Tag: trump economy
Why Corporate Economists Predict Recession -- And May Well Be Wrong

Why Corporate Economists Predict Recession -- And May Well Be Wrong

Be cautious about recession predictions.

After consulting their models of the American economy, many political naysayers and Wall Street economists are shouting “A recession is coming! A recession is coming!”

Should we trust these projections, which dominate major news reports on the economy? Count me a skeptic, given what the economic performance data show and the conflicted interests of commercial economists.

More jobs and more pay are the opposite of what the word ‘recession’ implies: “a significant, widespread and prolonged downturn in economic activity.”

In a piece typical of news articles last week, CNN reported:

“Former Federal Reserve Chairman Alan Greenspan believes a US recession is the ‘most likely outcome’ of the Fed’s aggressive rate hike regime meant to curb inflation. He joins a growing chorus of economists predicting imminent economic downturn.”

Then, without attribution, CNN added, “His views are particularly important” because he was Fed chair from 1987 to 2007 under Presidents Reagan, Clinton, and both Bushes.

Unmentioned by CNN and others: Greenspan couldn’t foresee the mortgage market collapse that led to the Great Recession in late 2007, the worst economic downturn since the Great Depression.

That’s amazing because Greenspan, now 96, cultivated an image as a clear-eyed and profound student of economic statistics. So how did he miss years of economic red lights flashing that housing prices were headed for a collapse? It was so evident that I told my New York Times editors about the problem in 2003 and then twice found a way to write about it even though it was far beyond my beat covering taxes.

In weighing Greenspan’s prognostications, remember that Ayn “Love Is Immoral” Rand trusted him to be the executor of her estate. Greenspan adored the views of Rand, who taught that altruism is a vice, selfishness a virtue, and who wrote a novel glorifying a criminal who blows up a building because it offended his aesthetics.

Greenspan’s views are, technically and philosophically, on the fringe, yet he gets treated like a centrist.

Key Indicators

That said, how is our economy doing? Let’s examine some key indicators.

The economy added a healthy 233,000 jobs in December.

Employers created more than four and a half million jobs in 2022. That’s an average of 375,000 new jobs per month, almost twice the rate of jobs growth during the Trump Administration’s pre-pandemic years.

Indeed, 2022 was the second-best year ever for job growth. The best year was 2021, but much of that was due to our coming out of the worst of the pandemic, which Donald “inject bleach” Trump badly mismanaged, pushing the jobless rate to almost 15 percent. Most of those discharged performed manual work. People who do intellectual work mostly continued working.

For context, consider job growth under Barack Obama and Trump.

President George W. Bush’s laissez-faire banking policies produced the Great Recession, so we’ll ignore the economic results he bequeathed to Obama.Then, startingg in October 2010, when the economy turned around, Obama averaged 201,600 new jobs per month for six years.

Trump, before the pandemic, averaged just 191,100 jobs added. That’s five percent less per month than Obama and barely half of Biden’s 2022 monthly average.

Voluntarily Quitting

How about job quits? The level at which people voluntarily leave their job says a lot about expectations that they will or already have found new work, often at better pay or under better conditions. People who see a recession looming usually stay put, even in a job they hate.

Each month starting in July, more than four million workers quit their jobs voluntarily. The November quit rate was a robust 2.7 percent or 1 in 37 jobs, although that’s down from the three percent rate a year earlier.

Very Low Jobless Rate

How about unemployment? The jobless rate last month was 3.5 percent under the most widely used measure.

That’s the lowest recorded level of joblessness since World War II save the slightly lower 3.4 percent rate in May 1969 when Vietnam War and NASA spending were boosting the economy, and early Boomers were entering the job market en masse without driving up the jobless rate.

Trump’s average pre-pandemic jobless rate was 3.9 percent though he hit 3.5 percent for three months shortly before the Pandemic began in early 2020.

There is an alternative and broader measure of unemployment, known as U-6 or Bureau of Labor Statistics Table A-15.

The U-6 measure counts people working part-time because they can’t find full-time employment, or are only marginally part of the workforce, or have temporarily given up trying to find work. These marginal workers, whose economic lives are filled with stress and misery, are not central to whether the economy grows or shrinks, but their numbers tell a deeper story about job quality.

