The economy rolls along
The jobs market turned in a stellar performance in November, with nonfarm payrolls surging by 266,000 and the unemployment rate falling to 3.5%, according to Labor Department numbers released Friday.
Those totals easily beat the Wall Street consensus. Economists surveyed by Dow Jones had been looking for solid job growth of 187,000 and saw the unemployment rate holding steady from October’s 3.6%. The decline in November’s jobless rate came amid a corresponding 0.1 percentage point drop in the labor force participation rate, to 63.2%.
And yet all the Democrats seem to do is talk about how awful Trump is. And really, what else can they do at this point but ignore the good economic news?
Of course, they can predict a fall. And they might get lucky because a fall could occur before the election.
Such things happen. What goes up must come down.
There might even be some way to coax it along, if the Democrats so desire. The continuation of a good economy during the Trump administration must be exceptionally frustrating for them. Here’s how some of that frustration is expressed:
…New York’s Rep. Carolyn Maloney, the top Dem on Congress’ Joint Economic Committee, found some clouds to wrap around the silver lining of Friday’s news: “The job market has shown remarkable resilience in the face of the president’s increasingly erratic trade policies. But let’s not forget that Americans in many communities and parts of society still find it hard to get a well-paying job.”
But I basically agree with this “Democratic strategist”:
“The normal rules of political gravity no longer apply,” said Democratic strategist Craig Varoga. “Voters’ opinions about Trump are baked in. Good news and bad news no longer move the needle. The only major variable is the identity of the Democratic nominee, and it may be another half-year until we know who that is.”
However, despite the relatively fixed nature of opinions on Trump, good economic news can only help him. Some movement of opinion also may be possible, and every little bit can matter in what might be a close election.
I don’t think it’s important or wise to get in the weeds debating how good the economy is under Trump or arguing over this or that part of the country that might not be doing as well as others.
What matters is this: The people who think they should run America told us THEIR economic policies weren’t just the best, they were literally the ONLY policies we could pursue. They claimed they weren’t making choices, just responding to economic realities in the only way possible. They said Trump deviating from those policies would be a disaster. AND THEY WERE WRONG.
Not just slightly wrong. Not just partially wrong. Not even just mostly wrong. THEY WERE ENTIRELY WRONG.
Which isn’t to say Trump’s economic policies are perfect. But the last three years have proven that our “best and brightest” do and did not understand how the economy works, that they in fact made choices which harmed the nation and its people, and that different choices were not only possible but completely practical.
Mike
An interesting side light is the gov’t budget.
Congress has not passed a budget for many years–too much gridlock I guess.
They are tee-ing up another Continuing Resolution, since the House has been focused on Resisting and not on doing the nation’s work… such as producing a budget.
If I understand correctly, in general a CR leaves the old budget priorities in place. Thus, Dems are not unhappy. Their wasteful spending policies and rewards to favored groups continue. Will Repubs risk a shutdown with everything else going on? Should they?
TBH, if PDJT was confident enough, it would be exciting to see him shut down the gov’t and say “I told you last year: pass a budget!”
3 recent polls have revealed that support for Trump is above 30% among BOTH black and Hispanics. While I would love to imagine that those voters have awakened to the positive aspects of conservatism, I think it far more likely that they are simply convinced that they’ve done much better under Trump than they did under Obama. I suspect that those minority voters have come to view Trump’s catch phrase, “Make America Great Again” as a goal of making every American’s life better.
The democrats are facing what can only be described as a political debacle in Nov of 2020.
From his debate performances and other various cable tv appearances, Trump showed from the beginning that he understood how to use trade policy to fight back against China’s currency manipulation.
Punishing chinese statecraft disguised as legitimate market behavior; cutting taxes and red tape; putting monopoly crony capitalists in the crosshairs of the regulatory body where they belong, being an overall good shepherd of the public’s confidence in the economy …
Policy wise, It’s a pragmatic mix, nothing ideological, a little experimental; the place where the social scientist aims to be, where the approach and the results are as much art as science.
