Making News: Two Podcasts of National Radio Trade War & Economy Interviews…& an Eye-Opening Look at Amazon.com!

Tags

Amazon.com, Breitbart News Tonight, economy, election 2020, Gordon G. Chang, Henry George School of Social Science, Hong Kong protests, Jobs, jobs report, Making News, manufacturing, publishing, Rebecca Mansour, Rick Manning, Robin Gaster, Smart Talk, The John Batchelor Show, Trade, trade war, Trump

I’m pleased to announce that just out on-line are two podcasts of national radio interviews on the Trump trade wars and a video on an especially startling aspect of Amazon.com’s stunning rise to business titan status.

The latest interview now available was conducted last night on “Breitbart News Tonight” and can be found at this link.  Once you’re there, scroll down a fair ways till you see my name on a December 6 segment – a discussion with hosts Rebecca Mansour and Rick Manning that ranged from the last (excellent) U.S. jobs report to the Hong Kong protests to the intensifying presidential election campaign.

The previous interview was broadcast Wednesday night on “The John Batchelor Show.”  Click here to listen to a conversation with John and co-host Gordon G. Chang on how well the U.S. manufacturing sector is faring as President Trump keeps trying to revamp U.S. trade policy.

The video shows me reversing roles and interviewing economist Robin Gaster on the implications of Amazon.com’s efforts to disrupt yet another major U.S. industry, and one playing an especially important role in American culture – the book publishing industry.  Click here to watch, and keep in mind that the interview is posted in two parts.

Incidentally, this interview is the latest in the “Smart Talk” series sponsored by the Henry George School of Social Science – a New York City-based economic research and education institute on whose Board I’ve served as a Trustee for several years.  “Smart Talk” has featured some of the world’s leading economic thinkers, and if you search around its section on the website, I’m sure you’ll find some fascinating and important material.

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

(What’s Left of) Our Economy: How Many Strikes Does Paul Krugman Get on Trade?

Tags

automation, China, China shock, globalization, hyperglobalization, Jobs, manufacturing, manufacturing employment, offshoring, Paul M. Krugman, protectionism, tariffs, The New York Times, Trade, Trade Deficits, World Trade Organization, WTO, {What's Left of) Our Economy

Contrary to what many trade mavens must think, Paul Krugman’s recent confession that he (and nearly all of his economics colleagues) have seriously misjudged the impact of international trade on America’s manufacturing workers isn’t his first. At least twice before (see here and here), this Nobel Prize-winning economist and New York Times columnist has admitted in print that the economics profession’s consensus was wrong to brush off (and often scorn) claims that post-Cold War trade agreements and similar trade policy decisions would foster a combination of wholly new and unbeatable (but economically unsustainable) forms of import competition for domestic industry, and related job and production offshoring. (I’m among those he’s mauled in print.) And he’s granted that trade policy critics who predicted these consequences and kept pointing to evidence of their emergence were right. (See here and here.)

Still, Krugman’s latest mea culpa is noteworthy for two reasons. First, it undercuts another tenet of trade economics dogma held almost as strongly believed as the belief that trade expansion in all circumstances is a net contributor to human welfare – the related conviction that imbalances like trade deficits don’t matter (at worst).

In particular, the author acknowledges that the rapid and massive increase in America’s manufacturing-dominated goods trade deficit – especially from super-low cost economies (and offshoring destinations) like Mexico and especially China – occurred at exactly the same time that U.S. industrial employment cratered. And not coincidentally, the destruction began right about when China was admitted into the World Trade Organization (WTO). That mattered greatly because the Beijing subsidies and other predatory trade practices that benefited both foreign- and Chinese-owned producers in the PRC gained invaluable protection from unilateral U.S. responses.

How greatly? According to Krugman, the worsening of the trade deficit “reduced the share of manufacturing in GDP by around 1.5 percentage points, or more than 10%, which means that it explains more than half the roughly 20% decline in manufacturing employment between 1997 and 2005.” In other words, most of the manufacturing job loss during this crucial period – which is a particularly important one because that’s when critical masses of recently offshored factories got up and running and began exporting to the American market – should be blamed not on supposedly impersonal and clearly positive forces of progress like containerization in global shipping, and automation generally, but on actions by American leaders.

Not that Krugman abandons conventional trade economics completely. Specifically, he contends that trade deficits generally speaking are still ultimately unimportant, partly because countries can’t grow indefinitely indebted to the rest of the world and “must pay their way eventually.” The post mid-nineties surge in the manufacturing trade shortfall hammered domestic American manufacturing, he explains, only because it skyrocketed so suddenly.

