Resurrecting A Failed State

The week ahead features the first monthly payrolls report since Joe Biden assumed the presidency.

The market is looking for a marginally positive print following December’s disappointing report, which showed the first monthly decline since April.

You’re all familiar with the narrative. The labor market decelerated, stalled, and finally slammed into reverse last month, mostly due to ongoing malaise in the leisure and hospitality industry, which lost nearly a half-million jobs.

Restaurants and bars are still suffering mightily under the strain of pandemic restrictions and a generalized reluctance on the part of some would-be diners and patrons to engage with high-contact businesses.

Of the nearly half-million jobs lost in leisure and hospitality in December, 372,000 came in restaurants and bars. That hurts (figure below).

There are tentative signs that things could be turning a corner. Andrew Cuomo plans to reopen New York City indoor dining at 25% capacity on Valentine’s Day, for example. Is it enough to save beleaguered restaurants? Well, no. But, as Cuomo put, it’s better than nothing.

Jobless claims suggest ongoing suffering, while consumption recently weakened. December’s income and outlays data offered a bit of hope.

Biden’s stimulus plan is running up against predictable GOP resistance. While efforts to craft bipartisan alternatives are ongoing, it seems just as likely as not that Democrats will be forced to forge ahead without Republican support if they plan to pass what the White House considers to be crucial elements of the proposal.

Donald Trump’s Senate trial is an unwelcome distraction and in the House, I’d simply suggest that some GOP lawmakers need to be removed, as at least two (and that’s a generously low tally) have proven, beyond any doubt, that they have no business whatsoever in government.

Jen Psaki insists things are still proceeding apace. “We’re actually pretty hopeful and optimistic about the opportunity and the ability to work with Democrats and Republicans to get packages through to help bring relief to the American public,” she said last week.

Still, Biden knows all too well how challenging it is to break through the ice in D.C. politics, which America (correctly) identifies with greed, corruption, and gridlock. The tragicomedy of the Trump administration was that the former president capitalized on public disaffection with “the swamp” only to dial up the greed, corruption, and gridlock to a Spinal Tap-ish “11”. That effort is ongoing. A Friday filing with the Federal Election Commission showed Trump and the RNC raised $86 million from November 24 through December 31, as Trump blitzed supporters with propaganda and false claims.

“Most of the money Trump raised through WinRed, some $68 million, flowed to Trump Make America Great Again, which is supported by small-dollar donors and splits the contributions between Save America, the political action committee he started after the election, and the RNC,” Bloomberg noted, adding that “a solicitation to his donors for Trump Make America Great Again, made on January 6, the same day his supporters stormed the US Capitol, said 75% of small-dollar donations would go to Save America, with the rest going to the RNC.”

Despite the tragedy of it all, you almost have to laugh at the sheer brazenness inherent in Trump’s message. Something like this: “Whatever you can spare would be great. I need to ‘Save America’ because, as you may have noticed, some guy just nearly destroyed it.”

Biden’s extensive experience on Capitol Hill could plausibly be described as an advantage when it comes to actually “saving America.” That’s certainly how he sought to frame things when he insisted, on the campaign trail, that he could work across the aisle, in many cases with people he’s known for longer than some House members have been alive.

At the same time, though, the nature of the partisanship in D.C. is different these days. The “bitterness” of yesteryear means something totally different post-Trump. For lack of a better way to describe the situation, some in the GOP are stuck in a dangerous personality cult. House minority leader Kevin McCarthy is among them. He met with Trump last week to discuss… well, who knows what they discussed, but officially, they strategized about taking back the House in the midterms. Trump also spoke to Marjorie Taylor Greene. Greene, of course, faces calls for expulsion for a list of grievances so long and so heinous that I’ve generally steered clear of enumerating them on the (probably misplaced) hope that Republicans will eventually be forced to join Democrats in the push to expel her from Washington.

One gets the uncomfortable impression that, once “enough” time has passed since the Capitol riots, Trumpism will be re-embraced by additional Republican lawmakers. It would be naive to think that pro-Trump sentiment within Congress won’t eventually translate into outright, vitriolic opposition to Biden’s agenda, not on the merits, but out of fealty to Mar-a-Lago’s despot-in-exile. On the other hand, Trump’s second impeachment in the House did made it clear that at least some GOPers will never back him again in any fashion.

The hope is that the initial sprint to pass more virus relief and get Americans inoculated against COVID can be accomplished while the memory of the Capitol riots is still fresh enough to stymie Trumpism on the Hill (if only because it will be at least another few months before lawmakers who haven’t completely abandoned their senses go back to supporting the “movement,” for fear that doing so now would make them radioactive).

In the near term, the economy is a semblance of stable. But, again, the momentum is either fading or lost even as PMIs continue to suggest the potential for a robust recovery exists. GDP was a slight downside miss last week and personal consumption was disappointing, although, as alluded to above, the trajectory appears to have improved in December.

Also on deck in the new week: ISM manufacturing, ISM services, and a bevy of Fed speakers.

I suppose I would just add that if the jobs report again shows losses in the services sector, that would bode poorly for spending going forward.

As much as politicians on both sides of the aisle have demonstrated an affinity for the notion that good, high-paying “Made in America” jobs can somehow be created quickly (for Trump it was “just” a matter of resurrecting long-dead industries and for Biden it’s “only” a matter of convincing Congress to get behind spending trillions on infrastructure and green energy), the “here and now” reality is that America depends on a self-referential loop defined by people providing services for meager wages and then consuming them from economically identical people on their days off.

That loop is still disrupted. And there are only so many hammers Americans can buy.


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