Friday, October 22, 2021

Four Months of Highly Understandable Inflation, and Our Best Attitude About It

In June, per “Prices Pop Again, and Fed and White House Seek to Ease Inflation Fears” (Jeanna Smialek and Jim Tankersley, The New York Times, July 13th), “a key measure of inflation spiked,” reaching 5.4 percent, which in the 1960s and early 1970s was a perfectly ordinary rate (in the late 1970s it was much higher), and about what basic savings accounts paid.  Much of this bulge was from used cars, and the rest from supply-chain problems and slower-than-expected employment gains.  I wrote then that it was nothing to worry about – is that still true?

The day after that, Smialek reported, again in the New York Times, that “Fed Chair Powell Sees Months of High Inflation, but Then Moderation.”  Powell has been a sober, consistent voice, exactly what best serves the Federal Reserve, which left interest rates unchanged and very low, and he continued that here.

In August, another 5.4% inflation month, as per Smialek, once more in the Times, “Consumer Prices Keep Climbing as Fed and White House Await a Cool-Down” (August 11th).  Wages went up “as employers scrambled to hire and rehire,” and Chipotle price increases, to name one restaurant chain, precipitated, per its CEO, “very little resistance.”  That was all natural and appropriate, as well summarized by Paul Krugman the next day in the same publication, in “Don’t Let Inflation Anxiety Undermine Our Future.”  Krugman backed the then $3.5 trillion infrastructure plan, including its nonphysical components, but acknowledged that such “would take a long time to materialize,” before he ended with “build we can, and build we must.” 

We got word on the next month’s data in “Inflation rose again in July, the Fed’s preferred measure of prices shows” (Coral Murphy Marcos, The New York Times, August 27th).  The rate actually fell then, to 4.2 percent, with a comment from a chief economist that “the economy is still recalibrating.” 

Panicking resumed with the August information, as “Inflation Warning Signs Flash Red, Posing Challenge for Washington,” published October 1st, again by Smialek in the Times.  The annual rate here of 4.3% hardly seemed to require urgent action, especially given the probable crest of the container-ship logjam and low-end pay reaching and exceeding $15 per hour in most places.  (Note that the free market has almost overwritten any need for that to be the national minimum wage.)  I don’t see why that was either unexpected or disturbing, especially when coupled with “Fed’s Bullard:  U.S. businesses having no problems raising prices” (Reuters, October 4th).  As before that is healthy and normal, as people both eager to spend and knowledgeable about higher costs will take the push.  Still the fear continued, as the “Risk of high inflation dogs central bankers as consumer expectations climb” on October 12th once more by Smialek in the New York Times, but, thankfully, per Federal Reserve vice chair Richard H. Clarida, most in that department “generally view that, so long as the recovery remains on track, a gradual tapering of our asset purchases that concludes around the middle of next year may soon be warranted,” but no more, while per Smialek “interest rates are expected to remain near zero for months or even years.” 

Although it isn’t reasonable to blame any one person or group for our rising prices, Peter Coy, in The New York Times on October 15th, reminded those not sure in “Don’t Blame Workers for Inflation.”  That is easy to do, but, per Coy’s research, wages since 2018 have gone up less than consumer prices, and “economists disagree on how much worker incomes will eventually spill over into the general price level.”  However, Jeanna Smialek, twice more in the same publication, determined that “Rising Rents are Fueling Inflation, Posing Trouble for the Fed” (October 15th) and “A regional Fed analysis suggests Biden’s stimulus is temporarily stoking inflation” (October 18th).  Economic stimuli should do just that, as ideally they should largely be spent instead of saved, and the first, “exacerbated by work stoppages, supply shortages and labor constraints” handcuffing real estate developers, makes sense as well. 

Overall, our current level of inflation should not make us lose sleep.  It has clear origins, all from the Covid-19 root cause.  There remain vast trillions of capital dollars ready to fund business opportunities when they present themselves.  We are almost certainly within a year of far better alignment of work and workers, which we will resolve at a level of high prosperity.  Then we may again see 2% inflation, but if we don’t we will still flourish.  Social Security checks, as widely reported, will grow 5.9% next year.  So for now, depending on your outlook, you can worry about climate change, gray goo, creeping socialism, or another Trump election, but don’t be concerned about prices going up.

