Eight Days on Inflation: Statistics, Opinions, and the Best Possible Outcome

Ukraine, the Super Bowl, and the Winter Olympics have all been larger news stories, but the financial pages have focused on another topic.

In February 9^th’s “Peak inflation and value stocks” in Fidelity Viewpoints, the investment company ventured that prices would increase more slowly due to “rising long-term bond yields“ (as that would “push up rates on mortgages and other loans”) “a stronger dollar” little changed since summer, and greater business inventories which have grown significantly lately. 

As it’s already over a week old, the results as “Rapid Inflation Stokes Unease From Wall Street to Washington” (Jeanna Smialek and Madeleine Ngo, The New York Times, February 10^th) have already happened, and, before the Ukrainian situation did the same, caused a substantial Dow Jones Industrial Average drop, as “markets tumbled after the government released Consumer Price Index figures for January, which showed prices jumping 7.5 percent over the year and 0.6 percent over the past month, exceeding forecasts.”  Although some have suggested inflation is already leveling off, this is still the most recent CPI data, and that 0.6%, with compound interest, works out to close to the 7.5% annual rate.  The predictions, by “economists” that price increases would be “transitory,” were not so bad, but the transition is taking longer.

Fox Business, though unobjectively negative about many things Biden has affected, was completely right in saying that “Red-hot inflation gave most Americans a pay cut in January” (Megan Henney, February 11^th).  It wasn’t a large loss, but it wasn’t the net gain many workers made in late 2021.  That outcome also hints at uncertainty at best, and lagging-pay problems possibly followed by more “labor shortages” at worst, this year.  The issue of pay-versus-inflation was also central to Peter Coy’s “High prices are not the only things that affect our buying power” (February 11^th, The New York Times).  Coy mentioned that “if the Fed acts too aggressively, it could cause a recession and throw people out of work,” which would be “worse than paying more for stuff.”  He also, though, related that Fed chair Jerome Powell, who agreed with the previous, “has argued that keeping a lid on inflation prevents it from getting so high that extreme measures are required to stop it.”  Also that same day, we saw “Inflation May Have Already Peaked.  The Fed Needs to Step Gingerly” (Jeff Sommer, The New York Times), which may be shown true next month.

Once again, I disagree with a certain former Secretary of the Treasury, his views described in “Larry Summers has a new inflation warning” (Jeffry Bartash, MarketWatch, February 14^th).  Also apart from all the commentators above, he thought it would get still worse, fueled by “an acute shortage of workers” and that a recent unemployment rate “is probably too high and understates just how few people are available for work.”  Monthly federal employment statistics have clearly shown that when jobs are obtainable and well-paying, people appear in the labor force and often accept them, and the American Job Shortage Number or AJSN, though much improved, still reveals that almost 18 million additional positions, over twice the number of officially unemployed, could be quickly filled.  We also learned Monday that “Federal Reserve officials call for a measured response to inflation” (Jeanna Smialek, The New York Times), namely various Federal Reserve Bank presidents, and, soon after, the opinion that “Inflation will ‘moderate’ as COVID fades:  Moody’s economist Mark Zandi” (Angelica Stabile, Fox Business, February 15^th).

Zandi’s view here is a major reason why our current bout with higher prices is not the usual, and, indeed, may not respond to interest rate hikes, which won’t do anything constructive for supply-chain snags either.  I understand that, despite its being officially and generally apolitical, the Federal Reserve is under pressure to “do something” about inflation, so it will happen, but they should keep it as light as they think they could get away with.  One-quarter of a percent in early March would be enough of an increase.  That should be followed by the board paying close attention to pandemic outcomes and the specific transportation situation as well as unemployment.  If we get real progress on these first two issues, we may not need any more rate increases.  That would be the best outcome for America. 

News for the Economy: Interest Rate Increases, Why Has Inflation Got So High, World Economic Growth Problems, a Coming Boom, and Unemployment Claims

On American jobs, what can we expect for the rest of 2022?  Most of it we don’t know, but there are considerations that will help us. 

We start with the oldest article, on a subject with little more information since provided.  “Fed Eyes 3 Rate Increases in 2022; Slows Stimulus as Prices Rise,” by Jeanna Smialek in the December 15^th New York Times, dealt with a then-new Federal Reserve announcement, that as well as cutting “monthly bond-buying,” they would hike interest rates.  Since then, all we have heard is that these boosts will start in March and continue for an unspecified time.  From the current 0% to 0.25%, “Fed officials” expected about 0.75% by the end of this year and 1.75% in December 2023.  The Dow Jones Industrial Average dropped several hundred points when the Fed non-specifically confirmed that last month, and may do more as the rate increases happen.  It is questionable whether higher borrowing charges will help at all, with the causes of inflation now supply chain problems and Covid-distorted demand, but it seems the Fed is under pressure to do something, and this is their usual and well-understood tool.