Unilateral free trade is for suckers. It’s great for consumers in a one-shot game, no need to worry about effective demand drying up in subsequent rounds.
Diplomacy can facilitate free trade agreements between select nations on a range of things. But even Adam Smith recognizes important exceptions.
Laissez faire is a sometimes-dangerous abstraction. Trump has many faults. Market fundamentalism cannot be numbered among them.
Well, there you have it, “It’s the economy stupid” when the lefties will denounce, every day, giving every reason, why Trump had no input whatsoever in regular people, and others, having more jobs and spending more money on them-selves.
Trump perhaps has done some incredible things and made decisions about tariffs and money allocations to various other nations that are different than those who came before him. We are a long way from having a balanced budget, which might never happen, with the splits in the house and the senate, but at least today we have a strong stock market and more people have jobs to be able to buy a turkey for Christmas.
“It’s the economy Stupid.”
Yes, when it all come down to dust and votes, it is the economy stupid. But with the exception of those with TDS. They want a deep recession as soon as possible to defeat orangemanbad. What they are saying is we don’t care if the middle class experiences a 50 or 60% decline in their investments. Elites care only for elitists. That is the story of Obama.
What we are seeing is the recovery we should have had after 2008. It is just 10 years late because Obama did what Roosevelt did in 1933. History is written by leftists almost exclusively. Amity Schlaes is the only one writing revisionist history. Her “The Forgotten Man” should be mandatory in any business course. I am now starting her “Great Society.”
I realize that things look good. But the reality is at this point the next correction will be truly horrible.
When the economy tanked the Fed used its primary tool to stabilize things. It lowered the interest rate. Which short term is a good move. It keeps financial transactions moving along. Allows for some businesses who could not afford to expand the capital to do so . But shortly afterward the rates should have been heading somewhere back to normal. Maybe 2-3 years after they should have been close to historic norms.
That never happened. Obama never saw decent growth because of his general ineptness regarding business. So the interest rates never went up. So as time went on. People began to realize that investments that relied on the interest rate made no money. So they had two choices. Sit on their cash and never let it expand. Or start investing in the market just to try to see ANY growth.
Once Trump was elected you saw this initial exuberance because he had run on getting government to reign in unfriendly regulation. And he has been keeping to his word. But he also has kept the interest rate artificially low. It has not only kept the boom going, but accelerated it. Look back at his threats when the wanted to normalize rates .At this point he must know that It will tank things.
So people are stuck. They keep piling money into a market that is grossly overvalued. Just look at the stock prices for some of these newer companies that have never in their existence turned a profit. Like Netflix, Lyft etc. People are heavily into speculation as the only way to expand their retirement savings. Raising interest rates to even a fraction of normal would give people an alternative to invest in. And the market would begin to correct.
But at the same time by keeping the rates so low. The one main piece of control the government had. The ability to lower rates, no longer exists. So whatever correction that happens will occur without the ability to put on the brakes. Thats why Europe has experimented with NEGATIVE interest rates. And they can do that because they control the banks so completely. Try that here and it would just spark a bank run like during the depression.
In short I support Trump for his better understanding of the business cycle. And am hoping a second term would allow him to begin turning things back to normal.But I fear this has simply gone on way to long and forced us to simply wait for the next crash to do it for us.
mythx,
I agree the markets will not rise forever, there will be a correction, that is just how it goes. However, a 20 to 30% correction from 27,000 leaves us close to 20,000. I can weather that. If you can’t there is always under the mattress, earning less than zero percent. Your prediction of hysterical, don’t thinkso.
Mythx: ” But the reality is at this point the next correction will be truly horrible.”
Oh, boo! You have no way of truly predicting that. none whatsoever.
The media and the democrats have all been predicting that with Trump’s election the economy will implode and we will all die.
Your comment is the same nonsense.
