Friday, July 3, 2020

Hendrika Devries Best Review Ever!

When a Toy Dog Became a Wolf and the Moon Broke Curfew: A Memoir
by Hendrika de Vries

She Writes Press

Book review by Mark Heisey

"Being the old, dark child of the past, I was the one bound to my mother through the secret memories that everyone wanted to leave behind and forget."

De Vries's memoir tells of her time as a child in Amsterdam during the Nazi occupation. Her father, the traditional provider and protector, is taken to a German POW camp, and the young de Vries and her mother are suddenly left alone in an occupied city with no one to depend on but themselves. As the war goes on and the occupation lengthens, food and safety become scarce. De Vries' mother begins to take bold steps to ensure the safety and welfare of her child. Even as suspicions run high, and neighbors report neighbors, de Vries' mother begins associating with the resistance. She even shelters a young Jewish girl in their home, fully aware of the danger that brings to herself and her own daughter.

At just over two hundred pages, this book is a quick read with clean, clear sentences. Although much of the narrative is based on the recollections of a young girl and the stories she has been told, the memoir feels genuine with honest, flawed characters who show courage and toughness in the face of terrible circumstances. The addition of family photos and documents helps establish the historical accuracy and allows the reader to get a better sense of the men, women, and children involved.

Fascinating in itself is the author's recollection of life after the occupation is lifted, and the war is over. The exploration of the range of psychological impacts on the survivors and the difficulty of living in a post-war country without enough jobs or housing sheds light on the internal wars that can plague the survivors for years.

World War II is a subject much discussed in a variety of genres. In regard to personal narratives, Elie Wiesel's Night and The Diary of A Young Girl by Anne Frank are classic examples. De Vries' memoir is a welcome addition to this group. What stands out in this work is the strength of these women, the sacrifices they made, and the risks they took to protect what they held dear. The terrors of concentration camps are well-known, but less well-known is the plight of those left behind in Nazi-occupied cities.

The author's book brings Kristin Hannah's The Nightingale to mind. Although Hannah's book is fiction, both works bring to light the hardships faced by the women left behind and the courage these women showed to protect not only their loved ones but also their neighbors and friends and the countries in which they lived. Their sacrifices were no less significant nor less heroic than those facing the enemy on the front lines.

It often seems the domestic battles, possibly due to the psychological impact, are the last to be told after wartime. De Vries's memoir sheds new light on this aspect of World War II and is a compelling read on its own. Ultimately, this memoir inspires and embodies the words de Vries' mother told her: "' We are facing cold, dark days, but I want you never to forget this feeling of warmth and light, and I want you to know that no matter what happens, all this light and warmth will return.'"

A 2020 Eric Hoffer Book Award Grand Prize Short List winner

RECOMMENDED by the US Review

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Friday, June 26, 2020

Job Losses Still Too High

Popular Economics Weekly


The U.S. economy is recovering very slowly, in part because the number filing for first-time unemployment benefits is still too high (see above graph). Why? Businesses are now shedding workers because the COVID-19 pandemic is not under control in the U.S. Total infections are now surpassing April highs, which means some states will have to slow down their re-openings as well as the rehiring of workers.

CDC and NIH experts Drs. Redfield and Fauci testified Tuesday to congress that COVID-19 is surging rather than fading, as President Trump has asserted in recent speeches. In fact, Dr. Fauci said they won’t even have reliable diagnostic tests that will tell them how patients are infected until this fall.

Dr. Fauci said the U.S. is still in the middle of the first wave and the imperative is to “get this outbreak under control over the next couple of months," in his testimony.

It is also affecting world-wide growth. economist Mohamed El-Erian writes in Project-Syndicate: “
The world’s leading international economic institutions – the International Monetary Fund, the OECD, and the World Bank – now warn that it may take at least two years for the global economy to regain what has been lost to COVID-19. If the major economies face additional waves of infections, recovery would take even longer.”
According to World Bank forecasts, the global economy will shrink by 5.2 percent this year. That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870, the World Bank says in its June 2020 Global Economic Prospects.

This in fact mirrors what happened after the world’s last worst pandemic—the 1918-20 Spanish flu outbreak from which the U.S. economy didn’t recover until 1922.

 And growth in the developed countries will be worse where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing, says the World Bank.

Guess which country has the worst death toll and infection rates? It is the U.S., which means U.S. GDP growth in predicted to shrink by 5-6 percent this year say all three of the international economic institutions El-Erian highlighted.

In the week ending June 20, the advance figure for seasonally adjusted initial jobless claims was 1,480,000, a decrease of 60,000 from the previous week's revised level. The Labor Department said the advance seasonally adjusted insured unemployment rate was 13.4 percent for the week ending June 13, a decrease of 0.5 percentage point from the previous week's revised rate. The advance number for seasonally adjusted insured unemployment during the week ending June 13 was 19,522,000, a decrease of 767,000 from the previous week's revised level.

And WHO also warned of a new and dangerous phase of the pandemic. Eighty-one nations have seen a growth in new cases over the past two weeks. Only 36 have seen declines.
“Many people are understandably fed up with being at home,” Dr. Tedros Adhanom Ghebreyesus, director general of the WHO, said in a news conference in which he described the new phase of the virus. “Countries are understandably eager to open up their societies and their economies. But the virus is still spreading fast. It is still deadly and most people are still susceptible.”
We said last week that many employers, the including auto and airline sectors, had been hiring back their employees over the past month, hence a surprise jump in employment with the 2.5 million jobs increase in May.

Now both consumer sentiment and retail sales are beginning to recover, but only in those states and counties that listen to the experts, which means this recovery will be uneven at best.

Harlan Green © 2020

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Tuesday, June 23, 2020

Have Home Sales Reached Bottom?

The Mortgage Corner


Why is it important to report on the housing market? Because there is a housing shortage (Forbes says up to 3.8 million unit shortfall to date), and the NY Times, among others, is predicting a record wave of bankruptcies of large and small companies that could put even more than the 20 million unemployed already out of work.

Existing-home sales fell in May, marking a three-month decline in sales as a result of the coronavirus outbreak, according to the National Association of Realtors. Each of the four major regions witnessed dips in month-over-month and year-over-year sales, with the Northeast experiencing the greatest month-over-month drop.

Total existing-home sales, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, slumped 9.7 percent from April to a seasonally-adjusted annual rate of 3.91 million in May, according to the NAR. Overall, sales fell year-over-year, down 26.6 percent from a year ago (5.33 million in May 2019), which shows how deep is this recession.

And the pandemic is reaching “forest fire” proportions according to some experts with no end in sight, so it’s important to ask if existing-home sales have bottomed out their decline in sales in May.


Other indicators, including pending-home future sales, already down 22 percent in April, will be the first indicator that tells us whether sales will drop further and inventories increase from their current lows. It largely depends on how many workers are able to return to work, as I’ve said earlier.

The latest pending-home sales numbers reveal the greatest decline since NAR begin tracking such transactions in January 2001. However, chief economist LawrenceYun expects that April will be the lowest point for pending contracts. We will know next Monday, June 29, when May pending-home sales are released.

“Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lockdown and hence the cyclical low point,” said Yun. “Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”
 Yun is surprisingly sunny about the rest of this year. “Given the surprising resiliency of the housing market in the midst of the pandemic, the outlook for the remainder of the year has been upgraded for both home sales and prices, with home sales to decline by only 11 percent in 2020 with the median home price projected to increase by 4 percent,” Yun said. “In the prior forecast, sales were expected to fall by 15 percent and there was no increase in home price.”
 I am not so optimistic after seeing the many ups and downs of housing in recent years. We are really in another Great Recession, at least, and the NY Times says more than 6,800 companies filed for Chapter 11 bankruptcy protection last year.  This year will almost certainly have more, according to NY Times reporter Mary Williams Walsh. The flood of petitions from the worst economic downturn since the Great Depression could swamp the system, making it harder to save the companies that can be rescued, bankruptcy experts said per Walsh.

But rather than be the total pessimist, I can hope that we contain this ‘forest fire’ sooner rather than later, as well as the bankruptcy problem by continued government support that boosts spending in such as infrastructure, spending that has been too long postponed.

It might even now have the attention of congress, as the NY Times pandemic graph above isn't lying.






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Tuesday, June 16, 2020

Economic Recovery Picks Up Steam

Popular Economics Weekly


The head of steam analogy seems to be working for our economic recovery, as consumers let off steam after two months of staying at home with a burst of shopping activity from the re-openings.

We said last week that many employers, including the auto and airline sectors, had been hiring back employees over the past month, hence a surprise jump in employment with the 2.5 million jobs increase in May. Now both consumer sentiment and retail sales are beginning to recover.
Consumer sentiment posted its second monthly gain in early June,” said U. of Michigan survey chief economist Richard Curtin last Friday, “paced by gains in the outlook for personal finances and more favorable prospects for the national economy due to the reopening of the economy. The turnaround is largely due to renewed gains in employment, with more consumers expecting declines in the jobless rate than at any other time in the long history of the Michigan surveys.”

FRED/MarketWatch

And retail sales jumped 17.7 percent last month, the government said Tuesday, after two months of record declines. Sales had tumbled by a record 14.7 percent in April and 8.2 percent in March. The rebound in sales also reflects the loosening of restrictions on business activity after two months of stay-at-home orders to combat the coronavirus pandemic.

The burst of activity comes from pent-up consumer demand, as we said; i.e., not being able to shop for at least two months. Federal tax payments to families and more generous unemployment benefits also helped stoke higher sales.

Yet even after the rebound in May, sales were still 6 percent lower compared to the same month in 2019, showing the lingering damage caused by the lockdown of the economy. This tells me we will have a U-shaped economic recovery where GDP contraction will bottom in Q2 and GDP begin a gradual rise in Q3, rather than a quick return to normal growth (the V-shaped recovery).
This is because “Few consumers anticipate the reestablishment of favorable economic conditions anytime soon. Bad times financially in the economy as a whole during the year ahead were still expected by two-thirds of all consumers, and a renewed downturn was anticipated by nearly half over the longer term,” said U. Michigan chief economist Curtin.
Sales increased across the board with autos up 44 percent, clothing sales up 188 percent, 90 percent at home-furnishing stores and 88 percent at stores that sell books, music, sporting goods and other hobby items. Receipts also increased 29 percent at bars and restaurants that bore the brunt of the coronavirus lockdowns in March and April, says MarketWatch.

A gradual return to what will be called the ‘new normal’, particularly for consumers that power most economic growth, is really due to the lack of any national coordination of the pandemic response.
The perennially poor and science-denying red states currently have the highest infection rates with the exception of Oregon in second place and purple Florida ranked fourth, according to today’s NPR COVID-19 dashboard.

States that listen to the scientists will recover first and return sooner to a more normal growth, whereas the states and local governments that choose not to listen to experts in their haste to perhaps salvage the November election will continue to suffer from the effects from higher rates of infections and social-isolation.

Harlan Green © 2020

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Friday, June 12, 2020

Recession Has Arrived, No Big Surprise!

Financial FAQs

The Dow plunged 1,862 points on Thursday, as the Business Cycle Dating Committee of the National Bureau of Economic Research, which maintains a chronology of the peaks and troughs in economic activity in the United States, had just determined that a peak in monthly US economic activity occurred in February 2020.
The NBER press release said, “…The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. The expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854. The previous record was held by the business expansion that lasted for 120 months from March 1991 to March 2001.”
And Fed Chairman Jerome Powell gave some further bad news. The Federal Reserve on Wednesday slashed its estimate for U.S. gross domestic product this year to -6.5 percent, yes minus 6.5 percent, when many economists were predicting a return to growth by the end of the year. It also raised its median forecast for 2020 unemployment to 9.3 percent.

Powell and the Fed Governors are saying we could have several years of very slow growth. This is exactly what happened from the 1918-20 Spanish flu pandemic, the only real historical comparison. That recession lasted from 1920-22 before growth resumed and became what is known as the “Roaring Twenties”, as I’ve said.


However, just reported initial claims for unemployment was better news as it is continuing to decline per the above graph. It fell to 355K to 1.542 million in the week of June 6 in seasonally adjusted terms, another sign that the work shutdown is ending, which could shorten the recession. 
Reuters ICAP news says “Our guess is that employment will rise again on a net basis in June as more workers are called back from temporary layoffs, but at the same time there continues to be a heavy flow of new job losses as the corporate sector re-evaluates the post-pandemic outlook.” 


And lastly, we have the just released the JOLTS report (Job Openings and Labor Turnover Survey - above graph) that counts the number of hires and layoffs each month confirming that hiring tumbled 1.6 million to a record low 3.5 million in April. Job openings declined 965,000 to 5.0 million on the last business day of April, the lowest since December 2014 when six to seven million job openings had been the norm for the past several years.

How do we make sense of all this news? Firstly, ignore the stock market for now as worthy of any prediction of future prosperity. It’s attempting to parse discounted earnings at least six months from now. And who knows what earnings will be even in one year?

Also, if a vaccine in developed by the end of this year or early next year, as Dr. Fauci keeps hoping, how will it be distributed to most of the earth’s now 8 billion in population? Because no one will be safe until we all are safe, if we want to resume normal economic activity, which has no borders.

So I am maintaining it will be at least two years before consumers or producers return to what would be normal activity.  BTW, what will be the ‘new normal’ everyone is talking about when people can safely gather again in large shopping mall or stadium crowds, for instance? The health care experts are saying mask wearing and social-distancing must be part of it.

 Harlan Green © 2020

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Saturday, June 6, 2020

Employment Rise is Big Surprise!

Financial FAQs


What happened? American workers are suddenly going back on the job; at least 2.5 million of them, according to the Labor Department. That knocks down the number of unemployed to maybe 20 million, and surprised economists.

