GDP Will Hit a New High Next Quarter
Real GDP is poised to hit a new high next quarter.
Is that a sufficient?
GDP Three Ways
GDP Reporting Confusion
Reporting adds to the GDP confusion. Economists like to present GDP at a Seasonally-Adjusted Annualized Rate (SAAR).
In the first quarter of 2021 GDP was up a reported 6.4% annualized. Actually, quarter-over-quarter GDP was up 1.6%.
From the above chart one would be hard pressed to know the numbers I presented in the lead chart.
The 33.4% rise did not come close to wiping out the 31.4% decline.
It takes a 45.8% rise to wipe out a 31.4% decline.
GDP did not really fall 31.4% in the first place. It fell 9.0% but that was the biggest decline in the history of the data.
Official Arbiter of Recessions
The National Bureau of Economic Research NBER is the official arbiter of recession starts and ends.
Criteria is Flexible
The traditional role of the committee is to maintain a monthly chronology of business cycle turning points. Because the BEA figures for real GDP and real GDI are only available quarterly, the committee considers a variety of monthly indicators to determine the months of peaks and troughs. It places particular emphasis on two monthly measures of activity across the entire economy: (1) personal income less transfer payments, in real terms, which is a monthly measure that includes much of the income included in real GDI; and (2) payroll employment from the BLS.
Although these indicators are the most important measures considered by the committee in developing its monthly business cycle chronology, it does not hesitate to consider other indicators, such as real personal consumption expenditures, industrial production, initial claims for unemployment insurance, wholesale-retail sales adjusted for price changes, and household employment, as it deems valuable. There is no fixed rule about which other measures contribute information to the process or how they are weighted in the committee’s decisions.
The committee’s approach to determining the dates of turning points is retrospective. It waits until sufficient data are available to avoid the need for major revisions.
The Keys
The two primary keys are personal income minus transfer payments and employment.
Curiously, the NBER seems to place little significance on GDP itself.
Personal Income Soars Over 21% on Third Round of Free Money
I discussed personal income this morning noting Personal Income Soars Over 21% on Third Round of Free Money.
Life Support
Note that personal income minus transfer payments is barely above the pre-pandemic high while stimulus is through the roof.
And stimulus it has taken massive stimulus to keep PCE afloat, also just now above the pre-pandemic high.
What About Employment?
Every month I comment on the Jobs data which typically comes out the first Friday of every month.
On April 2, I noted the Economy Adds Over 900,000 Jobs Beating the Consensus By a Mile.
And the unemployment rate fell to 6.0%. But nonfarm payrolls tell another story.
Nonfarm Payrolls
The above chart puts a much needed perspective on the recovery.
- Jobs are up 13,959,000 from the low in April 2020.
- Jobs are still 8,403,000 from the February 2020 pre-covid high.
Some losses are permanent due to a surge in work-at-home and online shopping (less office space and malls needed).
What Happens When the Stimulus Efforts Stop?
That is the key question. Millions make more being unemployed than they did employed.
Also long-term rates have risen and that will impact housing.
The Fed inflated assets which have also propped up spending. Yet, despite a massive boom in housing and the stock market PCE has barely recovered.
NBER Patience
The NBER announced that the trough of the 2007-2009 recession occurred in June 2009 only on September 20, 2010. That was a lag of 15 months.
I do not know what the NBER will decide, but I do not expect a decision soon. There are too many issues and questions as well as a potential relapse as soon as the stimulus dries up.
Fed Says the Recent Jump in Inflation is Transitory
Meanwhile, Don’t Worry, the Fed Says the Recent Jump in Inflation is Transitory
That’s a rebuttal to the notion that current inflation is low, even while admitting the Fed will likely be correct on the transitory inflation.
The key is understanding what happens when bubbles pop.
Mish
best employmet blog visit link to myhr.info
I don’t think 100 days in office had anything to do with these numbers Trump called it and made it possible with the warp speed viral development, but the next two quarters will be down because of the 1.9 trillion which only 5% will go to COVID-19 relief will keep people out of work, I hope the democrats choke on the pork.
Vietnam was the Poorest Country in the World are now kicking our kids asses link to mattredgate.substack.com
Communism. It just works.
You can also compare the number of covid deaths/million hab. :
Vietnam : 0.36
US : 1742
It will be over about 3 months before the “average man in the street” says it is over.
I don’t think you can “measure” it.
It’s all assuming we are beyond the health crisis….
…Paul Hunter, a professor in medicine at the University of East Anglia, cautioned that more information is needed, including data about how severe the disease is compared with previous variants in both immunised and non-immunised individuals. But he agreed the India variants could become a major challenge for the UK.