As for inflation itself, it probably was the best option.  As described in “President Biden’s Economy Is Failing The Big Mac Test” in the January 23^rd New York Times, “the discomforting truth is that the United States last year faced a choice between a protracted period of economic pain and an economic recovery whose benefits are temporarily attenuated by high inflation.”  People hate paying more, but would they like shortages, which would be caused by trying to hold prices in place, any better?  It is a natural result, caused as it is supposed to be by too much money chasing too few goods and services, and when we get more of those, as we will when supply routes are smoothly functional again and demand settles down, it will be reduced.  That has nothing to do with interest rate levels.

When the two largest economies have problems, it makes the world look worse – that is the thesis of “Slowdowns in the U.S. and China will hold back global growth, a report says” (Patricia Cohen, January 25^th, also in the Times).  The author mentioned the two factors in the previous paragraph, along with inflation itself, resulting in the International Monetary Fund’s cutting “its estimated global growth rate to 4.4 percent from the 4.9 percent it projected just three months ago.”  That may mean more than usual, as “the dimmed economic prospects come at a time when governments have less room to maneuver in how they spend their money,” caused mostly by pandemic-relief debt.

The good news came from Megan Cassella, in the January 26^th barrons.com “Expect a Post-Omicron Boom as Americans Binge on Services.  Workers Are the Wildcard.”  When the current overwhelmingly predominant coronavirus variant fades nationally even more than it has over the past week in the greater New York City area, which will probably happen within the month, people, “many armed with either triple or quadruple vaccinations or heightened immunity due to infection,” will be ready to rush into activities and spend a lot of money doing them.  Per the title’s second sentence, though, there may not be enough workers to keep up with demand, unless they are paid more, which of course would be inflationary.  Prices on many services will rise, but as before customers will generally pay for them anyway and be glad they are truly available.  Unless our government tries to freeze prices…

The Department of Labor issues a weekly report on “unemployment insurance weekly claims,” the main number nationally reported.  This issue, released February 3^rd, tells us that “seasonally adjusted initial claims” reached 238,000 in the previous entire week.  That is more or less an ordinary pre-pandemic result, above its 184,000 low several weeks before but vastly below almost anything in widespread Covid’s first year and a half.  The report also provided unadjusted figures and 4-week moving averages, which don’t vary much from the regular weeklies.

Add all of this up, and where are we going?  More inflation from multiple sources, as the supply-chain problem is hardly solved.  Higher but still low interest rates, for better or worse.  Massive numbers of employment opportunities, though not all paying market rates.  Ever more money, though still largely pooling up in a few spots.  Does all of this sound familiar?  It should.  It means the American jobs situation may not change for a while.

Odd and Choppy Jobs Report on December’s Data, with AJSN, Showing Higher Latent Demand, Up 1,500,000 to 17.8 Million

This morning’s Bureau of Labor Statistics Employment Situation Summary was expected to be “strange” – and it was. 

There was ostensible good news in several places, most believably with the 467,000 net new nonfarm payroll positions, almost double the only projection, 245,000, I saw.  From there, though, the data was distorted by the almost vertical Covid-case graph and battered by various year-end adjustments.  Reported were 4.0% seasonally adjusted unemployment instead of 3.9%, 4.4% unadjusted instead of 3.7%, 6.5 million unemployed replacing 6.3 million, 959,000 on temporary layoff instead of 812,000, 1.7 million out 27 weeks or longer replacing 2.0 million, and 3.7 million working part-time for economic reasons, or keeping that sort of position while so far unsuccessfully seeking full-time employment, instead of 3.9 million.  The two numbers showing how common it is for people to be working or officially jobless, the labor force participation rate and the employment-population ratio, now stand at 63.2% and 59.7%, compared with December’s 62.9% and 59.5%.  Average private nonfarm payroll earnings went up from $31.31 to $31.62, including a correction but still almost double the inflation rate. 

The American Job Shortage Number or AJSN, the metric showing how many new positions could be quickly filled if all knew they were easy to get, jumped 1,479,000 to the following:

Several of the factors changed substantially.  The State Department issued a new estimate of the number of American expatriates, which was 1.3 million higher than the most recent previous one I had, issued 4 ½ years ago by the Association of Americans Resident Overseas.  Although the 16^th-of-the-month population estimate from the United States Census Bureau changed little from the previous, other differences in counting affected the number of non-civilian, institutionalized, and unaccounted, which came in at over one million less.  The largest gap between December and January, though, was from the number of officially unemployed, with those wanting to work but not looking for it for a year or more adding another quarter-million.  Accordingly, the share of the AJSN from unemployment increased 3.6%, and is now at 36.4%.   