Readers, however, will ask themselves how the United States can pay its way in the foreseeable future when manufacturing still dominates its lopsided goods trade flows. And they should note that although the damage to manufacturing could still prove temporary, it’s already lasted nearly twenty years, with no imminent end in sight until the past year. (See this post for one of my recent claims that President Trump’s trade policies are starting to bend the curve.)

Second, and following logically from the first point, Krugman continues to insist that protective tariffs should be avoided. Now his opposition focuses on his contention that the trade-related danger to U.S. manufacturing is coming to an end. The China shock in particular, which spearheaded the recent period of “hyperglobalization,” was “a one-time event” that’s already showing signs of ebbing.

But if Krugman was so offbase in evaluating trade’s economic effects, why should such predictions deserve any credibility? Off the top of my head, I can think of several reasons for ongoing concern. For example, China still has massive reserves of super cheap, U.S. wage-depressing labor in its interior and, counter-intuitively, in its national student body. In addition, the progress Beijing has fostered in capital- and technology-intensive industries means that these sectors of American manufacturing will keep facing the same kinds of low-wage (but high productivity) challenges that decimated less advanced, more labor-intensive U.S.-based sectors in previous decades. Moreover, if China does lose competitiveness even in these portions of manufacturing, there’s no shortage of bargain basement third world population giants – like India, Indonesia, and Brazil – that would be more than happy to receive more manufacturing investment from the United States and other high-income countries.

Everyone’s entitled to make mistakes – even know-it-alls like Krugman, who’s known for torching those disagreeing with him as know-nothings and liars. And Krugman deserves praise for owning up to his own mistakes. But it’s also appropriate to ask this question: Since Krugman first established his economic chops as a trade expert, and since he’s clearly been proven wrong about the leading trade-related controversy of our time, how many more strikes does he get?

(What’s Left of) Our Economy: The Trade Wars’ Bite on Manufacturing Jobs Looks Deeper

Tags

2020 elections, aluminum, China, Jobs, Labor Department, manufacturing, metals tariffs, metals-using industries, private sector, steel, tariffs, Trade, trade war, wages, {What's Left of) Our Economy

Today’s U.S. jobs report (for September) contained much better news for President Trump and his supporters in terms of the economy’s overall performance than it did in terms of his trade policies. American employment on net rose by a decent 136,000 sequentially last month, and the revisions (which boosted the July and August numbers by a total of 45,000) were especially encouraging.

But payrolls in domestic manufacturing – a sector heavily exposed to trade – shrank month-to-month by 2,000. That decline was the first such dip since March’s 3,000. And despite the big positive revisions in overall employment, manufacturing’s left its modest recent hiring record virtually unchanged.

Worse for the President, manufacturing’s metals-using industries in September continued their worrisome recent transition from employment out-performers for the first half year or so after the first duties on steel and aluminum were levied to employment laggards.

Moreover, although manufacturing employment does face two obstacles having nothing to do with the Mr. Trump’s trade wars – Boeing’s safety woes and the strike that began last month against General Motors – damage from the former isn’t yet evident in the jobs data, and the latter probably began too recently to be showing up in the numbers yet.

The impact of the much broader China tariffs remained as elusive as ever, largely because of the on-again, off-again nature of the President’s policies, along with changes and threatened changes in tariff rates on so many goods. But even if Mr. Trump was a model of consistency on this score, the China levies’ effects would be fiendishly difficult to gauge because manufacturing inputs from China are used so broadly but so unevenly by domestic manufacturers.

By contrast, the trends for the metals-using industries look clear enough. This time, I’ll present not only their employment changes since April, 2018 (the first full month in which the metals levies were in effect) and September, but the same employment changes for an earlier post-tariff period. First, the latest numbers:

                                                   Old thru Aug     New thru Aug      Thru Sept

entire private sector:                  +2.30 percent    +2.31 percent    +2.40 percent

overall manufacturing:              +1.73 percent    +1.73 percent    +1.71 percent

durable goods:                           +2.10 percent    +2.10 percent    +2.05 percent

fabricated metals products:        +1.58 percent   +1.56 percent    +1.36 percent

non-electrical machinery:          +2.19 percent    +2.20 percent   +1.95 percent

automotive vehicles & parts:        0 percent         -0.23 percent    -0.69 percent

household appliances*:               not available     -6.31 percent    not available

aerospace products & parts*:      not available    +8.38 percent    not available

*data are one month behind

The loss of the metals-using sectors’ employment momentum in relative and absolute terms can be easily seen. But the more important comparison is between the above figures and those below, which present these trends for the first 10 months of the metals tariffs.

