(What’s Left of) Our Economy: An Omicron Bump in the US Manufacturing Recovery

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aircraft, aircraft parts, automotive, CCP Virus, chemicals, coronavirus, COVID 19, facemasks, Federal Reserve, machinery, manufacturing, masks, medical devices, miscellaneous durable goods, monetary policy, non-metallic mineral products, Omicron variant, personal protective equipment, petroleum and coal products, pharmaceuticals, plastics and rubber products, PPE, printing, semiconductor shortage, semiconductors, stimulus, ventilators, wood products, Wuhan virus, {What's Left of) Our Economy

The big takeaway from today’s Federal Reserve after-inflation U.S. manufacturing data (for December) is that it may show domestic starting to suffer from the arrival into America of the super-infectious Omicron strain of the CCP Virus and the renewed economic curbs and behavioral changes it’s spurring, along with the spread of vaccine mandates in the ranks of U.S. businesses (of course, before yesterday’s Supreme Court decision striking down such policies for the private sector).

And especially discouraging: Just as Omicron began taking off, inflation-adjusted domestic output of medical equipment and supplies – including all the protective gear and treatment devices needed to fight the virus – fell sequentially at its fastest rate since the worst of the spring, 2020 pandemic-induced depression. Indeed, monthly real production in this category is now lower than in February, 2020 – the last full data month before the virus’ first variant began distorting the U.S. economy.

December’s 0.28 percent monthly decline in price-adjusted American manufacturing output represented industry’s first sequential retreat since September’s (hurricanes-affected) 0.52 percent drop. But the solid growth of recent months stayed largely unrevised.

The December results (which will remain preliminary for several more months) brought 2021’s yearly improvement in inflation-adjusted manufacturing output to 3.71 percent. That’s the best growth since 2011’s 6.48 percent, but as known by RealityChek regulars, it’s important to look at possible baseline effects nowadays. And this strong performance in part reflected the virus-fostered 1.94 percent fall-off in such growth in 2020.

The December downturn stemmed in part from problems (like the global semiconductor shortage) in the automotive sector, which shrank on month by 1.29 percent – following sequential expansion in November of a downwardly revised 1.69 percent. But even without the drag from vehicles and parts, domestic industry’s constant dollar production would still have been off by 0.22 percent.

Aside from automotive, the most important December real manufacturing growth loser by far was miscellaneous durable goods – a category that includes those pandemic-fighting essential medical devices and equipment industries. Its price-adjusted output slumped by 2.68 percent – the biggest downturn since April, 2020’s18.43 percent, during the worst of the CCP Virus’ first wave. Even so, measured by real production, the sector is 2.49 percent larger than in February, 2020, right before the pandemic’s initial major economic impact.

Other big December losers included:

>printing and related support activities, whose 1.82 percent slide was also the worst since April, 2020 (23.94 percent), and whose real output is now down by 5.14 percent since February, 2020;

>plastics and rubber products, whose 1.78 percent decrease was the worst since April, 2020 as well (19.12 percent), but that also followed seven months of strong gains. As a result, its real production is off just 1.08 percent since February, 2020; and

>petroleum and coal products, whose 1.58 percent fall-off was its worst since February’s seven percent, and whose after-inflation production is 4.49 percent lower than in February, 2020.

The biggest December winners were:

>non-metallic mineral products, which not only generated a 1.49 percent increase, but whose November inflation-adjusted output advance was revised all the way up from 1.25 percent to 3.03 percent. All the same, this sector’s constant-dollar production is still 1.32 percent lower than in February, 2020;

>wood products, whose 1.18 percent real increase in production was its best since March’s 4.05 percent, and which is now 3.03 percent bigger by this measure since February, 2020;

>the big chemicals sector, where real growth hit 0.69 percent following an upwardly revised 0.65 percent in November (from 0.50 percent), and which has grown by 7.93 percent in real terms since just before the pandemic; and – most encouragingly –

>machinery, a manufacturing bellwether because its products are so widely used throughout both industry and big non-manufacturing sectors like construction and agriculture – not to mention many services sectors. Its price-adjusted output increased by 0.68 percent sequentially in December – its best such result since July’s 2.85 percent, and revisions were unchanged on balance. Machinery production is now 5.20 percent higher than in February, 2020.

As for manufacturing industries that have been prominent in the news during the pandemic, they had a lousy December generally.

Aircraft and parts saw its monthly output down by 0.38 percent, and in stunning news, November’s initially reported 1.90 percent increase is now judged to be a 1.04 percent decrease. With October’s after-inflation production rise downgraded, too, aircraft and parts output is now just 10.71 percent higher than in February, 2020. As of last month’s Fed manufacturing data, this figure was a much higher 15.86 percent.

In pharmaceuticals and medicines, December’s 0.13 percent real output dip was the third straight monthly decline, and November and October revisions were fractionally negative on balance. Consequently, in price-adjusted production terms, these sectors were 13.42 percent larger than in February, 2020 – as opposd to the 13.54 percent calculable from last month’s industrial production report.

And as mentioned at the outset, the December results for medical equipment and supplies sector were awful – especially considering that for the next few months at least, Omicron’s metastasis will greatly increase demand for face masks, protective gowns, ventilators, and the like.

Real production of these products tumbled seqentially by 2.75 percent – the worst such performance since April, 2020’s 15.97 percent, during that first CCP Virus wave. Revisions for November and October were mildly positive, but whereas last month’s report revealed that inflation-adjusted production in these sectors was up since just before the first wave struck in force (though by a bare 0.65 percent), it’s now down by 1.50 percent. 

And let’s add another sector to the pandemic industries list – semiconductors and related devices. As implied by the category name, the numbers include more than the microchips that have been in such global short supply in recent months – and whose U.S. production revival has been such a high stated Washington, D.C. policy priority.

Still, it’s noteworthy that constant dollar output in this grouping rose a mere 0.12 percent on month in December, But it is up 16.86 percent since the pre-pandemicky February, 2020.

