Making News: Back on National Radio Talking Midterms and Trade…& a New Podcast!

Tags

agriculture, Biden, CBS Eye on the World with John Batchelor, Congress, Democrats, election 2022, environment, fast track, Federal Reserve, friend-shoring, interest rates, Kevin Brady, labor rights, MAGA Republicans, Making News, manufacturing, midterms 2022, monetary policy, recession, regulation, Republicans, reshoring, taxes, Trade Promotion Authority, U.S. content, U.S.-Mexico-Canada Agreement, unions, USMCA

I’m pleased to announce that I’m scheduled to return tonight to the nationally syndicated “CBS Eye on the World with John Batchelor.”  Our subjects: yesterday’s midterm election and how it might affect Washington’s approach to international trade.

I don’t know yet when the pre-recorded segment will be broadcast but John’s show is on between 9 PM and midnight EST, the entire program is always compelling, and you can listen live at links like this. As always, moreover, I’ll post a link to the podcast as soon as one’s available.

In that podcast vein, the recording is now on-line of yesterday’s interview on the also-nationally syndicated “Market Wrap with Moe Ansari.” The segment, which dealt with what the midterm results (which aren’t all in yet!) will mean for the U.S. economy – and the manufacturing sector in particular. It begins about 22 minutes into the program, and you can listen at this link.

Note: My forecast of significant Republican gains in the House and Senate seems to have been on the over-optimistic side, but of course, many key races remain undecided.

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

Advertisement

(What’s Left of) Our Economy: Strong Crosswinds Roil the New U.S. Manufacturing Jobs Figures

Tags

aerospace, air travel, automotive, CCP Virus, chemicals, coronavirus, COVID 19, Employment, fabricated metals products, infrastructure, Jobs, machinery, manufacturing, miscellaneous durable goods, miscellaneous non-durable goods, non-farm jobs, pharmaceuticals, PPE, private sector, regulation, semiconductor shortage, semiconductors, stimulus package, taxes, vaccines, wood products, Wuhan virus, {What's Left of) Our Economy

It’s tough to imagine a U.S. official monthly jobs report giving off so many conflicting signals about the health of domestic manufacturing and its outlook than the one that came out this morning (for April).

On the one hand, the sector’s 18,000 jobs loss was its worst monthly performance since the identical January setback. On the other hand, the problem was heavily concentrated in the automotive sector, which has been forced to cut back production due to the ongoing global semiconductor shortage. On the other, other hand (!), this shortage is unlikely to ease for many months. On still another hand, the revisions were strong. And some key manufacturing industries continued a recent pattern of solid results. At the same time, even removing the automotive results would still leave the rest of domestic manufacturing’s April employment performance decidedly weak.

I could go on in this vein – and will below.

The decisive automotive/semiconductor effect on the April manufacturing figures becomes clear enough upon realizing that this sector’s 27,000 sequential employment loss was considerably greater than manufacturing’s total on-month job decline. Nonetheless, even had automotive held its employment line, the consequent 9,000 manufacturing job increase would have been unimpressive at very best.

And yet there are those revisions. March’s initially reported 53,000 monthly manufacturing payroll increases – the best such figure since last September’s 55,000 – are now pegged at 54,000. Even better, February’s initially downgraded (from 21,000 to 18,000) monthly employment increase has now been revised all the way up to 35,000.

As a result, domestic industry has now regained 63.83 percent (or 870,000) of the 1.363 million jobs it shed during the height of the CCP Virus pandemic in spring, 2020. It’s still behind the private sector overall (which has recovered 66.88 percent of its pandemic peak employment loss), but still ahead of the overall economy’s (called the non-farm sector by the Labor Department, which issues the monthly jobs reports) 63.26 percent.

The only major April manufacturing jobs loser other than automotive was the small wood products sector (7,200). The big fabricated metals products industry saw employment fall by 2,900 on month in April, but the drop followed a large March gain that’s been downwardly revised but still stands at a strong 10,400.

The machinery numbers were downright encouraging, and that matters because as I keep reminding, this subsector’s products are used not only throughout the rest of domestic manufacturing, but in other important parts of the economy like construction and agriculture. Its April employment boost of 3,700 followed March job creation that was upgraded strongly to 5,400.

In the big miscellaneous durable goods sector, a catchall category that includes everything from surgical equipment and supplies (like personal healthcare protection equipment – PPE – more on which later) to jewelry to gaskets and fasteners to musical instruments, payrolls jumped by 12,600 – their best monthly performance since its 15,300 advance last July.

And two other significant manufacturing employers –miscellaneous non-durable goods and the big chemicals sectors (whose output is also used all over the economy) – each generated enjoyed healthy payrolls increases of 4,300 in April.

Even the industries closely related to the fight against the CCP Virus, whose employment performance since the pandemic’s arrival generally have disappointed, showed some signs of job-creation life in April.

The overall pharmaceutical industry added 1,500 jobs on month in March (the latest available figures) and Februay’s improvement remains a strong 1,700. Since the last pre-pandemic month (February, 2020), this sector’s payrolls have grown by 3.11 percent.

Hiring slowed in the pharmaceuticals subsector containing vaccines – from 1,300 sequentially in February (unchanged from the first estimate) to 500 in March (also the latest available figures). But these companies’ employment is still 6.77 percent higher than in that last pre-pandemic month of February, 2020.

