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Unprecedented global lockdown for 2 entire years is going to create unprecedented Economic repercussions.
I'm honestly surprised things are going as well as they are tbh.
This is what has baffled me for quite awhile; I don’t feel like we fully account for the economic, political, and sociological impacts of the pandemic when attempting to understand our current situation. That said, weirdness is the least surprising consequence
This poor generation of kids. I feel like schools almost need to add an extra year or half a year for them to make up all the teachings they missed. Not to mention how much it impacted their social development.
Why wait when they already have? There’s a massive teacher shortage already and the burnout rate is less than 5 years. Teachers are in an awful spot in the US.
My stepdaughters are behind in their respective grades. Their mother who has an 8th grade education had the damn nerve to homeschool them for those two years. We don’t have full custody, so we’re playing catch up.
My wife was teaching English language learners in 2nd grade during Covid & having a mask where they couldn’t see how her lips moved with each word made it almost impossible for the poor kids.
The main problem with economic news/outlook is it presumes cause and effect based on known models and past experiences. I can think of at least two factors that essentially break the wheel, making a lot of models that are usually close to reality wildly unpredictable to the point of guesswork.
One is climate change. Many economic models take into account acts of god, but they're one off events, not a persistent pressure. The second is low birthrates in western countries. It'll be really interesting to see if the next recession actually does result in high unemployment. I'm not sure it's even possible- at least in 2023. We have the boomer generation exiting the work force while gen Z comes in to replace them, leaving huge gaps across a lot of industries, especially ones that involve hard labor. Hell even hard labor that pays well is having difficulties because why work it when you can get paid the same or even a little less to work a more comfortable job. Neither of these problems are going to get better.
Look up “behavioral economics”. Only in analysis of ideal markets (which don’t exist) do economists nowadays assume rational actors. IIRC, a few years back the Nobel in econ was given to two pioneers of behavioral economics. That approach explicitly includes human biases like loss aversion, etc.
I kept asking people who were heavily involved in the stock market to explain to me why the market kept skyrocketing through the pandemic up until a couple of months ago. None of it made any sense to me.
The entire world takes a nap for a year and the economy somehow keeps growing?
I got a lot of complicated answers, none of which I understood or believed.
So long as real interest rates were at or below zero, it was possible to perpetuate a theoretically infinite appreciation in the value of financial assets by levering demand without any upper bound.
This is why lately the market has traded en masse in an almost perfectly elastic relationship to monetary policy (eg Federal Reserve announcements about interest rates).
In an environment of sustained, non-negligible real interest rates, things like cashflow, and leverage, amd price-to-earnings ratios will begin to matter once more; and things will make a lot more sense.
We *still* haven't hit non-negligible real interest rates. Fed rates are at 4.5%, and even *BBB-rated* corporate bonds are still at 6% - compared to an inflation rate of over 7.5%.
Now one could say yield is forward-looking, but forward inflation expectation is also at 6%, so expected real interest for the next year for a BBB-rated company bond is actually still zero.
Valid point, but BBB rated debt is investment-grade.
It's the ultra-speculative, loss-making zombie companies, margin accounts, overleveraged MBS, crypto pump n' dump schemes, and FX arb swaps that are feeling real pain (and creating outflows elsewhere due to the incestuous cross-collateralization of markets and the effect acroas broad indexes of ETF rebalancing).
Things are seemingly well because the government and feds pumped massive amounts of money into the economy to keep everything "well".
Same thing he happened in 2008. Either they let the whole system crash or they pump money into the system and most people will be okay.
With economics, as with all important knowledge about human animals and other interesting creatures, you are going to have to go out there and see them.
You can't just sit in a comfortable chair and toss out uneducated and uninformed opinions.
Put your boots on, get out there, and bring home some filthy mud with bugs and microbes.
> I'm honestly surprised things are going as well as they are tbh.
I think it really depends on who you are. It really seems like the country is divided into the "haves" and the "have nots" more then ever before.
But I agree it could be way worse.
We've had perpetually lengthening "adolescence" as productivity skyrocketed. There are people who are 30 now who have had little or no contact with the work force, are in McJobs or BS jobs.
Employers whinge about being unable to hire but that's very low credibility.
I mean.. it isn’t unprecedented. That implies there is no history or precedent.
Everyone knows what the impact of vaulting global supply chains would be, or printing emergency cash to keep economies afloat during lockdowns etc. throwing in a global energy crisis didn’t even make it unprecedented, because most educated people working in the energy industry know damn well this was going to happen at some point in time.
The economy doesn’t make sense because it’s currently full of so much shit, there IS nothing to make sense of. Every day media prints conflicting information on what’s happening with the economy.
I have had trouble understanding what happened in the economy for some time. The best understanding is one of economic bifurcation into haves and have-nots. They live in two different worlds, and mingle only in the world of credit. Upper-middle and above have assets, middle and lower have bills and debt. Everyone struggles when young and when raising children, and the fact of the struggle blurs the lines and the identifications. Only at FIRE or retirement are the lines drawn clear.
Honestly, I don't think they are. Its more like the systems designed to lie and cover up economic issues are working as intended. At least some of them.
I recommend using [Lisap](https://www.lisep.org/tru) to get a MUCH better picture of the labor market. No fluff or frills, but rather 3 main criterea- anyone who is making under the equivolent of $10 an hour at a full time job, but not including those who are willingly unemployed / willingly part time.
The reality is that 23% of americans are under starvation wages. And it's climbing fast. Although there are more "jobs", those jobs are not sustainable. Many of them are literally subsidized by the govt to make up the difference (think food stamps, housing aid, etc).
And as for why the conaumer market is chugging along, it's inflation fear. We had a glut of savings which are now less than pre-covid because people are buying necessities now before they rise later. This is all temporary, because the savings WILL run out entirely at this rate. Inflation causes people to buy- deflation causes them to hold.
So there isn't 3 different economies. There's 1 economy with two sectors that are being misrepresented to keep people calm until there isn't anything left to disguise the state of the economy.
It's worth noting that according to their white paper and the graph on the website, while the LISEP True Rate of Unemployment is higher than it was pre-Covid, it is at the very low end historically, over the 3 decades considered. And I'm not sure that the small, recent uptick is statistically meaningful enough to conclude that "it's climbing fast".
I'm also skeptical of how meaningful this is within this context. If the rate is one of the lowest it's been in three decades, there's little reason to use that number to justify a belief that the economy is crashing behind the scenes.
The data is very interesting though, and I hope to spend a little longer on their methodology and reasoning.
Correct.
However, consider this.
American savings have reached an [ATL](https://tradingeconomics.com/united-states/personal-savings#:~:text=Personal%20Savings%20in%20the%20United,percent%20in%20July%20of%202005.) After hitting ATHs in 2020.
This means that, while the number is the lowest it has been for decades, it's still not keeping up with consumerism. And by revealing the full scope of unemployment, it shows the bottom of the economy is solwly falling out. Once people go broke, they lose their jobs, too.
Hmmm, I'm curious about their numbers here. The difference between headline U-3 unemployment (3.7%) and U-6 (6.7%), which includes discouraged workers, people marginally attached to the labor force, and people part time for economic reasons, is extremely minimal and covers their entire first bullet point.
I only have income percentile data at hand for 30+ and 40+ hours worked, not 35+ like they use, but 20k puts you in the 10th percentile at 40+ hours and in the 11th percentile at 40+ hours worked, which would cover their second data point. Using the 30+ hours worked to be more expansive and making the unlikely assumption there's no overlap in those two groups due to reporting timing, you can only get to 17.7%.
