Friday, January 14, 2022

Our Inflation: More About It, and Six Truths

It’s strange to realize that most people in this country have never experienced price increases of more than 4% annually, but that’s correct.  We have not seen inflation as high as the annual 7% the Bureau of Labor Statistics announced Wednesday since 1981.  Accordingly, many can’t be counted on to understand it.  So here’s more.

It exceeds the money things cost, as pointed out by Neil Irwin in “There Is Shadow Inflation Taking Place All Around Us,” revised October 11th in The New York Times.  The author was writing about reductions in service which aren’t counted in tabulations of price increases, such as rarer cleaning of restaurants and hotel rooms and slower and less comprehensive product availability. 

If you think prices will increase more slowly soon, Matt Phillips, on October 26th also in the New York Times, disagreed with “The Bond Market Says Inflation Will Last.  You Should Be Listening.”  Per Phillips, bond prices can be measured by determining a “break even,” assuming that their five-year returns equal the projected inflation rate.  That reached “about 3 percent a year,” which, as low as that seems, would be “far higher than any time in the decade before the pandemic hit.” 

Back to Irwin, who, on December 31st and again in the Times, told us “What We Learned About the Economy in 2021.”  One of his four points was “people really, really, really don’t like inflation.”  It has been a source of “generalized discontent,” and has caused “poorer customer service,” “more hassle planning Christmas gifts far ahead of time,” and beyond.  It is too easy, as Irwin put it, to take attitudes of “that pay raise was money I earned fair and square” but “that higher grocery bill is an affront done to my by powerful forces beyond my control.”

Once more in The New York Times, we had Paul Krugman, in January 7th’s “Wonking Out:  Through A Price Index, Darkly,” give us some of inflation’s technical details, along with the sound observations that “economic developments since the pandemic began have taken place in Covid time – that is, they’ve moved at a pace that makes past ups and downs look as if they were filmed in slow motion” and “the one-year rate of change is more or less guaranteed to show continuing high inflation for a while even if actual price pressures are quickly fading away.”  The last, exemplified by the price of gasoline, is because such statistics show what has happened over the entire time period, and can conceal recent leveling-off or even dropping.

So what observations can we make about our current price increases?

First, this is not typical inflation with root causes self-sustaining and hard to pinpoint.  It is due to temporary supply-chain disruptions cutting supply, higher wages increasing business costs, and irregular demand from the pandemic’s changes.  That means the usual recommended measures may not be effective or necessary. 

Second, the past 40 years notwithstanding, we have had inflation during much of our history.  Per google.com, the average rate since 1914 has been 3.25 percent, which means that at times it has been more.  It’s normal.

Third, zeroing in on cutting inflation would mean more shortages of both goods and workers and higher unemployment, neither of which is popular either.

Friday, January 7, 2022

December’s Jobs Numbers: Almost a Repeat of November’s Improvements, But with a Reservation – AJSN Down to 16.3 Million as Latent Demand for Work Descends to Almost Pre-Pandemic Levels

Not too often have I seen back-to-back Bureau of Labor Statistics Employment Situation Summaries this similar. 

We start with the current marquee number, that of net new nonfarm payroll positions, which again came in well below the consensus prediction, this time 199,000 or half of multiple 400,000 estimates.  The rest, though, were strong.  Seasonally adjusted and unadjusted unemployment shaved 0.3% and 0.2% to reach 3.9% and 3.7%.  There are now 6.3 million officially jobless, off 600,000 from last month’s initial report, and although the count of people on temporary layoff was 12,000 higher, those out for 27 weeks or longer fell another 200,000, to 2.0 million.  The two measures of how common it is for Americans to be working or one step away, the employment-population ratio and the labor force participation rate, logged 0.3% and 0.1% improvements to 59.5% and 61.9%.  The number working part-time for economic reasons, or holding that kind of job while looking for something full-time, ditched 400,000 to 3.9 million.  Average hourly private nonfarm payroll wages did better than inflation this time, up 28 cents since the last report to $31.31. 

