There are quite a few observations in Richard M. Ebeling’s comments at the American Institute of Economic Research about Federal Reserve Chairman Jerome Powell’s latest pronouncements that I wish more people understood. Here’s an example:

It is worth keeping in mind, however, that all of these numbers are exaggerated in terms of real private sector vibrancy because in 2019, federal government expenditures came to $4.45 trillion, or 23 percent of that $19.2 trillion GDP total. By the end of 2020, due to the relaxing of the federal and state lockdown and shutdown mandates over much of the U.S. economy in the second half of last year, real GDP had recovered to $18.76 trillion, but federal government expenditures came to $6.6 trillion, or 35 percent of that total GDP. And just in the first half of 2021, out of that $19.36 trillion GDP, federal spending has already been $5.86 trillion of that total, or 30.2 percent.

If government spending is even partly discounted from GDP as a false indicator of the economic “health” of the U.S., since Uncle Sam has nothing to spend other than what it either first taxes away from the private sector or has borrowed from the financial markets, the private economy is far from doing as well as the GDP numbers suggest.

Shorter and simpler: we can’t borrow our way to prosperity.

At Knowledge Leaders Capital Stephen Vannelli delves into a point I’ve considered around here—what the heck does “transitory” mean?

• Recent economic data in the US and around the world has surprised on the downside for the last several months, while inflation continues to surprise on the high side.
• We are told that inflation is transitory, but does that mean that stock price and house price inflation is transitory too?
• Is the era of digital deflation over as semiconductor prices are now increasing in price rather than falling?

all these and more are explored in an attached PDF. Here’s a telling graphic:

I don’t think that tells the story we’ve been hearing.

Here are some observations from the analysis which addresses the question: that product outputs seem constrained and increasing shipping costs both suggest that supply chain issues are not transitory.

In the past I’ve mentioned that sometimes I encounter one sentence in an article which I simply cannot move past. Although I found Jessica Guynn and Jayme Fraser’s piece at USA Today on I guess racial inequities in businesses interesting I simply could not get past this sentence:

One sobering data point: The overwhelming majority of executives are white, while only 1 in 443 Black or Hispanic employees have an executive job.

Do you see why I have a problem with that sentence? Or should I spell it out? I’ll give one example. It should be obvious that there are 500 CEOs of Fortune 500 companies. Roughly 158 million people are employed in the U. S. It’s a matter of simple mathematics that 1 in 316,000 workers is a Fortune 500 CEO. Is that something about which we should be upset? Is it “sobering”?

I wanted to share some thoughts on how I think that our struggle with COVID-19 is unfolding, using Illinois as an example. I think the evidence is that in Illinois at least the pandemic is over or, more precisely, has entered a new phase and is now endemic. Consider the increase in hospitalizations and deaths due to the latest COVID-19 variant:

But surely deaths aren’t the only metric we should be considering. What about the overburdened healthcare system.

If Illinois’s healthcare system is in danger of being overwhelmed, it isn’t by COVID-19.

Also, consider the inoculation rate, widely quoted as 60% having received at least one dose. I think that’s grossly misleading. 15% of Illinois’s population consists of children under 12 who aren’t eligible to receive the vaccine, at least not yet. Then add the percentage of people who’ve had the disease and recovered. That’s at least 12% of the population and possibly considerably more. Now you’re starting to talk 80-90% of the population with at least some resistance to the disease.

Don’t get me wrong. I believe that more people should be vaccinated. I also have no problem with making wearing masks mandatory when you go to the store or to work or even among children in school. Something I haven’t heard mentioned: there are social reasons for that. If everyone is wearing a mask in school—no problem. If some kids are wearing masks including those with suppressed immune systems and others aren’t kids being what they are there will be bullying.

One more point. Increasingly, the stats I’m seeing on severe disease seem to show a pretty close correlation between serious COVID-19 and obesity. How far would that go to explaining the racial disparities in contracting the disease? I think it’s worth considering.

My preliminary conclusion from all of this is that this is what things are going to look like for the foreseeable future. The disease will continue to circulate among the population, new mutations arising, and we’ll have yet another seasonal disease with mortality somewhat above the flu and another annual inoculation. It’s not a particularly appealing prospect but it’s something we can get used to.

I’m a bit puzzled by this article in the Washington Post by Heather Long, Alyssa Fowers, and Andrew Van Dam. The question they’re considering is clear enough:

A mystery sits at the heart of the economic recovery: There are 10 million job openings, yet more than 8.4 million unemployed are still actively looking for work.

