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  • US Trade to September 2021

    US trade grew 17.8% in September, down from 20.9% in August, but still up 22.7% over the first three quarters of the year. Exports were up 16.8% that month and 23% over nine months. Imports rose 18.4%, and 22.5%, respectively. The merchandise deficit grew 21.6% thus far this year, to $803.6 billion.

    On the export side, half of the increase (50.9% of the total rise, up 35.8%) was industrial supplies and materials, particularly fuels and chemicals. Among imports, that category accounted for 28.3% of the rise (up 30.1%), while consumer goods comprised 27.4% (up 21.3%). In real terms, however, industrial imports fell 2.3%

    _ _ _ _ _ _ _ _ _ Exports _ _ _ _ Imports _ _ _ _ Bal _ _ _ _ Two-Way
    Jan-Sept 2021 _ $1,281.5 bn _ _ _ $2,085.1 b _ _ -$803.6 b _ _ $3,366.6 b
    Percent Change _ _+23.0% _ _ _ _ +22.5% _ _ _ +21.6% _ _ _ +22.7%
    July _ _ _ _ _ _ _ +28.0% _ _ _ _ _ _+20.1% _ _ _ +8.7% _ _ _ +23.0%
    Aug _ _ _ _ _ _ _ +25.7% _ _ _ _ _ _+18.1% _ _ _ +7.1% _ _ _ +20.9%
    Sep _ _ _ _ _ _ _ +16.8% _ _ _ _ _ _+18.4% _ _ _ +20.9% _ _ _ +17.8%

    Trust me?
    I'm an economist!


    • Originally posted by zraver View Post

      2 posts down I actually cited 3 economist and provided links.
      Raphael Bosti is a serious economist, I'll grant you that.
      What did he say? In the interview, he did lay the stagflation bogeyman to rest: “The Atlanta Fed believe that 'episodic' better describes pandemic-induced price swings than 'transitory.'”
      In the actual paper you cited we find exactly zero references to stagflation, no more and no less.

      But, I guess you didn't read the paper, did you?

      And, a quick search elsewhere in the Atlanta Fed's website for the word “stagflation” yields this:

      “Before conjuring ghosts of 1970s stagflation, it’s important to keep things in perspective. The slower-than-expected job growth might not reflect less demand for workers. On the contrary, many employers—especially in industries emerging from a particular battering from COVID—are reporting difficulties finding workers”
      – Julie L. Hotchkiss, June 2021

      (the only other reference is a citation in a 2013 paper)

      And, the other guy was the one with an MA in music theory? Lyndon LaRouche's old buddy? Larry Kudlow's regular guest?
      Trust me?
      I'm an economist!


      • Guess we will see what 22 brings. Based on 2 Nov 21 more people agree with me.


        • Let's put that hyperinflation into some perspective, OK?

          Trust me?
          I'm an economist!


          • Perspective is real wages are going down due to inflation. People don't care the great grandma had it worse. They care that they have it worse this year compared to last.


            • This is a lesson we learned in the Army...the hard way. We tried to greatly reduce our warehouse capacity and depend on velocity management and just in time logistics....and then we went to war and wondered why our operational rates sucked. Well a lot had to do with lack of warehouse space in theater and the type of units which manage those had been dropped from the force structure. So 2 National Guard units had to make it up on the fly. That's another reason why we waited so long to attack Iraq...we didn't have the sustainment footprint in place.

              And now we are seeing in the private sector the dependence on just in time logistics is failing under the load of what the industry considered excessive demand.


              Warehouses are overwhelmed by America's shopping spree

              A person walks in an Ikea warehouse in New York City on Oct. 15.

              Doug Kiersey has been building, buying and leasing warehouses for almost 40 years. He's never seen a time like this.

              "It's completely unprecedented," says Kiersey, president of Dermody Properties, which owns warehouses used by some of the country's largest retailers. "In some markets ... we're over 99% occupancy."

              In simplest terms, America's warehouses are running out of space. It's all claimed and bursting at the seams.

              How did that happen?

              Warehouses have become a key middle link in the country's supply chain. Couches, phones, floorboards and virtually everything else a shopper might buy passes through them. Today, the U.S. is dotted with more warehouses than ever. But they are overcome by the lack of workers to get stuff in and out fast, by the lack of truck drivers and rail cars to haul things away — and above all, by the extraordinary abundance of goods.

