which received the controversial U.S. research grant) presents itself as a “civilian institution, the United States has determined that the WIV has collaborated on publications and secret projects with China’s military. The WIV has engaged in classified research, including laboratory animal experiments, on behalf of the Chinese military since at least 2017.” Nor has the Biden administration disputed this allegation – even when the President’s national security adviser was asked about it directly.

Further, virus research has always had obvious links to biological weapons research, and there’s no bright line in China (or anywhere in the world these days) between civilian technologies and innovation and military technologies and innovation. No one with any credibility has explicitly charged that Beijing intended the results of its virology research to be used militarily. But no one with a lick of common sense could dismiss this prospect, either. Did either Fauci or Collins consider it? If so, neither has mentioned it yet.

Then there are the secrecy and oversight issues. Fauci has claimed that “You never know” whether grant recipients are trustworthy. But even though governments in both China and the United States (and every other country) keep lots of secrets, military and otherwise, and even though all go overboard with the secrecy too often, who can doubt that China is in a class by itself for blocking transparency, and for lacking systemic means of exposing improperly kept secrets?

In other words, even assuming that the U.S. government can never completely ensure that grantees won’t lie, did Fauci or Collins ever consider that trustworthiness in China is a special problem, and required special monitoring procedures to be in place before any money was transferred – especially given the bio-weapons angle? Not only is there, again, no reason yet to believe that either of them did, Fauci has even told Congress that the Chinese recipients are in fact “trustworthy.” (See the above-linked CNBC.com post.   .

And don’t forget safety – an issue on which the available evidence indicates that lackadaisical attitudes weren’t confined to Fauci and Collins.

A Washington Post article has reported that in 2018 – that is, during the Trump administration – concerns about the WIV’s coronavirus studies led the State Department to send some of its China-based science specialists to the facility to check on its safety conditions. They found enough subpar standards and practices to warn about the risks of a leak causing a pandemic. And here’s where the story gets especially troubling, and where many more questions need to be answered.

According to the Post report, the WIV’s own officials asked for help in this regard, and the State Department inspectors concluded that the best U.S. response was providing assistance – both because they considered the work to be valuable and because the coronavirus research was being supported by “the Galveston National Laboratory at the University of Texas Medical Branch and other U.S. organizations.” That is, the NIH of Fauci and Collins wasn’t the only federal government sources of funding.

It’s not clear that they also got word of the slipshod conditions at the WIV. It’s not even clear that the Galveston lab did. But is it credible to suppose that they were left in the dark? (Its head, interestingly, gave a non-denial-type denial in this April, 2020 interview. To my knowledge, Fauci hasn’t been asked the question.)

All that’s known for sure is (1) that the Post article (and a follow-up Politico piece from the same correspondent, Josh Rogin) reported that the State Department inspectors’ request for more assistance wasn’t granted; and (2) that the NIH-funded research wasn’t suspended until April, 2020.

It’s vital that responses to all these unanswered and sometimes unasked questions be forthcoming.

At this point, therefore, it’s possible that Fauci and Collins are off the hook on the safety issue – and that others who served in the State Department during the Trump years are squarely hanging from it. Otherwise, however, it looks like this pair decided to support dangerous and potentially catastrophic biological research by a regime known for its disregard for the safety of its own people – let alone foreigners – in its pursuit of power, for its eagerness to turn scientific advances into military assets, for its obsession with secrecy and impressive capability for remaining opaque, and, last but not least, for its growing determination to challenge U.S. national security interests.

Finding out why on earth this idea ever entered or stayed in their heads seems a lot more important than haggling over whether in some technical or even legal sense they were or weren’t funding gain-of-function research.

Im-Politic: Biden’s Latest Americans Last Immigration Policy

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America First, Biden, Border Crisis, border security, Central America, Chobani, cities, corruption, crime, El Salvador, foreign aid, gang violence, governance, Guatemala, Honduras, Im-Politic, immigrants, Immigration, inequality, Kamala Harris, Mastercard, Microsoft, migrants, Northern Triangle, racial economic justice, urban poverty

As known by RealityChek regulars, I’m deeply skeptical that the Biden administration can bring migrant flows from Central America (or similar regions) under control by adequately improving the miserable local conditions that (understandably) drive so much flight northward to begin with. But the first detailed description of this policy that I’ve seen not only ignores all of the intertwined institutional, governance, and cultural obstacles to turning regions like Central America’s Northern Triangle (El Salvador, Guatemala, and Honduras) into even approximations of success stories. It also casts real doubt on the seriousness of the vaunted domestic social justice and inequality commitments made both by President Biden and by at least some of the U.S. corporate sector.

As argued by a White House Fact Sheet released yesterday, support for economic development in these long-impoverished, abusively ruled countries will “require more than just the resources of the U.S. government.” Also essential “to support inclusive economic growth in the Northern Triangle” will be the “unique resources and expertise” of the private sector.”

It’s true that only three completely private, profit-seeking American companies have responded so far to the “Call to Action” for business involvement issued by Vice President Kamala Harris, who’s the administration’s designated czarina for dealing immigration-wise with the Northern Triangle. But let’s say lots more get involved.

Why would anyone capable of adult thinking believe that their efforts will succeed? After all, the administration acknowledges that economic success in the region depends on overcoming its “long-standing impediments to investment-led growth.” And it specifies that these obstacles include governments that simultaneously either can’t or won’t carry out their duties in corruption-free ways, and are unable to provide minimal levels of security for their populations against criminal gangs.

