Im-Politic: So Fauci Finally Gets It on Lockdowns?

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Anthony S. Fauci, Biden administration, CCP Virus, China, coronavirus, COVID 19, facemasks, Im-Politic, lockdowns, social distancing, Wuhan virus, Xi JInPing, Zero Covid

Retiring U.S. chief infectious disease specialist Dr. Anthony S. Fauci told us over the weekend that he’s just shocked by what he calls China’s pointlessly “draconian” Zero Covid policy to defeat the CCP Virus. And the Biden administration has been critical, too. To which the only reasonable response is, “Seriously?”

Not that Zero Covid hasn’t been an epic fail by Chinese dictator Xi Jinping. But the criticism from Fauci and the Biden presidency sure looks like the pot calling the kettle black.

If you’re skeptical, here’s Fauci’s response to a question noting perceptively that “you’re seeing things that we saw in this country when people didn’t like how Covid response — What is going on in China, and why do they seem to be in a worse place than anyone else in the world?”

“[T]heir approach has been very, very severe and rather draconian in the kinds of shutdowns without a seeming purpose. I mean, if you’re having a situation, if you can recall, you know, almost three years ago when we were having our hospitals overrun, you remember the situation in New York City, you had to do something immediately to shut down that flow. So remember we were talking about flattening the curve and the social distancing and restrictions and shutdown, which was never really complete, is done for a temporary period of time for the purpose of regrouping, getting more personal protective equipment, getting people vaccinated. It seems that in China it was just a very, very strict extraordinary lockdown where you lock people in the house but without any seemingly endgame to it.”

No one can reasonably criticize any public official for urging extreme and sweeping anti-virus measures during the pandemic’s early days – before its nature and especially its highly granular lethality (overwhelmingly concentrated in seniors and others with major health problems) were understood. For it could have been like the Black Death.

But of course Fauci, the rest of the official public health establishment, and left-of-center leaders like Biden, were championing these policies long after these patterns became known.

And more important, when it comes to comparing U.S. policies during his tenure with Chinese policies today, Fauci’s claim that he was only urging “social distancing and restrictions and shutdown” essentially until vaccination was widespread ignores his stated belief in March, 2020 that “It will take at least a year to a year in a half to have a vaccine we can use.” And of course getting enough arms jabbed to turn the CCP Virus tide was always going to take months more even if the rollout went perfectly (which was far from the case). And what if the vaccines were major flops?

So Fauci himself clearly felt that pretty draconian policies – despite their devastating impact on the economy, on education, and on Americans’ mental health – would be needed over a very long haul. Therefore, when it counted, his differences with the approach taken recently by China (which lacks vaccines even as effective as America’s imperfect – especially against transmission – versions) was one of degree, not of kind.

Just as bad, as with Xi Jinping, this conviction of Fauci’s didn’t seem to be greatly affected by the proven potential of natural immunity per se to help end the pandemic (especially as variants, predictably, became more infectious but less lethal), or by the emerging evidence of sharp limits (to put it diplomatically) to the utility of social distancing in and of itself, and masking – and even of widespread lockdowns themselves.

Fauci’s declaration that “a prolonged lockdown without any seeming purpose or end game to it…really doesn’t make public health sense” comes way too late to impact America’s strategy during the pandemic era.  But hopefully it will dissuade both politicians and the public health establishment from repeating these grave mistakes when the next pandemic – inevitably – comes the nation’s way.

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Im-Politic: The Public Shows Signs of Getting It on Fighting Pandemics

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CCP Virus, CDC, Centers for Disease Control and Prevention, coronavirus, COVID 19, facemasks, Great Barrington Declaration, Im-Politic, lockdowns, mandates, masks, Pew Research Center, public health, social distancing, vaccines

It looks like Americans are having second thoughts about how their government has responded to the CCP Virus pandemic, at least according to this new Pew Research Center survey. And that’s great news for those of us who have insisted that, once it became clear (awfully early on) that the pandemic wasn’t a rerun of the Black Death, the widespread lockdowns, mandates, and other indisciminate measures were cures that, on balance, were needlessly worse than the disease.

To be sure, Americans still feel pretty cautious about the pandemic and its effects. Principally, in May, 41 percent of U.S. adults told Pew that they viewed the virus as a “major threat to public health.” That’s down considerably from the spring of 2020, when the share describing the virus this way was in the mid-60s percent. But it’s still more than four in ten.

The public also still gives robust endorsements to many restrictions on behavior and anti-covid measures that have been strongly encouraged or required nationally or in various states at various times during the pandemic era. For example, 55 percent said that vaccination had been “extremely” or “very” “effective in limiting the spread of the coronavirus,” 49 percent agreed with his characterization of “wearing masks around other people indoors,” and 48 percent thought the same of “limiting activities/interactions with other people.” One exception: Only 34 percent put much stock in “staying at least six feet apart from other people indoors.”

But by an impressive 62 percent to 31 percent, respondents said that “the country’s COVID-19 response has given too little priority” to “meeting the educational needs of K-12 students.”. By 48 percent to 40 percent they felt that short shrift had been given to “supporting overall quality of life for the public.” By 46 percent to 40 percent they said not enough attention was paid to “supporting businesses and economic activity.” And by 46 percent to 30 percent they said that anti-virus strategies failed adequately to “respect individuals’ choices.”

Moreover, the public approval of the authorities most supportive of the virus-centric priorities has taken a major hit. In the spring of 2020, 79 percent agreed that “public health officials such as those at the CDC [U.S. Centers for Disease Control and Prevention]” had done “an excellent or good job responding to the coronavirus outbreak.” By this past May, this support had dropped to 52 percent. And since February, 2021 (shortly after his inauguration) the share of U.S. adults stating that President Biden’s response to the CCP Virus has been excellent or good fell from 54 percent to 43 percent. (Such approval for former President Trump’s virus responses sank as well – from 48 percent in March, 2020 to 36 percent in February, 2021. But no samplings about the Trump strategy have been taken since.)