              "It's not that the system is broken. [Warehouses] are just totally, totally overwhelmed," says Zac Rogers, assistant professor of supply chain management at Colorado State University.

              Warehouses went into the pandemic already pretty busy, with over 90% of space claimed. Then, closures began at factories, ports and stores. People cut back on shopping, and stuff in warehouses started piling up. Then, when everything reopened, a pent-up rush of goods arrived.

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              "Warehouses were already sort of full and now they're really, really full," Rogers says. His data shows available warehouse space declining every month since last spring.

              Meanwhile, shoppers have been spending at record levels, unleashing all the money saved by not traveling or going out — and their cooped-up pandemic anxiety — onto buying things. In an average year, online spending might grow 10% 0r 15%. Last year, it jumped over 40% and has only kept growing through 2021.

              Retailers responded to the surge in demand by increasing imports to record levels.Companies scrambled to bring into the U.S. as much as they could, while they could — because they had seen what factory and port disruptions can do. They began storing things "just in case" shoppers want them, rather than "just in time" for when a shopper is likely to buy.

              "Essentially, you kind of see this doomsday-prepper mentality in all of these companies where normally they've been as lean as possible," Rogers says.

              Warehousing companies have been building as fast as they can. In fact, it was the one type of commercial construction that boomed all through the pandemic.

              But setting up millions of square feet with conveyor belts, robots and all the bells and whistles takes time. Plus, prime warehousing space is tricky and limited.

              Building a warehouse used to involve finding a cornfield in the exurbs or aligning with a freeway interchange, Kiersey says. Now, that's too far. Retailers want to get packages to doors in the least amount of time, which means jockeying for storage in expensive and crowded urban and suburban areas.

              Warehouse builders were just figuring all that out when the pandemic shopping boom raised the stakes.

              "So demand has come up against a static supply," Kiersey says.

              In a matter of a year, warehousing rents in some markets have doubled. Brand-new buildings that would normally sit vacant for months are selling space before they're finished. The other day, Kiersey had to do something unheard of: turn away an old client as three companies vied for the same warehouse.
              “Loyalty to country ALWAYS. Loyalty to government, when it deserves it.”
              Mark Twain


              • Another interesting listen/read on how something called queuing theory and how it impacts supply chains...

                As an aside...Marketplace is a must listen to in my household. A great show to understand so much of the economy for lay people.


                Using “queuing theory” to understand supply chain logjams

                According to logistics expert Keely Croxton, the mathematical formulas that explain wait times at an ATM can be applied to global supply chains. Yasuyoshi Chiba/AFP via Getty Images
                Hosted by Kai RyssdalGet the Podcast

                One month after the Joe Biden administration announced a plan to ease supply chain congestion by opening the Port of Los Angeles 24/7, there is still a record backlog of container ships off the coast of Southern California, waiting for a spot to unload. Plus, the average wait time for a ship arriving at the Port of Los Angeles has reached 17.7 days.

                In response to a listener request, “Marketplace” host Kai Ryssdal spoke with Keely Croxton, a professor of logistics at Ohio State University about how “queuing theory” — the mathematical study of waiting lines — helps explain ongoing supply chain issues. The following is an edited transcript of their conversation.

                Kai Ryssdal: For the uninitiated, which I’m going to guess is most of us, give us a basic sketch of queuing theory.

                Keely Croxton: Yeah, queueing theory is basically used to predict the expected behavior of any system where things arrive, they get serviced and then they leave. So, for you and me in our everyday lives, we can think of places like walking into the grocery store or a doctor’s office or a restaurant, and if we have data, we can use some fancy math to predict how long the line will get. And then we can flip that problem around, for example, if I want to figure out how many cashiers I need at the grocery store, I can use queueing theory as a way to mathematically calculate the number of cashiers that I would want to keep my lines at an acceptable level.
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                Ryssdal: When people first started studying lines, which is fundamentally what this is, what did they learn? Was there like an aha! moment?