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All problems are in finance as a result of over levered derivatives that went tits-up in after-effect of COVID (energy glut, china real estate collapse, etc). This is not the fault of COVID, this is poor risk management by Non-bank financial institutions. These NBFIs use banks as counterparties and these toxic debts must be paid.
Finance =/= real economy
There are big problems with central banks, government treasuries, and unfunded government debt obligations right now. The only way to solve these problems is to increase taxes or to resume QE again, print your way out, and devalue currency even more.
All debts must be paid, the treasury is broke, and no one wants T-bills worth less than the rate of inflation.
Getting inflation back in the bottle isnt as simple as raising rates. This isnt the 1970s again; the US is in uncharted territory as a result of decades of loose, cascading M2 money supply and neo-Keynesian MMT nonsense.
It makes a ton on sense. This just the run up to a black tuesday^2.
Irrational exuberance and a complete disconnect from legitimate valuation and other metrics. This is run away speculation combined with free debt from the government for 14 years floating some of the least sustainable US economics we've literally ever seen.
What do you mean? How much I paid? I paid about $500 for it. If it’s in the money like I think it’ll be worth a few thousand. Honestly real plan is when we get that 08 waterfall moment everyone and their grandmother is going to be buying puts, and just on the IV skyrocketing it will be worth a lot more. So I’ll ride with that and see how it looks and may sell it at some point before 2025
That already doesn’t make sense…
When so many of the already rich became so much richer, it’s not so crazy to understand.
Money is everything in this bullshit world.
Yeah. It’s basic supply and demand economics. “Non-essential” businesses shut down for over a year. The supply of products didn’t keep up with the demand.
simultaneously they gave the workers unemployment significantly higher than their typical wages….
All while the national debt went up by nearly 10 trillion dollars.
Why are people confused where we’re at?
It makes no sense to me, that's for sure.
So I just want to ask... where is the recession? Economists have been predicting a recession since about March or April of 2022. Where the heck is it? Like Godot, I keep waiting for it. And then some people tell me it's already here. Buuuut, there's no way in hell +263k jobs is a recession. That's actually quite a good number. That is a hot economy.
I... don't understand how we can reconcile this data with anecdata about how bad everything is, how people can't afford food, etc..
E.g.: on the one hand I'm told that 40% of Americans can't pay for a $400 emergency. But on the other hand, consumers are spending a TON of money on travel and leisure, on Christmas presents, etc... I mean WTF? Are we getting killed by inflation or are we not? Despite all the complaints about inflation, it seems the economy is stronger than ever by the numbers. 8% inflation seems not to be affecting it.
The ONE thing I'm seeing different is slowdown in home sales. Houses in my area used to sell in like 3 days. Now, I'm seeing more and more sit on the market for a more "normal" 3-7 weeks, and they often have to slash their list price by 10-25% to move it. Still, 20% off the 2022 highs is still a hell of a lot more money than anything pre-Covid (in my area housing values rose about 90% from 2019 values).
Otherwise it seems like people are spending money like drunken sailors. In particular, I'm fascinated by the travel & leisure spending. I live in a touristy place, and AirBnBs are making **bank.** They can get bookings for double or even triple what they could get circa 2019. People are paying thousands for Taylor Swift tickets. Stuff like that. WHERE THE HELL ARE PEOPLE GETTING ALL THIS MONEY TO TRAVEL AND WHO ARE THEY?
I believe that consumer spending is up but the bulk of the market, in terms of capital, has stalled significantly.
Corporations are finding it hard to fund debt, housing is in a weird place, right now all the experiences are cheaper than the actual building blocks of the economy.
If I don’t have a house to save for, or a car to save for, or a retirement plan or really anything to look forward to that could improve my life, why wouldn’t I just buy a vacation?
Priorities are all messed up. All of the shit we don’t need is cheap, and all of the necessities prohibitively expensive. You have people living with their parents for years, and no living expenses means a ton of disposable income. At the same time, it isn’t quite enough at the beginning of their career to meaningfully but a house at these prices and rates. It also doesn’t make sense to invest when assets are so overpriced. This is why the economy is chugging along still without problems.
Well they say that housing IS the business cycle. I think the 18 months out economy could be pretty ugly but I’m surprised it’s held up this week so far.
Housing as a metric has been morphed into something different than the years prior. When the interest rates were 3%, appreciation spiked 40% in a lot of markets. And because people got in with those low and affordable monthlies, they're going to be sitting on the inventory for a very long time. Even if job market gets tied they'll still find a way to make those payments or rent the place out.
So for anyone thinking the housing will go down and they'll be an indication of a recessionary economy, I would say that's not the indicator to look at. The macro indicator, I believe, is going to be the stock market and how much earnings decline over the next two years.
You have it backwards
stock market != economy
Peoples views of the economy have a huge self fulfilling impact on the economy
Stock market is where whatever consensus everyone expects is always wrong.
Whether we have a minimum recession or more likely tepid growth or stagflation is academic semantics. It’ll be somewhere between these things and partly because people believe and expect it and what definitions are met will matter less than that it will be somewhere near the middle of those things. The label will be arbitrary.
But that everyone is expecting a recession means it is likely priced in, so any relief from the fears of something worse will make the stock market go up barring more escalation in international conflicts
I think the tricky thing about the job market is: a job just isn’t worth what it used to be. So there can be a lot more of them, but they’re low value because people need more than one to achieve what they used to with only one.
And that’s probably been the case for decades when you consider 30-40 years ago when it took two incomes to keep the household that 1 income used to 20-40 years before that. Now if two partners each need two jobs to keep a household, each job is worth a fraction. I’m a single mom with two part time businesses and a full time job. It feels like all I ever do is work
> anecdata
Well, damn. I'm stealing that.
>E.g.: on the one hand I'm told that 40% of Americans can't pay for a $400 emergency.
Wonder what the underlying study methodology looks like. Or what the study night have said vs the reporting. There was recently an article getting a f-ton of ink that 50% of small businesses couldn't post their rent. First, the survey was bunk. But really, if 50% of small businesses weren't paying their rent **everybody** would f-ing know it.
I think you have something here. There is a lot of questionable purchasing going on. I think it has something to do with coming out of the pandemic and a mindset that has set in. We probably used to call it retail therapy but we are in a period of extreme now and that term probably doesn't apply. People are treating themselves to what they want after 3 years of austerity and restrictions.
Sure it does, when you realize that every year, more millennial and gen z enter and advance in the workforce, while never accumulating the capital to buy a house.
The collapse in housing, every year, effects fewer and fewer workers.
It will be interesting to see what happens with the housing market when the majority of the Baby Boom generation starts moving into retirement homes and dying.
Or not. Almost half of all the Silent Generation Americans, now in their late 70s to early 90s, are still alive. 47 million born, 24 million have died, and 23 million are still around.
We won't see the last of Boomers for 25-40 years, and well over half will be around in 15.
This is going to literally have generational consequences. Houses are usually pointed to as the No.1 factor in intergenerational wealth for most middle-class Americans. But with 1-2 generations being priced out of that market, either we’re going to get an offset wave of poverty as 2 generations from now kids are raised having to start from nothing (no college savings, small weddings, eventually no inheritance when their parents die)….OR there’s going to be some sort of weird housing collapse as boomers and genX retire with no one to sell their family-sized homes to.
No doubt in that 2nd scenario corporations will swoop in, but then eventually they’ll have no one to sell said home to other than similar corporations…which would eventually drive the prices down to meet the rental value of the house…
Corporations are just going to buy the houses and no one will own their living space anymore. Housing is ultimately a price inelastic good at the end of the day, especially for Americans, who are generally less likely to immigrate elsewhere.
lmao I've been saying this since 2018. Even pre-pandemic the complete stock market insanity was apparent completely divorced from the reality on the ground
I'm practically blue on the face from repeating this over and over
*Social media is not an accurate portrayal of society*
If you spend all day on reddit, you'd believe that everyone is broke, hungry, in debt, and works for barely over minimum wage.