Predictably, partisan splits appeared, and although no trends over time were presented, it was striking how many self-identified Democrats and ”Democratic leaners” expressed disenchantment with some priorities that have been pursued for most of the pandemic era. In particular, 57 percent of them agreed that “the educational needs of K-12 students have been neglected and 45 percent agreed that too little attention has been paid to “overall quality of life for the public.” At the same time, only 34 percent of Democrats and leaners felt that “businesses and other economic activity” should have received more support, and only 28 percent believe “respecting individuals’ choices” has deserved more emphasis. 

To me, the big takeaway is that Americans may finally be realizing that the tradeoffs between public health and other pressing needs were never adequately acknowledged by the nation’s lockdowns- and restrictions-obsessed public health establishment, or by the political leaders who uncritically followed their advice and failed to understand that balances needed to be struck.

Far from a position that’s “anti-science” or dismissive or the virus’s deadly properties and potential, it’s one that’s entirely consistent with that pressed by the legions of eminent epidemiologists, virologists, and other medical specialists who signed the Great Barrington Declaration. This manifesto urged viewing the public health dangers posed during the pandemic holistically, avoiding the wide-ranging and grave consequences of shutting down entire national economies and societies, and focusing virus-mitigation measures instead on those most vulnerable to serious disease and death.

Will the U.S. public health establishment display as much of the learning curve that the Pew poll indicates the public has demonstrated? Will the politicians whose policies overwhelmingly reflected their conventional wisdom? Those are questions whose answers had better be “Yes” if America is to cope with the next pandemic better than it handled this one.  

(What’s Left of) Our Economy: The U.S. Trade Deficit Falls Again — For the Wrong Reasons

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Advanced Technology Products, ATP, Canada, CCP Virus, China, coronavirus, currency, euro, Eurozone, exchange rates, exports, goods trade, imports, Japan, lockdowns, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, services trade, trade deficit, Vietnam, yen, zero covid policy, {What's Left of) Our Economy

As of this morning’s official data, May makes two straight months during which the total U.S. trade deficit has fallen. The last time that’s happened? The second half of 2019, and then, the shortfall dropped sequentially six consecutive times – between June and November.

Normally such declines would be good news. But of course, these times still aren’t normal thanks to the lingering effects of the CCP Virus and more recently to the Ukraine War. And indeed, back in 2019, this trade gap narrowing took place as economic growth was slowing moderately, but the post-financial crisis expansion was nonetheless continuing. The more recent improvement is likely coming, as often happens, while the economy likely has slipped into recession.

The new Census Bureau release shows that right after it tumbled sequentially in April by a whopping 19.47 percent (a little more than first reported), the combined goods and services trade deficit shrank by another 1.32 percent in May, from $86.69 billion to $85.55 billion. For good measure, this shortfall was the lowest since December’s $78.87 billion.

The gap narrowed because exports advanced respectably and imports rose more sluggishly – a bit of encouraging news, especially considering the dollar’s recent strength (which by itself boosts the prices of U.S. goods and services both at home and abroad versus the foreign competition), and the many weak and/or weakening economies overseas (which increases the pressure they feel to grow by exporting to stronger and/or more open economies).

Even so, combined goods and services exports climbed by 1.20 percent on month in May, from an upwardly revised $252.85 billion to $255.89 billion – their fourth straight monthly record.

Overall imports, however, grew by just 0.56 percent – from a downwardly revised $339.54 billion to $341.44 billion.

The goods trade deficit sank by 2.65 percent sequentially in May, from an upwardly revised $107.82 billion to $104.96 billion – which, as with the overall trade gap was the best monthly level since December ($100.52 billion).

Unfortunately, in May the big services trade surplus that the United States has run for so long dropped sequentially for the first time in three months – and by 8.52 percent, from an upwardly revised $21.13 billion to $19.41 billion.

Goods exports were up 1.71 percent month to month in May, from a downwardly revised $176.02 billion to fourth straight all-time high of $179.03 billion.

Services exports rose, too, and to their second straight all-time high. But the increase was only 0.05 percent, from an upwardly revised $76.52 billion to $76.83 billion.

Goods imports also increased on month in May by just 0.05 percent, from $283.84 billion to $283.99 billion.

But services imports in May grew much faster – by 3.15 percent, from a downwardly revised $55.70 billion to a fourth straight monthly record of $57.46 billion.

The non-oil goods trade deficit is known to RealityChek regulars as the Made in Washington trade deficit, because by stripping out figures for oil (which trade diplomacy usually ignores) and services (where liberalization efforts have barely begun), it stems from those U.S. trade flows that have been heavily influenced by trade policy decisions.

In May, this shortfall was down 3.43 percent sequentially, from an upwardly revised $108.47 billion to $104.68 billion. That’s the lowest monthly total since February’s $103.29 billion.

No such luck with America’s enormous and persistent manufacturing trade deficit. It rose month to month in May by 6.58 percent, from $124.41 billion to a $132.60 billion level that was the second worst of all-time after March’s $142.22 billion.

U.S. exports of manufactures increased sequentially in May by 2.55 percent. And the new $112.15 billion in such sales was their second best ever, after March’s $113.96 billion.

But the much greater amount of manufacturing imports jumped by 4.82 percent, to $244.75 billion – another second best ever (after March’s $256.18 billion).

On a year-to-date basis, the manufacturing deficit is running 24.07 percent ahead of last year’s total, ($504.94 billion to $626.48 billion) which almost guarantees that this shortfall will hit its eleventh straight all-time high, in the process topping last year’s $1.3298 trillion.

Manufactures exports year-to-date have risen by 15.87 percent, but imports have surged by 20.01 percent.

The trade deficit in Advanced Technology Products (ATP) worsened in May as well, advancing 11.94 percent on month to $20.48 billion. ATP exports dipped by 0.71 percent, but imports were up by 3.94 percent.

Given the prominence of both manufactures and Advanced Technology Products in U.S.-China trade, it’s no surprise that as their global trade gaps widened in May, so did the U.S. goods deficit with the People’s Republic. Also at work on all these fronts: the partial easing of the Zero Covid policy-induced lockdowns that halted so much economic activity in China this spring.

The China goods shortfall rose by 3.18 percent, from $30.57 billion to $31.54 billion. And in a continuing departure from a recent pattern, this growth contrasted with the aforementioned 3.43 percent drop in the non-oil goods deficit that’s its closest global proxy.