Meaning that private businesses will be keen even on setting up the kinds of training and business incubator and internet connectivity programs that predominate in their Northern Triangle plans while threats of violence and extortion remain omnipresent? Maybe they’re planning to cope by hiring massive  private security forces – but such precautions were never mentioned in the Call to Action announcement.

Just as important, here’s another major head-scratcher, especially given the flood of promises over the last year or so from U.S. business circles about promoting racial economic and financial equality. If companies are willing to wade into dangerous environments to educate populations, build or strengthen the infrastructure needed for significant economic progress, and foster new businesses in Central America, why aren’t they focusing their efforts on America’s own inner cities, or at least focusing more tightly on these efforts first? It’s not like their needs aren’t pressing. And although the Northern Triangle countries have actually made some noteworthy progress in fighting violent crime lately, they’re still much more dangerous places than even most of America’s homicide capitals.

Consequently, for companies concerned overall with actual results, it would make far more sense to take an America First approach. Not that Microsoft, Chobani, and Mastercard have ignored their disadvantaged compatriots in practice. But even as their U.S. efforts remain pretty modest (Microsoft, e.g., to date has only launched its digital skills and access improvement program in Atlanta and Texas, and Chobani’s incubator program still seems pretty small scale), they’ve decided to head south of the border(s).

Incidentally, the entire Biden Central America and overall immigration policies are vulnerable to a similar criticism. Since however difficult it’s going to be to spur racial and other economic and social progress at home, the challenge will be far more difficult in foreign countries, a President truly committed both to these vital domestic goals and to staunching migrant flows would focus focus his economic development programs on his own country, and deal with the migrants as an immigration issue – by securing the border. Unfortunately for Americans, Joe Biden has been anything but that President.

(What’s Left of) Our Economy: New GDP Figures Show Slower U.S. Trade Normalization

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CCP Virus, coronavirus, COVID 19, GDP, gross domestic product, inflation-adjusted growth, lockdowns, real GDP, real trade deficit, reopening, semiconductor shortage, trade deficit, West Coast ports, Wuhan virus, {What's Left of) Our Economy

When the the U.S. government’s first read on the economy’s growth during the first quarter of this year came out, I wrote that the trade highlights showed some tentative signs of normalization for CCP Virus-distorted flows of exports, imports, and for the resulting trade balances.

As of this morning, we have the second report on change between January and March in the gross domestic product (GDP), and the normalization trend still looks intact – but in weakened form.

The new data judged that first quarter growth in inflation-adjusted terms at an annual rate was a bit faster than previously estimated – 6.25 percent versus 6.24 percent. Yet the real combined goods and services trade deficit of $1.1939 billion annualized is 1.57 percent bigger than the quarterly record $1.1755 trillion reported a month ago.

As a result, the overall deficit a represented a 6.41 percent worsening from the fourth quarter figure, as opposed to the 4.77 percent increase previously reported. That’s still much lower than the 10.12 percent rise from the third quarter to the fourth quarter. And it’s orders of magnitude less than the 31.47 percent recorded during the spectacularly high growth second to third quarter period. But it’s definitely a step backward.

Ditto for the impact on after-inflation economic growth of the overall trade deficit’s increase. The initial read for the second quarter reported that the gap’s widening subtracted 0.87 percentage points from the 6.24 percent annualized total real GDP growth figure. In other words, constant dollar GDP growth would have been 13.94 percent greater had the real trade deficit not climbed at all.

Now the growth-killing impact of the trade shortfall’s expansion is pegged at 1.25 percentage points from 6.25 percent annualized price-adjusted economic growth. So that real GDP growth would have been 20 percent faster had the deficit not worsened. As with the increase in the deficit itself, the impact on growth of the deficit’s rise is smaller than it was in the fourth quarter – when it hit 35.92 percent for the worse, a multi-decade high. But the improvement is now a good deal smaller than first thought.

On a static basis, however, the inflation-adjusted adjusted total trade deficit’s share of the real economy keeps surging. This morning, it came in at 6.25 percent – as opposed to the 6.16 percent first reported. The fourth quarter level was only 5.97 percent and the third quarter’s just 5.48 percent.

Consequently, the real trade deficit is still bigger relative to the whole economy than during the fourth quarter of 2005, when it hit 6.10 percent. That incidentally was the previous record, and that time is of course known as the bubble decade – after which the financial crisis and Great Recession quickly followed.

Moreover, although signs of overall economic normalization keep mushrooming (thanks, e.g., to the spread of CCP Virus immunity and continued stimulus spending), trade flows may still be in for months more of pandemic-related distortions. Indeed, they may worsen.

After all, on top of all the stimulus the economy will keep receiving for the foreseeable future, two major bottlenecks crimping growth are easing. Specifically, progress is now being reported not only in clearing West Coast ports congestion, but in alleviating the global semiconductor shortage (albeit partly because the production cuts it forced on customers are cutting their demand).

It’s true that these bottlenecks – which have stemmed largely from the sudden stop-start nature of transitions from lockdowns to reopenings – have affected both U.S. exports and imports. But with the United States still a strongly consumer-dominated economy, and almost certain to recover much faster than many of its leading trade partners (many of which will therefore be relying on generating their own trade surpluses for growth more than ever), it’s all too easy to see how its trade deficits will either keep setting records or at least stay at their current lofty levels well into the next year.