                                                   Old thru Dec    New thru Dec      Thru Jan

entire private sector:                 +1.37 percent   +1.36 percent   +1.60 percent

overall manufacturing:             +1.45 percent   +1.39 percent   +1.49 percent

durable goods:                          +1.67 percent   +1.72 percent   +1.97 percent

fabricated metals products:      +1.75 percent    +1.57 percent   +1.78 percent

non-electrical machinery:        +2.20 percent    +2.33 percent   +2.57 percent

automotive vehicles & parts:  +0.77 percent     +1.07 percent   +1.15 percent

household appliances*:            not available      -2.21 percent     not available

aerospace products & parts*:   not available     +5.51 percent    not available

*data are one month behind

This table shows that except for the household appliances sector (which has faced a separate, product-specific set of tariffs on large household laundry equipment since February, 2018), and automotive, the metals-using sectors were creating new employment at a considerably faster pace than both the overall private economy and overall manufacturing. And automotive was closing the gap.

Aside from trade, the White House, and everyone seeking the best for the U.S. economy, should also be troubled by the drop in September in the year-on-year manufacturing jobs increase to 117,000. That’s the worst such performance since August, 2017’s 112,000 and less than half the rate of the previous September annual improvement (266,000).

Better news for Trump-ers? Manufacturing job creation during the first 31 months of the Trump presidency is still much better (464,000) than during the last 31 months of former President Barack Obama’s administration (198,000).

Matters look better for the President (and manufacturing workers) on the wages front. Although industry’s pre-inflation hourly pay only inched up on month by 0.07 percent, that result beat the 0.04 percent dip for the overall private sector. (The Labor Department, which tracks the employment and wages figures, doesn’t monitor public sector wages since they’re set largely by politicians’ decisions, not largely by market forces. Therefore, they say almost nothing about the state of the labor market or the economic in general.)

Moreover, this relatively good manufacturing’s wage performance continued a slow relative catch up trend that began this year. Since January, current-dollar private sector pay is up 1.92 percent, versus 2.20 percent for manufacturing workers.

All the same, since the current economic recovery began, in mid-2009, private sector wages have risen by 26.87 percent. Manufacturing’s increase? Only 21.03 percent. And these manufacturing wages rose faster during the last 31 months of the Obama presidency (6.04 percent) than during the first 31 months of the Trump administration (5.53 percent). 

The safest economic conclusion seems to be that manufacturing hiring is hardly in the dumps – as suggested by the latest (also September) soft data from the Institute for Supply Management.  Nor does this looks like a “Tariff-mageddon” is upon us. But manufacturing job creation is also well off 2018’s robust pace, and the more so in major trade-affected industries . And its underlying situation will as more difficult to describe the Boeing and General Motors effects become visible (assuming the auto strike isn’t settled quickly).

But as cautious as that analysis is, the political implications as the 2020 presidential campaign heats up are even murkier. For barring a dramatic change in the manufacturing picture, they’ll depend on voters deciding whether the Trump manufacturing, trade, and overall economic record are good enough.   

(What’s Left of) Our Economy: The AP’s Manufactured Nonsense About Manufacturing

Tags

AP, Associated Press, Calvin Woodward, fake news, innovation, Jobs, manufacturing, productivity, research and development, technology, Trump, {What's Left of) Our Economy

The Associated Press (AP) is a ginormous global news organization, and its reach is especially widespread here in the United States (although I couldn’t find figures breaking out its American clientele specifically). So it’s a big deal when one of its highest profile writers spreads the kind of utter claptrap about domestic U.S. manufacturing that Calvin Woodward just peddled in his new piece on President Trump’s views on the economy.

In an article posted today, Woodward portrayed Mr. Trump’s emphasis on industry (and other elements of his worldview) as nothing more than a pathetic and downright dangerous exercise in nostalgia for the “grunt work of old” that ignores how “Industry, technology and much of the culture are finding new ways of doing and living” and how “U.S. prosperity has been driven for decades by services, technology and new things….”

Some confidence in Woodward’s conclusions might be justified if he relied on manufacturing specialists or even economists to support them. But the authorities he cites are a “professor of communications” and a psychologist who “studies nostalgia from Britain’s University of Southampton.”