For most of the time since the Trump tariffs on China started being imposed in 2018, the goods deficit with the People’s Republic actually had been falling while that Made in Washington gap kept growing, suggesting that the former President’s ongoing trade curbs had been achieving a major stated goal. On a year-to-date basis, the China deficit is still up slightly less (26.23 percent) than the Made in Washington deficit (27.56 percent). But clearly the difference between the two is shrinking.

One entirely possible reason is that China has devalued its controlled currency versus the dollar by 5.45 percent since the end of last year – which of course cheapens the price of Made in China products for reasons having nothing to do with free trade or market forces, and which suggests that rather than thinking about cutting or eliminating tariffs on these products, President Biden should be mulling some increases.

For May, U.S. goods exports to China improved sequentially by 9.99 percent, from $11.20 billion to $12.32 billion, while imports grew by 5.01 percent, from $41.77 billion to $43.86 billion.

In other May developments with major U.S. trade partners:

>The U.S. goods deficit with Canada soared by 35.84 percent on month, from $7.25 billion to $9.84 billion. That total was the second biggest ever after the $9.88 billion recorded back in July, 2008;

>A new record was set by the goods gap with Vietnam, and in fact, May’s $10.66 billion figure was the third new all-time high in the last three months and the fourth this year. These results largely reflect Vietnam’s mounting attractiveness versus China as a destination for export-focused foreign investment – in part due to the Trump tariffs and in part due to all the worsening difficulties of doing business in China;

>The goods deficit with the eurozone was up 8.08 percent, and worse is likely to come as the single currency keeps weakening versus the dollar and Europe, too, seems heading into or is already mired in a new recession;

>But despite the continuing weakening of the yen, the goods deficit with Japan fell by 6.86 percent. The ongoing global semiconductor shortage still plaguing the auto industry in particular looks like a big culprit here.

Im-Politic: Will the Pandemic’s Real Lessons Ever Be Learned?

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CCP Virus, coronavirus, COVID 19, facemasks, Great Barrington Declaration, Im-Politic, lockdowns, Mainstream Media, mandates, natural immunity, The New York Times, vaccines

Give The New York Times some credit here. On the one hand, its big, graphics-rich feature marking the grim news that about a million Americans have been killed by the CCP Virus has pinpointed a highly specific group of culprits for this towering toll, and an equally specific group of measures that could have held it way down (although it’s never indicated by how much).

Among the worst: “elected officials who played down the threat posed by the coronavirus and resisted safety measures” and “lower vaccination and booster rates than other rich countries, partly the result of widespread mistrust and resistance fanned by right-wing media and politicians.”

So clearly, the authors insist, mask-wearing and lockdowns and social distancing should have been imposed much faster and more widely (without stating for how long), and more vaccinations required.

On the other hand, the reader is presented with abundant evidence that the benefits of such measures might have been limited – which is especially striking since not even a hint is provided that such steps might have inflicted considerable damage in their own right – including from other threats to public health that have been neglected.

Most strikingly, consistent with its observation that “The virus did not claim lives evenly, or randomly.” the piece reminds that in fact, the worst damage was remarkably concentrated in a single group. Specifically, “Three quarters of those who have died of Covid have been 65 or older.” Moreover, of that cohort, a third were 85 and over.

And then there was the related nursing homes disaster. According to the Times piece, a fifth of the roughly million CCP Virus-induced deaths in America occurred among residents and staff of these facilities.

Why longer and more sweeping lockdowns and the like would have reduced the virus’ damage to the nation as a whole, considering all the economic, educational, and health harm they produced for the vast majority of Americans who were far less vulnerable, is never explained.

The article’s case for vaccine mandates is similarly muddled. It repeats the widespread claims that most of those who died from the virus after vaccines became widely available were unvaxxed, and that “vaccinated people have had a much lower death rate — unvaccinated people have been at least nine times as likely to die since April 2021 [when the eligibility for the doses became universally available].”

At the same time, readers learn that:

>“at least 50,000 vaccinated people, many of them older or without booster shots, were among the deaths reported since late April 2021….”; and that

>”People 80 and older who had gotten shots were almost twice as likely to die at the height of the Omicron wave as those in their 50s or early 60s who had not, according to C.D.C. [U.S. Centers for Disease Control and Prevention] data.”

Further, the article makes clear that, even forgetting about the decisive role played by age, claims about vaccine effectiveness are substantially exaggerated. Despite presenting the common contention that “unvaccinated people have been at least nine times as likely to die since April 2021,” the chart presented to support this point shows that this ratio has held for only part of the period duing which vaccines have become widely available. The chart also that the gap has almost disappeared today.

In addition, the piece reports that “The C.D.C. has received data on deaths by vaccination status from only about half of the states….” As the authors explain, this data shortage makes it “impossible to know exactly how many vaccinated people are among the million who have died.”

Conversely, this data shortage – along with thoroughgoing ignorance about how many Americans have enjoyed natural immunity from the virus and therefore passed up the jabs, and how many who caught Covid asymptomatically and made similar decisions – also prevents figuring out what share of unvaccinated Americans died of the virus.

But because both numbers are doubtless both enormous, this percentage is doubtless much smaller than commonly supposed.  The Times authors (and their editors, who it should always be remembered greenlight every article’s journalistic methodology) might have adjusted their judgements, and recognized that alternative pandemic mitigation approaches — including those that took into account the difficult tradeoffs that needed to be made — have long been recommended, had they bothered to consult any of the impressively credentialed specialists who have been making these points. 

Yet they seemed as determined to ignore or marginalize their views as the official U.S. medical establishment has been.  As long as both America’s healthcare leaders and its Mainstream Media so doggedly oppose full debate on the real lessons taught by the pandemic, it’s hard to imagine that the nation will be prepared for the (inevitable) arrival of the next deadly pathogen. 

Following Up: Podcast Now On-Line of National Radio Interview on Ukraine War, Manufacturing, & Reshoring

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CBS Eye on the World with John Batchelor, China, Following Up, globalization, Gordon G. Chang, IMF, International Monetary Fund, lockdowns, logistics, manufacturing, reshoring, supply chains, Trade, transportation, Ukraine, Ukraine-Russia war, Zero Covid

I’m pleased to announce that the podcast of my interview Wednesday night on the nationally syndicated “CBS Eye on the World” with John Batchelor is now on-line.