The American Job Shortage Number or AJSN, the statistic showing how many more positions could easily be filled if all knew they were easy to get, got 348,000 better as follows:

 

All but 44,000 of this month’s improvement came from lower official joblessness, with the other components light and mixed.  The share of the AJSN from this piece dipped 1.2% to 32.8%, meaning that, of people not working now, more than two thirds of latent demand for new positions comes from those not eligible for such benefits.  Compared with a year before the AJSN is down 4.9 million, with almost exactly four million of that from those unemployed, almost 700,000 from a lower count of those wanting work but not looking for it for a year or more, and over 100,000 apiece from people discouraged and in the “other” category above.

On the pandemic side, although the Omicron effect was only starting we saw, for the first time in months, a cause for concern.  Per the New York Times, between November 16th and December 15th or 16th, the seven-day weighted average of new daily cases jumped 44% to 122,368, people hospitalized from Covid rose 43% to 68,222, and pertinent deaths increased 22% to reach 1,302.  The same measure of vaccination doses given, though, was up 23% to 1,799,583.  The worsening numbers, here including deaths, suggest there now may be a real increase in people exposing themselves to the virus at workplaces who should not be. 

How are we looking?  Once more, we must not confuse erroneous forecasts with poor results.  Our country’s population growth has slowed considerably in the past two years, and now we only need about 50,000 net new jobs each month to cover it.  We got four times that.  The other figures, including the AJSN, are quickly heading for where they were two years ago.  Since we know now that the Omicron variant, accounting for the overwhelming majority of new cases, is much less deadly than those before, it is easier for people to justify risking their health at work.  Whether that is worth it is for you to decide.  In the meantime, the turtle took another robust step forward.

Friday, December 31, 2021

The Great Resignation: Who’s Doing It, Why Is It Happening, What Options Do People Have, How Long Will It Last?

We’ve heard a lot about people not only refusing work but leaving their positions.  How can we understand it better?

Per Paul Davidson, updated December 9th in USA Today, “Job openings hover near all-time highs as Great Resignation shows little sign of easing.”  As of most-recent-data-month October, there were 11 million advertised opportunities, which “have topped 10 million for five straight months.”  As reasons, Davidson cited people taking advantage of higher starting pay elsewhere, wanting to work from home, discontented with pandemic-time employer treatment, wanting “new career paths,” feeling lacking in “work-life balance,” and, once again, going into business for themselves. 

As for those soon to depart, Andrea Derler, in Fast Company on November 2nd, told us “These are the people still most likely to quit during the next wave of the Great Resignation.”  The author called “quitting your job” “the hottest trend in 2021,” and per this publication’s research said that “resignations were occurring at alarming rates for tenured, long-term employees,” that figure increasing over 50% for those with 5 to 15 years of service since 2020, for reasons including “burnout following the impact of the pandemic on their organizations” as well as those Davidson named.

Many have wondered “How millions of jobless Americans can afford to ditch work” (Allison Morrow and Anneken Tappe, MSN.com, updated December 29th), of which the authors found, of a 3.6 million two-year increase in people claiming no interest in work, 90% to be 55 and older, who often have “accelerated their retirement” helped by higher stock and house prices.  An economics professor blamed some departures on “a job quality shortage,” rightfully more meaningful than the alleged one of workers. 

Another root cause was the subject of “Ken Coleman on workforce flight:  COVID-19 pandemic changed what workers value in a job” (Kristen Altus, Fox Business, October 27th).  Here we learned about a Ramsey Solutions report showing that “6 in 10 workers said the COVID-19 pandemic changed what they value in a job or career and 52% preferred to work fully remote if possible.”  Also, per the title’s author and radio host, “55% of workers are considering a job change for a career that better aligns with their values,” and he considered “impact” maybe more critical than pay rates. 

Gray areas between full employment and full retirement have become increasingly populated, leading to Jim Probasco’s December 21-updated Investopedia.com “The Rise of the Semi-Retired Life” with subhead “Leaving work completely is not the only choice as retirement age nears.”  Probasco defined semi-retirement as working fewer hours or changing to a “less stressful” full-time position.  Per a Pew Charitable Trust study, “31% of retired women and 50% of men said they worked part-time because they wanted to do so.”  Other options the author put in the same category included self-employment efforts, beginning “a new career based on an interest, passion or hobby,” and consulting. 