A private payroll survey (ADP) that precedes the government’s had said on Thursday their estimate of -2.8 million jobs lost had caused them to lower their guess for the official BLS number (on Friday) to the -4 million to -5 million range, versus an earlier forecast of -8 million. 
“These improvements 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,” said the Bureau of Labor Statistics (BLS). “In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, employment in government continued to decline sharply.”
In fact, American businesses have been going back to work for more than one month, especially in the airline, automobile, leisure and hospitality industries, per the BLS.

American Airlines said Thursday that it expects to fly in July about 55 percent of the domestic capacity that was flown during July 2019, as load factor improved 55 percent at the end of May from 15 percent for the month of April.
“We’re seeing a slow but steady rise in domestic demand,” said Vasu Raja, senior vice president of network strategy. “After a careful review of data, we’ve built a July schedule to match.”
Airline travel has picked up substantially, in other words. On Wednesday, the International Air Transport Association (IATA) said daily flights increased by 30 percent between April 21 and May 27. The IATA said the improvement in the data suggests “the industry has seen the bottom of the crisis, provided there is no recurrence.”

And tens of thousands of autoworkers started streaming back into car and truck plants across the South and Midwest in May, “a critical step toward bringing the nation’s largest manufacturing industry back to life,” according to the NYTimes.

Ford, General Motors, and Fiat Chrysler restarted, after Toyota, Honda and Tesla began reopening plants. Hyundai restarted a plant in Alabama on May 4, according to the NYTimes.

The manufacturing sector lost 1.32 million jobs in April, but gained 225,000 jobs back in May. The so-called underemployment rate that includes part timers and those who have stopped looking for a job recently fell to 21.2 percent from 22.8 percent in April. But it was just 7 percent in February, so the latest payroll numbers are nothing to crow about.

Cities such as Detroit have also announced that hundreds of its employees are returning to work. Detroit Mayor Mike Duggan revealed to Detroit Regional Chamber President and CEO Sandy K. Baruah that the city is preparing “to send hundreds back to work in areas like cutting grass, road work, and construction.”

The DOW Jones is up more than 900 at this writing, and S&P 500 up more than 90 points on the surprise news. It looks like many companies called back their workers at the earliest opportunity with either emails or texts after two months of layoffs, thus escaping the notice of statisticians.

Is this improvement just a blip, as COVID-19 infection rates continue to climb in most of the country? We have to assume this will continue as more of the economy opens this summer, and demonstrations against police brutality continue.

Any real improvements will also depend on how returning workers are treated at their job places. Will they follow CDC guidelines of workers safety with appropriate disinfection protocols, including the continued wearing of masks and social-distancing?

Today’s financial market euphoria smacks of an irrational exuberance based in the belief that further disruptions due to the pandemic and street protests will  not last long, when it's better to act rationally in such times.

Harlan Green © 2020

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Thursday, June 4, 2020

Was there ever any doubt?


Why Has U.S. Made Such a Mess of It?

Popular Economics Weekly


Private sector employment decreased by - 2,760,000 jobs from April to May according to the May ADP National Employment Report®, much less than the original estimate of –8 million jobs. It precedes Friday’s official government unemployment report for May.

Should we be thankful it wasn’t worse when the U.S. recovery from COVID-19 has been more damaging than in most other developed countries?

From Japan to Australia to Germany, the April unemployment rates were no more than 6.2 percent in April vs. our 14.8 percent, because they hadn’t mishandled the pandemic as had the U.S. Friday’s unemployment report is predicted to show the U.S. May unemployment rate rising from 14.8 percent to about 19 percent.

We weren’t prepared, in other words, and with the George Floyd killing and protests, there will be even more chaos as angry protestors precipitate higher COVID-19 infection rates and shut down businesses that are just opening.

It didn’t have to be this way. President Obama had set up a commission to study police violence and policing policies, but the Trump administration abolished it as they abolished the National Security Council commission that advised the White House on how to prepare US for pandemics.

Nothing was done to prepare Americans for either of the long predicted events, in other words. It was more important for President Trump to want to abolish President Obama’s accomplishments, rather than build on them.

Such is the cost of one political party’s single-minded focus on maintaining power and what amounts to an apartheid policy—discriminating against darker-skinned people, including immigrants—that Republicans risk taking down American democracy itself.

Nobel Laureate economist Paul Krugman lamented this in a recent opinion column.
“Every day, it seems, brings another indicator of our decline: the can-do nation has become a land that can’t deal with a pandemic, the leader of the free world has become a destroyer of international institutions, the birthplace of modern democracy is ruled by would-be authoritarians. How can everything be going so wrong, so fast?”
“Well, we know the answer,” he said. “As Joe Biden put it, “the original sin of slavery stains our country today.”

What have most other developed countries done to control COVID-19? They were prepared. Australian Prime Minister Scott Morrison, a staunch conservative, listened to the scientists that predicted the oncoming pandemic early.
According to the NYTimes,“Scientists, whom Mr. Morrison’s party has derided for over a decade, were respectfully asked for their views about the novel coronavirus and, more remarkable still, these views were acted on and amplified. Mr. Morrison dismissed the idea of trying to build herd immunity among the population, calling it a “death sentence.”
Angela Merkel, Germany’s Prime Minister had a scientific background as a former research scientist with a doctorate in quantum chemistry who once co-authored a paper on the “influence of spatial correlations on the rate of chemical reactions”, according to the Guardian.
She was able to explain why abandoning the lockdown early was so dangerous to Germans, as did New York Governor Andrew Cuomo at his daily briefings.
“If the reproduction number (infection rate) of one were to go up to 1.1, Merkel explained, the German health system could be overwhelmed by October. If it were to go up to 1.2, hospitals could reach a crisis point in July, and if it went up to 1.3 the crisis point would come in June.”
Why would Republicans discount science and scientists such as Dr. Fauci, director of the Institute of Allergies and Infectious Diseases, and demote Dr, Rick Bright, former director of the Biomedical Advanced Research and Development Authority (BARDA) at HHS?

It’s very sad to see one of our two political parties be so oblivious to what has happened and is about to happen.

Prime Minister Morrison, as much an ideological opportunist as Trump, was smart enough to listen to his scientists. “That’s the advice we have taken.” Mr. Morrison went so far as to declare: “Today is not about ideologies. We checked those at the door.”

But I see hope.  The Republicans’ modern history of denigrating anything scientific that doesn’t preserve the status quo or forward their ideological agenda to maintain power is their vain attempt to defeat Mother Nature, and it won’t work. 

Harlan Green © 2020

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Tuesday, June 2, 2020

Why the Housing Shortage?

The Mortgage Corner


We are now beginning to feel the recession in housing caused by the Coronavirus pandemic. What can we say with so many living on the edge because of the loss, or temporary hiatus, of their jobs? There’s still a housing shortage, for starters.

Some homeowners are falling behind on their mortgage payments.The majority are protected from default proceedings for at least one year, if their mortgages were guaranteed by any of the government-guaranteed GSEs like Fannie, Freddie, FHA, and VA. So no one is expecting defaults to raise the number of homes available for sale.