                Croxton: I think, for me at least — my aha! moment when I was learning all this stuff — is the role of variability in all of this. When things are operating close to an average, queues don’t develop and utilization rates are fine. The example I give to my students is if you want to set up an ATM machine and on average someone’s arriving every three minutes, and the average processing time is two and a half minutes, it would seem like there shouldn’t be any waiting, right? Because your processing time is less than your arrival time. But the problem is that there’s variability in that. We’ve all been behind that person at the ATM machine that fumbles for their card, and needs to look up their PIN, and wants to do five different transactions, [and] it’s the variability that really starts to drive lines.
                Variability drives wait times

                Ryssdal: Yeah, setting aside for a second the fact that I’m always behind the guy who’s refinancing his mortgage at the ATM machine, it seems to me that it’s a single-node problem, right?

                Croxton: Yeah.

                Ryssdal: Good. You know where I’m going with this. Global supply is a bajillion-node problem. So, how can we think about it in terms of queueing theory?

                Croxton: Yeah, well, we can extend queueing theory to think about, for example, the port. You know, think of it as a cashier at the grocery store. These ships arrive, they need to be processed, and then they leave. And so we can use queueing [theory] to make the same kinds of predictions about what capacity we need, or how long the ships will have to wait. But you’re right. It’s not just what happens at the port. The supply chains are really long, and so when you’ve got things happening all along that supply chain, that’s creating this variability that I think is a part of the problem.
                High utilization makes systems more vulnerable to variability

                Ryssdal: Just on that variability thing, how important is it to be able to adapt when systems are running at close to full capacity before they get stressed? Like, I imagined our port operations in this country were running pretty close to capacity before the pandemic, and now they’ve got this huge burst that they can’t handle.

                Croxton:Yeah. So we can learn from queueing theory is exactly what you were just suggesting — that the higher the average utilization rate of our system, the longer the wait times and the more brittle the system is. These ports were already working pretty close to full utilization, which just makes them unable to handle not only the change in variability of that processing time, but also a sharp increase in simply the arrival rates.

                Ryssdal: Right, right.

                Croxton: Retail demand is up something like 30% over 2019, and there’s 20% more ships arriving at these ports, and it just is really creating a system that is just designed to snap.

                Volume of U.S. retail import cargo 2004-2021 based on data and forecasts from the National Retail Federation and Hackett Associates.

                A TEU is one 20-foot container or its equivalent.
                Ryssdal: One of the things I’ve been saying when people ask me, you know, “How much longer is this going to take?” I say, “Look, the more backed up it gets, the more backed up it’s going to get,” because there’s a finite output from the port, no matter how many ships you get in there. So, I’m going to turn around to you, the professional, and say, “How much longer is this gonna last?”

                Croxton: Well, I mean, the good news is they’re starting to see some relief. I just saw a report that there’s more capacity downstream from the port, but we’ve got the Christmas rush coming in, and so it is going to take certainly through the holidays, and I think well into 2022 — maybe even the end of 2022 — before we see a return to what most of us in the field would think of as normal supply chain operations. When retail demand is up 30%, we’re just asking a lot of this very constrained system.

                “Loyalty to country ALWAYS. Loyalty to government, when it deserves it.”
                Mark Twain


                • Job growth this last summer was actually better than reported.

                  The government dramatically underestimated job growth this summer - The Washington Post

                  The government dramatically underestimated job growth this summer

                  Initial reports underestimated job growth by a cumulative 626,000 over four months

                  By Andrew Van Dam
                  November 16, 2021 at 6:00 a.m. EST

                  The government sharply underestimated job gains for most of 2021, including four months this summer in which it missed more job growth than at any other time on record.

                  In the most recent four months with revisions, June through September, the Bureau of Labor Statistics (BLS) reported it underestimated job growth by a cumulative 626,000 jobs — that’s the largest underestimateof any other comparable period, going back to 1979. If those revisions were themselves a jobs report, they’d be an absolute blockbuster.
                  In an average month before the pandemic, estimates would be revised by a little over 30,000 jobs, or just 0.02 percent of all the jobs in the United States. The recent revisionsto the jobs reports have been much larger.

                  The missing jobs surfaced through revisions to the widely watched non-farm payrolls number that BLS releases each month. The data is considered preliminary until it has been revised twice. The fixes are typically minor, but recent revisions have been big enough to turn a substantial slump into a surprising surge.

