Making News: Podcast Appearance Tonight on Apple Diversifying Out of China

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Apple, CBS Eye on the World with John Batchelor, China, decoupling, Making News, manufacturing, supply chain

I’m pleased to announce that I’m scheduled to be back tonight to the nationally syndicated “CBS Eye on the World with John Batchelor” – with a difference. Since it’s Saturday, the segment will appear tonight on the program’s podcast page, not on the radio. Our subject: The implications of a report that Apple has decided to speed up its plans to move some of its massive production out of China.

I’m not sure when the pre-recorded segment will be on-line, but I’ll post a link once it’s up.

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

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(What’s Left of) Our Economy: More Evidence of Biden-Flation’s Toll

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American Rescue Plan, Biden administration, Covid relief, energy prices, Federal Reserve, food prices, hunger, inflation, monetary policy, progressives, recession, supply chain, Ukraine War, {What's Left of) Our Economy

Left-of-center critics of the Federal Reserve’s inflation-fighting efforts keep insisting that risking recession to tame prices would unnecessarily harm the most vulnerable Americans and their struggling working class counterparts. Instead,  many have claimed that living costs can be cut sufficiently by forcing greedy corporations to charge less through windfall profits taxes, price controls, and the like.

And they’ve bridled in particular at charges that the Biden administration’s American Rescue Plan (ARP) greatly worsened the problem by handing trillions of dollars of CCP Virus relief – and therefore purchasing power – to U.S. consumers well after economic growth had already rebounded strongly and unemployment had already nosedived.

Any development that can engulf the gargantuan American economy, like historically high inflation, almost by definition has many different causes. But anyone doubting the economic overheating role of the ARP should check out the graph below, which is found in this Reuters piece from over the weekend.

The article adds to the evidence that still-towering inflation rates are devastating low-income Americans by super-charging the prices of that most basic of basics: food. But the graph makes clear as can be how the ARP contributed to the problem.

As it shows, prices of food (the darker line) began taking off just about the time that the ARP’s strings-free child tax credit payments started to be sent out (July 15, 2021, to be precise) – and not just to the needy, but to considerably better off households as well. Not so coincidentally, the share of American families with children reporting to U.S. Census Bureau surveys being “sometimes or often” short of food (the lighter line) started taking off soon after. And also noteworthy – these food price rises began many months before Russia’s February, 2022 invasion of Ukraine began playing its own major food inflation role. 

As the article also emphasizes, between 2020 and 2022, “as pandemic restrictions eased, so did the appetite for congress and some states to fund hunger prevention efforts.” But continuing federal purchases for “pantries, schools and indigenous reservations” were needed in the first place largely because food – not to mention other necessities – kept becoming so much more expensive.

The lesson here isn’t that no pandemic assistance should have been provided at all. After all, genuine suffering was widespread in its early phases and no one knew how long they would last. And the Fed’s left-of-center critics are correct that ongoing CCP Virus-related and Ukraine War-related energy supply disruptions have greatly boosted prices recently, too.

But as noted here previously, the supply- and demand-side roots of inflation are very closely related (because businesses can be relied on to continue raising prices as long as they can find enough buyers, and to cut them when customers start balking). Moreover, although in economists’ lingo, some prices are “inelastic” (because they’re for goods and services that are essential enough to prevent purchasing cutbacks even after major price increases), when they rise high enough, they can still foster lower prices for other purchases that are deemed less important.

Therefore anything, like big government checks, that fills consumer pockets will strongly tend to spur inflation sooner or later. So when help does need to be provided, it should be much more precisely focused on relieving genuine privation than pandemic relief was.

Even more important: The inflationary effects of supporting household consumption can be offset – and are best offset – by policies to support more production. When the Fed’s left-of-center critics start addressing defects in that supply side of the economy, rather than trafficking in gimmicks sure to exacerbate them, their complaints about excessive central bank monetary medicine will deserve a much bigger audience. In the process, they’ll be able to deliver lasting assistance to those whose plight they rightly emphasize.        

Those Stubborn Facts: U.S. National Security Outsourced to China

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China, defense, Defense Department, national security, Pentagon, procurement, supply chain, Those Stubborn Facts

Number of Chinese entities in the U.S. Defense Department’s supply base, 2019: 655

Increase since 2012: “More than fivefold.”