The employment signals were mixed in the manufacturing category containing PPE goods like facemasks, gloves, and medical gowns. Monthly job creation in February was downgraded from zero to a loss of 100, but March’s results (also the most recent) came in at 900, and this sector now employs 8.75 percent more workers than in February, 2020.

In an aerospace industry troubled for years by Boeing’s safety woes, the recent jobs figures are literally all over the place. The latest (March) results show that payrolls for aircraft fell month-to-month in March by 1,800 – surely reflecting the continuing virus-generated slump in air travel. But February’s upward revisions were nothing less than stunning – skyrocketing from a jump of 1,000 to one of 11,700. Fluctuations – though more modest – were also evident in aircraft engines and parts, and non-engine aircraft parts.

Yet as confusing as the new manufacturing jobs figures have been, the future seems just as cloudy. Optimism remains justified by developments like the enormous amounts of stimulus still pouring into the U.S. economy, by the apparent certainty that a major injection of infratructure spending is (finally) on the way, and by the continuing reopening of the economy spurred by vaccinations and less consumer caution.

Even so, the semiconductor shortage is not only here to stay for some time, but has affected many other industries other than automotive. The rate of U.S. vaccinations is slowing and the virus – including the new variants – appears likely to stage something of a comeback when the weather cools again in the fall. Air travel may never recover to pre-virus levels, which will harm not only the aerospace industry per se, but its vast domestic supply chain. And higher taxes and many more regulations could well hit U.S.-based manufacturers – at least until the Congressional elections of 2022.

On balance, I’d still bet on a bright future for domestic industry – mainly because all the sentiment surveys show that manufacturers themselves are full of confidence, and because President Biden has kept in place all the Trump China and metals tariffs that have priced much foreign competition out of the U.S. market. But I’m far from willing to bet the ranch.

(What’s Left of) Our Economy: March U.S. Manufacturing Job Gains Lagged – For a Good Reason

Tags

aerospace, aircraft, aircraft engines, aircraft parts, American Jobs Plan, automotive, Biden, Build Back Better, CCP Virus, coronavirus, COVID 19, Donald Trump, Employment, fabricated metal products, Jobs, Labor Department, lockdowns, machinery, manufacturing, non-farm jobs, pharmaceuticals, PPE, recession, recovery, regulation, semiconductor shortage, semiconductors, tariffs, taxes, Trade, travel services, vaccines, Wuhan virus, {What's Left of) Our Economy

This morning’s figures from the Labor Department show that U.S. domestic manufacturing was a bit of a jobs creation laggard in March – and that was good news. The reason? The employment gains for the rest of the economy were so enormous.

This latest monthly U.S. jobs report showed that non-farm payrolls (the definition of the U.S. jobs universe used by the Labor Department, which tracks these data), rose by 0.64 percent in March – to 144.210 million. Job-creation in the private sector advanced at a virtually identical rate.

Payrolls in manufacturing were up by a lower 0.43 percent – to 12.284 million. But they still increased by 53,000 – their best performance since September’s 55,000. It’s also possible that hiring in the automotive sector was held down by a global shortage of semiconductors – which has led to production cutbacks and even some layoffs.

The only disappointment in the new manufacturing jobs numbers concerned revisions – which were mostly negative. February’s initially reported 21,000 net employment gain is now estimated at 18,000. January’s 14,000 job loss (already downgraded from an initially judged 10,000) is now pegged at a still greater 18,000. But December’s improvement was upwardly revised again – from 34,000 to 35,000.

As a result, manufacturing has now regained 63.83 percent (870,000) of the 1.363 million jobs the sector shed during the peak CCP Virus lockdowns period of last March and April. That’s fewer relatively speaking than the recovery in private sector employment – 66.88 percent (14.172 million) of the 21.191 million jobs it lost during that period.

But because of continuing weakness in the public sector – which has recovered just 66.42 percent of its 22.362 million job loss last spring – manufacturing’s payrolls’ rebound is still ahead of the entire economy’s. In fact, manufacturing jobs now account for a higher (8.52 percent) of total non-farm employment than during the last full pre-pandemic data month (8.39 percent in February, 2020).

The biggest manufacturing jobs winners in March? Far and away the champ was the big fabricated metals products industry, which expanded employment by 13,700 – more than a quarter of the manufacturing total. Next came two smallish sectors – miscellaneous non-durable goods and printing and related support activities (up 7,400 and 5,900, respectively). Encouragingly, jobs increased by 3,500 in the big machinery sector – whose products are used throughout not only the rest of manufacturing but the entire economy.

The worst performers were transportation equipment – whose 3,000 lost March jobs included 1,000 in the automotive sector, which has been forced into production cutbacks and some layoffs due to the global semiconductor shortage – and furniture (down 1,300).

Unfortunately, these latest figures indicate that employment in many CCP Virus-fighting goods continues to lag. To be sure, their payrolls seem to be up from the last pre-pandemic levels whereas overall manufacturing jobs are down (by 4.02 percent). But given the nature of the emergency, and the shortages it revealed, it’s surprising they’re not higher still.

The relevant numbers only go through February, and in the broad pharmaceuticals sector, employment rose by 1,600 sequentially. And January’s initially reported 700 job loss has been upgraded to a decrease of only 100. But the sector’s payrolls have grown by a mere 2.60 percent since that last pre-pandemic month of February, 2020.