Forbes Magazine reported on a January NAR survey that America’s housing shortage is long lasting. According to their analysis, the market needs a whopping 3.8 million additional new homes to fully meet consumer demand.
“Since 2012, nearly 10 million new households were formed in the U.S. Only 5.92 million single-family homes were built in that same period, leaving what Javier Vivas, Realtor.com’s director of economic research, calls “a nearly insatiable appetite from potential buyers, especially in the lower end of the market.”
Why? Builders were so badly burned by the housing bubble and Great Recession and lack of entry-level homebuyers that suffered most from the Great Recession that they haven’t really begun to catch up to demand.

The recovery in home sales and construction is now largely dependent on how many jobs remain after the pandemic, which in part depends on whether the Senate agrees to more financial aid to state and local governments that employ most of the “essential” workers taking care of our health and safety.
NAR’s chief economist Lawrence Yun is surprisingly optimistic about the housing market. “Given the surprising resiliency of the housing market in the midst of the pandemic, the outlook for the remainder of the year has been upgraded for both home sales and prices, with home sales to decline by only 11 percent in 2020 with the median home price projected to increase by 4%,” Yun said. “In the prior forecast, sales were expected to fall by 15 percent and there was no increase in home price.”
Why does he know this? Mortgage application volumes have been picking up in spite of the stay-in-home orders. Home owners and buyers have been been taking advantage of the still record-low interest rates to improve their overhead costs.

The Mortgage Bankers Association (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 2.7 percent on a seasonally adjusted basis from one week earlier.
"The housing market is continuing its path to recovery as various states reopen, leading to more buyers resuming their home search. Purchase applications increased 9 percent last week - the sixth consecutive weekly increase and a jump of 54 percent since early April. Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.
Both pending home sales and existing-home sales are falling during the pandemic, but maybe not for long given the need for more housing..

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, fell 21.8 percent to 69.0 in April. Year-over-year, contract signings shrank 33.8 percent. An index of 100 is equal to the level of contract activity in 2001, according to the National Association of Realtors (NAR).

Total existing-home sales, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 17.8 percent from March to a seasonally-adjusted annual rate of 4.33 million in April, said the NAR, also not a surprise, and are down 17.2 percent from a year ago (5.23 million in April 2019).

More surprising was that housing prices are still rising, signaling there is still a strong demand because we still have that housing shortage in many markets. The median existing-home price for all housing types in April was $286,800, up 7.4 percent from April 2019 ($267,000), as prices increased in every region. April’s national price increase marks 98 straight months of year-over-year gains.

We also know that existing-home inventories are historically low. Total homes for sale at the end of April totaled 1.47 million units, down 1.3 percent from March, and down 19.7 percent from one year ago (1.83 million). Unsold inventory sits at a 4.1-month supply at the current sales pace, up from 3.4-months in March and down from the 4.2-month figure recorded in April 2019, when 6 months is the historical norm.

How many will lose their homes before this recession ends? That is the $64 question. Housing is being remarkably resilient with so many uncertainties. The majority of home owners or whannabe owners are in the top 10-20 percent income brackets not as affected by the pandemic.

Alas, it has be be because lower-income households that have suffered the most from this pandemic are mostly renters not in any position to own a home. That’s a problem politicians are not yet willing to face, but beware what the “I cannot breathe...” rioters are telling them.

Harlan Green © 2020

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Saturday, May 30, 2020

A Fall Revival?

Financial FAQs


The second estimate of first quarter real GDP growth was revised to a negative -5.0 percent from its initial estimate of -4.8 percent, with the decline in consumer services the main culprit. It only hints at how much second quarter GDP may decline.

And today’s April personal income data from the Commerce Department confirms consumers that make up 67 percent of economic activity aren’t buying, so producers aren’t producing the services that consumers use (blue section of bar in graph). Information, retail and wholesale trade, scientific, technical and professional services are the major parts of this sector.

Americans personal income rose 10.5 percent but consumer spending fell 13.6 percent after falling 6.9 percent in March. Most of the income rise was from government support payments, as wages also fell. The rise in incomes and the drop in spending pushed the savings rate up to 33 percent in April from 12.7 in the prior month.

The high rate of savings is telling us consumers won’t begin to spend again until they feel safe.
Second quarter GDP growth will inevitably shrink much more due to 2.1 million more workers applying for unemployment benefits in the latest week, bringing the total to more than 46 million.

But combined with federal layoffs the total is closer to 3 million in the latest survey.  Initial claims have fallen steadily since hitting a record 6.9 million in the week ended March 28.


But Reuters reports the big surprise in the jobless claims data was a 3.7 million decline in the reported level of continuing claims in the regular state programs, which is a sign that more are returning to work.  In not seasonally adjusted terms, the number of state beneficiaries fell from 22.8 million to 19.1 million in the week of May 16.

The sharp rise in unemployment has made consumers more cautious, as I’ve been saying. Retail sales fell a record 16.4 percent in April. The government checks over the past two months helped consumers pay their bills but for the economy to recover, consumer spending has to rebound.

While it is possible that the decline in continuing claims reflects individuals who left the benefit program as the economy reopened,” said Reuters, “the erratic pattern in the data for some states makes us wary of reading too much into the week to week fluctuations.  (Florida’s jobless rolls fell 76% in the week of May 16, from 2.2 million to 0.5 million; California’s fell 40%, from 3.6 million to 2.1 million.)  We would not extrapolate from the May 16 level.”

One economist stated that though social distancing measures are gradually being relaxed across the country, the lingering virus fear and restrained incomes “will continue to constrain consumers’ willingness and ability to spend.”

This is while experts and Federal Reserve banks such as the Atlanta Fed are predicting GDP shrinkage of as much as 40 percent in the second quarter, while consumers continue to stay close to home.

The hope will be that activity picks up again in the fall, if the federal government will show some nationwide leadership in what is after all, a nationwide pandemic.

Harlan Green © 2020

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Thursday, May 28, 2020

Which Letter Will Describe This Recovery?

Popular Economics Weekly


The Conference Board’s consumer confidence survey should help to predict the shape of this economic recovery from COVID-19. Economists usually described it as a letter in the alphabet, and I believe it will mirror the degree of “uncertainty” felt by consumers. Looking at past pandemics hints at what its shape might be.
In the words of Lynn Franco, Senior Director of Economic Indicators, “Following two months of rapid decline, the free-fall in Confidence stopped in May…Short-term expectations moderately increased as the gradual re-opening of the economy helped improve consumers’ spirits. However, consumers remain concerned about their financial prospects…While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers’ heads.”
Economists are therefore trying to determine if the US economy sinks back into recession in a second wave of infections in the fall, or even a third wave nest spring, as in past pandemics. Right now, some economists are predicting a ‘V’ shaped recovery with GDP growth gaining traction after two quarters of negative growth.

Just under half of 45 economists responding to a Reuters poll earlier this month said the U.S. economic recovery would be “U” shaped, which probably means at least two quarters of negative growth, but a very slow recovery. Ten of those polled said it would be “V” shaped, and five said it would be “W” shaped.