 

(Source: “Pentagon Pushes Defense Companies to Limit Use of Chinese Supplies,” by Doug Cameron, The Wall Street Journal, September 18, 2022, Pentagon Pushes Defense Companies to Limit Use of Chinese Supplies – WSJ )

(What’s Left of) Our Economy: An Encouraging June Swoon for the U.S. Trade Deficit

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China, energy, exports, GDP, goods trade, gross domestic product, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, recession, services trade, supply chain, Trade, trade deficit, Ukraine War, Zero Covid, {What's Left of) Our Economy

This morning’s official data (for June) show that U.S. trade was firing on practically all cylinders that month. In addition, the shrinkage in the combined goods and services deficit to the lowest level ($79.61 billion) since last December ($78.87 billion) was clearly attributable not only or even mainly to developments holding the nation’s imports down – ranging from a slowing in American economic growth (and therefore in most consumption) to the wounds China is inflicting on its export-heavy economy due to its insanely over-the-top Zero Covid policy to separate renewed backups at U.S. ports.

Instead, it’s also happening because many exports are up (to record levels), and that’s especally impressive because the dollar is so strong (which places U.S.-origin goods and services at price disadvantages all over the world, including in their home market) and because global growth is getting so weak (which tends to dampen demand for America’s offerings). And P.S. – these rising exports encompassed more than just the U.S. natural gas and other fossil fuels in such demand due to the Ukraine war and related sanctions on Russia.

The June figures reported one important exception, though: a monthly surge in the goods trade deficit with China to its highest level since November, 2018.

The June sequential drop in the overall trade deficit of 6.23 percent, from May’s $84.91 billion, was the third straight monthly decrease – a streak that hasn’t been seen since the second half of 2019, when the shortfall dropped sequentially six consecutive times – between June and November. Even better, the May total trade gap was revised down by a healthy 0.75 percent.

The deficit in goods trade – which dominates U.S. trade flows – tumbled 4.74 percent on month from $104.43 billion to $99.48 billion, its lowest level since last November. It, too, decreased sequentially for the third straight month, the first such stretch since December, 2019 through February, 2020 – just before the CCP Virus’ arrival in force began roiling and distorting the entire U.S. economy.

Meanwhile, the longstanding surplus in trade in services – which has been hit particularly hard by pandemic-related lockdowns and more cautious consumer behavior – advanced by 1.76 percent, from May’s upwardly revised (by 0.58 percent) $19.53 billion to $19.87 billion.

Combined goods and services exports hit their fifth straight monthly high in June, rising 1.67 percent from May’s upwardly revised $256.52 billion to $260.80 billion.

Energy goods exports were indeed way up – with natural gas overseas sales jumping by 26.51 percent, fuel oil exports increasing by 8.66 percent, and miscellaneous petroleum products climbing by 3.97 percent.

But they were far from the only significant export winners. For example, machinery and equipment exports soared by 13.78 percent on month in June; of foods, feeds, and beverages exports improved by 5.81 percent; and high tech goods’ foreign sales gained 4.51 percent.

In fact, goods exports overall also reached unprecedented heights for a fifth straight month in June, rising 1.97 percent sequentially from $179.51 billion to $183.04 billion.

As for services, their foreign sales hit their third straight all-time high, growing 0.97 percent on month, from $77.01 billion to $77.76 billion.

Overall imports, as mentioned, inched down sequentially – by 0.30 percent – in June, from $341.43 billion to $340.41 billion.

Another small monthly June decrease was registered by goods imports, which sagged by 0.50 percent, from $283.94 billion to $282.52 billion.

Only services imports broke this pattern: They set their own fifth consecutive record, increasing by 0.70 percent, from $57.49 billion to $57.89 billion.

The news in manufacturing trade was good, too – but only in comparison to industry’s recent alarming performance. The sector’s chronic, mammoth trade deficit was down 1.92 percent on month in June, from $132.60 billion to $130.05 billion. But this most recent total was still the third highest ever, after March’s $142.22 billion and the May figure.

Manufacturing joined the list of June export winners, as foreign sales increased sequentially from $112.15 billion to a new record $114.78 billion.