So far, betting against domestic manufacturing during the virus era has been a losing bet, But the headwinds for the near future at least look especially strong, topped of course by the spread of Omicron not only in the United States but in all the countries to which its manufacturers sell exports. Add to the list the apparent death of President Biden’s Build Back Better bill – which whatever its long-term economic wisdom and other effects, will certainly reduce government support for domestic economic activity – what seems like greater odds of more monetary policy tightening by the Federal Reserve sooner rather than later; and inflation that might be getting high enough to dampen U.S. consumer outlays.  

Tailwinds are by no means absent – like the beginning of spending made possible by the infrastructure bill, the still considerable amount of stimulus being provided by the Fed, and the easing of global supply chain knots. But even this last depends heavily on the medical, regulatory, and behavioral effects of Omicron in the United States and, perhaps even more important, in China, where the regime’s Zero Covid policy looks like a formula for ever broader lockdowns that will paralyze its ports and other infrastructure systems. 

Domestic manufacturers keep telling major surveys that they remain optimistic about the future.  (See here and here for the latest soundings.)  If anything’s certain about the circumstances they’re heading into, it’s that they’ll need every bit of this optimism to keep succeeding. 

Im-Politic: Omicron Looks Fairly Mild – Except Against a Key Biden Virus Claim

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Anthony S. Fauci, Biden, Biden administration, CCP Virus, CDC, Centers for Disease Control and Prevention, coronavirus, COVID 19, hospitalization, Im-Politic, Omicron variant, vaccination, vaccines, Wuhan virus

I was struck by the statement made by Anthony S. Fauci on Tuesday that the Omicron variant of the CCP Virus is so hyper-infectious that it will “ultimately find just about everybody.” I wasn’t struck by the words of President Biden’s chief medical adviser because Omicron has found me healthwise. Instead, I was struck because the pandemic keeps finding my blogging – even when I don’t intend to write about it.

And so it’s been today. I started out planning to post an item about the Ukraine crisis and globalization (which I will definitely turn to), but Mr. Biden’s latest virus-related remarks have jerked me right back to the pandemic. Specifically responsible was his claim that unless many more Americans become fully vaccinated, Omicron’s rapid spread will mean that the nation’s hospitals will be crowded with resisters who contract unusually severe cases, leaving “little room for anyone else who might have a heart attack or an injury in an automobile accident or any injury at all.”

This point makes perfect sense. Even if Omicron’s effects are relatively mild for most victims, if the absolute numbers of cases are high enough, even a relatively small percentage of infections serious enough to require hospitalization would be enough to overwhelm the hospital system. And if, as Mr. Biden and so many others insist, the overwhelming majority of those hospitalized are unvaccinated individuals, then the case for mandatory vaccination would look open and shut.

But to use one of the President’s favorite phrases, “Here’s the deal.” Even if every American was fully vaxxed and boosted, if Fauci is right about Omicron’s eventual reach, then the hospital system will get overwhelmed anyway. Just do the math.

The whole U.S. population is a little above 330,000,000. If everyone gets Omicron, that’s 330,000,000 cases. How many are resulting in hospitalizations? The President says that unvaccinated Americans are “seventeen times more likely to get hospitalized” from the CCP Virus than the vaxxed.

This figure seems to come from the latest data kept by the U.S. Centers for Disease Control and Prevention (CDC), which finds that for every 100,000 American adults, 67.8 “Covid-19-Associated Hospitalizations” take place each week, versus a rate of only 3.9 hospitalizations for the fully vaccinated. That’s a big difference. But if you project those numbers out to the full 330,000,000 population rather than a sample of 100,000, you get 12,870 fully vaxxed hospitalizations each week.

That figure is a lot smaller than the number of “staffed (operational) acute care beds” in America (534,964, according to the latest count from the American Hospital Association). It’s also a lot smaller than the number of intensive care unit beds (96,5960).

But all by itself, it seems to be enough greatly to stress the heathcare system, given that (as the President noted), it’s got many other responsibilities; given that the 12,870 figure represents the number of new hospital patients added each week; and given that many of these fully vaxxed CCP Virus patients are going to stay hospitalized for a certain period even as new patients in this category keep coming in. 

At the same time, the CDC data on fully vaxxed Covid hospital patients surely creates an understatement for one big reason: They only go up to the week of last November 20. Therefore, they predate the recording of the first U.S. Omicron case (last December 1.)

The United States still lacks comprehensive nation-wide statistics on Omicron-related hospitalizations of the fully vaxxed. But some preliminary numbers indicate that their impact on hospitals will be catastrophic. For example, for the week of last December 27 (more than a month after the latest CDC numbers but just as the first Omicron case was reported), New York State found that 4.59 out of every 100,000 city residents who had been fully vaccinated were hospitalized for the CCP Virus.

That’s a positively infintestimal number. But multiply it out by the total 330,000,000 U.S. population, and that’s more than 1.5 million virus-related hospitalizations of the fully vaxxed. And even if you doubt that these numbers would hold for the entire country (because the United States is big and diverse), a breakthrough hospitalization rate only half that high would still produce more than 750,000 such cases.    

Some more recent figures are even more alarming. As of January 6, the Las Vegas, Nevada area experienced 27,205 breakthrough virus cases (e.g., number of infections of the fully vaxxed), of which 873 were hospitalized. That’s 3.21 percent. Ohio’s official Covid-19 dashboard says that of 53,819 state residents counted as “Covid-19 Hospitalizations,” since January 1, 2021, 2,991 have been  fully vaccinated. That’s 5.56 percent.

According to this January 6 post, in Connecticut, “The overall percentage of fully vaccinated people hospitalized with COVID has also risen to 32 percent, from about 20 percent early last week.”

Massachusetts has reported that as of early January, the state’s hospitals were treating 2,970 patients with confirmed cases of the CCP Virus. Of these, 1,348 were fully vaccinated. That’s more than 45 percent!

In fact, once again, if these numbers are too high by a factor of two, they still add up to overwhelmed hospital systems.

Help is on the way in the form of recently approved treatments (though it looks like due to Biden administration shortsightedness or caution, they’ll be kind of scarce for several months), and in the distinct possibilities that the Omicron wave will crest sooner rather than later, and that follow-on virus strains will be even less virulent. What’s more certain is that Omicron is making a complete – and unnecessarily divisive – mockery of Mr. Biden’s continuing “pandemic of the unvaccinated” claims.