Fed Chairman Powell in recent comments at a press conference following the U.S. central bank’s latest policy meeting indicated he sees even more disruption than even the “W” camp. Powell said he believes the economy may go through a series of peaks and troughs for at least a year or more as the world battles to keep the virus under control.
“John Kenneth Galbraith famously said that economic forecasting exists to make astrology look respectable,” said Powell. “We are now experiencing a whole new level of uncertainty, as questions only the virus can answer complicate the outlook.”
This happened with the 1918-20 Spanish Flu pandemic that killed some 700-900,000 Americans. Its fall resurgence in deaths after a summer created an 18-month recession from January 1920 to July 1922. It was considered a mild recession with GNP growth falling approximately 8 percent.


A chart of the Spanish flu combined with the DOW-Jones Index shows how the stock market behaved during that time—the DOW fell with every resurgence of deaths. It wasn’t until the third death rate spike began to subside in early spring of 1919 that the DOW rose, though economic growth didn’t resume until the end of the recession in 1922, and the decade became known as the “roaring twenties”.

Two lesser-known pandemics based on bird flus in 1958 and 1968 caused more than 100,000 deaths in the US.

In February 1957, a new influenza A (H2N2) virus emerged in East Asia, triggering a pandemic (“Asian Flu”). It was first reported in Singapore in February 1957, Hong Kong in April 1957, and in coastal cities in the United States in summer 1957. The estimated number of deaths was 1.1 million worldwide and 116,000 in the United States.

Several short and mild recessions followed the two pandemics; the first in 1958 when GDP growth was a negative -1.54 percent in Q1 1958. GDP growth began to plunge again in Q1 1968 following the second Avian flu pandemic that killed approximately100,000 in the US, and ended with the 1970 recession.

The point is pandemics have always caused a substantial drop in GDP growth, and this pandemic is shaping into another Great Recession lasting at least two quarters, before beginning to recover in the fall or winter.

That is why Dr. Fauci has been so vocal in supporting continued vigilance and preparedness for an additional outbreak.

And Dr. Rick Bright, the recently transferred director of Biomedical Advanced Research and Development Authority director at HHS said, “The mortality of the pandemic could be “unprecedented” and ultimately outstrip the 50 million casualties of the 1918 influenza epidemic without a science-based national response to the pandemic.”

It’s going to be a difficult call, in other words, as to which letter will better describe the length of this recession due to the novel coronavirus.

Harlan Green © 2020

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

Tuesday, May 26, 2020

Will Those Jobs Return?

The Mortgage Corner


Initial claims for unemployment benefits fell by just 249K to 2.438 million in seasonally adjusted terms in the week of May 16, as the businesses begin to reopen in all 50 states.  The aggregate level of new claims not seasonally adjusted climbed to an actual 4-week high of 4.4 million when applications under federal programs are included. 

And more than 38 million workers are now out of a job, at least temporarily, in the latest week’s initial unemployment claims.

However getting them back to work will be far harder than separations, especially if congress cannot agree on another aid package to extend unemployment benefits, Personal Payroll Protection (PPP) to small businesses, and aid to states in addition to the just-passed $3 trillion bill.

Republicans meanwhile are holding up more aid, because they want workers back to work sooner when their current benefits run out, regardless of the still rising infection and death rates in many states.

But what if there are no jobs to come back to? Without more aid, states that hire and pay our essential workers (eg, Police, Fire, and health care workers) will run out money and have to reduce their payrolls. The same also applies to the PPP participants that wish to retain their employees.

Why would Republicans want to “cut off their nose to spite their face,” as the saying goes, after months of fiddling while America burned?

The latest infection data analysis is staggering. If the country had begun locking down cities and limiting social contact on March 1, two weeks earlier than most people started staying home, the vast majority of the nation’s deaths — about 54,000 — would have been avoided, reported Columbia University disease modelers.

And if many essential workers no longer have jobs, especially those workers that keep us safer and healthier, then a real recovery could be years away.

Workers can’t spend what they don’t make, which Roosevelt understood very well during the Great Depression. So he had government create millions of jobs building dams, monuments, energy grids, and planting trees; any work that allowed Americans to continue to feed their families.

And here’s another irony. Republicans support the de facto civil war between red and blue states when a viable recovery will only happen with a united effort, just as we won’t conquer the COVID-19 pandemic without a united effort in testing, contact tracing and quarantining the infected.

We cannot allow the unemployed to remain unemployed for too long. This lessens the demand for producers to produce, which in turn creates more layoffs instead of hires, which lowers Gross Domestic Product (GDP) growth. The Great Recession lasted 18 months, until June 2009 before growth was restored, yet employment didn’t return to prior levels for five years.

The Labor Department (BLS) reported unemployment rates were higher in April in all 50 states and the District of Columbia that were also higher from a year earlier. The national unemployment rate rose by 10.3 percentage points over the month to 14.7 percent as we reported last Friday and was 11.1 points higher than in April 2019.

Three states exceeded a 20 percent unemployment rate already; Nevada, Michigan and Hawaii.


The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate after inflation) in the second quarter of 2020 is -41.9 percent May 19, up from -42.8 percent on May 15.

Next Thursday’s first estimate of Q2 GDP growth will be the initial indication of just how weak are the job numbers for May. The Labor Department’s unemployment rate won’t be out until June 5. They don’t look good, with estimates as high as a negative -20 percent unemployment rate, or even --25 percent as in the Great Depression.

The powers-that-be must stop their fiddling, in other words, and cooperate in crafting programs that enable workers to get back to work safely, and consumers to shop without the fear of contagion, the same cooperation that’s needed to bring down the death rates from COVID-19.

Harlan Green © 2020

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

Thursday, May 21, 2020

Consumer at Center of Any Recovery

Financial FAQs


The American economy has depended on consumers’ health, and consumer spending since the 1950s, really. Consumers generate some 70 percent of economic activity from their purchases, with government spending and capital expenditures in the private sector generating the rest of the activity.

Yet there is much doubt that American consumers will be in any position to return to their spending ways once COVID-19 is sufficiently tamed (meaning testing, tracking and quarantining programs in all states are fully operational). Consumers will feel reassured when it is safe to return to work and consume again.

We save more and spend less in times of worry, which depresses the demand for goods and services. And any diminishment in demand caused by their insecurities diminishes the production of those goods and future investment that would expand economic growth.

There is now a tremendous worry that consumers may stay-in-home for a prolonged period because of the pandemic. The personal savings rate has jumped from 8 to 13 percent just in March, when it was as low as 3 percent during boom times leading up to the Great Recession. They weren’t saving during those heady times of the housing boom and bust when housing prices were rising in double digits.

But the lower-income earners haven’t recovered, and some 40 percent of households have almost no savings to weather this downturn.

The latest retail sales tell us what is happening with consumers. Retail sales plunged 16.4 percent in April, by far the biggest drop on record and another reflection of the severity of the coronavirus pandemic on the U.S. economy. They were nearly double March’s revised decline of 8.3 percent. Spending at restaurants and bars fell by about half from a year ago, while clothing store sales slumped 89 percent due to the work lockdown and stay-at-home rules.

