(What’s Left of) Our Economy: Winter Smacks February U.S. Manufacturing Output but Forecast Remains Bright

Tags

aerospace, aircraft, American Rescue Plan, automotive, Biden, Boeing, CCP Virus, China, coronavirus, COVID 19, Covid relief, Donald Trump, facemasks, Federal Reserve, industrial production, inflation-adjusted output, machinery, manufacturing, masks, medical equipment, petroleum refining, pharmaceuticals, plastics, PPE, real growth, resins, semiconductor shortage, semiconductors, stimulus package, tariffs, Texas, Trade, vaccines, winter, Wuhan virus, {What's Left of) Our Economy

Count me as one awfully surprised blogger when I saw this morning’s Federal Reserve U.S. manufacturing production figures (for February), which reported a 3.12 percent sequential drop in industry’s inflation-adjusted output. That was by far the worst such monthly performance since pandemicky April’s 15.83 percent crashdive, and even though the Fed largely blamed harsh winter weather in much of the country, it still contended that manufacturing would have shrunk by about half a percent even in balmier conditions.

A big reason for my surprise was the apparent contrast between these results and the findings of the monthly manufacturing surveys conducted by various of the Fed’s regional branches. They’re soft data, presenting manufacturers’ perceptions rather than actual changes in output (or jobs, or capital spending, or any other indicator), and I’ve written before that soft data are anything but perfect. But not only were the production reads in these surveys strong. They were strong even in Texas, where the storms were so severe. (And the Dallas Fed’s survey was conducted as they were raging.) Moreover, the same held for the February results from the neighboring Kansas City Fed bank.

Further, other hard data – specifically, on jobs – pointed to a good February for manufacturing, too, as industry expanded its payrolls by 21,000.

But the new Fed production numbers shouldn’t be dismissed entirely, so let’s look at the…lowlights, starting with the revisions, which were moderately negative. January’s previously reported 1.04 percent monthly advance is now pegged at 1.29 percent. December’s already once-downgraded inflation-adjusted output growth was lowered again, from 0.94 percent to 0.84 percent. November’s result, which had been upgraded twice (most recently to 1.10 percent) is now judged to have been 1.05 percent. October’s string of upward revisions was stopped, too, as the new report reveals a downgrade from 1.51 percent to 1.39 percent.

Overall, these readings mean that domestic manufacturing’s after-inflation production has grown by 20.26 percent since its April nadir, and stands 3.83 percent below its last pre-pandemic reading, from February.

As not the case with recent Fed industrial production reports, the output changes were highly concentrated in a few industries. Bearing out the central bank’s observation that “some petroleum refineries, petrochemical facilities, and plastic resin plants suffered damage from the deep freeze and were offline for the rest of the month,” most of these sectors saw outsized price-adjusted month-to-month drops in February. For petroleum and coal products, the fall-off was 4.43 percent, and for the huge chemicals sector, 7.11 percent Interestingly, the chemicals decline was even bigger than that it suffered last April, at the depths of the pandemic and related economic activity curbs (6.08 percent).

And as for those resin plants? Their February real output plummeted by fully 28.12 percent – much more than at any time last spring, during the pandemic’s height, and the worst such performance since the 30.64 percent cratering during Great Recessionary September, 2008. In fact, constant dollar output in the industry sank to its lowest level since equally Great Recessionary March, 2009.

Another February real production decrease that looks temporary (but perhaps longer-lasting): the 8.26 percent plunge in constant dollar automotive production. The main culprit is no doubt a global shortage of semiconductors that could well weigh on the entire domestic manufacturing sector going forward.

As known by RealityChek regulars, the machinery sector is a major barometer of manufacturing’s overall health, because its products are used throughout industry. So given February’s poor results for the entire sector, it’s no surprise that real machinery output was off by 2.33 percent on month. But January’s results were upgraded tremendously – from 0.52 percent after-inflation growth to 2.59 percent. So price-adjusted machinery output is still within 1.17 percent of its final pre-pandemic levels.

Because Boeing’s protracted safety-related problems continue to clear up, aircraft and parts production notched another month of growth in real terms in February – an increase of 1.04 percent. Revisions, however, were negative, especially December’s – its previously upgraded production increase (to a strong 3.03 percent) is now judged to be a 0.61 percent decline. Largely as a result, inflation-adjusted output is now just fractionally above its February pre-pandemic level.

