Plenty of Available Jobs!

 Financial FAQs

As a precursor to July’s unemployment report, the Labor Department’s JOLTS report that measures the number of job openings—jobs waiting to be filled—has just come out. The number of openings is still the highest in decades, per the FRED graph (it peaked during the pandemic shutdown).

“The number of job openings was unchanged at 8.2 million on the last business day of June, the U.S. Bureau of Labor Statistics reported. Over the month, both the number of hires and total separations were little changed at 5.3 million and 5.1 million, respectively.”

This means there aren’t enough workers to fill those 8.2 million job openings and 5.3 million hires in June. Our economy remains fully employed, despite the Fed’s attempts to restrict the number of hires by keeping interest rates high.

Why do they want higher unemployment when one of the Fed’s twin mandates is maximum employment (with stable inflation)? Because many of the Fed Governors seem to subscribe to an economic theory from the 1970s by the conservative Nobel Prize Economist Milton Friedman who postulated that the amount of money in circulation controls economic activity. Therefore the Fed has reasoned keeping interest rates high will slow growth enough to control inflation.

But this inflationary surge was caused by worldwide supply shortages from the pandemic shutdown that led to a temporary inflation surge, not too much money in circulation. Inflation has declined despite the abundance of money still in circulation to pay for our economic renewal— infrastructure projects and computer chip factories, for starters—for which $trillions are needed.

FREDjobopenings

The inflation decline has been corroborated while second quarter GDP growth doubled from 1.4 percent to 2.8 percent, I reported last week. Despite such a growth surge, its price index for gross domestic purchases increased just 2.3 percent in the second quarter, compared with an increase of 3.1 percent in the first quarter. The personal consumption expenditures (PCE) price index increased just 2.6 percent, compared with an increase of 3.4 percent in Q1.

These declining inflation rates are telling us it’s time for a rate drop. But are consumers getting the message? The Fed’s money tightening has been making consumers more cautious in their outlook but they aren’t seeing much light at the end of the inflation tunnel. The Conference Board’s latest Consumer Confidence Index is still showing pessimism.

Conference Board

Conference Board Chief Economist Dana Peterson said in its latest release, ““The proportion of consumers predicting a forthcoming recession ticked up in July but remains well below the 2023 peak. Consumers’ assessments of their Family’s Financial Situation—both currently and over the next six months—was less positive. Indeed, assessments of familial finances have deteriorated continuously since the beginning of 2024.”

Consumers shouldn’t be blamed for their pessimism, despite being fully employed. Prices are still 20 percent higher on average than before the pandemic. But their moods should considerably improve when the Fed finally begins to cut interest rates, and their fears lesson of an upcoming recession.

We are at the beginning, not the end of the post-pandemic recovery, in other words, which could continue for most of this decade and is generating many new high-paying jobs.

Harlan Green © 2024

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

Inflation Not The Real Problem

 Financial FAQs

FREDcpiinflation

Inflation is falling again with national gas prices below $4 per gallon while food prices are also beginning to decline.

The NY Times’ Paul Krugman just pointed out that food prices should continue to decline per the UN’s Food and Agricultural Index.

“The FAO Food Price Index* (FFPI) averaged 140.9 points in July 2022, down 13.3 points (8.6 percent) from June,” said the FAO, “marking the fourth consecutive monthly decline. Nevertheless, it remained 16.4 points (13.1 percent) above its value in the corresponding month last year. The July decline was the steepest monthly fall in the value of the index since October 2008, led by significant drops in vegetable oil and cereal indices, while those of sugar, dairy and meat also fell but to a lesser extent.”

FAO.org

Therefore, the Fed should not be focusing on bringing it back to a 2 percent inflation rate with more draconian rate increases that have only prevailed since the Great Recession and busted housing bubble.

The above FRED graph dating from 1950 shows both the annual consumer price index at 8.5 percent and ‘sticky’ CPI price without food and energy at 5.6 percent in July, down slightly from June.

During our most prosperous times since 1980 it ranged between 2.5 to 5 percent, per the above FRED graph. That’s because profits rose in tandem with rising prices, thus encouraging businesses to hire more workers and expand further.