Not that economists have been killing it in recent decades in properly evaluating the importance of manufacturing. But if Woodward had bothered to consult one,  the odds would have been higher that he’d have encountered the idea that industry is kind of important for any country seeking to build or maintain a world-class military. Or” that it’s historically been the U.S. economy’s leader in productivity growth (although as RealityChek regulars know, it’s recently been losing its mojo on that score). Or that it boasts one of the nation’s biggest employment multipliers – meaning that the creation of each American manufacturing job generates an outsized number of jobs elsewhere in the economy compared with employment increases in most other sectors. Or that manufacturing accounts for the lion’s share of American business research and development spending. 

That last fact is especially important for Woodward and others of his ilk to know. For it makes clear that if the United States is to keep generating the “technology and new things” that of course are central to its hopes for continued (much less greater) prosperity, it has better keep its manufacturing base world class.

I’ll leave it to you to judge whether Woodward’s article qualifies as Fake News.  But there can’t be any legitimate doubt that it’s manufactured nonsense.   

(What’s Left of) Our Economy: The New Jobs Report’s Wage Details are Mixed, Too – Economically and Politically

Tags

inflation-adjusted wages, Jobs, manufacturing, Obama, private sector, real wages, Trump, wages, {What's Left of) Our Economy

The latest U.S. government report on the nation’s employment picture (for August) produced unusually mixed jobs results. (See, e.g., this report.) Maybe that’s why analysts seem to have missed one of its more encouraging takeaways: Hourly wages in the manufacturing sector, which have remained weak throughout the current economic expansion and into the Trump era, have picked up notably so far this year.

Yet the new data also make clear that, when it comes to the gap between U.S. blue-collar workers’ in the private sector overall and those of their better paid white-collar counterparts, the former have lost some ground under the Trump administration, even though their hourly wages are up in absolute terms.

So for a President who’s going to run for reelection largely as a populist champion of forgotten Americans, the August results were unusually mixed as well. 

That manufacturing-specific pickup has taken place in pre-inflation wages, and we won’t get the latest constant dollar figures until this coming Thursday. But the progress before adjusting for price changes (and don’t forget – inflation has been awfully low lately) has been so notable that, for now, manufacturing wages’ performance is no longer worsening in comparison with the trends in the overall private sector. Indeed, the gap has narrowed a smidge.

Chiefly, from this January through August, current dollar manufacturing wages are up 2.09 percent. That’s the best such increase since 2008 (2.44 percent) – when the economy was still mired in recession, and employers’ tendency to jettison less experienced and thus more poorly paid workers produced a statistical wage increase for the remaining manufacturing workforce.

Moreover, this improvement was slightly faster than the two percent rise achieved by the private sector overall – also the best such performance since 2008 (2.36 percent). (This Labor Department wage series only goes back to 2006.)

The story is similar for blue-collar workers in both manufacturing and the private sector overall. (Data for these wages in the overall private sector goes back all the way to 1964 and for manufacturing to 1939.) For blue-collar manufacturing workers (called “production and nonsupervisory employees” by the Labor Department), January-through-August pre-inflation hourly pay is up 1.74 percent. That’s of course less than for the manufacturing workforce as a whole, but it’s the best such number since 2016 (1.98 percent) and, perhaps more important, the second best since 2006.

For the overall private sector, current-dollar blue-collar wages have advanced by 2.08 percent between January and August of this year. That’s their best such performance since 2008’s 2.48 percent.

As a result, from the beginning of the current economic recovery (mid-2009) this August, overall pre-inflation private sector wages had risen 1.2906 times faster than comparable hourly pay in manufacturing. That’s ever-so-slightly slower (but still slower) than the ratio through last August (1.294 times faster).

Manufacturing’s relative improvement was greater for blue-collar workers. From the mid-2009 beginning of the current economic recovery through this August, private sector nonsupervisory etc current dollar hourly wages have risen 1.2131 times faster than blue-collar manufacturing wages. That’s a smaller gap than the 1.228:1 ratio from the recovery onset through last August.

Nonetheless, the data show that, after narrowing slightly under former President Obama, the pre-inflation hourly wage difference between blue-collar and white-collar workers overall has been growing slightly again under President Trump.

When the recovery began, in mid-2009, private sector production and non-supervisory workers’ hourly wages were 83.83 percent of the wages earned private sector workers overall. By January, 2017 – the last Obama month in office, this figure had grown to 83.99 percent. As of this August, however, it’s back down to 83.92 percent.

Interestingly, the Trump record looks better when only the manufacturing trends are examined. In mid-2009, blue-collar manufacturing wages stood at 78.93 percent of manufacturing wages overall before inflation. By January, 2017, the share had dipped to 78.25 percent. The latest statistics show that it’s grown to 79.88 percent.

