Economic Snapshot NYC & US
In spite of Non-Vaxers’ Negative Impact on the Recovery, Generally the Economy Appear to be Steadily Improving
It’s been a while since I have done an economic update, and as we head into the Fall, it seems a good time to look through the tea leaves to figure out where we are and what risks lie ahead between now and the New Year.
The graph at right, created by the Federal Reserve Bank of St. Louis, shows employment in the U.S. from 1940 to date. To the far right of the graph, you can see the huge dip in employment in the Spring of 2020, as the pandemic hit. Since then U.S. employment has recovered, but not yet completely.
Unemployment Back to Normal Levels & Stimulus Winding Down
Unemployment continues to decline, and the unemployment rate reflects a growing economy and a tight labor market. One debated theory about the tight labor market, is that it was fueled in part by some of the generous government spending programs, designed to cushion folks from the pandemic, which some believed kept workers out of the employment market. As of this posting, we’ve not seen any good study that proves or disproves that hypothesis. So for now, I recommend you consider that hearsay, at least until you or I find one or more reliable studies that proves or disproves that hypothesis.
In any event, a good measure of both the federal and states stimulus programs have begun to wind down. Beginning in late Spring / early Summer, both states and the federal government began reducing or withdrawing the funding for extra [federal] and extended [states] unemployment benefits.
- CLICK here to read our multi-part series with a snapshot of the U.S. economy in the third quarter of 2021 Q3 2021 Economic Snapshot NYC.
17 Million Americans Back Working vs April 2020, but that's Still 5 Million Fewer Americans Working than the High Set in January 2020
As of August 2021, the national unemployment rate was at 5.2%, which is considered a healthy normal amount of unemployment for a functioning economy. But underneath that statistic are a couple of others which are worth talking about.
One such statistic is that there are about 147 million Americans working as of August 2021, but that the total number of Americans working is down 5 million from the 152 million in January of 2020. So that’s the bad news. The good news is that there are 17 million more Americans working than there were in April of 2020, when the pandemic took a major toll. So we’re about three quarters of the way back to normal in employment. See the Employment graph by the St. Louis Federal Reserve Bank above.
The Inflation Rate is Largely being Driven by Energy, which was Severely Depressed Last Summer, because Nobody was Driving Anywhere
Next week I'll take you on a journey through a number of economic factors to pay attention to, as we head into the home stretch of 2021. I’ll also take a look at individual work sectors, including a few at the local level.
The graph at right shows that once again, energy is what's been fueling inflation, as Americans hit the road again over the summer of 2021. Energy was up 25% versus year ago - BUT a year ago, energy was down 15% because nobody was driving, and the oil companies were having trouble finding places to store all of the excess oil until somebody wanted to buy it. Eventually oil producers cut production.
Network TV News - More a Home to Gossips than Journalists
I've been paying attention to the quality of TV News lately, and I find it isn't a very useful information source for context and perspective.
BUT, you want the hear and view the latest gossip, or gory murder, delivered by attractive, well dressed, well paid, well spoken teleprompter readers, TV News is hard to beat.
The R. Kelly sexual abuse court case and the Gabby Pettito murder are the headlines of TV News - while the CoVid pandemic, the potential federal government shutdown, the rising tensions with China, the retirement of two regional Federal Reserve Bank Chairmen for possible improper securities trading, climate change, the elections in Germany, immigration and about 1,000 other more important stories - are given less time and attention.
Why? Because sex and murder coverage gets good ratings - while informing the public about things they should know - does not.
Economic Snapshot NYC & US - Continued
Non-Vaxers’ Negative Impact on Society, May Retard the Economic Recovery, but Doesn't Stop it
This Economic Snapshot is continued from last week [see below 9/20/21].
Last week I talked about how the unemployment rate is back to normal, but that about five million fewer people are working than were working in the U.S. just before the pandemic hit in March of 2020.
I also touched upon inflation, which is up this year, but largely fueled by energy price increases, because last year energy prices fell by 15%.
In the chart at right, the Gartner Group predicts the global supply chain for semiconductors will gradually catch up to demand by about the second quarter of 2022. In the second quarter of this year , supply chain bottlenecks were plagued by severe shortages of raw materials and final product. Many, but not all of the severe shortages will be worked through by the fourth quarter of 2021, when the semiconductor supply chain will be facing moderate challenges of catching up to the backlog. See below for summary of another report, which provides a bit different perspective.