                  These waves of revisions in the same direction tend to happen at turning points in the labor market. BLS relies on highly technical models to adjust for seasonal patterns, business closures and other factors, to catch new trends in the labor market and make revisions quickly.

                  It’s happened before during this pandemic. Revisions in the already calamitous months of March and April 2020 found the economy had lost 922,000 more jobs than initially reported. Also, earlier in the pandemic, BLS drew criticism for a misclassification error in a different survey, which BLS economists said greatly understated the unemployment rate. Due to the way certain survey questions were interpreted, millions of workers who said they had a job but couldn’t work due to coronavirus shutdowns were marked as absent rather than as temporarily unemployed.

                  This time, the payrolls datahas been obfuscated as businesses have been slow to respond to government surveys amid the chaos of the pandemic — part of a larger pattern in which the deadly virus has wreaked havoc on federal statistics.

                  Angie Clinton, the BLS section chief who oversees the payroll number crunching, said there have been more large revisions since the start of the coronavirus pandemic, but that revisions are a sign of the system working as intended.

                  “We’re just improving the estimate using everything we know up through the month we’re releasing, really,” Clinton said. “I mean, it sounds counterintuitive to most people because revisions — they think, ‘Oh, they got it wrong the first time.’ But no, we got it right, based on what the sample told us. But going forward we receive more sample, some corrected records, and recalculate seasonal factors, which together may indicate a different story.”

                  The revisions have recast the narrative of a summer slowdown. In August, when economists expected a strong follow-up to the 943,000 jobs the economy added in July, the BLS announced the U.S. added only 235,000 jobs. Headlines dubbed it a “colossal miss” as job growth took a “giant step back.” Two months later, revisions based on additional data showed August jobs grew by 483,000, more than double the anemic original reading. It was the biggest positive revision in almost four decades.

                  When it was reported the economy added just 194,000 jobs in September, headlines called it “ugly,” “dismal” and “disappointing.” A month later, a revision showed the economy had actually added 312,000 jobs in September.

                  After the revisions, disappointing months like August looked a lot more like October, a month that was hailed as a labor market rebound. In hindsight, while a blockbuster June and July were even better than they looked, they didn’t lead to months of stagnation — they diminished somewhat, but still produced solid, steady growth that continued through October.

                  President Biden may have evenpaid a political price for the lackluster jobs numbers. From April to June, polls found that most Americans (51 percent) approved of Biden’s handling of the economy, according to an average of polls from Fox, NBC, Quinnipiac and The Post. But as bad economic numbers came out and the national political climate turned south, those numbers fell steadily — in October, just 39 percent approved of Biden’s handling of the economy, while 57 percent disapproved.

                  “Naysayers and detractors from Biden’s agenda are going to exploit any ‘bad’ economic indicator they can as evidence for why Biden has it wrong on the economy or why Biden’s Build Back Better proposal gets it wrong on the economy, and in that sense underestimates of the jobs numbers are not helpful,” said Lindsay Owens, executive director of the left-leaning Groundwork Collaborative.

                  However, Biden’s falling economic-approval numbers during that period could also be attributed to other issues, such as rising inflation and the controversial and abrupt Afghanistan withdrawal, which have dragged Biden’s approval down across the board, Owens said. In that environment, a few slow jobs reports may not been the primary driver of public opinion, Owens said.

                  Each month’s revisions simply reflect economists’ new best estimate, based on additional data. For example, when businesses report a surprisingly good month, such as this October, the seasonal adjustment algorithms look back on previous months with the benefit of hindsight. A good October likely didn’t come out of nowhere: the August and September estimates probably missed some growth. So, some of the jump in October is assumed to have occurred earlier, and a portion of the October gains are reallocated back to previous months.

                  These best-guess first estimates are often refined as responses straggle in from more of the 697,000 establishments surveyed each month, including major employers, government agencies and a rotating cast of small businesses. The businesses are asked how many people they employ, how much those people are paid excluding bonuses, and how many hours those are paid for.