Click here for a timely discussion (with co-host Gordon G. Chang, too) on how U.S. domestic manufacturing is coping with the Ukraine war and other global supply chain snags – including a possible scenario John brings up that clearly throws me for a loop.  We also comment on a new report from the International Monetary Fund questioning whether reshoring industry back to the United States makes sense in the first place. 

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

 

(What’s Left of) Our Economy: No More Baseline Excuses for U.S. Inflation

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baseline effect, CCP Virus, China, consumer price index, core inflation, coronavirus, cost of living, COVID 19, CPI, energy, Federal Reserve, food, inflation, lockdowns, prices, sanctions, supply chains, Ukraine-Russia war, Zero Covid, {What's Left of) Our Economy

As if the new monthly and yearly numbers for March per se weren’t high enough, they were far from the only bad news, or even the worst news, in today’s Labor Department report on its inflation measure – the Consumer Price Index or CPI.

The new data also made clear that the baseline effect is definitely gone — especially for the overall CPI — which means that prices in America are no longer rising at annual rates not seen in decades partly because they were rising so slowly in the pandemic period 2020 and very early 2021.

Now their year-on-year jumps are resulting from their more recent and current momentum. And with much more in the way of surging food and energy costs coming in the next few months due to Ukraine war-related global supply disruptions and anti-Russia sanctions, that means Americans will be contending with sky-high and even hotter inflation rates for the foreseeable future.

The rise and fall of the baseline effect becomes clearest from looking at the annual overall inflation rates by month starting in January, 2021, and comparing them with their counterparts from the year before. (Starting with the January, 2022 figures, the baseline year of course is 2021.)

The admittedly complicated table below shows (from left to right) the originally reported annual inflation figures by month for this period, the revised results, and the same annual figure for that month from the previous, CCP Virus-ridden year. Where only one inflation rate is presented, the original figure has remained unrevised:

Jan. 2021:       from 1.37 percent to 1.36       from 2.47 percent to 2.46

Feb: 2021:      1.68 percent                            from 2.31 percent to 2.32

March 2021:  from 2.64 percent to 2.66        from 1.51 percent to 1.53

April 2021:    from 4.16 percent to 4.15        from 0.34 percent to 0.36

May 2021:     from 4.93 percent to 4.94        from 0.22 percent to 0.24

June 2021:     from 5.32 percent to 5.34        0.73 percent

July 2021:      5.28 percent                            from 1.05 percent to 1.03

Aug 2021:     from 5.20 percent to 5.21        from 1.32 percent to 1.33

Sept 2021:     from 5.38 percent to 5.39        from 1.41 percent to 1.40

Oct 2021:      6.24 percent                             from 1.19 percent to 1.18

Nov 2021:     from 6.88 percent to 6.83        1.14 percent

Dec 2021:     from 7.12 percent to 7.10        from 1.31 percent to 1.28

Jan 2022:      7.53 percent                             from 1.37 percent to 1.36

Feb 2022:     7.91 percent                             1.68 percent

March 2022: 8.56 percent                            from 2.64 percent to 2.66

The baseline effect was strongest between March and July, 2021. That year, the annual overall (or “headline”) inflation rate went from 2.64 percent to 5.28 percent. But the annual rates for those months the year before dropped from 1.51 percent to 1.05 percent. Given that the Federal Reserve’s target rate for annual inflation (which helps determine how loose or tight it will keep the supply of credit to the economy and therefore – roughly – how much growth and job creation will be generated) is two percent (albeit for the slightly different gauge it uses), you can see how weakly prices were rising in deeply recessionary spring of 2020, and how those levels distorted the annual rates for the following year, as the economy returned — choppily — to normal growth. 

But a major baseline effect also shows up between September, 2021 at least through January, 2022. During that period, the annual inflation rates rose fom 5.38 percent to 7.53 percent. Yet their counterparts from the year before dipped from a still low 1.40 percent to 1.36 percent.

Starting in February, 2022, though, signs of a baseline fade began appearing, as the that month’s annual rate increased considerably over the January figure and its 2021 predecessor worsened to its highest level since the previous February – not so coincidentally, just before the virus’ arrival in force.

And last month’s big jump in the annual inflation rate came off a March, 2021 result that was significantly higher than the Fed target, and that also pierced that level for the first time since February, 2020.

The core inflation rate, which strips out food and energy because their price levels are supposed to be unusually volatile for reasons having little to do with the economy’s underlying vulnerability to inflation, shows a similar pattern, but with a recent wrinkle. The table below follows the same format as that for overall inflation, although as you’ll see, the absolute levels generally are somewhat lower.

Jan 2021:        from 1.40 percent to 1.39        2.26 percent

Feb 2021:       from 1.28 percent to 1.29        from 2.36 percent to 2.38

March 2021:  from 1.65 percent to 1.66        from 2.10 percent to 2.12

April 2021     from 2.96 percent to 2.97        from 1.44 percent to 1.46

May 2021:     from 3.80 percent to 3.81        from 1.24 percent to 1.25

June 2021:     4.45 percent                             1.20 percent

July 2021:      from 4.24 percent to 4.20        from 1.56 percent to 1.54

Aug 2021:      from 3.98 percent to 3.96        from 1.70 percent to 1.71

Sept 2021:      4.04 percent                            1.72 percent

Oct 2021:       from 4.58 percent to 4.59       1.63 percent

Nov 2021:      from 4.96 percent to 4.95       from 1.63 percent to 1.64

Dec 2021:      from 5.49 percent to 5.48       from 1.61 percent to 1.60

Jan 2022:       6.04 percent                            1.39 percent

Feb 2022:      6.42 percent                            1.29 percent

March 2022:  6.44 percent                            1.66 percent

Again, from March through July, 2021, the annual core inflation rate increased from 1.66 percent to 4.20 percent. But the comparable figures for the year before decreased for 2.12 percent to 1.54 percent. Also as with the headline inflation numbers, the baseline effect appeared later in the year, too. But it’s lasted longer. From September, 2021 through February, 2022, the yearly core inflation rate accelerated from 4.04 percent to 6.42 percent. For the same period from the year before, however, it sank from 1.72 percent to 1.29 percent.