The answer they’re putting forward is, basically, that things are different now:

At heart, there is a massive reallocation underway in the economy that’s triggering a “Great Reassessment” of work in America from both the employer and employee perspectives. Workers are shifting where they want to work — and how. For some, this is a personal choice. The pandemic and all of the anxieties, lockdowns and time at home have changed people. Some want to work remotely forever. Others want to spend more time with family. And others want a more flexible or more meaningful career path. It’s the “you only live once” mentality on steroids. Meanwhile, companies are beefing up automation and redoing entire supply chains and office setups.

The question they don’t address is whether the federal government should be subsidizing that reassessment. For some, e.g. the editors of the WSJ, the answer is obvious—bring in foreign workers willing to take the jobs that are remaining unfilled at the wage being offered. IMO the ROI on that is terrible. There are incremental costs associated with more people and a workers earning $10 or $12 an hour doesn’t pay enough in taxes to cover those incremental costs. Bringing in workers who are willing to work for wages that don’t cover the freight doesn’t make that freight go down. The people who are already here are one thing; bringing in more is something else entirely. I think that we have altogether too many jobs paying low wages and, indeed, there needs to be a reassessment but of a different sort than being discussed in the article. I’m not anti-immigrant. I’m anti-‘low wage immigrant” and anti-“immigrant who is being brought in to keep wages low”. If you don’t think the latter situation is actually happening you haven’t been paying attention to what has been going on in technology in the U. S. over the last couple of decades.

Here’s an interesting passage from the article:

Nationwide, most industries have more job openings than people with prior experience in that sector, Labor Department data show. That’s a very different situation than after the Great Recession, when the number of unemployed far outstripped jobs available in every sector for years. To find enough workers, companies may need to train workers and entice people to switch careers, a process which generally takes longer, especially in fields that require special licenses.

That reminds me of the famous “Help Wanted” ad that appeared in 1982: “Wanted: IBM PC Programmer. Five years experience required.”. The IBM PC was first released in 1981. Do the math. I can’t tell whether they’re hiring or fishing. Is there actually a skills mismatch or are employers trying to see what’s out there and at what wage they’re willing to work?

Here’s the conclusion of the article:

The White House and many business leaders hope a combination of rising vaccination rates, reduced unemployment benefits and more time will lead more unemployed Americans to find new careers — and to be excited about them.

Sarah Henrie, 39, from the San Francisco Bay area, lost her corporate job at Bloomingdale’s in June of 2020 and struggled to find any job openings in her area of expertise: International marketing and tourism. Initially, she was shocked to find herself unemployed for the first time in her career.

But after her daughter was born, she decided she wanted a more flexible career. She’s about to take the real estate exam in California. If all goes well, she will start as a Realtor early next year working with her brother.

“It’s been a crazy year and we’re still kind of navigating,” Henrie said. “The nice thing about real estate is it’s flexible and you’re not commuting and going into an office. I think it will allow me to work and also be able to have more time with my daughter than I would have if I had been in my old role.”

The key to this great reallocation will be ensuring some workers aren’t left behind.

which sounds quite a few warning notes to me including how unrepresentative Ms. Henrie is of those looking for work, that real estate is notoriously gig work particularly for women with children, that contacts matter, and that California real estate is rather obviously in a “greater fool” bubble.

At Crain’s Chicago Business Greg Hinz analyzes the census results for Chicago and sees trouble on the horizon:

If math is destiny, then a new set of numbers shows Chicago is in for a potential realignment of political power unlike anything it’s seen in decades.

I think what he found is pretty interesting and it comports well with what I have observed:

The story is the rise of the central area of Chicago as a booming population center in the past decade, the simultaneous decline of many African American neighborhoods (especially on the South Side) and Latino growth that appears to be occurring all over the place but does not appear as overwhelmingly concentrated as it has been in the past in neighborhoods such as Humboldt Park and Pilsen/Little Village.

Said another way “Hispanics” are not a cohesive interest group as blacks have been for the last 50 years. Here are some of the details:

Downtown, largely white wards have seen significant population growth. Latino growth is up, too, but more dispersed, while many Black-dominated wards on the South Side saw sizable drops.

Some may be inclined to try to dilute that by grabbing portions of that downtown population and shifting it to other, more outlying wards. Good luck with that. The next outlying wards with a combined population gain of roughly 19,000 residents all abut those downtown wards: the 4th, 43rd and 44th. As 27th Ward Ald. Walter Burnett puts it, “I’m not going to give up” Black residents in his ward to help build population of some people-short wards elsewhere. If anything goes, he adds, it will be part of his largely white east end, the portion of his ward that’s part of downtown.