The picture was brighter in pharmaceuticals and medicines. This industry, which includes vaccines, saw its after-inflation production climbed by anorther 1.29 percent in February. Moreover, January’s initially reported robust 2.42 percent increase was revised to an even better 2.57 percent. As a result, pharmaceutical and medicines real output is now 5.62 percent higher than just before the pandemic, and should generate even better results in the coming months, as vaccine production will be surging even more strongly.

Unfortunately, the also vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators – is still behind the curve. Constant dollar production actually dipped by 0.56 percent on month in February, although in another major revision, January’s performance is now judged to be a 1.08 percent gain rather than a 0.54 percent loss. All the same, real production in this sector (which encompasses many other products as well) is still 1.37 percent less than just before the CCP Virus and the lockdowns arrived in force.

All told, I’m still full of confidence about domestic manufacturing production, due to the Boeing, vaccines, and now the Biden stimulus effects. And don’t forget the administration’s continued reluctance to lift its predecessor’s towering and sweeping tariffs on China, and on metals imports from many countries. Lastly: The weather’s bound to keep getting better!

(What’s Left of) Our Economy: More Reopening, Not Endless Money, is Now the Best Jobs Strategy

Tags

African Americans, American Rescue Plan, Biden, CCP Virus, coronavirus, COVID 19, Covid relief, education, Employment, Federal Reserve, Hispanics, hotels, Jerome Powell, Jobs, Latinos, leisure and hospitality, lockdowns, recovery, restaurants, shutdown, stay-at-home, stimulus package, unemployment, wages, Wuhan virus, {What's Left of) Our Economy

There’s no doubt that the American jobs market has suffered an out-and-out disaster since it got hit by the CCP Virus and the follow-on lockdowns and other restrictions. There’s also no doubt that many workers and their families are still suffering greatly, and will need government aid to make it to the Other Side, and the Biden administration’s American Rescue Plan legislation that the President will likely sign into law soon will help fill this gap.

Plenty of doubt remains, however, about whether all, or close to all, of the massive funds approved in this measure are actually needed to cure the economy’s remaining employment woes, and one of the main reasons is the nature of the jobs blow that’s been delivered. Because it’s been so heavily concentrated in the country’s leisure and hospitality industries (encompassing eateries and drinking places of all kinds, plus hotels and motels, and entertainment and cultural venues), it’s entirely possible that nowadays, the most effective way to fix the jobs market fastest would be to lift the lockdowns and other mandated curbs that have fallen so hard on sectors that depend on serving in-person customers.

The case for relying on a virus-relief/stimulus package this big, at this stage of the economy’s recovery from its pandemic-induced recession, has been eloquently stated by President Biden and by Federal Reserve Chair Jerome Powell. The former warned just before the legislation passed that the U.S. economy “still has 9.5 million fewer jobs than it had this time last year. And at that rate, it would take two years to get us back on track.”

The latter has stated that he won’t be satisfied that full employment has returned until he sees what one reporter has called “broad-based gains in employment, and not just in the aggregate or at the median.” As a result, the Fed Chair is paying particular attention to (the reporter’s words again) “Black unemployment, wage growth for low-wage workers and labor force participation for those without college degrees, categories that historically have taken longer to recover from downturns than broader metrics.”

But it’s precisely these less fortunate portions of the workforce that would be helped disproportionately – and then some – by focusing on reopening steps that would surely affect the leisure and hospitality industries just as disproportionately.

If you doubt the importance of leisure and hospitality job loss over the last year in terms of overall U.S. jobs loss, here’s what you need to know. Of the 8.068 million positions shed by the country’s private sector between last Februrary (the final month of pre-CCP Virus normality for the American economy), fully 3.451 million have come in the leisure and hospitality industries. That’s nearly 43 percent.

Put differently, during that final normal economic month, leisure and hospitality workers represented just 13.04 percent of all private sector workers. Yet their employment plunge was more than three times as great relatively speaking.