Yet the new March, 2022 data indicate that the core’s baseline effects are numbered, as annual inflation inched up to a still very high 6.42 percent, but March, 2021’s version rose at a much faster clip – from that 1.29 percent to 1.66 percent. Yes, that’s still well below the Fed target, but the increase was the biggest in relative terms since July, and April, 2021’s annual rate had zoomed up to 2.96 percent – nearly doubling.

A glass-half-full result from the new CPI report came from the monthly change in the core figure. Not only did it tumble all the way from 0.51 percent in February to 0.32 percent. But the sequential decrease was the second straight, and the biggest in relative terms during the entire pandemic period and the level was the lowest for a single month since August’s 0.24 percent.

Unfortunately, Ukraine-related disruptions seem likely to reverse this trend, and this regression could well be reinforced by supply chain snags generated by China’s decision to lock down several enormous cities and industrial centers by responding to a recent rebound in CCP Virus cases with a return to its Zero Covid policies.

Moreover, since energy prices in particular eventually feed into price levels for every U.S. economic actor that uses energy, the headline-core inflation distinction will surely look more academic than ever in the months ahead.

Meanwhile, the red hot monthly headline CPI increase of 1.24 percent in March was the biggest such jump since 2005, and a huge speed-up over February’s 0.80 percent. For me, the big takeaway is that the U.S. economy now clearly faces a danger not only of the Federal Reserve creating a recession by tightening monetary policy enough to bring inflation under the control, but of such tightening producing that recession while still leaving inflation far too high.

(What’s Left of) Our Economy: U.S. Manufacturing Employment Powers Through Ukraine Jitters, Too

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aerospace, aircraft, aircraft engines, aircraft parts, appliances, automotive, CCP Virus, chemicals, China, coronavirus, COVID 19, electrical equipment, Employment, Federal Reserve, inflation, interest rates, Jobs, lockdowns, machinery, medicines, metals, monetary policy, non-farm employment, non-farm jobs, personal protective equipment, pharmaceuticals, PPE, recession, Russia, semiconductor shortage, semiconductors, supply chains, surgical equipment, tariffs, transportation equipment, Ukraine-Russia war, vaccines, Wuhan virus, {What's Left of) Our Economy

The Ukraine war looks like the latest disastrous development that’s failed to stop the impressive growth in U.S. domestic manufacturing employment – just as has been the case recently with the Omicron variant of the CCP Virus and surging inflation. And let’s not forget that the Federal Reserve has begun raising interest rates and signaled that steeper hikes are on the way – steps of course designed to cool off the economy, including the demand for manufactured goods.

U.S.-based industry added a strong 38,000 net new jobs on month in March, according to this morning’s monthly employment report from the Labor Department, and revisions were positive. February’s initially reported 36,000 sequential improvement was upgraded to 38,000, and January’s already upwardly revised 16,000 advance is now judged to have been 26,000.

In fact, domestic industry slightly outperformed the rest of the non-farm economy (the Labor Department’s definition of the U.S. jobs universe) job-wise in March, with its share of non-farm employment inching up from 8.38 percent to 8.39 percent. These results, moreover, show that manufacturing jobs have grown a bit faster than the overall economy’s throughout the pandemic period. In February, 2020, the last data month before the virus and related lockdowns and behavioral curbs began roiling and distorting the economy, manufacturing accounted for 8.38 percent of total non-farm jobs.

The comparison with the private sector isn’t quite as impressive, but satisfactory all the same. Manufacturing’s share of those jobs as of March was 9.83 percent – exactly the same as it was in February, 2020. And some context is essential here: U.S. manufacturing payrolls have held their own and then some even though the massive, sweeping Trump tariffs on imports from China – which were supposed to cripple domestic industry – are still almost entirely in place, as are many of the former president’s tariffs and other trade curbs on metals.

From another vantage point, manufacturing has now replaced 1.244 million (90.60 percent) of the 1.362 million jobs it shed in March and April, 2020 – the peak of the CCP Virus’ first wave.

That trails the 92.82 percent of non-farm workers and 95.46 percent of private sector workers hired back during this period. But the gap isn’t big at all, and manufacturers shrunk their headcounts proportionately less than the rest of the economy during that horrendous spring of 2020. So they didn’t have as much ground to make up.

February’s biggest manufacturing jobs winners among the major sectors tracked by the Labor Department were:

>transport equipment, where payrolls in March advances by 10,800 – their best such performance since last August’s 19,000. At the same time, this increase followed a 19,800 February jobs plunge that was the sector’s worst such performance since the automotive sub-sector’s semiconductor shortage woes led to a nosedive of 48,100 in April, 2021. All this volatility left this sector’s employment levels 4.05 percent below those in that final pre-pandemic data month of Februay, 2020 – versus the one percent decrease since then by manufacturing overall;

>chemicals, whose 7,200 monthly jobs jump was its best ever (or at least since figures began being tracked in 1990). The previous all-time high was the 6,600 gain of January, 2021. This huge industry’s headcount is now up 4.49 percent since February, 2020;

>electrical equipment and appliances, where employment rose sequentially by 3,800 for its strongest increase since March, 2021’s 4,200. Jobs-wise, these industries are now 2.82 percent larger than in Febuary, 2020;

>and automotive. This industry, a sub-sector of transportation equipment, boosted employment by 6,400 in March, the most in a month since last October’s 34,200 burst. But underscoring the volatility among vehicle and parts makers, This March increase followed a 16,000 drop-off in February that was the biggest decrease since the 49,100 jobs lost in April, 2021. These ups and downs still have left automotive employment 1.32 percent their February, 2020 levels.

Machinery’s 1,700 monthly jobs gain in March wasn’t exceptional by the above standards. But RealityChek regulars know it’s of special importance because its products are so widely used throughout manufacturing and the rest of the economy. And in a somewhat discouraging development, this sector’s initially reported 8,300 jobs growth was revised down to 6,600. And its payrolls are still 2.89 percent smaller than in February, 2020.