Im-Politic: Covid Derangement Syndrome

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CCP Virus, CDC, Centers for Disease Control and Prevention, coronavirus, COVID 19, health care, hospitals, Im-Politic, mask mandate, masks, Omicron variant, Politico, vaccine mandates, vaccines, Wuhan virus

If there’s emerged an Exhibit A as to how completely incoherent the nation’s public health establishment and medical systems have become on dealing with the CCP Virus (including its super-infectious but generally mild and often asymptomatic Omicron variant), it’s an article yesterday in Politico headlined “Health care workers are panicked as desperate hospitals ask infected staff to return.”

As is so often the case, moreover, this virus-related trend and its fallout has been reported without any allusions to the incoherence. And practically all of the muddle is expressed in the very first paragraph, starting with the very first half of the very first sentence:

“While most health workers are vaccinated, many are still falling sick, exacerbating a staff shortage as more Americans seek hospital care. The reliance on employees who may still be infectious comes despite objections from nurses‘ unions and the American Medical Association, which warned the decision puts patients’ health and safety at risk. And there are no requirements that patients be notified if their caregiver is sick.”

Presumably, when reporter Rachael Levy writes that “most health workers are vaccinated,” she means “fully vaccinated” – including boosters. Yet “many are still falling sick.” Readers never learn how many or, more important, what percentage. But it’s no doubt lots – indeed, enough to create and worsen staff shortages.

That alone should blow a big hole in the various sweeping “vaccines work” claims used, notably, to justify mandates for the jabs, especially since these health care workers by definition must overwhelmingly be individuals young enough and free enough of the special medical conditions to be able to avoid illness serious enough to render them too infeebled to report to work — much less to threaten grave illness or death.

But the headline indicates that the concern of the “panicked” health care workers isn’t simply that the colleagues who believe they should be staying home are crawling in, uncontrollably shedding pathogens and threatening staff and patients alike, and/or are physically incapable of performing their duties adequately.

They’re also concerned that these colleagues are “infected” in the first place.

Yet these worries are loopy for any number of glaringly obvious reasons. For example, if infected health care workers are asymptomatic, they should be fully capable of doing their jobs. In addition, the evidence so far seems to show that most virus victims don’t spread the pathogen (see, e.g., here and here), and when they do, they’re most contagious very early in their infections.

That last point is crucial because it’s behind the latest guidance for health care facilities issued by the U.S. Centers for Disease Control and Prevention (CDC). As Levy (thankfully!) reports, this advisory allows such providers “to bring back workers after five days of isolation, instead of 10, without a negative Covid-19 test.” What’s more, “In cases where workforce shortages become extreme, hospitals can bring back staff without any isolation period.”

Stranger still: Presumably the health care workers who so fear their supposedly irresponsible colleagues are, according to their own definitions, behaving very responsibly themselves. In other words, they’re surely individuals who are both fully vaccinated and dedicated mask-wearers.

If they’re vaccinated, of course, it’s now clear that their protection against infection is far from perfect, but that their protection against severe illness and death is very good. That is, if they do get infected, and since they are young-ish and strong-ish, they’ll recover fully and pretty quickly — assuming they experience any symptoms at all.

Further, since they work in hospitals, they’re almost certainly also wearing the kinds of masks that are highly effective in preventing infection, not the cloth masks worn so widely outside hospitals that even the CDC has found provide pretty ineffective protection. So have the worried workers now joined the “vaccines and many masks don’t work at all” camp?

It’s true that the Omicron variant may be a virulent enough spreader to confound both vaccines and boosters and even high quality masks, at least to a significant degree. But if this is the case, to date, the health effects of Omicron spread look much too weak to justify panic or even close for anyone without specific vulnerabilities.

Yes, hospitals are full of people with such vulnerabilities – the patients. But the CDC guidelines contain recommendations for dealing with them.

Not that the CDC has covered itself with glory throughout the pandemic. Or that this specific approach that it’s taken to the health care system will keep everyone involved fully protected.

But as one hospital CEO quoted by Levy reminds, “We don’t have good choices — or the choices that we want.” A new consensus seems to be emerging in the nation that America has to “learn to live” with the CCP Virus. Unless it’s believed that somehow the health care delivery system should be an exception (and should be crippled until somehow something close to Zero Covid is reached without it?) hospital workers need to follow this advice, too.

(What’s Left of) Our Economy: U.S. Manufacturing Job Creation Stands Out Again

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aerospace, aircraft, aircraft engines, aircraft parts, CCP Virus, chemicals, coronavirus, COVID 19, Employment, Jobs, machinery, manufacturing, medical supplies, NFP, non-farm jobs, non-farm payrolls, non-metallic mineral products, Omicron variant, paper and paper products, personal protective equipment, pharmaceuticals, plastics and rubber products, PPE, private sector, semiconductor shortage, semiconductors, surgical equipment, vaccines, Wuhan virus, {What's Left of) Our Economy

Make that twice in a row. Just as in its November counterpart, the December official U.S. jobs data revealed sluggish overall American employment growth but better numbers for manufacturing. Even better, the gains were broad-based and the revisions of previous solid results were nicely positive.

A glass-half-empty type could rightly point out that industry’s 26,000 sequential payrolls gain last month was its weakest monthly result since April’s 35,000 employment drop. But the sector’s previously reported 31,000 sequential employment improvement is now pegged at 35,000. And after being downgraded from 60,000 to a (still-not-too shabby) 48,000, October’s increase has now been upgraded to 52,000.

For comparison’s sake, industry’s employment improvement came to 0.21 percent – as opposed to 0.17 percent for the private sector as a whole and 0.13 percent for “non-farm payrolls” (the U.S. Labor Department’s definition of the American employment universe).    

In fact, the December results continued a record of job out-performance that’s been consistent throughout the pandemic period.

As of December, manufacturers had replaced 84.19 percent (1.166 million) of the 1.385 million employees they’d shed during the short but steep CCP Virus-induced downturn of March and April, 2020. That figure’s 3.01 percent higher the 81.73 percent of regained jobs calculable from last month’s jobs report. Consequently, manufacturing payrolls are within 1.71 percent of their levels in February, 2020 – the last full data month before the pandemic began hammering and distorting the entire economy.

