Sunday, March 21, 2021

Let's Look At Unemployment

The Fed claims that the US economy is not out of the COVID woods yet, therefore monetary policy has to remain uber-loose until at least 2023.  The most frequent statistic quoted is "high unemployment" and its attendant output gap.

OK then, let's look at unemployment.  From the Bureau of Labor Statistics (BLS) we get the following chart:


In February, total non-farm payrolls were down by 9.5 million versus last year. That's certainly lots of jobs - but what kind of jobs are we talking about? Are they professional, highly paid positions? No: 3.5 million are in leisure and hospitality (i.e. restaurants, hotels, theaters, etc) where wages are the lowest, 1.4 million are in government (lots of shutdowns) and another 1.3 million in education and healthcare (schools and colleges were closed).  Those three sectors alone account for 6.2 million of the total jobs lost between Feb. 2020 and Feb. 2021 - that's 65%.

As the COVID emergency subsides, these are the kinds of jobs that are coming back fastest.  Leisure and hospitality is already leading the comeback.  Last month the sector added 355.000 jobs out of a total of 379.000 (94%) in employment gains.  And as soon as education goes back to in-person classes (already happening), those jobs will be restored, too.  Government may be a bit slower in restoring some services, but it won't be very far behind.  So, I have to ask... what output gap???

It is, therefore, highly questionable as to why the government thought it necessary to send $1.400 to just about every American. I can certainly understand helping those who are unemployed, but... everyone? 

I'm not the only one who thinks this is irresponsible, dangerous even.  Larry Summers just spoke out again - Bloomberg notes in an article (my bold):

In his latest attack on the recent rush of stimulus, Summers told David Westin on Bloomberg Television’s “Wall Street Week” that “what was kindling, is now igniting” given the recovery from Covid will stoke demand pressure at the same time as fiscal policy has been aggressively eased and the Federal Reserve has “stuck to its guns” in committing to loose monetary policy.

These are the least responsible fiscal macroeconomic policy we’ve have had for the last 40 years,” Summers said. “It’s fundamentally driven by intransigence on the Democratic left and intransigence and the completely irresponsible behavior in the whole of the Republican Party.”

I'm with Larry, who now sees a one in three chance of the US falling into stagflation, a condition we haven't experienced in 40 years.  I may remember it, but today's "investors" (aka kiddies running algos) have not a clue, they could care less about such outmoded, Buffet-era fundamentals.  Today, it's all about momentum and pie-in-the-sky "tech".  Their hero being Elon Musk, all I have to counter with is.. PT Barnum.

 P. T. Barnum & the Circus – A Stamp A Day


  1. goodness gracious hell... you have a very good grasp of technology...

    here I was thinking only techies would see through that. Salute.

    1. A couple of degrees in engineering helps separate the wheat from the chaff, thanks :)

  2. btw... I was thinking about the Chinese civil war and how the KMT fell apart from incompetence and communist agents... the KMT then, sounds scarily like the US now.

    If you have time, this might be a good read... I suspect it is not fully correct, but I think its broad strokes are correct. Especially key is the idea of how Mao Zedong's activities were harmful to his own side but led to his eventual triumph by using his enemy's people to loot his enemy.

    Mao in turn is drawing from a long tradition of Chinese court politics... Unfortunately, this is all we have to show for 2000 years of civilization.

    Mao: The Unknown Story, by Jung Chang

    1. Do remember, though, that China never had anything remotely approaching communism. Even if they called themselves that. The US calls itself capitalist, but is a full blown plutocracy.

      Hells, but those would be macro numbers, there still is a whole lot of pain in the working class out there. With wage stagnation and all. The working poor are in the millions. Even if they show up as employed in the macro scheme of things.

    2. For reference re: communism/socialism

    3. Hi Camabron,

      Thanks for the input.

      I think something that few westerners realize is that the Chinese basically don't go in for ideology, religion, etc... yes, there is some of that but by and large, they don't believe in the die for god, die for communism, kind of way... they sort of always figured that these stuff is more custom than real... Thus, China has had very few (maybe no major) religious wars.

      Although Chinese are very good at science and mathematics, we never really had the Western instinct for developing universal formulasims. The Chinese seem to instinctively think in terms of Taoism. Everything is right or wrong in its place and time... I think that makes for effective (I am deliberately not using the word good) politics. It generally makes for good engineering. It tends not to be good for making great scientific leaps.

    4. Hi Camabron,

      Sorry, I was too indirect.... The CCP did not attract many high ranking generals through ideology.

      They did it through greed, fear and primarily pretending they were the wining side until they became the wining side.

      Hell, I still remember your Quantum casino story... This might be another case. If you fake it long enough, it becomes real, to hell with fundamentals... I think the CCP understands that too.

    5. I read you akoc, interesting views. Yes, the Chinese are pragmatic as hell lol.