The performance of the pharmaceuticals subsector containing vaccines was considerably better. February payrolls expanded by 1,300 sequentially, and January’s gains are now estimated at 500, not 100. As a result, this vaccine-related sector’s employment levels are now 6.23 percent higher than in February, 2020.

The story, however, has been more discouraging lately in the manufacturing category containing personal healthcare-related protection devices (PPE) like facemasks, gloves, and medical gowns. Payrolls were flat on month in February, and the initially reported January job loss of 800 was only upgraded to a decline of 700. Still, payrolls in this sector have climbed by 7.98 percent since February, 2020.

Interestingly, despite the rebounding orders for Boeing’s popular but previously grounded 737 Max jetliner, the recovery of national and global travel, and the resumption of deliveries of its also-troubled 787 Dreamliner, none of these positive developments has shown up in the aerospace jobs numbers.

For example, aircraft employment in February (also the latest available figures) grew by only 1,000 on month and not only remains down 10.66 percent on year, but substantially lower than all of last year’s safety crisis- and the worst of the CCP Virus-plagued months. Similar trends hold for aircraft engines and engine parts, and non-engine aircraft parts.

The outlook for domestic manufacturing job creation still seem bright, as vaccinations are being administered rapidly, reopenings are spreading, igniting renewed overall economic activity, Boeing does seem to be emerging from its safety and manufacturing-related troubles, and the high, sweeping Trump tariffs keep pricing many Chinese goods out of the U.S. market, thereby creating new opportunities for American producers.

But that global semiconductor shortage, which will eventually affect much more than automotive output, may not end until late next year. It’s tough to know the overall impact of the Biden administration’s American Jobs Plan and other Build Back Better virus recovery proposals on the one hand, and the tax increases proposed to pay for them on the other, as well as the new regulations that will be involved – assuming even that they pass Congress reasonably intact. And vaccines production won’t be booming forever.

So no one concerned about domestic manufacturing’s health and prospects has any excuse not to peruse carefully all the industry-related data and news that are in store in the weeks and months ahead.

(What’s Left of) Our Economy: October Costs Manufacturing Some Jobs Momentum

Tags

(What's Left of) Our Economy, automotive, CCP Virus, coronavirus, COVID 19, election 2020, Employment, fabricated metal products, food products, Jobs, Joe Biden, machinery, manufacturing, metals, motor vehicle parts, NFP, non-farm jobs, non-farm payrolls, private sector jobs, recession, regulation, tariffs, taxes, Trade, transportation equipment, Trump, Wuhan virus

The manufacturing jobs picture revealed in this morning’s October official U.S. jobs report was a classic glass-half-empty/half-full story. But for the first time since the employment rebound from its CCP Virus-induced lows, the gloomier view seems to have the edge – though a modest one. The main reason: In October, the rate of cumulative manufacturing job creation fell slightly behind that of the U.S. government’s entire employment universe (so-called non-farm payrolls, or NFP), and of the private sector.

Domestic industry increased its employment level on net by 38,000 in October on a sequential basis. That figure represented a decrease from the September total – which has been revised down from 66,000 to 60,000. But it’s an improvement over August’s also downwardly revised 30,000 total.

In addition, as opposed to dominating the manufacturing jobs picture for good and ill, as it has during the pandemic recovery period, automotive jobs, rose by a mere 1,400. The downward revision in combined vehicle and parts payrolls in September, however (from 14,300 to 7,700) did account for more than all of the total downward manufacturing revision for the month.

October’s manufacturing net jobs-creation leaders were fabricated metals products (7,200), food manufacturing (6,200), primary metals (6,000), and machinery (3,900). The first two categories enjoyed their second straight month of relatively strong job improvement, while the primary metals gain amounted to an important turnaround from September’s 3,400 net employment loss.

At the same time the October machinery results – important because that sector influences so much manufacturing activity overall, and because of its close connections to non-manufacturing industries like agriculture and construction) – were much less impressive than the 12,600 employment rise of September. Worse, this figure itself was downgraded from the initially reported 13,800.

The only significant October jobs loser in manufacturing was transportation equipment. This large category – which includes automotive – shed 2,400 jobs on net. The big problem here was motor vehicle parts, where employment fell by 2,800.

October’s employment progress means that manufacturing overall has regained 742,000 (54.44 percent) of the 1.363 million jobs it lost during the worst of the CCP Virus economic slump of March and April. (Those earlier job losses represented 10.61 percent of the last pre-virus – February – manufacturing employment level.)

As of October, non-farm payrolls total had regained 12.070 million (54.47 percent) of the 22.160 million total decrease they suffered in March and April. So although by this definition, overall U.S. employment plunged by 14.53 percent during the virus low point – more proportionately than manufacturing) — the rate of its jobs rebound is now slightly faster.

Faster still has been the bounceback in private sector jobs. Non-government employment (whose status is much more revealing of the economy’s fundamentals than government employment) fell by 21.191 million in March and April combined – greater relative losses (16.34 percent) than experienced either by manufacturing or the non-farm sector. But its strong October performance mean that it’s regained 12.317 million of these position on net – an increase of 58.12 percent.