How long will this movement continue?  Per Justin Wolfers in The New York Times on December 3rd, “The Great Resignation Won’t Last Forever.”  His main point seemed to be that job shortages, when they start, can precipitate fear among those with employment, causing them to keep that they have.  Yet we aren’t there yet.

Overall, what can we say about the rate of people leaving their positions?  Although it will of course shift sometime, it doesn’t need to be soon.  However, we should not confuse greater affluence, including a 15% rise in total household net worth between the third quarters of 2020 and 2021 per the Federal Reserve, with a permanent situation.  While most people recently choosing retirement, or a mild semi-retirement, will never return to their previous states, younger Americans will need money too much to stay on the sidelines for long.  Once again, the market will speak.

Friday, December 24, 2021

Consumer Spending, and the Rest of the Economy: What Seems to be Happening, What People Think is Happening, and What’s Really Happening

It’s strange, or maybe it isn’t, that on a topic with so many high-quality facts regularly issued, viewpoints and conclusions should differ so much.  Maybe that’s a result of many members of one party, and the great majority of the other, chucking well-documented ideas they think are bogus or otherwise conflict with their worldviews.

With that, what has been written this quarter about the title matters?

In MarketWatch on October 11th, Barbara Kollmeyer made the mildest claim here: “’Not missing it’:  Some consumers will never go back to their pre-pandemic spending habits, research predicts.”  She cited a European Central Bank working paper, with data collected in middle and late summer, that “many households that cut spending on products and services because of lockdown experiences had “permanently altered their preferences,”” mostly people finding that lower consumption rates seemed fine to them.  The areas of continued reduction Kollmeyer named were travel, public transportation, restaurants and bars, and brick-and-mortar stores in general. 

On the other hand, on this side of the Atlantic only one week later, Emma Cosgrove wrote in Business Insider that “America isn’t running out of everything just because of a supply-chain crisis.  America is running out of everything because Americans are buying so much stuff.”  One cause of our elevated inflation rate has been the basic economic situation of demand outstripping supply, with both reasons in this article’s title pertinent.  Cosgrove cited the National Retail Federation as claiming that our citizens “are buying everything they can get their hands on,” and that the inventory to sales ratio is the lowest since 2011, “which indicates that we’re low on stuff,” in turn “because sales have gone completely nuts.”  Over the past two years, retail volume has risen 8% and 14.5%.  At press time, “supply-chain professionals” were “chipping away at the backlog container by container,” which has improved since, but, per Cosgrove, as a clogged bathtub won’t drain quickly if water pours in, the backup won’t ease all that quickly.

On November 6th, Neil Irwin announced in The New York Times that “Americans Are Flush With Cash and Jobs.  They Also Think the Economy is Awful.”  Although “Americans are sitting on piles of cash; they have $2.3 trillion more in savings in the last 19 months than would have been expected in the prepandemic path,” and jobs of some sort are plentiful, they are worrying more about inflation.  An October Gallup poll showed 68% considering the economy to be worsening.  Surprisingly, it is no more a partisan issue than it was about ten years ago. 

Americans may be spending a lot in general, but “Many consumers are holding off on making big purchases.  That’s a good sign” (Peter Coy, The New York Times, November 12th).  A graph here showed the share of survey respondents “saying now is a good time to buy” diving for “large household goods,” houses, and cars right when inflation jumped in late spring, and largely continuing to drop ever since.  This effect will hurt employment in related areas, and may not level off when the inflation rate does.

Next, Paul Krugman’s “How Is the U.S. Economy Doing?,” on December 9th in the same newspaper, was a response to negative views of the last Employment Situation Summary, in which net new nonfarm payroll positions came in at less than half of projections but other items, from the household survey component, were favorable.  I published here an almost identical view on the report’s December 3rd release date, and Krugman added that “the employment rate among prime-age adults, a key measure of labor market health, is beginning to approach prepandemic levels” and “in many ways this looks like the best economic recovery in many decades.”  He concluded that “this is actually a very good economy, albeit with some problems.” 