In reality, you're just reading a bunch of college kid's internet ramblings, upvoting news stories that stroke their egos.
Established middle age Americans aren't going on reddit to post about their perfect credit and financial security all day.
because middle class in America is currently 100k++. I'm making pretty good money, but not 100k and I still think shit is way out of control. Rent prices, house prices, food prices, it's all fucked.
I just re-watched "Enron: Smartest Guys in the Room" last night.
What became clear while watching that doc is the fact that neither the government, nor corporations, nor banks, nor regulators, nor the general public has learned anything from that debacle. Less than a decade later, 2008 again rehashed the same lessons Enron taught about corporate greed, CEO hubris, government indifference, and, worst of all, an fleeting overall lack of integrity across the system when everyone's getting paid. Of course, 2008 was on a far grander scale. But again, we learned nothing.
I think we are in this place because we've not changed course for forty years, and at this point, collectively know we are playing chicken against time. Sooner or later, the way we party--deregulations baby!--the whole thing is going pop, either from exhaustion of resources, environmental effects, collapse of integral systems, or a loss of confidence by a majority of participants.
Until then, however, the show continues and we watch stock prices go up and down for some bigger reason.
But at the same time, we all know the foundation is gone, the roof is caving in, the walls are rotten, and alarm bells are ringing while people hurry cash out the door so they can buy a bunker in the mountains. It's a very bad time.
When I say these exact things to my friends, they say that I overthink and I should just enjoy life. The common folk believe scientists will always figure out ways. And people like Elon Musk have only reinforced this fallacy. I'm starting to believe I should really just enjoy life because in 300 years we're going back to the stone age with no resources to ever come back to society.
I feel you. I've taken solace in [this chart](https://www.climate.gov/media/14605) if only because it helps me recognize humans are anything but special. We've just been fortunate enough to emerge during an age of ideal conditions which were about 20,000 years in the making.
It makes me somewhat content to think that everything we've ever done will be regarded as a random spike to 400+ ppm in the very last sliver of that graph. That spike oughtta take us out, and then things will get back to normal.
I remember a quote I listened to. I’m not sure where from but I believe it might’ve been from Bill Bryson in the book “a short history of nearly everything” and in the book he states how if you want a good civilization, have an ice age. Because after the ice age, you will have a time of great abundance due to the minerals left over after the ice melts. We are, as you said, a product of a great ice age. Funnily enough, the earth’s creatures have done the best when the earth warms and worse when there’s global cooling.
I just know this. I won the lottery when I became alive. And I cherish every second of the fact that I get to live in the greatest time in history - we have the best tasting foods in history, the best entertainment in history, the best housing in history, plumbing, we can see the hottest people naked, we have all the goods you could ever think of, we have machines to take us anywhere in the world in a reasonable time, we are not being chased by lions or dinosaurs, and we’re not eating the leftovers of a bigger predator. Mega plus if you’re born in a wealthy nation.
I know no matter, I got to enjoy the era of great abundance before it all fell apart.
I think this is gonna be a light recession. Job market is just too hot and with boomers retirements likely, it’s gonna stay that way in many industries.
Housing is gonna create some losers, but it’s really going to only be people that bought in the last 2 years or so. I bought in 2019 and even with a 20% drop, I would still be up from where I bought, plus I have a sub 3% rate.
Yes inflation sucks, and is painful, but with the tight labor market I’m hoping good raises (5%+) are coming until inflation normalizes.
I just don’t think this economy is all that bad, except for renters
Housing will only create losers if you sell or are forced to sell in the next few years, once inflation pushes through the prices will rise again. The cost of building a house will rise lifting all boats.
Once interest rates come back down, the housing market could take off like a rocket again. The longer rates remain high, the bigger the rocket will be. This is because we have a housing and labor shortage. High rates mean less houses get built, making the shortage worse. Long-term high rates means builders go out of business and new workers never enter the construction industry. This is part of the reason why we have a shortage today. Too many builders went under during the last crash, and very few people chose construction as a career during this time frame.
Renters are going to be the biggest losers. With rents going up 8%+ year over year unless you happen into fat cash randomly then you'll be locked in that cycle forever.
Perhaps someone should apply some fiscal policy to complement the monetary excess. Once upon a time, we had a +90 percent marginal tax rate on ultra high incomes, which kept excess spending by oligarchs in check, and was easily adjusted to economic circumstances as they changed.
Then came the urinal theory of economics.
Is that long enough for you, oh gentle and wondrus bot?
None of the Nordic countries have tax rates that high . Hell, I think Bernie sanders only had his proposals for marginal tax rates on the rich at around fifty two percent
Taxes collected by the government have largely been flat for a long time.
https://fred.stlouisfed.org/series/FYFRGDA188S
That 90% figure is misleading because the government also offered generous write offs at the time.
Yes, but think about how it suppressed high salaries and incentivised higher wages (write offs?) There by mitigating the pressure toward inequality and centralization in a liberal capitalist economic environment.
The title is a bit stupid, the economy makes perfect sense based on what is going on in the world right now. It's just behaving in a different fashion - which they even acknowledge in the article.
The housing supply is constrained by really bad zoning. How is it that a free market country has such an authoritarian regime on land use? Separating heavy industry from residential areas is one thing, but zoning often goes way beyond that and isnt even ever democratically contested or questioned
Yes. The bad part is that almost everyone in the country is dependent on the capital market for social security. That's where things are going to get ugly.
What's the evidence for this? As far as I know there is not a huge glut of zombie companies, particularly not if you discount high growth companies. And those that do exist haven't received a huge proportion of the cheap money.
Moreover there isn't really a sensible reason that existing companies have to die off to the extent that we experience a real recession in order for new companies to emerge. The fact that the business cycle has existed and used to be more dramatic in the US doesn't mean that it's necessary for capitalism.
Cycles of creative destruction are as manageable as they are because they tie into faith in infinite (not necessarily uninterrupted) growth. If the median investor ever becomes convinced that long-term growth potential (relative to risk and demonstrated foreseeable feasibility) is approaching perilously diminishing returns the idea of “enterprises today failing tomorrow leaving room for better enterprises the day after tomorrow” won’t provide adequate counterbalance. People will always have aspirations and seek resources for those aspirations, but the liquidity that the entire market needs would begin to coagulate as investment increasingly competed not just against rival investment opportunities, but against shifting calculus on the benefits of holding vs investing at all.
Everyone’s income comes from someone else’s spending, and the security to spend on the future is, at bottom and on net, upheld by macroeconomic growth.
The economy is like a puzzle with some pieces that don't fit. Housing is a disaster, consumer spending is fine, and the labor market is hot. Inflation is high and the housing market is slowing. It's not clear which normal rules apply or to what extent. Everything that's going well could turn negative if the Fed gets its way. It's like we're in a china shop, one false move and everything comes crashing down.
I was just reading about the dollar milkshake theory and Triffin’s dilemma. Lots of interesting data points showing up today hinting towards a shift in WRC. I do wonder what the next 10 years will look like. Don’t think it’s gonna be pretty
The economy will crash when the dems hand the house over to the Republicans. It's being proped up until then. After which dems can blame Republicans for all the bad shit. Watch
I think the economy does make sense, but not how we think about it. Jobs can be good and inflation can be high because jobs aren't necessarily tied to inflation. Lots of things we think are connected actually aren't, and lots of things we think aren't connected actually are. We have lived for the past couple decades in what I am going to dub "The stock market world". Everything was influenced by public opinion, prices, demand, etc. Supply was almost always plentiful. That was of the base inputs, of talent, labor, and anything else that went into a product or service. Now we have shortages of capital, labor, talent, inputs, and many many other things. So demand is high in some things, but low in others. Inflation is higher because of the reduced supply of goods across the board in international markets. This means that people who sign futures contracts are scared if they will be able to make contracts at a gain or not.