As for non-farm payrolls, they’ve now regained 84.02 percent (18.790 million) of the 22.362 million jobs lost during the worst of the pandemic. That’s 1.84 percent better than the 82.50 percent share calculable from last month’s jobs report. And there are now just 2.34 percent fewer non-farm U.S. jobs than in February, 2020.

As in the recent past, at first glance today it looks like the U.S. private sector has outdone manufacturing jobs-wise since the current economic rebound began. It’s recovered 87.61 percent (18.708 million) of its 21.353 million job loss during the spring of 2020. That’s 1.80 percent higher than the 86.06 percent figure calculable from the November jobs report. So it’s workforce is now 2.04 percent smaller than just before the pandemic.

But as known by RealityChek regulars, manufacturing’s jobs decline during that terrible spring of 2020 was smaller proportionately than that of the private or non-farm sectors. So even though it’s had less ground to make up, U.S.-based industry has been creating new employment at nearly the pace of the economy as a whole.

Indeed, just before the CCP Virus struck, manufacturing jobs represented 8.45 percent of total non-farm employment and 9.87 percent of private sector employment. As of December, these shares had risen to 8.45 percent and 9.90 percent, respectively.

The list of biggest jobs winners among the major manufacturing sub-sectors tracked by the Labor Department was headed by machinery – where payrolls rose by 7,000 on month in December. That was its biggest advance since July’s 8,700, and especially encouraging both because this industry lost 6,000 jobs in November (slightly better than the 7,000 decrease previously reported), and because its products are used throughout both manufacturing and big non-manufacturing industries like agriculture and construction.

Therefore, if machinery makers are adding strongly to their headcounts, they’re probably expecting demand for their goods to grow further. December’s hiring surge brought machinery employment to within 2.14 percent of its February, 2020 level.

Another major manufacturing employment gainer – automotive, where employment increased by 4,200 sequentially in December, and where the terrible 10,100 job loss reported last month for November is now judged to be just 5,900. As a result, payrolls in automotive – which remains dogged by the global semiconductor shortage – are now 5.28 percent lower than their immediate pre-pandemic levels.

Good December results were reported as well in the very big chemicals sector, which added 2,300 positions on month, and whose November performance was upgraded from no change to a 400-worker increase. Consequently, chemicals employment is now 1.30 percent greater than in February, 2020.

Other significant December manufacturing jobs winners included non-metallic mineral products (2,100) and plastics and rubber products (2,000).

The only manufacturing jobs loser that saw payrolls down by more than 1,000 was paper and paper products, where employment was off by 1,500. Even here, though, there was a somewhat bright side, as the decline was its first since July, and followed an upwardly revised 2,800 gain – its best since September, 2020’s 3,200. And this sub-sector’s employment levels are off just 1.84 percent since pre-pandemic-y February, 2020.

Given the aforementioned semiconductor shortage, however, it’s worth noting that December saw the semiconductors and electronic components industries (which, as the name suggests, includes more than just microchips), suffer their first back-to-back employment decline since March and April, 2020. The job reductions of 200 in November (upgraded from the previously reported 600) and 800 in December left employment levels 0.08 percent below those just before the CCP Virus struck.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and their November job creation was mixed.

The surgical appliances and supplies sector, which contains personal protective equipment and similar goods, added 1,400 workers sequentially in November. And even though October net hiring remained unrevised at a small 100, these industries have now increased employment by 9.60 percent since February, 2020.

Yet the overall pharmaceuticals and medicines industry lost 600 jobs in November, after boosting employment by a downwardly revised 1,400 in October. Its workforce is now 5.27 percent larger than in February, 2020.

Much better results were turned in by the medicines subsector containing vaccines. October’s hiring gain was revised up from 700 to 800, and payrolls rose by another 1,400 in November. These advances have pushed these companies’ payrolls 14.66 higher than just before the pandemic’s arrival.

The mixed pattern continued in the aviation cluster, which has suffered both from aerospace giant Boeing’s manufacturing and safety problems and the pandemic’s restrictions on travel. Good news like the prospect of China allowing the troubled 737 Max model to return to its huge market reportedly have spurred the company to speed up a production rebound, and interestingly, U.S. aircraft employment climbed by 1,000 in November – the best monthly performance since July’s 4,700 jump.

But October’s previously reported small 300 jobs gain was revised down to 200, and with its workforce still 7.75 percent smaller than in February, 2020, aircraft employment’s comeback remains far from complete.

Moreover, the improving aircraft jobs picture doesn’t yet extend to aircraft suppliers. In aircraft engines and engine parts industry, October’s previously reported 100 job decline is now judged to be an increase of 100. But payrolls resumed shrinking in November (by 300), and employment in this sector is now off 13.93 percent since February, 2020.

In non-engine aircraft parts and equipment, employment was unchanged sequentially in November, but a jobs gain of 100 previously reported for October has now been downgraded to a job loss of 100. The bottom line? Its workforce is now 15.74 percent smaller than in February, 2020.

As has been so often the case, and like the rest of the economy, U.S. manufacturing faces perplexing – and in fact unprecedented crosswinds – going forward. And the uncertainties look all the more mysterious since these December jobs results pre-date the arrival of the wildly infectious Omicron variant of the CCP Virus – which could well lead to more health-related restrictions and behavioral changes, even tighter labor markets, and slower economic growth.

But unless Omicron prompts major, protracted shutdowns, manufacturing’s performance during the pandemic so far seems to justify optimism that industry will keep overcoming whatever obstacles come its way — whether policy or pathogens.

(What’s Left of) Our Economy: November Was an Awfully Cruel Month for U.S. Trade

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Advanced Technology Products, Canada, CCP Virus, Census Bureau, China, coronavirus, COVID 19, European Union, exports, Federal Reserve, goods trade, imports, inflation, Japan, manufacturing, non-oil goods trade deficit, Omicron variant, services trade, stimulus, supply chains, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

So maybe the global and especially U.S. supply chain snags of the last year are finally unraveling? That could well be a message being sent by this morning’s official release on American trade figures for November – which was dominated by huge increases in the nation’s goods imports, often to record levels.