I hope the economy will continue to “fall” like it has under Trump – all the way to the bank for me! After 10 years of the younger Bush and Obama’s lousy economic policies I finally have a permanent job (unlike the contract jobs with no future I had under Obama), I have bought a house, and watched my 401K and other savings grow and grow. And when folks say the economy is going to tank all I can think of that they must be jealous that someone like me is doing well.
So, boo on you and your negativity.
Parker,
Part of what you are saying is true. And whatever crash will be cushioned by the fact that QE has been rapidly expanding the money supply. But what I am saying is that some of the very mechanisms we have installed to prevent a fast crash (like the depression) have been disabled. Others have been put in place that are in fact a detriment.
If you have a retirement plan. Do yourself a favor and see how many funds you are able to sell at one time. Ill bet its been artificially limited. The reason is so that YOU cannot remove money from the market in an expedient manner. Their reasoning is that it would help prevent a mass sell off. That is true it would. BUT if you think that large shareholders are limited by this you are wrong. THEY will be able to remove their cash quickly. You will not. Thereby being forced to weather that particular loss very hard .
Simple rule changes like this seem like little things. But the cumulative effect on the AVERAGE investor will be horrible. I choose cash and gold years ago. Limited my exposure by paying off loans. And before the accusations start flying let me be frank. I DONT WANT ANY OF THIS TO HAPPEN. My family is still very invested in the market. But like any crash it is the result of an accumulation of errors in judgement. And the length of time since a correction and the manner in which we have avoided it are particularly bad.
The only real mechanism the government will still have left in its bag, Will be a massive expansion of QE to pay off the debts. That is printing lots and lots of money. Devaluing the debts, but your moneys value also.
My hope is that Trump gets reelected. And since he will then be term limited will take to opportunity to reverse course and fix some of our worst excesses. Raise the interest rate, taper QE, and some action to stop the increase in government debt.
Sean Hannity led his show with a video clip of investing advisor guy Jim Cramer over at CNBC. Cramer can get loud like Mark Levin. Cramer starts with how fabulous the economy is, then gravitates towards how no one in the MSM is willing to talk about it. Oops. Don’t poke your finger in your boss’ eye.
____
“Not just slightly wrong. Not just partially wrong. Not even just mostly wrong. THEY WERE ENTIRELY WRONG.” — MBunge
Very nice. Are you thinking of Paul Krugman, because I am. “If Trump is elected the market will crash, and stay way down for an unlimited amount of time.” Or words to that effect.
Harvard econ hotshot Robert Barro said of Krugman, maybe 2 or 3 years after he started at the NY Times:
Krugman writes his column about various macro-economic issues which is interesting because his field of expertise is micro-economics, not macro. Also, Krugman has a bad habit of stating things in his column that are in direct contradiction to statements he has made in peer reviewed publications.
There was a 3rd Barro-Krugman comment but I’ve forgotten it.
Charles
Your right I cannot “prove” a prediction. And I really believe that you are taking my observation in entirely the wrong light.
I LIKE TRUMPS POLICIES. I AM GLAD THE ECONOMY IS DOING WELL. But I am not blind to the fact that long term growth like this without a correction is a bad thing. Especially in some of the ways we are doing it. I am happy you now have a home and a nice 401k. I am simply trying to point out the trade offs we as a society have done to get to this point. It is something that can be fixed incrementally. And I hope can be in the next term.
mythx,
I agree with some of your general thrust, but you get a little carried away in spots.
The definition of a “correction” is a 10% or more decline the Dow or S&P500. And they’re not really horrible until they hit “bear market” territory (a 20% decline) and stay low for a long period.
Interestingly, we had a 17.5% decline in the S&P500 that hit bottom on Dec. 21, 2018. Didn’t last very long, and it was not connected to an actual economic recession. Sounds like a “real” correction, which I believe means that the market just got ahead of itself.
I agree that Bernanke’s nearly 8 years of zero interest rates was destructive, and I don’t much like Trump trying to strong-arm the Fed into a lower Fed funds rate. But … I’m less sure that Trump is wrong and the Fed was right a year ago when they did their last couple interest rate increases and tanked the market.