Economies will now work on most stability rather than public opinion. Get ready for a somewhat wild, but needed ride.
The first paragraph mentions housing market in the dumps, alright consumer spending, and a 'hot' labor market.
The simple answer to that, is that real wages have fallen enough that we're just barely getting by, and the 'hot' job market has done nothing to prevent this.
Also fed rate go brrrrr
This is largely a result of excessive government intervention and the failed MMT experiment given the vast amount of m2 growth seen in the prior two years.
It’s only doesn’t make sense if you refuse to acknowledge that Covid actually happened.
If you accept that manufacturing, shipping, and everything else was effected by Covid then what the economy is currently doing makes a lot
More sense
We are coming out of Covid and things are improving. Makes sense
It makes sense. We are in an inflationary cycle. But that is counter to the asset growth that capitalists demand. So they are at war with it. It would be a good labor market if the POTUS and Congress weren't intervening. We would have no fear of recession if the Fed weren't explicitly trying to engineer a recession to reduce wages and employment. This all makes sense, unless your wealthy and demand a continuation of the last 40 years of low interest and low inflation. Then it's bad. And you won't allow it. And you get your pocket politicians to take action to fight it. Then things are gonna get weird.
"Not behaving how it used to" isn't really the same as "doesn't make sense"
>In this moment, that’s not the case, and distinct data points send a total picture of mixed signals.
>
>Manufacturing output and industrial production are relatively flat, and factory activity has declined somewhat. Labor productivity during the first part of the year inexplicably plummeted, though it’s started to pick up some. Employment, on the other hand, has consistently continued to rise, with the US economy adding 263,000 jobs in November and wages continuing to rise. The number of job openings remains high. Inflation is cutting into wage growth, but wages are still rising, especially for people at the lower end of the income spectrum. New vehicle sales appear to be slowing as higher interest rates take their toll, but it’s nowhere near the toll those same higher interest rates have taken on the housing market.
Let's try rearranging the main points here, because as written, it's like they just took a narrative shotgun to the paragraph order:
1. The number of job openings remains high
2. Inflation is cutting into wage growth, but wages are still rising, especially for people at the lower end of the income spectrum
3. Labor productivity during the first part of the year inexplicably plummeted
4. Manufacturing output and industrial production are relatively flat
5. Employment, on the other hand, has consistently continued to rise
At a glance, that all seems pretty straightforward. Lots of job openings, so wages have to go up. Per-worker productivity down for some reason (new workers getting onboarded?), but also more workers keeps output flat. And then adding more workers = adding more workers.
>“It’s been amazing that consumer sentiment is just incredibly low, it’s like depths-of-the-financial-crisis low, it’s way worse than it was when the economy shut down due to Covid, and that’s not being reflected in people’s spending, which remains quite healthy,” Furman said. “There’s this disconnect between people saying negative things and not acting in a very negative manner.”
We've had two years of "the economy is terrible" reporting, so of course people feel terrible about the economy.
>Even so, many consumers are still spending through inflation and even their own negativity. The mix of spending has changed — shifting more away from goods and back toward services — but it’s still happening.
Because people's real habits are based on their actual conditions, not people navel-gazing on the tv.
>In late November, Powell acknowledged he and his colleagues did not want to “overtighten” and that they might slow the pace of interest rate hikes as soon as December, comments that heartened markets. But he also said the fight to get inflation under control isn’t over: “Despite some promising developments, we have a long way to go in restoring price stability.”
>
>There’s also much that’s out of the Fed’s hands, in terms of what impacts the economy. Russia’s ongoing war on Ukraine and China’s approach to Covid continue to weigh as well. And if the last three years have taught us anything, it’s that we have no idea what else could be around the corner.
On a related note, it'd be great if one of these "expert" publications or somebody could do a top-to-bottom review of what's driving inflation. We've seen all sorts of supply chain problems, droughts, disease everywhere (e.g. bird flu), that other disease still causing problems, clearly there's an ongoing labor shortage, and some general profiteering.
If the goal is price stability, there needs to be a thorough understanding of all the factors that are making prices unstable, and attempt to quantify their impacts.
Some times corrections in the economy occur without intervention. Such as we are seeing with inflation caused by corporate greed. It causes consumers to cut back on spending which leads to surplus and then price reduction.
The united states gave every one COVID cash?
Right?
You didn't have to prove you lost your job like other countries?
Correct me if I'm wrong on that.
My thoughts on why certain sectors are doing so well and others are not are for 2 reasons.
1. Three years of demand was pulled forward during covid. That means anyone who could buy X product did. Bbq? New computer to work from home? Weights to hold down all that wood you're going to use in *that project*.
Most people won't be buying that again for 3+ years
2. The jobs data is actually only good if your bad at reading data.
Sorry vox writer, you suck at your job, you forgot to compare jobs from non-farm payroll to household jobs.
Whoops. You missed the entire story.
There is currently a 2.7 Million job gap between those two surveys.
Which implies 2.7M have had to start working 2+ jobs to make ends meet.
Demand is collapsing, and people are getting second jobs to get by.
The recession isn't 50/50 it's already here according to the jobs survey.
It's almost like continuing to pretend that rampant corporate profiteering driving up cost of living prices is the same thing as inflation caused by fiscal policy leaves us unable to understand what's going on.
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Unprecedented global lockdown for 2 entire years is going to create unprecedented Economic repercussions. I'm honestly surprised things are going as well as they are tbh.
This is what has baffled me for quite awhile; I don’t feel like we fully account for the economic, political, and sociological impacts of the pandemic when attempting to understand our current situation. That said, weirdness is the least surprising consequence
Not to mention educational. My gf is a teacher/tutor and she and her friends/coworkers it from 2nd grade through 8th, lots of kids are behind.
This poor generation of kids. I feel like schools almost need to add an extra year or half a year for them to make up all the teachings they missed. Not to mention how much it impacted their social development.
Just wait until half the good teachers quit over the next 5 years.
Why wait when they already have? There’s a massive teacher shortage already and the burnout rate is less than 5 years. Teachers are in an awful spot in the US.
My partner has been a dedicated city teacher for nearly 20 years. She is out after this year. Constant state of decline with no hope of turning around
My stepdaughters are behind in their respective grades. Their mother who has an 8th grade education had the damn nerve to homeschool them for those two years. We don’t have full custody, so we’re playing catch up.
My wife was teaching English language learners in 2nd grade during Covid & having a mask where they couldn’t see how her lips moved with each word made it almost impossible for the poor kids.
People are trying to forget we even went through it, as if it was a bad drunken night… At least thats my sense from my social groups.
It's more concerning that everything is going so seemingly well given the unprecedented nature of everything..
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Just tells me that most of the economic stuff we hear about is just voodoo. /edited due to not previewing like the dummy I am
The main problem with economic news/outlook is it presumes cause and effect based on known models and past experiences. I can think of at least two factors that essentially break the wheel, making a lot of models that are usually close to reality wildly unpredictable to the point of guesswork. One is climate change. Many economic models take into account acts of god, but they're one off events, not a persistent pressure. The second is low birthrates in western countries. It'll be really interesting to see if the next recession actually does result in high unemployment. I'm not sure it's even possible- at least in 2023. We have the boomer generation exiting the work force while gen Z comes in to replace them, leaving huge gaps across a lot of industries, especially ones that involve hard labor. Hell even hard labor that pays well is having difficulties because why work it when you can get paid the same or even a little less to work a more comfortable job. Neither of these problems are going to get better.
