Tuesday, August 11, 2020

What Future Job Growth?

 Financial FAQs


 Calculated Risk

The Job Openings and Labor Turnover Survey (JOLTS) put out by the Labor Department (BLS) probably only makes sense to economists, because it gives a picture of the job market in coming months, as well as the present.

It literally measures the number of job openings (yellow line in graph) vs. hires (blue line) for a month; June in this case; enabling economist to measure whether the demand for new jobs is rising or falling. And though hires decreased slightly to 6.7 million from 7.2 million, it “was still the highest level in series history,” per the BLS.

Job openings rose 518,000 to 5.9 million in June, according to the Labor Department on Monday. That’s above the median forecast of 5.3 million jobs in an Econoday survey of economists. However, the number of jobs available was running around 7 million before the pandemic.

Job openings, another measure of demand, increased in June to 5.889 million from 5.371 million in May, so the number of hires was almost one million higher than vacancies (6.7 hires -5.9 vacancies), meaning there is large number of unfilled jobs to be filled.

So this statistic probably gives the best monthly picture of where the jobs market is headed. The number of job openings (yellow) is still down 18 percent year-over-year, and quits were down 25 percent year-over-year, says Calculated Risk.

Quits are voluntary separations. (see light blue columns at bottom of graph for trend for "quits") that tells us whether employees are moving on to better paying jobs. More workers are therefore hanging on to their current jobs at the moment, due no doubt to the uncertainty of the pandemic outcome.

In the words of the BLS, “These changes in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it. This release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector, by industry, and by four geographic regions.”

The largest gains in openings came from accommodation and food service, other service and arts. The biggest declines were in construction and state and local government education, per Marketwatch.

Why are stocks and bonds continuing to rally in the face of the worst infection and death rates in developed countries,? It’s really the record low interest rates with the benchmark 10-year Treasury bond yield down to almost zero (0.58%) at times that are keeping stock and bond prices at record highs (and bond yields at comparable lows).


Watch interest rates, as the Fed has pumped extra $trillions into the economy and held short term interest rates also close to zero. There is really too much unused money not being put into useful endeavors, because corporations are reluctant to invest in an uncertain future,and the federal government won’t do more than provide pandemic relief rather than investing in future growth—e.g., in public works projects like infrastructure, education, and the environment.

So there is no plan for post-pandemic growth right now, or maybe until November. Democrats are thinking of the future with the Biden campaign’s “Biden Plan for Leading the Democratic World,” while Republicans are still obsessed with trade wars and ignoring the Wuhan virus that is hurting us much more than China.

The bottom line is there are 13 million fewer jobs than before the pandemic, and still no national plan for combating the pandemic and therefore putting them back to work.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Friday, August 7, 2020

Employment Picture Still Unclear


Popular Economics Weekly


The official unemployment rate fell for the third month in a row to 10.2 percent from 11.1 percent, the government said Friday. The hot pace of U.S. employment growth in the late spring gave way in July to a sharp slowdown in hiring as the economy added back just 1.76 million jobs, “underscoring the fragile nature of a recovery with the coronavirus still running rampant in many states,” said Marketwatch’s Jeff Bartash.

We have merely returned to the highest unemployment rate achieved during the Great Recession (10 percent) that ended in 2009. But it took until 2018 to return to anything resembling full employment (4 percent), another 8 years. Even then many millions were still either working part time that couldn’t find full time work, or had given up looking for work.

Will that happen again? So far we have only restored about 9.3 million, leaving more than half of the Americans who lost their jobs still unemployed.

The Bureau of Labor Statistics said today, “These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it. In July, notable job gains occurred in leisure and hospitality, government, retail trade, professional and business services, other services, and health care.”

What’s more, an even larger 31 million people were collecting unemployment benefits in mid-July based on the most recent numbers available. And the divided Congress still hasn’t agreed to extend a $600 federal unemployment bonus that expired at the end of July, we know at this writing, which is another potential roadblock for the recovery, .

It’s a decided mixed picture, in other words, with most sectors adding workers at this moment, except for Mining/Logging and the Information services.