The only significant jobs loser in March was non-metallic mineral products, where employment sank by 4,500 on month. That was the sector’s worst such perforance since last May’s 5,300 decline, but the March downturn snapped a string of good gains for these companies, and their workforces are 2.81 percent above their February, 2020 levels.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and as with the rest of domestic industry for February, their employment picture showed improvement overall.

In that shortages-plagued semiconductor and related devices sector, employment dipped by 100 on month, but January’s initially reported 200 increase was revised up to 300– its best such performance since October’s 1,000 advance. Since February, 2020, its headcount has climbed by only 0.86 percent, but these companies actually added jobs during the very steep CCP Virus-induced recession of spring, 2020.

Surgical appliances and supplies makers – whose products include personal protective equipment and similar medical goods – boosted employment by 800 in February. January’s initially reported 1,700 jobs increase was downgraded to 1,300, and December’s results were unrevised at 1,100. These health security-related companies have expanded their workforces by 3.79 percent since February, 2020.

The employment news was particularly good in the very big pharmaceuticals and medicines industry. Its February monthly employment increase of 1,300 was the best since September’s 1,600, and January’s initially reported dip of 100 now stands as an increase of 1,100. December’s downwardly revised 900 jobs gain remained the same, and these companies have now increased their employee numbers by 9.04 percent since February, 2020.

The medicines subsector containing vaccines didn’t perform nearly as robustly in February, but still grew jobs by 800. January’s initially reported 500 employment increase and December’s downwardly revised 2,000 expansion remained the same. The vaccine industry workforce is now 23.05 percent larger than in February, 2020.

The aviation cluster enjoyed a good hiring month in February, too. Jobs in the aircaft industry, dominated by Boeing and companies in its supply chain, rose by 500 – the best since the identical total in November. January’s initially reported downturn of 800 and December’s decrease of 400 remained unrevised. Aircraft employment is still off by 11.57 percent since February, 2020.

Makers of aircraft engines and engine parts expanded their workforces by 900 during February, and although January’s initially reported hiring figures were downgraded, the estimate went only from 1,000 to 900. December’s upwardly revised employment increase of 700 was unrevised, all of which helped these companies bring their payrolls to within 13.20 percent of their February, 2020 levels.

Jobs prospects in the deeply depressed non-engine aircraft parts and equipment sector keep looking up, too. Employment improved by 200 in February, and January’s initially reported job growth of 500 was revised all the way up to 1,500. December’s jobs losses stayed at 900, and although these industries’ headcounts are still 16.35 percent below February, 2020’s, that’s better than the 17.30 percent shortfall calculable last month.

Continuing headwinds are still imaginable for domestic manufacturing – like a dramatic escalation of the fighting in Ukraine (which could greatly heat up inflationary pressures and foster even greater Federal Reserve efforts to slow economic growth); a new CCP Virus variant that’s not only more infectious but more deadly; and more big China lockdowns that could further screw up global supply chains. But given the recent actual record, it’s even easier to imagine manufacturing employment continuing to improve.

(What’s Left of) Our Economy: At Least Pre-Ukraine, U.S. Manufacturing’s Solid Growth Continued

Tags

aerospace, aircraft, aircraft parts, automotive, Boeing, CCP Virus, coronavirus, COVID 19, Federal Reserve, interest rates, lockdowns, mandates, manufacturing, manufacturing production, medical devices, monetary policy, pharmaceuticals, real output, semiconductor shortage, semiconductors, Ukraine, Ukraine invasion, Ukraine-Russia war, {What's Left of) Our Economy

This morning’s Federal Reserve report on U.S. domestic manufacturing production (for February) was especially interesting for three reasons. First, it showed that the output of America-based factories rose month-on-month in inflation-adjusted terms by 1.20 percent. That was the best such performance since October’s 1.71 percent, and although it covers the period just before whatever Ukraine war-related disruption is going to hit the U.S. economy, it also contrasts with most (sluggish) estimates of overall American growth for the first quarter of this year. Manufacturing production revisions, moreover, were only slightly negative.

Second, since February, 2020 was the final data month before the CCP Virus and related lockdowns and voluntary behavioral changes started roiling and distorting the economy, it’s noteworthy that exactly two data years later, manufacturing output has grown by a real 3.37 percent. (As of last month’s Fed release, this figure was 2.49 percent.)

Third, these results hardly mean that domestic industry is in top shape, at least not historically speaking. For in inflation-adjusted production terms, it’s still 3.88 percent smaller than at its all-time peak – reached in December, 2007, just before the economy plunged into the Great Recession prompted by the global financial crisis.

February’s biggest monthly manufacturing production winners were:

>non-metallic mineral products, whose 3.46 percent monthly real expansion was its best since the 4.34 percent achieved in June, 2020 – during the rapid economy-wide recovery from the first wave of the virus and resulting activity curbs and dropoffs. This latest sequential increase brought output in the sector to 4.36 above its February, 2020 levels;

>the broad aerospace and miscellaneous transportation equipment industry, which increased after-inflation output in February by 3.22 percent. That rise was its best since July, 2021’s 4.21 percent, and the sector is now fully 16.90 percent bigger production-wise than in February. 2020;

>the small apparel and leather goods industries, which improved its constant dollar output on month by 2.96 percent, for its best sequential gain since January, 2021’s 3.31 percent. This industry’s production – which shrank greatly for decades due to low-cost foreign competition – is now up by just 1.85 percent since February. 2020; and

>wood products, where price-adjusted output expanded sequentially by 2.58 percent – the most since March, 2021’s 4.05 percent. In real terms, wood products production is now 6.28 percent greater than in February, 2020.

RealityChek regulars know that the broad machinery sector is a key barometer of national economic health generally speaking, since its products are used by so many manufacturing and non-manufacturing industries. So it’s good news that its sequential inflation-adjusted output advanced by a solid 0.78 percent in February, and even better news that January’s results were revised up from 1.08 percent to 1.83 percent – its best such perfomance since July. The machinery industry’s real output is now a strong 7.62 percent greater than in Febuary, 2020.