“Raising interest rates to even a fraction of normal would give people an alternative to invest in. And the market would begin to correct.” — mythx
What’s normal? Maybe 4 to 5.5% on the Fed funds rate? Call it 4.5%. So the Fed topped out at about 2.5% a year ago. Maybe mythx is roughly correct. That 2.5% rate did seem to tank the market. Now the Fed rate is 1.5 – 1.75%. The market seems fine now, and 1.75% isn’t very high, but substantially above zero.
mythx suggests, but doesn’t exactly say, that we’ve had continual QE, quantitative easing. In reality we had huge QE under Bernanke, not sure about Yellen (static?), and Powell actually instituted QT, quantitative tightening. Powell did QT while he was raising the Fed rates rather quickly. In combination, that was much too much tightening. Now we have quantitative run-off (QR?). Bonds are allowed to mature and run off the Fed’s balance sheet without replacement.
I hate the idea of negative interest rates, and don’t quite know what to make of it, except that I’m relatively sure that it is weakening the Euro dollar and strengthening the US dollar thereby hurting our balance of trade with the EU.
Interestingly, the latest talk on tariffs is that Trump may place tariffs on French champagne, wine, cheese, etc. That would help the trade balance some. The other proximate reason for the tariff is that France seems poised to levy a large tax on US tech companies, because of “fairness” or “justice” or something.
“But I am not blind to the fact that long term growth like this without a correction is a bad thing.“
I know next to nothing about economics and wonder how much the untapped potential of the U.S. economy matters. We’ve had decades of wage stagnation, a ridiculous level of wealth inequality, and probably trillions of dollars worth on infrastructure improvements just begging to be done. Addressing those things would seem like great fuel for a virtuous cycle that could stave off a correction for a long time.
Mike
Tommy JAY
I fully agree that my predictions may be wrong. I dont claim to have particular insight into the market. I am only pointing out my observations of what i believe will happen based upon historical norms.
As your point to the interest rates. I agree that keeping the rates low helps the economy at this point. I view the normal rate as several points above inflation. the current 1.75% is nowhere near. Otherwise QE effectively destroys savings by having an inflation rate above that of an income rate from interest.
To me the problem occurs when something seriously goes wrong. Another DOT.com type bust or the like. There will be no interest rate to adjust. And the question becomes what to do at this point? By adding in that uncertainty to a market on the rocks. I dont see a good outcome. I would rather change and trade some growth now. For the cushion to make adjustments later. I was raised and taught that you need a diversified portfolio for stability. I dont see that basic advice as wrong.
But currently the diversity seems to be be primarily just different avenues of the stock market. Now that savings,CD’s bonds (all affected by the interest rate) have little effective return. I admit I could be wrong. And so far I have been. But I fear that when it turns. It turns extra hard because of the problems to this point.
MBunge
I view the market as a serious of millions upon millions of individual decisions. Increases and corrections are just the cumulative of those choices. I dont view spending and investment as “virtuous”. Simply building infrastructure that has no positive value is a drag on an economy. See the solar panel spending of the Obama era and the California train to nowhere. All spending that was done for virtuous reasons on infrastructure. But were distortions to the market. And ultimately are just wastes of our money.
What we have been doing since the end of Bush II has been using our capital to distort the market in a similar way to avoid those corrections. To avoid temporary pain. And the culmination of those mistakes long term will come due. Happening at the same time while we have fewer ways to combat it. That is my fear. And the longer things continue. That is the market being distorted. The worse the bill will be once it comes due
Seems to me low interest rates serve the purpose of keeping housing affordable. Sort of! If interest rates were any higher a mortgage would be out of reach for even more people. But that begs the question; Why is housing so damn expensive? Is it labor costs? Over regulation? Restrictive zoning? This is more than a simple economic issue, home ownership is a cornerstone of the American Dream and our national character. Trump is a builder – I’d love to see him tackle this in a second term.
And while I’m on the subject, why is it the price of most consumer items has gone down or held steady, while the costs of life’s three essentials – housing, education and medical care, have increased far beyond the rate of inflation? it wouldn’t be to put us all into debt slavery, now, would it?