Interestingly, though, little of this surge in goods from abroad came from China – probably reflecting some combination of the continuing effects of the Trump (and now Biden) tariffs, the ongoing semiconductor shortage that creates outsized problems for a country so reliant on electronics exports, and widespread power outages stemming from tight coal supplies.

Today’s report from the Census Bureau showed that the overall U.S. trade deficit swelled sequentially from $67.16 billion in October (the smallest since April’s $66.15 billion) to $80.17 billion. That total was the second largest ever (after September’s $81.44 billion). In addition, the 19.38 percent monthly increase was the most since July, 2020’s 19.87 percent. (The worst all-time relative month-to-month increase was 44.12 percent way back in December, 1996, when U.S. trade flows were much smaller, and therefore percentage increases much easier to generate.)

The November goods deficit of $98.99 billion was a record (topping the previous $97.83 billion all-time high of September), and the18.04 percent increase over October’s $83.86 level was the second greatest ever (after the 25.18 percent spurt of March, 2015 that resulted largely from a recovery after the previous month’s harsh winter weather).

Although November’s petroleum trade deficit more than quadrupled on month (to a still-modest $1.07 billion), the month’s shortfall in non-oil goods – the trade flows most influenced by U.S. trade policy decisions – soared by 17.06 percent, to $96.97 biillion. That total is a new record (eclipsing September’s $93.67 billion), and the increase was the biggest since the record 31.24 percent also set in March, 2015.

The roughly $13 billion absolute monthly rise in the November overall trade deficit resulted entirely (and then some) from combined goods and services imports, which were up $13.44 billion. The month’s $304.89 billion total was a second straight record (besting October’s $291.04 billion), and the 4.60 percent increase the biggest since March’s 7.18 percent. (The record relative total monthy import incease was July, 2020’s 10.58 percent.)

The story was similar in goods imports. They, too, set a second straight record, with the $254.93 billion level 5.05 percent higher than October’s previous all-time high of $242.67 billion, and the rate of increase the fastest since March’s 7.73 percent. (This record, too, was set in July 2020 – at 11.93 percent).

Continuing November’s string of consecutive all-time highs was the non-oil goods category of imports. At $232.30 billion, these purchases broke October’s previous record of $221.82 billion by 4.73 percent, a relative rise that was the fastest since March (7.12 percent). Their fastest increase came in July, 2020, too (11.88 percent). 

As indicated earlier, though, goods trade with China departed from this pattern. These imports advanced as well – but by just 0.73 percent. Their $48.39 billion level was the year’s highest, but only slightly above October’s $48.03 billion. Moreover, though elevated, these inflows fell short of the record $52.08 billion in October, 2018 – when U.S. companies were “front-running” their China purchases to bring them into the country before steep tariffs kicked in.

Moreover, the $32.32 billion goods deficit with China was far from the high for the year (September’s $36.50 billion), much less anywhere close to the monthly record ($42.89 billion, which also came in October, 2018).

So geographically speaking, where did U.S. goods deficits go up the most month-to-month in November? Among the nation’s biggest trade partners, Canada was the biggest culprit percentage-wise. America’s $6.12 billion of goods purchases from its northern neighbor were the most of 2021 and the biggest such total since September, 2008’s $7.36 billion. And the sequential leap of 60.67 percent (which, to be fair, followed a big October decline of 26.09 percent) was the fastest since January, 2021’s 74.04 percent surge.

The goods deficit with the European Union was up 28.59 percent sequentially in November to a record $20.85 billion. The increase, moreover, was the greatest since the 73.82 percent rate of March, 2020, as Europe was climbing out of its first CCP Virus wave.

And the goods gap was up by 17.74 percent with Japan to $4.16 billion. The total was the year’s second lowest (after February’s $4.02 billion) but the increase was the fastest since July’s 27.43 percent (though it followed a 23.21 percent plunge in October).

Turning to specific products, more new trade records came in the manufacturing sector. The November trade deficit for industry hit a new all-time high of $124.06 billion – a total that broke the old mark (September’s $118.75 billion) by 8.06 percent. Manufacturing exports sank sequentially in November by 4.15 percent, from $102.752 billion to $98.488 billion, and the 2.29 percent increase in manufacturing exports brought them to their second straight monthly worst – $222.553 billion.

With one month left in data year 2021, the manufacturing trade deficit stands at $1.209 trillion, and is running 11.63 percent ahead of 2020’s record rate.

Not that the records stop with manufactures. In Advanced Technology Products, imports of $52.52 billion set their third staight all-time high, and the November deficit of $21.76 billion trailed only November, 2020’s $21.90 billion in this data series’ 33-year history.

One positive all-time trade high was set in November: At $224.22 billion, total exports established their second record monthly total. But the monthly improvement was a measly 0.16 percent.

November’s $155.94 billion worth of goods exports were the second highest monthly total on record – but the level was down 1.81 percent sequentially.

The pandemic-beleaguered services sector delivered some good trade news, too. Its longstanding trade surplus remains low by historic standards, but did climb by 12.68 percent, to $18.82 billion. The increase was the fastest since the 28.08 percent recorded in September, 2004 (when services trade flows were much smaller than today’s), and the total was the best since June’s $20.33 billion.

Services exports enjoyed a strong November, too. They hit $68.27 billion, for their highest mark since the $69.12 billion reached in February, 2020 – just before the pandemic arrived in the United States and began seriously distorting its trade flows and entire economy. Further, the 4.97 percent improvement was the best since January, 2002’s 5.56 percent.

Will November prove to be the cruelest month – at least for the time being – for U.S. trade? A further removal of supply chain bottlenecks and the huge savings still amassed by American consumers say “No.” But the opposite conclusion could easily be reached by pointing to a reduction in the Federal Reserve’s economic stimulus programs, the unlikelihood of Congress approving big spending bills during this midterm election year, and still lofty inflation rates – which at some point will produce a consumer pullback.

The impact of the CCP Virus, it’s highly infectious Omicron variant, and possible future strains? Those are the $64,000 questions that trade and economic policy analysis may well find excruciatingly difficult to answer.

