(What’s Left of) Our Economy: Boeing Woes Finally Smack (Otherwise Encouraging) Fed Manufacturing Data

Tags

737 Max, aircraft, Boeing, China, China trade deal, Commerce Department, Fed, Federal Reserve, industrial production, inflation-adjusted output, manufacturing, manufacturing production, manufacturing recession, Phase One, recession, tariffs, Trump, {What's Left of) Our Economy

The Federal Reserve’s report on January industrial production is out, and it not only finally makes clear the impact on manufacturing output of Boeing’s safety woes. It also strongly suggests that whatever (mild) recession industry has experienced is now over.

I say “whatever (mild recession)….” because several official measures of manufacturing output indicate that no downturn took place at all. For example, the Commerce Department’s GDP-by-Industry data series (which gauge factory production on a quarterly basis, not a monthly basis like the Fed) shows that manufacturing’s real gross output (analogous to the Fed’s inflation-adjusted manufacturing output figures) has not declined for two consecutive quarters during the entire current economic recovery. At the same time, it has registered several two-quarter (and longer) stretches periods during which manufacturing by this measure of inflation-adjusted output fell cumulatively.

Commerce’s tables for real value-added (a measure of manufacturing production that tries to prevent counting the production of inputs both as such, and as parts, components, and materials of finished goods) do report that industry’s production dropped between the fourth quarter of 2018 and the first quarter of 2019, and between the first and second quarters of this year. Cumulatively, moreover, this production level was lower in the second quarter of this year than in the third quarter of 2018 – revealing that on this basis, manufacturing suffered a three-quarter downturn.

At the same time, according to this series, both by the consecutive quarters and the cumulative methodology, the manufacturing recession ended in the third quarter, when it topped both the second quarter level and the output figure for the third quarter of 2018.

And don’t forget: According to the Fed’s real manufacturing output figures, domestic industry’s price-adjusted production peaked in December, 2007 – i.e., it’s never pulled out of the slump that began with the Great Recession. Further, as I documented last month, the Fed’s data show that within this long manufacturing recession, several shorter recessions have begun and ended by the cumulative criterion.

So that’s some of context needed for the Fed finding that after-inflation U.S. manufacturing production fell by 0.09 percent in January. That represented its first sequential decline since October, and left year-on-year production down 0.72 percent. By that standard alone, therefore, manufacturing’s recession has continued.

At the same time, industry’s constant dollar production is up since last April – by 0.70 percent. It’s also up 0.34 percent since April, 2018 – the first full month when the Trump administration’s tariffs on steel and aluminum imports went into effect,  and signaled that the President’s tariffs-heavy approach to trade had begun in earnest.

But the Boeing effect also needs to be considered as well. January saw a nosedive in aircraft and parts production of 1.07 percent sequentially, due to the company’s December announcement that production of its flawed 737 Max model would be suspended. The drop-off was the sector’s biggest monthly decline since the nearly 24 percent plunge in recessionary September, 2008.

I’ve wondered whether Boeing’s troubles had already been dragging down manufacturing output – given the company’s huge domestic supply chain, and given that the 737s had been grounded or banned from national airspaces nearly worldwide since March. But today’s report leaves no doubt that their effects have shown up. Indeed, the Fed explicitly stated that “excluding the production of aircraft and parts, factory output advanced 0.3 percent” on month in January.

So without the Boeing effect, January manufacturing output would be up cumulatively since last February – by 1.09 percent, not by 0.70 percent. And the increase since the advent of the main Trump tariffs would have been 0.74 percent, not 0.34 percent. These figures certainly don’t reveal a manufacturing boom – or even close. But given that even after the Phase One trade deal was signed with China, tariffs on hundreds of billions of dollars worth of Chinese products remain in place (many of them levied against goods that are manufacturing inputs), they cast new doubt on how damaging the President’s trade war has been for domestic industry.

Boeing’s 737 Max crisis will end some day. But the company itself warned that it could last “several quarters” more. Moreover, Boeing’s troubles scarcely end with this ill-fated aircraft. In other words, the company’s woes will keep impacting both all U.S. manufacturing data for the foreseeable future. Therefore, it’s up to the nation’s economists and journalists (along with think tank hacks, no matter who’s funding them) to keep this in mind when judging the effect of the President’s trade wars and other economic policies. Let’s see how many can meet this challenge.