None of these changes is anywhere close to dramatic – a timely reminder, as a presidential campaign year rapidly approaches, that the U.S. economy really is akin to a supertanker, and barring sudden catastrophes or windfalls, typically takes a frustratingly long time to turn significantly.

(What’s Left of) Our Economy: A Good U.S. Manufacturing Jobs Report – for Trump Trade War Critics

Tags

aluminum, Jobs, Labor Department, manufacturing, metals tariffs, metals-using industries, steel, tariffs, Trade, trade war, Trump, {What's Left of) Our Economy

This morning’s August jobs report from the U.S. Labor Department was mediocre news for the American economy as a whole, but it finally brought some good news for opponents of President Trump’s trade policies. For the new monthly numbers, plus the latest set of benchmark revisions, finally revealed some notable damage to hiring in U.S. manufacturing in industries exposed the longest and most consistently to the tariffs he’s imposed.

Although it’s now gotten just about futile to measure the effect of Mr. Trump’s China policies – because of the on-again-off-again nature of his tariff and tariff threats, and because their future is still so cloudy – the President’s levies on steel and aluminum date from March, 2018 and most have stayed in place. Therefore, we have a solid idea over a respectable length of time over how these measures have affected manufacturing overall – as Trump critics have noted, not simply for the industries that have received trade protection, but for those (collectively much larger) sectors that use the two metals to make their final products.

As RealityChek regulars know, for many months following the metals tariffs’ imposition, these sectors had actually been outperforming not only the rest of manufacturing but the rest of the private sector economy on several fronts. (See, e.g., here and here.)

But the August jobs report makes clear that those days are over, at least for now. Below, as usual, are the figures for these main metals-using sectors since April, 2018 (the first full month in which the metals tariffs were in effect), along with the hiring statistics for two control groups: manufacturing overall, and the private sector overall.

                                                        Old thru July      New thru July      Thru August

entire private sector:                      +2.13 percent     +2.22 percent      +2.30 percent

overall manufacturing:                  +1.69 percent     +1.71 percent      +1.73 percent

durable goods:                               +2.10 percent     +2.10 percent      +2.10 percent

fabricated metals products:            +1.71 percent    +1.69 percent      +1.58 percent

non-electrical machinery:              +2.73 percent    +2.34 percent      +2.19 percent

automotive vehicles & parts:         +0.33 percent    -0.01 percent           0 percent

household appliances*:                   not available    -7.57 percent         not available

aerospace products & parts*:          not available   +8.36 percent         not available

*data are one month behind

As these figures demonstrate, except for aerospace (and oddly, because of Boeing’s safety troubles and their impact on this giant manufacturer’s sales and orders), all of the metals-using sectors are now under-performing the rest of industry and the private sector when it comes to net new job creation. And all except aerospace have displayed weaker relative momentum. (Don’t forget that the appliances totals have been affected not only by the metals tariffs, but by a separate set of product-specific tariffs levied on large household laundry equipment the month before.) 

The policy questions raised are whether these results mean either that Trump should rethink his decision to confront China’s economic and technological predation, or whether he should change tactics. My own answer is “No” in each case, since the stakes of countering China are so great, the losses are still small, and since the economy, manufacturing generally, and the metals-using industries could easily be revived – and strongly – with a big domestic infrastructure building and repair program. But the August jobs report does further undercut the President’s claim that “Trade wars are good, and easy to win.”

Meanwhile, the actual August manufacturing numbers and the revisions are worth examining. August’s 3,000 net monthly gain in manufacturing payrolls was the worst such improvement since May’s 2,000. And the revisions for July were nothing less than stunning: An initially reported 16,000 jobs sequential increase has been downgraded to 4,000 (a result that’s still preliminary). June’s downgrade was smaller – from a 12,000 advance to 10,000. But the initial estimate was 17,000, so the trend looks comparably bad.

Moreover, if the new (preliminary) August figure holds, it would produce the worst year-on-year manufacturing jobs performance (up 138,000) since September, 2017 (123,000). Last August’s year-on-year manufacturing employment advance, moreover, was nearly twice as strong – 256,000.

That July revision was so big that it could justify some hope that subsequent reevaluations will generate significantly upside surprises. President Trump, moreover, can still brag that manufacturing job creation during his first thirty months in office (up 467,00, or 3.77 percent since February, 2017) has considerably exceeded that of former President Obama’s final thirty months (up 179,000, or 1.47 percent). But hopes are just that. And many more months like the last few, and the Trump manufacturing jobs record will start looking awfully similar to that of his predecessor – both economically and politically.

