Reader Steve Kopits, after again asserting that VMT, gasoline consumption, GDP all imply recession in H1 2022, writes as his clinching argument “And apparently, the public is none too enamored of macro indicators, either, given recent polling heading into November.” I agree, the public is not terribly happy, as evidenced by say the U Michigan Sentiment indicator. But that’s not to say we’re in a recession.
Figure 1: “Misery index” as sum of inflation and unemployment rate, in % (blue, left scale), and University of Michigan Consumer Sentiment index (brown, right INVERTED scale). NBER defined peak-to-trough recession dates shaded gray. Source: BLS via FRED, Cleveland Fed, U.Mich., NBER, and author’s calculations.
Obviously, sentiment declines during recessions, but it also declines at other times, so that the match is not complete. Same for the misery index (what Arthur Okun called the “discomfort index”). Otherwise, especially in regard to the sentiment index, we would be talking about the recession of 2011. Note, the “misery index” has declined since June, while the sentiment index has risen since June.
Two observations (recapping what I wrote in this post):
- Unemployment has greater weight in the University of Michigan Sentiment index than y/y infation, according to regression coefficients, and scaled-by-standard-deviation (or “beta”) coefficients.
- Both the misery index and the sentiment index are lousy predictors of recession 12 months ahead.
As an additional observation, in fact, both are worse concurrent predictors of recession than the 10yr-3mo term spread with 12 month lag!!!! (using McFadden R2 as metric). Of course, this would not be apparent to somebody who is unable to comprehend what probit regression results means.
U Mich said we were in recession in H1. GDP said we were in recession in H1. So did VMT and gasoline consumption.
The issue is not whether there was an H1 recession, but why there was an H1 recession. If you don’t have a clear view on that, you could screw up interest rate policy heading in 2023, with a sharp downturn as a result.
I think it would be appropriate to review the recession of 1920/1921 (I may have my dates slightly off). This was the aftershock of the 1918 Spanish flu. It’s an interesting precedent and under-explored to date. Would make a nice little project for P&P.
“U Mich said we were in recession in H1.”
My – you should proved beyond questioning you are STUPID. U Mich reports consumer sentiment not economic activity. Come on Stevie – read what Dr. Chinn wrote. DAMN!
“I think it would be appropriate to review the recession of 1920/1921 (I may have my dates slightly off).”
Like you did when you kept telling us about that alleged 1947 recession? Dude – you have a perfect record. You get EVERYTHING wrong. Simply amazing.
The ‘Forgotten’ Depression of 1920/1921
The recession lasted from January 1920 to July 1921, or 18 months, according to the National Bureau of Economic Research. This was longer than most post–World War I recessions, but was shorter than recessions of 1910–1912 and 1913–1914 (24 and 23 months respectively). It was significantly shorter than the Great Depression (132 months).[1][6] Estimates for the decline in Gross National Product also vary. The U.S. Department of Commerce estimates that GNP declined 6.9%, Nathan Balke and Robert J. Gordon estimate a decline of 3.5%, and Christina Romer estimates a decline of 2.4%.[2][7] There is no formal definition of economic depression, but two informal rules are a 10% decline in GDP or a recession lasting more than three years, and the unemployment rate climbing above 10%.[8]
The recession of 1920–1921 was characterized by extreme deflation, the largest one-year percentage decline in around 140 years of data.[2] The Department of Commerce estimates 18% deflation, Balke and Gordon estimate 13% deflation, and Romer estimates 14.8% deflation. Wholesale prices fell 36.8%, the most severe drop since the American Revolutionary War. This is worse than any year during the Great Depression (although adding all the years of the Great Depression together yields more cumulative deflation). The deflation of 1920–21 was extreme in absolute terms, and also unusually extreme given the relatively small decline in gross domestic product.
If 1920/1921 is the template downturn, then monetary policy is set way too tight.
https://en.wikipedia.org/wiki/Depression_of_1920%E2%80%931921
Yes Stevie – everyone with a brain knows about the 1920/21 recession. In fact I provided a link to some interesting research from Barro et al. Of course you have to go to Wikipedia rather than read Barro’s paper.
And had you bothered to READ what I wrote here – I was challenging your claim we had a 1947 recession.
If you are going to stoop using Wikipedia as your source for economic history – at least TRY to read the whole thing:
‘There was a two-year post–World War I recession immediately following the end of the war, complicating the absorption of millions of veterans into the economy. The economy started to grow, but it had not yet completed all the adjustments in shifting from a wartime to a peacetime economy. Factors identified as contributing to the downturn include returning troops, which created a surge in the civilian labor force and problems in absorbing the veterans; a decline in labor union strife;[3] changes in fiscal and monetary policy; and changes in price expectations.’
Stevie – please tell us when the most recent World War ended. Oh yea over 75 years ago. Now we get you want a World War with China but your wishing does not mean it has happened. BTW some of those articles noted in the footnotes would be worth reading even though you never read actual economics.
I get you avoid reading real economics but this paper has been widely cited:
https://www.nber.org/system/files/working_papers/w26866/w26866.pdf
The Coronavirus and the Great Influenza Pandemic: Lessons from the “Spanish Flu” for the Coronavirus’s Potential Effects on Mortality and Economic Activity
Robert J. Barro, José F. Ursúa, and Joanna Weng
NBER Working Paper No. 26866
March 2020, Revised April 2020
JEL No. E1,I0,O4
ABSTRACT
Mortality and economic contraction during the 1918-1920 Great Influenza Pandemic provide plausible upper bounds for outcomes under the coronavirus (COVID-19). Data for 48 countries imply flu-related deaths in 1918-1920 of 40 million, 2.1 percent of world population, implying 150 million deaths when applied to current population. Regressions with annual information on flu deaths 1918-1920 and war
deaths during WWI imply flu-generated economic declines for GDP and consumption in the typical country of 6 and 8 percent, respectively. There is also some evidence that higher flu death rates decreased realized real returns on stocks and, especially, on short-term government bills.
“If you don’t have a clear view on that, you could screw up interest rate policy heading in 2023, with a sharp downturn as a result.”
Wait – you are now saying the FED has only recently screwed up interest rates with a 2023 recession the way? That was what a lot of other economists have been saying – economists that some jerk formerly from Princeton named Steve was mocking.