That can be counteracted by programs that reassure consumers. For instance the CARES Act prolonged unemployment benefits to July or longer, but need to be extended for at least another six weeks..

But a far more active federal government that develops a real social safety net with far fewer holes is the real answer.

There are some basic elements that might keep consumers from saving too much for a rainy day, if it is being saved for them by effective government social programs, like some form of universal health care that insures as many Americans as possible from expensive medical bills.

Then a much expanded education system that insures a good education for all Americans through high school, and even two-year community colleges to increase their skills. (Community College’s would be tuition-free, in other words.}

What else would reassure ordinary citizens? A safer international environment is being threatened by nationalist and populist governments that have closed their borders to any kind of international cooperation. But COVID-19 is stopping that fragmentation of necessity, as countries must work across borders to share medical science that saves their own populations from higher death rates.

We therefore see a rebuilding of the international supply chain that produces most consumer products, as well. Those products will continue to be produced overseas because of cost factors, no matter how many tariffs Trump imposes on the countries that manufacture them.

Mohamed El-Erian, former CEO of PIMCO and Chairman of President Obama’s Global Development Council, has worried about the damage COVID-19 has done to global growth, and the supply chains that connect what has become a global economy.

“Having already been buffeted by two big shocks in the last ten years, the global economy’s highly interconnected wiring is suffering a third because of the COVID-19 pandemic,” he said in a recent Project-Syndicate article. “Globalization thus faces a three-strikes-and-out situation that could well result in a gradual but rather prolonged delinking of trade and investment, which would add to the secular headwinds already facing the global economy.”

Those “headwinds” include the possibility of greater geopolitical conflicts and increased poverty levels of poorer countries from a prolonged slump in foreign trade and investment. Keeping the international supply chain from breaking is an absolute necessity for maintaining worldwide peace and prosperity, in spite of the backlash against globalization by populist governments.

I have cited NYTimes’ commentator Peter Goodwin before, when he said, “For seven decades after World War II, the notion that global trade enhances security and prosperity prevailed across major economies. But in many countries—especially the United States—a stark failure by governments to equitably distribute the bounty has undermined faith in trade, giving way to a protectionist mentality in which goods and resources are viewed as zero-sum.”

We cannot allow the “protectionist mentality” to continue, in other words, if we are to recover from what Mother Nature has thrown at us.

Harlan Green © 2020

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

Tuesday, May 19, 2020

In The Age of Anxiety

Popular Economics Weekly


We are now in a full-blown “Age of Anxiety”; not the first, of course. There was as much anxiety during the 1918-20 Spanish Flue pandemic that reportedly killed 50 million in a series of worldwide outbreaks lasting more than two years.

If we do not find ways to lessen anxiety in this age due to the novel coronavirus pandemic, we might seriously experience what Dr. Rick Bright, who was recently transferred from his position as Biomedical Advanced Research and Development Authority director at HHS has described as “the darkest winter in modern history.”
“The mortality of the pandemic could be “unprecedented” and ultimately outstrip the 50 million casualties of the 1918 influenza epidemic," wrote Bright in his prepared testimony,“ without a science-based national response to the pandemic.”
There is much more to the current age of anxiety. New Deal economist John Kenneth Galbraith wrote a book called The Age of Uncertainty in the 1970s that attempted to explain the general anxiety brought on by post-WWII institutions that were no longer stable.
“In it we contrast the great certainties in economic thought in the last century with the great uncertainty with which problems are faced in our time,” he said. “Little of this certainty now survives. Given the dismaying complexity of the problems mankind now faces, it would surely be odd if it did.”
This anxiety has been compounded by a record income inequality, the worst since the Great Depression. A 2018 PEW Research survey showed the wage stagnation of American salaried workers over almost two generations.

PEW

Its study found that today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers, the top 10 percent of income earners.

I have frequently cited Robert Shiller, a Nobel Laureate economist who says anxiety has reached such a level that it is becoming a second pandemic, an anxiety pandemic that is contagious because “stories of fear have gone so viral that we often think of them constantly,” which could delay the recovery because of the public’s irrational responses.
“Business closures, soaring unemployment, and loss of income fuel financial anxiety, which may, in turn, deter people, desperate for work, from taking adequate precautions against the spread of the disease…But, unlike COVID-19 itself, the source of our anxiety is that we are unsure what action to take.”
And that is already happening with news pictures of crowded bars and restaurants  in states like Texas and Georgia, where they haven’t met the 14-day requirement of falling infection rates decreed by the CDC.
“Unless we get the virus under control, the real recovery economically is not going to happen,” says Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, in a recent interview. He goes on to say that “even if social distancing standards were relaxed, it wouldn’t restore the health of the economy as some protesters have implied it would.”
It is the economic health of Americans that most concerns Americans, which means remedies must be found to curb the rising anxiety, if there is to be something less than a Great Recession or Depression.

And it has to be a united focus of governing authorities on the scientific message that this pandemic is bringing; we are all in this together.

Harlan Green © 2020

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

Thursday, May 14, 2020

The Times Are Changing

Financial FAQs


“The Times They Are a Changin” was Bob Dylan’s song for the 1960’s. Change was happening because of the Vietnam War and civil rights era. That is nothing like the coming changes we will see in the war against COVID-19.

In the week ending May 9, the advance figure for seasonally adjusted initial claims was 2,981,000, a decrease of 195,000 from the previous week's revised level, as the number of laid off workers has now reached 26 million, far past that of the Great Recession.

It doesn’t take rocket science to know what needs to be done to bring us out of this record economic downturn. It must be a nationally coordinated response to a worldwide pandemic, yet the White House and Republican Party is living by policies based on ignorance, with the denial of science and facts the means they use to carry out such policies. And it will not end well in the face of a virus that has no party affiliation.

The pandemic will change our way of life, just as the Great Depression and World War II changed America from an industrial and farming nation to a consumer and high tech nation.It has highlighted the major weaknesses in our broken economic and healthcare systems, and everything else government needs to do better that the private sector can’t do

Doctor Rick Bright, former head of the federal government’s vaccine testing program testified today in front of a House committee that without a science-based national response to the pandemic, 2020 will be the “darkest winter in modern history.

“The mortality of the pandemic could be “unprecedented” and ultimately outstrip the 50 million casualties of the 1918 influenza epidemic," wrote Bright in his prepared testimony, who was recently transferred from his position as Biomedical Advanced Research and Development Authority director.

What does Dr. Brightmean by a national response? The federal government has lacked a coordinated plan to first, provide enough PPE to weather not only the current outbreak, but what may occur in the fall and next year when the annual flu season hits that killed more than 70,000 last year.

But he also mentioned the fact that there was not yet a coordinated plan to produce and distribute enough vaccine “equitably and fairly” to everyone once it was developed. And this after mentioning a 12-18 month time frame to produce a viable vaccine was “highly optimistic”. It took up to 10 years to produce an effective Ebola vaccine, for instance.