“Simply building infrastructure that has no positive value is a drag on an economy.”
I believe there are East Coast cities in the U.S. that have sewer and gas pipes that are 100 years old. There has been report after report for year after year on the atrocious and dangerous condition of hundreds and thousands of bridges all over the country. How much of the American power grid is capable of withstanding the EMP effect of a particular type of solar activity, such activity being almost certain to happen though no one knows if it will be tomorrow or a thousand years from now? When is the last time we built a nuclear power plant?
Infrastructure is a real thing. A great deal of private business activity is entirely dependent on publicly created and maintained infrastructure.
Furthermore, your concerns about the market, while perfectly reasonable, miss an important point. The reason the market is so out of whack is because it’s been the only place to make any money. We haven’t been growing the middle class. It hasn’t been getting more prosperous. We haven’t been building things. Millions of jobs and entire industries have disappeared from the U.S. economy, due in large part to specific policy choice made by our political leaders.
If we are to avoid or at least lessen the impact of a massive market correction, we are going to have to generate real wealth though real economic activity outside the stock market. That’s the only thing we can do.
Mike
We haven’t been growing the middle class. It hasn’t been getting more prosperous.
Per capita product has doubled in real terms since 1973. There’s been some modest deterioration in the distribution of income (the most affluent decile captures 30% now, rather than the 25% it captured 40-odd years ago). AFAIK, the share of the working population employed in salaried as opposed to hourly positions is not declining. The ratio of proprietors income to personal income in toto has declined some (from 9.8% to 8.7%) since 1973, with the decline entirely concentrated in the agricultural sector.
There has been report after report for year after year on the atrocious and dangerous condition of hundreds and thousands of bridges all over the country.
“Our crumbling infrastructure” has been a meme for 40 years. I can remember John Anderson plumping for a plan to devote x% of some new tax he was proposing to the repair of “The. Leaky. Water. Mains.”: Associations of civil engineers lobby for more employment opportunities for…civil engineers. Politicians want more public works projects they can put on their campaign brochures. (Louise Slaughter running for Congress in New York, in that Kentucky accent you could cut with a knife, “Ah voted for legislation to bring Jaaaahbs to our area….”). Ted Stevens wangling federal funding to construct a mammoth bridge between two points in Alaska for the convenience of a few score people who’d elected to live on an island in the Alexander Archipelago.
If there’s a problem with public works in this country, it’s because environmental law allows professional obstructionists in the lawfare business to get their ass in the way for decades on end, because state governments refuse to institute sensible local government boundaries, because governments at all levels prefer cash accounting schemes that business haven’t used in generations, and because the public has an odd allergy to road tolls and fuel excises as a means of finance.
I still worry about the economy growing too fast. We do not have the workforce to support current economic activity.
And if we actually start removing significant numbers of illegal workers, it would make the situation worse. Not that I want there to be illegal workers, but before we start kicking them out, we need to have a plan as to how we will replace them.
Not that I want there to be illegal workers, but before we start kicking them out, we need to have a plan as to how we will replace them.
No we don’t. Enterprises will make their adjustments in accordance with their specific circumstances. That can include recruiting displaced tradesmen, recruiting youths, recruiting the elderly, recruiting housewives, process changes, automation, &c.
Raise the interest rate, taper QE, and some action to stop the increase in government debt.
The last round of QE was seven years ago.
Lot’s of interesting points made in the comments above however we start out with the fact that right now the economy is good. If the market holds reasonably well and some adjustments both up and down will occur and if more people continue to have jobs for the next eleven months then the economy will be a big factor in the election. There are a lot of if’s however so far so good and it’s driving Trump’s opposition, both politicians and the professional media nuts, add that to the fact that the Democrats are continuing to neuter each other instead of building some sort of a reasonable comprehensive message besides ‘No More Trump’ !
Art Deco,
You need to get out more. Businesses are scraping the bottom of the labor pool now. They are hiring anyone who can fog a mirror.