Hey – I guess you moved to Cape Cod because the smart kids at Princeton University started teasing you for being a stupid jerk.
“The issue is not whether there was an H1 recession, but why there was an H1 recession. ”
just curious, what do the unemployment numbers say about a recession in H1? or are we to ignore this inconvenience?
Steven, we will simply assert this as fact? as I recall, you also asserted double digit deaths in hurricane Maria, rather than the 3,000 that is the official statistic. Steven, you seem to constantly be in conflict with reality.
Stevie could care less about facts as long as Fox and Friends invites him to spread his anti-immigrant hate.
When reality disagrees with his favorite narratives he doesn’t revise his narratives – he just ignores and/or deny reality.
He is either a troll or a joke – possibly both.
Initial unemployment claims from March 19th through about June were consistent with an emerging recession. Not since July, though. Remember, for a recession, we’re not looking at levels, but changes in levels.
Dude – we addressed this misleading claim of yours when you first made it. I guess you do not read anyone’s comments after all.
I guess Stevie does not think people can actually check the data but note this from FRED:
https://fred.stlouisfed.org/series/ICSA
Initial unemployment claims were really low on March 19th and while they rose slightly over the next few months, they were still really low even in July.
Look folks – Stevie is a blatant liar so never ever take his word on anything without checking the data. Now he will not provide links to the data because that would make it too easy to see what a liar he is. But FRED makes this quite easy.
https://fred.stlouisfed.org/series/UNRATE
Steve, I don’t see any indication of a recession in the unemployment data.
by the way, have you updated your Maria death toll yet?
This Initial unemployment claims also shows a strong labor market. I guess Stevie does not get labor economics, macroeconomics, or even how to tie his shoe laces.
The magnitude of the level is important as well. A 50% increase from a low level (which we have) is not the same as a 50% increase from higher levels.
BEA announced real GDP growth in QIII was 2.6%. Real GDP is higher than it was as of 2020QIV. But of course lying trolls like Stevie will ignore this data point too.
“The sentiment index has risen since June”.
Gee Stevie for a person who puts so much weight on this index, why did you fail to tell us it recently rose?
Oh yea – you are a very dishonest person. Got it!
demand destruction making gasoline available for export helps gdp!!
21 oct 2022 eia data/report
net export crude and product 3 million barrels per day
of which net product export was 4 million barrels per day
while net imports of crude was lowered to ~1 million barrels per day also helping gdp
smallest rate of export for product was 3.5 million per day week of 14 oct 2022 (since 16 sep).
usa replaced sanctioned russian product
“The issue is not whether there was an H1 recession, but why there was an H1 recession.”
No. The issue IS whether there was a recession. You stating it does NOT make it true. Quite simply, you do not possess the education, training, or experience to make that call. Soi-disant oil market expert is not a credential, and any arrogant twit can hang up a shingle proclaiming themselves a consultant. Even if you are such an expert and consultant, despite the presence in these comment threads of a lot of evidence to the contrary, that does not in any way, shape, or form imply even the slightest expertise in macroeconomics.
It will have been a recession IF AND ONLY IF the NBER BCDC says it was a recession. That is both a necessary and sufficient condition for declaring a recession at any time, not just 2022 H1.
Just stop with pushing your poorly founded guesses (they don’t even qualify as hypotheses, let alone theories). Your continued insistence on this only makes you look like a fool, and I’m sick and tired of reading it ad nauseam. You’re not a legend in your own time, you’re a legend in your own mind.
Just for a pleasant change of pace for the rest of us, you should try actually learning from these posts. They contain a lot of useful information, if only you (and others) would use them.
But Kopits’ milk he poured in his raisin bran earlier this morning tasted rancid, and he’s unhappy. That verifies we are now in recession. It’s known as “The Grumpy Kopits Rule”, the discovery and mention of which stirs up jealousy in Fulbright scholars everywhere. So nyaaa!!! nyaaaa!!! You….. you….. you…… damnded durnded blasted blamded confounded nuisance Puh-hud you.
Showed you, didn’t I??
Did he invite Bruce Hall over for breakfast? Both of them are writing some really angry but typically stupid rants. But what’s new?
LOL!
https://dilbert.com/strip/2022-10-26
Hope your solar array keeps you warm when it snows this winter. Or maybe you can just shout out ad hominem rants and hope it heats your place.
https://www.bostonglobe.com/2022/10/26/business/new-york-new-england-ration-heating-oil-even-before-peak-winter/
There may not be a recession in New York, but I bet there are going to be a lot of unhappy people.
Exactly. Those who have been smart enough to install solar arrays don’t have to worry about heating oil rationing. The sun will predictably shine regardless of season, whether or what market forces do to the delivery of oil and Natural gas. When others suffer black out, smart people suffer brown out.
Do you actually think your cartoons are publications in the American Economic Review? Don’t you recognize the dog as it is yours? Yea – your dog is laughing at your incessant stupidity!
Did you even bother to READ that story? The Biden White House is taking steps to address any shortages. Your boy Trump would likely just toss them paper towels. Come on Brucie – we have been over this before. You might try reading Kelly Anne’s links before embarrassing yourself again.
Bruce, you should be celebrating every breath of life you take now. According to political analyst Scott Adams, some “dirty Black” person should have shot you about nine months ago:
“Dilbert” creator Scott Adams made a fearful prediction about the 2020 presidential election on Twitter on Wednesday, telling his Republican followers that if Joe Biden is elected to the White House, “there’s a good chance you will be dead within the year.”
“Republicans will be hunted,” he wrote in a follow-up tweet, later adding, “Police will stand down.” <<—-Adams stated July of 2020
I guess this must be like the Obama "death panels" that no one could ever find, or perhaps children being abused in a pizza parlor basement of a pizza parlor which has no basement. No doubt something else Scott Adams believes in.
I'd be curious to know what makes Scott Adams think police change the way they perform their duties based on which party inhabits the White House?? Does Scott Adams know Orlando Harris is/was Black??
Sack offered this timeline of events: A 911 call came in at 9:11 a.m. alerting police of an active shooter. Officers — some off-duty wearing street clothes — arrived at 9:15 a.m. Police located Harris at 9:23 a.m. and began shooting at him. Harris was shot at 9:25 a.m. He was secured by police at 9:32 a.m.