Now, despite what Burnett said, I don’t yet have detailed demographic breakdowns ward by ward. But based on the 2000 census and later American Community Survey data, it’s clear that the only predominantly Black wards that gained people overall are either downtown (the 3rd and 27th) or on the reviving South Side lakefront (the 3rd, 4th and 5th). Interior wards, especially on the South Side, each lost thousands of people in the last decade. Most were intentionally kept smaller than average in the last remapping 10 years ago in an effort to help Black aldermen retain their numbers. It’s far from clear that can happen again.

That positions Latinos as the big potential winner this remap cycle.

and the Latino population is not concentrated but dispersed. Ray Lopez’s 15th Ward, the most Latino ward in the city which includes West Englewood, Brighton Park, Back of the Yards, and Gage Park, actually lost population while the Hispanic population in Chicago actually grew.

What will complicate matters is voter turnout. Even though the numbers of Hispanics have grown it doesn’t mean that the number of likely Hispanic voters has grown as well.

In a piece at RealClearPolitics professors Chad Flanders and Kevin Vallier do a pretty good job of identifying the problem:

Indeed, we seem to be locked into a kind of a death spiral in election reform, where anything that changes how we run elections is looked at in terms of which side will benefit. Bills being considered – and passed – in many states, justified as improving election “integrity” and “security,” seem almost transparently designed to shrink the electorate to a more GOP-friendly core. The goal is not making elections more trustworthy but electing more Republicans.

In essence, this is results-oriented tampering with the election process. Long term, it can only increase cynicism about our elections while stifling other, more sensible, reforms. The same phenomenon plays out in debates over redistricting, where each side jockeys to draw districts not in pursuit of better representation, but to ensure more districts “lean” their way. That’s nothing new, although we may be entering an era of exceptional brazenness in this regard. Using increasingly sophisticated computer programs to design districts that maximize partisan advantage has become a perverse art form.

To restore trust in elections, we have to find policies that are not simply tilted in favor of one political party. Policy that increases trust in elections has to benefit both sides. This will not be easy: Election reform never occurs in a vacuum, and many reforms do help one side more than the other – much of the time, in fact, we know in advance which side will benefit more. This colors and corrupts debate over the policy. We must work hard to assess reforms on the merits, and not in terms of partisan advantage.

Like many such plaints, despite being able to see the problem clearly they fail to offer any solutions. I think there is no solution as long as the stakes are so high. Those at the top of the pyramid depend on winning for their cushy livelihoods, the media need to maintain a constant state of unhappiness to preserve their livelihoods, and so on.

Also the most transparent and fair election process is moot in the face of tortured electoral districts, carefully constructed to benefit one party or group and disadvantage others. I don’t remember which Chicago pol said it (probably the late Mayor Daley) but one map drawer is worth 10,000 precinct workers.

Finally, opinion being as closely divided as it is makes all elections look unfair. There is always a margin of error in tallying election results. Always. When the margin of error exceeds the margin of victory the winner of an election is actually indeterminate.

At RealClearMarkets Nicholas Eberstadt observes that we’re about to conduct a real world experiment:

A natural experiment in the US labor market commences next week as pandemic benefits (including pandemic unemployment insurance) are scheduled to end on Labor Day.

The US labor market suffered a terrible shock from the COVID19 pandemic in early 2020, and experienced a remarkably rapid initial recovery — a snap back of unprecedented speed and magnitude. Curiously, however, the return to pre-pandemic employment rates seemed to stall out last fall. While employment rates for men and women 20 and over remain below their Great Recession nadir, they have risen only by a mere one percentage point since October 2020.

Yet, while no one was vaccinated in October 2020, today, thanks to the advent and rollout of three highly effective coronavirus vaccines over 60 percent of the US adult population — over 160 million men and women — are fully inoculated. So what is constraining the return to paid work?

We’ve been doing a lot of that lately. He proceeds to make his case that a presumably unintended effect of pandemic policy was to reduce the willingness to work.

We’ll see. The real world is peculiar. However convincing the argument what matters is what actually happens.

The infographic above is courtesy of No Labels from this post at RealClearPolicy. I found point #2 particularly interesting.

The $1.5 trillion “infrastructure bill” includes $27 billion for electrical grid improvement. That’s 1.8% of the total.