As before, though, not everyone agrees, as pointed up by Jim Tankersley in the December 10th “How’s the Economy?  Biden Sees a Boom.  Many Americans Don’t,” also in the New York Times.  White House communications director Kate Bedingfield took it further with “every economic indicator shows an economy which is growing,” but acknowledged that “when people experience a higher price at the grocery store or at the gas pump that has an impact on their budget.”  Inflation in particular, “underestimated” by the administration, has dominated numerous views, and Biden’s opinion that “I think it’s the peak of the crisis” is not everyone’s.  It seems clear that, per a University of Massachusetts at Amherst economist, “the lowest-paid 70 percent of American workers have seen wage increases over the last two years even after accounting for inflation,” but that probably does not apply to as many in higher brackets.

 So how is the American economy really doing?  Krugman has it.  Although plenty are not as prosperous as six months ago, we are overall in good shape and continuing to improve.  Inflation should top off soon, and the number of jobs, with generally high consumer demand and supply-chain improvement, should continue to comfortably outstrip the monthly 60,000 or so we need for population growth.  The true nature of the Omicron Covid-19 variant is still unknown, but data creeping in suggests higher contagion with lower infection severity.  Vaccination rates keep increasing, headed by, per the New York Times, 88% of those 65 and older now fully dosed, and with the total number of American cases now over 50 million we can forecast lower numbers there.  There is a real chance of a relapse before the 2022 midterm elections, and we can and will argue more then, but, for the moment, we should give our financial system a bipartisan thumbs up.

Friday, December 17, 2021

The So-Called Labor Shortage – Some Views, and the Best Courses of Action

The issue of businesses not being able to fill positions has been getting press since at least May.  How accurate and complete, though, is what has been published about it?

Before the big bill, we saw “Skilled Workers Are Scarce, Posing a Challenge for Biden’s Infrastructure Plan,” by Madeleine Ngo in the September 9th New York Times.  It started with concerns from a construction firm expecting, or hoping for, a large contract “repairing aging bridges and roadways in the nation’s capital,” but wondering if they could find enough suitable employees.  The piece quoted a masonry-company owner saying that “the biggest struggle is finding guys that want to work,” but others cited here focused on the lack of experienced, skilled employees ready to join them.

In the same newspaper’s edition 18 days later, the author above combined with Jeanna Smialek on “Top Fed officials say the labor market needs more time to heal.”  The Federal Reserve then said that Covid effects were still too strong to justify raising interest rates.  The president of the New York branch also reminded us, also accurately, that “job postings are not jobs,” and likewise that “it may take quite a bit longer” than October “for the labor supply to come fully back.” 

Moving along to the Guardian on October 10th, Gene Marks told us that “US wages are going up, and those who don’t adapt to the new reality will fail.”  This story, or at least its headline, should have been posted on human resources bulletin boards across the country.  The rocket science of economics need not be invoked to understand that when “job openings are at a historic high and small businesses across the country are begging for workers,” it means “the demand for a critical commodity is high and the supply of that commodity is in short supply,” making “prices go up.”  Some things are simple. 

So how about existing employees, who have often watched new hires get more than they do?  Per Charisse Jones in the December 10th USA Today, “Workers can expect a nice raise next year as companies struggle to fill jobs, report says.”  We saw that “budgets for wage hikes are projected to jump 3.9% next year,” progressive but doesn’t approach the 6.8% latest inflation figure, and must include some anticipating offering less or nothing.

Finally, Rick Newman’s December 14th Yahoo Finance “Maybe bad bosses are causing the worker shortage“ was misheadlined – it was also about several other factors.  According to Prudential research, a stunning 46% of employees “said they’re looking for a new job, or considering looking,” and, after those wanting to be paid more (45%), “lack of growth opportunities” was, at 26%, the second most common reason.  While raising compensation is “probably the easiest” solution, despite a dearth of workers for “a year or more,” “there was no notable pickup in average pay until recently.”  Ideas for getting and keeping people in positions Newman mentioned, along with the usual vague self-fulfillment things which are often more basic issues in disguise, included ending “rigid eligibility requirements” such as college degrees. 

Per the American Job Shortage Number or AJSN, 16.7 million of our citizens – over half again the recently reported 11 million job openings, would take employment if the terms were right.  So what should companies do?  First, they need to raise pay – not just a few percent, but 10%, 20%, or more – and for in-place workers as well as new hires, announce that future average levels will at least equal the inflation rate.  Second, rediscover corporate training, or, if it seems better, pay community college tuition, books, and fees.  Third, be aware of true market rates for well-defined jobs, such as machinists and warehouse workers, and at least match them for skilled and experienced employees and candidates.  Fourth, search for and destroy barriers, such as the education ones above along with many certifications, which were often put into place when the massive baby boom generation produced too many applicants.  Fifth, when appropriate, allow people to work remotely, but do not pawn off costs on them by being stingy about allowed equipment such as ergonometric chairs.  Sixth, don’t forget promotions.  Seventh, when all else fails, pay even more – and repeat that as often as necessary.  Companies that follow these recommendations will have the employees they need.

Friday, December 10, 2021

Around the Horn with Robots

This is a highly jobs-related area which has had less press than I might have thought, probably due to emphasis on the pay demands, quitting, workspace-setting, and vaccination tendencies of human workers.  Here’s about all I have encountered in the past nine months.

“Do Not Be Alarmed by Wild Predictions of Robots Taking Everyone’s Jobs” – Kevin Carey, Slate, March 31st.  But be aware they will take a LOT of them, later if not sooner.  True, the 2013 Oxford study projecting that 47% of American positions were “”at risk” of computerization” did not mean anything imminent, but the possibility remains, which could massively materialize if our national will to achieve true innovations returns.  That we’re now in a forest of Help Wanted signs does not mean we won’t see skyrocketing automation by 2050, 2040, or even 2030.

“The Robot Surgeon Will See You Now” – Cade Metz, The New York Times, April 30th.  Well, not quite yet, but they have been assisting doctors there for years.  Implementation of autonomous robots in this field is unusually unpromising, since consumer resistance, especially when even small numbers of things go wrong, will be massive.  If many consider one fatal autonomous-vehicle accident worse than 30,000 annual driver-error deaths, they won’t tolerate risking delicate, high-skill processes on automata.

“Instacart enlisting robots to cut labor costs” – Jeanette Settembre, Fox Business, June 1st).  Picking grocery orders is much less emotional than cutting into heart muscles, and is effective, especially when the company’s warehouses can be designed for them.  A natural way of using technology when it not only keeps improving but, as labor costs climb, is even more valuable.  Many positions are strictly humans’ work, but this one is robots’ work.

“Elon Musk introduces humanoid robot prototype at Tesla AI Day” – Ken Martin, Fox Business, August 19th.  Unclear how these devices, except for looking more like humans (“standing” 5’8” “tall”), would be anything meaningfully new.  Robots already “eliminate dangerous, repetitive, boring tasks” and “carry out the work people don’t like to do” (or, more properly, carry out the work people’s companies don’t want them to do).  Sorry, Elon, but this one, unless Martin missed something huge, was a yawner.

“Workplace automation bots gain clout amid COVID-19 pandemic” – Angus Loten, Fox Business, September 24th.  The pandemic should have started many efforts to provide them, which may take a while to produce market-ready product.  This piece is about “robotic process automation,” covering the likes of “processing payroll data or expense reports and fielding call-center queries.”  Interesting to see how the latter would go over, even at the lowest, Tier 1, level of complexity. 

“Alec Ross:  COVID unleashes robots – and the hit on America’s workforce will be enormous” – Alec Ross, Fox News, October 10th.  The author looked in on a pharmaceutical-packaging plant “without human beings on the factory floor,” although workers did control the robots remotely.  More and more of this is on the way, as before pushed by higher pay levels.

“Desperate for Workers, Restaurants Turn to Robots” – Janet Morrissey, The New York Times, October 19th.  And in the next two years, it will mushroom.  Ones perhaps already at eateries near you include the Servi, which “uses cameras and laser sensors to carry plates of food from the kitchen to tables in the dining room” but not directly to customers; the Flippy, which as you might think can “fry fast food, like French fries and chicken wings“; Peanut, which covers every restaurant employee’s favorite detail by cleaning bathrooms; Whiz, “which vacuums floors,”; and silicon bartenders.  These mechanical employees have had their share of spectacular mishaps, leading some to be “fired” – just like their predecessors.