(What’s Left of) Our Economy: Manufacturing’s (Latest) Recession Looks Like It’s Over

Tags

aluminum, China, Commerce Department, Federal Reserve, Great Recession, industrial production, inflation-adjusted output, manufacturing, manufacturing production, metals tariffs, recession, steel, tariffs, Trade, trade war, Trump, {What's Left of) Our Economy

Let’s do something a little different this time in RealityChek‘s monthly examination of the Federal Reserve’s latest domestic U.S. manufacturing output figures – which came out this morning and bring the story through December and therefore through full-year 2019 (at least preliminarily).

Instead of focusing on the industries most seriously affected by President Trump’s tariff-heavy trade policies (mainly the metals tariffs, given big measurement problems with the China duties), let’s look at the question of whether manufacturing remains in recession – which has big, trade war-related implications because this Trump campaign is widely blamed for many of manufacturing’s recent weakness.

There’s considerable evidence that the answer is “Yes” – that industry’s inflation-adjusted production (the measure used by the Fed) is back in growth mode, though just barely.

But the question remains an open one. That’s partly because the answer depends on which baseline date you use for the start of the manufacturing recession, which unit of time you use (along with which particular manufacturing output gauge you favor).

Among that evidence tilting toward “Yes” – today’s Fed data.  Specifically, December’s 0.16 percent monthly increase in constant dollar manufacturing output means that, since June, such production is up. Now it’s only up by 0.04 percent. But since that’s a cumulative increase over the last six months (i.e., two consecutive quarters), the technical definition of recession no longer applies.

Or does it? The same Fed figures show that, between December, 2018 and December, 2019, after-inflation manufacturing output was down – by 1.26 percent. So the recession is still on, right?

Maybe. But use another baseline – April, 2018. As RealityChek regulars know, that’s the first full month in which significant Trump tariffs went into effect (on imports of aluminum and steel). Since then, though, price-adjusted manufacturing production has grown by 0.38 percent. This result, therefore, indicates that, although the President’s trade policies seem to have delivered a hit to domestic manufacturing, it was pretty negligible, and it’s already over (at least for now).

To complicate matters still further, as RealityChek reported last July, according to the Fed’s figures, manufacturing has suffered several recessions since the current economic recovery began (in the middle of 2009).  Indeed, as of this morning, it  still hasn’t recovered from the Great Recession that began at the end of 2007!

At the same time, another set of U.S. government data support the conclusion that there has been no trade war-related manufacturing recession during the Trump years – or manufacturing recession of any kind.

These statistics come from the Commerce Department’s “GDP [Gross Domestic Output] by Industry” reports. They use the same measure used by the Fed for tracking manufacturing growth (or contraction), but they’re kept on a quarterly, not monthly, basis. As a result, these numbers aren’t issued as frequently.

Yet the latest results came out January 9, and although they stop at the third quarter of last year, they show that in real terms, domestic manufacturing under Mr. Trump never shrank on net for two straight quarters, much less over any longer time frame. Here are the quarterly change figures:

2Q 16-1Q 17 :+0.32%

1Q 17-2Q 17: -0.7%

2Q 17-3Q 17: +0.35%

3Q 17-4Q 17: +1.22%

4Q 17-1Q 18: +0.38%

1Q 18-2Q 18: +0.09%

2Q 18-3Q 18: +1.38%*

3Q 18-4Q 18: +0.38%

4Q 18-1Q 19: +0.43%

1Q 19-2Q 19: -0.38%

2Q 19-3Q 19: +0.67%

*those Trump metals tariffs began in this quarter

Indeed, what comes through loud and clear from them is that not only has there been no manufacturing recession on President Trump’s watch, but there hasn’t even been an output slowdown.

It’s always possible to point to the counter-factual – that is, in this instance, to try to figure out how matters would look without any Trump tariffs, or similar Trump efforts to transform U.S. trade policy. And it’s certainly conceivable that domestic industry would have fared even better had Trump abjured all tariffs.

