I probably should post a guide to the titles I give to my posts. In general when I end a title with a question mark it’s because I’m not sure of the answer. That may not be the case from time to time—no system is perfect.
In yesterday’s post wondering if what I pointed to was indicative of stagflation several commenters rejected the idea vehemently, pointing to low unemployment which was reasonable enough. However, no one produced an alternative explanation for the extreme flatness of the curve for the last couple of years. As the complete series makes clear, that isn’t unprecedented. It happened in the mid-1970s, the early 1980s and the early 1990s and each time it coincided with recession.
If you have another explanation, please feel free to offer it in comments.
People should be careful of the employment numbers.
First, the unemployment rate is simply bogus from an historical perspective, as the size of the workforce has shrunk. Gene Sperling attempted to finesse this yesterday by noting that the workforce size in the 25-54 range was roughly stable pre and post pandemic. That just waives away other historical work force participants. And it doesn’t address the fact that it always trends up over time.
Second, the household survey is being ignored. It shows a different picture – flat. You can go to zerohedge (yesterday) or other places for an explanation of the differences. Essentially a person working two low wage, part time jobs gets counted in the survey that made the headlines. The household survey does not.
These two have diverged dramatically since the pandemic and need to get sorted out.
A third issue to consider is that it is now declared that all the lost jobs in the pandemic have been regained. That’s fine. But its snapback, not real growth. And its far below trend line given GDP.
You don’t need to consult FRED to know whats really happening. Just leave your house. All the retail and hospitality positions are being refilled. Necessary, but not prime jobs. This was noted in comments in the previous post.
The last point to be made is that things are moving real time; right under our feet. (Just look at the housing data) People are up to their eyeballs in credit card debt again. Probably a post-covid reaction wrt vacations, family visits etc. After labor day could be a critical performance period to gage consumer spending, GDP and jobs.
As to the flatness, you need income to generate purchasing. If jobs have just now recovered to pre-pandemic levels, you would expect flatness.
I can totally understand why people are confused what to call what is going on in our economy and country today. Recession? Stagflation? Inflation? On-the-road-to-a-depression?
The stock market continues to erratically rebound. The UE remains low, while more lay offs are announced every day. Gasoline consumption is less today than in the summer of 2021, when everything was locked down. That’s puzzling as Biden says the economy is cruising along fine. Some say the reason is because 1 in 5 people have to choose between the high cost of food and the high cost of fuel. Nationally 35% of businesses could not pay July rent, juxtaposed anecdotally by a 60% vacancy factor seen in a local once-popular promenade in S CA. Even offering one year free rent has not been able to tease a business owner to sign a rental contract. Between rampant homelessness and an uneasy business climate, perspective renters continue to stay on the sidelines, as does a thriving, growing economy. iMO, it will only worsen.