So what are the changes that are needed in this new world of dangerous pandemics, in part brought on by geopolitical strive and a crowding out of natural habitats that has put us in closer contact with those creatures that carry such viruses?
“Perhaps rebalancing is a useful word,” said the NYTimes’ Roger Cohen recently. “From consumption to contemplation, from global to local, from outward to inward, from aggression to compassion, from stranger to guest, from frenzy to stillness, from carbon to green.”
What comes to mind is the social isolation requirement that will mean less crowded conditions at work and play; also the realization that we are all in this together if we want to survive, as well as save what is left of the natural planet.

I should emphasize there will be changes to the workplace as well. There has to be more reliance on the digital world that enables work at home that will also replace all those workers in warehouses, retail and transportation with robots and Artificial Intelligence.

And what if many of the 26 million have no jobs left when this economy recovers, as work becomes more dependent on computers and AI? Then jobs will have to be created elsewhere, such as in healthcare (some 300,000 contact tracers probably needed to monitor future outbreaks), environmental protection (to have clear air and water) infrastructure (e.g., to save drowning cities), education, and above all, new Research and Development to develop future ways to live in this new world.

Harlan Green © 2020

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

Monday, May 11, 2020

Government Was Never the Problem

Popular Economics Weekly


President Reagan’s all-encompassing campaign slogan that “government is the problem” was never the problem. But competent governance has been a problem; in as much as incompetent leaders have been the problem dogging the overall prosperity and sustainable economic growth in our free enterprise capitalist system.

Herbert Hoover was an incompetent leader who was very image conscious (as is our current President). He helped to precipitate the Great Depression by ignoring the changing times—and a stock market crash due to record income inequality of that time. The “roaring twenties” unleashed so much irrational exuberance that the public came to believe anyone could become a Great Gatsby that lived beyond their means if they played the financial markets right.

It took one of our greatest presidents to look behind the mirrors to lift our spirits and win World War II. But then President Roosevelt had already a lifetime of experience running government as an Assistant Navy Secretary in the 1920s, then as the Governor of New York.

Hoover was a mining engineer before entering politics. President Reagan, the ‘Great Communicator’, was also image conscious as a former actor. His rise to power came from being the great communicator for Big Business that wanted to gain more power and globalize its work force; therefore Reagan reduced the power of labor unions to bargain for their rights and instituted trickle-down economics.

We know how that ended. Whole industries were deregulated in the name of free enterprise and allowed to form monopolies. Very little of our national wealth has consequently trickled down to the rest of us; except maybe for the top 10 percent income earners since the end of the Great Recession.

Corporate CEOs now earn more than 300 times the average salary of their employees. AT&T’s CEO is apparently scheduled to retire with a lifetime $274,000 per month pension.

President Reagan became a great leader for the wealth-holders in extracting more wealth for themselves, in other words, but not for those workers that actually produced it. And now we need competent governance more than ever to extract us from this oncoming Great Recession, or Depression, depending on how quickly Americans can return safely to work from the damage done by COVID-19.

Even Treasury Secretary Mnuchin predicts we could reach a Great Depression level unemployment of 25 percent, if we don’t return to work sooner. But studies show that the recession will be prolonged if we return to normal before implementing all the CDC-administrations guidelines of social isolation, testing, and contact tracing until an effective vaccine is created.
“We need to find ways of getting the people who are healthy, who are at lower risk, back to work and then providing the assistance to those who are most at risk, who are going to need to be quarantined or isolated for the foreseeable future,” Minnesota Federal Reserve Governor Kashkari said in a recent CBS Sunday interview.
But such a plan depends on leaders that can lead all Americans, the poor as well as wealthy. Whereas, Jennifer Senior New York Times Op-ed contributor has perhaps described the current administration best: “Vice President Pence may talk about a “whole-of-government approach” to the pandemic, but what we really have is a government of holes,” she said recently.

We will have to slog a long, hard road until we get to either an effective therapy or a vaccine, even with good leadership. It’s hard for me to see a quick, V-shaped recovery because of what we are facing, and now we have so much mixed-messaging coming from Washington that creates even greater uncertainty.

The only competent leadership is in states like New York, California, and Michigan—mostly blue states with Democratic governors. So I ask, why must the response to a pandemic that doesn’t recognize borders be so partisan?

Harlan Green © 2020

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

Friday, May 8, 2020

The Coming Greater Depression?

Economics Weekly


Minnesota Fed Governor Neal Kashkari believes the COVID-19 pandemic doesn’t have to bring on another Great Depression. But it will still take some 18 months to recover, and only if Americans are able to cooperate in protecting themselves and each other.

There were 20.5 million jobs losses in the just released April unemployment report, and the unemployment rate rose from 3.5 percent to a rate of 14.7 percent in just one month. 
“We need to find ways of getting the people who are healthy, who are at lower risk, back to work and then providing the assistance to those who are most at risk, who are going to need to be quarantined or isolated for the foreseeable future,” Kashkari said in a recent CBS Sunday interview.
“This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine. It’s hard for me to see a V-shaped recovery under that scenario.”
The letter that best describes how long the depression will last can be either a ‘V’, ‘U’, or ‘L’ shape.

Most economists say there will be at least two quarters of negative GDP growth, which means a very steep drop and sudden recovery—the ‘V’ shape. But some economists like Nouriel Roubini, the NY

University economist, see a much more prolonged recovery, the ‘L’ shape, which means no recovery for several years.

Professor Roubini raises the possibility of “mass defaults and bankruptcies. Together with soaring levels of public debt, this all but ensures a more anemic recovery than the one that followed the Great Recession a decade ago.”

Why wouldn’t he believe this, as New York has suffered the most because of its dependence on crowded subways to move its millions of workers and proximity to Europe that probably brought COVID-19 to its shores?

So New York Governor Andrew Cuomo has been exhorting New Yorkers to behave as if “It’s not about you or me, it’s about we,” to bring down their infection rate.

Job losses were heaviest at restaurants, retailers and hotels, but every major industry suffered, per the Labor Department. The health-care sector even lost 1.4 million jobs amid the worst health crisis in American history.

This is the highest rate and the largest over-the-month increase in the history of the series (seasonally adjusted data are available back to January 1948), said the BLS. The number of unemployed persons rose by 15.9 million to 23.1 million in April. The sharp increases in these measures reflect the effects of the coronavirus pandemic and efforts to contain it.

The real question is what Nobel Laureate Robert Shiller predicts will be the resultant anxiety pandemic.
“It is not good news when two pandemics are at work simultaneously. One can feed the other. Business closures, soaring unemployment, and loss of income fuel financial anxiety, which may, in turn, deter people, desperate for work, from taking adequate precautions against the spread of the disease.”
We want to also watch consumer sentiment, since there is no central message coordination from the federal government. Even the CDC, as well as the NIH and other government health agencies have been muzzled by the Trump administration in reporting consistent facts due to Trump’s fear that it hurts his reelection chances in November.

