Warning Signs

The Bureau of Labor Statistics has revised its estimates of job growth over the last year downwards by more than 800,000 jobs. Josh Shafer reports at Yahoo Finance:

The US economy employed 818,000 fewer people than originally reported as of March 2024, showing the labor market may have been cooling long before initially thought.

The revisions are a yearly practice from the Bureau of Labor Statistics; final revised numbers are expected to be released early next year.

The report, released Wednesday morning, showed the largest downward revisions to the professional and business services industry, where employment was revised down by 358,000 during the period. Leisure & hospitality saw the second-largest downward revision of 150,000.

The report moves down the monthly job additions seen in the US economy over the time period to 174,000 from 242,000.

“Despite this big downward revision, that’s still a very healthy growth rate in terms of the monthly jobs added to the economy,” Omair Sharif, Inflation Insights president, told Yahoo Finance.

I think that’s about right. Job growth was still good; it just wasn’t as good as previously estimated. For context consider this graph:


That chart does not include the downwards revision. As you can the revision is not catastrophic.

To my eye more concerning is this from Business Insider. The M2 money supply has decreased, a sign that spelled every time it has occurred in the last century.

The US money supply is flashing a major warning to the US economy, according to Wharton professor Jeremy Siegel.

M2 money supply, which includes cash, checking deposits, and other highly liquid assets, bottomed out around $20.7 trillion in April this year amid aggressive rate hikes, according to Federal Reserve data. That’s a 4% drawdown from the prior all-time-record of $21.7 trillion, which was recorded in 2021.

Money supply then rebounded through the summer, but has recently returned to its decline, nearing April’s low.

That marks the the longest stagnation in the M2 money supply since World War II, Siegel said in an interview with CNBC on Monday.

The feeling seems to be that recession is likely over the next six months. The reason it is more troubling than your run-of-the-mill economic slowdown is our flat output. That suggests that deficit spending to stimulate the economy will go straight to inflation.

Unlike some I don’t have a problem with the federal government meddling with the economy. I just think it ought to meddle in the direction of greater production rather than greater consumption. Unfortunately, the direction of policy has been wrong for a very long time.

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Two Down

The second night of the 2024 Democratic National Convention has passed and it was largely peaceful. There were more violent demonstrations and attendant arrests than Monday.

Let’s hope it remains mostly peaceful.

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One Down

One day down; three more to go. No major upheaval. So far so good with the Democratic National Convention.

I did not watch the convention proceedings of the Democratic National Convention here in Chicago last night. Fifty years ago I followed the national political conventions with rapt attention. I just don’t have it in me any more. Did I miss anything?

On a lighter note things are still fulminating in Dolton. The police chief there just received a vote of no confidence.

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More Questions About Ukraine’s Strategic Objectives

As it turns out it’s not just the WSJ bureau chief and I who are puzzled about Ukraine’s strategic objectives. At Foreign Policy John R. Deni does some speculation of his own:

Why send thousands of forces north when Ukrainian territory is being lost elsewhere? Why incentivize Moscow to reinforce a border region that has been relatively quiet, hence creating a longer-term security dilemma for Ukraine? Why not wait until Ukrainian units in the east and south were robust enough to leverage any siphoning of Russian forces resulting from an operation in the north?

Whatever Kyiv’s actual goals may be, the operation holds important insights regarding the long-term trajectory of the war. It’s possible, although not yet certain, that the Kursk offensive is not merely an opportunistic gambit but rather part of a broader military campaign that could stretch well into 2025, purposefully setting the stage for operations elsewhere.

Secondly, the offensive appears to provide evidence of Ukrainian ability to leverage Western training in a way unseen during the failed counteroffensive of 2023, namely by using combined arms maneuver warfare—the synchronization of various combat tools in a way that shocks, disorients, and ultimately defeats an adversary.

If these preliminary conclusions crystallize, the Kursk offensive could prove to be a major turning point.

