(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.   

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Im-Politic: Has Trump’s Record on Real Wages Been Good Enough Politically?

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Barack Obama, China, Im-Politic, inflation-adjusted wages, Labor Department, manufacturing, private sector, real wages, tariffs, Trade, trade war, Trump, wages

Given the on-again-off-again nature of President Trump’s tariff policies (which against China went partly off again yesterday in the form of an announced short delay in the imposition of $250 billion worth of levies originally set for October 1), I figured there was no sense in performing my now-standard analysis of this morning’s new monthly U.S. consumer price inflation figures (for August).

Instead, I’ll focus on today’s inflation-adjusted wage data – which is always released by the Labor Department in tandem with the consumer inflation report –  and here there’s definitely some good news for President Trump, his supporters, and for manufacturing workers. One notable qualification: The shorter the memories of Trump working class voters, the better for his political future.

The table below makes clear what I mean. It shows the price-adjusted wage changes for the last three January-thru-August periods for private sector workers overall, for “blue-collar” private sector workers (that is, those not in management or supervisory positions), for manufacturing workers overall, and for blue-collar workers in general and their manufacturing counterparts. (To remind:  The Labor Department doesn’t track wages for public sector employees, since their pay stems mainly from politicians’ decisions, not economic fundamentals.) 

January thru Aug. real wages                  2019                2018                 2017

private sector:                                 +0.55 percent   +0.75 percent    +0.94 percent

private sector blue-collar:               +1.27 percent   +0.76 percent   +0.76 percent

manufacturing:                               +0.65 percent     -0.19 percent   +0.46 percent

manufacturing blue-collar:            +0.23 percent         0 percent      +1.15 percent

As you can see, manufacturing workers in particular have seen January-through-August constant-dollar wage gains in 2019 that were much better than in the comparable last year – but largely because the 2018 results were terrible. Moreover, for blue-collar manufacturing workers, the 2019 improvement was still much weaker than the 2017 increase. Private sector blue-collar after-inflation hourly wages accelerated year-on-year in 2019 as well, but the 2018 gain was at least identical to 2017’s.

Short blue-collar worker memories will also help Trumpworld if the Obama administration’s real wage record is forgotten. For Mr. Trump’s record trails that of his predecessor for all of these major worker categories (although the advance in inflation-adjusted manufacturing blue-collar wages under both Presidents during comparable periods of their terms in office is pretty similar).

                                                   Last 30 Obama months       First 30 Trump months

private sector:                                  +3.39 percent                      +2.62 percent

private sector blue-collar:               +3.97 percent                      +2.72 percent

manufacturing:                                +3.25 percent                     +0.37 percent

manufacturing blue-collar:              +3.22 percent                     +3.11 percent

Let’s end on a fairly positive note for Mr. Trump and his backers: The table below shows that overall, price-adjusted wages in manufacturing fared better after his tariffs’ advent in March, 2018 (for the most part) than during the pre-tariff phrase of his presidency. Because the two time periods have been of different lengths, I’m presenting the results in terms of average monthly changes in absolute dollars and cents terms.

                                                         Pre-tariffs                            Post-tariffs

Manufacturing:                               -0.31 cents                           +0.50 cents

Blue-collar manufacturing:           +0.85 cents                            +0.75 cents

Again, what these statistics mean for the future of American workers is anyone’s guess, especially in trade-heavy manufacturing, since trade policy decisions seem so ragged. And politically, the key question remains: Have times been good enough for working class and other voters during the Trump era to offset other concerns about his leadership sufficiently to bring him a second term?

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

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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: A Big Fade for Tariffs-Led Consumer Inflation

Tags

aluminum, China, inflation, Labor Department, metals tariffs, metals-using industries, steel, tariffs, Trade, Trump, {What's Left of) Our Economy

Well, that was fast. Last month, when the Labor Department’s consumer price data came out (for June), I observed that they revealed some tariff-led inflation – especially in goods categories that by all rights should be affected by the duties on steel and aluminum that President Trump imposed in March, 2018.

(More such evidence appeared in categories in which tariffs have been placed on Chinese imports. But as continually noted, because of several complications – e.g., shorter duration, great variations in metals-intensity, data classification issues – these results should be considered much less reliable than the metals tariffs statistics.)

Yet this morning’s new consumer price data, for July, shows a significant fade in tariff pricing pressures for the metals users. Part of the reason no doubt is the lifting of the metals tariffs on imports from Mexico and Canada. But they were removed only in late May, so it’s difficult to believe that this decision deserves most of the credit.