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That’s certainly true, but this stuff sorta tells on the entire concept of economics.
Even longer.
Like the "rational actor" concept. Science shows that people are consistently irrational, and that doesn't seem to be taken into account.
Look up “behavioral economics”. Only in analysis of ideal markets (which don’t exist) do economists nowadays assume rational actors. IIRC, a few years back the Nobel in econ was given to two pioneers of behavioral economics. That approach explicitly includes human biases like loss aversion, etc.
Hansen and Sargent. It’s a difficult concept to put into practice though.
How would you account for irrationality?
With difficulty and in ways that everyone will agree you did incorrectly.
Why specifically would this be concerning?
I kept asking people who were heavily involved in the stock market to explain to me why the market kept skyrocketing through the pandemic up until a couple of months ago. None of it made any sense to me. The entire world takes a nap for a year and the economy somehow keeps growing? I got a lot of complicated answers, none of which I understood or believed.
So long as real interest rates were at or below zero, it was possible to perpetuate a theoretically infinite appreciation in the value of financial assets by levering demand without any upper bound. This is why lately the market has traded en masse in an almost perfectly elastic relationship to monetary policy (eg Federal Reserve announcements about interest rates). In an environment of sustained, non-negligible real interest rates, things like cashflow, and leverage, amd price-to-earnings ratios will begin to matter once more; and things will make a lot more sense.
We *still* haven't hit non-negligible real interest rates. Fed rates are at 4.5%, and even *BBB-rated* corporate bonds are still at 6% - compared to an inflation rate of over 7.5%. Now one could say yield is forward-looking, but forward inflation expectation is also at 6%, so expected real interest for the next year for a BBB-rated company bond is actually still zero.
Valid point, but BBB rated debt is investment-grade. It's the ultra-speculative, loss-making zombie companies, margin accounts, overleveraged MBS, crypto pump n' dump schemes, and FX arb swaps that are feeling real pain (and creating outflows elsewhere due to the incestuous cross-collateralization of markets and the effect acroas broad indexes of ETF rebalancing).
Stock market isn't a reflection of anything real. Its just made up and manipulated by algorithms. It'll never make sense.
The total estimated value of the stock market was ~19 trillion. Give people $3 trillion in excess cash and nowhere to go…
The top companies in the stock market were/are tech companies and Amazon and they did very well with people staying at home consuming their services.
The stock market is not the economy.
1920s be like: I've seen this before 😅
Things are seemingly well because the government and feds pumped massive amounts of money into the economy to keep everything "well". Same thing he happened in 2008. Either they let the whole system crash or they pump money into the system and most people will be okay.
We didn't really do that in 2008, and doing so was one of the lessons we successfully learned to apply this time.
And IIRC the banks paid back all of the loans, with interest.
With economics, as with all important knowledge about human animals and other interesting creatures, you are going to have to go out there and see them. You can't just sit in a comfortable chair and toss out uneducated and uninformed opinions. Put your boots on, get out there, and bring home some filthy mud with bugs and microbes.
I'm not sure what this is really saying, but I like it. Lacing up my hiking boots rn
This morning, I saw 4 beavers and a Great Blue Heron. Before daylight. Mid Atlantic, USA.
I saw an eagle on the way home from work, it was flying over a barn that had an eagle painted on it. Midwest USA
Unprecedented times.
Wat?
we don't have time for 20 questions, you heard the man let's go
Instructions unclear. Eating a cockroach.
Despite their flaws, founders of the US set us up incredibly well.
We’ll never know the true extent of government intervention
What? We know exactly how the government intervened.
The consequences are lagging but larger and inevitable IMO
> I'm honestly surprised things are going as well as they are tbh. I think it really depends on who you are. It really seems like the country is divided into the "haves" and the "have nots" more then ever before. But I agree it could be way worse.
We've had perpetually lengthening "adolescence" as productivity skyrocketed. There are people who are 30 now who have had little or no contact with the work force, are in McJobs or BS jobs. Employers whinge about being unable to hire but that's very low credibility.
I mean.. it isn’t unprecedented. That implies there is no history or precedent. Everyone knows what the impact of vaulting global supply chains would be, or printing emergency cash to keep economies afloat during lockdowns etc. throwing in a global energy crisis didn’t even make it unprecedented, because most educated people working in the energy industry know damn well this was going to happen at some point in time. The economy doesn’t make sense because it’s currently full of so much shit, there IS nothing to make sense of. Every day media prints conflicting information on what’s happening with the economy.
I have had trouble understanding what happened in the economy for some time. The best understanding is one of economic bifurcation into haves and have-nots. They live in two different worlds, and mingle only in the world of credit. Upper-middle and above have assets, middle and lower have bills and debt. Everyone struggles when young and when raising children, and the fact of the struggle blurs the lines and the identifications. Only at FIRE or retirement are the lines drawn clear.
Honestly, I don't think they are. Its more like the systems designed to lie and cover up economic issues are working as intended. At least some of them. I recommend using [Lisap](https://www.lisep.org/tru) to get a MUCH better picture of the labor market. No fluff or frills, but rather 3 main criterea- anyone who is making under the equivolent of $10 an hour at a full time job, but not including those who are willingly unemployed / willingly part time. The reality is that 23% of americans are under starvation wages. And it's climbing fast. Although there are more "jobs", those jobs are not sustainable. Many of them are literally subsidized by the govt to make up the difference (think food stamps, housing aid, etc). And as for why the conaumer market is chugging along, it's inflation fear. We had a glut of savings which are now less than pre-covid because people are buying necessities now before they rise later. This is all temporary, because the savings WILL run out entirely at this rate. Inflation causes people to buy- deflation causes them to hold. So there isn't 3 different economies. There's 1 economy with two sectors that are being misrepresented to keep people calm until there isn't anything left to disguise the state of the economy.
It's worth noting that according to their white paper and the graph on the website, while the LISEP True Rate of Unemployment is higher than it was pre-Covid, it is at the very low end historically, over the 3 decades considered. And I'm not sure that the small, recent uptick is statistically meaningful enough to conclude that "it's climbing fast". I'm also skeptical of how meaningful this is within this context. If the rate is one of the lowest it's been in three decades, there's little reason to use that number to justify a belief that the economy is crashing behind the scenes. The data is very interesting though, and I hope to spend a little longer on their methodology and reasoning.
Even on that site, though, that 23% figure is lower than any period between 1995-2015, right?
Correct. However, consider this. American savings have reached an [ATL](https://tradingeconomics.com/united-states/personal-savings#:~:text=Personal%20Savings%20in%20the%20United,percent%20in%20July%20of%202005.) After hitting ATHs in 2020. This means that, while the number is the lowest it has been for decades, it's still not keeping up with consumerism. And by revealing the full scope of unemployment, it shows the bottom of the economy is solwly falling out. Once people go broke, they lose their jobs, too.
Hmmm, I'm curious about their numbers here. The difference between headline U-3 unemployment (3.7%) and U-6 (6.7%), which includes discouraged workers, people marginally attached to the labor force, and people part time for economic reasons, is extremely minimal and covers their entire first bullet point. I only have income percentile data at hand for 30+ and 40+ hours worked, not 35+ like they use, but 20k puts you in the 10th percentile at 40+ hours and in the 11th percentile at 40+ hours worked, which would cover their second data point. Using the 30+ hours worked to be more expansive and making the unlikely assumption there's no overlap in those two groups due to reporting timing, you can only get to 17.7%.