He goes on:

Some observers have speculated that the operation is intended largely for political purposes. Certainly, at the strategic level—and at a time when many in the West are now considering what Ukrainian forces will need to initiate a broad counteroffensive in 2025—the Kursk operation may generate optimism among Ukraine’s supporters and bolster their willingness to continue funding and training. Evidence for this already exists in some of the reactions across the West.

However, it is difficult to believe that the principal aim of the Kursk offensive—10 days old as of Aug. 16—is purely political, intended to strengthen Kyiv’s bargaining position in (nonexistent) peace talks, guarantee additional Western assistance, undermine Russian President Vladimir Putin’s authority at home, or facilitate prisoner exchanges.

Of course, as all students of Prussian Gen. Carl von Clausewitz know, warfare is an extension of politics. But to conclude that Ukraine would send thousands of troops north on a risky operation into Russian territory while its forces to the south and east are slowly losing ground for purely political reasons seems dubious at best.

Alternatively, some Ukrainian officials have claimed that the Kursk operation is intended to complicate the flow of forces from elsewhere in Russia to Ukraine’s eastern Donetsk region. This seems doubtful, given the relatively limited extent of the operation so far and the lack of evidence regarding the interdiction of major rail lines, roadways, or other transportation infrastructure or platforms related to the flow of personnel and equipment into Donetsk. Ukrainian forces would have to drive farther east into Russia, probably to the rail junction at Voronezh, roughly 200 miles to the east of the border town of Sudzha in Kursk Oblast, or roughly the same distance headed southeast toward Valuyki, to interdict the rail lines or roads that eventually make their way into Ukraine’s Donbas.

Ukrainian officials have also claimed that the Kursk offensive was intended to enable the destruction of Russian facilities and platforms engaged in glide bomb and other long-range operations against Ukrainian territory. On Aug. 13, a Ukrainian official argued that Kyiv’s forces lacked enough long-range weapons to hit these targets from across the border. However, that very night, Ukraine conducted its largest drone operation to date, reportedly sending scores of drones to hit facilities and platforms across a wide swath of Russian territory, including in Kursk, Belgorod, Voronezh, Volgograd, Bryansk, Orel, Rostov, and faraway Nizhny Novgorod—approximately 500 miles from the Ukrainian border.

Somewhat more likely than all these other rationales, and as some Ukrainian officials have indicated, the operation seems designed to relieve pressure on Ukrainian forces in the south and east. It may also force Moscow’s military planners to consider the longer-term defense of Russia’s border with northern Ukraine, tying down more troops there and introducing a new constraint on Russian commanders. So far, there have been some reports that Russian officials have diverted troops from the southern portion of the front as well as from Kaliningrad.

However, even if pressure is relieved, it is unlikely that Ukrainian troops in the east and south will have the wherewithal to conduct a counteroffensive of their own, at least in the short run.

That may explain why activists in Kaliningrad have been doing some saber-rattling lately. He continues to speculate that Ukrainians are putting their Western training in “combined arms warfare” to good use which I find pretty unlikely. I suspect this particular offensive is purely Ukrainian in its methods and purposes. Has any evidence to the contrary been produced?

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Why Did Ukraine Invade Kursk?

Here’s the answer of the Wall Street Journal’s Moscow bureau chief Anne M. Simmons to the question of what the strategic objective of Ukraine’s counter-attack in Russia was from a newsletter I received this morning:

“The Ukrainians took Russia by surprise and dealt an embarrassing blow to President Vladimir Putin. The incursion shifts the strategic dynamic of the conflict, in that it puts Russia on the back foot at a time when Moscow felt it was making gains, no matter how incremental. The Kremlin has had to divert resources away from the Ukrainian battlefield, which going forward, could stymie the goals of its offensive.