Im-Politic: Despite Omicron, Progress Against the Virus So Far Has Continued

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CCP Virus, Centers for Disease Control and Prevention, coronavirus, COVID 19, hospitalization, Im-Politic, mortality, Omicron variant, Washington Post

I wasn’t planning on writing on CCP Virus-related issues today in part because I just posted on them on Saturday. But given today’s stock market rout (so far) and the recent instances of virus-related disruption of sports, education, and business due to fears about the highly contagious Omicron variant, it seems worthwhile to present the latest data on the virus’ ongoing impact on public health so far.

And the big takeaway so far is that despite Omicron’s arrival in the United States and the continuation of the Delta variant’s dominance of reported domestic virus cases, the damage to Americans’ health as best as can be measured has continued a persistent decline.

Although these conclusions need to be seen as very preliminary, they deserve attention for several reasons, especially considering the magnitude of the policy response so far. First, although Omicron was probably present in America well before the first case was confirmed on December 1, it’s now nearly three weeks after that apparent initial infection. So the new variant has been here for a while. Second, the also-highly infectious Delta variant still accounts for fully 97 percent of all reported cases across the country as of yesterday, although certain regions (like the New York City metropolitan area), have recorded a much greater Omicron presence.

Third, it’s getting to be winter throughout the United States. So any new variant that came state-side was inevitably going to pack quite an infection punch simply because respiratory viruses tend to spread faster in cold weather, and mainly because more of us spend more time in indoor spaces with less-than-super-ventilation.

So given all that, here’s what’s been happening since December 1 with the two indicators that tell us the most about the public health impact – hospitalizations and deaths (although, because of reporting methodology problems described here, neither is great):

First, new hospitalization admissions, as measured by daily changes in the seven-day averages (7DAs), which smooth out the random fluctuations that always pop up over shorter periods. And I’ve switched over to getting them straight from the website of the Centers for Disease Control and Prevention (CDC) rather than taking them from the Washington Post‘s virus tracker – which also draws from the CDC, and remains very good, but which doesn’t seem to transfer hospitalization information from the agency consistently enough.

On December 1, when the first Omicron case was detected, the 7DA average of these admissions was rising at a five percent rate. By December 4, this rate of increase had hit 16 percent, and stayed in that neighborhood through the ninth. But it was back to the single digits three days later, and has fallen steadily since. As of last Friday, moreover, the 7DA had actually fallen by two percent. So if anything, it looks like the strain on hospitals, has been easing most recently overall in the nation.

The trends in the 7DAs in the daily death counts have been much more volatile, but considerable improvement can be seen here, too. (And these figures come from the Post tracker.)

As of December 1, the 7DA of these counts was down by nearly 22 percent. But it shot up to just over 42 percent on December 3, and stayed above 40 percent through the seventh.

But a dramatic drop-off began right afterwards. On December 8, the 7DA sank all the way down to abut 13.5 percent. The following day, 3.3 percent. And on the tenth, it declined by nearly seven percent. Moreover, this rate kept falling through the fourteenth – and by double-digits on two of those days.

On the fifteenth, it jumped back into positive territory (nearly 7.5 percent), but as of last Friday was back down to a little more than 4.5 percent. (For the record, we have numbers for Saturday, the eighteenth and yesterday, and they were about five and four percent, respectively, but reporting for weekends can be pretty spotty, so don’t make too much of them.)

In other words, American deaths associated with the CCP Virus are still taking place every single day – and in big numbers. On December 1, that day’s count was 2,678. Last Friday, it was 2,099. But that’s down nearly 22 percent. Measured in terms of the more reliable 7DA, they’re up from 1,048 to 1,291 – up more than 23 percent.

But what’s most important – and the most that can realistically be hoped for – is that the rate of increase slows. If these somewhat encouraging trends hold, let’s hope that the Biden administration and other public health authorities recognize that this is what the 7DA data have been showing both on the mortality and hospitalization fronts.

(What’s Left of) Our Economy: A New U.S. Manufacturing Growth Report That’s the Good Kind of Boring

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aerospace, aircraft, aircraft parts, automotive, Boeing, Build Back Better, CCP Virus, China, coronavirus, COVID 19, Federal Reserve, inflation-adjusted output, infrastructure, interest rates, Iran, Iran deal, Israel, Joe Manchin, machinery, manufacturing, medical devices, nuclear deal, Omicron variant, personal protective equipment, pharmaceuticals, plastics and rubber products, PPE, quantitative easing, Russia, semiconductors, stimulus, supply chains, Taiwan, tariffs, therapeutics, Trade, Ukraine, vaccines, Wuhan virus, {What's Left of) Our Economy

Today’s Federal Reserve after-inflation U.S. manufacturing data (for November) were refreshingly (though encouragingly) boring, with one exception – some genuinely eye-popping revisions in specific, high-profile industries.

Overall real manufacturing output improved on month by 0.68 percent, adding to the evidence that domestic industry has bounced back from summer and early fall doldrums caused partly by damage from Hurricane Ida and partly by a global semiconductor shortage that depressed automotive production.

And in this vein, the November results weren’t dramatically impacted by the vehicle and parts sector, whose inflation-adjusted production rose by a 2.22 percent figure that’s clearly strong but decidedly un-dramatic compared with the roller-coaster it’s been on for most of the year.

In addition, revisions for manufacturing as a whole were modest and mixed.

The list of November’s biggest monthly manufacturing growth winners indicates how broad-based industry’s sequential constant dollar output gains were in November. No fewer than six of the major manufacturing subsectors tracked by the Fed enjoyed price-adjusted production advances of more than one percent. Aside from automotive, they were aerospace and miscellaneous transportation (whose 1.64 percent increase included another strong rise in aircraft, as will be detailed below); paper (up 1.63 percent); plastics and rubber products (1.45 percent); non-metallic mineral goods (1.25 percent); and textiles (1.21 percent).

The biggest losers were petroleum and coal products (down 1.24 percent on month); machinery (off by 0.66 percent); apparel and leather goods (0.53 percent); and printing and related support activities (0.50 percent).

But even in this group, hopeful signs can be found. As RealityChek regulars know, drps in machinery production are worrisome because its products are used so widel in the rest of manufacturing and in big non-manufacturing sectors like construction and agriculture.

