Making News: On Israeli TV Tonight Talking Trump Tariffs…& More!

Tags

Breitbart.com, economy, i24News, inflation, John Carney, Making News, tariffs, Trade, Trump, wholesale prices

I’m pleased to announce that I’m scheduled to make my debut on Israel’s i24News tonight! The segment, slated to air at 7:49 PM EST, will cover President Trump’s trade policies, and you can watch on-line at this link. As usual, if you can’t tune in, I’ll post a link to the streaming video as soon as one’s available.

Also, my analysis earlier this week of new data on American wholesale prices and what they’re telling us about the Trump tariffs was quoted by John Carney in this Breitbart.com analysis.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

 

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Following Up: Last Night’s National Radio Interview on the U.S.-China Trade Wars Now On-Line

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China, Following Up, Gordon G. Chang, The John Batchelor Show, Trade, trade wars, Trump

I’m pleased to announce that the podcast of my interview last night on John Batchelor’s nationally syndicated radio show is on-line.  So click here if you missed this informative conversation among John, co-host Gordon G. Chang, and me on where we stand with the U.S.-China trade conflict – and what Beijing’s next moves might be.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Making News: Hits on Breitbart.com, in The Pittsburgh Post-Gazette…& More!

Tags

Apple Inc., Breitbart.com, China, Gordon Chang, Jobs, John Carney, Len Boselovic, Making News, manufacturing, Pittsburgh Post-Gazette, The Daily Beast, The John Batchelor Show, Trade, trade wars, wages

Time to summarize some recent media appearances!

Yesterday, in a post on a new New York Federal Reserve study on U.S. trade flows, John Carney of Breitbart.com cited my own analysis of this bizarre report. Here’s the link.

Also yesterday, Len Boselovic’s Pittsburgh Post-Gazette analysis of the latest developments in manufacturing wages cited my findings about how hourly pay in industry has lost its leadership status in the U.S. economy.

On Saturday, August 11, TheDailyBeast.com ran Gordon Chang’s latest article on U.S.-China trade relations, which quoted me on the possibility of new pressure on Apple, Inc. from the Chinese government.

Finally, on July 30, I made a short-notice appearance on John Batchelor’s nationally syndicated radio show to discuss the latest developments in the U.S.’ trade confrontation with China. Here’s a link to the podcast of the segment, which experienced some technical difficulties because John was calling in from Azerbaijian!

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

 

(What’s Left of) Our Economy: The IMF (Unwittingly) Explains Why Trade Deficits Really Do Matter

Tags

China, current account, current account surplus, current deficit, Germany, Global Imbalances, globalization, IMF, International Monetary Fund, Japan, tariffs, The Netherlands, Trade, Trade Deficits, Trump, {What's Left of) Our Economy

One of my greatest professional disappointments has been my failure to help make many converts to the idea that one of the biggest – and possibly the biggest – reason that trade deficits matter a lot (contrary to the insistence of most economists) is that they can lead to global financial crises like the one that struck in 2007 and 2008. The idea is that these deficits lay at the heart of the broader economic imbalances run up during the previous decade – which flooded borrowing- and spending-happy economies (especially America’s) with oceans of cheap credit, and inevitably produced the reckless use of such credit and the inevitable – and terrifying – bursting of the resulting bubbles.

You see? It’s a thesis that’s tough to summarize briefly – even though it’s widely accepted by some of the world’s leading economists, who nonetheless remain reluctant to acknowledge any connection to trade flows.

So I’m gratified that the International Monetary Fund has just lent additional support to this thesis, but I’m under no illusions that the determinedly oblivious conventional wisdom is going to budge – especially since the Fund goes out of its way absolve lopsided trade flows of any blame.

According to the Fund’s new External Sector Report (click here for a link to the PDF), these imbalances (measured in their broadest form, the current account) stayed at about the same share of the world economy last year as they did in 2016 (some 3.25 percent). Yet in the IMF’s view, between 40 and 50 percent of these imbalances were “excessive (that is, not explained by countries’ fundamentals and desirable polices).”

Why should anyone care? Because, as the Fund explains, “Large and sustained excess external imbalances in the world’s key economies—amid policy actions detrimental to external balances—pose risks to global stability.” Specifically, “Over the medium term, sustained deficits, leading to widening debtor positions in key economies, could constrain global growth and possibly result in sharp and disruptive currency and asset price adjustments.”

That last reference to “sharp and disruptive currency and asset price adjustments” is a fancy, and deliberately understated, way of saying “financial crisis.”

The danger is underscored by Figure 1 from the Report (on page five) – which shows how the world’s current account situation has changed over time. Optimists might take comfort from the fact that the overall global imbalance today (showed by the thick, solid line), is considerably smaller as a share of global output than it was at the peak of the last decade’s bubble. Also of interest: China’s current account surplus has shrunk in relative terms, while those of Japan, Germany, and the Netherlands have remained about the same. (For evidence that the better Chinese numbers are largely smoke and mirrors, see this analysis from the Council on Foreign Relations – not exactly a hotbed of protectionist thought.)

But here’s what the pessimists would note – and what should worry everyone: Although the total worldwide current account imbalances is down, so is global growth. During the peak bubble years, it was about 4.30 percent annually after inflation. During the current recovery, it’s been much lower, and last year, it was 3.15 percent. Worse, a new slowdown may well be in the cards.

That is, the world economy seems to be facing all the dangers of a new financial crisis without having received many of the (dubious) benefits of a preceding bubble.

The IMF has a solution: The persistent surplus countries should spend more (which will presumably pull in more imports from the deficit countries) and the deficit countries should take “actions to strengthen public and private sector balance sheets” (that is, in large measure, spend less).

And it sends a warning: “[P]rotectionist policies should be avoided as they are likely to have significant deleterious effects on domestic and global growth, while limited impact on external imbalances.”

These are pretty standard prescriptions. The trouble is, as usual, neither the surplus nor the deficit countries are showing any interest in following them. Moreover, the IMF’s views on the relationship between trade flows on the one hand, and national borrowing and spending and savings rates on the other, seems to repeat the canard that net savings levels determine trade flows. Nowhere do its economists acknowledge that the fundamental mathematical relationship is that of an identity – which says nothing about causation at all. As a result, they also ignore all the ways in which trade flows can determine savings rates.

It’s anything but realistic to expect the Fund to endorse President Trump’s tariffs or any of the rest of his trade policies. But it also seems to remain anything but realistic to expect the Fund to identify any plausible alternative ways to prevent today’s global imbalances from turning into Financial Crisis 2.0.

Making News: Two New National Radio Podcasts on Trump, “Trade Wars,” and America First Foreign Policies

It’s been great for yours truly that a week (or so) marked by high threatened Trump tariffs and a summit of the leaders of the North Atlantic Treaty Organization (NATO) has resulted in more national radio appearances.  Sometimes, however, they come up without enough notice to post a heads-up on RealityChek.

But even though I couldn’t get out the word here about another appearance on “Breitbart News Tonight” last night, I am pleased to be able to post the podcast.  So click on this link and scroll down to the July 13 entry for a great discussion about what’s really wrong with President Trump’s policies toward NATO; and about dangers posed by Chinese investment in the U.S. economy that keep getting overlooked even by many so-called China policy “hawks” inside and outside the administration.

Also, the podcast of Wednesday night’s “John Batchelor Show” interview on the U.S.-China trade conflict was finally posted late yesterday.  Here’s the link to another lively update provided by John, co-host Gordon G. Chang, and me.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

(What’s Left of) Our Economy: A 20-Plus Year High in Manufacturing Jobs Gains – & Wages Growth Still Lags

June’s 36,000 monthly manufacturing employment gain, the sector’s best sequential performance since December’s 39,000, helped industry produce its best annual job creation figure (285,000) since April, 1998 (288,000). Largely as a result, manufacturing employment as a share of total employment hit its highest level (8.54 percent) since July, 2016 (8.56 percent). That is, since that time, American manufacturing job creation has risen faster than overall U.S. job creation.

Pre-inflation manufacturing wages rose by 0.22 percent sequentially in June – unusually, beating the overall private sector’s performance (0.19 percent). But industry’s continuing wages woes were made clear again by the annual increase. Not only was it a meager 1.66 percent in constant dollars (well short of the overall private sector’s 2.74 percent advance). But this figure meant that manufacturing wage increases kept decelerating from the previous year’s rate (2.19 percent between June, 2016 and June, 2017).

The June inflation-adjusted wage figures won’t be released until next week, but as of May, manufacturing remained stuck in a real wage recession that began in January, 2016

Here’s my analysis of the latest monthly (June) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>Thanks to a June monthly employment improvement of 36,000 (the best such gain since December’s 39,000), U.S. manufacturing last month saw its payrolls rise by the biggest absolute number (285,000) in more than twenty years. The previous best annual job gain for industry came in April, 1998, when the total hit 288,000.

