We have two “stories that matter” in addition to the continually soars, jacked-up-on-cash shit-show previously known as the Stock Market. Normally, given the serious hit to both employment and economic activity, stocks would decline to lower levels of equilibrium as risk and reward rebalance.
However, with the (not really) Federal (and with no…) Reserve, save the “full faith and credit…” (as a right to tax you, the Citizen) you are living through the Hollowing Out of the former World Reserve Currency.
The domino-like collapse will take some time but it will result in a global restructuring and the slow letting-go of Globalism into reconstituted Trading Blocks.
The process, near as we can estimate, will go something like this:
- Money’s purchasing power will be diluted as excess cash is pumped into the economy.
- Very short-term, there will be a vibrant price-spike as excess cash bids up goods with “utility value.”
- Under the surface, however, the amount of foreign goods that may be purchased with the former reserve currency (“dollars”) will descend. As a result? Overseas buyers will demand more excess cash, realizing that when they need to “flip cash into goods” there will be a higher discount rate.
- This becomes rising prices of imported foreign goods. Which (and there’s a silver lining here) will be a major incentivization to on-shore manufacturing.
- This is fine with China, however. Armed with their “kinder, gentler, more “narrated” version of Soviet-style buffer states (sold to the gullible West as the Belt and Road Initiative), the Chinese will be in position to build a large middle class.
- The U.S., faced with the return of excess cash will eventually increase taxes (dramatically!) at a time of falling employment. Due to a wide, developing pattern of lower consumption (lockdown, rising prices) as well as sham climate change, and robotization.
Sizing all this up? My first point this morning is to direct you to the story about how “Sex robots will ‘fundamentally change human existence’ after revolutionary upgrades.” The takeaways are that a) sex robots are getting smarter, while b) humans are getting dumber. And in the end, we’re all f*cked.
(Say, Mr. Chipper is in a mood this morning, ain’t he?)
Jobs Data: Location Matters
Before we get into the monthly job-spinning, let’s all hold hands for a minute and consider the detail level quietly released by the Labor Department Wednesday. We do this in order to appreciate how totally uneven massive unemployment is in the current “stage of events.”
“Unemployment rates were higher in May than a year earlier in all 389 metropolitan areas, the U.S. Bureau of Labor Statistics reported today. A total of 109 areas had jobless rates of less than 10.0 percent and 16 areas had rates of at least 20.0 percent. Nonfarm payroll employment decreased over the year in 357 metropolitan areas and was essentially unchanged in 32 areas. The national unemployment rate in May was 13.0 percent, not seasonally adjusted, up from 3.4 percent a year earlier.”
And remember how tourism collapsing is “doing in” places? A couple of salient lines in the report:
“Kahului-Wailuku-Lahaina, HI, had the highest unemployment rate in May, 33.4 percent, followed by Atlantic City-Hammonton, NJ, 32.4 percent. Logan, UT-ID, had the lowest unemployment rate, 4.8 percent.”
Remember all those glorious road trips Elaine and I used to take? Driving across the country and having marvelous meals and our share of winnings in casinos? We may see a dramatic change in the American propensity to gamble thanks to the virus.
And in “Sin City” Not so much (out of town, anyway) sinning going on, says the data:
“Of the 51 metropolitan areas with a 2010 Census population of 1 million or more, Las Vegas-Henderson-Paradise, NV, had the highest unemployment rate in May, 29.0 percent. The next highest rates were in Detroit-Warren-Dearborn, MI, 23.7 percent, and Orlando-Kissimmee-Sanford, FL, 22.6 percent. Phoenix-Mesa-Scottsdale, AZ, had the lowest jobless rate among the large areas, 8.3 percent, followed by Birmingham-Hoover, AL, and Hartford-West Hartford-East Hartford, CT, 8.7 percent each.”
This all gets to what I’ve always considered “The Big Hole” in economic thought. Convention holds there to be microeconomics (as in an individual business or small geographic region) and macroeconomics (the whole McGillah).
One of the notions on Peoplenomics is that there is a modelable structure of complex interactions which define how economic “upset” ripples through the economy.
As Hawaii is experiencing, a collapse of tourism hurts every island location. It ripples-back to the Mainland, too. It factors in airline, cars rental, hotel chains, and food service sectors that “play in the Islands” and those once-upon-a cruise ship lines, as well.
Economic Ripples 101
It’s very much a “knock-on” process. Done long enough, it will transform the “virtuous cycle” of the economy into the “vicious cycle.” With the Fed gambling our economic future on the chance that if they can throw enough paper to the crowds, we won’t notice disaster, until after the election. Though, our ponder now is whether this stock market can continue “subdividing” its wave-count until the latter days of August, which could then propel us into utter economic collapse this fall. Which will install Slow Joe, and leave the TDS crowd with nothing to whine about.
Well, except for the immediate impeachment drive on Biden for his role in Ukraine, but that’s next year’s grist.
We living not as free-thinkers, but as stooges and partisans. Our alternative is to look at the data, pass on social media almost entirely, and chart ourselves an independent course based on dead reckoning and skimpy, manipulated and massaged data.
So much for today’s foreplay:
Jiggering Unemployment Data
We begin by recalling the “numerator” is the top number in a fraction. The “denominator” is the bottom. Since we don’t trust government figures when comes to employment reports, the ONLY number we really focus on is the total number of people employed.
That’s because the RATE can be jacked-around by any number of 2-bit bureaucrats who choose…
Here’s how the game is played: Say you have 158-million people in the Labor Force and 20-million are unemployed. Simple arithmetic says 138-million are working. Oh, and 20 million divided by 158-million is a 12.658% unemployment rate.
How do we make that look better? Shade the workforce numbers higher. Because if we could just add 10-million to the workforce (168-million) than the same number of unemployed (20-million) becomes an unemployment rate of only 11.9%. Seeing how this works?