                  In a typical recent month, about a quarter of the responses have come in late. When businesses don’t respond, economists and their models must account for all the reasons a business might not return a survey, including the possibility that it may have suddenly closed up shop. They must also account for newly formed businesses that won’t be on their survey rolls quite yet.

                  Jane Oates, the president of the employment-focused nonprofit WorkingNation and a Labor Department official in the aftermath of the Great Recession, said the coronavirus crisis and subsequent worker shortage put many employers under amazing stress. One plausible explanation for the Labor Department’s chronic underestimates is that the employers who were hiring the most were too busy to respond to the survey, so initial responses missed the fastest-hiring firms.

                  “Back in the Great Recession, there were many employers who were impacted but now every employer is impacted. Everybody is scrambling for talent. And I bet there’s just a higher percentage of them missing the deadline,” Oates said.

                  Before the pandemic, about 60 percent of contacted businesses responded to the survey, BLS data show. By May 2021, the most recent month for which data is available, that had declined to 49 percent. Those low response rates may have played a role in the unusually high revisions seen during the past two years.

                  Rather than showing that BLS has failed, the revisions are a tribute to the agency’s commitment to getting the numbers right, said Cornell University economist Erica Groshen, who served as BLS commissioner from 2013 to 2017.

                  “They take their responsibilities very seriously,” Groshen said. “They’re very transparent about their methodology and they’re always trying to improve that.”

                  BLS is a professional civil-service agency. The only political appointee, the commissioner, has no access to numbers before they are finalized. The economists and statisticians entrusted with the jobs numbers work with almost fanatic secrecy, Groshen said.

                  When staffers worked in the offices, before the pandemic, security was so tight that, if window washers appeared outside their windows, staff would get up and close the blinds. Staff had to empty their own trash from their locked-down offices — outside workers, even cleaners, aren’t allowed to enter the inner sanctum of statistics.

                  Scott Clement contributed to this report.
                  “Loyalty to country ALWAYS. Loyalty to government, when it deserves it.”
                  Mark Twain


                  • In terms of what the president can actually control to reduce inflation, one neglected tool is trade policy. Former President Donald Trump put these tariffs on aluminum and steel, and everything we import from China — all kinds of goods. The tariffs raise prices to consumers. It seems to me a no-brainer to undo those barriers. Biden should be able to get China and other countries to reciprocally lower some barriers against us. But with or without that, removing tariffs could bring down consumer prices and prices to businesses for steel and aluminum and all kinds of inputs immediately. That’s the one thing that the government could most rapidly control.

                    --Jeff Frankel,
                    Trust me?
                    I'm an economist!


                    • A good news story...Powell has done well IMHO keeping things going in very turbulent times. He is no radical bomb thrower which is what the economy needs right now.

                      Biden nominates Jerome Powell for second term as Federal Reserve chairman (

                      Biden nominates Jerome Powell for second term as Federal Reserve chairman

                      Martha C. White - 10m ago

                      © Provided by NBC NewsPresident Joe Biden on Monday renominated Jerome Powell as Federal Reserve chairman, ending months of speculation over who would run the central bank for the next four years, the White House announced in a statement.

                      Powell had drawn ire from some progressives who have pushed the central bank to expand its dual mandate of keeping people at work and prices in check, and focus more on climate change and racial equity. Some Democrats also had argued that he has been too hands-off as a bank regulator.

                      Fed governor Lael Brainard was nominated to serve as vice chair, the White House also announced.

                      "Chair Powell has provided steady leadership during an unprecedently challenging period, including the biggest economic downturn in modern history and attacks on the independence of the Federal Reserve," the statement read. "President Biden has full confidence in Powell and Brainard’s experience, judgment, and integrity to continue delivering on those mandates and to help build our economy back better for working families."

                      As a Republican appointed in 2017 by a Republican president to lead the Fed, Powelll had drawn solid support from GOP lawmakers for much of his tenure, although that support had become checkered in recent weeks as the specter of sharply rising inflation rose to dominate the headlines.

                      A jump in consumer prices to a 30-year high, combined with the worry that prices would remain elevated for a duration that stretches the boundaries of “transitory” — the Fed’s preferred descriptor — has triggered criticisms that Powell is not being proactive enough in the fight against inflation.