Manufactures imports inched up by mere 0.04 percent on month in June, from $244.75 billion to $244.83 billion. But this number was the second worst on record, after March’s $256.18 billion.

All told, at the statistical midway point of the year, the manufacturing trade deficit is running 22.13 percent ($756.53 billion vs $619.42 billion) ahead of last year’s record total. As a result, it’s all but certain that the United States in 2022 will rack up its fifth straight $1 trillion-plus manufacturing trade gap.

Year-to-date manufacturing exports are up 16.26 percent – from $548 billion to $637.12 billion. But the much greater amount of manufacturing imports has risen even faster – by 19.38 percent, from $1.16742 trillion to $1.39365 trillion.

Until very recently in the pandemic period (and its possible aftermath), as noted here, domestic manufacturing output and employment have held up remarkably well despite U.S.-based industry’s ballooning trade gap. The reason, as I pointed out here, is that Americans’ demand for manufactured goods has grown so strongly that domestic producers have been able to boost output even as imports flooded in much faster.

But with domestic manufacturing output decreasing in inflation-adjusted terms in both May and June, it looks like an economy-wide U.S. slowdown is weakening this demand, and that U.S.-based industry is finally paying a price for the share of its home market that it’s been losing.

The June China trade front news was even worse than that for manufacturing. The U.S. goods deficit with the People’s Republic soared by 17.13 percent sequentially, from $31.54 billion to $36.95 billion. That level is the highest since November, 2018’s $37.69 billion, and the increase the biggest since the 20.45 percent recorded in May, 2020 – when China and the United States were making recoveries from the first CCP Virus wave.

U.S. goods exports to China slumped by 5.22 percent, from $12.32 billion to $11.68 billion, while imports popped by 10.85 percent, from $43.86 billion to $48.63 billion – the highest total since last December’s $49.53 billion.

At least as important, this bilateral goods trade deficit is now up 27.51 percent on a year-to-date basis, as opposed to the 24.34 percent increase over the same period for its closest global proxy – the U.S. non-oil goods deficit.

For most of the time since the imposition of the first China tariffs imposed by former President Donald Trump in early 2018, this “Made in Washington” trade deficit (so named because by omitting services and oil trade, it tracks the U.S. trade flows most heavily influenced by U.S. trade policy) has been rising more slowly than the China goods deficit. Yet the gap, as noted in last month’s trade report, has been narrowing lately, and the June figures signal that it might be gone for the time being.

In general, though, the June trade report was a pleasant surprise given the currency and global growth headwinds mentioned above. Additional cause for some optimism:  The latest official release on the size of the U.S. economy in inflation-adjusted terms told much the same story of the trade gap narrowing for the “right reasons.”

But can the trade deficit keep falling due mainly to better exports, rather than following the typical slowdown and recession pattern of shrinking mainly due to the falling exports caused by weaker demand? In other words, can the falling deficit contribute to the quality of U.S. growth rather than simply reflect a feebler economy? Those are different questions altogether.

Following Up: Podcast Now On-Line of Biden and the Supply Chain Crisis National Radio Interview

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Biden, Biden administration, CBS Eye on the World with John Batchelor, Following Up, friend-shoring, Gordon G. Chang, health security, manufacturing, medical devices, national security, reshoring, semiconductors, supply chain

I’m pleased to announce that the podcast is now on-line of last night’s interview on the nationally syndicated “CBS Eye on the World with John Batchelor.” Click here for a timely discussion among John, co-host Gordon G. Chang, and yours truly on whether the Biden administration has a handle on the supply chain threats plaguing the U.S. economy in critical industries ranging from semiconductors to healthcare products.

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

(What’s Left of) Our Economy: U.S.-Based Manufacturing Returns to Pre-Pandemic Job Levels

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aerospace, aircraft, aircraft engines, aircraft parts, Bureau of Labor Statistics, CCP Virus, coronavirus, COVID 19, Employment, fabricated metal products, Federal Reserve, food products, inflation, Jobs, Labor Department, machinery, manufacturing, miscellaneous non-durable goods, monetary policy, non-farm jobs, non-farm payrolls, personal protective equipment, pharmaceuticals, PPE, printing, private sector, recession, semiconductors, supply chain, surgical equipment, textiles, transportation equipment, vaccines, {What's Left of) Our Economy

A power outage in my Maryland suburb of Washington, D.C. prevented me from filing my usual same-day post on the manufacturing highlights of the latest official U.S. jobs release, but the big news is still eminently worth reporting:

Specifically, “It’s back.” According to yesterday’s employment report from the Labor Department (for June), as was the case with the private sector overall, U.S.-based manufacturing last month finally regained all the jobs it lost – and then some – during the deep but short CCP Virus- and lockdowns-induced recession of spring, 2020.