But that’s not the only counter-factual. For example, what if the rest of the world had been able to deal with the pressure created by China’s steel dumping by dumping its own steel into the United States (which hasn’t happened because the Trump metal tariffs were global)? What if China itself had remained completely free to send artificially low-priced (because heavily subsidized) product into the US market? What if President Trump had kept the United States in the Trans-Pacific Partnership trade agreement (TPP), with its wide open back door for imports with lots of Chinese content, while China remained under no obligation whatever to open its market to U.S. products? It’s easy to see that U.S.-based manufacturing could have gone on the critical list.

What’s certain, however, is that according to the most authoritative data available, claims of tariffs-led disaster for U.S. manufacturing have been either much ado about nothing, or much ado about very little. Could the coming months finally bear out the worst fears of cheerleaders for pre-Trump trade policies and other globalists? Of course. But that’s simply speculation, which counts much less than facts.

(What’s Left of) Our Economy: A Thoroughly Muddled Manufacturing Production Figure

Tags

aluminum, Boeing, China tariffs, Federal Reserve, General Motors, General Motors strike, industrial production, inflation-adjusted output, manufacturing, metals tariffs, metals-using industries, recession, steel, supply chains, tariffs, trade war, {What's Left of) Our Economy

The latest U.S. inflation-adjusted manufacturing output numbers (for September) are now out, and they leave more muddled than ever the matter of how much (if any) damage American industry has suffered from President Trump’s tariff-heavy trade policies.

And it’s not just because of ongoing uncertainties about the effects of President Trump’s current and threatened China tariffs, and all the fluctuations in coverage and rates. It’s not just because of the month-long General Motors strike – which could end soon if the union rank-and-file approve the settlement agreed on by their leaders, and which the Federal Reserve itself (which tracks manufacturing output) fingered as a big culprit behind September’s lousy read. It’s also because of the impact of Boeing aircraft’s continuing safety woes (a subject on which the Fed has been strangely silent).

As I’ve reported, the Boeing effect finally showed up in the latest U.S. trade data – which is especially important given the aerospace giant’s reliance on exports. But it hasn’t appeared anywhere else, including the new manufacturing production figures, even though orders for Boeing jets have been dramatically slashed, and even though the company is a huge consumer of materials, parts, and components from other manufacturing sectors.

With all those cautions out on the table, here’s what the new Fed statistics showed. After-inflation domestic manufacturing output slid by 0.48 percent sequentially in September, the worst such result since April’s 0.87 percent decrease, and more than enough to keep industry overall in recession. Since July, 2018, its real output is down a total of 0.38 percent.

GM’s labor troubles clearly dragged the total number down. Constant dollar vehicles and parts production in September sank by 4.22 percent on month, its worst such performance since January’s 7.18 percent nosedive (when the federal government was still shut down, surely depressing consumer confidence).

The Fed made clear that “Excluding motor vehicles and parts, [its] overall [industrial production] index and the manufacturing index each moved down 0.2 percent.” (More precisely, the real manufacturing decline would have been only 0.15 percent without automotive.) Oddly, though, the Fed didn’t mention that any development that depresses vehicle and parts production is bound to ripple through all the industries making up its extensive supply chain, too.

Yet despite the export troubles revealed in the trade figures, the Fed’s statistics show that aircraft and parts production enjoyed a terrific September. Indeed, the 1.82 percent sequential jump was the biggest since March, 2014’s 2.42 percent.

Nor do sectors comprising the aerospace supply chain (which broadly overlaps considerably with automotive’s) seem to be lagging significantly, except for primary metals. For example, below are the inflation-adjusted output figures for some big supplier sectors and control groups since April (the first full data month following actions the world over grounding or banning from various air spaces Boeing’s 737 Max jets):

overall manufacturing: +0.44 percent

durable goods: +0.75 percent

primary metals: -3.38 percent

fabricated metals products: -0.17 percent

machinery: +1.19 percent

As for the impact of the trade wars, as usual, the consequences of the President’s tariffs on aluminum and steel are easiest to gauge, since they’ve been on the longest, and the major metals-using industries (the presumed leading victims) are so easy to identify. The table below represents the changes in their real output since April, 2018 (the first full month in which the levies were in effect), with the data for manufacturing overall used as a control group, and durable goods included because it’s the super-category in which most of the main metals-using industries are located:

                                           Old Apr thru Aug   New Apr thru Aug   April thru Sept

overall manufacturing:        +0.54 percent          +0.57 percent       +0.09 percent

durables manufacturing:     +1.98 percent          +2.00 percent       +1.25 percent

fabricated metals prods:     +1.88 percent          +2.07 percent       +1.85 percent

machinery:                         +0.67 percent          +1.39 percent           0 percent

automotive:                        +0.17 percent          +0.30 percent        -3.92 percent

major appliances:               -2.04 percent           -1.22 percent        -2.19 percent

aircraft and parts:              +4.39 percent          +3.54 percent        +5.43 percent

The results are mixed – and obviously the most recent automotive number has little to do with the metals duties. Otherwise, three of the remaining four metals users have gained momentum versus the rest of manufacturing (durables, appliances, and aircraft), although their output performances remain subdued in absolute terms, and machinery has lost momentum.

Unfortunately, this kind of analysis not only remains much more difficult for the impact of the China tariffs. But every twist and turn in the trade talks saga only increases the challenge. Primarily because of uncertainties stemming from differences between the manufactured goods classification systems used by the U.S. Trade Representative’s office (which publishes the lists of tariff-ed items) and the main system used by other U.S. government agencies (like the Fed), the sectors below are among the handful that are reasonably certain to have faced tariff pressure since the first duties were placed in imports from China in July, 2018. Each column shows the real output changes since their first full month in effect through July, August, and September of this year:

                                                  Aug thru July      Aug thru Aug      Aug thru Sept

overall manufacturing:             -0.89 percent       -0.33 percent       -0.81 percent

ball bearings:                            -2.32 percent       -2.26 percent       -2.30 percent

industrial heating equip:          -4.58 percent       -1.72 percent       -1.01 percent

farm machinery & equip:        -6.91 percent      +9.71 percent       -0.69 percent

oil/gas drilling platform pts:   -0.86 percent       -1.38 percent       -1.38 percent

As is clear, these results are even more mixed than for the metals-using industries – to which all of these products belong. And with the President’s trade policies all too likely to stay ragged as the 2020 elections come closer, “more confusion” looks like the safest prediction possible regarding American manufacturing production 

Making News: CNBC Interview on China Trade Talks Set for this Afternoon, New Podcasts…& More!

Tags

aerospace, Boeing, China, CNBC, IndustryToday.com, Making News, manufacturing, manufacturing recession, Market Wrap with Moe Ansari, recession, The John Batchelor Show, Trade, trade talks, trade war

I’m pleased to announce that I’m scheduled to appear this afternoon on CNBC’s “Power Lunch” program in a segment focusing on the latest U.S.-China trade talks underway in Washington, D.C.  The interview is slated for 2 PM EST and, as usual, I’ll post a link to the video as soon as one’s available.

Speaking of podcast-like items, here’s a link to the one featuring my China trade policy interview on Moe Ansari’s nationally syndicated “Market Wrap with Moe” radio program.  Our discussion begins at about the 27:30 mark.

And this link will take you to my segment on the same subject last night on John Batchelor’s nationally syndicated radio show.

Finally, on Tuesday, IndustryToday.com re-posted (with permission, of course!) my RealityChek piece from earlier this week on how Boeing’s safety-related woes have helped drag U.S. domestic manufacturing into (a very shallow) recession for reasons having nothing to do with President Trump’s trade policies.  Click here to read.

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

 

(What’s Left of) Our Economy: Is Trump’s Trade War Really Killing Manufacturing Exports?

Tags

dollar, exchange rates, exports, IHS Markit, Institute for Supply Management, manufacturing, recession, tariffs, Trade, trade war, Trump, {What's Left of) Our Economy

The economics and investment worlds have plunged into near-panic mode over a report yesterday on American domestic manufacturing whose headline number was the worst since recessionary 2009. The September results from the Institute for Supply Management (ISM) have been interpreted as a sign that a U.S. recession has just become much more likely, and an unusually bad finding for export orders triggered a burst of analyst claims that President Trump’s tariff-heavy trade policies were the main problem. (See, e.g., this article.)