                      Economists and policymakers had been speculating for months as to whether Biden would take the unusual step of choosing not to reappoint Powell to a second term (although Powell also succeeded a single-term Fed chair).

                      As head of the central bank of the world’s largest economy and de facto reserve currency, it is arguably the highest profile role, with high stakes, in the realm of economic policy.

                      While Fed nominees are confirmed by the Senate, five progressive members of the House, led by Rep. Alexandria Ocasio-Cortez, D-N.Y, issued a statement in August agitating for a new Fed chair. “We urge President Biden to re-imagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice,” the statement read, in part.

                      In the Senate, Elizabeth Warren, D.-Mass., emerged as the most high-profile Powell foe. She blasted the Fed chair at a hearing in October, calling him a “dangerous man to head up the Fed.” Warren was also the only member of the Senate Banking Committee to vote against Powell’s nomination in 2017.

                      Despite this left-wing opposition from both chambers of Congress, no one suggested the name of someone to replace Powell if Biden chose not to renominate him.

                      Randal Quarles, whose position as vice chair for supervision expired last month, recently resigned as governor, giving Biden another opportunity to fill a Fed seat.

                      The assumption among monetary policy wonks is that the unspoken preference of progressives was Brainard, who would most likely take a more aggressive approach to bank oversight and regulation. She also has targeted income inequality as a source of economic destabilization and pushed for the central bank to take a more active role around the financial risks of climate change, two issues that have won her fans among progressive lawmakers.

                      Brainard’s name also came up for Treasury secretary in the Biden administration, although the White House ultimately went with Janet Yellen, the Fed chair who preceded Powell.

                      Yellen expressed her support for Powell, saying in a statement on Monday that she was "pleased our economy will continue to benefit from his stewardship."

                      “Over the last two years, the American economy has endured one of the most challenging episodes in our nation’s history," Yellen continued in her statement. "The global and domestic economies were brought to a standstill and millions of American families were at risk of permanent scarring. Today, our economy has rebounded with strong job creation, low unemployment, and economic growth that has outpaced our global competitors. The steady leadership of Chair Powell and the Federal Reserve helped ensure that America’s economy was able to recover from a once-in-a-generation health and economic crisis."

                      Powell was initially appointed to be on the Fed Board of Governors by Barack Obama and took office in 2012. Nominated by Donald Trump to lead the Fed, Powell initially faced skepticism from some lawmakers, particularly on the left, because of his background in investment banking and private equity rather than economics. But since his appointment, Powell has generally enjoyed broad-based support.

                      For his handling of the economy, including executing unprecedented actions to keep the financial system from collapsing in the early days of the pandemic, Powell won bipartisan praise. He has frequently cited the need for economic and labor market gains to be broad and inclusive as rationale for maintaining accommodative economic policy in the wake of the pandemic-triggered recession.

                      “If the people who are at the margins of the economy are doing well, then the rest of it will take care of itself,” Powell said in a "60 Minutes" interview on CBS in the spring. In congressional testimony, this stance has drawn approval from Democratic lawmakers and challenges from Republicans.

                      This was not the only criticism Powell has faced during his term. Most recently, he came under fire after two regional Fed bank presidents, Robert Kaplan of Dallas and Eric Rosengren of Boston, resigned after financial disclosures found that they had made trades during the pandemic that could benefit them financially. In response, the Fed implemented new restrictions on the financial activities officials can undertake. In a statement, Powell said that what he characterized as “tough new rules” would restore public trust in the central bank’s actions.

                      In addition to the role of chairman, Biden had a few vacancies to fill at the Fed: There was one vacant seat on its Board of Governors when he took office, as Trump nominees Stephen Moore and Judy Shelton failed to get congressional backing.

                      By appointing Powell to a second term, and then choosing nominees like Brainard more aligned with progressive priorities to fill the remaining open positions, policy experts say Biden has succeeded in shaping the Fed’s most influential policymaking body to conform with his administration’s goals and priorities.
                      “Loyalty to country ALWAYS. Loyalty to government, when it deserves it.”
                      Mark Twain


                      • When was the last time we saw a GOPer president renominate a Democratic-appointed Fed Chair?
                        I can’t remember …
                        Trust me?
                        I'm an economist!