The land that Kyiv says it’s taken will provide President Volodymyr Zelensky with leverage in negotiations to regain Ukrainian territory that Moscow has illegally occupied, as will the hundreds of Russian troops Ukraine says it’s captured. These soldiers will help to bolster Kyiv’s pool of POWs who can be used for future prisoner exchanges with Moscow.

The fact that Ukrainian troops made such headway will be a morale boost for the Ukrainians and dent the self-assurance of Russia’s forces. It showcases Ukraine’s resolve, signaling to the countries backing Kyiv that their troops are in this fight for the long-haul. But don’t write off Russia just yet. It remains to be seen whether Kyiv’s forces have the ability to maintain their presence inside Russia given their limited manpower and stretched supply lines.”

I strongly suspect that the strategic objective Ukraine counter-attacking Russia was to shore up flagging Western support. Something of how effective it will be in achieving that depends on the Russian response.

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The Coming Democratic National Convention

Chicagoans are looking forward to this week’s Democratic National Convention with considerable apprehension. What will happen? No one really knows.

The best case scenario is that it will be a joyful celebration, entirely peaceful—an introduction to the coming Harris Administration. The worst case scenario is that it will be a rerun of 1968 and demonstrators, Chicago politicians, and the Chicago Police Department will reveal exactly who they really are—a somewhat less benign introduction to the coming Harris Administration.

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A Country in Despair

Yesterday I read one of the most depressing posts I can recall reading recently from photographer Chris Arnade at UnHerd. In a “road trip around the United States” interviewing people Mr. Arnade found many people expressing despair with far fewer bright spots along the way. He cut his trip short, giving up in dismay:

A decade ago, I had hope that things were so bad that we couldn’t possibly keep ignoring the malaise, the emptiness, the ugliness and we would move to right the ship. Instead, we buried our heads deeper into the sand, allowing life in the US to grow even more banal and isolating. We still haven’t grasped that the problem isn’t economic, it’s spiritual. And the answer isn’t to build another basic housing complex, another road, another shopping mall, but to build more cohesive and meaningful communities. Which isn’t easy, but unless that’s done, little will change towards the good, not in another year or another decade.

I honestly can’t recommend that you read it but I think he’s pointing out things that are real. While I agree that Americans eat junk I don’t attribute the sense of despair to eating lousy food.

To the contrary I think that both the lousy food and sense of despair have a common cause. We’ve spent the last fifty years or so tearing down institutions that have grown up over thousands of years, replacing them with nothing. Marriage, the family, faith, social organizations. The grounds on which these institutions have been criticized has largely been that they aren’t perfect, pointing out these imperfections as proof of inherit viciousness.

People have turned to self-gratification but hedonism has never been the foundation for a happy, fulfilling life. That’s why they’re eating mostly fat and sugar. It’s why we have substance abuse problems, an increased suicide rate, and why life expectancy has plateaued or actually decreased.

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The Problem With Harris’s Housing Plan

or beware of unintended run-on effects. In the Wall Street Journal Andrew Restuccia and Tarini Parti report:

Housing is one of the most stubborn costs facing the country, even as inflation is slowing.

“Costs are still too high and on a deeper level, for too many people, no matter how much they work, it feels so hard to just be able to get ahead,” Harris said.

Mortgage rates are at the lowest level in more than a year, but they are unlikely to soon return to anywhere near the levels before the Federal Reserve started raising interest rates in early 2022.

Home-buying affordability dropped last fall to the lowest level since September 1985, and it fell near that level again in June.

Harris proposed a $40 billion fund to help local governments develop innovative solutions to the lack of housing supply. It is an expansion of a similar $20 billion fund proposed by the Biden administration.

No word on how Vice President Harris intends to pay for all of the spending she’s proposing. Presumably, she plans to put it on the cuff.

Unless there is unused productive capacity lying idle (there isn’t) and unless taxes are increased to cover it, that will increase inflation. The Fed will try to handle that by increasing interest rates which will make housing that much less affordable.