In fact, the ISM report itself stated that “Global trade remains the most significant issue….”

So is the evidence finally reaching critical mass that the President’s approach to trade is backfiring? Here’s why that conclusion seems like a big stretch.

First, the ISM and similar reports present “soft data.” That is, they don’t contain actual figures on production, employment, export orders, or other indicators. Instead, they feature findings on how many of the manufacturers they survey say their results on these and other fronts are worsening and how many are observing improvement.

The scope for error here is made clear by the release yesterday of another closely followed American manufacturing gauge – from IHSMarkit.com. According to this soft data report, September was domestic industry’s best month in the last five, and better orders from American customers were enough to keep U.S. manufacturing in growth mode despite a seriously sagging export business.

Second, as for the most authoritative hard data on manufacturing output, it comes from the Federal Reserve. As my latest update on RealityChek showed, its latest industrial production statistics show that the sector remains in a shallow recession, but that production has been turning up recently.

At the same time, manufacturing employment continues to stumble, and in particular, industries most affected by the Trump tariffs have turned in recent month from employment leaders to employment laggards.

Third, just as I’ve presented the evidence showing that manufacturing’s current recession is anything but its first slump since the U.S. economy’s current expansion began in mid-2009, the current export downturn (which is supported by the hard data) is anything but unprecedented during this period, either.

The table below shows the recovery-era annual changes in total manufacturing exports (the broadest measure of such shipments), global economic growth, and the value of the dollar. The export and growth figures are in pre-inflation dollars.

         total exports         % change          world growth           dollar’s value

08     $1.121872t

09     $0.916726t       -18.29 percent      -5.15 percent          +11.43 percent

10     $1.100394t      +20.04 percent     +9.44 percent             -7.13 percent

11     $1.276906t      +16.03 percent   +11.08 percent            +0.41 percent

12     $1.341398t        +7.40 percent     +2.30 percent            +1.58 percent

13     $1.375170t        +2.52 percent     +2.86 percent             -0.67 percent

14     $1.403782t        +2.08 percent     +2.73 percent            +1.62 percent

15     $1.317019t         -6.18 percent      -5.41 percent          +15.65 percent

16     $1.246011t         -5.39 percent     +1.47 percent            +5.45 percent

17     $1.323574t        +6.22 percent     +6.29 percent            +2.26 percent

18     $1.400022t        +5.76 percent     +6.07 percent           -10.85 percent

18 ytd  $0.812914t

19 ytd  $0.796902t    -1.97 percent         2.60 percent*          +3.82 percent

*latest World Bank estimate for 2019

As should be clear, manufacturing exports so far this year are off by less than two percent (the new U.S. monthly trade figures, for September, will be out Friday morning) – a decline much smaller than those in 2015 and 2016, when no President was conducting a trade war. Quite the contrary. And once the current expansion ended its early “snapback” phase, manufacturing export growth was pretty underwhelming. Indeed, manufacturing export growth rates sank below global growth rates in 2013 and haven’t recovered by this measure since – although the gap closed markedly during the first two Trump years.

Overall, in fact, since Mr. Trump’s trade policy about-face began in earnest (with metals tariffs imposed in March, 2018), manufacturing exports have held up pretty well considering that global growth (i.e., the health of the foreign markets to which American manufacturers are trying to sell) has slowed considerably (partly due of course to the impact of the trade war in a world outside the United States that’s still overwhelmingly dependent on amassing exports and trade surpluses in order to grow adequately).

And don’t forget exchange rates – which go far toward determining the cost and therefore appeal of U.S. exports versus the competition. Their impacts operate with a time lag, but even with all the complexities of measuring such effects, with the dollar hitting 29-month highs in absolute terms on Tuesday, it’s difficult to argue credibly that the Trump tariffs are the predominant cause of American manufacturing’s export woes.