                        • Originally posted by DOR View Post
                          When was the last time we saw a GOPer president renominate a Democratic-appointed Fed Chair?
                          I can’t remember …

                          Paul Volcker, about to need someone like him again.


                          • Originally posted by zraver View Post

                            Paul Volcker, about to need someone like him again.
                            We are nowhere near that level of inflation. It was 14.8% under Volcker. Money got horribly expensive. Interests rates pushed all the way to 21% under him. I remember buying my first house in 1985 and being glad I got a VA loan at "only" 16.5%...2 points below prime at the time.

                            This Is Jerome Powell’s Shot at a Volcker Moment—in Reverse

                            It took courage to lift rates in 1979 to kill inflation. The gutsy move for today may be to stand fast until we have more jobs.
                            Joe Weisenthal

                            The pundits are coming for the Federal Reserve and Chair Jerome Powell. Mohamed El-Erian, chief economic adviser to Allianz SE and a Bloomberg Opinion columnist, recently said the central bank has made one of the worst inflation calls in its history. Writing in the Financial Times, the economist Willem Buiter called on the Fed to abandon the more flexible inflation target it established last year. The White House is feeling the heat: Polling on the handling of the economy is dismal, with inflation a key contributor. There’s plenty to make voters unhappy: Prices for gas and food are up. Rents are rising. Used-car prices are surging.
                            Former Fed Chair Paul Volcker, 1983.
                            For many of today’s leading policymakers and economists, the 1970s inflation and the discontent it caused are hard to forget. Among this group, former Fed Chairman Paul Volcker is regarded as a brave public servant—the one person who had the will to break that inflation through a series of politically unpopular rate hikes that induced a recession. And now there’s pressure for Powell to pull a Volcker of his own and pivot hard to fighting higher prices. It seems like the obvious lesson of history.

                            But what would pulling a Volcker actually look like in 2021? Perhaps it would be the exact opposite of what people imagine. Because despite elevated inflation, the Fed is nowhere close to maximum employment, which it’s mandated to promote alongside stable prices.

                            The unemployment rate right now is 4.6%, vs. 3.5% pre-Covid. But that gap, which captures people who say they are looking for work, disguises a much bigger hole. Total nonfarm payrolls stand at 148 million, 5 million below the 153 million before the pandemic. Assuming the economy was going to keep growing before the coronavirus kicked it off course, the actual shortfall may be closer to 8 million. Labor force participation among prime-age workers, 25 to 54 years old, is 81.7%, compared with 83% pre-pandemic.

                            The shortfall in employment comes after a decade of a painfully slow recovery for workers following the financial crisis. So it’s not just that there’s still a hole left to fill on the jobs side. There’s been a broader recognition at the Fed that for years it missed its employment goals or underestimated how strong the labor market could get without triggering sustained inflation.

                            At the 2020 Jackson Hole conference, Powell unveiled “flexible average inflation targeting,” the central bank’s new approach to thinking about when to raise rates. It was aimed at avoiding past errors: the premature tightening cycles that slowed job growth. The idea was that after a long period of inflation coming in low, it would be all right to let prices run a little hotter—to average things out—before raising rates to cool things down. Since then, Powell has stressed the Fed’s commitment to achieving maximum employment before allowing rates to lift off again. Then the consumer price index rose 6.2% in October over a year earlier, bringing inflation anxiety to a boil.

                            Let’s go back to Volcker. His tenure looms large in the minds of modern central bankers, economists, and pundits—not just because inflation declined under his watch, but also because he cemented the notion of “credibility.” Central bankers love to talk about the credibility they earned (by demonstrating a willingness to fight inflation at every turn) as a reason for years of mild price increases.

                            This credibility is cherished. Powell now has the opportunity to redefine it so it applies to both sides of the Fed’s mandate—not just to inflation but also to labor. Since the pandemic hit, he has made a commitment to delivering maximum employment, and it’s paid off with a fast recovery from what could have been a worse economic disaster. Pulling a Volcker now might entail ignoring politicians, Ph.D. economists, and various editorial boards who all want a fast turn to inflation-fighting mode. Pulling a Volcker might mean having the confidence to see through pandemic-driven, elevated CPI numbers until the job is done getting people back to work.
                            “Loyalty to country ALWAYS. Loyalty to government, when it deserves it.”
                            Mark Twain


                            • Weekly jobless claims post stunning decline to 199,000, the lowest level since 1969

                              The ranks of those submitting jobless claims tumbled to their lowest level in more than 52 years last week, the Labor Department reported Wednesday.