But as if the CCP Virus and its decimation of the economy haven’t created enough uncertainties for manufacturing employment (and for the economy as a whole), this week’s Election 2020 results could further muddy the waters – especially if the White House changes hands. Despite October’s jobs slowdown, industry’s employment and output have held up well, due no doubt significantly to President Trump’s tariff-centric trade policies and domestic overhauls in taxes and regulations. The Trump manufacturing record pre-virus has also been strong. Would a Biden administration reversal of these moves put U.S. manufacturing back behind the eight-ball? Or would it find new alternative growth fuels for industry?

Making News: New Article on Why I Voted for Trump

Tags

Big Tech, Black Lives Matter, censorship, China, Conservative Populism, conservatives, Democrats, economic nationalism, election 2020, entertainment, environment, freedom of expression, freedom of speech, George Floyd, Hollywood, Hunter Biden, Immigration, industrial policy, Joe Biden, Josh Hawley, journalism, Mainstream Media, Making News, Marco Rubio, police killings, regulation, Republicans, Robert Reich, Russia-Gate, sanctions, Silicon Valley, social media, supply chains, tariffs, taxes, technology, The National Interest, Trade, trade war, Trump, Truth and Reconciliation Commission, Ukraine, Wall Street, wokeness

I’m pleased to announce that The National Interest journal has just published a modified version of my recent RealityChek post explaining my support for President Trump’s reelection. Here’s the link.

The main differences? The new item is somewhat shorter, it abandons the first-person voice and, perhaps most important, adds some points to the conclusion.

Of course, keep checking in with RealityChek for news of upcoming media appearances and other developments.

(What’s Left of) Our Economy: Why Trump’s Not Down on the Farm

Tags

agriculture, Alan Rappeport, American Farm Bureau Federation, election 2020, farmers, Greg Sargent, Mainstream Media, regulation, tariffs, taxes, The New York Times, Trade, trade war, Trump, Washington Post, {What's Left of) Our Economy

For anyone with any sympathy for President Trump’s China and other trade policies (like yours truly), one of the great pleasures of following the news coverage has been reading the bushel of stories that conform to the following pattern: a Mainstream Media reporter jets out to farm country expecting to find the nation’s agricultural community – which voted strongly for Mr. Trump in 2016 – up in arms about lost export sales due to foreign tariffs and other restrictions imposed in retaliation to new U.S. levies. And selfsame reporter winds up grudgingly writing that farmers and ranchers are by and large sticking with the President.  (See this classic example.)

This morning, such coverage took a turn that’s new and especially important given the approach of the next presidential election. In the process, the journalists involved unwittingly demonstrated how ignorant they continue to be about the full relationship between Trump administration policies and American agriculture.

The new turn was made clear by this claim today in a New York Times report: After “remaining resolute” in support of Mr. Trump, the difficulties faced by U.S. Farmers is finally “becoming a political problem” for the President. Indeed, wrote correspondent Alan Rappeport, “as the trade fight gets uglier, farmers are beginning to panic.”

And following a recent, increasingly incestuous trend in which reporters and pundits from one news organization breathlessly (and often instantly) hype the findings of a rival, a Never Trump-er Washington Post columnist based an entire essay today on the Times piece, declaring “There are indications that they are now getting genuinely angry over Trump’s efforts to gaslight them so shamelessly over the impact of his trade war with China.”

Or are they?

The original (long) Times article – in the next to last paragraph – informed readers that

“many farmers continue to support Mr. Trump and express hope that the president knows what he is doing in his dealings with China. A July survey from Farm Journal found that 79 percent of 1,100 farmers still back Mr. Trump despite the lack of progress in negotiations with China.”

Similarly, Post columnist Greg Sargent wrote: “Let’s stipulate up front [actually, this insight didn’t come until the middle of the article] that there is zero chance that farmers — or rural voters — break with Trump in 2020.”

At the same time, there’s no doubt that American farm exports, especially to China, are down this year. So what gives? Two major developments, both of which have been almost completely neglected:

First, the Trump administration has done very well by American farmers and ranchers by way of tax policy. And second, it’s done just as well by them by way of regulatory policy. At least, that’s what the biggest U.S. agricultural lobbying group has said, in reports here and here. P.S. The American Farm Bureau Federation is no fan of the Trump tariffs.

I could add that American farm prices and incomes began falling years before Mr. Trump’s inauguration – and have actually been leveling off recently. And that, when it comes to trade, farmers are strongly in favor of the U.S.-Mexico-Canada-Agreement – the Trump administration’s rewrite of the North American Free Trade Agreement (NAFTA). But that would be piling on.

It’s not that everyone shouldn’t be heartened by the upsurge in national press corps interest in American agriculture. But that’s only Step One in generating accurate coverage. Step Two is actually learning something.

Im-Politic: Will Trump Let Trump be Trump on Issues?

Tags

Congress, conservatism, conservatives, Democrats, deregulation, establishment, Im-Politic, infrastructure, John McCain, Marco Rubio, midterm elections, Nancy Pelosi, Obamacare, Populism, regulation, Republicans, tax cuts, Trade, Trump

Ever since Donald Trump made clear his staying power in presidential politics, his more populist supporters have tried to beat back efforts of more establishment-oriented backers to “normalize” him by insisting that they “Let Trump be Trump.” The results of Tuesday’s midterm elections tell me that the populists’ arguments on substance (as opposed to the President’s penchant for inflammatory and/or vulgar rhetoric) are stronger than ever, but that the obstacles that they’ve faced remain formidable.