The U-6 rate was 6.5 percent in December, down from 7.3 percent a year earlier. However, that doesn’t seem to suggest that a recession is at hand.

Inflation Abating

How about rising prices? While inflation is about 7.1 percent above a year ago, that isn’t the story of the last half year.

Month-over-month inflation peaked at 1.3 percent in June. Then it dropped to zero in July and 0.1 percent in August. Inflation rose to 0.4 percent in September and October. It fell back to 0.1 percent in November. The December numbers should come out around January 13.

Inflation may be whipped, although it could roar back. But for now, its withering

The decent inflationary trend appears to have grown from the pandemic when demand for goods and services fell sharply, and global supply chain problems bedeviled businesses from toy sellers to carmakers. Remember all those acres of parking lots with shiny new cars and trucks that could not be sold until computer chips arrived from Asia? And those shipping containers piled high in ports awaiting trucks to haul them away?

Those bottlenecks have been eliminated or considerably eased through White House efforts to improve coordination and cooperation between merchant sailors, stevedores, teamsters, local port, truck, and railroad managers, and the companies that employ them all.

Still, high energy and food prices continue to bedevil most Americans. Fossil fuels are a major component in food prices. It takes lots of fuel to make fertilizers to grow crops, machines to plant and harvest them, and trucks to berry foodstuffs to grocery stores nationwide.

Overall Economic Growth

How about economic growth measured by Gross Domestic Product or GDP?

There was a lot of ill-informed talk of a recession last summer because GDP was slightly negative for the year’s first half.

But the National Bureau of Economic Research’s Business Economic Cycle Dating Committee, which calls economic contractions and expansions, didn’t call it a recession, partly because the number of jobs kept growing, as did incomes. More jobs and more pay are the opposite of what the word recessionimplies: “a significant, widespread, and prolonged downturn in economic activity.”

We don’t have the full 2022 data yet, but the federal Bureau of Economic Analysis shows overall economic growth, not contraction in the first nine months of 2022.

By the way, Trump’s economy was slowly sinking before the pandemic, as DCReport advised readers in October 2020.

Pump Price Plummets

And what of inflation, much in the news this year?

The best news is that the national average price of gasoline has plummeted from a high of $5.11 in early June to $3.77 recently. That’s $1.34 less per gallon, a stunning 26 percent decline, not that it made much of a splash on front pages and broadcast news programs.

The sharp drop in the price of gasoline came despite Vladimir Putin’s February invasion of Ukraine which disrupted worldwide oil and grain markets and may yet lead to mass starvation in Syria and parts of North Africa that rely on Ukrainian wheat. The Biden Administration imposed severe price caps on Russian oil via shipping insurance. At the same time, the president released 180 million barrels of oil from the American Strategic Petroleum Reserve to help knock down prices at the pump.

That 180 million barrels is roughly how much oil America burns every ten days, but as is often the case in economics small changes in supply or demand can prompt big changes in price, as our coverage of electrify market manipulations has shown.

Because the Democratic Biden Administration sold oil at about $89 a barrel and will buy replacement oil at about $70 a barrel, the government is expected to turn a profit of more than $3 billion on actions that sharply lowered gasoline prices. Talk about win-win government economic policies.

An inflationary threat that may emerge is tied to rising sales of what two decades ago were called Osama Wagons—gas-guzzling trucks and SUVs that help sustain Middle East dictatorships.

Trade Deficit Shrinks

Trade numbers are also improving under Biden Administration policies, although there was a brief and severe rise in the trade deficit months ago.

During Trump’s first 23 months in office his disastrous and mismanaged trade war with China played a key role in the monthly trade deficit ballooning by 26 percent, federal Bureau of Economic Analysis data show.

The trade deficit, or surplus, comes in two parts. The first and larger measures the value of goods we buy from overseas versus what we sell to foreigners. The second measure is business services we buy from foreigners or sell them.

Our perennial surplus of exported services slightly offsets a perennial and much larger deficit in goods. President Biden has made cutting reliance on overseas manufacturers—especially for computer chips and other high-value, high-tech products—a top priority.