Friday, October 15, 2021

The Container Ship Jam-up – What Is Happening, and Two Sets of Solutions

On my copy of the first article on this topic I saw, Cindy Wang and Enda Curran’s “The World Economy’s Supply Chain Problem Keeps Getting Worse” (Bloomberg.com, August 25th), which quoted a Hong Kong CEO as saying “we can’t get containers” and “costs have been driven up tremendously,” I wrote that the root causes were not enough infrastructure, reluctance by businesses to raise prices, and foot-dragging on paying workers more.  That was a start, but much has happened since.  This piece, though, hit the main problems, such as the Chinese government closing “part of the world’s third-busiest container port at Ningbo for two weeks after a single dockworker was found to have the delta variant,” “the cost of sending a container from Asia to Europe is about 10 times higher than in May 2020, while the cost from Shanghai to Los Angeles has grown more than sixfold,” and a prediction from a Taiwan company president that the capacity shortage could last into the middle of next year. 

From there, Costas Paris saw “shipping options dry up as businesses try to rebuild from pandemic” (Fox Business, September 12th).  Here we learned that as “the shipping industry consolidated between 2016 and 2018,” “a handful of big shipping players control the majority of containers via giant vessels, leaving the world with fewer routes, fewer smaller ships and fewer ports.”  A variety of infrastructure shortages, including not “enough manpower, trains, trucks and warehouses” along with too few unloading places, resulting in “forty or more loaded ships… waiting at anchor off the coast of Los Angeles on any given day in recent weeks.”  Among others, Walmart and Home Depot, later joined by Costco and Target, have themselves chartered smaller ships able to dock elsewhere.  Fourteen days later, The Wall Street Journal reported in “Cargo Piles Up as California Ports Jostle Over How to Resolve Delays” (Costas Paris and Jennifer Smith) that the average 40 waiting ships was now “more than 60,” worsened by the “port complex” closing “for hours on most days” and throughout Sunday in contrast with Asian and European 24/7 operations, and, due to insufficient warehouse capacity, becoming cluttered with empty containers. 

On October 10th, Peter S. Goodman documented “’It’s Not Sustainable’:  What America’s Port Crisis Looks Like Up Close” in the New York Times.  He discussed the Savannah port, where the 80,000 containers “stacked in various configurations” there are half again the usual amount, and 700 of them “have been left… by their owners for a month or more.”  There, though, they are improving, with “a $600 million expansion” involving “swapping out one berth for a bigger one to accommodate the largest container ships,” “extending the storage yard across another 80 acres, adding room for 6,000 more containers,” and expanding the “rail yard to 18 tracks from five to allow more trains to pull in, building out an alternative to trucking”

Some relief was announced on Wednesday, as “Biden Announces Measures at Major Ports to Battle Supply Chain Woes” (Ana Swanson et al., The New York Times), as “the Port of Los Angeles will operate around the clock.”  That day saw only 25 container ships there waiting to unload, an improvement, though that still meant they were sitting for an average of “more than 11 days.” 

How, beyond what Savannah and Biden are doing, can we free up the container port snarls?  In “Liz Peek:  Biden’s economy is stalled.  Here’s what he must do now to unfreeze our supply chain” (Fox News, October 12th), the author recommends the president “bring together union bosses, transportation industry CEOs, medical authorities, and other interested parties,” and, maybe most importantly, consumers will need to accept more outages and higher prices.  I endorse those, and add the need for longer port hours all over, higher pay for truck drivers and others in positions without enough employees, ample premium-rate overtime for union longshoremen and others already willing to take it on, a faster track to warehouse building, assessment and possible removal or shrinking of business regulations contributing to the jam, easing up on Covid-19-related outages, and quickly passing an infrastructure bill containing only the most urgently needed assistance.  As companies see the demand and can manufacture what is needed, including ships suitable for smaller ports, the problem will go away with time, but for now, many of our jobs and a good chunk of our prosperity depend on getting past the worst of the current situation.  We can do it – why don’t we?