“Robots navigate the streets to deliver food” – Fox Business, November 2nd.  More on automated edibles distribution, by “hundreds of little robots – knee-high and able to hold around four large pizzas” are at work around American and British colleges and elsewhere.  One company, Starship Technologies, has reached two million deliveries, despite the devices being “slow,” “inflexible,” and needing to “recharge regularly.”  They’re not for every area, as some cities “aren’t welcoming them,” but are piling up a history now.

“Can We Make Our Robots Less Biased Than We Are?” – David Berreby, The New York Times, November 22nd.  That gets us to the, to say the least, uncomfortable issue of what we should do when artificial intelligence and related systems conclude that people of all groups are not identically likely to have certain proclivities or characteristics.  Sometimes such machine knowledge comes from poor programming, but we are rapidly reaching a time, if we aren’t there already, when systems we know are logically flawless have discovered, without any input from humans biased or otherwise, differences that offend people with certain political sensitivities.  Soon, surely by the end of this decade, we will need to at least debate whether to accept such algorithm components or to somehow remove them from artificially intelligent entities.  Not deciding on a course of action will cost us increasingly dearly.  I suspect that this matter will give us some seriously unpleasant times. 

Overall, where are we with robots?  We will find out within a few more years, when their quality, scope, and number available have all multiplied.  That is what they will do – and they will be even harder for companies to resist.  Then we will not be alarmed, but rather quickly accepting, of robots taking over many more jobs.  We cannot avoid that forever.

Friday, December 3, 2021

November Jobs Report: Another Fine Month, But Without the New Positions This Time

That outcome may not seem possible, but it’s what happened with this morning’s Bureau of Labor Statistics Employment Situation Summary. 

The number of net new nonfarm positions grew a meager but still valuable 210,000, far below the three projections, all between 500,000 and 600,000, I saw.  That was the extent of the bad news.  Seasonally adjusted and unadjusted joblessness each shed 0.4%, to reach 4.2% and 3.9%.  There were half a million fewer unemployed people than the month before, reaching 6.9 million.  The count of those on temporary layoff fell 300,000 to 800,000, and those out 27 weeks or longer lost 100,000 and is now 2.2 million.  Those working part-time for economic reasons, or keeping such positions while looking thus far unsuccessfully for full-time ones, numbered 4.3 million or 100,000 less.  The two measures best showing how common it is for Americans to be working or officially jobless, the labor force participation rate and the employment/population ratio, improved substantially and are now at 61.8% and 59.2%, up 0.2% and 0.4% respectively.  The weakest measure here may have been average private nonfarm payroll wages, increasing 7 cents an hour, below inflation, to reach $31.03.

The American Job Shortage Number, the statistic showing how many new positions could be filled quickly if all knew they would be easy and routine to get, had another fine month, dropping 568,000 to get to the following:




Eight of eleven components contributed less this time, with about 90% of the drop from lower formal unemployment.  The rest was broad-based.  This time, only 34% of the AJSN came from that same piece, meaning that nearly two-thirds of people without employment who would take easily available new jobs would have other statuses.  Compared with a year before, the AJSN has shed almost 4.3 million, with all but 700,000 from reduced official joblessness. 

On the Covid-19 front, per the New York Times, the seven-day weighted average of new cases rose 2% from October 16th to November 16th, to reach 85,154.  Deaths measured the same way, though, lost 30% to 1,063, and hospitalizations dropped 23% to 47,852.  The number of vaccinations, including booster shots, jumped 70% to get to 1,368,939.  With the trends so generally positive, there is no reason to think that more people are excessively endangering themselves by working in pandemic-unsafe conditions. 

So how could this report be so good with the count of new jobs, treated by many as the most important number it contains, disappointing?  The marginal attachment statuses above are improving little, and the count of those claiming no interest in working, which soon may contribute more to the AJSN than the unemployed, has been irregularly but clearly increasing.  Otherwise, there are gaps between the number of jobs and the number of people with them, specifically that a rising share of the employed have more than one position, and the non-civilian et al. category above, including people off the grid or not wanting to be found, has settled at about a million and half higher than it was pre-pandemic.  Still, the report was strong indeed, and the unemployment rates are running, not walking, toward pre-coronavirus levels.  In light of that, the turtle took another big step in the right direction.