>June’s strong performance also helped lift manufacturing’s share of total non-farm employment (the Bureau of Labor Statistics’ U.S. jobs universe) to 8.54 percent – the highest level since July, 2016’s 8.56 percent.

>Manufacturing employment revisions were slightly positive, with May’s previously reported 18,000 sequential increase upgraded to 19,000, and April’s 25,000 now judged to be 28,000.

>Yet industry continued to be dogged by sluggish pre-inflation wage growth in June.

>The monthly increase of 0.22 percent actually exceeded that of the overall private sector (0.19 percent).

>Moreover, the previous months’ sequential wage performances were revised slightly upward, too – from a flat-line in May to a gain of 0.04 percent, and from a 0.15 percent sequential rise in April to 0.22 percent.

>On an annual basis, however, current dollar manufacturing wages improved by only 1.66 percent in June – well behind the private sector figure of 2.74 percent.

>Worse, the June figure represented yet another year of deceleration in manufacturing wage growth. Between the previous Junes, the sector’s hourly pay increased by 2.19 percent.

>By contrast, wage growth has been speeding up in the private sector, with the latest annual June increase besting the June, 2016-June, 2017 gain of 2.50 percent.

>And throughout the current economic recovery, even the mediocre-at-best increases in pre-inflation private sector wages have dwarfed those recorded for manufacturing – and the gap keeps widening.

>As of this June, since mid-2009, current dollar private sector wages had risen 26.43 percent faster than manufacturing wages. As of June, 2017, the difference was 21 percent.

>Further, in inflation-adjusted terms, hourly pay in manufacturing has been a much greater laggard.

>The latest official figures go through May, and they show that whereas real manufacturing wages fell by 0.19 percent on month, they inched up by 0.09 percent for the private sector.

>On an annual basis, as of May, inflation-adjusted manufacturing wages are down 1.10 percent. For the private sector, they’ve been flat.

>And although both manufacturing and all private sector workers have been experiencing technical real wage recessions (periods of cumulative shrinkage lasting at least two quarters), the private sector’s began only last June, and has seen constant dollar hourly pay dip by 0.09 percent.

>Manufacturing’s real wage recession began two-and-a-half years ago – in January, 2016. And since then, price-adjusted hourly pay if off by 0.19 percent.

>And during the current recovery, real private sector wages have risen more than 15 times faster (4.27 percent) than real manufacturing wages (0.28 percent).

>Nonetheless, despite its strong recent performance, manufacturing remains a longer-term significant job-creation laggard, too. Since its latest employment bottom, in February and March, 2010, it’s regained 1.26 million (54.95 percent) of the 2.293 million jobs lost during the recession and its immediate aftermath.

>The overall private sector lost 8.780 million jobs from the year-end 2007 onset of the recession through February, 2010. Since then, it’s created 19.291 million net new jobs.

>In fact, since the last recession’s onset, the private sector has boosted its employment by 9.08 percent. But manufacturing payrolls are still down 7.51 percent from their December, 2007 levels.

(What’s Left of) Our Economy: A Productivity Collapse in America’s “Industries of the Future”?

Tags

advanced manufacturing, information technology hardware, Labor Department, manufacturing, multifactor productivity, productivity, {What's Left of) Our Economy

To the surprise of exactly no one who’s been following the issue lately, last week’s newest data from the federal government on productivity was literally brimming with bad news.

True, the figures only go up to 2016 – because the report covered multifactor productivity, the broader of the two measures tracked by the Labor Department. These figures take longer to calculate than the narrower productivity measure (labor productivity) because they examine many inputs other than simply hours worked. But the results were entirely consistent with the longstanding story that the U.S. economy’s efficiency keeps growing more and more slowly – that is, where it continues to grow at all.

In fact, America’s recent productivity performance has been so bad that observers could actually take some comfort in the headline finding that multifactor productivity improved between 2015 and 2016 in only 37 of the 86 manufacturing industries looked at in detail by Labor. That’s because this total was significantly higher than in 2014-15 – when multifactor productivity rose in only 21 of those sectors.

I could repeat previous exercises and list the industries with the best and worst latest annual multifactor productivity performances – which as usual, will be full of surprises for those expecting that the stars would be the nation’s technology-intensive “industries of the future.” But for now, let’s focus on what looks like an especially alarming development: Over the last roughly three decades, these crucial chunks of the economy have turned from multifactor productivity growth champs to multifactor productivity disaster areas. Over the same period, several other touted advanced manufacturing industries have also tumbled into the dumps multifactor productivity-wise from much less lofty perches.