Here are the price increases for metals-using industries between June and July, since April, 2018 (the first full month in which the duties were in place), and the year-on-year figures for this June and July. Also included, as always, are statistics for various control groups of goods, including so-called “core inflation” (which strips out volatile food and energy prices), and for the foods and beverages that are sold in metal cans outside of these containers:

                                 June-July      Since April, 2018      y/y June            y/y July

core inflation:      +0.29 percent      +2.79 percent     +2.13 percent   +2.21 percent

fresh fruits           +0.60 percent      +1.67 percent     +0.86 percent   +0.33 percent

  & vegs:

fresh fruits:             0 percent           -1.55 percent      -1.85 percent    -2.74 percent

fresh vegs:           +1.28 percent       +5.49 percent    +4.09 percent   +3.96 percent

processed             -0.68 percent        +0.04 percent    +1.70 percent   +1.45 percent

  fruits & vegs

canned fruits:       -1.56 percent        +2.30 percent    +3.93 percent   +2.87 percent

  & vegs

canned fruits:       -0.44 percent        +0.99 percent     +2.02 percent  +1.89 percent

canned vegs:         -2.33 percent       +3.28 percent     +5.28 percent  +3.13 percent

soups:                   -0.18 percent       +0.28 percent     +0.30 percent   +0.04 percent

malt bevgs           +0.72 percent       +3.13 percent     +1.69 percent   +2.58 percent

  at home:

alcoholic bevgs   +0.38 percent       +1.90 percent     +1.05 percent   +1.43 percent

  away from home:

non-frozen, non-  -0.05 percent       +2.99 percent     +2.71 percent   +2.33 percent

  carbonated non-

  alcoholic rinks:

carbted drinks:      -0.47 percent      +3.39 percent     +3.15 percent   +3.14 percent 

juices & non-        -0.23 percent      +3.11 percent     +2.86 percent    +2.62 percent

  alcoholic drinks

new cars/trucks:    -0.19 percent     +1.17 percent     +0.58 percent    +0.34 percent

motor vehicle        -0.51 percent     +2.07 percent     +1.91 percent    +1.42 percent

  parts:

appliances:            -0.83 percent      +2.00 percent    +2.56 percent    +0.62 percent

major                     -0.98 percent      +4.13 percent    +2.94 percent     -0.75 percent

  appliances:

laundry                     0 percent          +2.83 percent    -3.98 percent     -4.63 percent

  equipment:

non-electric         -1.78 percent          -5.14 percent    -1.94 percent    -2.94 percent

  cookware & tableware:

tools, hardware,  +0.62 percent        +0.83 percent    +1.06 percent   +1.35 percent

  outdoor equipment:

The waning of inflationary pressures can be seen by comparing the core inflation rate since the advent of the metals tariffs with the inflation rates of the metals-using industries.

The latest data show that prices rose faster than that core rate in only six of the sixteen metals-using categories shown. Moreover, in four of these categories (beer and other malt beverages consumed at home; non-frozen, non-carbonated, non-alcoholic drinks; carbonated drinks; and all juices and non-alcoholic drinks), the results need to be treated with caution, since these products are also sold in non-metal containers.

The previous month’s data showed that prices rose faster than core inflation in ten of these metals-using categories – with the results in three complicated by the use of non-metal containers.

That total in turn was up from the nine of sixteen instances of relatively strong inflation in metals-using industries in both February and March (with the non-metal container issue muddying the waters for four of those nine categories in February and three in March).

As for the China-related evidence, I’m hesitant to examine it for the time being not only because of the aforementioned data issues, but because U.S. policy has changed so dramatically in the last few weeks – with the President in early August threatening ten percent tariffs by September 1 for a $300 billion tranche of imports from China that would have been dominated by consumer goods, and then today postponing their imposition until December 15 (or until a satisfactory bilateral trade deal is struck).

Nonetheless, the metals tariff-related data shows that inflation for these levies so far has never been especially strong (except, for a time, in large household laundry equipment – which had faced separate, product-specific duties since February, 2018), and whatever strength it’s shown, hasn’t lasted very long. (In fact, even for those laundry machines, the table shows that their super-charged price hikes are now turning into super-charged price drops.)

And of course, as Breitbart.com‘s John Carney keeps pointing out, the economy’s overall weak rate of inflation means that even when tariffs have pushed prices up, many other forces have been pushing other prices down.  (Further, these low overall inflation rates almost by definition mean that price pressures from the existing China tariffs can’t be impressive, either.)

That’s not to say that Mr. Trump’s trade policies therefore can’t be hurting the U.S. economy in other ways (although the evidence to date here is also pretty feeble). And it’s entirely possible that the widely tariff-mageddon could still hit Americans on a variety of fronts if the trade war with China in particular lasts long enough. But inflation claims have always been central to the Trump trade critics’ case, as made clear by how quickly #tariffsaretaxes became a hashtag, and how it’s persisted. And if the critics have been wrong on this crucial score, why should anyone be confident in any of their other predictions?

(What’s Left of) Our Economy: U.S. Manufacturing’s Productivity Lag Keeps Worsening

Tags

Labor Department, labor productivity, manufacturing, multi-factor productivity, non-farm business, productivity, {What's Left of) Our Economy

They’re not as exciting as the trade data and the jobs data these days. In fact, they rarely generate any excitement. And this year, they had the misfortune of coming out on the 75^th anniversary of D-Day. All the same, last Thursday’s second set of government figures on labor productivity for the first quarter of this year matters because it strengthened the case for a disturbing trend: Although this measure of efficiency – and indirectly, success in fostering healthy growth and sustainably rising living standards – confirmed the initial encouraging results for the economy as a whole, manufacturing’s laggard status looks worse than ever..