As of November, the deficit is down 3.6 percent compared to when Biden took office two years ago.

Mortgages and Paychecks

Another good sign, and a longer-term trend, is the falling share of personal income going to interest and principal payments on mortgages.

At the end of 2007, as the Great Recession began, Federal Reserve data showed 7.2 percent of personal income went to mortgage principal and interest. Now it’s less than four percent, with a slight uptick last year as the Federal Reserve under Chairman Jerome Powell, a Trump appointee, raised the interest rates it controls.

Americans owe about $12 Trillion in mortgage debt, down almost a fifth since the start of the Great Recession once inflation is considered.

So why do so many people feel so much economic pain?

The median weekly wage—half earn more, half less—is the same now as at the end of 2019 after taking inflation into account.

So why is the median not moving much?

Because a rapidly growing share of wages and salaries goes to executives and others paid more than $1 million per year while rank-and-file workers mostly lack unions and thus lack bargaining power.

Million Dollar Paychecks

In 2020 an eye-popping 82% of all pay raises went to the very thin and well-compensated slice of workers making $1 million or more.

That fell to 29% in 2021. However, the million-and-up club enjoyed average raises of $840,000 each while full-time workers making up to $250,000 got only $1,600. That’s a ratio of $500 to $1.

Also in 2021, the poorest-paid 60 million workers collectively made less than the best-paid 237,000, more than 500 of whom averaged about $151 million, my annual analysis of Social Security Administration payroll data shows.

The million-dollar and up pay club now collects almost seven percent of all wages and salaries, up from two percent in inflation-adjusted data from 1991. The number of these high-paid workers has exploded from 191 in 1991 to 237,000 three decades later in 2021. Last year the number of million-dollar-plus jobs grew 95 times faster than jobs overall.

Recession Risks

So, are we likely to fall into a recession, as Greenspan and many Wall Street economists warn?

The honest answer is we don’t know. As Yankees catcher Yogi Berra said, “it’s tough to make predictions, especially about the future.”

If the Fed raises interest rates too high or too fast, it could so discourage executives and entrepreneurs that they go on a capital strike, halting the new investment that is crucial to job creation. Then again higher interest rates may also draw more capital into the United States, further strengthening the dollar against other currencies.

When the dollar is high relative to other currencies, it makes what we import cheap, while other countries are burdened with high prices to purchase our goods and services.

The greenback has been riding very high for the past two years. My wife and I vacationed in New Zealand (beautiful, fascinating, and friendly) this fall. Our greenbacks were worth $1.78 against the Kiwi dollar. In Australia, the exchange rate was above $1.60. The story is similar worldwide.

My view on the chance of a recession: bringing back jobs from Taiwan and China, especially microchips and related high-tech manufacturing, will be a long-term boon to the American economy with some immediate effects.

If Biden succeeds in his goal of making America the go-to country for high-quality, high-tech manufacturing the American economic future will be bright. It will also enrich investors more than workers unless the union movement or a proxy for it becomes a major player in economic decision-making.

And as for the policies of the Fed?

It’s independent so you can’t do anything about how its regional governors vote on interest rates and whether money is hard or easy. But the notion that a recession is certain or even likely seems out there, at least for now.

Reprinted with permission from DC Report.

economy

Trump Economy Began Decline Even Before Pandemic

Reprinted with permission from DCReport

There's fresh evidence that the robust economy Donald Trump inherited from Barack Obama was faltering before the pandemic.

State personal consumption spending growth slowed sharply in 2019 compared to the year before, the federal Bureau of Economic Analysis reported Thursday morning. The growth rate plummeted by a fifth.

Personal expenditures grew in 2019 but by only 3.9 percent, down from 4.9 percent in the previous year.

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Trump’s Mediocre Economic Gains, In Three Graphs

Trump’s Mediocre Economic Gains, In Three Graphs

Reprinted with permission from DCReport

At Tuesday night’s State of the Union address, Donald Trump claimed repeatedly that he has created a great economy. Trump may have hoped that people forget his towering 2016 claims and promises. My spring 2019 analysis of Trump economic performance was a grade of C , average.

