Friday, June 17, 2022

Inflation, Interest Rates, Gas Prices, and Employment: What’s Really Happening, and What They Really Mean

These areas are all over the business news, and beyond.  Let’s clear the air.

First, inflation is high, but not atrocious, by historical standards.  The latest three months’ levels, 8.5% for March, 8.3% for April, and 8.6% for May, are not included here, but would easily fit on this chart:


(Source: The New York Times)

From “How inflation became a global problem” (Patricia Cohen, The New York Times, June 10th), we learn that its latest readings were 9.2% in the Netherlands, 5.3% in Australia, at “four-decade highs” in Germany and Great Britain, and over 10% in “seven eastern European nations.”  It’s not just us.

Second, on Wednesday afternoon the Federal Reserve raised the federal funds target rate by 0.75%, which, though the largest one-time boost in 28 years, only brings it to where it was just before Covid-19 became widespread, which was lower than it was from Nixon through Clinton:

(Source:  Trading Economics)

Third, at over $5 a gallon, gasoline prices seem way high, but when adjusted for inflation are not obscene:

(Source:  The New York Times)


Fourth, unemployment, 3.6% adjusted in most-recent May, is within 0.2% of the best it has been in 65 years:

(Source:  Federal Reserve Economic Data)

Beyond the statistics above, what is important to understand?

It is possible that interest rate hikes will not significantly shrink inflation.  That is because our current situation is due to “over-buoyant demand” (the view of the Organization for Economic Cooperation and Development, cited by Cohen above), from the pandemic’s slowing, and from relatively high household cash.  On the other hand, with deep job supplies such increases may not boost unemployment much either – indeed, per “Fed Takes Aggressive Action in Inflation Fight:  Live Updates,” by Jeanna Smialek in the June 15th New York Times, the Federal Reserve predicted joblessness, even with higher interest rates, would reach only 3.7% this year and 4.1% in the next.  In that case, the only thing we could do, without finding a way of wrenching tens of millions of jobs and trillion dollars of money away from Americans, would be to wait for demand to cool itself off.   

As well, as addressed in “The Daily Money:  Why are gas prices so high?  Oil refineries never caught up after COVID” (Jayme Deerwester, USA Today, June 7th), and reflecting on the United States only producing 12% of world petroleum and Russian production being down in “Biden Has ‘Only Bad Options’ for Bringing Down Oil Prices” (Clifford Krauss, The New York Times, June 5th), we cannot do a lot.  However, as described in “Gasoline demand falters with average price on brink of $5/gallon” (Yahoo Finance, June 9th), “demand destruction,” in the form of people just plain driving less, is already in progress and can only exert downward price pressure.  Expect more, including lower per-mile consumption from consumer vehicle choices. 

Overall, we are hardly in terrible shape.  Inflation and gas prices are high but understandable.  Interest rates remain historically tiny.  Today’s unemployment level would be the envy of any time from the 1970s through the 2010s, as virtually nobody wanting work needs to go without it.  Sometimes we can’t force things to change – we can nudge them, but that’s all.  Accept that, and we will all be happier.

Friday, June 10, 2022

Artificial Intelligence and Robots Keep Progressing, Like It or Not

Inflation and the pandemic have been the two largest American 2020s news stories, but not all.  Before they, and the Ukraine war, took over the headlines, another combined area gathered much more attention.  As it will remain critical after these three other situations have passed, let’s check in.

Artificial intelligence has been the toddler of technology, capable of much more than its governance can handle.  In “Clearview AI settles suit and agrees to limit sales of facial recognition database,” by Ryan Mac and Kashmir Hill in the May 9th New York Times, we learned about how this company, which uses “its database of what it said were more than 20 billion facial photos,” will no longer work with “most private individuals and businesses in the country,” but will still “sell that database to federal and state agencies.”  This decision stemmed from a 2020 American Civil Liberties Union lawsuit, which Clearview AI ended “to avoid a protracted, costly and distracting legal dispute with the A.C.L.U. and others.”  It can still be used by the likes of police departments, and the technology will remain.

Along similar data-collection lines, we have “Your Bosses Could Have a File on You, and They May Misinterpret It” (Sarah Scoles, The New York Times, May 17th).  Here, the ability to collect and integrate information has surpassed its prudent use, as “some private enterprises may be attracted to scrutinizing employees like an intelligence agency might keep tabs on analysts and spies,” since “software can watch for suspicious computer behavior or it can dig into an employee’s credit reports, arrest records and marital-status updates,” and it “can check to see if Cheryl is downloading bulk cloud data or run a sentiment analysis on Tom’s emails to see if he’s getting testier over time.”  This sort of thing, with poor or no established handling practices, being subject to unsettled laws, and as in the ACLU example ripe to easily run afoul of others with more power, is going to cause plenty of trouble before it achieves huge gains.

While still often controversial, physical AI applications are marching on.  One was described in “Robotic surgery is safer and improves patient recovery time,” from University College London on May 15th in Science Daily.  This was a formal writeup of an academic study showing that “robot-assisted surgery used to perform bladder cancer removal and reconstruction enables patients to recover far more quickly and spend significantly (20 per cent) less time in hospital.”  Here, “researchers say the findings provide the strongest evidence so far of the patient benefit of robot-assisted surgery.”  Although robots have helped with surgery before, such research results are where such things begin widespread legitimacy and implementation.

“What’s holding back the self-driving car revolution?”  This obvious query was posed by Mike Bebernes in Yahoo Finance on May 19th.  He said “the simplest reason” was that “driving is much more complex and difficult to replicate than automakers anticipated,” especially in dealing with “unexpected situations.”  Others he proposed were auto companies “rolling untested self-driving features onto the road and making lofty claims that prompt drivers to push beyond their vehicle’s capabilities,” and “the task of creating cars that can navigate every imaginable road scenario may simply be impossible.”  The second problem here is of marketing, but the first and third were supposed to be solved with efforts beginning with dedicated testing grounds and billions of dollars of purchased brainpower.  As one cited observer put it, “unless the industry and public agree to accept a flawed self-driving system – one capable of failure – autonomous vehicles on our streets will never become mainstream.  Achieving perfection here can’t, and shouldn’t, be the goal.”  That is the real issue, which boils down to a lack of tolerance, a lack of perspective in underemphasizing the most recent years’ 42,000 American human-driving deaths, and a lack of will.  There is no imaginable way that, given the possible things that could have gone wrong, we could have overcome a similar attitude when, for example, getting to the moon. 

How are sales of automatons doing now?  Just fine, as “US robot orders surge 40% as labor shortages, inflation persist” (Lucas Manfredi, Fox Business, June 1st).  It makes clear sense, as if workers need higher pay they open a door for alternatives, which can improve and cost less over time.  The industries with substantial increases were metals; plastics and rubber; semiconductor, electronics and photonic; food and consumer goods; and “all others.”  Expect more.

A well-established Japanese nursing-home idea has making stateside inroads.  As described in “Therapy with a robot?  How AI could help those struggling with mental health” (Michael L. Diamond, Asbury Park Press, published in Times Herald-Record on May 26th).  Sort of like 1990s Furby toys, called MARCos, “short for the mental health assisting robot companion,” they are “soft and cushy with two nonjudgmental eves and no mouth,” and look “like your favorite stuffed animal from childhood to whom you told your secrets.”  These devices “can respond, listening for key words to dispense advice or alert your contacts in case of an emergency.”  At $499 to $720 and heading lower, they are cost-effective if they achieve customer acceptance – and of course they can continue to improve.

Finally, “Farm Robots Will Solve Many of Our Food Worries” (Amanda Little,, June 2nd).  They “use computer vision to distinguish between crops and weeds and then deploy with sniper-like precision tiny jets of herbicide onto the weeds.”  Currently “expensive, enormous, wildly complex machines currently accessible only to industrial-scale farmers,” with enough demand they will get cheaper and smaller, and “within a few years their impact on the environment and human health could be nothing short of spectacular.”  More progress with the usual massive potential – that’s once more the story with robots and artificial intelligence.

Friday, June 3, 2022

Employment Report: New Jobs Healthy, People Rejoining Labor Force, AJSN Says We’re 16.4 Million Jobs Behind

This morning’s Bureau of Labor Statistics Employment Situation Summary turned out close to what people expected – almost. 

We gained 390,000 net new nonfarm positions, reasonably near the two 325,000 projections I saw.  Seasonally adjusted unemployment did not reach the 3.5% some thought, but held at 3.6%, actually increasing a bit with the difference falling into rounding – the unadjusted figure gained 0.1% to 3.4%.  Other indicators were mixed.  The adjusted count of those officially jobless rose 100,000 to 6.0 million, with 43,000 fewer or 810,000 on temporary layoff, and the number in long-term unemployment, or out for 27 weeks or longer, 100,000 better at 1.4 million.  The two measures best showing how common it is for Americans to be working or one step away, the labor force participation rate and the employment-population ratio, were up 0.1% and unchanged respectively to reach 62.3% and 60.1%.  The count of those employed, 158.609 million, was up 631,000, and that of unemployed also gained, 90,000 to 5.548 million.  Those working part-time for economic reasons, or holding that sort of position while seeking a full-time one, jumped 300,000 to 4.3 million.  Average hourly private nonfarm payroll wages again lagged behind inflation, gaining 10 cents per hour to $31.95. 

The American Job Shortage Number or AJSN, the metric showing how many currently unadvertised positions it would take to get one to each person who would grab it if they thought they were readily available, was up over 300,000 to reach the following:


The areas in which the AJSN got worse were people not searching for work in the previous year (adding almost 400,000 to the total) and those officially unemployed, contributing 81,000.  Improving were the count of those not wanting a job, contributing 52,800 fewer than in April, and the “other” category, with 47,100 fewer.  The share of the AJSN from those officially unemployed was almost unchanged, down 0.1%, to 30.4%.  Compared with April 2021 the AJSN again showed a year of great improvement, 3.5 million lower, with all but half a million of the difference from official joblessness and most of the rest from fewer people not looking for a year or more. 

On the pandemic side, per The New York Times, from April 15-16 to May 16 the seven-day average of new daily cases leaped 159% to 95,918, and hospitalizations were up 50% to 22,346 with vaccinations figured the same way off 33% to 371,272.  Deaths, though, fell 33% to 302, clearly telling us that the current variant is the least lethal we have seen.  Once more there is no indication from Covid-19 that people should be working less than they are. 

So what happened here?  The statistics above are unanimous in showing that many people tried to go back to work, starting with a one-million decline in those claiming no interest, and while most got there many did not.  The gain in people employed, along with the robust net new jobs count which is still around ten times what we need for population growth, tell us that our economy is strongly expanding.  Latent demand increased as more people are looking.  We still have a problem with wages, and the main reason for not finding jobs, and the boost in those working part-time for economic reasons, may be that existing opportunities pay too little.  That’s why the numbers above, for the strong and improving times we are in, look messy.  Employers still need to evaluate the cost of leaving needed positions unfilled against that of paying more – as they realize that the latter will allow their sales, in an outstandingly high-demand time, to jump even more, which will also shut up the misguided people talking about a possible recession.  There’s no doubt that the bones of our employment situation are strong, so, accordingly, the turtle took another solid step forward.