As RealityChek regulars know, the labor productivity measured in last week’s report is the narrower of the two productivity gauges regularly published by the Department of Labor. As opposed to multi-factor productivity, which measures how much in the way of a variety of business inputs is needed to generate a unit of output, labor productivity only tells us how much each hour of work put in by an employee achieves that result. But the labor productivity figures come out on a timelier basis, so they’re understandably watched closely.

The release’s headline figure confirmed the solid labor productivity gain originally reported for the first quarter in the “non-farm business” sector – the Department’s definition of the American economic universe when it comes to productivity. Although the 3.4 percent annualized sequential rate of improvement was a little slower than the first 3.6 percent estimate, it remained the best such result since the 3.7 percent recorded for the third quarter of 2014. Moreover, it still left labor productivity growth accelerating since the third quarter of last year.

For manufacturing, however, the first quarter’s sequential labor productivity increase was revised way down – from a pretty good 1.7 percent to a dismal 0.4 percent.

Even worse, whereas non-farm business productivity improved because both output and hours worked rose (the productivity gain recipe we want to see), the much smaller increase for manufacturing stemmed from hours worked dropping even faster than output (the productivity gain recipe we don’t want to see).

As a result of this poor manufacturing performance, the labor productivity gap between industry and the rest of the economy has been widening – and not in a good way for industry. Here’s an updated table showing the total labor productivity gains for non-farm businesses and for manufacturing during the two previous economic expansions and the current expansion (in order to ensure apples-to-apples comparisons).

                                                               Non-farm business       Manufacturing

1990s expansion (2Q 1991-1Q 2001):     +23.74 percent         +45.86 percent

bubble expansion (4Q 2001-4Q 2007):    +16.59 percent        +30.23 percent

current expansion: (2Q 2009 to present): +12.18 percent          +9.59 percent

It’s worrisome enough that the non-farm business increases have been decelerating since the 1990s expansion. But the extent of the manufacturing slowdown has been nothing less than shocking. Indeed, during the current recovery, manufacturing has clearly lost its labor productivity leadership status – and by a considerable margin.

Alternatively put, even though the 1990s expansion and the current expansion have lasted roughly the same amount of time, the rise in non-farm labor productivity during this recovery has been only about half as fast, and that for manufacturing only about a fifth as fast.

American manufacturing has shown some important signs of revival under President Trump – especially in job creation and output (at least until recently). But whatever the results of Mr. Trump’s trade wars, unless its labor productivity performance improves dramatically, its comeback will remain sorely incomplete.

(What’s Left of) Our Economy: U.S. Jobs Report Again Shows Evidence of Tariffs Damage

Tags

China, Jobs, Labor Department, manufacturing, manufacturing jobs, metals tariffs, metals-using industries, tariffs, Trade, Trump, {What's Left of) Our Economy

A speaking engagement yesterday prevented me from posting promptly on that morning’s monthly U.S. jobs report (for May), but after crunching the numbers, two conclusions come through loud and clear. First, the overall results added up to a total stinker. And second, like last month’s release, they contained more evidence that President Trump’s tariff-centric trade policies are taking a toll on hiring in manufacturing.

As with economy-wide (“non-farm”) hiring in May, manufacturing employment creation in general grew weakly – and for the fourth straight month. Industry’s payrolls rose by a measly 3,000 on month in May. The revisions, meanwhile, left the discouraging situation basically intact, as April’s previously reported 4,000 net sequential job gain was upgraded to 5,000, but March’s former flatline is now judged to have been a 3,000 net monthly job decrease.

As usual, however, when it comes to the trade policy implications, the results that count are those in manufacturing sectors actually significantly affected by trade policy moves like Mr. Trump’s tariffs. First let’s examine industry’s major metals-using sectors – both the necessary data for these industries goes back to April, 2018 (the first full month when these levies were in effect) and because the industries themselves are much easier to identify.

Here are the figures for these sectors’ employment changes between that month and this past April (both the originally reported numbers and today’s revisions), and between April, 2018 and May, 2019. (All these results, incidentally, are still preliminary.) Serving as control groups are the results for the entire private sector in the United States, for all of manufacturing, and for the durable goods super-sector (where all the main metals-using industries have been found).

                                                    Old thru April   New thru April   April Thru May

entire private sector:                  +1.79 percent     +1.93 percent      +2.00 percent

overall manufacturing:              +1.58 percent     +1.60 percent      +1.62 percent

durable goods:                           +1.92 percent     +1.94 percent      +1.99 percent

fabricated metals products:       +1.82 percent     +1.71 percent      +1.65 percent

non-electrical machinery:         +2.68 percent     +2.52 percent      +2.64 percent

automotive vehicles & parts:    +0.42 percent     +0.20 percent     + 0.48 percent

household appliances:               not available       -4.57 percent       not available

aerospace products & parts:      not available      +7.02 percent       not available

The pattern is clear. Even in metals-using sectors that had been outperforming the overall private sector and overall manufacturing in absolute terms, hiring momentum has waned. Moreover, it’s recently been slackening at a faster rate than evident in those larger sectors. That’s clear from the narrowing of the gap that can generally be seen between the employment increases in the metals-using sectors and the broader parts of the economy.