Moreover, leisure and hospitality’s progress in getting back to pre-pandemic square one has been slower than that of the private sector overall. Since the April employment trough, leisure and hospitality has regained 4.955 million of the 8.224 million jobs lost during the worst of the pandemic, or 60.25 percent. For the private sector in toto, 13.267 million of the 21.353 million jobs lost in March and April have come back since – 62.13 percent.

It’s also clear that many of the kinds of workers about which Fed Chair Powell has been most concerned are concentrated in leisure and hospitality. For example, in 2019, (America’s last pre-CCP Virus full year), 13.1 percent of these sectors’ workers were African American versus 12.3 percent for the entire U.S. economy (including government workers at all levels), and 24 percent were Hispanic or Latino versus 17.6 percent for the entire economy.

Leisure and hospitality companies tend to employ Americans with low levels of formal education, too. According to the Labor Department, in 2019, 79.9 percent of the nation’s “first-line supervisors of house-keeping and janitorial workers” 25 years and older lack even an associate’s degree, and 76 percent of their food preparation and service counterparts fall into this category. The shares are even higher for the workers they supervise. Meanwhile, only 51.5 percent of all U.S. workers haven’t taken their education beyond high school.

Not surprisingly, therefore, leisure and hositality jobs pay poorly. In February, 2020, just before the arrivals of the pandemic and the lockdowns, their average hourly wages were only 59.28 percent those of all private sector workers. Last month, this figure had fallen to 57.58 percent. (See Table B-3 here.) 

For most of the pandemic period, the U.S. government at all levels pursued a mitigation strategy that aimed mainly at curbing economic and other forms of human activity across-the-board. Now, even with vaccinations and growing population-wide immunity showing strong signs of bringing the pandemic under control, the Biden administration and the Democratic Congress are just as determined to stimulate the economy that’s still significantly shut down by with an American Rescue Plan that seems just as indiscriminate.

As I’ve been writing (see, e.g., here), it should have been clear since late last spring that the anti-virus fight would have much more effective (and less harmful to the economy and other dimensions of public health) had it targeted protecting especially vulnerable populations. I strongly suspect that, with the fullness of time, it will become just as clear that a stimulus and jobs strategy emphasizing accelerating reopening, and thus aiding sectors and workers hardest hit by the remaining shutdowns, will prove a much more effective employment cure than the indiscriminate spending approach on which Washington has just doubled down.

Im-Politic: Georgia Evidence that Trump-ism Needs to Transcend Trump

Tags

CCP Virus, conservatives, coronavirus, COVID 19, Covid relief, election 2020, election integrity, establishment Republicans, Georgia, Georgia Senate runoff, GOP, Im-Politic, Populism, Republicans, Trump, Wuhan virus

Good luck to anyone (including me!) in trying to figure out what the results of yesterday’s Georgia Senate runoff elections will mean for American politics – especially since there are so many reasons to waffle, and lots of them are very compelling. For example, although as of this morning, it looks like a Democratic sweep, but because the margins are so close, and non-trivial numbers of military and other mail-in ballots won’t be counted until 5 PM EST Friday, the final verdict may not be known until Friday. Largely as a result, recounts are practically certain.

In addition, so much about this entire national election cycle was unusual, and not at all sure to cast long shadows – especially the CCP Virus pandemic and its damaging economic consequences. As a result, on top of events’ impressive abilities to throw curveballs, it’s intimidating to try predicting two years out (when the 2022 midterm elections will be held) much less the outcome of the 2024 presidential and congressional races.

Weirdly, however, despite these yawning uncertainties, today at least I’m feeling more confident about a big question I found tough to answer shortly after the election: whether it’s best for the kind of Trump-ian populist policies I generally support strongly for the President to run for reelection the next time around, or call his political career quits.

Many of my reasons for equivocation still matter greatly. But the passage of two months, and particulary the apparent Democratic Georgia victories, have now convinced me that both Trumpers and therefore country will better off if with Trump-ism without Trump. And even though America’s pollsters overall still need to work hard to get their acts together and rebuild their reputations, it’s been the Georgia Senate exit polls that have mainly tipped me into the anti-Trump column, and two sets of findings in particular.

Several of these surveys are available; I’m using the one conducted by Fox News and the Associated Press because it featured what I regard as more of the most pertinent questions. As for the two sets of findings?

