Connect with us

Economy

Nobody seems to know what's going on with the economy – CNN

Published

 on


A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.

(CNN)If you’re confused by the US economy, which simultaneously shows signs of strength and cause for concern, you’re not alone.

The economy is on the road to recovery from the coronavirus pandemic, reeling from inflation or a source of disappointment on jobs creation, depending on who you’re talking to.
It’s probably all three, and what happens from month to month seems to be something of a surprise. That element of unpredictability might be the most normal possible thing given the shock of the pandemic — the extraordinary government intervention to save the economy is unlike anything anybody alive today has ever seen.
It’s hard to decide how important any single thing is.
Let’s look today at jobs.
Government data released Friday showed the US economy gained 210,000 jobs in November and the unemployment rate fell to 4.2%. A low rate traditionally signals full employment, meaning that nearly everyone who wants a job has one.
And yet!
Most stories about the November jobs report described it as “disappointing” in the first sentence, but also proof that the pandemic recovery is moving along.
Why the disappointment? Tappe wrote: “Economists had expected more than double the number of jobs created in November, forecasting a continuation of the buoyant economic recovery over the past two months. Instead, the November jobs gain was more reminiscent of the pre-pandemic economy, when employers added a smaller but steady number of positions, at least on the face of it.”
At the same time, there’s the good news. The jobs report suggests the pandemic recovery is progressing. The country has created more than 6 million jobs this year, and labor force participation increased to 61.8%, the highest level since the pandemic hit.
Much of the disappointment stems from expectations. The jobs report is based on two surveys — one of businesses with payrolls and one of households about their economic situation — that are conducted by the government mid-month and released by the Bureau of Labor Statistics in tandem on the first Friday of each month.
“Weird jobs numbers,” tweeted Jason Furman, who led the Council of Economic Advisors during the Obama administration.
“Very strong household survey: unemployment down to 4.2% & labor force participation up as employment up 1.1 million,” he tweeted. “But the normally more reliable payroll survey shows only 210K jobs added.”
He’s not sure what’s going on: “Some explanations may emerge but it may just be measurement error.”
Where do expectations come from? Leading up to the monthly release, economists and banks publish their own expectations for what the surveys will find. If the government data doesn’t hit those expectations, disappointment follows.
I talked to Elise Gould, a senior economist at the Economic Policy Institute, about what we do and do not learn from these reports.
She said they need to be viewed as pieces of information, not the full picture, in part because the surveys can overstate things and miss the changing composition of the workforce.
Revisions to jobs reports from recent months have confirmed stronger job growth than what was shown by the surveys.
Still, it’s best to know the latest information, even if we know it’s likely to change, she said.
Also, the pandemic. There is also the pandemic element to confound economic expectations, just like it has confounded people’s lives.
“Everyone in this economy today and the people that are making these predictions have never lived through a pandemic that hit the labor market so strong,” said Gould. “And so their models are not necessarily capturing the ebbs and flows of the pandemic.”
I asked David Goldman, managing editor of CNN Business, for his thoughts on why these reports seem to confound expectations each month. He came back with three points:
  • This is a particularly unusual environment. It is making predictions really difficult for economists. The labor shortage, supply chain crisis, energy crunch, inflation and Covid-19 situations all wrapped into one make for a delicate balancing act. We should cut economists a break.
  • Right in the long run. Economists actually have been proven correct over the past several months when they initially were thought to be wrong. That’s because the reports keep getting revised higher in subsequent months as Labor Department economists get more data. It’s not only hard for economists at Goldman Sachs and JPMorgan to figure out — it’s hard for the government, too.
  • Don’t focus on expectations. The forecasts aren’t the important thing here — it’s the actual data. And one month doesn’t a trend make. We’ve had some shockingly good jobs data in recent months, and November wasn’t all that bad — just not quite as good as we had expected.
There’s uncertainty elsewhere. Leaders at the Federal Reserve, like Chairman Jerome Powell, had been preaching that inflation was temporary — calling it “transitory,” meaning it wouldn’t permanently affect the economy.
But in a signal that inflation may last a little longer than expected, Powell told lawmakers this week the Fed may end some of its pandemic stimulus efforts — they call it “tapering” — earlier than expected.
“At this point the economy is very strong and inflationary pressures are high and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner,” Powell said.
One wrench thrown into the economy has been the resilience of the coronavirus. We may not quite understand how the surge of the Delta variant over the summer and fall arrested progress.
CNN’s Tappe and Nathaniel Meyersohn wrote about the Delta effect back in August.
Now that the Omicron variant is emerging, it, too, could send things in a new direction.

Adblock test (Why?)



Source link

Continue Reading

Economy

China Rate Cuts Not Enough to Stabilize Economy: Ex-PBOC Adviser – Bloomberg

Published

 on


Looser monetary policy in China won’t be sufficient to stabilize the economy and a faster increase in government spending is needed, according to a former adviser to the central bank.

“Under the current economic situation, the role the PBOC can play is limited,” said Yu Yongding, a member of the monetary policy committee of the People’s Bank of China in the mid 2000s, adding that he would “emphasize the importance of fiscal policy.”