The impact of the China tariffs remains a puzzle, though, because they’ve been in place for a briefer period of time, and because the industry classification system used by the Trump administration in developing its tariff lists is different from the system used by the Labor Department to track employment changes. In addition, the level of China content of domestic manufactured goods can vary considerably, meaning that the impact of the tariffs can vary just as considerably.

Nevertheless, some exact and reasonably close matches can be identified, and, at least through April (the latest month for which data are available for the specific sectors below, which are narrower than those in the table for metals-using industries), the same relative hiring weakness can be seen. That is, job creation in the China tariffs-affected sectors has been growing more slowly than job creation in the private sector in toto, or in manufacturing overall. This trend is visible even in sectors that have greatly bested the private sector and manufacturing control groups in absolute levels of job creation.

                                   July-March    Old July-April   New July-April    July-May

private sector:         +1.23 percent   +1.44 percent    +1.39 percent    +1.46 percent

overall                   +0.98 percent  +1.03 percent     +1.02 percent     +1.04 percent  

   manufacturing:

aircraft engines       +1.39 percent    not available    +1.51 percent    not available

   and engine parts:

industrial heating   +2.46 percent     not available    +1.45 percent    not available

    equipment:

oil & gas drilling   +5.83 percent      not available   +5.02 percent    not available

    platform parts:

farm machinery     +1.67 percent      not available   +0.17 percent     not available

    & equipment:

ball bearings:        +1.82 percent       not available   +1.54 percent     not available

These results don’t mean that the Trump tariffs, as some keep predicting, are going to throw the American economy into recession, much less that if they do start biting significantly, that they won’t be a price worth paying for overhauling decades of boneheaded, offshoring-friendly, national security threatening (especially in the case of China) trade policies. In fact, they don’t even add up to evidence that the levies are biting significantly now.

But empirical evidence of some damage is finally emerging, at least on the jobs front, and it should be seen as a warning to tariff supporters – including the President – to stop insisting that the current trade wars will entail no costs or need for sacrifice whatever.

(What’s Left of) Our Economy: Is the Middle Class Killing It Under Trump?

Tags

average hourly earnings, Barack Obama, ECI, election 2020, Employment Cost Index, hourly earnings, Labor Department, middle class, salaries, Trump, wages, working class, {What's Left of) Our Economy

Is the economy under President Trump producing outsized wage gains for working- and middle-class Americans, as the chief executive claims? Or have his policies betrayed the workers who gave him so many votes in the 2016 race for the White House, as his critics charge?  (See this piece for typical views from both vantage points.) 

The latest data say loud and clear that there’s some evidence that every day Americans are faring better in the Trump years. But it’s far from a slam dunk.

The first set of figures comes from this morning’s Employment Cost Index (ECI), a quarterly measure of worker compensation trends published by the Labor Department and the second is the Department’s newest monthly wage numbers.

One complication that emerges right away is that the middle class and the working class are two different groups each of whose composition is anything but homogeneous and each of whose definitions can vary widely. For example, manufacturing includes employees at opposite ends of the skills and therefore wages levels. And managers in numerous service industries earn pretty modest  salaries. (See, e.g., here.) Moreover, don’t forget gaping gaps among different regions of the country. In many major metropolitan areas, families earning six-figure incomes arguably are hard-pressed financially.

In this post, I try to distinguish between “the rich” and the rest by comparing trends for managerial and executive-type workers on the one hand (including professionals and keeping the above qualifications in mind), and non-supervisory workers on the other. As usual with compensation reports, I exclude government workers, because their wages, salaries, and benefits stems from politicians’ decisions, as opposed to the private sector, where compensation has much more to do with the economy’s fundamentals. And in the first table below, presenting calculations from the ECI data, I zero in on wage and salary costs. The reason? The ECI doesn’t directly measure what workers’ receive – instead, it gauges various costs businesses incur to keep them on their payrolls. And unlike benefits costs, wage and salary costs are much likelier actually to wind up in workers’ pockets.

What’s presented here is a number that shows the degree to which increases in wages and salaries for various classes of workers have been rising at a faster or slower pace (or actually fell) between the last nine quarters of President Obama’s administration and the first nine quarters of President Trump’s administration. (I chose these periods because they’re as close as possible to each other in the nation’s current economic cycle.) Call this figure the “wage and salary acceleration rate.” So for example, if a group of workers’ wages and salaries grew by 10 percent during the Obama period used and by 15 percent during the Trump period, the acceleration rate would be 50 percent.

And just FYI, I identify the last quarter of 2016 as Mr. Obama’s final full quarter, and the first quarter of 2017 as Mr. Trump’s first full quarter (since he took office on January 20).

Obama-Trump acceleration rate

All workers: +31.09 percent

Management/professional/related: +15.05 percent

Management/business/financial: -15.78 percent

Professional & related: +32.06 percent

Office/admin support: +15.51 percent

Construction/extraction/ +9.05 percent

farming/fishing/forestry:

  installation/maintenance/repair: +25.57 percent

Production/transportation/ +25.55 percent

  material moving:

Production: +18.26 percent

Transportation & material moving: +33.33 percent

To me, these result are a wash, in large part because the spreads between the results for the second, third, and fourth categories (the upper income categories) and those for the remaining, lower income categories are both pretty wide. Interestingly, only one group within each of these broad categories beat the workforce average of 31.09 percent – professional and related workers, and transportation and material moving workers.