Harris was armed with nearly a dozen 30-round high-capacity magazines, Sack said.
“This could have been much worse,” Sack said.
I guess Scott Adams is projecting his racist views onto America’s police, who though not perfect, risk their lives everyday to keep even racist pond scum like Adams safe from personal harm.
https://www.yahoo.com/now/dilbert-creator-scott-adams-says-001404374.html
https://www.kcra.com/article/st-louis-high-school-shooting/41754700#
Sorry I forgot to include the related links in my above comment. I was distracted~~ by brooding in my mind what Scott Adams might look like if he was surreptitiously wearing a KKK outfit, and if that would bother Adams’ fan base in the least.
I never have read Dilbert so I found it weird that Brucie kept linking to these cartoons. Thanks for explaining to us why Brucie loves these cartoons. Brucie during the height of the pandemic had to miss his favorite part of the week – those KKK meetings so he turned to cartoons made by a fellow Klan member.
Now I can go on not worrying about the latest hate filled garbage from either Scott Adams or his favorite reader.
https://comicsalliance.com/scott-adam-sexist-mens-rights/
The reality is that women are treated differently by society for exactly the same reason that children and the mentally handicapped are treated differently. It’s just easier this way for everyone. You don’t argue with a four-year old about why he shouldn’t eat candy for dinner. You don’t punch a mentally handicapped guy even if he punches you first. And you don’t argue when a women tells you she’s only making 80 cents to your dollar. It’s the path of least resistance. You save your energy for more important battles. -Scott Adams
‘Dilbert’ Creator Scott Adams Compares Women Asking for Equal Pay to Children Demanding Candy
Scott Adams appears to be sexist too. No wonder Brucie loves this racist sexist pro-Trump cartoonist!
This must be the type policeman that Scott Adams likes:
https://twitter.com/DGoforth918/status/1584975422009114625
These are Republican police in a major city in “red state” Oklahoma, “training” other less experienced police and indoctrinating them that if you’re not on the right politically, and you don’t enjoy physically abusing BLM protesters, you don’t belong in law enforcement. Saying he loves when businesses get their windows broken and property damaged so that he has his excuse/pretext to personally abuse Black people exercising their right to protest against a racist/corrupt district attorney’s office etc.
https://publish.twitter.com/?query=https%3A%2F%2Ftwitter.com%2FDGoforth918%2Fstatus%2F1584975428561035264&widget=Tweet
Then police sit around scratching their heads (in fake/phony befuddlement) wondering why large segments of communities hate the police. The police KNOW why large segments of the public hate them. Because police have worked towards and EARNED that hate.
The creator of your favorite little cartoon is a known racist and sexist. See the comments and links from Moses. Oh wait – you knew that which is why a flaming sexist and racist like you adores his cartoons.
pgl and Moses,
Actually Dilbert is a pretty good comic strip most of the time. It appears in WaPo. It is too bad that Adams has such creepy views. But he only occasionally lets them drive his comic strip, at least openly. Mostly it is a take on the absurd things that heppen within corporations, and it does a pretty good job of it most of the time, genuinely funny as well as insightful.
I am rather disappointed in the views of Adams. I used to read Dilbert years ago, but have not seen it much in over a decade. it is a shame its creator seems to be a bit of a turd. I was always a fan of the far side. or the greatest comic of all, Calvin and Hobbes.
We should always remember that Stevie have his own pet terms which have zero economic meaning but are useful cheap debating tricks as he strives to promote his worthless consulting business on Fox and Friends. We should always remember that Stevie goes on one fishing expedition after another until he at least thinks he has found empirical support for his nonsense. And we should also remember that Stevie – like fellow trolls Bruce Hall and JohnH – gets very indignant when their BS is called out.
I saw all of this as we await Stevie’s long winded and totally absurd retorts.
People are unhappy not necessarily because of conditions but because they increasingly fed a world-view that is biased toward negative emotions.
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0276367
I view this as a somewhat natural human condition because humans focus on things which need to be fixed and improved. The things that work well and run smoothly tend to get less thought. But there is no doubt that both TV media and the internet have intensified a type of negative feedback loop, along with a natural inclination to enjoy having our own thoughts and contentions “read back” to us, or the overly used cliché “echoed”.
My favorite book on this topic, by Tim Wu, “The Attention Merchants”
ISBN # 978-0804170048
There are other good books along this same train of thoughts, but Wu’s is my fav.
https://fred.stlouisfed.org/graph/?g=N741
January 4, 2020
Interest rates on 10-Year Treasury Bond minus 2-Year Treasury Note, 2020-2022
https://fred.stlouisfed.org/graph/?g=zSG6
January 4, 2020
Interest rates on 10-Year Treasury Bond minus 3-Month Treasury Bill, 2020-2022
https://www.nytimes.com/2022/10/26/business/yield-curve-inversion-recession.html
October 26, 2022
Another Closely Watched Recession Alarm Is Ringing
A so-called inverted yield curve between three-month and 10-year interest rates is considered by Wall Street as a reliable sign of an impending economic slump.
By Joe Rennison
A recession warning tracked by Wall Street is growing louder, as another measure of the widely watched “yield curve” signals that the United States is headed toward an economic slump.
The yield curve is a way of comparing interest rates, also known as yields, on different maturities of government bonds, from a few months to 10 years or more.
Investors typically expect to be paid more interest for lending to the government for a longer time, partly reflecting the risk of locking up money given the usual expectations for rising growth and inflation.
But short-term yields occasionally rise above longer-term yields, upending the usual situation in the bond market. It’s called a yield-curve inversion, and it means investors are now effectively demanding more money to lend to the government over shorter periods of time. That is an indication investors expect economic growth to decline soon — perhaps within a year — and that the Federal Reserve will need to cut interest rates below where they are currently to help an ailing economy.
Investors have grown increasingly worried about the global economic outlook, as roaring inflation, higher interest rates and volatile markets have destabilized the financial system.
One common measure of the yield curve has already inverted, with the two-year Treasury yield remaining above the 10-year Treasury yield since early July.