Of all the biggest manufacturing sub-sectors tracked by the Fed, only two suffered after-inflation monthly downturns in February:

>The automotive industry continued suffering from the global semiconductor shortage, with its constant dollar output sinking by 3.55 percent sequentially in February – its worst monthly performance since September, 2021’s 6.32 percent plunge. Price-adjusted production of vehicles and parts is now fully 10.68 below Febuary, 2020’s levels; and

>miscellaneous non-durable goods. Its real month-on-month output dipped by 0.36 percent in February, but since February, 2020, it’s off by 16.00 percent.

Industries that consistently have made headlines during the pandemic generally enjoyed February’s at least as strong as manufacturing overall.

Likely stemming from the widening flow of long overdue news from industry giant Boeing (see, e.g., here), aircraft- and parts-makers grew their after-inflation output in Febuary by 2.52 percent over Jauuary’s figure – their strongest such showing since August’s 3.44 percent. That January figure was revised down from 1.37 percent sequential growth to a still impressive 1.21 percent, and December’s upgraded 0.38 percent monthly dip is now judged to be a 0.62 percent decline. But after-inflation output for these companies is now up 16.35 percent since February, 2020 – up from the 13.14 percent calculable from last month’s Fed report.

The combination of a solid February and negative revisions also marked the big pharmaceuticals and medicines sector. February’s 1.08 percent price-adjusted monthly output gain was the industry’s best since August’s 2.39 percent. But January’s initially reported 0.27 percent sequential uptick is now pegged as a 0.14 percent decrease, and December’s upwardly revised 0.81 percent rise is now judged to be a 0.10 percent drop. Even so, total real pharmaceutical and medicines production is 14.91 percent higher than in February, 2020 – up from the 13.42 percent calculable last month.

Much better February results were turned in by the medical equipment and supplies sector. Monthly production improved by 1.39 percent – the best such result since the 10.78 percent reported in July, 2020, early during the recovery from the first pandemic wave.

And revisions were positively eye-popping. January’s initially reported 2.50 percent monthly real output rise is now judged to have been 3.26 percent, and December’s first estimate of a 2.75 percent after-inflation fall-off is now estimated at just a 0.37 percent decline. All told, this grouping is now 8.44 percent bigger real growth-wise than in February, 2020 – as opposed to the 4.43 percent increase calculable last month.

Those semiconductors in such short supply were more abundant after February’s price-adjusted sequential production increase of 1.96 percent that was the best such performance since May’s 2.61 percent growth. January’s previously reported fractional decline is now pegged at a 0.37 percent decrease, but December’s 0.52 percent rise is now estimated at 0.88 percent. Consequently, these industries’ real output is now up 21.97 percent since February, 2020, as opposed to the 20.66 percent calculable last month.

The economic fall-out of the Ukraine war won’t start being reflected in the Fed manufacturing production reports until next month, but it looks virtually certain that it will either keep inflation (and therefore manufacturers’ input costs) high or push it higher. A bigger wild card could be the Fed itself. The central bank yesterday did keep its quasi-promise to start increasing the federal funds rate, but the hike was only 0.25 percent. And though more increases supposedly are scheduled, they’re far from certain if overall growth weakens markedly (as the Fed itself has forecast). New, more dangerous CCP Virus variants can always emerge. But national rates of vaccination and natural immunity seem high enough – and the public fed up enough with restrictive mandates – to keep supporting growth all else equal for the foreseeable future.

So unless the fortunes of manufacturing and the broader economy diverge sharply, it looks like domestic industry’s steady-for-the-most-part expansion since the depths of spring, 2020 will remain on course.

(What’s Left of) Our Economy: Americans’ Real Wages Keep Sinking

Tags

CCP Virus, China, consumer price index, coronavirus, cost of living, COVID 19, CPI, energy, food, inflation, inflation-adjusted wages, living costs, lockdowns, private sector, real wages, Russia, sanctions, supply chains, Ukraine, Ukraine invasion, Ukraine-Russia war, wages, Wuhan virus, zero covid policy, {What's Left of) Our Economy

Last Thursday’s news coverage of U.S. inflation rates (as measured by the Labor Department’s Consumer Price Index, or CPI) rightly emphasized that the February headline figure hit its highest annual rate in 40 years. What such reports seem to have missed is something at least as important, especially for understanding why the American public seems so angry about these price hikes despite lots of other strong economic indicators.

Specifically, the same day the Labor Department released the new CPI numbers, it also posted data showing that after adjusting for inflation, wages for many major categories of U.S. workers saw their greatest drops in several months and in some cases longer than that. And much of the news was especially bad in manufacturing.

To start with the broadest grouping, in February, hourly pay for the average private sector worker fell on month by 0.80 percent, the worst such performance since the 1.72 percent decrease in June, 2020, early during the recovery from the CCP Virus’ first wave. (As known by RealityChek regulars, the Labor Department doesn’t track wages for government workers because those pay levels are mainly set by politicians’ decisions, and therefore say little about the fundamental state of the nation’s labor market or broader economy.)

For private sector production and nonsupervisory workers (who are often called blue-collar workers), the 0.86 real wage decline they experienced was also the worst since June, 2020 (1.30 percent).

On an annual basis, after-inflation wages in February sank for all private sector workers by 2.63 percent – the fastest pace since last May’s 2.67 percent. And for the blue-collar subset, they’re off by 1.93 percent – also the most since last May (2.69 percent).

Throughout manufacturing, these inflation-adjusted wages took major hits, too. For all workers in the sector, such pay dropped by 1.29 percent between January and February – the biggest falloff since May, 2020’s 1.76 percent. For industry’s blue-collar employees, they tumbled by 0.57 percent – the steepest since June, 2020’s 1.31 percent.

Much worse for manufacturing wages were the February year-on-year results. For manufacturing as a whole, they were down in after-inflation terms by 3.43 percent – the greatest decline since April, 2021’s 3.85 percent.

But the real stunner came for the production and nonsupervisory group. The 3.41 percent annual retreat in their real wages was the worst in more than 41 years – going back to July, 1980’s 3.90 percent.

And especially discouraging – with further price hikes in energy (and all the products and services that depend on it) and food seemingly certain because Russia’s invasion of Ukraine has disrupted global markets and supply chains anew, inflation-adjusted wages also seem likely to keep falling. The news that China has just locked down two big industrial cities in an attempt to fight a CCP Virus surge with its Zero Covid policy won’t help, either.