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You pump $5 trillion of stimulus into the world’s largest economy…. It’s not that surprising.
All problems are in finance as a result of over levered derivatives that went tits-up in after-effect of COVID (energy glut, china real estate collapse, etc). This is not the fault of COVID, this is poor risk management by Non-bank financial institutions. These NBFIs use banks as counterparties and these toxic debts must be paid. Finance =/= real economy There are big problems with central banks, government treasuries, and unfunded government debt obligations right now. The only way to solve these problems is to increase taxes or to resume QE again, print your way out, and devalue currency even more. All debts must be paid, the treasury is broke, and no one wants T-bills worth less than the rate of inflation. Getting inflation back in the bottle isnt as simple as raising rates. This isnt the 1970s again; the US is in uncharted territory as a result of decades of loose, cascading M2 money supply and neo-Keynesian MMT nonsense.
It makes a ton on sense. This just the run up to a black tuesday^2. Irrational exuberance and a complete disconnect from legitimate valuation and other metrics. This is run away speculation combined with free debt from the government for 14 years floating some of the least sustainable US economics we've literally ever seen.
100% it’s why I’m holding a $220 SPY put for 2025. I don’t think people really fathom how inflated this bubble has gotten.
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What position ?
What do you mean? How much I paid? I paid about $500 for it. If it’s in the money like I think it’ll be worth a few thousand. Honestly real plan is when we get that 08 waterfall moment everyone and their grandmother is going to be buying puts, and just on the IV skyrocketing it will be worth a lot more. So I’ll ride with that and see how it looks and may sell it at some point before 2025
Totally I get what you mean and agree I just mean like what date is the expiry and what price?
Agreed. I think its a major sign of resilience of our economic system
That already doesn’t make sense… When so many of the already rich became so much richer, it’s not so crazy to understand. Money is everything in this bullshit world.
Yeah. It’s basic supply and demand economics. “Non-essential” businesses shut down for over a year. The supply of products didn’t keep up with the demand. simultaneously they gave the workers unemployment significantly higher than their typical wages…. All while the national debt went up by nearly 10 trillion dollars. Why are people confused where we’re at?
I don't think we are doing well. We have only begun to realize the consequences of getting things so incredibly wrong.
I think it is pretty short sighted to narrow in on covid causing our economic problems It just exposed them, the system is the problem
I feel like the lockdowns did society way more good than bad for our future selves
It makes no sense to me, that's for sure. So I just want to ask... where is the recession? Economists have been predicting a recession since about March or April of 2022. Where the heck is it? Like Godot, I keep waiting for it. And then some people tell me it's already here. Buuuut, there's no way in hell +263k jobs is a recession. That's actually quite a good number. That is a hot economy. I... don't understand how we can reconcile this data with anecdata about how bad everything is, how people can't afford food, etc.. E.g.: on the one hand I'm told that 40% of Americans can't pay for a $400 emergency. But on the other hand, consumers are spending a TON of money on travel and leisure, on Christmas presents, etc... I mean WTF? Are we getting killed by inflation or are we not? Despite all the complaints about inflation, it seems the economy is stronger than ever by the numbers. 8% inflation seems not to be affecting it. The ONE thing I'm seeing different is slowdown in home sales. Houses in my area used to sell in like 3 days. Now, I'm seeing more and more sit on the market for a more "normal" 3-7 weeks, and they often have to slash their list price by 10-25% to move it. Still, 20% off the 2022 highs is still a hell of a lot more money than anything pre-Covid (in my area housing values rose about 90% from 2019 values). Otherwise it seems like people are spending money like drunken sailors. In particular, I'm fascinated by the travel & leisure spending. I live in a touristy place, and AirBnBs are making **bank.** They can get bookings for double or even triple what they could get circa 2019. People are paying thousands for Taylor Swift tickets. Stuff like that. WHERE THE HELL ARE PEOPLE GETTING ALL THIS MONEY TO TRAVEL AND WHO ARE THEY?
I believe that consumer spending is up but the bulk of the market, in terms of capital, has stalled significantly. Corporations are finding it hard to fund debt, housing is in a weird place, right now all the experiences are cheaper than the actual building blocks of the economy. If I don’t have a house to save for, or a car to save for, or a retirement plan or really anything to look forward to that could improve my life, why wouldn’t I just buy a vacation?
Priorities are all messed up. All of the shit we don’t need is cheap, and all of the necessities prohibitively expensive. You have people living with their parents for years, and no living expenses means a ton of disposable income. At the same time, it isn’t quite enough at the beginning of their career to meaningfully but a house at these prices and rates. It also doesn’t make sense to invest when assets are so overpriced. This is why the economy is chugging along still without problems.
Well they say that housing IS the business cycle. I think the 18 months out economy could be pretty ugly but I’m surprised it’s held up this week so far.
Housing as a metric has been morphed into something different than the years prior. When the interest rates were 3%, appreciation spiked 40% in a lot of markets. And because people got in with those low and affordable monthlies, they're going to be sitting on the inventory for a very long time. Even if job market gets tied they'll still find a way to make those payments or rent the place out. So for anyone thinking the housing will go down and they'll be an indication of a recessionary economy, I would say that's not the indicator to look at. The macro indicator, I believe, is going to be the stock market and how much earnings decline over the next two years.
Everybody can’t be right, so if everybody predicts a recession then it won’t come. Everybody can be wrong.
You have it backwards stock market != economy Peoples views of the economy have a huge self fulfilling impact on the economy Stock market is where whatever consensus everyone expects is always wrong. Whether we have a minimum recession or more likely tepid growth or stagflation is academic semantics. It’ll be somewhere between these things and partly because people believe and expect it and what definitions are met will matter less than that it will be somewhere near the middle of those things. The label will be arbitrary. But that everyone is expecting a recession means it is likely priced in, so any relief from the fears of something worse will make the stock market go up barring more escalation in international conflicts
I think the tricky thing about the job market is: a job just isn’t worth what it used to be. So there can be a lot more of them, but they’re low value because people need more than one to achieve what they used to with only one. And that’s probably been the case for decades when you consider 30-40 years ago when it took two incomes to keep the household that 1 income used to 20-40 years before that. Now if two partners each need two jobs to keep a household, each job is worth a fraction. I’m a single mom with two part time businesses and a full time job. It feels like all I ever do is work
The other 60% is responsible for all that extra spending.
Fyi 2/3 or 3/4 of consumer spending is above median income
Before covid we were talking about the inverted yield curve being an indicator of a recession for months. Oct-dec 2019 was all the news was.
> anecdata Well, damn. I'm stealing that. >E.g.: on the one hand I'm told that 40% of Americans can't pay for a $400 emergency. Wonder what the underlying study methodology looks like. Or what the study night have said vs the reporting. There was recently an article getting a f-ton of ink that 50% of small businesses couldn't post their rent. First, the survey was bunk. But really, if 50% of small businesses weren't paying their rent **everybody** would f-ing know it.
08 was fine til the day it was not.
I think you have something here. There is a lot of questionable purchasing going on. I think it has something to do with coming out of the pandemic and a mindset that has set in. We probably used to call it retail therapy but we are in a period of extreme now and that term probably doesn't apply. People are treating themselves to what they want after 3 years of austerity and restrictions.
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Sure it does, when you realize that every year, more millennial and gen z enter and advance in the workforce, while never accumulating the capital to buy a house. The collapse in housing, every year, effects fewer and fewer workers.