At times on Tuesday and throughout Wednesday morning, another segment of the curve also inverted, with the three-month yield inching above the 10-year yield. Since the late 1960s, this part of the yield curve has inverted roughly a year before the start of a recession, with a range of six to 15 months, according to calculations by Arturo Estrella, an early proponent of the predictive power of the yield curve….
That’s just a reporter trying to squeeze a story out. A brief one-time inversion tells us vanishingly little compared to a long period of near-zero term spreads.
Yes, recession odds are elevated. No, one day’s yield wobbles doesn’t mean odds have changed.
Me thinks Hershel Walker is about to go down:
https://www.theguardian.com/us-news/2022/oct/26/herschel-walker-georgia-senate-abortion-clinic
The lawyer Gloria Allred was due on Wednesday to introduce to reporters a woman who alleges Herschel Walker, the Republican candidate for Senate in Georgia, took her to an abortion clinic to have an abortion. Walker has voiced strict anti-abortion policies but has already been accused of paying for an abortion for another woman. Allred said the woman now stepping forward, named as Jane Doe, would speak on Wednesday afternoon in Los Angeles. The woman, Allred said, would “allege that she had a romantic, intimate relationship with Herschel Walker and that he drove her to an abortion clinic to have an abortion after she became pregnant as a result of her relationship with him”.
Allred also promised to reveal “some of Jane Doe’s evidence in support of her romance with Mr Walker”, and said her client would read a statement to reporters but would not reveal her name or her face. Allred has represented numerous alleged victims of sexual misconduct and assault.
Word of advice – never mess with Gloria Allred. Of course Hershel’s bus is rocking out to “Bad to the Bone”.
https://news.cgtn.com/news/2022-10-26/Chinese-mainland-records-338-new-confirmed-COVID-19-cases-1erco5HkFRm/index.html
October 26, 2022
Chinese mainland records 338 new confirmed COVID-19 cases
The Chinese mainland recorded 338 confirmed COVID-19 cases on Tuesday, with 297 attributed to local transmissions and 41 from overseas, data from the National Health Commission showed on Wednesday.
A total of 1,069 asymptomatic cases were also recorded on Tuesday, and 15,493 asymptomatic patients remain under medical observation.
The cumulative number of confirmed cases on the Chinese mainland is 258,167, with the death toll from COVID-19 standing at 5,226.
Chinese mainland new locally transmitted cases
https://news.cgtn.com/news/2022-10-26/Chinese-mainland-records-338-new-confirmed-COVID-19-cases-1erco5HkFRm/img/8d1688894cf64edda6e5f4890991a7ae/8d1688894cf64edda6e5f4890991a7ae.jpeg
Chinese mainland new imported cases
https://news.cgtn.com/news/2022-10-26/Chinese-mainland-records-338-new-confirmed-COVID-19-cases-1erco5HkFRm/img/ac58afae8ec249f7aecba647af96aa3a/ac58afae8ec249f7aecba647af96aa3a.jpeg
Chinese mainland new asymptomatic cases
https://news.cgtn.com/news/2022-10-26/Chinese-mainland-records-338-new-confirmed-COVID-19-cases-1erco5HkFRm/img/80bbe61cde824d438e11ff5820ad089b/80bbe61cde824d438e11ff5820ad089b.jpeg
https://www.worldometers.info/coronavirus/
October 25, 2022
Coronavirus
United States
Cases ( 99,141,254)
Deaths ( 1,093,338)
Deaths per million ( 3,262)
China
Cases ( 257,829)
Deaths ( 5,226)
Deaths per million ( 3.6)
&Ingorance more frequently begets confidence than does knowledge.”
– Charles Darwin
Heck, while we’re at it:
“…by a disorderly and ambiguous terminology we are led into the most palpable mistakes and misunderstandings – all these failings are of so frequent occurrence in our science that they almost seem to be characteristic of its style.”
– Eugen von Böhm-Bawerk
Recession is when miles driven falls, or when public sentiment is sour or when GDP falls while employment climbs – disorderly and ambiguous.
Recession is when the NBER business cycle dating committee says there’s a recession – neither disorderly nor ambiguous.
I have to admit I skipped the Hochul-Zeldin debate as listening to Lee Zeldin makes me ill. But I have heard reviews of how he fared in last night’s debate. It seems whenever he was asked about abortion (he opposes a woman’s right to choose) he kept talking about crime on the subways. Huh? Oh yea – he has talked crime nonstop even though he has no plan to reduce it. None.
So let’s help this MAGA clown out with his plans to reduce crime. Is it that he will lock up all those OB-GYN doctors? Is it that he will make sure women are so bare foot and pregnant that they cannot take the subway? He is all for more guns in Time Square and on our subways like having a bunch of people carrying guns into crowded areas will make New Yorkers feel safer.
JohnH had to lecture us about this story which of course makes him very happy:
https://www.msn.com/en-us/news/world/russians-dig-in-to-defend-key-city-of-kherson-ukrainian-forces-say/ar-AA13pgEl
Russians dig in to defend key city of Kherson, Ukrainian forces say
FRONTLINE NORTH OF KHERSON, Ukraine (Reuters) – Squatting in a weed-choked irrigation canal, concealed from prowling enemy drones by overhanging trees, the Ukrainian soldier dismissed media reports that reclaiming the Russian-held port city of Kherson would be a cakewalk.
“They have good defensive lines with deep trenches, and they are sitting deep underground,” said Vitalii, gripping an assault rifle and nodding at the tree line where his foes were bunkered. “Ukrainian armored forces need to destroy those defensive lines.”
Personally I doubt the Russians will succeed but we all know these means a lot of people need to needlessly die. Putin does not give a damn about his own soldiers and it seems JohnH takes great glee in the death of Ukrainians. I have no clue what this very sick troll wants Ukrainians to needlessly die.
Off topic, Diatribe –
The source of inflation should should go some way toward choosing the appropriate policy response. Inflation can be demand-driven, supply-driven or the result of momentum. Broadly speaking, demand-driven inflation should look like real GDP above potential. Have a look:
https://fred.stlouisfed.org/graph/?g=VeGp
Real output has been below potential in all but one quarter of the post-recession period. Not good for the demand-driven inflation story. Of course, and less broadly, the swing in demand toward goods and away from services could be the problem:
https://fred.stlouisfed.org/graph/?g=VeIw
That should mean that excess inflation is all on the goods side:
https://fred.stlouisfed.org/graph/?g=VeI1
Oops. Not so.