The second table, presented below, compares the hourly earnings (including salaries calculated on an hourly basis) Obama-Trump accelerators for the entire private sector workforce, and for the non-supervisory portion of that workforce. Because these data come out monthly, the two time periods are the final 26 months of the Obama administration (ending in December, 2016) and the first 26 months of the Trump administration (starting in January, 2017).

These results look more clear-cut, with hourly pay for the non-supervisory workers increasing faster during the Trump presidency so far than during the final slightly more than two years of the Obama presidency.

Obama-Trump acceleration rate

All workers: +20.54 percent

Non-supervisory workers: +27.16 percent

As election 2020 so far makes clear, inequality and middle- and working-class-related trends are shaping up as major campaign issues. So far, the bottom line is that neither backers or opponents of President Trump deserve to make major political hay of them.

(What’s Left of) Our Economy: A Deep Dive Doesn’t Find Any Tariff-Led Consumer Inflation, Either

Tags

aluminum, China, consumer prices, inflation, Labor Department, metals, tariffs, Trade, {What's Left of) Our Economy

I decided to do something special for my regular analysis of the new U.S. consumer inflation figures (for February) and what they say about President Trump’s tariff-centric trade policies. Mainly because we now have four months worth of data on the prices of goods sectors where imports from China are common, it’s become possible to take the best stab yet determining whether the Trump levies are hammering American households by making these products much more expensive.

The verdict? Some tariffs-led inflation here can be detected, but the statistics are still too imperfect, and the time-frame examined still too short to justify any firm conclusions.

At the same time, it remains clear that Mr. Trump’s metals tariffs, which have now been in place for eleven data months, have had little if any impact per se on consumer buying power.

Let’s examine the steel- and aluminum-related figures first, since there are many fewer products involved. Here are the data for the January-February period, and for April to the present (the stretch during which the metals tariffs have been in place), as well as the year-on-year numbers for April and February (which provide some indication of trends over time). As usual, the results for tariffs-affected products (e.g., canned foods) are presented along with those of control goods (e.g., non-canned foods) to glean further insights into the tariffs’ effects.

But here’s another new wrinkle: Rather than use the most popular “core inflation” measure for the biggest control group, I’m going to use a different measure: all items minus energy. The reason? The standard core inflation gauge strips out food and energy, because price changes in those categories are so volatile that they’re thought to distort the picture of fundamental inflationary or deflationary forces influencing the economy.

Yet many metals tariffs-affected products are food products. So for our purposes, the core group needs to be more narrowly drawn – and in this case, is comprised of all items minus only energy.

                                       Jan.-Feb.        Since April       April y/y          Feb. y/y

core CPI:                   +0.15 percent   +1.76 percent  +2.01 percent   +2.07 percent

fresh fruits                 +0.72 percent   +1.95 percent   -0.43 percent   +2.34 percent

  & vegs:  

fresh fruits:                 -0.27 percent    -0.55 percent  +1.38 percent   -0.53 percent

fresh vegs:                 +1.86 percent   +4.92 percent   -2.50 percent  +5.76.percent

processed fruits         +1.42 percent   +0.11 percent   -1.29 percent  +0.88 percent

  & vegs:

canned fruits              +2.12 percent  +3.07 percent   -0.14 percent  +3.99 percent

  & vegs:

canned fruits:             +2.48 percent   +1.91 percent    -1.60 percent  +3.09 percent

canned vegs:              +2.23 percent   +3.70 percent   +1.00 percent  +4.66 percent

soups:                         +0.39 percent  +1.19 percent     -0.38 percent   -0.57 percent

malt beverages           +0.73 percent  +2.41 percent    +0.84 percent  +2.64 percent

  consumed at home:

alcoholic                     -0.26 percent   +1.14 percent   +2.17 percent   +1.36 percent

   beverages consumed away:

non-frozen, non-        +0.98 percent   +3.46 percent   -0.52 percent   +3.52 percent

  -carbonated non-

  alcoholic rinks:

carbonated drinks:      -0.19 percent   +4.72 percent   +0.04 percent   +5.04 percent

juices & non-             +0.98 percent   +3.46 percent    -0.26 percent   +3.52 percent

  alcoholic drinks:

new cars & trucks:     -0.24 percent    +0.66 percent   -1.61 percent   +0.29 percent

motor vehicle             -0.09 percent    +1.83 percent   -0.74 percent   +2.12 percent

  parts:

appliances:                 -0.94 percent   +3.44 percent  +0.27 percent    +6.80 percent

major appliances:       -0.56 percent   +6.86 percent  +1.55 percent  +11.08 percent

non-electric               +0.25 percent    -0.59 percent   -1.57 percent    +1.69 percent

  cookware & tableware:

tools, hardware,         +0.72 percent  +1.49 percent   +0.19 percent   +1.98 percent

outdoor equipment:

Something that becomes clear right away – the food price changes shown here demonstrate that they really are volatile. For example, from January to February, fresh fruits and vegetables prices together rose by 0.72 percent. The previous month, they fell 0.19 percent. Fresh vegetables prices have been on an even wilder roller-coaster – up 1.86 percent on month in February, down 1.66 percent on month in January. And unfortunately, this volatility can reduce the value of the year-on-year results.