Indeed, it’s at least as plausible to contend that manufacturing exports’ performance this year has been especially encouraging given that disrupting global supply chains and returning them to the United States – which obviously adds to the near-term challenges faced by American multinational and domestic manufacturers alike – are among the President’s main trade war objectives. And since the full benefits of Mr. Trump’s new trade policy approach can’t possibly quickly, these indications of resilience by U.S.-based industry have to be seen as good news for anyone hoping for an enduring American manufacturing revival.       

(What’s Left of) Our Economy: The Offshoring Lobby Admits Americans are Standing Tall in the China Trade War

Tags

2020 elections, capex, Charles Koch, China, CNBC.com, consumers, Democrats, inflation, manufacturing, national security, recession, slowdown, Trade, trade war, Trump, Xi JInPing, {What's Left of) Our Economy

Another trade war myth bites the dust! And its demise is especially big news, given that its killers are some of the leading myth-makers.

Specifically, as reported by CNBC,com, top officials of a major lobbying campaign aimed at forcing President Trump to overturn his tariff-heavy trade policies, and in particular, to make nice with China, have openly admitted that the ace-in-the-hole they thought they held turned out to be joker. According to a CNBC posting yesterday, the political network funded partly by billionaire libertarian Charles Koch has concluded that their efforts to restore the pre-Trump, offshoring-happy, U.S. trade policy status quo have failed because it completely misread the American public’s willingness to pay an economic price for combating China’s trade predation.

This news comes on the heels of ongoing evidence that, contrary to widespread predictions from economists, think tank hacks, globalist politicians, and the Mainstream Media reporters who keep taking their cues from all these trade zealots, raging American inflation has not been ignited, business investment has not been paralyzed, domestic manufacturing has not suffered a death blow (though it’s been in a shallow recession for a year), and the economy has not plunged into recession (though growth has slowed).

The advertising-focused Koch drive sought to convince President Trump to back off his strategy of trade pressure by exploiting the selfishness of U.S. consumers in particular and the supposed vulnerabilities of the U.S. political system. The apparent central assumptions (and they’ll be familiar to anyone who’s been following Mainstream Media coverage of trade issues): Affluent, and indeed spoiled, Americans have much less tolerance for economic pain than their long impoverished Chinese counterparts; and China’s dictators will find it much easier to resist any public pressure that did develop than American leaders. Therefore, the Koch operatives reasoned, stoking fears that Mr. Trump’s tariffs would supercharge retail prices in particular and kill jobs by prompting retaliatory Chinese measures and slumping American capital spending would set off a political firestorm that the President would need to extinguish if he hoped to win reelection.

But at a briefing it held in New York City yesterday, a Koch official told reporters that “The argument that, you know, the tariffs are adding a couple thousand dollars to the pickup truck that you’re buying is not persuasive. It doesn’t penetrate with the people that are willing to go along with the argument that you have to punish China.”

Nor did the Koch campaign make this decision lightly. The CNBC.com piece noted that “the network came to this conclusion after conducting weekly focus groups on trade policies.” Also cited in the post was a recent national poll showing that “63% of registered voters believe tariffs will ultimately hurt the United States more than China, but 67% of the electorate is convinced it’s necessary to confront China over its trade practices.”

In other words, the American public is wiser and more farsighted than the U.S-owned businesses that have worked overtime to help strengthen the Chinese economy – including by voluntarily transferring to the Chinese the technology they need to upgrade their mechanisms of repression and modernize their military. And everyday Americans are much smarter than those companies that China has begun victimizing once Beijing concluded they’d outlived their usefulness, but that keep hoping against hope that enough boot-licking will save their corporate skins in the Chinese market. Because the American public evidently understands that U.S. prosperity and national security alike require reversing these China-enabling policies, and that slightly more expensive imports from China are a small price to pay for preserving and achieving these goals.

Ironically, the poll indicates that the Koch campaign (along with similar efforts) has succeeded in one respect: It represents some evidence that Americans believe that their country is more vulnerable to a trade war than China – even though the Chinese economy is much more trade dependent, and even though, as noted above, the United States keeps growing (albeit more slowly), and its overall inflation remains subdued by any reasonable standard.