Partying Like It’s 1999
What most people fail to internalize – as we look at an uncertain future – is how massive the virus impacts have been. Do you realize we have wiped out all jobs gains since 2000?
This is the “elephant in the room.” Trump can talk all day about MAGA and the like, but he had the great historical misfortune to be on the bridge of The Economic Titanic when we hit this iceberg.
Problem is, we’re leaking below the waterline now. In ways many people can’t see.
Life in the Fifties – Flashback
A colleague and I wrote a long economics book (point-counterpoint kind of thing) that we never published. But, in it, we agreed that Peak Prosperity for America likely came in 1960, or so.
The problem? In a nutshell it’s that we stopped being a “goods economy” in 1954. That is, up until then, we had more people producing “real goods” than we had “people waiting on them” – in other words, the service sector.
My colleague and I went back and forth…how many service jobs could one worker support? We thought between 1 and 2 service employees for each goods producer would be “reasonable.” That was then…
Just before the virus hit, the services sector was employing 131.26-million while manufacturing (Thanks Robots! Thanks Asia! Thanks idiots in Washington!) was just 12.85-million. Converting, that’s about 10.2 people serving the goods for EACH goods producer. And you wonder while the National Debt’s piling up?
LIfe in the 1950’s
My buddy The Major and I came up in the middle class, well-integrated neighborhood called Beacon Hill in Seattle. Pick a race, pick a religion, a cuisine…it was ALL on Beacon Hill. We enjoyed all cultures. Our dads both worked – his managed a bank, mine ran a fire station. His mom did hair, mine answered the switchboard at Seattle City Light.
The families lived well – got good vacations, and rode the bus to go downtown. Men wore white shirts, sensible ties and haircuts. Women wore dresses. And we didn’t go out much. Families worked on their homes. The Major’s dad was excellent at home-building and his mom was a great artist. My mom canned when vegetables and fruits were “running” in the Pike Place Market. Homemade garlic dills? OMG.
Occasionally, we’d go bike-riding – 20-50 mile rides. At the end of which, my record was 2 orders of fries and 6 cheeseburgers plus a chocolate shake. Dag’s ort Dick’s was the only sensible choice for “fast food.” For Chinese, you went to Chinatown. For Italian, you went to “garlic gulch” (Rainer Valley).
People worked. They saved. They weren’t waited on. They canned. They did their own nails. About 20% of homes had small gardens. Taxes were modest. Invention was high and workmanship was supreme. There’s a reason I favor real solid steel tools in my shop over most modern “disposables.”
Don’t look now, but we might all be going back there. We are, in my judgement, well into Economic Overshoot territory now. But time will tell. Been wrong before, but 10-servers for each “goods producer?” Hard to believe than can pencil-out, forever.
Now the Data
Enough of the lead-in and contextualizing. Dope-up on the Happy Talk here:
“Total nonfarm payroll employment rose by 4.8 million in June, and the unemployment rate declined to 11.1 percent, the U.S. Bureau of Labor Statistics reported today. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it. In June, employment in leisure and hospitality rose sharply. Notable job gains also occurred in retail trade, education and health services, other services, manufacturing, and professional and business services. “
Dow Futures were up more than 400 points. We may have dead people stacking up, but hey! Look at them jobs!
Still, economic reality is?
- Total number of people working is? 142.182-million.
- Total in Services? 4.263-million
- Total Goods Producers? 504-thousand.
- The Services / Goods ratio: 1 Goods Producer down to 8.4 service workers.
- And the number of all “simply estimated into existence” in the CES Birth Death Model? 295,000 with 220,000 of that coming in Leisure and Hospitality workers. Take some aspirin and call me in the morning.
As the Moody Blues sang (Nights in White Satin): “Just what the truth is
I can’t say any more..”
Trade Gap Higher, Too
“The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $54.6 billion in May, up $4.8 billion from $49.8 billion in April, revised. “
Well, what did you expect, for crying out loud? We don’t make much, and we have fewer servants waiting on the few remaining workers. Shopkeeper economies do tend to collapse, you know… Just not yet…
Heading into this Fourth of July weekend (is it Miller Time, yet?) we have found a very good paper you might want to read if you’re still undecided on whether to wear a mask, or not.
You know, some are calling it Cult of the Mask, others decry public health risk. And likely the reason is the data is not entirely clear, except it is.
Start with the paper “Nonpharmaceutical Measures for Pandemic Influenza in Nonhealthcare Settings—Personal Protective and Environmental Measures.” Then, click over to Figure 2 here and observe that despite what some misrepresent, the data tilts modestly toward wearing a mask.
Elaine and I are still Cloroxing everything coming home from the store. Stand upwind of people. And, George II (firefighter/EMT son) won’t get his CV-19 test results until today. He’s got two fellow firefighters who are positive, though not on his shift.
While we respect the opinions of people who don’t wear masks, we point to the data and note how it tilts to mask wearing. Sure, you may not wear a mask and remain healthy, or wear one and get the virus any way.
But, to us, it’s a lot like going into a casino. Do you put your bet with the House or against it. The “House” in this case argues for the mask. So does our age and, frankly, cowardice since we’re in our seventies.
And in Japan, possibly the most “mask-happy place on Earth?” A mere 18,913 total cases. Whereas our “freedom” to not wear masks has netted us 2.687-million cases. Japan has had just 977 deaths, as of this morning. We’re sitting over 128-thousand. Freedom at work, or stupidity? You make the call.
Ya’ll have fun with bullshit “mask partisanship.” We bet with the House. Just remember, there’s no such thing as 5% dead. Markets and Life, we always bet on the data.
But there’s gotta be losers, I suppose… We’re still rolling with “First do no death.”
Write when you get rich,