Scrutinizing Those US Economic Numbers

Flurries of numbers shower Americans each month when the Bureau of Labor Statistics (BLS) unveils the latest economic data. The blizzard is left to the media and financial experts to interpret.  Too often, Americans are fed headline numbers and little else, instead of contextual clarity. 

Confusion has persisted about U.S. economic numbers since the Bureau of Labor began collecting and publishing employment and payroll data in October, 1915.  Over time, the methodologies and terminology have changed, adding to the public bewilderment.  

A looming presidential election likely will turn on economic issues, underscoring the importance of understanding the data.   Wall Street and the media appear to have little interest in peering beyond the numbers, based on current reporting and the rose-colored economic forecasts.

Amid the dizzying amount of economic data, here are some current headline numbers that are ripe for interpretation  

The pace of inflation is cooling.

The BLS reported inflation for August rose 0.6%, based on the Consumer Price Index.  The monthly increase follows 0.2% upticks in July and June. August numbers indicate that inflation may be heating up again. The government is quick to point out gasoline prices accounted for the lion's share of the gain.

The media dutifully reports the monthly data in headlines without the same attention to the 12-month change in inflation.  Prices have increased 3.7% since last August. That is higher than the 3.2% increase in July and 3.0% in June.  Clearly, inflation is proving to be stickier than experts forecast.

To justify the narrative that inflation is slowing, the media and Wall Street remind Americans the current inflation is lower than the 8.0% inflation rate for calendar year 2022.   True but hardly comforting to consumers. 

Whenever the CPI drives up inflation, the media and Wall Street turn to so-called core inflation, the preferred measurement for the Federal Reserve. Core inflation excludes prices for food and energy because of volatility.  Core inflation inched up 0.3% in August, which is 4.3% higher than August, 2022.

For average Americans, the core inflation number might as well be an unlisted telephone number.  Americans don't have the luxury of excluding energy and food from their budget.  

For further context, consider that inflation has risen 16% since January 2021, when prices roared at historic levels.  Most consumers cannot quote that number, but they know their household budgets have been impacted more than the 0.6% August increase.   

Workers wages are continuing to rise.

Americans' wages are riding an upward trajectory.   Beginning in April of 2021, wages and salaries have risen steadily more than 3.4% every month,  hitting 6.7% in July of 2022.  That same month inflation was 8.5%.  The latest available data for June shows wages and salaries climbed 4.7%.

February marked the first month since 2021 that wages grew faster than inflation, according to data compiled by Statista. 

For hourly workers, the wage growth has failed to keep up with inflation for most of this year.  June marked the first month weekly earnings rose faster than inflation.  The latest data from July revealed average hourly wages are up 1.1% on an annual basis.  

Hourly workers are falling further behind the inflation rate, which is the reason there are mushrooming demands from unions for higher wages.   

Rising wages is usually a positive sign, but inflation has made today's dollar worth less.  The BLS calculates that a dollar today only buys 88.6% of what it did in 2021. Inflation is sapping Americans purchasing power.  

Job growth points to a healthy economy.

The economy added 6.7 million jobs in 2021, the largest annual total in U.S. history. That was followed by an impressive gain of 4.5 million last year.  Year-to-date the economy has created 1.6 million jobs. That's a total for 12.8 million jobs in less than three years. An estimated 72% of the job growth represents jobs lost during the pandemic.   

Average monthly job growth has moderated this year, despite the addition of 1.6 million jobs.  The average monthly growth rate this year is 258,000 compared to nearly 400,000 last year.  In the most recent report, the economy added 187,000 jobs in August.  Job growth is decelerating.   

Last year's booming job market wasn't as robust as the monthly numbers published by the media.  That's because the BLS adjusts the figures each month.  The trend has been that the adjustments wind up reducing actual job growth.  The media usually downplays the data or ignores it.

For example, in March the BLS revised the job growth downward by 306,000.  Do you recall reading or hearing that number?  June and July numbers were reduced by a combined 110,000.  Over the last three months, the economy recorded a modest average monthly gain of 150,000 after adjustments. 

Unemployment is at historic lows.

In the latest report, the unemployment rate ticked up to 3.8%.  The rate inched up from July's 3.5%.  That still reflects a healthy job market.  However, the BLS headline number for unemployment rate is just one indicator of employment.  And it may not be the best. 