(What’s Left of) Our Economy: The Trump Effect on U.S. Manufacturing Workers

Tags

blue-collar workers, election 2020, inflation-adjusted wages, Jobs, manufacturing, Obama, real wages, Trump, wages, {What's Left of) Our Economy

There’s no question that President Trump has compiled a solid record when it comes to boosting American manufacturing employment, and the numbers look especially good compared with that of his predecessor, Barack Obama.

Wages, though? They remain another story entirely, and keep raising the question of how convincingly during his reelection campaign the President will be able to portray himself as a godsend to U.S. industry’s workers.

According to the most valid comparison that can be made to date, during the 29 months since Mr. Trump settled into the Oval Office (February, 2017), overall manufacturing employment and blue-collar manufacturing employment are both up considerably faster than during the last 29 months of the Obama administration. Here are the specific percentage gains for the manufacturing sector overall, and for industry’s non-supervisory and production workers – often informally dubbed “blue-collar workers”:

                                                Last 29 Obama months        First 29 Trump months

Manufacturing:                            +1.31 percent                        +3.86 percent

Blue-collar manufacturing:         +0.92 percent                         +3.40 percent

But the average hourly wage figures adjusted for inflation actually flip these results on their head:

                                              Last 29 Obama months          First 29 Trump months

Manufacturing:                           +3.05 percent                           -0.09 percent

Blue-collar manufacturing:         +3.22 percent                          +2.31 percent

It’s true that manufacturing’s blue-collar workers during the Trump era so far have been faring far better than their supervisors (who remain better paid in absolute terms). But the price-adjusted paychecks are growing significantly more slowly than they were during the final Obama years.

Of course, this politics-centric post on manufacturing wouldn’t be complete without discussing how President Trump’s tariffs have affected the picture. And here the script is arguably flipped once again to some extent, at least during the Trump years alone. The table below shows the average monthly jobs gains recorded for manufacturing and blue-collar manufacturing before the first metals tariffs were imposed (March, 2018) and after. Since the time frames differ somewhat, I thought the monthly averages would illustrate the trends more clearly.

                                                   Pre-tariffs                                  Post-tariffs

Manufacturing:                            17.38K                                       15.07K

Blue-collar manufacturing:         11.54K                                           8.6K

After the tariffs, the pace of manufacturing employment increases slowed somewhat, but it slowed much faster for blue-collar manufacturing workers.

Now for the wages results, presented as the average monthly changes in absolute (dollars and cents) terms:

                                               Pre-tariffs                                     Post-tariffs

Manufacturing                        -3 cents                                         +2 cents

Blue-collar manufacturing    +8 cents                                          +5 cents

In sum, after-inflation hourly pay rose slightly after the trade curbs came on after having fallen beforehand. Real wages for blue-collar manufacturing workers rose during both periods, but more slowly after the tariffs.

These results indicate that the President can make a decent case that his administration, and even his tariffs, have helped manufacturing workers on balance. But on the pay front in particular, the story gets complicated – and the kind of rhetorical precision Mr. Trump will need to display to date in order to tout these achievements credibly doesn’t seem to be one of his strong suits.

Making News: A National Radio Update of the Trade War…& More!

Tags

China, Clare Goldsberry, CNBC.com, Gordon G. Chang, IndustryToday.com, Jake Novak, Jobs, Making News, manufacturing, Plastics Today, tariffs, The John Batchelor Show, Trade, trade war, Trump

I’m pleased to announce that last night, I was interviewed on John Batchelor’s nationally syndicated radio show, where John, co-host Gordon G. Chang, and I updated the U.S.-China conflict – which now includes not only a trade war and a tech war, but a currency war (all closely related of course).

As usual, if you couldn’t tune in (and apologies for not being able to post a heads up last night), I’ll put up a link to the podcast as soon as one’s available.

In addition this morning, Industrytoday.com republished my post from August 2 detailing the mixed trade war-related results from the latest (July) U.S. jobs report.  Here’s the link.

Also, it was great to see economic analyst Jake Novak’s Monday column for CNBC.com reference my views on Trump tariffs’ (so far marginal) impact on the U.S. economy.  You can access it here.

That same day, a piece by Plastic Today‘s Clare Goldsberry spotlighted more evidence from RealityChek showing that America’s manufacturers are withstanding the trade conflict just fine.  Click here to read.

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

 

(What’s Left of) Our Economy: The Jobs Fog of Trade War

Tags

aluminum, China, Jobs, manufacturing, metals tariffs, metals-using industries, steel, tariffs, Trade, trade war, Trump, {What's Left of) Our Economy

Domestic U.S. manufacturing turned in a mixed job creation performance in July, with this morning’s figures containing fodder both for the optimists and the pessimists. And the ambiguousness extended to interpreting the results of President Trump’s tariff-centric trade policies – which is not entirely surprising, especially given the nature of the China duties, which have been imposed in phases, and where threats have displayed an on-again-off-again nature.