Adblock test (Why?)



Source link

Continue Reading

Economy

Eighty years late: groundbreaking work on slave economy is finally published in UK – The Guardian

Published

 on


[unable to retrieve full-text content]

Eighty years late: groundbreaking work on slave economy is finally published in UK  The Guardian



Source link

Continue Reading

Economy

Ignore the Hype, China’s Leaders Cannot Re-Shape Economic Reality – Forbes

Published

 on


While worries about Evergrande seem to have quieted, none of this means there’s nothing to learn from what happened. The Chinese real-estate giant is a useful reminder of how politicians and bureaucrats have no ability to prop up or grow any economy. None at all.

This is worth bringing up as news out of Beijing signals alleged economic support from China’s leadership. In a recent front page piece (“Beijing Moves to Cushion Economy As Risks Worsen”) at the Wall Street Journal, Stella Yifan Xie reported that “China’s leaders” cut “two key interest rates” in “response to the impact of pandemic restrictions and a property-market slump.” At best, these machinations will achieve less than nothing. And the reasons why are obvious.

Most obvious is that market interventions don’t work. By definition. Markets aren’t political or inclined one way or the other. Markets quite simply are. They’re a reflection of what’s known in the here and now. They’re an ideology-blind verdict. Please keep this in mind with government interventions meant to “Cushion Economy As Risks Worsen.” The translation of the latter is that Beijing’s leaders will lean against the truthteller that is the market itself. The markets are signaling dismay with pandemic restrictions, and they’re similarly signaling mistakes made by investors in the allocation of capital toward property.

In which case Beijing is aiming to reshape reality. Even if it succeeds (it won’t) in overwhelming the message of the market, such a move will not enhance China’s economy. We know this because restrictions on human action are by their very name a growth depressant, and China’s leaders are trying to paper over their own freedom-limiting errors. Just as harmful would be attempts to limit the market’s message about property mis-allocations. This is the equivalent of Congress intervening in the failure that was Warren Beatty and Dustin Hoffman’s Ishtar as a spur for the stars to make Ishtar II. Massive federal support (buying tickets for empty theaters) could have theoretically created a blockbuster that was otherwise a flop, but doubling down on bad is rarely good. The movie industry is bolstered by its failures precisely because failure teaches it how to succeed. Applied to China, how will it aid the property market and the economy more broadly if bad decisions are subsidized?

To which some will say an ability to limit the pain of bad decisions is evidence that government interventions do in fact work. Precisely because government can spend in order to mitigate the pain of bad, so can it soften the blow of Evergrande’s collapse by propping up same. The latter is a very debatable presumption (see below), but the presumption only speaks to what’s visible as is.

What’s not visible is what intrepid investors could achieve if able to acquire properties or resources on the fire-sale cheap. Economic growth is a consequence of investment in frequently unknown, untested, and potentially transformative ideas, but what’s unknown, untested and potentially transformative is generally expensive. It’s risky. This is important in consideration of bailouts. They limit the potential fall in prices, thus making it more challenging for the purchasers of troubled assets to take big risks. Investors quite simply have a lot more leeway to make audacious bets if they can buy distressed market goods for .25 cents on the dollar versus .75.

Worse, all businesses and entrepreneurs eager to rush a different, more vibrant future into the present must have access to precious resources (capital) in order to take the giant steps. Except that if government is providing an alleged “cushion” for a weakening economy, it’s by definition keeping precious capital in the hands of those who’ve abused it or misused it, as opposed to those interested in treating it better.

Stated simply, bailouts are always and everywhere an economic wet blanket. It’s been said here since 2008, but eventually it will be conventional wisdom that the interventions overseen by the George W. Bush administration and the Ben Bernanke Fed didn’t avert a crisis, rather they were the crisis. Absent their naïve meddling, 2008 is presently a year instead of an adjective.

Which brings us back to Evergrande. There’s more to its story than simple debt troubles. To see why, consider the currency denomination of so much of its debt. It’s in dollars. This speaks volumes, and most crucially does about the globalization of capital. While Evergrande is based in China, it’s apparent that the financing of its business endeavors is globalized.

On its own the above is a positive statement of the growing interconnectedness of the world economy, but it also speaks to the folly of “Beijing” attempting to cushion China’s economy. Good luck.

Indeed, assuming China’s economy is really contracting, rest assured that global capital intermediaries will pull from China’s commercial sector much more capital than Beijing can add. There’s no stimulus to speak of here. Money goes where it’s treated well, and if the markets have decided that Chinese producers are overextended, no amount of meddling by Chinese bureaucrats will alter this truth. All the leadership can do is slow economic growth by subsidizing what market actors will not.

Conversely, assuming the markets are wrong about growth prospects in China, rest assured that globalized financiers will know this far sooner than the high functionaries in Beijing. Put more simply, if there’s abundant potential for progress in China, copious funds from around the world will be there to finance it. Government cannot make great what isn’t.

Adblock test (Why?)



Source link

Continue Reading

Trending