Compared with January 2021, which was also higher than its previous month, the AJSN is down almost four million, 3.3 of that from official unemployment and enough to cover the rest from a lower number of those not looking for 12 months or longer.

As expected, the difference in pandemic statistics between mid-December and mid-January was gigantic.  Per The New York Times, the seven-day average of Covid cases, reflecting almost the very peak of the Omicron variant, shot up 555% from 122,368 to 801,903.  Deaths, using the same measure, were up 53% from 1,302 to 1,991, while pandemic-caused hospitalizations soared 127% from 68,222 to 154,698.  The 7-day average of vaccinations given, no doubt reflecting limits on the number of willing uninoculated Americans, fell 40% from 1,799,583 to 1,080,493.  The first three of these outcomes are almost guaranteed to be vastly improved next month.

What can we do with this dog’s breakfast of a jobs report?  Not much.  It’s great that we added so many positions, even with Omicron making a mess.  Beyond that, the numbers defy interpretation at best and are almost nonsensical at worst.  We will need to see February’s report, which should be directly comparable to this one, to judge where we are going.  The turtle picked up his foot, closed his eyes, and put it down somewhere, and forward, backward, or the same not even he knows.

Restaurant Delivery Apps, Job Training, General Education, Tech Jobs, and Male Burnout: Around the Horn

Once in a while I accumulate a little pile of articles worth sharing, but which don’t fit with others.  Here is the latest.

The oldest is from over a year ago, but still pertinent: “Apps Are Helping to Gut the Restaurant Industry” (Greg Bensinger, The New York Times, December 8^th 2020).  The author related how the likes of DoorDash, UberEats, and Grubhub, which bring restaurant food to customers, are charging those places “30 percent or higher per order,” often too high for eatery profitability.  Although this is a classic free-market situation, where the app companies can charge what they want and their two sets of customers can govern themselves accordingly, some cities and states have put limits on fees.  If this service is too expensive, it will not be used, and, as it is hardly necessary to life or prosperity, that is fine.  Meanwhile, if people are willing to pay, say, $10 to have a pizza brought to them, why should they be denied?

When commentators call for more job training, they are often vague about how it should work.  In the April 7^th New York Times, Steve Lohr got more specific in “Job Training That’s Free Until You’re Hired Is a Blueprint for Biden.”  A good idea, and puts pressure on training organizations to ensure what they offer can lead to actual opportunities, but could get them too many students, so if so they would emerge with admission requirements.  The schools would be forced to care, validating the article’s last four words: “They fight for you.” 

As well, and not contradictorily, per David Epstein in Slate on April 27^th, “General Education Has a Bad Rap.”  In the late 1970s when I was in college there was a great controversy on whether that should mainly be for mind-furnishing, the choice I made, or for vocational preparation.  Early in the next decade the careerists won, accounting became the most popular undergraduate major, and since then the names of some majors have looked like those for week-long corporate classes.  The conflict, though, seems too timeless to go away forever, and it’s revisited here.  Points in favor of learning less focused subjects Epstein made include excessively early specialization, problems when targeted careers end early or do not materialize at all, inflexibility, and narrower life experiences.  As someone who took undergraduate courses in 15 different departments and eventually had careers in a 16^th and 17^th, I am biased, but doubt that was unique.

On October 8^th in the New York Times, Peter Coy told us that “Tech Jobs Are Everywhere Now.”  His now-data-backed claim was that, with more remote work, such positions are becoming less concentrated, with employees “moving all over the place.”  That trend will not last forever, as the pendulum between home and office has moved back and forth since Clinton was president, but it is good for potential employees to know, as they are more likely to get started, from their hometowns, now.

We see far more material on how women are suffering, both from the pandemic and for other reasons, so in a way it’s refreshing to learn something about “How Men Burn Out” (Jonathan Malesic, The New York Times, January 4^th).  While less burdened by childcare, men are still under real pressure to be main or often only breadwinners, “are much less likely than women to talk about it,” and still too often buy in to career success as a proxy for personal worth.  Extra-hours tasks and off-hours contacts make that worse, and it is clear that employers, who pay a real tangible and intangible price when their workers burn out, have choices to make here.  That, if you include valuing less career-focused education, ties these five pieces together.

Picking Through the Remnants of Autonomous Vehicles: What’s There?