Overall, the optimists could point out that the new Bureau of Labor Statistics (BLS) data showed a fourth straight sequential gain for manufacturing employment, as industry added 16,000 net new jobs in July. Moreover, the monthly rate of payroll increases is up from 3,000 in April. In fact, the July sequential gain was the sector’s best since January, when manufacturers grew net employment by 17,000.

Nonetheless, the revisions were decidedly negative, with May’s increases being downgraded from 4,000 to 2,000, and June’s all the way down from 17,000 to 12,000. Moreover, July’s 157,000 year-on-year manufacturing employment improvement was the lowest in absolute terms since October, 2017’s 146,000.

Identifying a clear bottom line from the trade war-specific manufacturing employment results is just as difficult. First, let’s look at the performance of the major metals-using sectors, which have faced varying levels of tariffs on steel and aluminum since spring, 2018. (April was the first full month in which they were in place.) Here’s the comparison between their employment changes since then, and those of manufacturing overall and the American private sector overall. Also included are the figures for home appliances (where producers of large household laundry machines have been dealing not only with the metals tariffs but with separate, product-specific levies that began that February). It’s also important to note that figures for these goods and for aerospace products and parts are one month behind the rest. So for those two sectors, the results are for (from left to right), the previously reported May figures, the latest May figures, and the June figures.

An optimist could observe that two of the durable goods sectors, fabricated metals products and automotive, have increased their hiring momentum versus the broader economy, the overall manufacturing sector, and even the durable goods super-sector (where the main metals-using industries are found).

The pessimists, however, could say that through the end of 2018, the metal users in general were clearly besting all of their counterparts in job creation, and that their relative strength has faded since.

                                                       Old thru June     New thru June     Thru July

entire private sector:                     +2.14 percent      +2.13 percent   +2.25 percent

overall manufacturing:                 +1.74 percent      +1.69 percent   +1.82 percent

durable goods:                              +2.11 percent      +2.10 percent   +2.25 percent

fabricated metals products:          +1.49 percent      +1.71 percent   +1.74 percent

non-electrical machinery:            +2.92 percent      +2.73 percent   +2.40 percent

automotive vehicles & parts:       +0.27 percent      +0.33 percent   +1.06 percent

household appliances*:                -4.73 percent        -4.89 percent    -6.15 percent

aerospace products & parts*:      +7.46 percent       +7.44 percent   +7.64 percent

*data are one month behind

And two final complications: First, the low (in absolute terms) hiring gains for the automotive sector surely in large measure reflect not only tariffs on metals, but the slow decline of auto and light truck sales that began back in the summer of 2015 after a strong post-recessionary comeback – and well before any metals duties. And with the automotive sector such a big consumer of machinery and fabricated metals products, its troubles undoubtedly bleed into those industries and have dragged down their results for equally non-trade-related reasons.

Second, the aerospace industry is another big purchaser of inputs from throughout domestic manufacturing, and especially from other metals-using industries. So although its employment levels appear to have held up exceedingly well, they might be better still if not for the safety problems encountered by Boeing.

The case for optimism looks much stronger for those industries that seem to be most greatly affected by the China tariffs. But as usual, the results are surrounded by much greater uncertainties – mainly because the scope and level of these levies has changed so significantly since the first batch went into effect in July, 2018; because the use of Chinese inputs in domestic manufacturing is so widespread but also varies so considerably; and because the list of products hit by China tariffs uses a manufacturing classification system different from that used by the BLS to track jobs.

So the following China figures – presenting employment changes for what look like some of the main China-affected industries since July, 2018, plus those for broader parts of the economy to provide some context – should still be viewed with extreme caution. (I’ve added the results for non-durables, too, since the use of Chinese inputs is so widespread.) Moreover, as indicated below, the results for those main China-affected sectors are always one month late.