The new figures show that by adding 29,000 workers on net sequentially during June, and having added slightly more to their headcounts in April than previously reported, domestic industry’s employment last month stood at 12.797 million. That’s 0.09 percent more than the 12.785 million on their payrolls in February, 2020, the last full data month before the pandemic’s arrival in force began decimating and distorting the economy.

As of June, American private sector workers now number 129.765 million – 0.11 percent above its immediate pre-pandemic level of 129.625 million.

Yet the entire non-farm economy (the employment universe of the Labor Department’s Bureau of Labor Statistics, which tracks employment trends for the federal government) still hasn’t recovered all the jobs it lost during March and April, 2020. Because public sector employment is still off some, June’s 151.980 million non-farm payroll count remains 2.38 percent below the February, 2020 total of 152.504 million.

The June jobs report left manufacturing employment at the same level of total non-farm employment (8.42 percent) as in May, and a slightly smaller (9.86 percent versus 9.87 percent) share of total pivate sector employment that month.

But since the CCP Virus’ large-scale arrival, domestic industry has boosted these percentages from 8.38 percent and 9.83 percent, respectively.

Another reason for optimism about the manufacturing results of the June jobs report: The 29,000 payrolls boost was a nice increase from May’s unrevised 18,000 increase – the worst monthly performance since April, 2021’s 28,000. And as noted above, this past April’s excellent results saw their second upward revision – from 58,000 to 61,000 (the highest month-to-month gain since last July’s 62,000).

May’s biggest manufacturing jobs winners among the broadest Individual industry categories monitored by the Labor Department were:

>transportation equipment, which has been on a genuine rollercoaster. June’s hiring increase of 7,200 followed a May loss revised down from 7,900 to 9,800 – the worst such monthly drop since February’s 19,900. Yet the April figure for the sector was upgraded from an unrevised 19,500 to 20,100 – and followed a March advance of 25,000. That was the best such performance since October’s 28,200.

Yet all this tumult – due largely to an ongoing semiconductor shortage still plaguing the automotive sector in particular – still left transportation equipment employment 2.23 percent lower than in immediately pre-pandemic-y February, 2020 – as opposed to the 2.57 percent figure calculable last month;

>miscellaneous non-durable goods, where headcounts improved by 5,400 – the biggest monthly increase since February, 2021’s 5,500. But volatility is evident here, too, as May’s previously reported 2,900 jobs decrease was revised downgraded 3,400 – the biggest decline since December, 2020’s -9,400. Yet payrolls in this catch-all sector are now 9.68 percent higher than in February, 2020 – up from the 8.12 percent calculable from last month’s figures;

>plastics and rubber products, whose 5,300 hiring advance was its best since April’s now twice upgraded 8,000 rise. Moreover, May’s initially reported jobs decrease of 400 is now judged to have been a gain of 2,600. These companies now employ 4.33 percent more workers than just before the pandemic’s large-scale arrival in February, 2020, versus the 2.88 percent calculable last month; and

>food manufacturing, which added 4,800 employees on month in June. In addition, May’s initially reported 6,100 increase was revised up to 7,600, more than offsetting a second downgrade of the April advance from 7,700 0 7,100. This huge industry’s workforce is now 2.87 percent greater than in February, 2020, as opposed to the 2.53 percent figure calculable last month.