Since 1980 we have never had a prolonged supply problem, in other words, with retail inflation trending down ever since—until the current post-pandemic era of a Ukraine-Russia war and recovering supply chains, that is.

Why? Because there was never a shortage of supply due to modern technology’s ability to increase productivity that could flood markets with goods and services. Asia with China could produce things more quickly and cheaply that US.

Yes, all that money now raised from the government aid coursing through the economy is causing a temporary inflation problem, but much of it will be invested in future growth—like the infrastructure and inflation reduction act bills just passed.

President Biden’s $1.2 trillion infrastructure bill includes funding allocations of $89.9 billion to improve public transit, $65 billion toward better internet connectivity and access, and money for 500,000 electric vehicle charging stations, which could help address charging “deserts;” areas where it isn’t currently available.

“The infrastructure bill widely focuses on improving passenger and freight transportation, for instance, so steel and material suppliers, including companies that produce materials for buses, trains, bridges, rail, or related equipment, could see heavy activity. Makers of products supporting things like 5G infrastructure and EV stations, too, will see improved demand,” said a Forbes Magazine article on its effects.

And while there will be little inflation reduction in The Inflation Reduction Act bill just passed, the White House says the package will address inflation in two key ways: by lowering energy and health care costs for families and by helping to bring down the deficit.

"And that's why even Democrats and Republicans, former Treasury secretaries, economists across the board have said that this bill will make a positive impact on inflation while also tackling some of the biggest and long-standing issues facing our country, like prescription drugs and like tackling climate change," said Brian Deese, director of the National Economic Council, in an interview this week with NPR's Morning Edition.

As important in bringing down oil prices is that oil and gas drilling is at a 7-year high. U.S. crude oil prices have dipped below $90 per barrel of late, and who knows how much lower oil prices may decline as more alternative energy sources financed by those two bills come on line to replace the need for fossil fuels?

Harlan Green © 2022

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

Booming Retail Sales Confirm Holiday Rally

 Financial FAQs

 

FRED

September retail sales and food services presage a holiday season worth celebrating, despite supply shortages, worker shortages, and the pandemic. Seasonally adjusted retail sales are up 12 percent over last September, which means that the demand for goods and some services is at a historic high.

So the shortages are due to consumers and businesses buying more than ever, more than last year and all the years before, in spite of the supply shortages.

There’s little evidence of production shortages, per se, as much as a slowdown in getting to their destinations in ports such as Los Angeles and Long Beach, where more than half of all imports to the U.S. arrive.

NY Times Paul Krugman put up a FRED graph that illustrates the huge surge in the demand for durable goods—goods like appliances and vehicles that last more than three years. It tells us that said demand can continue above the average dotted trend line into the year end holidays.

FRED

The demand for services such as leisure activities and travel is lagging because the pandemic has kept many consumers at home. But that will pick up as well once the Pandemic is subdued.

And what if the Infrastructure and Build Back Better bills pass would add additional $ trillions to programs that boost businesses and improve consumers’ lives? Then the boost in demand for goods and services could be prolonged for…years.

Should we worry about inflation because too much money is in circulation, driving up prices? Not if it’s put to productive uses, as I’ve been saying. Both physical and so-called social infrastructure spending go into increasing productivity, hence a greater supply of goods and services, not excessive speculation in the financial markets as have past tax cuts from which the wealthiest most benefited.

Studies have shown that parents in such states as California that have some of the social infrastructure proposals in President Biden’s Build Back Better Act, such as paid family leave and child care, allow them more family time and resources to raise their children, thus reducing the number of children trapped in a cycle of poverty.

And better physical infrastructure will help to cure the supply bottlenecks. “In the longer run, investments in infrastructure could help much more: U.S. ports, rail lines and so on are shabby compared with their counterparts in other countries and could be much improved.” says Krugman.

So we really need to grow what one political scientist has termed our social capital as much as physical infrastructure, if we want a sustainable recovery. It can be done by improving people’s lives.

Harlan Green © 2021

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