Friday, October 8, 2021

September’s Employment Data: A Pitiful Number of New Jobs Conflicts with Strong Apparent and Real Progress Elsewhere, as Latent Demand, Per the AJSN, Dives 1,200,000 to 17.7 Million

Another Bureau of Labor Statistics Employment Situation Summary, another fall in unemployment, another disappointing count of net new nonfarm payroll positions.  That came in at 194,000, this time just over one third of a published prediction, which was 500,000.  Doesn’t look that bad, but…

Wait a minute!

Well before the survey weeks, the federal $300 unemployment add-on ended.  We have been seeing, especially from conservatives but also moderates, how vast numbers of Americans would rush back to the workforce when they lost that extra money. 

No.

I went so far as to predict a banner jobs-adding month, strong also from higher wages, more vaccinations, and more consistent safety for the prudent.  I was so high on those factors that I considered any gain below 1.5 million to indicate little effect from the add-on’s sunset, and predicted about a million. 

Not close.  We now have no reason whatever to think that this supplement kept people away from workplaces.

So what numbers turned up?  Seasonally adjusted unemployment fell a healthy 0.4% to 4.8%, with the unadjusted version, helped by many people as usual returning to work with the new school year, down 0.7% to 4.6%.  The total number of jobless decreased 700,000 to 7.7 million, with those out 27 weeks or longer dropping 500,000 to 2.7 million and those on temporary layoff 200,000 lower to 1.1 million.  The count of people working part-time for economic reasons, or holding on to one or more of those opportunities while unsuccessfully seeking a full-time one, though, held at 4.5 million.  The two indicators of how common it is for Americans to be working or one step away, the labor force participation rate and the employment-population ratio, were mixed, with the former off 0.1% to 61.6% and the latter up 0.2% to 58.7%.  Average hourly private nonfarm payroll earnings, reflecting larger labor demand and higher pay, were up 12 cents, actually less than inflation, before any adjustment, and now sit at $30.85.

The American Job Shortage Number or AJSN, the metric showing how many more positions could be quickly filled if all knew getting one would be as easy as getting a pizza, showed latent demand fell 1.2 million, as follows:


 


Almost 1.1 million of the AJSN’s drop was from lower official unemployment.  The count of those not looking for work for the past year contributed more than the remainder, and almost everything else got higher.  Most noteworthy was the 650,000 gain in those claiming no interest in working, and that, along with others, show that the unemployment drop came not only from those with that status but from those leaving the labor force.  With the AJSN taking big steps toward its prepandemic levels, it is now 5.3 million less than a year ago, with the marginal statuses much lower.  The share of the AJSN from those officially jobless was 37.5%, down 3.3% and meaning that of those not now working who would actually take new, fillable jobs, five-eighths would not be what we consider unemployed.

On the Covid-19 side, the bad effects, yet becoming less common since, were still getting higher at survey time.  Per the New York Times, from August 16th to September 16th the seven-day average of new cases rose 6% to 150,376, that of deaths soared 180% to 1,969, and that of hospitalizations increased 18% to 97,413.  The same number of vaccinations administered was almost unchanged, reflecting fewer people without them and willing to have them offset by those changing their mind on higher infection numbers, gaining 1% to 773,763.  With the low number of new jobs, though, it is clear that few people were unduly endangering themselves for paychecks.

What can we make of this mess?  Clearly, most of those wanting to work took their time getting it.  Those who toyed with finding employment and weren’t successful continued to return to the shelf – and the number of those saying they wouldn’t welcome jobs, which we know is partially contingent on opportunities, again pushing all-time highs is no sign of rising prosperity. 

Overall, September was neither as bad as the puny 194,000 nor as good as the unemployment-rate drops.  We are slowly improving, with the possibility of further, much larger gains over the next few months fully alive.  This time, however, the turtle managed only a baby step forward.