But the November decline followed one of those eye-popping revisions. October’s originally reported 1.27 percent sequential decrease is now judged to be a 0.59 percent increase.

Moreover, the printing and petroleum and coal products fall-offs were both preceded by October real production advances that have been downwardly revised (from 4.97 percent to 3.79 percent for the former, and from 1.41 percent to 1.18 percent for the latter) but were still impressive.

Manufacturing industries that have been prominent in the news during the pandemic generally performed worse in November, save for aircraft and parts – whose performance was spurred by news from industry giant Boeing that continues to be pretty good. (See, e.g., here and here.) After-inflation production climbed by 1.90 percent month-to-month in November, and October’s 1.43 percent increase was revised up to 1.54 percent.

Even with a second downward revision to September’s inflation-adjusted output (from 0.45 percent all the way down to a negligible 0.09 percent), constant dollar output in aircraft and parts is now 15.86 percent higher than in February, 2020 – the last full data month before the CCP Virus began seriously distorting the U.S. economy.

Pharmaceuticals and medicines, however, lost even more growth momentum. Despite major demand for and use of vaccines, their price-adjusted output dipped by 0.15 percent sequentially in November, and October’s decrease was revised from 0.51 percent to 0.76 percent. But September saw another one of these enormous revisions – from a downgraded 1.04 percent production fall to a 0.76 percent gain. All told, these industries are now 13.54 percent bigger in constant dollar terms as of November than in February, 2020.

The news was worse in the crucial medical equipment and supplies sector – which includes virus-fighting items like face masks, protective gowns, and ventilators. Real production in November was off by 0.61 percent month-to-month in November, and October’s previously reported 1.08 percent decrease is now estimated at a greater 1.91 percent. Moreover, September’s results saw their second big downgrade – first from an initially reported 1.53 percent growth to a 0.73 percent gain, and this morning to one of just 0.16 percent. So since February, 2020, after-inflation production in this sector is up a mere 0.65 percent.

As with the entire economy, the manufacturing sector is being pushed and pulled by what seems to be an unprecedented number and type of forces and government decisions. On balance, though, unless the Omicron variant of the CCP Virus prompts much more voluntary or officially mandated disruption at home or abroad than seems likeliest now, further manufacturing growth still looks like the best bet for the foreseeable future.

Although prospects for stimulus from President Biden’s Build Back Better bill seem barely on life support due to West Virginia Democratic Senator Joe Manchin’s continuing objections, and the Federal Reserve yesterday announced further reductions in its stimulative bond-buying (AKA quantitaive easing), infrastucture bill money should soon begin flowing.  Further, the central bank still made clear that heavy levels of quantitative easing will continue for months more, and is in no rush to start raising interest rates.

Most consumers still have plenty of money to spend, even though further inflation could weaken their appetites. U.S. employment levels keep rebounding strongly by most measures. Supply chain knots continue untangling, albeit not always quickly. Mr. Biden is keeping nearly all of his predecessor’s China tariffs in place, which is preventing predatory Chinese competition from taking customers from domestic manufacturers. The brightening Boeing picture will help its entire vast U.S.-based supply chain. And American and overseas demand for both CCP Virus vaccines and now therapeutics will surely keep growing whatever the rest of the domestic or global economies do.

One set of gathering clouds shouldn’t be neglected, however. I don’t mean to sound alarmist, and don’t believe conflicts are imminent, but what the investment community calls “geopolitical risk” is troublingly on the rise in Asia (due to mounting Chinese pressures on Taiwan) and Europe (due to Russia’s military buildup on the Ukraine border). Moreover, although negotiations to slow Iran’s progress toward nuclear weapons capability have resumed, this has been ongoing and nearing critical threshholds. And it’s far from clear how well a nuclear Iran would go down with Israel – just as it’s far from clear how well domestic manufacturing and the rest of the economy could withstand a second major non-economic disruption in a very few years.

Making News: Back on National Radio Tonight for a Check Up on the Economy

Tags

CCP Virus, China, coronavirus, COVID 19, inflation, Making News, Market Wrap with Moe Ansari, Omicron variant, Trade

I’m pleased to announce that today I’m scheduled to be back on the nationally syndicated “Market Wrap with Moe Ansari” radio program to discuss the general state of the CCP Virus-rocked U.S. economy – including no doubt the outlook for inflation. And don’t be surprised if we bring up the latest in U.S.-China relations as well.

“Market Wrap” is broadcast nightly between 8 and 9 PM EST, the guest segments typically come in the second half-hour, and you can tune in by visiting Moe’s website and clicking on the “Listen Live” link on the right-hand side.

As usual, moreover, if you can’t tune in, the podcast will be posted as soon as it’s on-line.

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

(What’s Left of) Our Economy: Steady as She Goes for U.S. Manufacturing Employment

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737 Max, aerospace, aircraft, aircraft engines, aircraft parts, appliances, automotive, Biden administration, Boeing, Build Back Better, CCP Virus, China, computer and electronics products, coronavirus, COVID 19, electrical equipment, Employment, fabricated metals products, Federal Reserve, food products, Jobs, Labor Department, machinery, manufacturing, miscellaneous durable goods, miscellaneous non-durable goods, NFP, non-farm payrolls, Omicron variant, personal protective equipment, pharmaceuticals, PPE, private sector, stimulus, surgical equipment, vaccines, Wuhan virus, {What's Left of) Our Economy

However disappointing America’s November economy-wide job creation was, the official U.S. statistics released this morning show that you shouldn’t blame the nation’s manufacturers. Although total non-farm payrolls (NFP – the domestic employment universe of the U.S. Labor Department, which tracks these trends) advanced sequentially by a modest 210,000 (the worst such figure since last December’s 306,000 monthly loss), U.S.-based industry added a solid 31,000 net new positions. And revisions of the previous few months strong numbers were revised downward only moderately.