What I, along with many others, thought would be the massive technical improvement of the 2020s seems to have failed.  Four years ago, there were so many articles about that effort that I could have dedicated this entire blog to it, and in fact, for a few months, I did just about that.  It seemed worth it, as it promised titanic changes, equivalent to cars becoming widespread a century before, many unexpected.  As the Ford assembly line was to transform romance, autonomous vehicles, just to name one, might have slashed smoking, as vehicles filling their tanks without occupants would have made human trips to gas stations, during which many cigarettes are bought, unnecessary.

Here is my latest file of what has been written.  Given that I did not save pieces only on future possibilities, whether judicious or hyped by companies providing them, I had to go back nine months to have enough for a post.

The oldest is Aaron Mak’s “The Most Disturbing Part of the Latest Tesla Crash,” from April 19^th in Slate.  This story was about an incident not involving a fully autonomous car, but an electric vehicle with an “autopilot” feature, abused by the occupants as neither was in the driver’s seat.  That was nothing against current or future autonomous vehicles, but was ripe to be misperceived as such.

Next is “Silicon Valley is resetting expectations for self-driving cars and settling in for years of more work” (The New York Times, May 25^th).  The unbilled author started with “after years of hype, bullions of dollars of investments and promises that people would be commuting to work in self-driving cars by now, the pursuit of autonomous cars is undergoing a reset,” and seemed to blame excessive expectations, yet in 2017 such vehicles were already quite adept and drew intense and extensive efforts zeroing in on remaining problems.  Per this piece, Uber and Lyft, expected to be early and large customers, have sold and “offloaded” their driverless divisions, and, in the year before the article date, “three prominent self-driving start-ups have sold themselves to companies with much bigger budgets.” 

Less optimistic is Ashley Nunes’s May 31^st Business Insider “The dream of the truly driverless car is officially dead.”  In this self-described “opinion column,” Nunes wrote about the lack of truly self-sufficient systems elsewhere, without acknowledging the value of a mere reduction in human involvement.  Despite requiring overseers, store self-checkout lanes have hardly petered out, as the number of people per unit is less than one, and the same could work here.  The reason for autonomous vehicles not becoming widespread is elsewhere.

Distant emergency command is prominent in “How Germany Hopes to Get the Edge in Driverless Technology” (Jack Ewing, The New York Times, July 14^th).  A Hamburg “ride-hailing service” used vans which could “steer themselves, but technicians working from a remote control center keep an eye on their progress with the help of video monitors,” allowing these workers to “take control of the vehicle and steer it our of trouble.” That was the old “Level 4 autonomous driving, in which a vehicle can steer and navigate by itself most of the time but may occasionally require human intervention.”  Although German law still required at least one human driver or supervisor on board, and such vans were only used to “navigate a predictable course, such as from an airport parking lot to a departure terminal,” such niches may be where autonomous efforts can thrive.

The count of foolish accidents is probably increased by sloppy use of promotional language, as shown on August 30^th in the New York Times, in Cade Metz’s “Tesla Sells ‘Full Self-Driving,’ but What Is It Really?.” That is the name of a “package… which can be purchased as an extra on Tesla cars,” and is no such thing, rather “a collection of services that add to Tesla’s Autopilot,” also an overstated title.  Indeed, that is the subject of a customer lawsuit mentioned here, alleging misrepresentation. 

Beyond “Alphabet’s Waymo launches autonomous taxi service test in San Francisco,” by Brock Dumas in Fox Business on August 24^th (didn’t that happen in 2018?), we got a post-mortem of Tesla’s bad things mentioned here in “Inside Tesla as Elon Musk Pushed an Unflinching Vision for Self-Driving Cars” (Cade Metz and Neal E. Boudette, The New York Times, December 6^th).  Musk, Tesla’s owner, understandably touted his technology, but seemed to have conflated what the hardware could do with progress in software and testing. 

What can we conclude about the true state of driverless cars?  Metz, two articles above, quoted a Consumer Reports’ Auto Test Center director as saying “These systems are good at dealing with the boring, monotonous stuff.  But when things get interesting, I prefer to drive.”  That is our overall situation.  I had thought that with test-ranges and scrutinizing problem situations, the technology would be developed, and it still could be.  I refuse to believe it cannot be done. 

The real problems are societal.  Can we accept occasional, even fatal, mishaps in the service of removing America’s 27,000 annual driver-error-caused deaths?  Can companies find enough people willing to go years without product for a potentially gigantic long-term gain?  Can we regain the national will to embark on long, expensive, and uncertain efforts?  Until then, all we will have here, outside a few well-protected enclaves, is driving assistance technology.  That, though valuable, is a far cry from the benefits true vehicle autonomy would get us.  Yet again, the choice is ours.

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 11^th 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 26^th 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 31^st 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 7^th’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.

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 16^th and December 15^th or 16^th, 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.