While Inflation is Primarily Driven by Energy, Semiconductor Supply Chain is at Issue too
There are also bottlenecks in the global supply chain, primarily centered around technology companies that rely on the semiconductors or chips for their products. These industries include automobiles, computers, cell phones, TV's and just about anything else that is run by electricity.
I did some research into the problems affecting the supply of semiconductors and found differing reports about what's affecting global supply. But in a word, I would say it's mostly about China. China supplies about half of some of the critical materials used in semiconductor electronics, and controls some good share of the global manufacturing capacity of semiconductors. After the CoVid pandemic broke out in 2020, China began encountering problems keeping up their production of both materials used in semiconductors, as well as the finished products.
Compounding the semiconductor materials and manufacturing problems, there were also shipping bottlenecks. Many of the shipping bottlenecks were attributed to the management of the Los Angeles harbor, which doesn't operate 24/7 like they do in China, and the harbor reportedly even closes on Sundays. At present we understand there's a queue of ships, laden with cargo, waiting to dock and unload their wares.
The chart above shows that the composite wait time for chips has risen by eight weeks since 2021 began. Nonetheless there are reports that the tight market for some chips, like power management devices, has begun to ease. While the tightness remains in others, like the automotive industry. What remains unclear - vis a vis the extended wait times - is whether companies are overordering now in order to mitigate potential shortages going forward.
Just as He did in Business, Trump Exited While Saddling his Successor with a Plethora of Crises, that the Biden Administration Seems to be Slogging Through
It's not as if the Biden Administration hadn't been saddled with enough problems when they took the helm in January 2021. Trump left a raging CoVid pandemic, and sabotaged efforts to mitigate it by failing to tell his followers to vaccinate. Trump did his best to sabotage Americans' faith in their electoral system by failing to acknowledge defeat. Trump left with the economy on shaky ground given the CoVid pandemic still threatened it. Trump left behind the uncertain prospect of safely withdrawing from Afghanistan, having drawn down 11,500 of the 13,000 troops there. Some believe it was Biden who prematurely withdrew the troops, but they must be fans of one of Murdoch's propaganda outlets such as Fox News. Trump absolutely failed miserably to do anything constructive about climate change fires and floods, and in fact, many of the actions Trump took were headed in the carbon creating direction. And Trump left behind unresolved trade issues with the Chinese and an ongoing massive illegal immigration crisis on the southern border. Although to be fair, on the last one, his treatment of illegal immigrants did reduce the numbers of those who tried to gain illegal entry into the nation.
The photo above right shows Mitch McConnell and the Republicans celebrating a $1 trillion tax cut in December 2017. According to an October 20, 2017 PolitiFact report [based on the plan at that time, which has since been modified],
"... in the first year of changes, the top 1 percent are projected to draw a little over half the tax savings. The threshold of 80 percent going to the top 1 percent is projected for the tenth year."
Mitch McConnell & the REPUBLICANS' PHONY BRAND of Fiscal Conservatism Laid Bare
During the Trump Administration, the National Debt Rose $8 Trillion or 42% in Just Four Years, SETTING A NEW RECORD
Now Biden faces another Mitch McConnell / Republican inspired government shutdown over the federal debt.
McConnell and the Republicans' phony claims of fiscal responsibility was laid bare for all to see, during the four year Trump Administration, when the debt rose by nearly $8 trillion from $19 trillion to $27 trillion.
The obvious political hypocrisy by McConnell and the Republicans becomes even more disgusting, when you consider that some good measure of it was to fill the coffers of the richest people in the nation and on the planet.
In the midst of all of the crises left by , the Biden Administration has been reaching out to the vested parties in an effort to break the backlog.
In Spite of Ongoing Issues, the U.S. Economy Continues to Chug Along
Despite the expected rebound / increase in energy prices, and the unanticipated global semiconductor supply chain snafus, and the CoVid resurgence, the U.S. economy continues to chug along.
As you can see from the Gross Domestic Product graph at right, provided by the Federal Reserve Bank of St. Louis, Gross National Product, which is a measure of total U.S. output, pretty much snapped back onto its trendline this year, after a pretty big hiccup in 2020, which was followed by faltering starts, due to CoVid pandemic outbreaks.
Speaking of the Federal Reserve, two regional chairmen stepped down / retired within the past couple of weeks. While they gave other reasons, it appears their 'retirement' may have come early due to some reported questionable securities trades made by the two men [not related to or entangled with one another].
Next week we'll look at trade, the dollar, productivity, real estate and the stock market, to see how all these elements affect the outlook for the U.S. economy for the remainder of the year.