The canned foods price volatility is impressive, too. Between January and February, the prices in the canned fruits, canned vegetables, and canned produce overall categories all rose more than two percent. But between December and January, the price of the first of these fell by 1.59 percent, the price of the second rose by just 0.45 percent, and the price of the third dipped by 0.05 percent.

And these products are where the strongest signs of metal tariffs-led consumer price inflation are found. So take the price acceleration revealed by the year-on-year data with a grain of salt. (No pun intended.). Also revealing: When you look at the cumulative price changes since the first metals tariffs were imposed (the post-April figures), some of these canned food categories exhibit stronger-than-core inflationary trends (the canned produce groupings and the drinks categories – which unfortunately also include many products packaged in glass and plastic bottles and cardboard containers) but some exhibit weaker pricing (like soups and alcoholic beverages consumed away from home – which also include many non-canned products). So there’s also abundant evidence that prices are mainly driven by something other than the metals in cans.

As for other products that use steel and aluminum, appliance prices keep increasing ever faster – but of course inflation in those categories has also been influenced by a separate set of tariffs imposed a year ago on large household laundry machines. The pricing trends for motor vehicles, automotive parts, non-electric cookware and tableware, and the tools and hardware categories, are decidedly mixed – which again undercuts tariff-centric interpretations of their inflation rates.

And now for the China tariffs’ effects. In part this post has been delayed because I actually went through the list of tariff-ed consumer (and other) goods published by the U.S. Trade Representative’s office in mid-September. The groupings of these products still often match up poorly with the groupings used by the Labor Department to track consumer pricing trends. Moreover, in many of these cases (especially the food products), imports from China are pretty modest. But the groupings aren’t entirely off, so I concluded these numbers are worth presenting.

What you see are the data for the latest month (February), for the post-September period (since October was the first full month these levies were in effect), and for October and February on a year-on-year basis. And as with the metals tariffs figures, the main control groups (like items minus energy) are presented as well.

                                     Jan.-Feb.          Since Oct.         Oct. y/y           Feb. y/y

core CPIU:              +0.15 percent   +1.76 percent   +2.01 percent   +2.07 percent

food:                        +0.40 percent   +1.17 percent   +1.21 percent   +1.96 percent

frozen/freeze-          +1.56 percent   +0.47 percent    -0.46 percent   +0.95 percent

  dried/prepared

  foods

fish/seafood:            +0.79 percent   +1.85 percent   +2.82 percent   +4.44 percent

processed fish/         +0.41 percent   +0.92 percent   +1.46 percent   +5.21 percent

  seafood

frozen fish/              +0.78 percent   +1.24 percent    -0.15 percent    +3.67 percent

  seafood

fruits/vegs:               +0.86 percent   +1.83 percent    -0.32 percent   +2.03 percent

fresh fruits/               +0.72 percent   +2.11 percent   -0.38 percent    +2.34 percent

  vegetables

fresh fruits:                -0.27 percent   +1.29 percent   -1.40 percent    -0.53 percent

fresh vegs:                +1.86 percent   +3.05 percent   +0.81 percent   +5.76 percent

processed                  +1.42 percent   +0.79 percent   -0.06 percent   +0.88 percent

  fruits/vegs:

frozen fruits/             +0.81 percent   -0.51 percent    -2.72 percent    -2.41 percent

  vegetables

non-carb,                  +0.98 percent   +2.06 percent   +1.23 percent   +3.52 percent

  non-frozen juices/drinks:

personal care            +0.55 percent   +0.91 percent    +1.52 percent   +1.87 percent

  products:

household                +0.31 percent    +0.78 percent    +0.69 percent   +1.49 percent

  furnishings:

recreation                 -0.86 percent    +0.53 percent     -3.51 percent    -1.38 percent

  goods:

men’s                       +3.27 percent     -1.52 percent    +1.47 percent   +4.10 percent

  sportswear:

women’s                   -2.51 percent     -2.47 percent     -5.08 percent   -5.91 percent

  sportswear:

computers,                -0.94 percent    -1.70 percent     -4.09 percent    -3.95 percent

  peripherals, etc.:

window/floor            -1.97 percent    -2.39 percent    +0.74 percent    -3.53 percent

  coverings:

furniture &               +1.20 percent   +1.22 percent    +1.26 percent   +2.36 percent

  bedding:

appliances:                -0.94 percent    +0.17 percent   +4.82 percent    +6.36 percent

major                         -0.56 percent    +1.83 percent  +8.08 percent  +11.03 percent

  appliances:

misc appls:                -0.85 percent     -1.04 percent  +3.25 percent    +4.38 percent

non-electric              +0.25 percent    +0.27 percent   -0.51 percent    +1.69 percent

  cookware/tableware:

tools/                        +0.72 percent     +1.91 percent  +0.39 percent    +1.98 percent

  hardware &

  outdoor equip:

household                 +0.13 percent    +0.41 percent  +1.79 percent    +2.94 percent

  cleaning products:

televisions:                 -3.23 percent   -7.01 percent  -17.95 percent   -20.18 percent

misc video                 +0.71 percent  +4.45 percent    -3.87 percent    +1.53 percent

  equipment

pets &                       +0.55 percent   +1.50 percent   +0.91 percent   +2.84 percent

  pet products

sporting                     -1.90 percent    +2.02 percent   +1.71 percent   +0.30 percent

  goods

photo equip               -2.26 percent     -1.24 percent    -4.94 percent    -4.12 percent