Besides we don’t have a housing or even a homelessness problem. We have zoning, mental illness, substance abuse, underemployment, and an admitting-too-many-poor-and-unskilled-people-into-the country problems. Unless those problems are addressed first no housing plan will solve the problem she is presumably trying to address.

Restrictive zoning prevents homes from being built in places like San Francisco, New York, Los Angeles, etc. People live on the streets for many reasons. Many are mentally ill. Others have substance abuse problems. Some just don’t want to work or have financial responsibilities. Others are employed but don’t earn enough money to pay rent. I could explore that last issue at length but the bottom line is the unemployment rate doesn’t reflect people who are employed but don’t earn enough so politicians aren’t interested in it.

I could also delve into how subsidies will actually increase prices but why bother? You get the idea. She’s trying to move a rope by pushing on it.

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The Analogy

In her Wall Street Journal column Peggy Noonan reminisces, drawing an analogy between George H. W. Bush’s speech at the Republican National Convention in 1988 and Kamala Harris speech in Chicago at the Democratic National Convention next week:

He defined modern conservatism: “An election that is about ideas and values is also about philosophy. And I have one. At the bright center is the individual. And radiating out from him or her is the family, the essential unit of closeness and of love. For it’s the family that communicates to our children—to the 21st century—our culture, our religious faith, our traditions and history. From the individual to the family to the community, and then on out to the town, the church and the school, and, still echoing out, to the county, the state, and the nation—each doing only what it does well, and no more. And I believe that power must always be kept close to the individual—close to the hands that raise the family and run the home.”

He then defined what kind of conservative he was, one who saw the centrality of the individual existing within the connectedness of communities: “I am guided by certain traditions. One, is that there is a God and he is good, and his love, while free, has a self imposed cost: We must be good to one another. . . . And there is another tradition. And that’s the idea of community—a beautiful word with a big meaning.”

Democrats, he felt, had an odd view of it. “They see community as a limited cluster of interest groups, locked in odd conformity. . . . But that’s not what community means—not to me. For we’re a nation of community, of thousands and tens of thousands of ethnic, religious, social, business, labor union, neighborhood, regional and other organizations, all of them varied, voluntary and unique. This is America: the Knights of Columbus, the Grange, Hadassah, the Disabled American Veterans, the Order of Ahepa, the Business and Professional Women of America, the union hall, the Bible study group, Lulac”—the League of United Latin American Citizens—“Holy Name—a brilliant diversity spread like stars, like a thousand points of light in a broad and peaceful sky.”

I wonder: Would Ms. Harris ever define modern liberalism? Would she want to define her own?

I don’t think the analogy is as strong as Ms. Noonan seems to think. I don’t believe that speeches, particularly long speeches, are an effective method of communication in the modern post-literate world. You can’t appeal to reason or to, as Abraham Lincoln put it, “the better angels of our nature”.

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Now They Have Something to Write About

Catherine Rampell uses her latest Washington Post column to react to the Harris campaign economic plan which includes a proposal for a subsidy for first-time homebuyers and restrictions on “price gouging”:

So what actually happened with grocery inflation, if not “price gouging” (however defined)? Superstrong consumer demand plus major supply disruptions (the coronavirus pandemic, bird flu, Russia’s invasion of Ukraine, etc.) pushed prices and profits up. Once those shocks abated and consumers started spending down their pandemic savings, price growth cooled.

These are the kinds of facts the Harris campaign should be explaining to consumers, not exploiting for demagogic gain because push-polling suggests people are mad about “greed.”

But more to the point: If your opponent claims you’re a “communist,” maybe don’t start with an economic agenda that can (accurately) be labeled as federal price controls. We already have plenty of economic gibberish coming from the Republican presidential ticket. Do we really need more from the other side, too?

I think this illustrates how much better off the Harris campaign was when it focused on memes, photo ops, and graphics than when it tried to explicate actual policy positions. I’ll have more to say about subsidies for first-time homebuyers in a later post.

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