It’s true, as President Biden and his supporters keep noting, that growth is still strong, and that unemployment is way down.  But the former understandably can seem abstract, and high inflation means that even recent job gainers can’t be faulted for feeling that they’re falling behind economically despite paychecks resuming.  

 

(What’s Left of) Our Economy: #PutinPriceHike? Not Even Close – Yet

Tags

baseline effect, Biden administration, CCP Virus, coronvirus, COVID 19, energy, fossil fuels, gasoline, inflation, lockdowns, oil, Putin, sanctions, stay-at-home, Ukraine invasion, Ukraine-Russia war, Wuhan virus, {What's Left of) Our Economy

According to the Biden administration, it’s the #PutinPriceHike. That is, don’t blame anything Washington has or hasn’t done for the the bulk of the high gasoline prices Americans have been paying lately. Instead, blame Russian dictator Vladimir Putin, his aggression against Ukraine, and the global oil market turmoil it’s triggered.

The trouble is, if you look at these prices in a comprehensive, statistically legitimate way, scapegoating Putin in this case isn’t justified yet. But the same methodology shows that Mr. Biden and his aides are off the hook, too – at least until recently.

Critics (see, e.g., here) have countered the Biden claims by noting that strong U.S. gasoline inflation predates the Ukraine war and even Russian military buildup by many months, and they’re right. As known by RealityChek readers, however, that’s far from the whole story. In particular, they’re ignoring the impact on gasoline and other prices of the ongoing aftermath of the CCP Virus pandemic, the brief but sharp recession created by the disease and related lockdowns and voluntary behavioral changes, and ongoing stop-start U.S. economy that’s still resulting.

In other words, they’re ignoring the “baseline effect” caused by the economic shocks of the 2020 pandemic year in particular. These drove economic activity down to such low levels, and kept it there so long, that any major return to normal (and therefore normal prices) is going to produce unusually lofty inflation stemming from a catch-up effect. Therefore, it won’t be possible to determine the role of other contributors to inflation in gasoline or any other goods and services until this baseline effect fades significantly and finally disappears. And therefore, scapegoating Biden for soaring gasoline prices pre-Ukraine buildup isn’t justified, either.

RealityChek reported yesterday that the latest official U.S. figures show that the baseline effect has ended for headline inflation, and looks on the way out for core inflation (which strips out food and energy price. And roughly the same is true for gasoline prices.

The table below shows their monthly year-on-year percentage changes for last year (2020-21) in the middle column and for pandemic-dominated 2019-2020 (in the righthand colum). The numbers begin in March because March, 2020 was the first month in which the virus began significantly affecting the economy.

Gasoline price annual percentage changes      2020-21             2019-20

March:                                                               22.58                 -10.05

April:                                                                 49.68                 -32.03

May:                                                                  56.51                 -33.67

June:                                                                  45.42                 -23.41

July:                                                                   41.93                -20.12

Aug.:                                                                  42.76                -16.67

Sept.:                                                                  41.93                -15.43

Oct.:                                                                   49.52                -18.15

As is evident, starting in March, 2020, gasoline prices began nosediving from their levels of 2019, and steep annual drops continued (though at a slower pace) through October. It’s easy to understand why. The combination of lockdowns and stay-at-home behavior caused automotive travel to crater, and national demand for gasoline naturally plummeted as well. Further, that’s clearly a big part of the reason why during the following March-October period, gasoline prices prices skyrocketed on the same annual basis. They were returning to normal from an artificially low base. And as a result, it’s wrong to blame the Biden administration exclusively or even mainly for this hot gasoline inflation.

From that point, however, the Blame Biden case gets stronger. The above table stops in October, 2021 because November was when the Putin military buildup began – and according to the Biden argument, gasoline prices really began taking off. What happened to annual gasoline prices increases from then until the end of  2021, and how strong was the baseline effect? Here are the numbers for November and December, with the 2020-21 annual increases in the middle column and the 2019-20 increases in the righthand column:

Gasoline price annual percentage changes      2020-21             2019-20

Nov.:                                                                  57.76                 -19.53

Dec.:                                                                  49.34                 -15.34

The strong 2020-21 yearly price increases continued for these two months. But the baseline effect (from the big 2019-20 price drops) weakened. In fact, the December, 2019-20 annual 15.34 percent annual gasoline price decline was the smallest such figure since March, 2019-20’s 10.05 percent. And the annual increase for the following March (22.58 percent) was less than half December’s 49.34 percent.

What about this January and February? For these months, of course, the comparison years are 2021-22 (whose increases are presented in the middle column) and 2020-21 (in the right hand column).

Gasoline price annual percentage changes      2020-21             2019-20

Jan.:                                                                   40.02                  -8.90

Feb.:                                                                   38.01                   5.42

So the story for the first two months of this year – between the start of Putin’s buildup and the (late February) invasion – is that annual increases slowed, but the baseline effect vanished much faster. Indeed, between February, 2020 and February, 2021, gasoline prices actually rose. So the administration’s #PutinPriceHike claims hold much less water.

Blaming Putin will become more credible going forward, as sales of Russian oil worldwide are curbed by sanctions. Since the global oil market is so thoroughly integrated, U.S. oil supplies will be crimped and upward price pressures will strengthen. But this is also the point at which other major administration policies will rightly attract attention for their role in spurring torrid gasoline inflation. They include in particular measures and rhetoric that throughout the President’s term have convinced oil and other fossil fuel providers that their industries’ growth will keep facing ever greater policy obstacles, and whose cumulative effect has undercut their ability to ramp up output quickly to fill the Russia gap.(See, e.g., here and here.)

All of which means that, as is the almost always the case with major economic trends and developments, recent gasoline price inflation has many causes, not one. And they can change profoundly in their nature and respective importance with the kinds of changing circumstances that have shaken the global oil and U.S. energy policy landscapes since the CCP Virus pandemic began. Let’s all hope, therefore, that American leaders across the political spectrum begin spending more time developing effective responses to oil price inflation, and less on bombarding each other and the rest of us with facile talking points.