  & supplies

sewing                      +1.82 percent    +9.76 percent    -2.08 percent   +6.10 percent

  machines/

  fabrics

motor vehicle            -0.09 percent    +1.03 percent   +1.25 percent   +1.86 percent

  parts:

tires:                         +0.25 percent     +1.66 percent   +0.03 percent   +0.91 percent

stationery/                +1.60 percent     +4.24 percent    -6.48 percent    -0.22 percent

  gift wrap

Again, the short duration of these tariffs means that even the post-October and year-on-year results should be treated with major caution. And the prevalence of faster-rising food prices is clear from the table as well (although the modest level of tariff-ed imports from China further undermines the claim that trade deserves significant blame). Another complication that explains many of the diverging metals-related results, too: Different products operate in very different markets with highly distinctive features – including demand. Just look at the sportswear categories – where by most measures, pricing for men’s products is moving in exactly the opposite direction as pricing for women’s products.

The bottom line seems to be that, for price changes starting in October, only five of these 23 categories show increases above the core inflation rate, while 18 show below it. And one of those high inflation products was the major appliance category that’s also been affected by the washing machine tariffs.

Yet for year-on-year inflation rates, between October and February, the story looks very different. Price rises sped up (or price drops slowed down) in 18 of the categories, with greater price weakening characterizing the other five.

That’s why I believe that it’s still most responsible to adopt a wait-and-see approach to evaluating the China tariffs – along with the short time frame involved and the uncertainties over categorization. For the impact of the longer-lasting metals tariffs, however, claims of trade war-wreaked devastation just look even more and more far-fetched with each passing month.

(What’s Left of) Our Economy: Why the Lousy February Jobs Numbers Don’t Vindicate Tariff Alarmism

Tags

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

The stunningly poor February overall and manufacturing jobs figures released by the Labor Department today surely caused rejoicing in the ranks of America’s trade alarmists. Here, finally, was evidence that President Trump’s tariff-centric policies are backfiring on the U.S. economy and especially its manufacturing sector.

Actually, however, the new employment data show that the alarmists will need to wait at least another month for the statistics even remotely to justify their claims and warnings. For however disappointing the 20,000 net monthly increase in total American job creation and the 4,000 improvement in manufacturing payrolls, the internals provide no reason to assign significant – or any – blame to trade.

The first clue of course was the steep sequential drop in non-farm employment (the Labor Department’s U.S. jobs universe) generally speaking recorded in this first survey of February trends. After all, if the trade wars were mainly behind February’s results, why was the monthly drop-off in job creation nearly three times steeper in the overall economy (most of which has little global trade exposure) than in manufacturing (which has lots of it)?

At least as important, although the President began imposing tariffs on imports of steel and aluminum eleven months ago, manufacturing sectors heavily reliant on these metals keep outperforming the rest of manufacturing in employment terms. And similar trends are becoming apparent for the enormous number of industries that use various inputs from China that have been tariff-ed starting in July.

Below are the net hiring increases since April (the first full month of the new metals trade regime) for the American private sector as a whole, for all of manufacturing, and for the main heavy metal-using industries.

                                                   Old thru Jan.         New thru Jan.         Thru Feb.

entire private sector:                +1.36 percent         +1.62 percent      +1.64 percent

overall manufacturing:            +1.39 percent         +1.55 percent      +1.58 percent

durable goods:                         +1.72 percent         +1.97 percent      +2.04 percent

fabricated metals products:     +1.57 percent         +1.80 percent      +1.60 percent

non-electrical machinery:       +2.57 percent         +2.54 percent      +2.82 percent

automotive vehicles & parts:  +1.15 percent         +0.97 percent      +1.11 percent

household appliances:             not available           -2.52 percent        not available

aerospace products & parts:    not available          +5.93 percent        not available

The only metals-using sector that seems to have encountered employment trouble in February was the fabricated metals industry. And even in this segment of manufacturing, hiring since April has been slightly stronger than in manufacturing overall.

Automotive job creation has been weak as well, but actually enjoyed a relatively good February, relatively speaking. And although the appliance employment picture remains very weak, it needs to be remembered that it’s been laboring under an additional set of product-specific tariffs since late January.

Yet the entire durable goods sector continued to punch above its job creation weight in February, including the crucial machinery and (at least through January), aerospace industries. Why haven’t higher metals prices darkened their employment picture.