It is truly a sad spectacle to see what years of attempts to discredit scientific knowledge have done to one political party, now that it’s in the White House and faced with a virus that doesn’t differentiate between red and blue states, Democrats and Republicans.

It is an even greater tragedy to see the confusion this engenders among Americans needing to cope with this epic natural disaster that only a belief in scientific knowledge can mitigate.

Harlan Green © 2020

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

Wednesday, May 6, 2020

The Coming Anxiety Pandemic

Popular Economics Weekly


Americans’ confidence in their future is sinking fast as they decide who to trust during the COVID-19 pandemic. Hence what Nobel laureate economist Robert Shiller has called the rise of its result—an anxiety pandemic.

Dr. Shiller’s predictions on financial behavior include a psychological element. As can be seen from the rising debate over masks, or when and how to open public spaces, the level of anxiety over this pandemic is already sky high.

This, unfortunately, will slow down any sustainable recovery that doesn’t take into account how consumers in particular react to the remedies being proposed to tame COVID-19. A good outcome doesn’t look good at the moment because of the mixed messages coming from on high—the federal government vs. states, Trump’s advisors vs. actual scientific experts.
“It is not good news when two pandemics are at work simultaneously,” Shiller said in a recent Project-Syndicate column. “One can feed the other. Business closures, soaring unemployment, and loss of income fuel financial anxiety, which may, in turn, deter people, desperate for work, from taking adequate precautions against the spread of the disease.”
The University of Michigan’s final April sentiment survey sank to a 7-year low of 71.8. The current conditions component bore the brunt of the deterioration, falling 33 points to 74.3.  Expectations posted a smaller decline, with that index falling just ten points, albeit to a lower level of 70.1.  The record low for the monthly Michigan headline index is 51.7, set 40 years ago, and that could be repeated.

Expectations for the recovery are now running all other the map. The White House has revised its estimate of coronavirus deaths from 100,000 to more than 200,000 back to more than 100,000, while the latest Washington state and Johns Hopkins survey raised it latest estimate from 135,000 to 200,000 deaths, in part because of some states opening too early and thus ignoring White House guidelines of at least two weeks of declining infection rates before lifting stay-in-home orders.

Why so much confusion? Major economists are becoming alarmed at the uncertainty being manifested by the messaging.

Nobel economist Paul Krugman attributes the uncertainty of message to Trump and the Republican Party’s refusal to rely on scientists for advice.
”The disdain for experts, preference for incompetent loyalists and failure to learn from experience are standard operating procedure for the whole modern G.O.P.,” he said recently.
Obama economic advisor Austin Goolsbee said as much on the struggles to provide recovery money:
“The administration has been adamant that it is not required to be fully transparent or accountable in handling these (recovery) funds…They undermine the credibility of the crisis response, which the government will desperately need soon enough.”
Add to this the latest employment numbers. Private payroll data service ADP just predicted a loss of 20 million payroll jobs in its latest private sector survey.

ADP

In other words, we will be seeing much darker days ahead if the American public cannot trust the words of our leaders. They cannot unite if they are listening to different voices. “It’s not about red or blue states,” New York Governor Andrew Cuomo has been saying at his daily press conference. “It’s not about ‘you’ or ‘me’, it’s about ‘we.”

Harlan Green © 2020

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

Sunday, May 3, 2020

Our Record Income Inequality Needs Fixing



In an earlier column I imagined what could have been accomplished if the $2 trillion given to corporations in the 2017 Tax Cuts and Jobs Act had been put into upgrading our infrastructure, instead of given to corporations and used to boost their stock prices and executive incomes. We might have avoided what will become another severe, maybe Great Recession lasting years,as I said.

This downturn could be as disastrous for the US economy with upwards of 30 million applicants filing initial unemployment claims, and an unemployment rate that approaches 20 percent, if the $ trillions just raised in support of a revival is not put to better use.

The COVID-19 pandemic offers a once is a lifetime opportunity to make drastic changes in American capitalism that would level the playing field for salaried workers most affected with the loss of jobs. Most of the $$ must be spent in the public sector for infrastructure, education, healthcare, R&D, and environmental protection, it the US is to recover from this any future pandemic.

The decline in public spending encapsulates why America still has record income inequality equaling that of the Great Depression. Most economists agree the starving of government programs that would benefit working folk is a major cause of most recessions, including the Great Depression and Great Recession that must be corrected if there is to be a robust recovery.

And we are dependent on those salaried working folk to generate 70 percent of U.S. economic activity, yet at least 80 percent are earning no more than in the 1970s with inflation factored in.

I say this because we have always been a fragmented country with a weak federal system, a system of red and blue states still fighting over the same issues that prevailed during the civil war, resulting in the least regulated capital and labor markets in the developed world with no universal health care.

The record decline of the American worker’s income and labor organizations that supported it since World War II is a long story, though I will attempt to condense its history without too much simplification.

First a fact. The most recognized measure of income inequality is the Gini inequality coefficient, that calculates the percentage of income earned by different segments of a country’s populace. The U.S. ranks 118th in the list of 157 countries compiled by the CIA World Factbook, which is below every other developed country in the equal distribution of national income—between Peru and Cameroon.

We know about our record income inequality from countless stories of rising poverty levels, homelessness, and the Occupy Wall Street movement that first focused attention on the extreme wealth of the top one percent of income earners. French economist Thomas Piketty and UC Berkeley economist Emmanuel Saenz were the first to plough through 100 years of tax returns that measured income differences of the wealthy and poor.

The rise in income inequality and poverty levels was also due to the decline in progressive tax rates. The maximum income tax rate topped out at 92 percent during Eisenhower administration, uniting Republicans and Democrats to build our modern post-WWII public infrastructure, before declining to 36 percent today.

After the 1973 Arab oil embargo that boosted oil prices and inflation to unacceptable levels, a new kind of economics was born. Some called it trickle-down economics, others supply-side economics. The idea was to shift most profits to the side of business owners so they would produce more by cutting taxes and regulations.

They used an old French economic theory as the justification for such a shift in economic thinking—Says Law named after an earlier French economist. It said that producers should maximize their profits, and enough would trickle down to the workers that produced their increased profits. Everyone would then be happy, there would be enough to go around, a rising tide would lift all boats, etc., etc.

However, lowered taxes did not raise all boats, but it did create soaring federal debt. And labor had lost its clout as higher-paid manufacturing jobs went overseas, leaving the U.S. with lower-paying, service jobs at warehouses and transportation hubs.

The end result was that most industries were deregulated creating today’s dog-eat-dog capitalism that has starved government of public services and rules that would mitigate the predatory behavior of modern capitalism.

All public sector investment consequently declined—in education, Research and Development (that created the Internet and sent us to the moon), and modern infrastructure that would boost our declining labor productivity.

There is really no other choice but reform of the economic system Americans live with. A country that unites behind the support of its workers by giving them a greater of our national wealth—sich asbetter healthcare, education, while fixing our infrastructure—and raising taxes enough to keep social security and Medicare financially sound—will put US on the road to a better recovery.

Harlan Green © 2020

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