Yes, the jobless rate is low but the participation rate and the employment rate are both below their pre-recession level, so the negative output gap still makes sense:
https://fred.stlouisfed.org/graph/?g=VeMm
We could dig up details to support the demand-side story – lots of people have – but the basic demand-greater-than-supply story is not obvious in the conventional math. Maybe we should be cautious in applying demand-focused remedies.
OK, maybe we have a supply-side problem. Jay Powell has repeatedly mentioned supply problems and particularly a tight labor market. If a tight labor market is resulting in wage-driven price increases, wage (actually, total compensation) gains should be leading price gains and should be at least as large as price gains. Here’s the picture:
https://fred.stlouisfed.org/graph/?g=VeJZ
Again, not so. And again, we could dig up some data to support the wage-price spiral story, but give me a minute…
How about a wider look at supply-side elements? Labor costs, non-labor production costs, commodity input cost and stuff like that. Here’s the picture:
https://fred.stlouisfed.org/graph/?g=VeLY
Everything has gone up in price, but there are a couple of stand-outs: Commodity prices and….drum roll…profits! So wedo have a supply-side problem – two, in fact. And if wages are driving price increases, shouldn’t profits be suffering? In fact, profits are the best evidence of demand-driven inflation. (Remember I said we could dig up evidence in support of demand-side inflation?) And there are other ways of explaining profits – feel free to pile on!
Then there’s the momentum story, which is one of the Fed’s obsessions and which Menzie has addressed often. Here’s a reminder:
https://fred.stlouisfed.org/graph/?g=VeNw
Inflation expectations at five years, when monetary policy lags are mostly used up, are running around 2.4%. Saints preserve us.
To sum up:
Output is below potential, which casts doubt on the demand-side story. Service sector activity is below pre-recession levels but service inflation is high, which means demand-driven inflation because of a demand imbalance isn’t the whole story, either.
Wages are rising, but wages are a price like any other. In an inflationary environment, of course wages are rising. They are not rising faster than inflation and not faster than other production costs. Wages have risen a lot more slowly than either the price of commodity inputs or profits.
So what’s the real theory here for the Fed? Tight labor markets didn’t lead to accelerating inflation prior to the Covid recession. In fact, the Fed was struggling to get inflation up to target in a tight labor market. Powell has asmittd to supply problems and that the Fed has little power to deal with supply-driven inflation. Powell has no tools to bring down profits or commodity prices, no remedy for supply-side problems. His tools kill off demand, so he kills off demand. Powell has said as much.
So fine, the Fed is using the only lever it has. It’s a tool poorly suited to the situation, but well suited to cause harm. Monetary policy today, says the IMF, has its full effect* on output in about a year, on inflation in four or five years. That structure of lags says it’s a mistake to keep hiking, or even to leave rates very high, until inflation has cooled off very much. That’s the path to a resumption of inflation undershoot, with output undershoot for a considerable period. The components of inflation over which the Fed has any real control are going to keep cooling for a long time after the funds rate peaks. Current inflation data tell us very little about inflation after the lags are uses up. And by the way, the real funds rate is now positive, using five-year inflation expectations.
Could it be that the goal is to cause recession because “everybody knows” recession stops inflation? Policy theater to save face? Time to give it a rest.
* Never forget hysteresis.
Europe now has so much Natural Gas they can’t give it away.
https://www.cnn.com/2022/10/26/energy/europe-natural-gas-prices-plunge/index.html
Not good, but better than freezing for a lack of it.
It is so refreshing to have a strategic genius in the White House rather than an Orange clown.
https://www.cnn.com/2022/10/26/politics/us-ukraine-aid-skepticism-putin-analysis/index.html
Recently, Putin has appeared desperate and getting ready to use dirty bombs in Ukraine. Then suddenly it appears that he has hope that those weak westerners are about to break their unity and start breaking down in response to tough Russians (as he the genius alway predicted they would). I guess now all he has to do is wait for the inevitable infighting among the weak westerners – no need to go nuclear. He can just hang tough over the winter, and wait for the west to stop supplying Ukraine, then scoop them up like a clump in the litter box. Sure Putin, you are brilliant, like certain participants debating here.
China helping Russia with its disinformation campaign
https://www.mandiant.com/resources/blog/prc-dragonbridge-influence-elections
Well I guess a few of our local actors have been doing the same.
https://fred.stlouisfed.org/graph/?g=R4BT
January 30, 2018
Case-Shiller National Home Price Index / Consumer Price Index, 2007-2022
(Indexed to 2007)
https://fred.stlouisfed.org/graph/?g=QJHY
January 30, 2018
Case-Shiller National Home Price Index / Consumer Price Index, 1992-2022
(Indexed to 1992)
[ A question for me, is whether home prices can hold at current levels when the work of Robert Shiller would suggest “no.” Possibly though conditions in home markets are significantly different than in the past, and I have not understood why. ]
Are we in recession only when economists become unhappy?
You are a worthless little idiot. We have asked you to cease making such obscenely stupid comments but I guess it is all you know how to do.
rsm,
But some economists are happy when there is a recession. Lots of people pay more attention to us. You did not get that? Listening to too much noise you are, rsm.
Off topic, another diatribe –
This time, a really short diatribe. Immigration limits on low-skilled labor (H-2B) reduce growth with no benefit to non-immigrant workers:
https://www.nber.org/papers/w30589
At some higher level of low-skilled immigration, these results might be different, but we aren’t at some higher level.
I agree that “Recession” Is Not the Same as “People Are Unhappy”” And this begs the question of why macroeconomists are so obsessed with the growth of the economy and care so little about Americans’ general wellbeing.
As just one example, the BLS published its Real Earnings Summary on October 13. It showed that real average hourly earnings are back to where they were in February 2019. On October 18. BLS released its Usual Weekly Earnings Summary. It showed that Median usual weekly earnings of full-time wage and salary workers are back to where they were three years ago.
Neither report merited a mention here. Granted that this is only one economics site, but it’s consistent with my impression that economists care a lot about how “the economy” is doing, but care little about how Americans are faring. In fact, when economic growth goes negative, economists have a word for it: recession. But when Americans’ incomes go negative, there is no word for it. (Some even get offended if you call it a wage recession, which what we have been experiencing for a while now.) If economists gave a hoot about workers, why wouldn’t they have come up with a single word as shorthand for a decline in median wages?
Now a cynic, which I am, might say that, well, average Americans are in fact not important to most economists because they are not where the money is. The real money is with GDP, which roughly measures the welfare off the affluent and wealthy, who take home the majority of national income and account for most of national consumption. A similar phenomenon is the real time reporting of stock market measures, which only the truly wealthy care about, because they own most financial assets.
Like the proverbial tree falling in the forest, if Americans’ real wages fall, and no one hears about it, did they really fall? Elections, where American vote to throw the bums out, are one sure indicator. The unfortunate result is that incumbent bums only get replaced by the bums of the alternative party.
“…why macroeconomists are so obsessed with the growth of the economy and care so little about Americans’ general wellbeing.”
“As just one example, the BLS published its Real Earnings Summary…”
Johnny has returned to his claim that macroeconomists don’t care about welfare (I guess microeconomists are big fans of welfare), and then an economic data seres publishd by government economists to demonstrate hs point. I’m confused. Well actually, Johnny is confused. If government economists DIDN’T’ publish the data Johnny uses as a measure of welfare, THAT would be evidence economists don’t care.
Johnny, you’re getting lazy. You made this silly argument some time back, and in the process made all sorts of misstatements about economics. You were wrong then and you’re wrong now. You don’t know enough about economics or economists to know what economists care about. Why are you trying to revive your previous mistakes?
“If government economists DIDN’T’ publish the data Johnny uses as a measure of welfare, THAT would be evidence economists don’t care.”
Johnny has expounded on his claim. You see this data is not published on a daily basis at every quintile so it does not count.
Johnny, Johnny, Johnny! Remember when you claimed that a wobble in the Atlanta Fed’s GDPNow measure meant real GDP was probably going to fall in Q3? Remember? And I offered you a bet – a bet you didn’t have the stones to accept? Remember Johhny?
It’s kinda funny that your reprising one of your ill-informed arguments about economics just when another has gone so comically wrong.
It’s also kinda odd that you and Brucey and Stevie all seemed to run out of silly things to write in comments for a while and have now all resumed saying silly things. Do you guys all take orders from the same propaganda shop?
Oh I forgot to mention Johnny’s other favorite cheap debating trick. Johnny has been saying for months that we should ignore mainstream media such as the NYTimes. But wait – Paul Krugman has not written on this in the NYTimes for the last 2 weeks so he must not care. Wait – he wrote an informative discussion on the topic for some overseas paper but no – that does not count unless Krugman put the discussion in the NYTimes.
“And this begs the question of why macroeconomists are so obsessed with the growth of the economy and care so little about Americans’ general wellbeing.”
When you begin a comment with such an incredibly stupid lie, NO ONE bothers to read the rest of your comment. JohnH – totally worthless little troll.
So let me put it to pgl this way: real wages are back where they were in 2019…why aren’t economists talking about it? In a time of economic expansion, isn’t this obliviousness scandalous?
So why do economists fixate on the growth of the “economy” and ignore the decline in real wages? Shouldn’t the health of the economy be measured by Americans’ prosperity? But instead it receives short shrift.
It seems that most economists don’t care to be bothered much with Americans’ general wellbeing but love to talk about “the economy.”
You really are STUPID. Yea I have commented on the decline in real wages. MANY TIMES. A lot of other economists have done so too. So when you say we have not you are doing what you do best – LIE, LIE, LIE, LIE.
Oh wait – Krugman once wrote on this in the non-mainstream media so it does not count since that discussion was not on the NYTimes THIS WEEK. But wait – you keep telling us we should read more of the non-mainstream media.
You are so two faced I bet you do not know which direction you are walking. Be careful not to get run over by a bus.
“So let me put it to pgl this way: real wages are back where they were in 2019…why aren’t economists talking about it?”
considering the pandemic that we have been going through for two years, does it not seem reasonable that we are simply back to where we were just prior the pandemic? did you really believe that real wages should have increased across the board during the greatest world health crisis in decades? exactly what rock have you been living under for the past couple of years, John? that is what I would call obliviousness.
And Republican insider politics –
Growing number of Republicans say Trump won’t be GOP nominee
“Former Speaker Paul Ryan (R-Wis.), former Florida Gov. Jeb Bush (R) and former Vice President Mike Pence in recent days each indicated they’d rather see someone else on the ballot in the next presidential election.”
https://thehill.com/homenews/administration/3704024-growing-number-of-republicans-say-trump-wont-be-gop-nominee/
Someone else on the ballot, like themselves, perhaps. Who has popcorn?
Way off topic, Give Edison a Chance –
Energy efficiency, resource efficiency, cost control and environmental health might all get a boost from greater us of direct current:
https://www.treehugger.com/the-home-of-tomorrow-will-run-on-direct-current-4863157
It’s the transition that gets ya. Inertia, path dependence, turf wars – call it what you will, but greater use of direct current won’t be easy. Oh, and DC would cut down on amplifier hum!
Found this link on an NYT newsletter called “Debatables” er something like that:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4138728&te=1&nl=debatable&emc=edit_db_20221026
Thought some of my compatriots here on the blog that kinda sorta agreed with my stance on inflation being caused more by supply chain issues than caused by demand might care to read it. It’s relatively new research.
Danke Sehr.
Ever since the Jerry Sandusky scandal, with sidekick Joe “No Need to Involve Police” Paterno, in which multiple people at Penn State admitted Jerry Sandusky’s abuse of children was an “open secret” on campus, I have referred to Penn State as “Pedo U”. And I don’t feel an ounce of regret doing that. And it seems the level of class, dignity, and grace at “Pedo U” hasn’t changed AT ALL:
https://www.splcenter.org/hatewatch/2022/10/25/protesters-maced-canceled-far-right-comedy-event-penn-state
“Comedy Event”…….. ?? “Comedy event” means we declare racism as a form of “satire” so we don’t get sued. It gives them “license” to act like KKK on the “Pedo U” campus. These “Pedo U” students are “the future of America”?? GOD PLEASE HELP US.