Overall business activity has been picking up in both the manufacturing and service sectors, according to surveys by the Institute of Supply Managers (ISM) released earlier in the week. But said surveys are also deceptive, since they tell us whether there is an increase or decrease in activity, but not actual numbers.

The service sector supply managers’ index rose to 58.1 percent with any number above 50 signifying expansion; 67.2 percent said business activity had ramped up and 67.7 percent had new orders. They included Health Care & Social Assistance; Retail Trade; Transportation & Warehousing; Wholesale Trade; Educational Services; and Construction among the 15 businesses that make up the survey, just as do the jobs’ numbers in the unemployment report.

“This reading represents growth in the services sector for the second straight month after contraction in April and May, preceded by a 122-month period of expansion,” said the ISM non-manufacturing report.

Manufacturing also did well in the ISM manufacturing survey.

“The July PMI® registered 54.2 percent,” said the report, “up 1.6 percentage points from the June reading of 52.6 percent. This figure indicates expansion in the overall economy for the third month in a row after a contraction in April, which ended a period of 131 consecutive months of growth.”


And lastly, new applications for unemployment benefits, a rough gauge of layoffs, fell by 249,000 in early August to 1.19 million, touching the lowest level since the coronavirus pandemic began more than four months ago.

It was a surprising decline that also suggests some improvement in the labor market despite another surge in coronavirus cases in many U.S. states, as we said.

So it’s probably safe to say that congress has to get its act together and provide more recovery assistance if we want actual positive economic growth in the fall. The Fed’s easy money policy that has driven short-term interest rate to essentially zero can’t prevent an even deeper recession that began in February without more congressional aid.

That was the lesson we learned in the Great Recession. A divided congress that won’t act will create a divided country.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Wednesday, August 5, 2020

Alas, The Recovery That Was....

Financial FAQs


Because the deadline has passed to renew unemployment benefits enacted by the CARES Act, it looks like there will be no quick economic recovery in the fall. I am supposing the recovery could ultimately be shaped like a ‘W’—sporadic spurts of growth and declines in growth with new COVID-19 surges, given there is no coordinated national response to the pandemic.

And what about school openings when 60 percent of the major elementary school districts will have at-home schoolings this school year, according to a CNN survey, and no national guidance on what constitutes safe re-openings?

This has to be why Republicans are pushing for the full re-opening of schools, regardless of the dangers to children. It keeps at least one parent at home who isn’t working when they want to speed up the reopening of businesses.

The huge jump in consumer spending in May and June highlights what could have been if benefits had been renewed with the additional $600 per week boost to unemployment compensation, and which Republicans don’t want to renew.

The above Reuters graph highlights the record 7.1 percent boost given by the additional benefits since the CARES Act was implemented.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 5.6 percent last month after a record 8.5 percent jump in May as more businesses reopened, the Commerce Department said. But most of the spending was due to the $600 boost to low-income service workers that tend to spend more of their incomes.

Consumers boosted purchases durable goods such as auto and appliances that last more than three years, as well as clothing and footwear. They also spent more on healthcare, dining out and on hotel and motel accommodation, though outlays on services remained lackluster because of caution sparked by the virus.

Q2 economic growth had plunged 32.9 percent because consumer spending fell minus -35 percent during this period. So growth will only recover when consumers feel safe enough venture out of their rabbit holes, I said last week. They will instead choose to save more—currently a huge 25 percent of their personal incomes vs. more normal 3-6 percent—and spend less.


That is why Friday’s upcoming unemployment report is so important. Dallas Fed President Robert Kaplan on Monday said he now expected an unemployment rate in a range of 9 -10 percent at the end of the year. Ten percent was the highest unemployment rate during the Great Recession when some 8 million jobs were lost.

The June unemployment rate was 11.1 percent and estimates are for July to show a 10.5 percent rate, according to an average estimate of economists. It took more than eight years, from October 2009 at the end of the Great Recession until March 2018, for the unemployment rate to drop from 10 to 4 percent, which is considered full employment.

How long might this depression last with today’s political polarization?