Art Deco,
I should have said… Yes, all of the solutions you mentioned are valid. But the transition must be gradual, not sudden.
But the transition must be gradual, not sudden.
It doesn’t have to be gradual at all.
Businesses are scraping the bottom of the labor pool now. They are hiring anyone who can fog a mirror.
When Clayton Cramer can find work again in computer programming, I might consider that viewpoint.
How to get more laborers without lots of illegal immigration or permanent legal immigration? Here is the intro from Wikipedia on the Bracero Program.
It’s demise was apparently quite messy and complex.
How to get more laborers without lots of illegal immigration or permanent legal immigration? Here is the intro from Wikipedia on the Bracero Program.
The correct number of guest workers in your country at any one time = 0.
Art Deco,
If it is ok to import goods, then why not labor? Let’s face it… very few American citizens want to pick lettuce. Legal guest workers makes perfect sense.
I’m with TommyJay on this one.
I live in a place that produces cherries. For the four months leading up to, during, and after the harvest, the farmers need far more labor than our town could possibly provide. We have a symbiotic relationship with a town in Mexico whose seasonal labor is needed in the winter. Their workers come here for the cherry harvest and many of our farmers go to Mexico for the winter to help the Mexican farmers with their harvest.
Extremist and reactionary policies such as Art Deco’s would destroy the economies of two towns… one here, and one in Mexico.
Molly Brown — housing costs are directly proportional to the amount of regulation.
And that’s true pretty much across the world.
Consumer item prices have gone down because the vast improvements in manufacturing. They can’t be applied to largely service Health and Education — just as haircuts haven’t fallen while TVs have.
Housing prices have risen due to scarcity (caused by regulation) and low interest rates allowing big mortgages.
Prices haven’t risen for houses in cities losing population.
If it is ok to import goods, then why not labor?
You mean merchandise and people are now interchangeable in your mind? You said that, not me.
Let’s face it… very few American citizens want to pick lettuce. Legal guest workers makes perfect sense.
Only if you insist that (1) you not pay wages which will attract domestic farm labor, (2) you will not automate processes, and (3) you will not substitute one crop for another which can be cultivated with domestic labor and equipment.
I live in a place that produces cherries. For the four months leading up to, during, and after the harvest, the farmers need far more labor than our town could possibly provide.
Evidently, no one around your town commutes and no one in your town can rent or drive a bus to transport workers.
Extremist and reactionary policies such as Art Deco’s would destroy the economies of two towns… one here, and one in Mexico.
Agricultural laborers account for 0.3% of the working population in this country. Your town is a very peculiar place.
Art Deco,
1) “Labor” is not the same as “People”, and you know that. That was a cheap and gratuitous argument.
2) Wages: Are you prepared to pay five dollars for a head of lettuce? I don’t know the actual numbers, but I do know that without migrant agricultural labor a lot of our produce would become so expensive that it would be cheaper to import it than produce it here.
3) For many miles around us, summer is when we “make hay”. You don’t understand the rhythms of agriculture in America. And, so far as I can tell, city people can’t leave their jobs to pick fruit either. A long time ago, all the children and teenagers were employed in the summer… but times changed. No one wants their children to be agricultural workers any more.
4) Every place is peculiar… in it’s own way.
This is my last word on this. I won’t be responding again on this subject. Good day.
1) “Labor” is not the same as “People”, and you know that. That was a cheap and gratuitous argument.
I’m afraid labor is people, even if you find the thought ‘cheap’ and ‘gratuitous’. There is no such thing as a ‘laborer’ without outside interests and an affect on his social environment outside the workplace.
You have three choices in these matters. One is to accept that your industrial mix is a function of your available factors of production, whatever they are. Another is to progressively dilute the stake in society of your extant population by importing wave after wave of foreigners to maintain certain industries via cheap labor. A third is to have a population of metics performing work your governing class fancy is beneath their own people. It is socially corrupting to do that and in occidental countries has tended to generate downstream policy dilemmas. Importing settlers is legitimate within limits. Importing servants is not.
2) Wages: Are you prepared to pay five dollars for a head of lettuce? I don’t know the actual numbers, but I do know that without migrant agricultural labor a lot of our produce would become so expensive that it would be cheaper to import it than produce it here.
I’m not terribly concerned about the price of lettuce, per se. It’s a tiny part of my household budget. If it’s imported from abroad, it isn’t much skin off my nose. I haven’t a clue where the vegetables I purchase were produced. People who grow lettuce for commercial markets will be injured. The question is would their interests be so consequential that I’m willing to adopt unsalutary social polices? (Answer: No).
While we’re at it, per the Bureau of Labor Statistics, the wage bill for general farm labor in this country is about $11.4 bn a year, give or take. Farm revenues are currently $389 bn. per year, give or take. So, these workers account as we speak for 3% of your costs.
3. You don’t understand the rhythms of agriculture in America. And, so far as I can tell, city people can’t leave their jobs to pick fruit either. A long time ago, all the children and teenagers were employed in the summer… but times changed. No one wants their children to be agricultural workers any more.
I’ve never met Mr. and Mrs. No One. It did occur to me somewhere along the line that agriculture has seasonal rhythms, but thanks for your instruction; it’s the thought that counts.
There are 400,000 positions to fill, give or take, and 113 million people over the age of 14 who are not currently employed in some other capacity. There are, at any one time, about 25 million registered students over the age of 14. What do you have to pay them to make it attractive to them to do the work? What alternatives do you have in the world of mechanical harvesting? What do you grow if your hand-picked produce can no longer be produced with adequate economy?
Two thoughts: Our growth will be constrained by a lack of individuals possessing the skills or the desire to acquire them required of our modern economy. Century Furniture in North Carolina cannot meet the demand for its product because of a lack of new skilled workers to replace those who are retiring. That is one small example, though the same condition exists in the building trades. The second is that as long as human nature remains unchanged we will have business cycles. When the next downtown will occur is known only to the gods.
Century Furniture in North Carolina cannot meet the demand for its product because of a lack of new skilled workers to replace those who are retiring. That is one small example, though the same condition exists in the building trades.
How long is an apprenticeship to acquire the skills they’re looking for?
“Our growth will be constrained by a lack of individuals possessing the skills or the desire to acquire them required of our modern economy.”
People respond to incentives. In my entire life there has been no incentive at all for Americans to acquire the skills for an job they believe likely to be out-sourced, off-shored, or filled by an illegal alien or a holder of any one of the alphabet soup of special work visas that exist.
Hence, no one is especial interested in becoming an apprentice in a furniture factory that is likely to be packed up and sent to China any day now. Or an American in the building trades, which is heavily filled by Hispanics, legal and otherwise.
All this is a problem, I think, if you want to maintain a workforce capable of doing anything more than unloading their bridge card or collecting disability payments.
Century Furniture in North Carolina cannot meet the demand for its product because of a lack of new skilled workers to replace those who are retiring.
This is such an EASY company problem to solve:
1) raise prices a bit — MUCH more profit per product sold, per order; but slightly fewer orders,
and
2) raise wages for workers until you hire some good ones willing & able to learn, and stay after learning.
2b) maybe hire more ex-lettuce pickers and teach them furniture skills, so the lettuce is grown more in countries with low cost labor and exported to the higher paid furniture makers who buy it with furniture wages.
Still, stu is correct that talent development of workers is already, and will continue, to constrain the US economic growth rate.
Far too many elite-wannabees graduate from college with x-Studies degrees, and lots of tax-guaranteed school debt, but without work skills or habits.
On housing prices and interest rates, there are many influences:
1) at any given time, most folk buying a new house buy as much house as their monthly payments they can afford. If a couple make $150k /yr, getting 96k in the bank meaning $8k/month, they can pay some $4k/month.
That monthly payment is principal plus interest. At low interest rates, it’s mostly principal, little interest. Very high sticker price for the house.