Why does Chintzy’s blog immediately spring to mind upon reading the following passage?
《Year after year economic theorists continue to produce scores of mathematical models and to explore in great detail their formal properties; and the econometricians fit algebraic functions of all possible shapes to essentially the same sets of data without being able to advance, in any perceptible way, a systematic understanding of the structure and the operations of a real economic system.
Wassily Leontief》
I’m happy that beer prices so far have not risen that much but this story says that may change:
https://www.reuters.com/business/retail-consumer/carlsberg-ceo-says-inflation-could-hit-beer-sales-2023-2022-10-27/
‘Danish brewer Carlsberg (CARLb.CO) on Wednesday reported third-quarter sales broadly in line with expectations and lifted its profit forecast for the year despite weakening consumer sentiment. The world’s third-biggest brewer said revenue in the quarter rose 14% to 20.2 billion Danish crowns ($2.72 billion) on the back of strong Asia sales, compared with the 20.3 billion forecast by analysts in a poll compiled by the company.’
It seems that American microbrews like Sam Adams saw profit margin declines but I checked the financials for Carlsberg and their profit margin has stayed above 16%. It also turns out that they sell a lot of beer to Russia and China.
https://www.nytimes.com/2022/10/27/business/economy/us-economy-gdp.html
October 27, 2022
The U.S. economy grew sluggishly in the third quarter.
By Ben Casselman
Economic growth rebounded over the summer, the latest government data shows, but slowing consumer spending and a rapidly weakening housing market mean the report will do little to ease fears of a looming recession.
Gross domestic product, adjusted for inflation, rose 0.6 percent in the third quarter, a 2.6 percent annual rate of growth, the Commerce Department said Thursday. It was the first increase after two consecutive quarterly contractions.
But the third-quarter figures were skewed by the international trade component, which often exhibits big swings from one period to the next. Economists tend to focus on less volatile components, which have showed the recovery steadily losing momentum as the year has progressed.
“Ignore the headline number — growth rates are slowing,” said Michael Gapen, chief U.S. economist for Bank of America. “It wouldn’t take much further slowing from here to tip the economy into a recession.”
https://www.nytimes.com/2022/10/27/business/european-central-bank-rates-inflation.html
October 27, 2022
With inflation at 9.9 percent, the European Central Bank raises rates again.
By Eshe Nelson
The European Central Bank imposed another large interest-rate increase on Thursday, as policymakers tried to quell the region’s record-high inflation.
The central bank, which sets monetary policy for the 19 countries that use the euro, raised interest rates by three-quarters of a percentage point, matching the previous increase last month. After a slow start in raising rates — its July increase was the first in more than a decade — the bank said it had rapidly tightened its policy stance as inflation has proved worse and more persistent than the bank expected.
Consumer prices rose 9.9 percent on average in the eurozone in September from a year earlier, the fastest pace on record, driven by energy and food prices.
“Inflation remains far too high and will stay above the target for an extended period,” Christine Lagarde, the president of the central bank, said on Thursday. The bank’s policy stance is intended to weaken the forces pushing up demand and guard against the risk that inflation expectations persistently shift higher, she said.
Policymakers expect to raise interest rates further as they seek to return inflation to the bank’s target of 2 percent, Ms. Lagarde added at a news conference in Frankfurt.
Overt U.S. antisemitism returns with Trump, Ye: ‘Something is different’
https://www.msn.com/en-us/news/politics/overt-u-s-antisemitism-returns-with-trump-ye-something-is-different/ar-AA13rcpb?ocid=msedgdhp&pc=U531&cvid=b0f9a06f93c7422b85fe72e26adba8d9
Violence against Jews is alarmingly high in part because we let a blatantly racist person become our 45th President. I may not be Jewish but a lot of my friends are. And none of them can understand why a single American Jew ever supported Trump.
@ pgl
Right together with Blacks who support donald trump, and Hispanics who support donald trump, this is one of the biggest mysteries of the whole MAGA nightmare. Then there’s the MAGA women mystery, although that one is not so mysterious taken along some prior behavior lines. Like women who have married 4 different domestic abusers. Then we can go into evangelicals. But let’s please not get into evangelicals….. I think Elaine Chao is a simple case of pragmatism, which my experience with mainland Chinese certainly fits a stereotype profile. Here is the broader view, but frankly the fact 1 in 3 Asians voted for the Orange Abomination is really from my personal perspective an unbelievably high ratio.
https://www.nbcnews.com/news/asian-america/asian-americans-voted-biden-63-31-reality-more-complex-n1247171
You literally have to be masochistic to be Asian and vote for donald trump. Are 1 in 3 Asians masochistic?? It’s a strange “scratch your head and squint your eyes” for half-an-hour kind of deal. Are American Chinese as “victim mentality” as mainland Chinese are “victim mentality”?? My sense is “NO”, but how would “victim mentality” make you vote for a man who hates your group……. ?? I have no idea and my brain will go into pinball game full tilt if I think about it too long.
“Barkley Rosser
October 27, 2022 at 7:55 pm
pgl and Moses,
Actually Dilbert is a pretty good comic strip most of the time. It appears in WaPo. It is too bad that Adams has such creepy views. ”
Ah Barkley – I usually avoid the spats you and Moses have. But come on! I never said Dilbert is a terrible comic strip and neither did Moses. The issue for me – and I think for Moses – was the sexist and racist garbage Bruce Hall routinely spews as he thinks he has the right to mock people who call him out for his incessant garbage.
Now I do not think you support Bruce Hall on his garbage. Maybe you do think Brucie has a point but if you don’t – then do not give an ounce of credence to this partisan racist, sexist troll.
pgl,;,
Well, I don’t think there is a spat here, at least not up until now. No, neither of you commented on the comic strip per se. It was all about Adams. And for once neither Moses nor I were arguing. Indeed, neither of you had actually commented on the strip itself, but rather had gone on and on about Adams. And I agreed with you that Adams has as I put it, “creepy views.”