The biggest jobs losers in June among the broadest manufacturing sectors were:

>printing and related support activities, where 900 jobs were cut in the biggest monthly decrease since January’s 1,800. Worse, May’s initially reported employment retreat of 400 is now estimated at 700, and April’s upgraded increase (of 3,100) was revised down to 3,900. Employment by these companies is now down by 10.63 percent since just before the CCP Virus’ arrival in force in February, 2020, versus the 10.23 percent calculable last month;

>textile product mills, whose sequential June jobs loss of 700 was its worst since last September’s 900. May’s initially reported 100 employment dip stayed unrevised, but April’s initially upgraded results (from a headcount loss of 400 to one of 300) is now judged to be a decline of 400 once again. Consequently, payrolls in this sector are now off by 5.32 percent since February, 2020, as opposed t the 4.60 percent calculable last month; and

>fabricated metal products, whose 600 job loss in June was its worst such retreat since April, 2021’s 1,600, and the first fall-off since then. Revisions were mixed, with May’s initially reported increase of 7,100 downgraded to 6,900 (still its best sequential performance since February’s 9,300 surge) but April’s losses were revised down again, from 1,600 to 1,400. Despite its recent hiring hot streak, however, payrolls in this large sector are still 2.31 percent below pre-pandemic-y February, 2020’s level, versus the 2.24 percent calculable last month.

As known by RealityChek regulars, the big machinery industry is a bellwether for all of domestic manufacturing and indeed the entire U.S. economy, since so many industries use its products. So it was definitely good news that employment in this sector rose on month in June by 1,000 after having dropped by a downwardly adjusted 3,200 in May. That’s the sector’s worst such performance since it shed 7,000 workers last November. (Note: Last month, I mistakenly reported the May, 2021 decrease at 7,900.)

Yet April’s hiring gains were revised down again – from 5,900 to 5,800 – and machinery employment is still off since just before the pandemic’s arrival by 2.05 percent, versus the 2.12 percent calculable last month.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and interestingly, their May performance was generally better than that for domestic industry as a whole.

The semiconductor industry still struggling with the aforementioned shortages boosted employment on month in May by 800, and April’s initially reported 900 increase was revised up to 1,100 – the best since December’s 1,400. Even though March’s jobs improvement remained at a downgraded 400, payrolls in the sector moved up to 2.20 percent higher than just before the pandemic arrived in February, 2020 from the 1.66 percent calculable last month. And although progress seems modest, it must be remembered that even during the early spring, 2020 downturn, these companies added to their headcounts.

In surgical appliances and supplies (which includes all the personal protective equipment and other medical goods so widely used to fight the CCP Virus), employment in May climbed by 400 on month, April’s initially reported 200 loss is now estimated at just 100, and March’s unrevised 1,100 increase stayed unrevised. These results mean that these sectors have increased their workforces by 4.36 percent since February, 2020, versus the 3.88 percent calculable last month.

The large pharmaceuticals and medicines industry was a partial exception to this pattern, losing 100 jobs sequentially in May. But April’s initially reported 1,400 rise (the best monthly performance since last June’s 2,600) is now judged to have been 1,500. And March’s advance stayed at an upwardly revised 1,200. As a result, these industries now employ 10.10 percent more workers than in immediately pre-pandemic-y February, 2020, versus the 9.78 percent calculable last month.

The medicines subsector containing vaccines hired 600 net new employees on month in May, April’s 1,100 payrolls increase (the best such performance since December’s 2,000), stayed unrevised, as was March’s previously upgraded 600 increase. Consequently, these companies’ headcounts are now 25.08 percent above their February, 2020 levels, versus the 24.47 percent improvement calculable last month.

Good job creation also continued throughout an aerospace cluster hit especially hard by CCP Virus-related travel restrictions. Aircraft manufacturers added 1,300 workers in May, their most robust monthly hiring since last June’s 4,000 jump. April’s initially reported climb of 200 was upgraded to 500, and March’s results stayed at an upwardly revised 1,200. These companies’ workforces have now crept to within 10.30 percent of their pre-pandemic total, versus the 10.96 percent shortfall calculable last month.\

In aircraft engines and engine parts, jobs rose by 700 sequentially in May, and though April’s initially reported increase of 900 is now judged to be 800, it was still the best such performance since February’s increase of 900. March’s new hires stayed at an upwardly revised 600, leaving employment in this sector 10.91 percent below February, 2020 levels, versus the 11.56 percent calculable last month.\

Non-engine aircraft parts and equipment makers kept making steady employment progress as well. They added 300 workers on month in May, and their initially reported new April hiring of 300 is now estimated at 400. March’s employment increase stayed unrevised at 700, but this sector still employs 15.14 percent fewer workers than in February, 2020, versus the 15.48 percent calculable last month.