“That we have a new variant that is increasing so rapidly, even during a period when we are still in a pretty strict lockdown and have more than 50% of the UK population with at least one immunisation, is very depressing and suggests that as we come out of lockdown this variant could accelerate even more rapidly,” he said….
Some might also find it a depressing indicator that a “pretty strict lockdown” isn’t as useful for inhibiting spread as they think it is.
If Personal Income minus PCTR is above pre-pandemic there is no reason for stimulus, only unemployment support for those still out of jobs. Either inflation is going to take off or we are going to have one huge bubble popping. If the bubble pops it will be a great time to shop for a house, RV, or car. If it doesn’t good luck ever affording a house if you don’t own one already. I looked up the entire Western Coast of the US (California, Oregon, Washington) and almost every home is either pending or contingent. The contingencies are typically that the seller can find a new home to buy not that the buyer can sell their old home.
Mark Blyth – An Inflated Fear of Inflation? link to theanalysis.news
I have followed Mark for several years and he very often makes good points that I think about. I believe he is right on inflation. House inflation is also caused by not building enough housing for whatever reason and not simply because of easy money for example. If we talk about input factors that are inflationary it really hasn’t been Labor except in certain specific areas. Commodities did not inflate until recently. Energy itself has not inflated although taxes on them have. His point on bottlenecks is right on. It comes from disorganization followed by a surge in demand. It is temporary. Where I disagree with him is that he indicates that unionization is a partial answer and that government needs to be expanded. I believe on the contrary that for wages to rise and so distribution can take place is to have an economy good enough so that people who do work have bargaining power. I remember that when the economy hummed on the late 1990’s companies were going through the ghettos offering jobs that paid well. The same happened in 2005 and then it started to happen in 2016. Strangely when the economy got that good something always seemed to go wrong as if full employment was an economic aberration. I do remember that at those times companies in public and in private would bitch about how hard it was to find good people at a cheap price.
Housing prices are astronomic in Canada, and that is not transitory. Every time you think this insanity cannot go any higher, it does, and drunken gamblers always look like geniuses. Trust me.
When banks pay zero interest on fixed income investments, it almost doesn’t matter what inflation is, you’re loosing money. Hence the mad scramble to put you hand on some tangible assets.
It’s all driven by central banks, stimuli, and unrepayable debt.
If you live in your mansion, you can harbor some idle intellectual thoughts, but when you’re in the thick of it, it’s real.
How the US won the economic recovery
I looked for a country that got the economic response to Covid-19 right. I found the US. link to vox.com
Not sure what happened but the comments conversion did not take place tonight.
Shooting for Monday afternoon.
Mish
No worries mate !
Not over yet–there have been a lot of distortions due to pattern changes and discoveries as to howan economy can work in a distant manner.
I don’t think the large office hubs of urban areas will ever be the same–why would they? In person vs on-line will be the discussion in every hiring or construction decision. All of the associated minor business in the urban hubs will hit hard.
Is an urban core an attractive living place when the elimination of transit time is not a concern?
What about retail–a big chunk of the in-person shopping experience has become a foreign and time-wasting experience.
It’ll be years before it all shakes out, and a lot of the changes that have come have cut even more fat out of the economy and spending. I know for myself, as I have worked through the pandemic, I have spent far less money in the past year and put away more.
For those who have received help through stimulus spending, the drying teat will lead to hardship.
So no, I think hard times are still ahead.
That’s even assuming we don’t have a return of variants-of-concern.
Inflation is far from transitory. This 60 YEAR interest rate cycle is 40 years old and at its bottom. There is a 20 year trend in rising rates dead ahead.
It s all a matter of torturing the data till they tell you what you want them to tell you…We were in dire straits BEFORE the pandemic so
…..so what kind of miracles happened justifying stock markets all time highs and exuberant GDP expectations amidst one of the most awful crisis we ve been through since WW2 ? Yes I know the answer, Central Banksters are the new gods of eternal and unlimited abundance and prosperity !
You’re not supposed to worry about the financial shenanigans. You should be worried about Russian spy stories that are being created for you every day.
…don t quite get the ‘for you’….that being said, the spy stories have indeed become a daily agenda item, a preposterous one, looks like puppet Biden is doing a good job for Ukraine (or for his son rather) with the spineless, worthless, nonthinking EU circus playing along. The ‘Putin has to go’ narrative is gaining ground; resourceful and full of resources Russia is too big and too financialy healthy, it should be ‘ours’. Thank gowd though our moribund, hunger striking, western puppet is getting better, the innumerous sanctions, must be working, LOL !
I was being a bit sarcastic.
Unfortunately, the propaganda is at least partially working.
It works until the bread in the bread-and-circuses stops coming.
I know only a couple old pros who see the propaganda for what it is – a deliberate, centrally directed program.