But I thought I would provide the minor informative tidbit that I and also many other people who do not agree with Adams’s views like the comic strip Dilbert most of the time. I confess that hearing about his views has made me like it less than I used to, and look at with a more critical eye than I used to, occasionally finding him sort of sneaking some of his less agreeable views into it, although usually fairly covertly and infrequently. But I contend again that most of the time it is indeed an excellent takeoff on not just corporate nonsense but bureaucratic and organizational nonsense more broadly, including in academia that I deal with. I have on numerous occasions had conversations with academic colleagues about particular strips, with it often them bringing it up, given that so many of us read WaPo.
As it is, I only this once looked at the one Bruce Hall linked to, and it mostly seemed irrelevant to the discussion, as well as being harmless, if not a particularly amusing one. I think going after him for linking to Dilbert was basically a sideshow. He may be doing it because he agrees with Adams, and I have and had no problem with you going after him for that, and, you may notice, I said nothing about that particular one he linked to, which, again, seemed pretty irrelevant, so just silly and stupid to link to.
I get it that lots of people think that if somebody has bad views one should boyoctt them, but I did not see Moses make that case, and I do not accept that. If that was true, I would not listen to the music of Wagner. But I do listen to his music and love it, despite him being admired by Hitler and having seriously anti-Semitic views, and his widow actually meeting with Hitler in the 1920s and supporting him. For a long time after WW II, playing Wagner was forbidden in Israel, but after a time, that ban was lifted as simply stupid. And Wagner was way worse than Scott Adams in his views and personal actions.
Anyway, I have followed Dilbert for decades, and the vast majority of the time it fits what I said of it, funny and insightful. Occasionally it fails both of those, and this one Bruce linked to did, although it did not seem to obviously be obnoxious.
As it is, I get WaPo delivered to my door in hard copy in the morning, and I am very addicted to reading it that way. In today’s WaPo I saw a letter from somebody in Frederick MD complaining about them ceasing to deliver at the door, yet another cutback. It is closer to DC than Harrisonburg. So I see this as a sign that this may happen here too in the near future. I am now in anticipatory mourning of losing my decent hardcopy morning paper. I get my local one online, and I seem unable to access the comics page. So I am now anticipating not being able to read Dilbert, and I shall miss it.
So there. If you want to pick a fight about Dilbert, Moses was not doing so, unless I missed it. But you are doing so in a fairly silly environment, and, no, I shall continue to read Dilbert with pleasure and eagerness for what looks to be the probably pretty short time I have left to do so, at least in a hard copy newspaper (maybe I shall be able to access it in the online version).
This was a pretty pointless comment, pgl, not up to your usual standards, and, sorry, I think you are full of it on it, if you want to continue fighting over it. I am all for Dilbert, if not for its author.
Read Dilbert all you wish. But I guess you have not followed the incredible dishonesty et al. from Bruce Hall. In my view – this troll has crossed so many lines that he should be banned from all blogs. Now if you choose to skip his insulting rants – good for you. But trust me – he likely took your comment as support for his racist sexist garbage even though clearly that was never your intent. So please refrain from supporting this troll in any way.
pgl,
Oh, I am not defending Bruce Hall at all here. As it is, unlike you, I rarely bother looking at his links as they are so worthless generally. I was completely unaware that he has been linking to Dilbert cartoons until now when you made a fuss about it. Again, while this one was not particularly funny or insightful, I also found it to be basically irrelevant to the topic as well as also basically harmless and apolitical. Mostly just showed Bruce up for being stupid to link to it.
Since you seem to know little to nothing about the comic other than what a Bad Guy Scott Adams is, I shall say a bit more about it. There are only about a half dozen regular characters with names, a few with labels, and then a lot of extras. Dilbert himself is a nerdy engineer in a company who is competent and mostly tries to get along with others unless they behave outrageously to him, which many do. He is not married and a social flop, occasionally trying to date, but always messing up due to his general nerdy ineptness. He is a mostly sympathetic character, if not somebody wonderfully virtuous. The next most important character is the nameless Pointy Haired Boss, who is Dilbett’s nemesis and the bearer of all sorts of corporate bad behavior as well as incompetent, with many days it just being the two of them, Dilbert trying to avoid or undo damaging and stupid things being foisted on him by this Pointy Haired Boss. That was it today in the Sunday Post, where it appears in the Business section of all places, with the Pointy Haired Boss wanting Dilbert to email nasty things to Rob Reiner because of his political views, with Dilbert resisting and saying “What would this accomplish?” with amazingly enough the Pointy Haired Boss looking out for two slides and then walking off and amazingly enough and unprecedently saying to himself “I must be some kind of jerk.”
There is another white male character, Wally, who is totally lazy and spends all his time figuring out ways to get out of doing anything and covering up that fact. There are no Black or Latinz or LGBTQ+ characters. There is one East Indian male, Asok, who is supposedly a more recent hire and younger than the others, smart but sort of innocent, so he gets picked on and discriminated against and exploited, usually with the Pointy Haired Boss the main culprit in this. There is an unnamed female secretary, who mostly just disrespects the Pointy Haired Boss for good reason. There is Alice, a whlte female who is clearly highly competent, the only character besides Dilbert who is clearly so, who is also more or less a feminist. She is rather unpleasant, but she clearly stands up for her rights fairly reasonably with other characters clearly respecting her, if not liking her all that much. There ia an unnamed CEO who occasionally appears, another while male with a tall bald head who usually is pushing some sort of corruption or cheating by the company,, or else supporting the Pointy Haired Boss in some stupid idea he is trying to push on the hapless Dilbert. Finally there is a dog named Dogbert, who is often identified as the HR person of the company, although also not an employee of the company, and occasionally as living with Dilbert, which seems odd, but who is constantly making proposals to the Pointy Haired Boss that will cause all kinds of trouble.
There are all sorts of irregular and unnamed other characters appearing and disappearing, lying contractors for example, with whom poor Dilbert must contend. Occasionally there are foreigners called “Elbonians” who have beards and tall hats and seem to be either out to steal ideas or engage in terrorism. Oh, I guess this is a bit of xenophobia in the strip. But I would say largely the politics is more by omission than commission., although I did see him in recent months a couple of times have one or another character make a snotty comment about “wokeness.” But, really, it is mostly pretty apolitical with the targets being mostly corporate and hierarchical malfeasance and incompetence.