                              New filings totaled 199,000, a number not seen since Nov. 15, 1969, when claims totaled 197,000. The report easily beat Dow Jones estimates of 260,000 and was well below the previous week’s 270,000.

                              The Labor Department did not indicate any special factors that caused the stunning fall, which could provide an important signal about a jobs market that has been struggling to come back since the Covid-19 shock in March 2020.

                              The decline appeared at least in part to be due to seasonal adjustments. Unadjusted claims totaled 258,622, which actually was an increase of 7.6% from the previous week.

                              In other economic reports Wednesday morning, second-quarter GDP growth was revised up slightly to 2.1%, though that was below estimates for 2.2%. Also, durable goods orders declined 0.5%, worse than expectations of a 0.2% gain.

                              Along with the drop in weekly claims, continuing claims, which run a week behind, fell by 60,000 to 2.05 million, a fresh pandemic-era low and a strong sign that the labor market is getting notably tighter.

                              The total of those receiving benefits under all programs fell sharply, down by 752,390 to 2.43 million, according to data through Nov. 6.

                              The data comes amid surging inflation in the U.S. that is running at its fastest pace in 30 years. Clogged ports and supply chains have been major contributors to higher prices as manufacturers and service providers meet escalating demand.

                              The tumble in weekly claims could get the attention of policymakers at the Federal Reserve who have kept crisis-level policies in place despite the steady improvement in the jobs market.

                              While the Fed already has said it will begin gradually reducing its monthly bond purchases, markets are watching closely to see when the central bank might start raising interest rates. Though officials have indicated a possibility of perhaps one rate hike in 2022, traders are now indicating about a 61% probability of three increases next year, according to the CME’s FedWatch tracker.

                              Government bond yields were higher after the report, and Wall Street braced for a negative open in stocks.

                              The drop in claims came alongside indications that the economy grew a bit faster than originally thought over the summer, though not quite as quickly as Wall Street had expected.

                              GDP, a total of all goods and services produced, increased one-tenth of a percentage point from the initial estimate of 2%, mostly on the backs of upward revisions in consumer purchases and private inventory investment, according to the Commerce Department.

                              The report also saw a massive revision to the increase in wages and salaries, which rose $301.1 billion, an upward revision of more than 50% from the original estimate.

                              Finally, a separate report showed that orders for longer-lasting goods fell for the second consecutive month.

                              However, excluding transportation, durable goods orders increased 0.5%, and excluding defense, they were up 0.8%.

                              Nondefense new orders for capital goods, a proxy for business investment, fell 1.2% for the month. However, shipments, unfilled orders and inventories all rose.

                              There's always a "but" lurking in there somewhere.... DOR what's the "but" in this case?
                              Supporting or defending Donald Trump is such an unforgivable moral failing that it calls every bit of your judgement and character into question. Nothing about you should be trusted if you can look at this man and find redeemable value


                              • Who’d a thunk it?
                                Growth soars to double-digits, unemployment hits a 30 year high and — Holy Mackerel, Batman! — unemployment claims plunge like a bus into a ravine!
                                Somebody should come up with a theort or some “rule” to explain that massive coincidence.

                                Oh, look: they did.
                                It’s called Sanity Returns To Washington.

                                Well, actually, it’s Okun’s Law: unemployment moves in the opposite direction of the economy, and is somewhat synced to interest rats.

                                There’s a lot of lag time, but when demand shoots up, things get scarce and people are suddenly in higher demand. Wages rise enough to convince some folks to come back to the labor force, and (here’s the kicker on claims) employers start paying attention to retention, not just labor costs. Fewer layoffs because finding replacements isn’t nearly as easy. Since quits and retirements don’t show up in unemployment claims, this is a very good sign that we may dodge a recession.

                                If we’re not already in one.
                                And, if the revisions don’t reverse the trend.
                                And, if the trend continues for a year or so.
                                Trust me?
                                I'm an economist!