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Monday, August 3, 2020

Consumers Losing Confidence

Popular Economics Weekly


There are a number of reasons that consumers are becoming more fearful after that initial boost of spending with the spring holidays. It’s not only the prospect of a COVID-19 resurgence in the fall when we are still in the first surge, but the added oncoming flu season.

And so consumers will not be happy, but begin to hunker down again, even without new stay-in-home mandates. It’s just too dangerous out there when there’s not even a national mandate to wear masks, much less keeping safe distances, or getting quick testing results, and they will spend less, thus slowing the economic recovery.

So the index of consumer confidence fell to 92.6 this month from a revised 98.3 in June, the Conference Board said Tuesday.

“Consumer Confidence declined in July following a large gain in June,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index improved, but the Expectations Index retreated. Large declines were experienced in Michigan, Florida, Texas and California, no doubt a result of the resurgence of COVID-19.”

Consumer spending soared in June with Retail Sales up 6.4 percent in June, whereas it shrank a negative -12.4 percent in April during the shutdown.


What do we expect with the “Whac-A-Mole” recovery I’ve been talking about? No sooner than it being ‘whacked’ down in some states, the virus pops up in others. Trump’s conflicting comments say it all in this Invictus graph—as he rides the infection curve higher.

The first second quarter GDP growth estimate comes out July 30, and look for as much as a minus -30 percent drop, after Q1’s -5 percent decline. So activity in the July-September quarter will tell us if we recover quickly, or not.

Dr. Fauci just sent out new warnings today that infection rates are rising in more states—Kentucky, Tennessee, Ohio and Indiana—and they need to “get ahead of the curves”, or they will experience the soaring infections rates in many southern states, as well as California and Arizona.

Fed Chairman Powell ended the FOMC meeting with the not surprising announcement that the rising infection rates are slowing growth.

“On balance, it looks like the data are pointing to a slowing in the pace of the recovery,” he said. He gave as evidence that hotel vacancy rates have flattened out, and Americans are not going to restaurants, gas stations as much as they had earlier in the summer.

All in all, we should know something in the July unemployment report, after the May and June reports showed 7.5 million had returned to work. But that leaves at least 13 million still out of work due to the shutdowns, and the service industries will be the slowest to recover—hotels, travel, restaurants, and the like—that employ all the low-wage earners hurt most by this pandemic.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Thursday, July 30, 2020

When Will Growth Return?

Financial FAQs


The headline decline in Q2 GDP growth only touches the surface of what economic growth to expect this fall and winter. The drop of minus -32.9 percent was inevitable with the pandemic lockdowns, but not the severity of any recovery.

Q2 plunged this much because consumer spending plunged -35 percent during this period. And since consumers power some 70 percent of economic activity—i.e., GDP growth—it will only recover when consumers feel safe enough venture out of their rabbit holes.

And when can that happen with new record COVID-19 death rates in California, Idaho, Florida, N. Carolina, Texas and Arizona? The infection and death rate curves are still rising, rather than even plateauing.

As NY Times columnist and pandemic authority Don McNeil, Jr. put it today, “One or several vaccines may be available by year’s end…But by then the virus may have in its grip virtually every village and city on the globe.”

And so consumers will not be happy, but begin to hunker down again, even without new stay-in-home mandates. It’s just too dangerous out there when there’s not even a national mandate to wear masks, much less keeping safe distances, or getting quick testing results, as I said yesterday.

That is why consumer confidence fell to 92.6 this month from a revised 98.3 in June, the Conference Board said Tuesday, which is a major indicator of future consumer behavior.

Initial jobless claims also rose last week to 1.43 million, when it should be declining. Continuing claims of those receiving benefits for more than one week now total 17 million. It is not a good sign for any fall or winter revival.

The saddest fact of this pandemic is that science doesn’t lie, but politicians do about the efficacy of mask-wearing and social-isolation, in particular. Why would they? Even asking the question flies in the face of common sense. Infected populations with such a highly transmittable disease facing possible death or even lifelong debilitation from COVID-19, will not be in any hurry to resume normal activities.

It’s as simple as that.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen