I have to admit, I’m not enamored with the spin the White House is putting on the incoming inflation data.
“We have been using every tool at our disposal, and while today is a reminder that Americans’ budgets are being stretched in ways that create real stress at the kitchen table, there are also signs that we will make it through this challenge,” Joe Biden said, in a statement following the release of January’s CPI report.
So far, so good. Americans are, in fact, experiencing “real stress” when it comes to rising prices for necessities, and it’s nice the White House acknowledges as much in unequivocal terms. And I’d actually venture to say Biden understated the case when he said there are “signs” the country will persevere. That is, of course America will “make it through” 7% inflation. It’s not the end of the world, although for lower-income families, it could be financially ruinous if it persists for too long.
The problem is the spin. Or, more accurately, the juxtaposition between a president who holds himself up as a no-nonsense, plainspoken Everyman, and any kind of spin on a core issue for Main Street.
Every president has to lie. About national security. About the economy. And about God only knows what else. But coming from Biden (who, by all accounts, including pre-Trump testimonials from Republicans, actually is the genuine article when it comes to caring about everyday people), the following excerpt (from the same statement about January’s inflation data) was needlessly disingenuous:
While today’s report is elevated, forecasters continue to project inflation easing substantially by the end of 2022. And fortunately we saw positive real wage growth last month, and moderation in auto prices, which have made up about a quarter of headline inflation over the last year. We separately saw good news with new unemployment claims continuing to decline. That’s a sign of the real progress we’ve made in getting Americans back to work over the last year.
First, forecasters have been disastrously wrong on inflation. Even if there’s every reason to believe they’re right about 2022, they currently have no credibility. It’s time to stop citing them. Or at least if you’re the president it is.
By mentioning economists’ inflation forecasts, Biden is undermining his own message. Better to just tell the unvarnished truth: By and large, economists were wrong. We can still hope they’ll ultimately be vindicated, but in the meantime, we need a plan that goes beyond hiking interest rates, because the only way that can work is through the expectations channel or through efforts to engineer demand destruction. The former is grasping at straws given the general public’s obliviousness to what it is the Fed does. The latter is suboptimal because it’s a euphemism for deliberately plunging the economy into recession.
Second, Biden’s “positive real wage growth last month” was a meager 0.1% rise in inflation-adjusted hourly earnings. Real average weekly earnings declined (shorter work weeks) and real hourly earnings dropped markedly on an annual basis. Just like they did in December. And in November. And so on (figure below).
Additionally, real average hourly earnings for nonsupervisory roles were flat in January. Obviously, they’re negative on a 12-month basis. The inflation-adjusted hourly wage for non-management roles was $9.71 last month. It was $9.84 in January of 2021.
That’s the harsh reality that Biden needs to address. Not a rounding error in the MoM top line print.
He went on to deliver a series of perfunctory promises about rebuilding the country’s infrastructure and bringing jobs back. (Sound familiar?)
The point isn’t to castigate the Biden administration, rather to highlight the incontrovertible fact that it’s not going particularly well. There’s a reason why the president’s poll numbers are down. Maybe we can blame Joe Manchin and his Maserati Levante. But we can’t blame The Taliban anymore. They don’t have anything to do with it at this point.
To state the obvious, it’s great that the US economy has added so many jobs over the past year. But let’s be honest: Employers are desperate for labor. They’ll hire anyone willing to put on a name tag. The latest JOLTS data suggested there are 1.7 open jobs for every unemployed person in the country (figure below).
With apologies, claiming credit for job gains when the labor market has never been so short of workers is wildly presumptuous.
I’ve mentioned this previously, but I’ve been compelled of late to venture off the island where I reside to shop at large chains because local grocery stores are struggling to keep the shelves stocked. It’s plain to me, based on those excursions, that reports of businesses struggling to find workers aren’t exaggerated. Not even a little bit. I assume that’s plain to everyone else too.
On Thursday, one netizen suggested (tacitly) that I was somehow a traitor to the Progressive cause for pointing out that electricity prices just posted the second-largest MoM increase in the history of the government’s data series. Apparently, anyone who wasn’t enamored with America’s experiment in autocracy under the former president is duty-bound to pretend Biden’s economy is working when it isn’t.
Denying reality, relying on forecasters who’ve been wrong repeatedly and taking credit for outcomes that were foregone conclusions, isn’t going to foster trust among a skeptical body politic.
The last election proved, beyond a shadow of a doubt, that tens of millions of Americans are, unfortunately, unable to discern the difference between truth and lies. We also know that a subset of those voters are ready and willing to submit to autocratic rule by a reality television host. That’s highly unfortunate. But it is what it is. If we want to shepherd those folks back to reality, a good start would be eschewing the temptation to insult what little intelligence they have by spinning objectively poor economic outcomes as something other than what they are.
“Here’s the deal,” Biden might begin. I’ll leave it to his speech writers to come up with the rest.
Refreshing to see Paul Krugman, a Nobel Prize winner, admit he was wrong about inflation; a bit nonplussed, though, when he asked — rhetorically — What do we do about it?
Yes! Telling the truth is the only way to save democracy. Populists and autocrats will always be better at telling lies.
That is the problem- he is leaving it (the statement to the American people) to his PR people and his speech writers.
“Truth’s a dog must to kennel” is the autocrats creed. H and Nicolas H are spot on in that Spot needs to run free.
Perhaps not the goal, but Putin couldn’t have engineered a better situation to get sanctions lifted on iran.