The “Let Trump” argument contends that the President’s best hope to attract the most voters has always been his willingness to reject positions that for decades have been conservative and Republican hallmarks, but that have become increasingly unpopular outside the realms of most national GOP office-holders, other Washington, D.C.-based professional Republicans and conservatives, and the donors so largely responsible for their power, influence, and affluence. These maverick Trump positions have included not only trade and immigration; but the role of government and the related issues of entitlements, healthcare, and infrastructure spending; and Wall Street reform.

But since his election, as I’ve argued, Mr. Trump’s willingness to embrace the full maverick agenda has been blunted by his vulnerability on the scandals front. Specifically, he’s seemed so worried about impeachment threats from Democrats that he’s been forced to shore up his support with the conventional Republicans that dominate the party’s ranks in Congress. Why else, I’ve written, would his first two years in office have so prominently featured strong support for right-of-center standbys like major tax and federal discretionary spending cuts; curbs on regulation; repeal of Obamacare; and bigger military budgets, rather than, say a massive push to repair and retool America’s aging or simply outdated transportation, communications, energy, and other networks?

It’s true that Trump remained firmly in (bipartisan) populist mode on trade (notably, withdrawing from the Trans-Pacific Partnership agreement and slapping tariffs on metals imports and many Chinese-made products), and just as firmly in (conservative) populist mode with various administrative measures and proposals to limit and/or transform the makeup of legal immigration – though many of his most ardent backers accuse him of punting on his campaign promise to build a Border Wall.

Yet this Trump populism strongly reflected the views of the Republican base – a development now not lost on conventional conservatives when it comes to immigration, even though they’ve been slow to recognize the big shift among Republican voters against standard free trade policies. By contrast, the President has apparently feared that Congressional Republicans would draw the line on the rest of their traditional agenda – or at least that he could curry favor with them by pushing it.

The midterm results, however, might have brought these political calculations to a turning point. On the one hand, there’s no doubt that most House and Senate Republicans, along with the donors and most of the party’s D.C.-based establishment, are still all-in on their tax, spending, regulatory, and Obamacare positions.

On the other hand, according to the exit polls and other surveys, the tax cuts didn’t even greatly impress Republican voters (let alone independents). And most Americans aren’t willing to risk losing Obamacare benefits they already enjoy (especially coverage for pre-existing medical conditions) by supporting Republican replacement ideas that may be less generous.

The message being sent by all of the above trends and situations is that President Trump may have even more latitude than he’s recognized to cut deals with Democrats. At the same time, the Democrats’ capture of the House of Representatives on Tuesday and signs that they’ll ramp up the scandal investigations could keep preventing him from “being Trump” on such issues and possibly antagonize most Republican lawmakers.

Of course, my political neck isn’t on the line here. But I’d advise Mr. Trump to follow his more unconventional instincts. The Congressional Republicans still uncomfortable with him ideologically must be aware that his personal popularity with GOP supporters has grown significantly since mid-2017, and that this surge owes almost nothing to their own priorities. So if they don’t help staunchly resist any intensified Democratic probes, their political futures could look pretty dicey, too.

One big sign that ever more establishment Republicans are getting “woke” on the obsolescence of much establishment conservatism: the efforts by long-time mainstream conservative/Republican favorites like Senator Marco Rubio of Florida to develop a Trump-ian agenda that can survive Mr. Trump’s presidency. Further, resistance in Washington to their efforts is likely to continue weakening, since so many of the President’s ideological opponents on the Republican side are leaving the House and Senate. (And of course, their spiritual leader, veteran Arizona Senator and 2008 Republican presidential nominee John McCain recently passed away.)

To be sure, Mr. Trump yesterday (rhetorically, anyway) erected his own obstacle to deal-cutting – his declaration that he won’t be receptive if investigations persist and broaden. House Democratic leader (and still favorite to become Speaker again) Nancy Pelosi has pretty clearly, however, signaled that she herself is not impeachment-obsessed, even if those exit polls say most of the Democratic base is.

As a result, I can’t entirely blame the President for still feeling spooked by the Democrats – at least this week. But what an irony if the most important opponent “letting Trump be Trump-ism” – whose broad popularity could well combine with the advantages of incumbency to outflank the Democrats, win the President a second term, and pave the way for a truly earth-shaking, lasting realignment of American politics – turned out to be President Trump himself.

(What’s Left of) Our Economy: Both Trump and Critics Could be Wrong About the Business Spending Rebound

Tags

Barack Obama, business spending, Center for Economic and Policy Research, Dean Baker, energy, recession, regulation, Trump, {What's Left of) Our Economy

Economist Dean Baker of the Washington, D.C.-based Center for Economic and Policy Research has just performed a valuable service. He’s looked under the hood of U.S. economic data and found a major, under-reported feature of the economy’s business spending performance under President Trump so far: A lot of the improvement has come in the energy sector, and therefore stems from energy price increases that have little to do with Washington policy decisions.

And if the story ended there, Baker would be justified in dousing “Trump capex (capital expenditures) rebound” claims with lots of cold water. But it doesn’t.