A person out of work may not be counted as unemployed. The BLS unemployment figure does not include the following: 1. Millions of so-called discouraged workers. 2. The underemployed--part-time workers who prefer a full-time job. 3. Those who don't have a job but claim they have looked for one in the past four weeks.

To get an honest picture of the employment landscape, the BLS publishes a U-6 unemployment figure that measures the total number of employees who are part of the labor force, but without a job. For example, the U-6 rate was 7.2% in August, slightly higher than the July figure of 7.1%. 

However, you will never read or hear about the U-6 data because it is entombed  in rows of tables that are included in the monthly BLS unemployment report. 

By now, you may be shaking your head and asking: "Does any of this really matter?"  This writer believe it does.  We are a nation of economic illiterates, unfortunately.  (Excluding of course you dear reader.) That matters when the economy is the top issue with voters in most years.

Americans don't have to be economic experts.  But an informed voter is best for our democracy. And the media and Wall Street are flubbing their responsibility to provide context and interpretation to help Americans digest the government data.

Nearly Guaranteed Top 12 Predictions For 2023

No one is shedding a tear over the end of 2022.  Sharp inflation. Record food price hikes. Highest ever gasoline prices. Worrisome product shortages. Rising interest rates. Steep stock market losses. A porous border. Runaway federal government spending.  War in the Ukraine.  Good riddance to 2022. 

No even Nostradamus could have predicted the gloom of 2022.

When the calendar flipped to 2023, forecasters with short memories are peddling cheery news about everything from the stock market to inflation.  Optimists claim the new year will make Americans forget 2022.  Not so fast.  My occasionally reliable, highly unpredictable crystal ball is blinking red.

1. The country sinks into a recession, as predicted by a majority of economists and large banks.  The Gross Domestic Product (GDP) will be negative for at least two straight quarters this year.  The Biden Administration will avoid using the "r" word, referring to the crisis as a "temporary retraction." 

2. The economy will shed 1.1 million jobs as more major companies in the technology sector and big firms are forced to layoff employees in the face of less consumer spending.  First time unemployment claims increase each month.  Expect the unemployment rate to climb to 4.5% by year's end.

3.  Adding to the economic woes consumer credit card debt and personal loan delinquencies surge in the new year.  Consumers have been on a spending binge the last two years seemingly immune to inflationary prices.  A consumer retrenchment will negatively impact corporate earnings. 

4.  After the worse market since 2008, equities managers are clinging to history that shows markets tend not to experience two negative years in a row.  Equities bounce around early on before gaining momentum. Stocks finish the year strong with the S&P (+20%) outperforming the NASDQ and Dow. 

5. Home sales will reach their lowest point since the 1980's as interest rates make real estate less affordable, especially for first-time buyers. The good news is that the overheated increases in prices will abate except in a few markets where demand for high-end homes flourishes such as Texas and Florida.

6. The Federal Reserve, as promised by Jerome Powell, will continue to raises rates in the new year as inflation persistently refuses to fall lower than 5.8%. Food and energy prices leap higher than the CPI. Eventually, Fed hikes dampen growth, prompting Powell to forego a rate hike in fourth quarter.

7.  COVID infection rates soar past 70% in China after the Communist nation abandons its COVID Zero policy. New highly infectious variants develop as the virus rages, killing 1 million Chinese.  Chinese travelers spread the virus globally, leading to worldwide outbreaks.  

8. The Supreme Courts ends its temporarily halt of Title 42, which allows the expulsion of illegal immigrants under pandemic-era restrictions. The move unleashes a torrent of border crossings, prompting the forced resignation of Alejandro Mayorkas.

9. More fast food restaurants will join the robot revolution as testing by Chipotle, White Castle and others proves diners are satisfied with food prepared by robots.  The fast food industry will move quicker to adopt robots and AI as wage increases and the difficulty hiring workers persist.   

10.  The collapse of FTX Exchange, once a $32 billion enterprise, prods the Securities and Exchange Commission (SEC) to issue regulations for the cryptocurrency industry.  As more crypto exchanges and lenders file for bankruptcy, the new rules clamp down on the industry, softening currency demand.    

11.  The Chinese will not launch an invasion of Taiwan instead increasing menacing militaristic tactics to cower the island.  When the U.S. fails to intervene, China finds an excuse to encircle the island with a naval armada.  China threatens a blockade unless Taiwan makes concessions.  

12. Trying to speculate on Putin's strategy in Ukraine is a fool's pursuit.  But the most likely scenario is the European Union will push for a settlement as energy supplies dwindle, sapping economic growth. Ukraine is pressured into a diplomatic solution when EU/US commit billions to rebuild the country.   

Print this column and wave in your prognosticator's face at the end of 2023.  However, if you have your own predictions you would like to share, I would like to read them.  After all, the prediction business is full of people who get it wrong every year.  And that has never stopped anyone, including me.  

The American Job Machine Purring

Nattering nabobs of negativism cloaked in coats of doom croaked like frogs when the American jobs figures were released this month.  The economy added "only" 75,000 jobs in May, they grouched.  Ersatz economists, media carpers and political pundits forecast the demise of the economic revival.

The scale of deliberate deception would make Herr Joseph Goebbels blanch.  Despite the collaborative clamor, rumors of the death of the economic recovery are greatly exaggerated.  If you doubt it, spend a few minutes delving behind the job numbers.  No media person will do it.

As a primer, job additions are a popular test of the country's economic health published monthly by the Bureau of Labor Statistics (BLS).  It tracks the total number of people being paid for work.  Often it is misinterpreted as a measurement of how many jobs industry and government created.

With that perspective, scrutiny of the May data reveals a very different interpretation than what has been offered by the cynical skeptics.  Here is an abbreviated version of what is happening: America is running out of qualified workers for an expanding number of jobs.  

The data confirms the economy is soaking up most of the labor pool, including many who had given up looking for jobs. In the last 12 months, the number of involuntary part-time workers has declined by 565,000.  That means people who were forced to work part-time, have found full-time jobs.

Since the end of the 2016, the unemployment rolls have thinned by 1,667,000 in 17 months.  The unemployment rate at the end of May stood at 3.6 percent, the lowest in 49-years. Unemployment for minorities, African-Americans (6.2%) and Hispanics (4.2%) are at historic troughs.

Only one demographic continues to experience stubbornly high unemployment: teens aged 16-19.  Unemployment averages 12 percent.  It is no coincidence they are the least educated and most unskilled in the labor force.  Fewer job opportunities exist for this group in the new economy. 

The government calculates there were 7.4 million job openings at the end of April, the latest available data.  It marks 14 consecutive months with more job openings than unemployed people.  Further evidence that there are just not enough workers to take advantage of the sonic boom in jobs.

The Labor Participation Rate, a measurement of the people aged 16-to-64 employed or seeking work, has nudged up to 62.8 percent, compared to 62.4 percent at the end of 2016.  Robust hiring has increased the size of the American workforce by 395,000 in 17 months.

According to BLS statistics, the economy has added 5,892,000 jobs since 2016.  During the previous eight years (96 months), job growth was 10,389,000.  This is an apples-to-apples comparison because the same government data source was used to calculate both figures.

To comprehend job additions, it helps to understand the derivation of the number.  The BLS tallies total hires and subtracts the job separations, which includes layoffs, firings, retirements, and employee resignations.  Total separations have remained flat while hiring has expanded.

Prophets of doom rushed to judgment on May figures.  Logically, it is an aberration.  The average monthly measure since the first of the year has averaged 164,000 jobs.  Historically, job growth figures between 100,000 and 150,000 represent a positive trend for the economy. 

The denizens of darkness have seeded the media with propaganda that low-skilled workers have been left behind.  The New York Federal Reserve has reported that for the first time in decades, it is harder to find blue-collar workers than white-collar prospects.  Low-skilled workers are in demand.

May wages for non-supervisory workers jumped 3.4 percent.  This marks the 10th consecutive month of rising pay after a dismal stretch of eight years when wage raises never attained the three percent level.  Wages rose for workers in hotels, restaurants and retail, traditional low-paying jobs.

The chronic complainers incorrectly claim job openings are mostly low wage opportunities.  Not according to the New York Fed.  Their data validates that average starting wage for full-time employees hiked from $58,035 last November to $66,415 in March, the most recent figures.

In review, job creation is pulsing.  Unemployment is sinking.  Wages are swelling.  Labor participation is ascending.  More people are joining the workforce.  More jobs are going unfilled, because hirings are depleting the labor pool.  So what's the beef about May's one-month snapshot?