The worst examples of literal collapse in multifactor productivity growth are in information technology hardware, and the most dramatic plunge has taken place in computers and computer peripheral equipment. Between 1987 and 2016, these sectors collectively have run away with the American economy’s multifactor productivity growth honors, with their efficiency advancing by this measure by 12.1 percent annually.

Since 2007, however (the year the Great Recession began), their average annual multifactor productivity growth rate has slumped to 1.2 percent, and between 2015 and 2016, it actually fell – by 2.6 percent.

Semiconductors and electronic components fared little better. Their 1987-2016 average annual multifactor productivity growth was 9.1 percent. But it’s fallen throughout the 2007-2016 period, and between 2015 and 2016 – when the current economic recovery was in its seventh year – it also dropped by 2.6 percent.

The ups and downs of multifactor productivity growth in communications equipment (including the gear used by the internet) have been more modest, but undeniably depressing all the same. Average annual growth between 1987 and 2016 was only 2.6 percent, but during the 1990s, it surged to nearly 5.5 percent. But since recession onset year 2007, multifactor productivity has decreased here as well, and declined by 1.6 percent between 2015 and 2016.

The aerospace industry, long America’s biggest net export winner, oddly has never registered robust multifactor productivity growth – at least not since 1987, when the data began to be collected. The average annual multifactor productivity growth rate for finished aircraft, missiles, and their parts? It’s actually -0.1 percent. The golden age (relatively speaking) of multifactor productivity growth for these companies came in between 2000 and 2007, when the average annual advance was 2.7 percent. But since 2007 it’s off slightly (dipping by an average 0.6 percent per year) and between 2015 and 2016 alone, plummeted by 6.7 percent.

Yet even these dismal figures look positively glowing when compared with those of the American pharmaceutical industry – widely viewed (like aerospace) as the global state of the art. From 1987 to 2016, multifactor productivity in this sector has decreased by an average of 2.3 percent every year. That’s by far the worst performance among the 86 industries tracked by the Labor Department. And since 2007, the rate of decline sped up to an annual average of 3.8 percent. Between 2015 and 2016, moreover, the drop-off gained even more momentum, reaching 4.8 percent.

Nor have other manufacturing sectors not typically classified as “technology intensive,” but nonetheless falling into the high value category, been immune from these woes. Here are the average annual multifactor productivity growth (and shrinkage) figures for key time periods for sectors both qualifying for this description, and known for strong exports:

 

agriculture, construction, and mining machinery

1987-2016: -0.2 percent

2007-2016: -2.5 percent

2015-2016: -8.6 percent (the year’s worst nosedive)

 

industrial machinery

1987-2016: 0.3 percent

2007-2016: -1.1 percent

2015-2016: -4.1 percent

 

turbines and power transmission equipment

1987-2016: 0 percent

2007-2016: 0.1 percent

2015-2016: -4.4 percent

It’s always possible that these multifactor productivity numbers have improved substantially over the last two years. But 30-year old trends rarely turn around completely, or even close, in such short time-spans. And multifactor productivity growth trends don’t turn around without the type of capital spending surge – among other developments – that the economy simply hasn’t seen yet. Until business begins spending considerably more, expect multifactor productivity in America to remain depressed – along with the nation’s odds of recreating sustainable prosperity.

Glad I Didn’t Say That! About that Auto Tariff Alarmism

Tags

Alliance of Automobile Manufacturers, auto tariffs, automotive, autos, Glad I Didn't Say That!, tariffs, Trump

“The Alliance of Automobile Manufacturers, a trade group representing domestic and foreign automakers with plants in the U.S., predicts the average price of a new vehicle will increase $5,800 if the president imposes a 25 percent tariff on imported models.”

–CNBC.com, June 27, 2018

“U.S. auto sales in June likely rose 2.5 percent from the same month in 2017…although discounts on new vehicles remain high, industry consultants…said on Tuesday.”

–Reuters, June 26, 2018

 

(Sources:  “Automakers to Trump:  Tariffs will drive up auto prices and cost thousands of jobs,” by Phil LeBeau, CNBC.com, https://www.cnbc.com/2018/06/27/automakers-to-trump-tariffs-will-drive-up-auto-prices-and-cost-jobs.html & “U.S. June auto sales seen up 2.5 percent, J.D. Power and LMC,” by Nick Carey, Reuters, June 26, 2018, https://www.reuters.com/article/us-usa-autos-sales/u-s-june-auto-sales-seen-up-2-5-percent-j-d-power-and-lmc-idUSKBN1JM1L4)

 

Making News: Back on CNBC This Afternoon – & More!