As Baker points out, energy-related capital spending accounted for more than 40 percent of the total increase in all capital spending recorded in the official government data since last year. That is indeed big-time out-performance, and there’s no doubt that (like the energy-related business investment bust that began in late 2014) it’s largely due to energy price changes. When the price of oil and natural gas goes up, businesses (understandably) conclude that demand is rising, drill more, and need more drilling equipment and the like. When energy prices fall, this spending just as understandably tends to sink.

Even so, if you look at the policy landscape, there’s a case for giving the administration some credit for the energy investment recovery. Specifically, it’s rolled back some important regulations in the industry, and has spoken repeatedly of eliminating more. And interestingly, this latest increase in energy-related business spending has taken place much faster than the previous surge, under former President Barack Obama – who was not exactly a fossil fuels booster.

Yet developments outside the energy sector indicate even more powerfully that the economy could be seeing a Trump effect on capex. The key is examining spending on equipment. Whatever the effect of energy-related spending on the business investment totals, equipment’s is much bigger. Even after the latest spurt in energy, it still represents less than four percent of the business spending total (officially called non-residential private fixed investment). The latest figures show the equipment share is more than ten times larger – nearly 48 percent.

So although equipment spending has increased by only 5.93 percent during the Trump era, that rise amounts to just over $62 billion – much more than the energy-related spending increase. And more telling, this advance follows a 3.38 percent yearly drop in this spending category in 2016. In fact, equipment capex was down on net from the third quarter of 2014 through the fourth quarter of last year. The last time it fell for that long a stretch was during the last (historically terrible) recession (when the plummet was much greater and lasted considerably longer).

All the same, let’s not forget that the Trump administration is still only one year old. So a wait-and-see attitude is probably best for both sides of the Trump effect capex debate. And to the extent that any patterns can be discerned, not surprisingly, the truth so far seems to lie somewhere in between.

(What’s Left of) Our Economy: Trump & Workers, by the Numbers

Tags

blue-collar workers, construction, healthcare services, Helaine Olen, inflation adjusted wages, Jobs, manufacturing, mining, real private sector, real wages, regulation, Steven Greenhouse, subsidized private sector, The Nation, The New York Times, Trump, unions, wages, workers, {What's Left of) Our Economy

Since Donald Trump first declared his presidential candidacy, he’s been dogged by charges that he’s a phony populist, and that his working class supporters have long been hoodwinked by his promises of restoring factory and other blue collar jobs and living standards. And this past Labor Day inspired the President’s critics to double down, as evinced by this piece by long-time labor reporter Steven Greenhouse in The New York Times and this one by economist Helaine Olen in The Nation.

So it seems appropriate for RealityChek‘s slightly delayed analysis of the latest monthly jobs report to include some data bearing on these questions. The verdict? Whatever anti-union and deregulatory measures the Trump administration has backed, its first months in office overall have been just about as good for blue-collar industries and blue-collar employees as during the latest comparable period during the supposedly worker-friendly Obama administration.

First, the manufacturing highlights of last Friday’s August jobs report:

>August saw the best month of net new job creation in U.S. industry since August, 2014 (36,000 in each month.

>Although the August and July totals are still preliminary, their combined sequential employment increase of 62,000 was the highest such figure since the 68,000 improvement in December, 2011 and January, 2012. This back-to-back total reduces the odds that the August numbers are a fluke.

>On a year-on-year basis, manufacturing’s August gain of 138,000 contrasts strikingly with the 5,000 net job loss in industry between the previous Augusts. In fact, this new annual advance was manufacturing’s strongest since the 139,000 yearly gain in August, 2015.

>Reenforcing this conclusion are the strong upward revisions for monthly manufacturing job growth in June (from an upwardly revised 12,000 to 21,000) and for July (from 16,000 to 26,000)

>Manufacturing has now regained 1.027 million (44.79 percent) of the 2.293 million jobs it lost from the onset of the last recession (at the end of 2007) through its jobs bottom in February and March, 2010.

>Yet manufacturing employment is still down 9.21 percent since the downturn’s beginning. During that period, overall private sector employment is up by 7.23 percent.

>Manufacturing’s wage performance, however, slumped notably in August. Pre-inflation wages sank sequentially by 0.56 percent – the worst such drop since May, 2012’s 0.63 percent.

>It’s true that manufacturing wages have been volatile this year, with July recording a strong month-on-month gain of 0.53 percent. But the yearly August manufacturing wage rise of 1.76 percent not only trailed the previous August-to-August rise of 2.68 percent. It was also the smallest annual increase since July, 2015’s 1.57 percent.

>By contrast, August current dollar wages in the private sector overall were up by 0.11 percent sequentially and 2.53 percent year-on-year. The latter total was just slightly below the 2.55 percent increase achieved between August, 2015 and August, 2016.

>Since the current recovery began, in mid-2009, pre-inflation manufacturing wages have risen by only 15.25 percent total. For the private sector overall, they’ve increased by 19.20 percent.

>As a result, the gap between private sector pre-inflation wage increases and those gains in manufacturing stood at 20.57 percent in August. One encouraging development for manufacturing workers: Last August, the gap was much wider: 27.92 percent.

>On an after-inflation basis, manufacturing’s wage performance remains mixed compared with the rest of the private sector. The latest data are from July, and show a monthly gain of 0.37 percent for manufacturing workers and 0.19 percent for the private sector overall – barely half as much.