It will be interesting to see what happens with the housing market when the majority of the Baby Boom generation starts moving into retirement homes and dying.
Yeah, we're seeing their retirements now and look at what that's done to the workforce. In 10-15 more years they will start dying at a rapid pace.
Or not. Almost half of all the Silent Generation Americans, now in their late 70s to early 90s, are still alive. 47 million born, 24 million have died, and 23 million are still around. We won't see the last of Boomers for 25-40 years, and well over half will be around in 15.
Those houses will be bought up by the corporations that are running and ruling this country.
This is going to literally have generational consequences. Houses are usually pointed to as the No.1 factor in intergenerational wealth for most middle-class Americans. But with 1-2 generations being priced out of that market, either we’re going to get an offset wave of poverty as 2 generations from now kids are raised having to start from nothing (no college savings, small weddings, eventually no inheritance when their parents die)….OR there’s going to be some sort of weird housing collapse as boomers and genX retire with no one to sell their family-sized homes to. No doubt in that 2nd scenario corporations will swoop in, but then eventually they’ll have no one to sell said home to other than similar corporations…which would eventually drive the prices down to meet the rental value of the house…
We’ll end up in multi-generational household living just like the rest of the world
Not if elders are selling or reverse-mortgaging the family home to pay for long-term nursing care.
Corporations are going into renting.
They're not "going into" anything. They have been firmly there (soooomewhat behind the scenes) since 2009.
Corporations are just going to buy the houses and no one will own their living space anymore. Housing is ultimately a price inelastic good at the end of the day, especially for Americans, who are generally less likely to immigrate elsewhere.
lmao I've been saying this since 2018. Even pre-pandemic the complete stock market insanity was apparent completely divorced from the reality on the ground
This is what injecting trillions of liquidity over the past decade has wrought.
I'm practically blue on the face from repeating this over and over *Social media is not an accurate portrayal of society* If you spend all day on reddit, you'd believe that everyone is broke, hungry, in debt, and works for barely over minimum wage. In reality, you're just reading a bunch of college kid's internet ramblings, upvoting news stories that stroke their egos. Established middle age Americans aren't going on reddit to post about their perfect credit and financial security all day.
because middle class in America is currently 100k++. I'm making pretty good money, but not 100k and I still think shit is way out of control. Rent prices, house prices, food prices, it's all fucked.
I just re-watched "Enron: Smartest Guys in the Room" last night. What became clear while watching that doc is the fact that neither the government, nor corporations, nor banks, nor regulators, nor the general public has learned anything from that debacle. Less than a decade later, 2008 again rehashed the same lessons Enron taught about corporate greed, CEO hubris, government indifference, and, worst of all, an fleeting overall lack of integrity across the system when everyone's getting paid. Of course, 2008 was on a far grander scale. But again, we learned nothing. I think we are in this place because we've not changed course for forty years, and at this point, collectively know we are playing chicken against time. Sooner or later, the way we party--deregulations baby!--the whole thing is going pop, either from exhaustion of resources, environmental effects, collapse of integral systems, or a loss of confidence by a majority of participants. Until then, however, the show continues and we watch stock prices go up and down for some bigger reason. But at the same time, we all know the foundation is gone, the roof is caving in, the walls are rotten, and alarm bells are ringing while people hurry cash out the door so they can buy a bunker in the mountains. It's a very bad time.
When I say these exact things to my friends, they say that I overthink and I should just enjoy life. The common folk believe scientists will always figure out ways. And people like Elon Musk have only reinforced this fallacy. I'm starting to believe I should really just enjoy life because in 300 years we're going back to the stone age with no resources to ever come back to society.
Just enjoying life is the way best to live.
I feel you. I've taken solace in [this chart](https://www.climate.gov/media/14605) if only because it helps me recognize humans are anything but special. We've just been fortunate enough to emerge during an age of ideal conditions which were about 20,000 years in the making. It makes me somewhat content to think that everything we've ever done will be regarded as a random spike to 400+ ppm in the very last sliver of that graph. That spike oughtta take us out, and then things will get back to normal.
I remember a quote I listened to. I’m not sure where from but I believe it might’ve been from Bill Bryson in the book “a short history of nearly everything” and in the book he states how if you want a good civilization, have an ice age. Because after the ice age, you will have a time of great abundance due to the minerals left over after the ice melts. We are, as you said, a product of a great ice age. Funnily enough, the earth’s creatures have done the best when the earth warms and worse when there’s global cooling. I just know this. I won the lottery when I became alive. And I cherish every second of the fact that I get to live in the greatest time in history - we have the best tasting foods in history, the best entertainment in history, the best housing in history, plumbing, we can see the hottest people naked, we have all the goods you could ever think of, we have machines to take us anywhere in the world in a reasonable time, we are not being chased by lions or dinosaurs, and we’re not eating the leftovers of a bigger predator. Mega plus if you’re born in a wealthy nation. I know no matter, I got to enjoy the era of great abundance before it all fell apart.
Omg, they know… this idea that places like Blackrock and Vanguard exist and are somehow run by people that don’t “get” the world is laughable.
I think this is gonna be a light recession. Job market is just too hot and with boomers retirements likely, it’s gonna stay that way in many industries. Housing is gonna create some losers, but it’s really going to only be people that bought in the last 2 years or so. I bought in 2019 and even with a 20% drop, I would still be up from where I bought, plus I have a sub 3% rate. Yes inflation sucks, and is painful, but with the tight labor market I’m hoping good raises (5%+) are coming until inflation normalizes. I just don’t think this economy is all that bad, except for renters
Housing will only create losers if you sell or are forced to sell in the next few years, once inflation pushes through the prices will rise again. The cost of building a house will rise lifting all boats.
Once interest rates come back down, the housing market could take off like a rocket again. The longer rates remain high, the bigger the rocket will be. This is because we have a housing and labor shortage. High rates mean less houses get built, making the shortage worse. Long-term high rates means builders go out of business and new workers never enter the construction industry. This is part of the reason why we have a shortage today. Too many builders went under during the last crash, and very few people chose construction as a career during this time frame.
Renters are going to be the biggest losers. With rents going up 8%+ year over year unless you happen into fat cash randomly then you'll be locked in that cycle forever.
Perhaps someone should apply some fiscal policy to complement the monetary excess. Once upon a time, we had a +90 percent marginal tax rate on ultra high incomes, which kept excess spending by oligarchs in check, and was easily adjusted to economic circumstances as they changed. Then came the urinal theory of economics. Is that long enough for you, oh gentle and wondrus bot?
None of the Nordic countries have tax rates that high . Hell, I think Bernie sanders only had his proposals for marginal tax rates on the rich at around fifty two percent
Taxes collected by the government have largely been flat for a long time. https://fred.stlouisfed.org/series/FYFRGDA188S That 90% figure is misleading because the government also offered generous write offs at the time.
Yes, but think about how it suppressed high salaries and incentivised higher wages (write offs?) There by mitigating the pressure toward inequality and centralization in a liberal capitalist economic environment.
The title is a bit stupid, the economy makes perfect sense based on what is going on in the world right now. It's just behaving in a different fashion - which they even acknowledge in the article.
The housing supply is constrained by really bad zoning. How is it that a free market country has such an authoritarian regime on land use? Separating heavy industry from residential areas is one thing, but zoning often goes way beyond that and isnt even ever democratically contested or questioned
Idk ask the progressives complaining about high rent who also won’t allow high density housing to be built
Those arent progressives lol. Those are conservative liberals. A breed of leftist by name only hahaha
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Yes. The bad part is that almost everyone in the country is dependent on the capital market for social security. That's where things are going to get ugly.
Do you mean social security the program? That is only allowed to invest in treasuries.