Maybe that’s why the Koch network says it’s far from giving up, and is considering delivering the same message with different tactics. Two seem especially promising to these Friends of China:

>“putting together a team of almost 100 business leaders to call on the Trump administration and lawmakers to end the trade war with China”; and

>educating “100,000 activists in at least 35 states about the potential negative impact of using tariffs to battle China. Those volunteers will then be expected to start reaching out to their congressional leaders. The network hopes these activists can convince lawmakers on Capitol Hill to stand up against the administration’s current trade policy. The latest phase of the Koch campaign is expected to cost the network millions of dollars.”

Of course, short of a major economic downturn, if the Koch network has already established that the public is rejecting its advertising-carried China fear-mongering, it’s unclear why President Trump would be more responsive to the 100 business leaders than he’s been to date? And why would most Members of Congress not already backing China coddling pay more much attention to the 100,000 activists?

That’s a question that also needs to be asked by some other major actors in the U.S.-China trade war: the majority of current Democratic presidential candidates, who clearly believe that there’s lots of voter China-related trade whining that they can turn into votes, and ultimately into victory over Mr. Trump; and Chinese dictator Xi Jinping himself, who just as clearly believes that if the President is defeated, he’ll be back to dealing with Uncle Sucker on trade – and so many other fronts.

Making News: Breitbart Podcast of Recession Gloom-Mongering Interview Now On-Line…& More!

Tags

Breitbart News Tonight, IndustryToday.com, Making News, productivity, recession, Trump

I’m pleased to announce that the podcast is now on-line of my Tuesday night interview on Breitbart News Tonight on evidence that many of President Trump’s opponents have launched a politically inspired campaign to talk the U.S. economy into a recession.  To listen, click here and scroll all the way down until you see the September 10 interviews – since for some reason, the podcasts aren’t arranged in chronological order.

Also, IndustryToday.com has re-posted two RealityChek columns this week – the first was the offering originally documenting recession gloom-mongering claims, and the second was the item on puzzling trends in productivity growth in America.

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

 

Making News: Talking Recession Gloom-Mongering on Breitbart Radio Tonight…& More!

Tags

Breitbart News Tonight, Making News, media, recession, Trump

I’m pleased to announce that I’m scheduled to return to Breitbart News Tonight to talk about evidence that President Trump’s opponents are trying to talk the U.S. economy into recession.  The segment is slated to begin at 9:40 PM EST, and if you’re not already a SiriusXM Patriot radio subscriber, you can get a free trial by clicking on this link and following the instructions.  But make sure to give yourself enough time!

In addition, it was great to see Tampa Bay (Florida) Times editorial writer Jim Verhulst designate as an especially interesting commentary my post last week for The American Conservative debunking “Trump as phony populist” charges.  Here’s the link.

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

(What’s Left of) Our Economy: Why Media Recession Cheerleading May Be a Thing

Tags

confidence, Federal Reserve, Mainstream Media, National Federation of Independent Business, NFIB, recession, small business, Trade, trade war, Trump, uncertainty, {What's Left of) Our Economy

Can a national economy be talked into recession? And is this a danger for the American economy today? As known by anyone with even basic knowledge about economics, because psychology (and especially optimism and pessimism) so crucial determines business and consumer decisions, the answer to the first question unmistakably is “Yes,” at least in theory.

There’s a lively debate over whether that’s now a danger – with Donald Trump among others charging that his political and Mainstream Media opponents’ alleged determination to defeat him in the upcoming presidential election has turned them into prophets of doom – but obviously the winner can’t be determined until an actual downturn has begun.

But two notable clusters of evidence have just emerged lending at least some credence to the latter proposition. The first comes from today’s news coverage of a key measure of confidence in the economy – the monthly Optimism Index issued by the National Federation of Independent Business (NFIB), the nation’s leading small business organization.

In quintessential examples of unjustifiably downbeat reporting, the survey’s results were widely portrayed as a sign that the national economic sky is getting close to falling. “U.S. Small-Business Optimism Drops to Lowest in Five Months,” blared a Bloomberg.com headline. “Trump’s trade war is triggering a ‘sharp slowdown’ among American small businesses, warned Business Insider pointedly. “Small Business Optimism Index for August 2019 falls 1.6 points,” specified a brief YahooFinance.com item, which also blamed the Trump trade policies (as did the Bloomberg article).