                                      July-May       Old July-June     New July-June   July-July

private sector:           +1.45 percent    +1.46 percent     +1.59 percent +1.71 percent

overall mfg:              +1.02 percent    +1.16 percent     +1.11 percent +1.24 percent

durable goods:          +1.22 percent     not available     +1.36 percent +1.51 percent

non-durable goods:  +0.67 percent     not available    +0.70 percent  +0.80 percent 

aircraft engines &     +1.51 percent    not available     +1.86 percent   not available

  engine parts:

industrial heating      +1.12 percent    not available     +2.24 percent   not available

  equip:

oil & gas drilling      +4.88 percent     not available    +5.56 percent    not available

  platform parts:

farm machinery        -1.00 percent     not available         0 percent      not available

  & equip

ball bearings:           +2.39 percent     not available    +3.16 percent    not available

At least through June, however, all of the apparent China tariff-specific industries have displayed much stronger recent hiring strength relative to industry and the economy as a whole. This greater momentum, moreover, is especially noteworthy given that the scale of the China duties has broadened so dramatically since July, 2018, and the tariff rates for so many products have been increased a second time.

Nonetheless, the China-related data are especially dodgy. And of course, President Trump just yesterday threatened a big new set of tariffs on the imports from China not already hit with duties. Which may or may not actually be imposed. And that may contain plenty of exemptions. All good reasons for analysts to remain data dependent – and prudent in the extreme – when judging how the U.S. economy is faring as the trade wars rage on.

(What’s Left of) Our Economy: U.S. Job Quality Takes a Turn for the Worse

Tags

Employment, healthcare services, Jobs, private sector, public sector, recovery, subsidized private sector, {What's Left of) Our Economy

Here’s how bad America’s employment performance has been so far this year. Not only has job creation lagged quantitatively. But by one key measure that RealityChek has followed for years, job quality worsened, too. Specifically, after falling significantly during the first two years of the Trump administration as a share of total hiring, job creation in what I call the subsidized private sector of the economy is up sharply.

To review, the subsidized private sector – dominated by healthcare services – consists of those industries that are typically classified (including by federal government statisticians) as private sector industries, but whose levels of activity (including job creation) are determined largely by politicians’ decisions about levels of government support, not market forces.

This observation doesn’t imply any conclusion that subsidized private sector jobs are merit-less. But it does reflect the understandable and commonly held belief that the genuine private sector is the economy’s main source of productivity growth and innovation, and that therefore it should dominate job creation as well.

The main evidence comes in the form of the figures on the subsidized private sector’s share of total hiring in America, of hiring in the private sector as conventionally defined (which includes the subsidized numbers), and of hiring in the “real private sector” (the total resulting from subtracting the subsidized private sector from the conventionally defined private sector figures). And since we only have data for the first six months of this year (including those for June, which are still preliminary), the time frames compared here will consist of the first six months of each year since the June, 2009 beginning of the current economic recovery).

During the first six months on Mr. Trump’s watch, net new subsidized private sector job creation accounted for 22.29 percent of total job creation (“non-farm” hiring, as the Bureau of Labor Statistics – BLS – defines it), for 23.41 percent of such hiring in the conventionally defined private sector, and of 30.57 percent of the net new jobs in the “real private sector.”

During the first six months of 2018, these shares all declined – to 18.85 percent, 19.75 percent, and 24.61 percent, respectively. At least as important, they were among the lowest recorded during the current recovery. In particular, they were all lower than they were during the first six months of President Obama’s last year in office – when they reached 28.57 percent, 31.57 percent, and 46.13 percent. That is, from January through June of 2016, the increase in subsidized private sector payrolls was nearly half as large as all net new hiring in the rest of the private sector (the “real private sector”) – which is much larger.

But during the first six months of this year, the subsidized private sector made a tremendous comeback.

These industries’ share of total net new U.S. hiring jumped from 18.85 percent to 30.88 percent. Its share of conventionally defined private sector hiring rose from 19.75 percent to 33.06 percent. And net payroll increases in the subsidized private sector compared with “real private sector” payroll increases more than doubled – from 24.61 percent to 49.38 percent.

Even worse, all three results were the highest registered during the current recovery.

The only (mildly encouraging) news on the job quality front in this respect (accepting my assumption that relatively weak job creation in the “real private sector” is a troubling development): On a standstill basis (representing a snapshot, not measuring rate of change), the combined share of total hiring accounted for by the subsidized private sector and the public sector keeps falling. But that’s clearly because job creation in the public sector proper remains weak.

At the onset of the last recession – at the end of 2007 – these jobs amounted to 29.84 percent of all U.S. jobs tracked by the BLS. When the recovery began, this figure had increased to 32.20 percent. By last June, it has dipped to 30.94 percent. And as of this past June (again, preliminarily), it was down to 30.87 percent. That’s still higher than when the last recession began, so it’s possible to argue that the American labor market still hasn’t fully normalized. If the subsidized private sector’s recent job creation resurgence isn’t interrupted, such normalization will become an ever more distant goal.