The current economic surge has proven beyond a doubt that everyone, the under employed and professionals, benefit from roaring growth.  Unlike wealth redistribution and government handouts,  economic prosperity fuels competition for employees, which advantages all American workers.

Democrats: It's the Economy Stupid!

Not even one of the 236 Democrats in the House and Senate voted to cut taxes in last year's legislative showdown. Hardheaded Democrats believe their stonewalling will be rewarded at the polls in the mid-term elections.  Apparently, they have forgotten the mantra of Bill Clinton.

During his first presidential run, Mr. Clinton was reminded daily by his handlers that voters really cared most about the economy.  It didn't mean Americans weren't concerned about other issues.  But they voted with their wallets.  Thus the theme "It's About the Economy Stupid!" was born.

Judging from their trashing of the Tax Cut and Jobs Act of 2017, Democrats apparently are living in some alternative universe where voters are more worried about deficits, Obamacare, gun laws, opioids or unisex bathrooms.  They have seriously miscalculated.  And Democrats will pay for it.

Recent polling by the Gallup organization lists economic problems as the single most important issue by a wide margin. Yet Democrats are betting voters will believe their fatigued narrative that only the rich will benefit. They think Americans are too dumb to notice the increase in their paychecks. 

Democrats are employing their dogeared political playbook, advocating for the issues of healthcare, the environment, gun control, race relations and LGBT rights.  They are out of touch with most Americans.  The Gallup Poll of Americans nationwide illustrates their folly.

Only eight percent of Americans think race relations is the most important issue.  Five percent mention healthcare, three percent the environment, one percent gun control and one percent gay rights.  By comparison, 17 percent of people surveyed tick the economy as the top issue.

The party's position on tax cuts has undergone a radical metamorphosis over the last 50+ years.  Once Democrats were at the forefront of the tax reform effort.  For instance, President John Kennedy championed one of the largest tax cuts in history which became law in 1964.

Under GOP President Richard Nixon, Democrats Ted Kennedy and Walter Mondale led the effort to slice taxes in 1974.  More than 20 years later in 1997, a reluctant President Clinton signed a tax cut bill that was shepherded through Congress by Republicans.

Despite Mr. Clinton's disappointment, 201 Democrats in the House and Senate joined Republicans in approving the measure, known officially as the Balanced Budget Act of 1997.  Earlier in his eight-year term, Mr. Clinton had spearheaded a legislative effort to hike taxes.

Even in 2003 when President Bush campaigned for a tax cut package, nine Democrats signed on to the legislation. Democrats' support for tax breaks has now dwindled to zero.  Virtually every Democrat who has campaigned for office in the last eight years has supported raising taxes.

Democrats are under the illusion that Americans will overlook last year's vote on tax cuts when the mid-term elections roll around in November.  It is a risky proposition for a party that will be defending 23 seats in the Senate, plus two held by independents who caucus with Democrats.

In comparison, Republicans will have eight Senate seats on the ballot. All 435 seats in the House will be up for grabs.  If past elections are any guide to the future, Americans are normally reluctant to change parties when the economy is good.  And right now America is experiencing a boon.

About 1.7 million jobs have been added since Mr. Trump became president.  Unemployment has fallen to its lowest rate in 17 years.  The unemployment rate for African-Americans, which zoomed as high as 16.8 percent under Mr. Obama, has dipped to 6.8 percent, the lowest since 1972.

The Gross Domestic Product (GDP) has topped three percent in the last two quarters.  During Mr. Obama's tenure, the GDP never reached three percent, widely regarded as the number indicating healthy economic growth.

The stock market is rocketing into new territory, setting record closes 17 times last year.  (Remember when Democrats credited Mr. Obama for stock market gains during his tenure?)  Since January of last year more than $5 trillion in wealth has been added to the U.S. economy. 

Peevish Democrats ignore the economic news at their own peril.  Their answer is to point to polls that show Mr. Trump's popularity ratings are in the dumpster.  Popularity contests are for chumps.  The most accurate polls are overwhelmingly in Mr. Trump's favor.

Consumer confidence soared to a 17-year high in November.  Similar indices for small and big businesses confidence are rising.  Consumer and business confidence are a more accurate measure of the mood of the country than polls about personality popularity. This isn't high school.

This year's election likely will be a referendum on the economy. If it is, Democrats will rue the day they voted against tax cuts designed to lift the economy and create jobs.  With their ballots, Americans will remind Democrats that it is still about the economy STUPID.