>Year-on-year, however, manufacturing’s real wage gains slightly lagged those of the private sector in toto in July – 0.74 percent versus 0.75 percent.

>And the gap is even wider during the current recovery – inflation-adjusted wage gains of only 1.96 percent for manufacturing workers during this more than eight-year period, versus an improvement of 4.75 percent for the entire private sector.

But what about the Trump-Obama comparison? Here are the main numbers, using February as the first plausible month of “Trump-onomics”:

>From this past February through August, total net new U.S. job creation is up by 0.66 percent, versus 0.83 percent from last February through last August – the final such period during Mr. Obama’s presidency. So score one for the previous administration? Maybe. But the economy is also deeper into the recovery, and just about at the official definition of full employment. So it’s natural that job-creation should slow down some.

>Interestingly, the difference is much smaller when looking at private sector job creation. Last February through last August, it grew by 0.84 percent. During the comparable Trump period, it’s increased by 0.79 percent. That’s one sign that the Trump employment performance has been healthier, and therefore more sustainable, because it’s been more private-sector driven, than the late Obama version.

>This difference becomes even more pronounced when looking at trends in the subsidized private sector – those industries traditionally considered private sector (notably healthcare) that nonetheless depend heavily on government subsidies. Hence my decision to place them in a separate category.

>So far this year, under President Trump, subsidized private sector jobs have indeed increased strongly – by 0.95 percent. But that’s a much slower rate of growth than the 1.29 percent recorded during the comparable Obama months.

>As a result, employment growth in the “real” private sector has been faster under Mr. Trump – by 0.76 percent to 0.74 percent – and this, again, despite the arrival of full employment.

>Continuing sector by sector, the statistics show that the some of the biggest employment gains during President Trump’s tenure have taken place in blue-collar heavy industries that performed poorly during the comparable final Obama period.

>Principally, net employment from this past February through August is up by 0.83 percent in manufacturing, by 4.96 percent in mining and logging, and by 0.68 percent in construction.

>The comparable Obama administration numbers: -0.27 percent, -6.90 percent, and +0.63 percent, respectively.

>More broadly, blue-collar employment throughout the entire economy (defined by the Bureau of Labor Statistics as production and non-supervisory workers) has increased at the same pace during the two time periods in question (0.70 percent), though in absolute numbers, the Trump administration gains are a bit larger (714,000) than the corresponding Obama administration advances (701,000) – again, despite the arrival or near-arrival of full employment.

>Where blue-collar workers fared better so far during the Obama period than during the Trump period is on the wage front. But they haven’t fared massively better.

>For all private sector production and non-supervisory workers, pre-inflation wages were up by 1.36 percent during those Obama months, and 1.19 percent during the Trump months.

>The same trends have been visible in the blue-collar industries. During the Obama months in 2016, current-dollar wages rose by 1.78 percent in manufacturing, 0.82 percent in mining and logging, and 2.60 percent in construction.

>The Trump results? 1.26 percent, 0.87 percent, and 1.98 percent, respectively.

>In other words, the only blue-collar sector in which blue-collar workers have outperformed under President Trump has been in the mining sector – which has seen by far the biggest employment outperformance.

Of course, the Trump administration is still pretty young, and any or all of these trends could change, and change dramatically, in the months ahead. But until they do, it’s clear that Mr. Trump’s presidency has neither devastated the workers who supported him so ardently or made their lives Great Again. And any analysts denying that the truth so far lies somewhere in between – including the administration’s own grandstanders – have some explaining to do.

Following Up: Where Trump on Trade Falls Short

Tags

2016 election, advanced manufacturing, apparel, Donald Trump, Follwing Up, Hillary Clinton, inflation-adjusted growth, Made in Washington trade deficit, multinational corporations, NAFTA, North American Free Trade Agreement, offshoring, offshoring lobby, recovery, regulation, Rust Belt, steel, subsidies, taxes, The Race to the Bottom, Trade, Trade Deficits, trade law, World Trade Organization, WTO

Donald Trump has just given a deadly serious, detailed, and common-sensical speech about the need for overhauling American trade policy, and the establishment media has decided to respond largely by dredging up the fatuous observation that the presumptive Republican presidential nominee himself produces his name-brand apparel overseas.

Before dealing with some of the genuine – though anything but fatal – shortcomings of Trump’s trade speech, let me (again) dispose of this ignorance-based cheap shot: The very trade policies that Trump has been attacking have practically destroyed the domestic U.S. apparel industry. When Trump claims that it’s nearly impossible to make garments in this country profitably anymore, he’s absolutely right. Indeed, the Federal Reserve’s industrial production data show that, since the North American Free Trade Agreement went into effect in January, 1994, and launched the current, offshoring-focused stage of U.S. trade policy, domestic garment output is down nearly 83 percent in real terms. That’s a bloodbath.

Yes, that means that some companies still produce clothing in the United States. But it also means that the biggest money in the industry has taken the hint that opening the American market to competition from penny-wage developing countries with no meaningful environmental or worker safety regulation has been an invitation to shut down or join the party and offshore. Any journalist who fails to mention these facts is either clueless or trying to sell you a bill of goods.