With the Federal Reserve still on record as seeing the need for slowing the economy’s growth (at best) in order to fight inflation, signs of recession multiplying (e.g., here), domestic industry’s major export markets looking increasingly weak as well, the Ukraine War dragging on, and supply chain problems ongoing (see, e.g., here and here) it’s difficult to expect U.S.-based manufacturers to escape these powerful downdrafts. But these companies have kept turning in remarkably strong results in production as well as hiring, so who’s to say they can’t keep bucking the odds?

Following Up: Podcast Now On-Line of National Radio Interview on Manufacturing Defeatism

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CBS Eye on the World with John Batchelor, China, Following Up, Gordon G. Chang, inflation, manufacturing, reshoring, supply chain, tariffs, Trade, trade policy

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

Click here for a timely discussion – including co-host Gordon G. Chang – of whether the U.S. manufacturing revival pessimists are right, and bringing factories back from China really is a fool’s quest.

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

(What’s Left of) Our Economy: U.S. Inflation Still Looks Transitory and Baseline-y – For Now

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baseline effect, CCP Virus, consumer price index, core inflation, coronavirus, COVID 19, CPI, Federal Reserve, inflation, monetary policy, PCE, personal consumption expenditures index, semiconductors, shortages, stagflation, stimulus, supply chain, Wuhan virus, {What's Left of) Our Economy

Earlier this month, we learned from the latest official U.S. jobs report how dramatically revisions can change the picture of the economy’s performance. Today’s official inflation numbers – presenting the Consumer Price Index (CPI) – contained some interesting revisions, too, and they’re enough to keep me in the “transitory” camp on the future of price increases at least a month more – and specifically, as long as the ”baseline effect” will remain in place.

In plain English, this means that I still believe that inflation nowadays– which is unmistakably high by historic standards and painful for so many Americans – results mainly from major distortions in the economy created by the CCP Virus and related regulatory and behavioral curbs. Also affecting inflation’s annual rates of change throughout 2021 and into early 2022: the fact that the previous year’s inflation – the baseline – was so abnormally low. In fact, one of the key revelations of the revisions is that the baseline effect for “headline inflation” (the figure that tries to cover everything) has increased some in recent months, and therefore has played a moderately larger role in pushing up the latest numbers.

First, though, let’s look at the monthly changes in the overall inflation rate going back to January, 2021, along with the revisions (the number furthest to the right):

Dec-Jan:                          0.26 percent  now 0.24 percent

Jan-Feb:                          0.35 percent  now 0.44 percent

Feb-March:                     0.62 percent   now 0.64 percent

March-April:                  0.77 percent   now 0.64 percent

April-May:                     0.64 percent   now 0.70 percent

May-June:                      0.90 percent   now 0.88 percent

June-July:                      0.47 percent    now 0.45 percent

July-Aug:                      0.27 percent    now 0.33 percent

Aug-Sept:                      0.41 percent   unrevised

Sept-Oct:                       0.94 percent    now 0.87 percent

Oct-Nov:                       0.78 percent    now 0.69 percent

Nov-Dec:                      0.47 percent     now 0.58 percent

Dec-Jan:                        0.65 percent

There’s no doubt that a sequential speed-up took place between December and January. But even with the revisions, decelerations took place between October and November, and November and December. In fact, October remains the peak month for sequential inflation.

It’s important to note that these slowdowns in the inflation rate don’t mean that prices are actually falling. Instead, they mean that they’re not rising as quickly. And although that may sound like a pretty weak reason for encouragement, it counts for more because a major reason that inflation is considered so dangerous is that it tends to feed on itself – and actually grow at increasing rates.

So slowdowns are good news, even if they’re not good enough news. Moreover, the revisions for two of the last three months have been downgrades; in other words, since October, on net, headline inflation has been weaker than originally estimated.

Revisions haven’t had the same effect on so-called “core inflation” (which strips out food and energy prices because they’re viewed as unusually volatile for reasons having little or nothing to do with the economy’s supposed susceptability to inflation). But the absolute rates have been lower than those of headline inflation, and the rates of change have fallen on net since October, too.