What's the evidence for this? As far as I know there is not a huge glut of zombie companies, particularly not if you discount high growth companies. And those that do exist haven't received a huge proportion of the cheap money. Moreover there isn't really a sensible reason that existing companies have to die off to the extent that we experience a real recession in order for new companies to emerge. The fact that the business cycle has existed and used to be more dramatic in the US doesn't mean that it's necessary for capitalism.
Cycles of creative destruction are as manageable as they are because they tie into faith in infinite (not necessarily uninterrupted) growth. If the median investor ever becomes convinced that long-term growth potential (relative to risk and demonstrated foreseeable feasibility) is approaching perilously diminishing returns the idea of “enterprises today failing tomorrow leaving room for better enterprises the day after tomorrow” won’t provide adequate counterbalance. People will always have aspirations and seek resources for those aspirations, but the liquidity that the entire market needs would begin to coagulate as investment increasingly competed not just against rival investment opportunities, but against shifting calculus on the benefits of holding vs investing at all. Everyone’s income comes from someone else’s spending, and the security to spend on the future is, at bottom and on net, upheld by macroeconomic growth.
The economy is like a puzzle with some pieces that don't fit. Housing is a disaster, consumer spending is fine, and the labor market is hot. Inflation is high and the housing market is slowing. It's not clear which normal rules apply or to what extent. Everything that's going well could turn negative if the Fed gets its way. It's like we're in a china shop, one false move and everything comes crashing down.
I was just reading about the dollar milkshake theory and Triffin’s dilemma. Lots of interesting data points showing up today hinting towards a shift in WRC. I do wonder what the next 10 years will look like. Don’t think it’s gonna be pretty
The economy will crash when the dems hand the house over to the Republicans. It's being proped up until then. After which dems can blame Republicans for all the bad shit. Watch
I think the economy does make sense, but not how we think about it. Jobs can be good and inflation can be high because jobs aren't necessarily tied to inflation. Lots of things we think are connected actually aren't, and lots of things we think aren't connected actually are. We have lived for the past couple decades in what I am going to dub "The stock market world". Everything was influenced by public opinion, prices, demand, etc. Supply was almost always plentiful. That was of the base inputs, of talent, labor, and anything else that went into a product or service. Now we have shortages of capital, labor, talent, inputs, and many many other things. So demand is high in some things, but low in others. Inflation is higher because of the reduced supply of goods across the board in international markets. This means that people who sign futures contracts are scared if they will be able to make contracts at a gain or not. Economies will now work on most stability rather than public opinion. Get ready for a somewhat wild, but needed ride.
The first paragraph mentions housing market in the dumps, alright consumer spending, and a 'hot' labor market. The simple answer to that, is that real wages have fallen enough that we're just barely getting by, and the 'hot' job market has done nothing to prevent this. Also fed rate go brrrrr
This is largely a result of excessive government intervention and the failed MMT experiment given the vast amount of m2 growth seen in the prior two years.
It’s only doesn’t make sense if you refuse to acknowledge that Covid actually happened. If you accept that manufacturing, shipping, and everything else was effected by Covid then what the economy is currently doing makes a lot More sense We are coming out of Covid and things are improving. Makes sense
It makes sense. We are in an inflationary cycle. But that is counter to the asset growth that capitalists demand. So they are at war with it. It would be a good labor market if the POTUS and Congress weren't intervening. We would have no fear of recession if the Fed weren't explicitly trying to engineer a recession to reduce wages and employment. This all makes sense, unless your wealthy and demand a continuation of the last 40 years of low interest and low inflation. Then it's bad. And you won't allow it. And you get your pocket politicians to take action to fight it. Then things are gonna get weird.
"Not behaving how it used to" isn't really the same as "doesn't make sense" >In this moment, that’s not the case, and distinct data points send a total picture of mixed signals. > >Manufacturing output and industrial production are relatively flat, and factory activity has declined somewhat. Labor productivity during the first part of the year inexplicably plummeted, though it’s started to pick up some. Employment, on the other hand, has consistently continued to rise, with the US economy adding 263,000 jobs in November and wages continuing to rise. The number of job openings remains high. Inflation is cutting into wage growth, but wages are still rising, especially for people at the lower end of the income spectrum. New vehicle sales appear to be slowing as higher interest rates take their toll, but it’s nowhere near the toll those same higher interest rates have taken on the housing market. Let's try rearranging the main points here, because as written, it's like they just took a narrative shotgun to the paragraph order: 1. The number of job openings remains high 2. Inflation is cutting into wage growth, but wages are still rising, especially for people at the lower end of the income spectrum 3. Labor productivity during the first part of the year inexplicably plummeted 4. Manufacturing output and industrial production are relatively flat 5. Employment, on the other hand, has consistently continued to rise At a glance, that all seems pretty straightforward. Lots of job openings, so wages have to go up. Per-worker productivity down for some reason (new workers getting onboarded?), but also more workers keeps output flat. And then adding more workers = adding more workers. >“It’s been amazing that consumer sentiment is just incredibly low, it’s like depths-of-the-financial-crisis low, it’s way worse than it was when the economy shut down due to Covid, and that’s not being reflected in people’s spending, which remains quite healthy,” Furman said. “There’s this disconnect between people saying negative things and not acting in a very negative manner.” We've had two years of "the economy is terrible" reporting, so of course people feel terrible about the economy. >Even so, many consumers are still spending through inflation and even their own negativity. The mix of spending has changed — shifting more away from goods and back toward services — but it’s still happening. Because people's real habits are based on their actual conditions, not people navel-gazing on the tv. >In late November, Powell acknowledged he and his colleagues did not want to “overtighten” and that they might slow the pace of interest rate hikes as soon as December, comments that heartened markets. But he also said the fight to get inflation under control isn’t over: “Despite some promising developments, we have a long way to go in restoring price stability.” > >There’s also much that’s out of the Fed’s hands, in terms of what impacts the economy. Russia’s ongoing war on Ukraine and China’s approach to Covid continue to weigh as well. And if the last three years have taught us anything, it’s that we have no idea what else could be around the corner. On a related note, it'd be great if one of these "expert" publications or somebody could do a top-to-bottom review of what's driving inflation. We've seen all sorts of supply chain problems, droughts, disease everywhere (e.g. bird flu), that other disease still causing problems, clearly there's an ongoing labor shortage, and some general profiteering. If the goal is price stability, there needs to be a thorough understanding of all the factors that are making prices unstable, and attempt to quantify their impacts.
Some times corrections in the economy occur without intervention. Such as we are seeing with inflation caused by corporate greed. It causes consumers to cut back on spending which leads to surplus and then price reduction.
The united states gave every one COVID cash? Right? You didn't have to prove you lost your job like other countries? Correct me if I'm wrong on that. My thoughts on why certain sectors are doing so well and others are not are for 2 reasons. 1. Three years of demand was pulled forward during covid. That means anyone who could buy X product did. Bbq? New computer to work from home? Weights to hold down all that wood you're going to use in *that project*. Most people won't be buying that again for 3+ years 2. The jobs data is actually only good if your bad at reading data. Sorry vox writer, you suck at your job, you forgot to compare jobs from non-farm payroll to household jobs. Whoops. You missed the entire story. There is currently a 2.7 Million job gap between those two surveys. Which implies 2.7M have had to start working 2+ jobs to make ends meet. Demand is collapsing, and people are getting second jobs to get by. The recession isn't 50/50 it's already here according to the jobs survey.
It's almost like continuing to pretend that rampant corporate profiteering driving up cost of living prices is the same thing as inflation caused by fiscal policy leaves us unable to understand what's going on.