So, what are the facts? Here are some hard numbers to judge Trump claims against reality.

Gross Domestic Product growth in the last quarter of 2019 was 2.1 percent. For the entire year, it was 2.3 percent. That means economic growth slowed.

That’s nothing to brag about. The average growth rate since 1947 has been 3.2 percent.

Voters should remember Trump promised if elected that he would blow away the performances of predecessor Barack Obama and others.

Here’s Trump in September 2016 on GDP growth: “We are looking at three percent but we think it could be five (percent) or even six (percent). We are going to have growth that will be tremendous.”

During the final presidential debate a month later Trump promised that if elected, “We’re bringing it (economic growth) from one percent up to four percent, and I actually think we an go higher than four percent. I think you can go to five percent or six percent.”

Jobs Growth Slows Under Trump

And how about jobs growth? Trump promised jobs galore but jobs growth has slowed significantly.

Obama inherited a collapsing economy. Three million jobs vanished in the first four months of 2009. That awful trend reversed in October 2010 when the economy began growing jobs in an unbroken chain since.

From then through January 2017, Obama’s last month in office, jobs averaged 201,600 per month.

Trump, from February 2017 to the end of 2019, averaged just 191,100. That’s 5 percent less per month.

Another White House announcement boasted that last year showed an average of 176,000 new jobs per month. That’s 25,000 fewer jobs added each month than under Obama, a decline of almost 13 percent.

So much for exceeding expectations.

Wages have increased. But that apparently is due to local and state increases in the minimum wage.

The federal minimum wage of $7.25 an hour was set in July 2009. Inflation has eroded its value to about $6 per hour today.

Trump has said he may, possibly, perhaps, someday consider increasing the minimum wage. Trump’s chief economic adviser, Larry Kudlow, calls the minimum wage “a terrible idea.”

Soybeans Shrivel and Farms Go Bust

How’s it going for soybean farmers since Trump’s gratuitous trade war promoted China to buy soybeans from Brazil?

Farm bankruptcies increased by 20 percent  in 2019 compared with 2018, data released by federal courts last week showed.

Family farm bankruptcies, known as Chapter 12 filings, have been on the rise since 2015. But remember Trump promised to improve the lots of America’s farmers, not make them worse.

Trump’s trade war with China has created a boom for Brazilian soybean farmers. Soybeans are America’s second most valuable crop, worth $39 billion in 2018, right behind corn at $51 billion.

In 2019 China grew more than 17 million tons of soybeans, about a third of its consumption. China has started expanding soybean production, which it could quickly multiply. Afterall, the can-do spirit thrives in China, which just built a hospital for Coronavirus patients in 10 days. Ten days.

Should Beijing decide to further expand its soybean farms then American farmers will have permanently lost sales. In turn, American farm incomes will shrink.

To provide cover for his trade war Trump is giving American soybeans farmers $28 billion of taxpayer money. About $19 billion has already been turned over. Don’t expect Trump to mention this Farm Belt welfare as what it is, socialism, and a burden for all taxpayers.

Then there’s the Trump/Radical GOP tax law adopted in December 2017. It slashed the corporate tax rate 40 percent. The lowered individual rates heavily favor the richest Americans.

That law was, Trump claimed, going to spur a massive increase in domestic capital investment, which is a key to more jobs.

After a brief increase in domestic capital investment in 2018, it has fallen back to previous levels. In other words, the Trump tax cut did not do what Trump promised.

Trump also promised voters he could pay off the federal government’s debt if he got two terms. Instead he already has pushed annual budget deficits back to the trillion-dollar level.

So, in light of Trump’s Tuesday night address to Congress, ask yourself if what he says is fact or fiction.

Danziger: Bull Rider

Danziger: Bull Rider

Jeff Danziger lives in New York City. He is represented by CWS Syndicate and the Washington Post Writers Group. He is the recipient of the Herblock Prize and the Thomas Nast (Landau) Prize. He served in the US Army in Vietnam and was awarded the Bronze Star and the Air Medal. He has published eleven books of cartoons and one novel. Visit him at DanzigerCartoons.com.