My not so scientific and small sample in Brooklyn suggests more folks are coming back into the labor force- I have bumped into more than one person who has been on the beach and is now looking at or interviewing for new jobs. Today’s print was ugly and the stock and bond markets reflected it but things are going to change, and change pretty quickly. Growth is going to slow quite a bit in the next 3-6 months and inflation will as well. We may not get back to 2% inflation- it may be 2.5% or so, but things will be getting better. There are several structural changes related to supply chains/inventories and trade barriers and tariffs that have permanently changed. These will keep inflation a bit higher than typically experienced since the 2000s. But the labor shortage is going to moderate. Housing prices are going to normalize in the near future as well- between the eviction moratorium expiring, and the fact that the supply of new single family homes and condos is rising will also adjust that market. The car market is also starting to see adjustments. The labor market, cars and housing are 3 large markets that affect prices greatly. Given the way that CPI is calculated with OER (owners equivalent rent) in particular a lagging indicator- it may take some time to see it on the prints but it is coming. I can also tell you that here in NYC, we are starting to feel the change in the pandemic. My own experience is showing that subway ridership is up and folks are going back to the office. That will help normalize things quite a bit in urban areas……both on the supply and demand side of things.
All good points, and as a resident of NYC I’m also seeing many of the same things you’re seeing. But I don’t think we print 2.5% on the CPI till 4Q — and for the Dems, that’s probably too late. Over the coming months, expect to see lots of jaw-boning from the WH urging the Fed to move faster and more decisively.
2.5% is going to be later. Yes it won’t help the Democrats this go around. The Democrats have another 3 months to pass some priorities and get more judges appointed. After I would expect that Biden’s priorities domestically will largely be on hold. This is not so startling as mid-terms are usually bad for incumbents. It looks like the Democrats will need to play the long game- 2023 could easily be a recession with a bounce starting later that year or in 2024. I expect the Republicans are going to overeach and the Democratic party could come back at that time. It is all idle speculation at this point anyway. NYC and coastal areas should do better as long as covid does not rear its ugly head. The kids are coming back to urban areas again and the natural ebb and flow of population shift will work its magic. We saw it after the 9-11 and many other events here.
Biden seems to have a gaslighting problem. When faced with harsh truths he lies through his giant shiny teeth rather than deliver reality to Americans. When the Afghanistan exit went horribly wrong he blamed the victims who are now being systematically hunted down and killed. The same people who helped us over our 20 year campaign there that, were supposed to be given visa opportunities, were left to fend for themselves. Blaming them for not getting out early enough is complete gaslighting. Now the inflation reads are horrible, his economists misjudged them, and he’s sitting there pretending like things are great. Things are not great, they are setting up for a terrible year. Him sitting up there smiling and pretending like they will be good now is going to kill his party in November.
Jobs; Amazon raised it’s max wage for IT workers to 350k. There are over 23k open positions in that space on their site. I threw my resume at their job finder tool and was immediately rejected. I have the skills and qualifications to at least be considered for an interview for many of their jobs. It seems like the jobs dearth is a problem of HR automation systems rather than appropriate talent applying to open positions. I know of several other candidate experiences over the past couple of years from qualified workers being rejected for openings. It’d be interesting to get a data set on rejected qualified applicants and what caused that rejection to occur.
Either way, 11M open jobs or no, the wage increases signal permanent inflation, in my opinion. That means the Fed has already missed the boat on preventing all of the current inflationary effects in play remaining permanent, as was their stated objective. If businesses are recognizing they have to increase wages, those wage increases will be almost impossible to claw back later, that sets a baseline level of inflation increase staying permanently in place. And again, I have to ask why in the world did Biden re-nominate Jerome Powell, the Fed chair who dismissed inflation 6 months ago and still hasn’t taken any real action to try to reduce it? You hate to see when people fail up.
” why in the world did Biden re-nominate Jerome Powell, the Fed chair who dismissed inflation 6 months ago and still hasn’t taken any real action to try to reduce it?”
I laugh as this question is written in a forum that, not too long ago, consistently praised the prudence and patience of a Fed trying to wade through a once-in-a-generation crisis, and the mayhem that the data is because of it.
Political spin has now entrenched itself in the Fed conversation (thanks to inflation) and now the entire conversation will carry the same tone and flipflopping that modern political discourse does with every other long term issue that all want to throw quick fixes at. Shame.
Laugh all you like, I was complaining about the Fed’s “transitory” narrative 6 months ago. Data was available in MAY of last year that indicated inflation was coming and that nothing was going to stop it. So for all of this data driven narrative the Fed and Federal government claims to be using it’s wrong. It seems being data driven in and of itself isn’t very valuable if you’re not sourcing the right data. Regardless, the Fed is still behind on its data and it has done nothing to rectify this gap in forecasting. The transitory narrative was wrong, the inflation will not be permanent narrative is wrong, and the economy will do well this year narrative will also be wrong. How many times does the guy have to be wrong before it reflects on his performance?
https://www.washingtonpost.com/opinions/2021/05/24/inflation-risk-is-real/
https://www.cnn.com/2021/06/10/economy/may-consumer-price-inflation/index.html
https://www.nytimes.com/2021/05/13/upshot/inflation-is-here-what-now.html
https://www.barrons.com/articles/inflation-is-here-and-rising-51621025783
https://think.ing.com/articles/us-inflation-to-the-moon/
https://www.ft.com/content/5d2aef18-e9c4-486a-8323-c5fc6addf5f7
https://www.bloomberg.com/news/articles/2021-05-12/-transitory-u-s-inflation-pressures-seen-lasting-for-months
https://www.forbes.com/advisor/investing/inflation-worries/
There are literally 10 pages of articles written between April and June of last year about inflation and the possibility that it could be longer term due to supply chain issue carryover from 2020, the Chinese energy crises, lack of employment, and the Evergrande debacle. Exactly where are they sourcing their data from? Stone tablets??