At the same time, since most of the public isn’t well informed about trade and manufacturing specifics, either. And since a torrent of such slanted coverage – which has been echoed by Trump’s presumptive November rival, Hillary Clinton – can definitely affect voter judgment, Trump needs to make it as difficult as possible for opponents to portray him as a know-nothing or a hypocrite on what he clearly sees as a core issue. This is where his Tuesday speech – which overall, I liked – fell somewhat short. Here are some important examples:

>Trump deserves a lot of credit for pointing out that misguided policies have killed not only employment – especially in trade-sensitive manufacturing – but growth throughout the economy. But he left off the table eye-opening figures on just how great the trade toll has been. As I’ve documented, during this feeble economic recovery alone, the growth of that portion of the trade deficit directly influenced by trade policy (what I call the Made in Washington trade deficit) has so far slowed this already feeble expansion by some 20 percent. That’s more than $400 billion after inflation, and he should have defied anyone to insist that huge numbers of jobs haven’t been destroyed as a result.

>The likely GOP standard bearer also rightly blasted American political and business elites for pushing these damaging policies. But explaining exactly why will not only educate the public – it will further infuriate voters. As I’ve written repeatedly, and most comprehensively in my book, The Race to the Bottom, the offshoring focus that has dominated U.S. trade policy since the early 1990s resulted from American multinational corporations realizing that expanding commerce with low-income countries would enable them to improve their own (though not the nation’s) competitiveness and boost profits by supplying the high-price American economy from super-low cost and largely unregulated production sites.

In other words, for all the talk about gigantic, rapidly growing third world markets, post-NAFTA trade deals weren’t mainly about expanding American exports – and therefore growth, employment, and wages. They were mainly about expanding U.S. imports from the multinationals’ new foreign production sites. That is, big American business wanted Americans to keep playing their roles as consumers of the products they made. They just didn’t want them to keep playing their roles as producers of these products. You don’t think a critical mass of voters would be outraged to hear this?

>Trump’s vow to file suits in the World Trade Organization to open foreign markets to U.S.-origin goods and services and halt predatory foreign trade practices is completely inadequate. As I’ve also written, the WTO is far from a U.S.-like trade court where objective magistrates render impartial justice. It’s an anti-American kangaroo court numerically dominated by foreign trade powers whose overwhelming interest lies in keeping the U.S. market much more open to their goods and services than their markets are to U.S. exports. That’s largely why even when the United States does win WTO cases, the process takes so long that American interests have been dealt decisive setbacks.

In fact, that’s also why the Offshoring Lobby pushed so hard back in the 1990s for U.S. Entry into the WTO. They knew that it would give predatory foreign trade powers substantial legal immunity from American efforts to deal with illegal subsidization, dumping, currency manipulation, and the like – and that the factories they moved and built abroad would benefit from these market-distorting practices at the expense of domestic American producers and their workers.

In other words, Trump shouldn’t be arguing for working through the WTO. He should be promising to seek an American withdrawal.

>Trump’s related promise to file more suits against predatory foreign traders in the U.S. trade law system is sorely inadequate for three main reasons. First, as suggested above, the WTO nullifies most of America’s legal authority to use such unilateral mechanisms. Second, the domestic trade law system is almost as slow-moving as the WTO. And third, this legalistic set of procedures is by definition piecemeal and reactive. If Trump thinks that American trade law can help make the U.S. economy great again in his lifetime, he’s dreaming.

>I recognize that the steel industry has acquired iconic status in American culture and politics. It also remains incredibly important economically. But Trump’s exclusive reliance on steel’s recent woes to illustrate what’s wrong with American trade policy unfortunately reinforces the wrongheaded conventional wisdom that trade policy critics are naively obsessed with reviving so-called Rust Belt industries.

What Trump should have added is that manufacturing sectors running sizable trade deficits also include semiconductors, electro-medical devices, all categories of machine tools, farm machinery, construction equipment, ball bearings, telecommunications equipment (not including smartphones), and pharmaceuticals. Believe me, I could go on. And that’s not your classic Rust Belt stuff. Are all these domestic producers hopelessly uncompetitive, Trump should ask? Or are global trade markets unmistakably rigged even against American-made products falling into any knowledgeable definition of advanced manufacturing?

>Trump clearly felt the need to throw some red meat to traditional Republicans and conservatives by also promising to boost the productive sectors of the American economy by getting rid of “wasteful rules and regulations” and cutting taxes in order to “make America the best place in the world to start a business, hire workers, and open a factory.”

Of course, there’s an important, legitimate debate about the proper scope of regulations and the proper level of taxation for both corporations and individuals. Think though, of the outreach potential to independent and even many Democratic voters had Trump added something along these lines:

“But we also have to remember that many of our regulations also serve the vital purpose of protecting us from dangers like polluted air, water, and land; and unsafe food and workplaces. By freeing America’s domestic companies of the need to compete against rivals free to ignore these goals, we preserve regulations reflecting values we should be proud of, and ensure that we remain a genuine first world country.”

And let’s not forget arguments made in Trump’s tax plan (though in a form that’s surely vastly overstated) but neglected in this speech: All else equal, the faster the economy’s real (as opposed to bubble-ized) growth, the stronger its ability to generate the tax revenues that are both politically acceptable and needed to finance true national needs and popular national desires in a responsible way.

Again, I really do believe that this Trump speech was the best Americans have heard on trade in decades. But that bar has been abysmally low. If Trump wants to make America “Greater Than Ever Before” ensuring that his trade positions fit this description will help a lot.