Ukraine has a lot of wheat, there’s some funny previous story about large land purchases somewhere. Iron also, which means autos I guess but you’d think by now the number of autos scrapped in europe equals those produced, so maybe just for bridges and toll booths. The show must go on, paper is cheap and Ukraine has wood:
Iron, steel: US$8 billion (17.4% of total exports)
Cereals: $6.7 billion (14.5%)
Ores, slag, ash: $4.7 billion (10.3%)
Animal/vegetable fats, oils, waxes: $4.5 billion (9.7%)
Electrical machinery, equipment: $2.8 billion (6%)
Oil seeds: $2.4 billion (5.1%)
Food industry waste, animal fodder: $1.6 billion (3.4%)
Wood: $1.5 billion (3.2%)
Machinery including computers: $1.4 billion (2.9%)
Inorganic chemicals: $1.2 billion (2.6%)
Ukraine as a cheap source of resources was the old program cooked up by “old Europe”. Then the US deep state moved in and ate their lunch by bringing forward a long planned coup. They (old Europe) seem to have been stunned by the events and the Russian response.
Putin bears his own responsibility: he promoted the Olympic games to showcase new Russia, giving the US deep state a perfect opportunity. Not very smart.
BTW: The least thing Europe needs is another low cost agricultural supplier, bankrupting her farmers, but politic trumps economics with these muppets.
It’s not that we want the Ukraine. It’s just that we don’t want Russia to have it. Thanks to Putin Ukrainians hate Russia so much that any rapprochement is dead letter. Mission accomplished.
I’m not any kind of expert on Ukraine, but I thought Ukraine’s hatred of Russia went all the way back to the Soviet Ukrainian genocide of the Holodomor. Another cautionary tale that today’s socialist wannabes should read about.
Ukrainians hate Russia. I don’t know what percentage does, but that would have happened anyways. Once you own the means of propaganda and brain washing, you own the country.
Strategically, I would call it a draw, but if Russia lost Crimea and Sevastopol would house a NATO base, Russia would be dead in the water.
That Ukraine doesn’t belong anywhere should suit Russia just fine. The Gorbatchev-Bush agreement envisioned a cordon sanitaire between Russia and old Europe, and everybody would live happy ever after. Something like Finland was since WW2. Without aggressive neighbors, you could be more relaxed and benevolent. Ask USA.
For rabid neocons, that was a non-starter.
NATO expansion was in violation of post soviet agreements and in fact an outright act of agression….Putin drew the line when Ukraine, including Russia’s naval base Crimea, was about to become the next ‘member’ of the criminal organisation ! If it wasn t for the nuclear deterrent the US would ve been all over Ukraine and all the other remaining ex soviets by now…and Moscow would ve been bombed in the name of fckn democracy !
….the Ukraine had a democratically elected pro Russia president….and then came the CIA orchestrated coup in 2014, I do remember Vicky Nuland-Fuck Europe….Putin drew a line there and annexed Crimea, he was damn right ! Too much of a unipolar world is simply too much of it !
EU imports very @ 5mt of wheat primarily from Ukraine, but exports @ 15mt worldwide . That is to say that if it owns Ukraine it owns any competition from it on world market, might possibly use Ukrainian wheat supply for political leverage.
…. Yeah, the ridiculed, boycotted olympics, the Kiev provoked shooting of a civil plane… the alleged poisoning of the Skripals just ahead of the World Cup…. dirty games, all too obvious….for critical minds anyway….
It does not feel to me like the crisis is over. It feels like we’re over the hump on the worst part of it, but I’d expect real growth to come in fits and starts……2021 will not be a great year for us…but maybe better than 2020…..which it pretty much has to for the long term survival of the business.
We are benefiting right now from people spending stimulus money with us. When that stops, our business will surely feel it.
The other thing is that COVID is a wild card. India had announced in February that COVID was beaten, and now look at what’s going on there. Vaccinations here could be better. Most people who want the vaccine can now get it with no problem, but we are far from the levels that would ensure COVID won’t spike again. I’m grateful for the low rate of new infections here at the moment, but I think it’s way too early to think we’re out of the woods.
Looking forward to having the edit back, and hope the changes work out well.
What I have learned from this “recession” is that small business no longer matters. Small business is down pretty much everywhere, but who cares?
That’s a spot on observation.
Then who advertizes on Google and Fakebook?
I am the wrong person to ask. I would have no idea.
Comment Outage for 2 Hours Later Today
Also – The site will be up without converted comments which accounts for the delay.
NO URL Change
still MishTalk.Com
After the migration it will be possible edit comments with lots of other nice comment controls.
There will be some small layout changes as well.
The new comment system is NOT Disqus as I mentioned before. That would have required another login.
You will have to login after the change but the problem with random logouts is supposed to be fixed.