Tags

China, CNBC, Germany, Making News, Power Lunch, tariffs, The John Batchelor Show, Trade, Trump

I’m pleased to announce that I’m scheduled to return to CNBC this afternoon at 1 PM EST to help provide an update on President Trump’s trade policies toward China and other major trade competitors.  You can watch the segment on-line – on the network’s “Power Lunch” program – at this link.  As always, if you can’t tune in, I’ll post a link to the streaming video of the segment as soon as one’s available.

The podcast of my interview last Wednesday on John Batchelor’s nationally syndicated radio show is now on-line as well.  Click here to listen to an informative discussion focusing on U.S.-Germany trade tensions — and apologies for posting the link so late!

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

(What’s Left of) Our Economy: The Real Deal with the U.S.-Canada Trade Balance

Tags

aerospace, Canada, China, crude oil, dairy, energy, Justin Trudeau, lumber, natural gas, subsidies, tariffs, Trade, trade deficit, Trump, {What's Left of) Our Economy

Extra! Extra! Read all about it! The nation’s globalist political and media classes have gotten it right on a major U.S. trade policy issue!

I’m talking about the numerous complaints issuing from American politicians, journalists, talking heads, and purported academic and think tank experts about President Trump’s decision to make Canada the focus of so much of his trade-related ire.

Mr. Trump is right about Canada maintaining sky-high tariffs and lavish subsidies in certain sectors of its economy, like dairy and lumber. (I’d add aerospace to this list.) But the idea that Canada represents one of America’s biggest trade headaches, and has been taking advantage of the U.S. economy left and right due to poorly negotiated trade deals, is completely belied by the numbers. And P.S. – it’s not even necessary to point to America’s services trade surplus with its northern neighbor to debunk the numbers.

The keys are recognizing the immense role played by energy in bilateral goods trade. Commerce in crude oil and natural gas is almost never the subject of the U.S. trade deals and broader trade policy decisions that the President – for the most part – has correctly lambasted.

Energy’s predominance is most apparent when U.S.-Canada trade in goods is calculated according to the measures used most prominently by the American government – total exports, and general imports. In fact, these headline data show that the U.S. oil and gas shortfall has typically been twice the size of the overall American merchandise trade deficit with Canada – meaning that when it comes to other goods (like manufactures) the United States has been running a surplus.

For example, in 2009 (the year the current U.S. economic recovery began), according to these figures, the United States ran an overall $20.18 billion goods trade deficit with Canada, a $45.75 billion deficit in crude oil and natural gas, and a $30.02 billion surplus in manufacturing.

Last year, the overall U.S. merchandise deficit with Canada had fallen to $17.50 billion – largely because the energy deficit had sunk to $16.45 billion. And the American manufacturing surplus reached $41.07 billion.

As many trade policy critics have rightly pointed out, the total exports and general imports numbers aren’t the best data for measuring U.S. bilateral trade balances. (They’re fine for America’s global trade balances, though, as the discrepancies that emerge in the bilateral accounts cancel each other out on a worldwide scale.) Instead, the most accurate picture is provided by looking at domestic exports and imports for consumption – i.e., the trade flows that concentrate on exports that are actually made in America (as opposed to being transshipped through the United States from countries where they originated), and on imports that Americans actually purchase for their own use (as opposed to products being transported through the United States to their final destinations).

But although these statistics reveal a much larger U.S. merchandise gap, along with deficits in manufacturing, oil and gas predominate in these figures as well. In 2009, the domestic exports etc numbers show a total American goods trade deficit with Canada of $52.89 billion – nearly 87 percent of which was in oil and gas. The manufacturing shortfall, moreover, was tiny – only $200 million.

By 2017, according to this measure, the annual U.S. goods deficit had risen to $64.84 billion. But the oil and gas deficit – which had shrunk dramatically in absolute terms due to the U.S. energy production revolution – still comprised a little over 73 percent of this total. And the manufacturing deficit was only $4.28 billion (out of a U.S. global total of more than $937 billion).

I can understand why President Trump views Canadian Prime Minister Justin Trudeau as a pro-globalist showboat. I agree. But when it comes to trade, and turning it into an engine of growth and domestic job creation, Mr. Trump has much bigger fish to fry – starting with the thoroughly and increasingly predatory trade policies pursued by his “good friend,” Chinese leader Xi Jinping.