Dec-Jan:                        0.03 percent   now 0.05 percent

Jan-Feb:                        0.10 percent    now 0.15 percent

Feb-March:                   0.34 percent    now 0.30 percent

March-April:                 0.92 percent    now 0.86 percent

April-May:                    0.74 percent    now 0.75 percent

May-June:                     0.88 percent    now 0.80 percent

June-July:                     0.33 percent     now 0.31 percent

July-Aug:                      0.10 percent    now 0.18 percent

Aug-Sept:                     0.24 percent     now 0.25 percent

Sept-Oct:                      0.60 percent     unrevised

Oct-Nov:                      0.53 percent     now 0.52 percent

Nov-Dec:                     0.55 percent     now 0.56 percent

Dec.-Jan:                     0.58 percent

But the real importance of those baseline effects and revisions come through in the annual inflation data. The table below shows the annual rates of change by month starting again in January, 2021. The left and center columns show the previous estimates and the revisions, and the right column shows the revisions of these rates for the last few months of baseline year 2019-2020:

Jan:                             1.37 percent    now 1.36 percent

Feb:                            1.68 percent    unrevised

March:                       2.64 percent     now 2.66 percent

April:                        4.16 percent      now 4.15 percent

May:                         4.93 percent      now 4.94 percent

June:                        5.32 percent       now 5.34 percent

July:                         5.28 percent      unrevised

Aug:                        5.20 percent       now 5.21 percent

Sept:                        5.38 percent      now 5.39 percent

Oct:                         6.24 percent      unrevised               2019-20 from 1.19 to 1.18

Nov:                        6.88 percent      now 6.83 percent  2019-20 still 1.14

Dec:                        7.12 percent      now 7.10 percent   2019-20 from 1.31 to 1.28

Jan:                         7.53 percent                                     2019-20 from 1.37 to 1.36

The big takeaway: The November and December annual inflation rates were both revised down by non-trivial degrees, and the baseline effects for October, December, and January have gotten bigger (because the annual inflation rates for 2019-2020 for these months have been revised down, too.

As with their monthly counterparts, the absolute annual core inflation rates are lower, the baseline effects aren’t quite as great, but they’re present anyway:

Jan:                        1.40 percent      now 1.39 percent

Feb:                       1.28 percent       now 1.29 percent

March:                   1.65 percent      now 1.66 percent

April:                     2.96 percent      now 2.97 percent

May:                      3.80 percent      now 3.81 percent

June:                      4.45 percent      unrevised

July:                       4.24 percent      now 4.20 percent

Aug:                      3.98 percent      now 3.96 percent

Sept:                      4.04 percent      unrevised

Oct:                       4.58 percent      now 4.59 percent

Nov:                      4.96 percent      now 4.95 percent    2019-20 from 1.63 to 1.64

Dec:                      5.49 percent      now 5.48 percent     2019-20 from 1.61 to 1.60

Jan:                       6.04 percent                                       2019-20 from 1.40 to 1.39

The baseline effect distortion of both sets of inflation figures should end when the February statistics come out (next month). Unless new revisions change the picture? But there are several other reasons inflation may moderate further going forward.

The economy’s widely predicted growth rate for the first quarter of this year is predicted to be wheezing and even negligible. As long as it lasts, much more sluggish economic activity should undercut price increases. (At the same time, what may be in store is stagflation – a punishing combination of weak growth and strong inflation.) The new CPI figures may well persuade the Federal Reserve to tighten monetary policy earlier and more vigorously than currently expected, which should also slow growth. (The Fed’s preferred measure of inflation, called the Personal Consumption Expenditures index, or PCE, will be updated later this month. It usually tracks the CPI pretty closely.) And rising prices seem to have put further economic stimulus off the table in Congress. 

Another (and maybe final?) V-shaped pandemic recovery, prompted by the fading of the Omicron CCP Virus variant, could always overcome all these growth obstacles. So could continuing supply chain snags and shortages – especially in industries like semiconductors, whose products are used in so many products. Or all these uncertainties and wildcards could keep the economy and inflation in a turbulent state, and keep complicating policymakers’ challenges in simultaneously fostering adequate growth and acceptable inflation.       