As for the impact of the China tariffs, that’s harder to judge for four reasons. First, an enormous number of manufacturing industries use Chinese inputs – and to greatly varying extents. Second, these levies only began in July, and then on a relatively small scale. Third, the list of products tariff-ed beginning in July matches up imperfectly at best with the sectoral classification scheme used by the Labor Department to track manufacturing employment. And fourth, most of the affected products are found in relatively narrow categories of manufactures, where the jobs data is one month behind.

So the following table shows the post-July employment performance of some major manufacturing sectors that use the Chinese parts, components, and materials tariff-ed that month. But it should be viewed with caution. Nonetheless, they show a heavy burden of proof on the tariff alarmists to identify any damage resulting from the China levies – especially since most of the July-January gains have been so strong.

                                                Old July-Jan.       New July-Jan.          July-Feb.

overall manufacturing           +0.91 percent      +0.98 percent        +1.00 percent

aircraft engines/engine parts: not available       +0.70 percent         not available

industrial heating equipment: not available      +3.02 percent         not available

oil/gas drilling parts:              not available      +3.93 percent         not available

farm machinery/equipment:   not available     +2.67 percent         not available

ball bearings:                         not available     +2.32 percent          not available

“Even a stopped clock is right twice a day” is a popular expression explaining why individual accurate statements or correct predictions shouldn’t automatically signal an information source’s broader credibility. The February jobs figures indicate once again that the trade alarmists haven’t even met this rock-bottom bar.

(What’s Left of) Our Economy: Pssst! Some Good News on Productivity!

Tags

Labor Department, labor productivity, manufacturing, multi-factor productivity, non-farm business, productivity, total factor productivity, Trump, {What's Left of) Our Economy

Here’s a peculiar new twist in ongoing media coverage and more general establishment commentary on the U.S. economy: The conventional wisdom among both these intertwined crowds holds that the American trade deficit doesn’t matter much economically. Yet the apparently poor trade numbers reported yesterday by the Census Bureau was the talk of these towns.

The conventional wisdom held by the establishmentarians also holds that productivity is incredibly important. Indeed, it’s widely described as a key to future prosperity. But the improving productivity figures released today by the Labor Department were virtually ignored.

Of course, a moment’s reflection reveals why. President Trump has made a very big deal out of the need to reduce the trade deficit, and the newest data indicate he’s failing. (Special note: You’ll be hearing more from me on this score very soon.) But Mr. Trump has said nothing about productivity. (That’s actually typical for politicians.) So even had the statistics been poor, there would have been no opportunity for a mass “Gotcha!” festival.

These latest numbers concern labor productivity which, as known by RealityChek regulars, is the narrowest of two productivity measures tracked by the Labor Department. But they’re also published in a much more timely fashion than the total factor (also called multi-factor) productivity statistics, which as their name implies, require collecting more information in order to calculate.

The improvement is most apparent upon examining recent annual changes in labor productivity (which tells us how many units of output a single person working for a single hour can turn out). The new figures bring the story up to the end of 2018, and show a year-to-year gain in the fourth quarter of 1.90 percent for non-farm businesses – the Labor Department’s American economic universe when it comes to productivity.

That increase may not sound like much, but it’s the biggest such advance since the first quarter of 2015 (1.60 percent), and the second biggest since the third quarter of 2010 (2.70 percent). And the trend has been upward since the second half of 2015.

Manufacturing’s labor productivity performance wasn’t quite so good. For the fourth quarter of 2018, it rose at a 1.00 percent annual rate. That increase represented a slowdown from the third quarter’s 1.50 percent. But even though industry’s productivity has been climbing only sluggishly in general since the beginning of 2016, that’s represented a major and positive change from the end of 2014 through 2015 – when manufacturing labor productivity fell on-year for five straight quarters.

Nonetheless, no one should assume that all’s well with labor productivity in America, either for non-farm businesses or for manufacturers. In fact, as the table below makes clear, the nation remains smack in the middle of a deep long-term labor productivity slump in relative terms. Specifically, over the last three economic expansions (the best way to measure trends over time, since it compares like stages of the business cycle), labor productivity gains for the non-farm business and manufacturing sectors have drifted steadily downward.

Especially discouraging: Although the current economic recovery is now just about as long as its 1990s predecessor, the cumulative non-farm business productivity rise for this expansion is less than half as strong. As for manufacturing, its labor productivity performance has been so weak (increasing by just over a fifth the rate of the 1990s expansion), that it’s lost its long-time productivity improvement lead.

When productivity improves strongly, all sorts of good things follow. In particular, workers’ wages can rise robustly without triggering inflation – which in an economy dominated by consumption, can help set the stage for equally vigorous, non-inflationary growth, and therefore more wealth for everyone to share. Does that sound boring to you? I’m shaking my head “No,” as well, which is why whether they keep getting overlooked or not, I’ll keep following the productivity news closely.

                                                                   Non-farm business          Manufacturing

1990s expansion (2Q 1991-1Q 2001)           +23.74 percent            +45.86 percent

bubble expansion (4Q 2001-4Q 2007)          +16.59 percent            +30.23 percent

current expansion: (2Q 2009 to present):      +11.28 percent              +9.70 percent