First, it’s clear that Georgia voters back the kind of unorthodox mix of policies that have marked Trump-ist economics. For example, by a whopping 72 percent to seven percent margin, respondents said Congress is doing “too little,” rather than “too much” to help the “financial situation” of “individual Americans” during the CCP Virus crisis. (Twenty-one percent credited Congress with doing “about the right amount.”) This sounds like a strong endorsement of the President’s (last-minute) call for $2,000 virus relief checks, and equally strong disagreement with the opposition of most traditional Republican politicians.

Ratings of Congress’ efforts to help small businesses were nearly identical to the individuals’ results. By 52 percent to 28 percent, however, these Georgia voters felt that Congress was providing “large corporations” with too much rather than too little support. (Twenty-eight percent viewed these efforts as about right.)

Yet by an almost-as-impressive two-to-one, respondents favored “reducing government regulation of business.” Nothing was asked about one of Mr. Trump’s signature issues – trade – but with China so deeply and increasingly unpopular among Americans, it’s tough to imagine that most Georgians would object to his tariffs and other crackdowns on Beijing’s economic predation. Immigration is a tougher call. Only four percent viewed it as “the most important issue facing the country,” but answers to this question understandably were dominated by “the coronavirus pandemic” (43 percent) and “the economy and jobs” (27 percent).

All told, though, these Georgians look like they’d be entirely comfortable with at least much of Trump-ism. But the President himself? Not nearly so much. Thus:

>Mr. Trump himself earned 51 percent-to-47 percent unfavorable ratings from the sample, which consisted of 52 percent Republicans or Republican-leaners, 42 percent Democrats or Democratic-leaners, and seven percent Independents; and 43 percent self-described conservatives, 34 percent moderates, and 23 percent liberals.

>The greater concerns expressed above about the CCP Virus than about its economic consequences clashes with the President’s clear priorities over the last year.

>Indeed, they also endorsed mandatory mask-wearing outside of the home by 74 percent to 26 percent. 

>Moreover, by 62 percent to 38 percent, respondents expressed confidence that, nation-wide, November’s presidential votes “were counted accurately” (with 56 percent “very confident”) and by 61 percent to 39 percent, they think Joe Biden “was legitimately elected president.”

>Therefore, Mr. Trump’s handling “of the results of the 2020 presidential election” were disapproved by a 56 percent to 44 percent margin.

And more signs that the President himself turned off many Georgia runoff voters – especially with his election challenges: According to the RealClearPolitics averages, as his protests of the presidential votes continued, both Georgia Democratic Senate candidates, Jon Ossoff and Raphael Warnock gained momentum at the expense of their Republican (incumbent) opponents David Perdue and Kelly Loeffler, respectively.

None of this is to say that creating a politically successful Trump-less Trump-ism will be easy. As I wrote right after the presidential vote, the President’s charisma-based ability to excite a large mass of voters is not yet remotely matched in Republican ranks. Yet the Georgia runoff results strike me as more evidence that his disruptive instincts represent a growing liability, and Mr. Trump’s insistence that he was the actual 2020 winner virtually rules out the chance that he’ll change spots that he obviously believes won him both election and reelection.

Right now, therefore, it seems clear that, as someone wrote someplace yesterday (unfortunately, I can’t find the quote), Republicans can’t win with Trump, and they can’t win without him.

Yet going forward, I suspect that two truths will begin weakening the President’s support. First, the fact that (as I’ve seen first-hand during my working life), the founders of movements tend to be lousy managers and sustainers of those movements. Second, any movement so heavily dependent on a single personality won’t likely be a lasting movement. So for those reasons, along with the Mr. Trump’s age, the sooner his supporters and leaners can choose a successor, or identify a group of plausible successors, the better.

But don’t think for a minute that I’m highly confident that this transition can take place in time for the 2024 campaign cycle’s kickoff. In fact, I am highly confident that the process will be loud and heated and messy – that is, pretty Trump-y.