Speaking of revisions, it’s especially important today to note that the new NFP statistics are still preliminary – and will be for two more months. It’s especially important because recently – and no doubt largely due to the unprecedentedly weird nature of the CCP Virus-era U.S. economy – revisions have been enormous. For example, August’s initially reported NFP increase was just 235,000. Since then, it’s been upgraded all the way up to 483,000. The first September result – 194,000 – is now judged to be 379,000. So there’s no reason yet to conclude that the national economic sky is falling, or even changing much.

At first glance, based on this preliminary November data, manufacturing’s latest monthly employment performance slightly trailed that of the rest of the economy.

As of last month, including the revisions, industry has regained 1.132 million (or 81.73 percent) of the 1.385 million jobs it lost during the worst of the pandemic-induced recession in spring of 2020. So the manufacturing employment recovery improved by 1.53 percent on month.

The private sector overall as of November has now regained 18.376 million of the 21.353 million jobs it shed during peak CCP Virus. That 86.06 percent figure is 1.76 percent higher than October’s.

And the total non-farm sector has now recovered 18.450 million of the 22.362 million jobs it lost during that pandemic-triggered downturn. The resulting 82.50 percent mark is 1.60 percent better than October’s.

But don’t forget – manufacturing’s jobs decline during that terrible spring of 2020 was smaller proportionately than that of the private or non-farm sectors. So even though it’s had less ground to make up, U.S.-based industry has been creating new employment at nearly the pace of the economy as a whole.

November’s manufacturing jobs improvement was also noteworthy because it took place despite job losses of 10,100 in the automotive sector – which accounted for more than 40 percent of October’s advances. In fact, automotive revisions also accounted for 70 percent of the downgrading of that overall manufacturing October monthly manufacturing jobs improvement (from 60,000 to 48,000).

Other important November manufacturing job losers in the larger categories monitored by the Labor Department were computer and electronics products, which contains semiconductors, and which saw employment drop by 1,300 (its worst monthly decline since the 4,900 recorded in July, 2020); and – at least as troublingly, machinery. That latter industry, whose products are used throughout manufacturing and big non-manufacturing industries like agriculture and construction, shed 6,000 positions. That was its biggest month’s worth of job losses since the 861,000 disaster during the dark days of April, 2020.

These losses leave computer and electronics employment levels just 0.85 percent higher than just before the pandemic began distorting the American economy (in February, 2020) and machinery employment levels 2.63 percent lower.

November’s big manufacturing jobs winners were topped by the miscellaneous durable goods sector – which includes the major CCP Virus-related medical goods. Its payrolls surged by 10,000 – the most since July, 2020, during the first post- pandemic economic bounce, when they soared by 15,000. The fabricated metals products industry generated a 7,900 payroll jump that was its biggest since March’s 10,100. Food products added 7,400 employees for its best gain since August, 2020’s 19,000. Miscellaneous non-durable goods manufacturing was up 3,500. And electrical equipment and appliances’ payrolls grew by 3,300.

As always, the most detailed employment data for pandemic-related industries is one month behind those in the broader categories, and their October job creation was generally solid.

On the disappointing side was the surgical appliances and supplies sector. This industry contains personal protective equipment and similar goods, and the miscellaneous durable goods sector in which it’s been classified saw employment rise by a respectable 2,900 sequentially in October. But only 100 of these new positions came in the surgical appliances and supplies sub-sector. At the same time, September’s initially reported 900 jobs increase was revised up to 1,300, so maybe October will be a statistical blip – assuming of course that it’s not substantially revised, too. And as of October, payrolls in this sector have climbed by 8.27 percent over their immediate pre-CCP Virus February, 2020 levels – compared with the 7.79 percent calculable from the previous jobs report.

The overall pharmaceuticals and medicines industry performed better, with payrolls swelling by 1,500 in October. Still, September’s initially reported jobs rise of 1,500 was revised down to 1,200. Therefore, employment in these sectors now stands 5.49 percent higher than in February, 2020 – better than the 4.62 percent calculable last month.

The medicines subsector containing vaccines expanded employment by 700 in October – down from September’s 1,700, but better than August’s 400. These results mean that this industry’s workforce is now 13.25 percent larger than in February, 2020.

U.S. aerospace giant Boeing’s manufacturing and safety problems have depressed employment in aircraft production along with the pandemic’s restrictions on travel, and payrolls improved by just 300 on month in October following an unrevised drop of 500 in September. But help may be on the way, with China having just decided that its troubled 737 Max model has passed safety inspections and may return to the China market after a two-year ban that greatly reduced the company’s – and overall U.S. – exports.

So although the American aircraft industry’s workforce in October was still 8.12 percent smaller than it was just before the CCP Virus era (down from the 8.24 percent shrinkage calculable last month), look for the sector to start closing the gap meaningfully.

Good news sure could be used by the U.S. aircraft engines and engine parts industry. In October, its employment dipped by 100, and September’s initially reported jobs gain of 600 has been downgraded to 400. This sector’s workforce is now down 13.82 percent since immediate pre-pandemic-y February, 2020 – more than the 13.49 percent calculable last month.

The situation in non-engine aircraft parts and equipment was a good deal better. It grew payrolls by just 100 in October, but September’s initually reported jobs increase of 900 is now pegged at 1,200 – the best such performance since April, 2008. Consequently, whereas employment in this sector as of last month’s data was 15.82 percent less than in February, 2020, the figure is now 15.48 percent.

A significant Boeing comeback would add to the tailwinds identifiable behind the manufacturing jobs scene at this time. Others of course are the expected continued strong growth of the entire economy, a possibly stronger recovery globally, an easing of the supply chain crisis, the prospect of infrastructure bill money starting to be spent, and the seemingly shrinking odds that manufacturers and other U.S.-based businesses will face significant tax increases related to the Biden administration’s Build Back Better legislation.

Not that clouds are gone from the scene completely. Inflation seems to be picking up (although so far, and by the same token, manufacturers in toto have been able to pass on price increases to business and household customers). A defeat or postponement of Build Back Better will reduce the amount of government stimulus supporting consumer spending – and if the Federal Reserve follows through with its decision to start cutting back on some of its own stimulus, contractionary forces will strengthen. And of course there’s the virus wild card that’s just appeared in the form of the Omicron variant.

Still, the tailwinds now seem more impressive than the clouds, so I’m still optimistic about the future of manufacturing’s jobs recovery.