(What’s Left of) Our Economy: U.S. Real Wage Decline is Really Widespread

Tags

CCP Virus, child care, coronavirus, COVID 19, elder care, health care, inflation adjusted wages, labor shortages, nursing, real wages, supply chain, trucking, wages, warehousing, workers, Wuhan virus, {What's Left of) Our Economy

A Facebook exchange I was involved in last night prompted me to check the U.S. government data to find out how widespread was the trend of falling real wages – and by definition falling living standards. And the answer is: incredibly widespread – including in supply chain-related sectors where crippling labor shortages are often blamed for much of the bottleneck problem that has helped fuel inflation by reducing the supply of goods sought by Americans.

The exchange began when a Facebook friend posted her view that the U.S. economy was doing far better than gloomy press reports indicated. I countered with my “putting people first” argument that falling living standards meant that the economy was failing in its fundamental mission: improving Americans’ material lives. My interlocutor responded by claiming that the unusually large number of unfilled job openings have appeared during the stop-and-start recovery from the brief but steep CCP Virus-induced downturn showed that many Americans falling behind economically could easily improve their lot by taking jobs in higher paying industries.

I could have answered by pointing out how many Americans in low-paying jobs in particular lack the training to move that wage ladder. But I was more struck by the pervasiveness of the recent decline in inflation-adjusted hourly pay – which shows that even those able to make that transition will find themselves on a downward moving escalator for the time being.

Specifically, I looked at price-adjusted wage trends on a November, 2020-November, 2021 basis for the eight broadest categories tracked by the Bureau of Labo Statistics (BLS). They are: mining and logging; construction; manufacturing; trade, transportation and utilities; information services; professional and business services; leisure and hospitality; and miscellaneous services.

How many of these eight sectors saw real wage declines between the two Novembers? Seven. Leisure and hospitality was the lone exception, and it’s the lowest paying of these categories by far. The constant dollar wage out-performance there was indeed encouraging, but with these hourly earnings still only standing at $6.88 in 1982-84 dollars – versus $11.13 for the private sector as a whole – I wouldn’t claim economic success just yet.

(As known by RealityChek regulars, BLS doesn’t monitor wages in the public sector because there, pay is determined mainly by politicians’ decisions, not economic fundamentals.)

The names of these eight sectors, however, make clear that they’re so broad that they could include subsectors where the story’s very different. And that’s true even for a number of what might be called pandemic-specific sectors with lots of job openings – but only sometimes.

For example, the enormous national healthcare sector is part of the business and professional services grouping, where real hourly wages of $13.44 – higher than the private sector average – are off by a little over one percent so far this year. But for healthcare alone, they’re up by just under one percent (to a lower $12.13, though).

Dig deeper, and you find that after-inflation wages for hospitals, nursing care facilities, elder care facilities, and child care services, have risen, too. But except for hospital workers (a broad, relatively high paying category itself), hourly wages in 1982-84 dollars in none of these sectors is anywhere close to even a measly $10. And none has seen year-on-year wage increases of more than 1.95 percent (for hospital workers).

The wage situation is even worse in many of the supply chain-related industries within the trade, transportation, and utilities super-sector. For example, next time you hear about a dire nation-wide shortage of truck drivers, keep in mind that their real wages have decreased by 3.67 percent annually as of November. And workers at those equally strained warehouses? They’re only off by 0.25 percent. But they’re supposed to be desperate to hire! What gives?

The most obvious answer to me is that a supposed labor shortage in a sector where real wages are decreasing is really a tale of inadequate pay. But that’s a subject for another post – or six. For today, though, it seems abundantly clear that the headline real wage decline number isn’t masking lots of workers gaining ground, and that if you view that standard as the main test of an economy’s success, America’s is definitely flunking.

Following Up: National Radio China Interview Podcast Now On-Line

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CBS Eye on the World with John Batchelor, China, decoupling, finance, Following Up, Gordon G. Chang, investment, John Batchelor, logistics, supply chain, tariffs, Trade, tradewar, transport, Wall Street

True to my word, I’m pleased to announce that the podcast is now on-line of my appearance last night on John Batchelor’s nationally syndicated radio show. Click here for a terrific discussion among John, co-host Gordon G. Chang, and me on how successfully Washington has – or hasn’t – been decoupling its economy from that of an increasingly hostile and powerful rival.

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