But if you think about it, two of these headlines themselves strengthen allegations of alarmism. After all, five months isn’t an especially long time period. And 1.6 percentage points isn’t exactly a nosedive.

More important were the points buried in these stories. For example, it wasn’t until the fifth paragraph (of eight) that Bloomberg readers were told that “Even with the decline [from a prior reading of 104.7], the NFIB gauge remains elevated by historical standards, though it’s below the average level since Donald Trump was elected president in 2016.”

And get a load of this statement from the NFIB’s leader, which appeared in a gloomily headlined Dow Jones piece:

“‘In spite of the success we continue to see on Main Street, the manic predictions of recession are having a psychological effect and creating uncertainty for small business owners throughout the country,'” NFIB Chief Executive Juanita Duggan said in prepared remarks. ‘Small business owners continue to invest, grow, and hire at historically high levels, and we see no indication of a coming recession.'”

Further evidence of media fear-mongering – also tightly linked to Mr. Trump’s trade wars – has appeared in a new study from the Federal Reserve. In a September 4 report titled “Does Trade Policy Uncertainty Affect Global Economic Activity?” a team of Fed staff economists seek to document the widespread (and entirely reasonable) belief that “Higher uncertainty could lead firms to delay their investment and reduce their hiring, lower consumer confidence and spending, and ultimately curtail economic activity around the world” – including in the United States.

To make their point, they created and use two measures of uncertainty. The first “is based on searches of newspaper articles that discuss trade policy uncertainty.” The publications comprising this database were “Boston Globe, Chicago Tribune, Guardian, Los Angeles Times, New York Times, Wall Street Journal, and Washington Post.” The second was constructed “in an analogous way from automated text searches of the quarterly earnings call transcripts of U.S.-listed corporations.”

Anyone with even a rudimentary knowledge of trade policy and its recent history might well immediately recognize one serious potential problem with the business-based uncertainty gauge: Public companies have been among the strongest and most influential supporters of pre-Trump trade policies, and have understandably been among the loudest critics – since the President’s pushback threatens established business models that have greatly boosted profits via sales to the high-wage U.S. market from offshored or other factories located in super low-cost countries like China and Mexico, and through the use of subsidized and artificially cheap inputs from numerous mercantile foreign economies.

But much more interesting and revealing: However strongly these companies logically would be expected in their public statements to harp repeatedly on the reality and potential of trade war-related problems (which can be considerably hyped, as I’ve demonstrated), the newspapers in the Fed report’s gauge cited such actual and possible difficulties much more – as the chart below shows. That’s why the solid line in the chart, showing the media’s mentions of uncertainty, has consistently been higher than the businesses’ mentions until very recently. (I know it’s a little hard to eyeball, but make the effort.)

Figure 1: Trade Policy Uncertainty

 

Do these findings mean that the economy has no serious problems, that the odds of a recession in the foreseeable future are negligible, and that Mr. Trump’s trade policy decisions may not exact significant economic costs? Of course not. They don’t even prove the charge that the media is seeking to oust the President by talking the economy down. But do they indicate that a “bad news sells” bias is pervading media coverage of the economy (and the trade war) at an especially crucial stage of the business cycle – and the political cycle? The above evidence makes this allegation look awfully credible.         

Making News: Talking Economy and Recession Chances on Breitbart Radio Tonight…& More!

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Breitbart News Tonight, China, economy, i24News, Making News, recession, Sirius XM Patriot radio, trade war

I’m pleased to announce that I’m scheduled to return to Breitbart News Tonight to talk about not only the Trump trade wars, but about the state of the economy and recession fears.  The segment is slated to begin at 9:05 PM EST, and if you’re not already a SiriusXM Patriot radio subscriber, you can get a free trial by clicking on this link and following the instructions.  But make sure to give yourself enough time!

As usual, if you can’t listen live, I’ll post a link to the podcast as soon as one’s available.

In addition, a video clip is available of my China trade war-related appearance last night on the U.S.-Israeli TV network i24News.  Click here and press the download button to access it.  But remember – it will only be available in this form for a week.

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