Friday, October 1, 2021

Reduced Work Hours: Four Sets of Insights, But One Big Question

In these times of unfilled jobs and higher pay, we’re getting a flurry of articles suggesting we cut back from five days a week, 40 hours a week, or both. 

The oldest I saw was a reissue of “The Research Is Clear:  Long Hours Backfire for People and for Companies,” first published August 19, 2015 in the Harvard Business Review.  Six years on, except for the lack of pandemic references it looks current as ever, with the likes of “managers want employees to put in long days, respond to their emails at all hours, and willingly donate their off-hours – nights, weekends, vacation – without complaining” and “we log too many hours because of a mix of inner drivers, like ambition, machismo, greed, anxiety, guilt, enjoyment, pride, the pull of short-term rewards, a desire to prove we’re important, or an overdeveloped sense of duty.”  The piece cited studies allegedly showing that “overwork and the resulting stress can lead to all sorts of health problems, including impaired sleep, depression, heavy drinking, diabetes, impaired memory, and heart disease,” with the usual correlation and causation problems, the difference between “a week or two of 60 hours to resolve a true crisis” and “chronic overwork,” and the doubtful or even negative value of more than 40 or 50.  Apparently, neither workers nor managers in many companies agree or even know about much of this, but it does set a starting point.

The first of the newer commentaries came out July 20th online and July 25th in print, by Bryce Covert in the New York Times, titled in the latter “Less Work, More Life.”  It recapped the studies above, but added mention of people, as the Bureau of Labor Statistics puts it, working part-time for economic reasons (“About one-tenth of American workers were working part time but trying to get more hours”), a statement that people in this country spend “7 to 19 percent more time on the job than our European peers,” that “employers steal… overtime hours spent in front of a computer,” and that longer time constitutes “a class divide in overwork” as “the demand to spend 60 hours at an office is one that depletes the lives of professional, higher-paid workers,” the last one refreshing as almost all printed complaints about job requirements have focused on the lowest-paying positions.  I add the effects of Parkinson’s Law, furthered by employees’ perceptions that they can always work into the evening or weekend if need be, and a related problem of people feeling more need to keep in touch because that is easy. 

Next, in Robin Madell’s September 21st Yahoo News “How Does a 4-Day Workweek Work,” we learned about a trend, probably driven by prospective employees demanding more personal time, which is varies between companies putting it into practice.  As well as differences in whether the third day off is fixed or at workers’ discretion, four-day pioneers Kickstarter, Monograph, and Nectafy split on the largest question, whether such a schedule means 32 hours or still 40.

Finally, we had “the Future of Work Should Mean Working Less,” by Jonathan Malesic on September 23rd in the New York Times.  I don’t share the author’s view that “work sits at the heart of Americans’ vision of human flourishing,” that “it’s how we earn dignity,” “how we prove our moral character,” or, much more, that “it’s where we seek meaning and purpose, which many of us interpret in spiritual terms” – those norms peaked in the 1950s, and modern-day employees are increasingly likely to get their emotional needs met from other ventures and relationships which they use their jobs to support, and have never stopped covering their spiritual life with religion.  As well and unfortunately, the “should” in the title exemplifies what else Malesic had to say, that we “ought to expect a bit less of people whose jobs grind them down” (and which are those?), that considering jobs away from the center of self-worth “justifies a living wage” (just exactly what is that?), and, worst, that “this new vision” (new?) “should inspire us to implement universal basic income and a higher minimum wage, shorter shifts for many workers and a shorter workweek for all at full pay,” something that could have been written by a fourth-grader in that paper’s For Kids section. 

More problematic than naivete, though, is the query looming over all of these stories:  If people are expected to work more, what does it mean to reduce stated hours from 40 to 32?  Before we decrease official time on the job, we need to address that.  It is silly to take pride in a cut to 32 hours if that only shrinks people’s labor from, say, 60 hours to 50.  The 40-hour standard workweek, fictional or not, has been described as the norm since the 1930s – bringing actual time below that is in fact two steps away.  Let us take them one at a time.