(What’s Left of) Our Economy: How to Bypass Washington on CCP Virus Relief

Tags

Americans for Tax Fairness, billionaires, CCP Virus, Congress, coronavirus, COVID 19, Covid relief, Institute for Policy Studies, stimulus, super-rich, woke capitalism, Wuhan virus, {What's Left of) Our Economy

It’s getting pretty clear that, even if the various anti-CCP Virus vaccines started getting stuck into Americans’ arms right away, many in the United States would be facing major financial hardships for many months because Congress and the administration still can’t get their act together to pass a meaningful relief bill.

My own hunch is that pretty full normality will return for most of the country by the end of next year. Through then, however, and afterwards, the personal service-oriented businesses big and small in particular that employ so many Americans in relatively low paying jobs will struggle to return to business- and employment-as usual. Moreover, continued budget crises in many states and localities could result in both significant, lasting layoffs of government workers, and big and equally lasting cuts in the social services needed by the needy.

Luckily, thanks to the work of the progressive organizations Americans for Tax Fairness (AFT) and the Institute for Policy Studies (IPS) a very promising bandaid has come into view: stimulus checks written voluntarily by America’s billionaires.

These two groups want the funds to be generated by an “emergency wealth tax on billionaire profiteers,” but there’s no reason to believe that such a measure would pass the Senate, assuming it turned Democratic. And even the House might balk, given that the Democrats’ majority will be so narrow.

There’s nothing, however, stopping the billionaires – who AFT and IPS say number 651 – getting together and furnishing such assistance on their own. Distribution could be handled just as official Washington handled the previous $1,200 checks.  Or the billionaires could set up their own system. (Maybe through Amazon and Fedex and other delivery companies?)

These funds won’t cure everything that will keep ailing Americans and their economy for the foreseeable future. But the effects would be considerable.

Specifically, if the 651 came up with the $3,000 per check recommended by the two organizations for every inhabitant of the country, the total 330 million U.S. population would receive a total of just under $1 trillion. That sum would represent a big fraction of the $3.5 trillion in federal budget resources and tax relief signed into law this year so far. And it’s somewhat bigger than the $908 billion framework for a compromise package put forward by a bipartisan group of Senators earlier this month.

Moreover, the uber-rich themselves could clearly afford this spending. AFT and IPS estimate that the billionaire class has increased its net worth by $1 trillion since the pandemic reached the United States. And its members would still be left with $3 trillion in assets.

In addition, unlike a big emergency wealth tax increase – a cash cow that government would be reluctant to repeal, at least in full, once normality returns – the billionaires’ check-writing would be a one-off measure, intended to help Americans keep their heads above water while the economy remains in extreme distress.

At the same time, if the pandemic emergency lasts longer than expected (e.g., because vaccine immunity doesn’t last as long as widely assumed), nothing would prevent the billionaires from coming to the (partial) rescue again, at whatever scale they chose. Even better – the 651 could also reach out to the somewhat less super-rich and urge them to lend a hand as well. It’s not like they’re without influence, and are unfamiliar with peer pressure – or outright arm-twisting.

Further, not only would the general politics of tax increases be avoided by privatizing virus relief. All the other conflicting priorities and legislative shenanigans that have held up progress on this particular package would be bypassed altogether, too – like CCP Virus liability insurance for business and bailouts for allegedly spendthrift state and local governments. And of course, no deficit hawks (phony or genuine) inside or outside government could object, since no public funds would be spent.

The one important objection I can think of is that billionaire action on this scale could convince politicians that they’re off the virus-relief hook for good. But it’s also possible that a privately financed aid package could shame collective Washington into subsequent needed action. In fact, this would be a great lobbying cause for the billionaires – along with threats to withhold campaign contributions from lawmakers or Presidents they’ve identified as obstacles.

The American super-rich haven’t blown off their fellow compatriots entirely during the pandemic. And of course, they’re major contributors to many non-CCP Virus-related good causes as well. But from what’s publicly known, their pandemic-related donations has been astonishingly meager, and their records seem Scrooge-ier still given how they’ve greatly they’ve become enriched collectively during the crisis.

Given the rise of “woke capitalism” in recent years, and the corporate world’s embrace – at least rhetorically – of social responsibility, it’s obvious that America’s super-rich fear they have a serious image problem. It’s hard to think of a better way to improve their standing than by springing to their compatriots’ rescue at a time of such dire need.