At a higher rate, the same $4k/month buys much less house “price”. If the economy had higher rates, which would be economically healthier (based on history), the house prices would be lower. But not actually more affordable.
2) Only building more houses makes houses really affordable. But most of the cities where the better jobs are growing have anti-growth policies that severely restrict house construction, especially zoning. So house prices go up to balance that supply & demand, just like Century should raise its furniture prices.
Trump’s policies have been surprisingly great. If no recession, he gets reelected.
There’s too much US federal debt – so I’ve long believed. But Japan has some 220% of its annual GDP in its national debt, and it’s not dying. So I don’t trust what I’ve been taught to believe about national debt for a mostly strong, market economy. Housing could crater; there could be a trade war and international trade could dry up; inflation could come back and be above 5%, or even 10%. It’s thousands of % in Venezuela, formerly the richest Latin America country. Socialism can kill any economy, with enough time and continued bad incentives.
But these problems seem unlikely to crash now, or in the next 12 months.
http://www.arnoldkling.com/blog/ << my favorite heterodox blog for most econ issues plus non-mainstream econ/ libertarian ideas.
https://marginalrevolution.com/ << more mainline / lib econ, tons of links, great MR university, free on-line, to learn econ.
MBunge on December 6, 2019 at 7:05 pm said:
I don’t think it’s important or wise to get in the weeds debating how good the economy is under Trump or arguing over this or that part of the country that might not be doing as well as others.
What matters is this: The people who think they should run America told us THEIR economic policies weren’t just the best, they were literally the ONLY policies we could pursue. They claimed they weren’t making choices, just responding to economic realities in the only way possible. They said Trump deviating from those policies would be a disaster. AND THEY WERE WRONG.
Not just slightly wrong. Not just partially wrong. Not even just mostly wrong. THEY WERE ENTIRELY WRONG.
* * *
Ed Morrissey agrees with you, and apparently so does the New York Times.
https://hotair.com/archives/ed-morrissey/2019/12/06/nyt-yeah-everything-knew-jobs-market-wrong/
Et cetera, et cetera, et cetera.
The discussion about which Americans would stoop (heh) to the labor performed by immigrants, legal and il-, might actually mean Wilson made sense in the quote on another thread.
However, there is no doubt that Wilson meant the first class of persons to include his circle (ancestors of our current elites?) and the second class to be all of the Deplorables.
My opinion is that many, if not most, of the people (all races and all genders) now enrolled in what we continue to laughably call “liberal arts colleges” should be in vocational and apprentice programs that formerly lourished.
Those that can benefit from a true college degree should have access to it, no matter what “class” they were born into — no one with the intellect (not just intelligence) and interest should be forced to forego that priviliege for the greater good.
I don’t think Wilson was really on board with that idea.
This is another good way to get more Americans working for a living.
https://libertyunyielding.com/2019/12/07/ocasio-cortez-called-out-after-claiming-trump-food-stamp-revisions-might-have-starved-her-family/
OT: Could Senator Warren revive her Medicare-for-all plan by challenging the assumption of scarcity that currently makes it unworkable?
Could Warren gain acceptance for her Medicare-for-all program by tying funding to “monetary reform” i.e. negative interest rates? Other countries are using negative interest rates to pay for infrastructure, maybe she could do something similar.
Is it a good idea? Probably not, but who’s to gain-say a big-brain like Professor Has-a-plan-for-everything when she says “Free Stuff for peepulz!”
Remember Bernanke’s “savings glut”? Since there was supposedly more savings… world-wide… than there were legitimate investment opportunities in established equity markets, rates belonged at or near zero. Warren could claim nothing has changed except Trump’s lousy pick to replace Yellen.
I could never swallow the whole savings glut rationale for keeping savings rates so low. The whole thing reeks of motivates reasoning.
But if Warren is going to play Santa Clause, she’s going to need a story people *want* to believe.
“We’re going to pay for Medicare-for-all via monetary reform! We’re going to get *paid* to borrow the money!”
Maybe? No?