It is so important to look at and understand details and not look at the headline and say “okay got it”. You likely don’t.
As I read PNKs article about inflation, I think on the impact this has on people/families living paycheck to paycheck and how it is getting worse. I listen to Bloomberg news and they love to say inflation / economy is getting better. The working poor and middle class is saying “the cost of non-discretionary goods has gone up so much, I can’t understand why they say another 3%ish rise is good. I can’t afford to live now”. I can’t help but think it creates anger or tears when they hear it.
I know when I read some of the media commentary about inflation, my general reaction is along the lines of "on what planet do you spend most of your time?"
Doesn't appear there are any books that they don't cook or revise anymore, in order to juggle things to show the picture that they want to show. But then again, we are talking about the government!!
Yes, the effects of government (debt) spending vs consumer spending, and most Americans are too ignorant regarding economics to understand the difference. Thus, the Biden administration continues to fool the electorate.
I have a question about long stretches of declining real disposable income. When a decline, especially a gradual decline, first begins, its effects on the economy aren’t very noticeable. Shops, restaurants, and other places for consumers to spend disposable income tough it out for awhile, without laying off employees or closing stores. But after a certain number of months, the owners cannot absorb further losses, and those stores, restaurants, etc. begin to close. Those laid-off workers now mean that there is even less real disposable income in an economy, and the effect starts to snowball into a serious recession. So, Peter, have you come across any studies showing, in recent decades, what the magic number on months of decline is before there is a tipping point into full recession? I realize that every decline has its own characteristics, but is there some historically average number of months?
There's no magic number of months. Much depends on the magnitude of the decline as well as the variability.
But there is a further complication in that the labor force was forcibly reduced by some 4.7 million workers as a consequence of the Pandemic Panic Recession--that half of the 9 million workers forced out of the labor force as a result of COVID lockdown lunacies who have never returned to the labor force. For whatever reason, that cohort of workers refuses to return to the labor force and at this juncture is unlikely to return to the labor force.
This is what creates the appearance of a "tight" labor market, and thus businesses become even more reluctant to lay off even as they strive mightily to hold labor costs down. If the labor market were truly "tight", then the resolution would be that labor costs would trend up relative to consumer price inflation--that labor costs have not done so except in recent months points to the labor markets being far more "toxic" than "tight".
Thus we have to be even more careful about making projections on future economic trends based on prior economic history. In many ways the current situation is almost without precedent, and so the traditional views of the data, and in particular the headline data, must be taken with massive doses of skepticism and more than a few grains of salt.
This much is certain: declining disposable income and declining investment are not trends that can ever result in future economic growth and prosperity. Therefore we may be certain that the economic prognosis in this country is, to one degree or another, "grim".
Nominal incomes: (gross income) are growing
Real incomes: (after inflation) are not growing.
It is so important to look at and understand details and not look at the headline and say “okay got it”. You likely don’t.
As I read PNKs article about inflation, I think on the impact this has on people/families living paycheck to paycheck and how it is getting worse. I listen to Bloomberg news and they love to say inflation / economy is getting better. The working poor and middle class is saying “the cost of non-discretionary goods has gone up so much, I can’t understand why they say another 3%ish rise is good. I can’t afford to live now”. I can’t help but think it creates anger or tears when they hear it.
I know when I read some of the media commentary about inflation, my general reaction is along the lines of "on what planet do you spend most of your time?"
Doesn't appear there are any books that they don't cook or revise anymore, in order to juggle things to show the picture that they want to show. But then again, we are talking about the government!!
Linking as usual @https://nothingnewunderthesun2016.com/
Yes, the effects of government (debt) spending vs consumer spending, and most Americans are too ignorant regarding economics to understand the difference. Thus, the Biden administration continues to fool the electorate.
I have a question about long stretches of declining real disposable income. When a decline, especially a gradual decline, first begins, its effects on the economy aren’t very noticeable. Shops, restaurants, and other places for consumers to spend disposable income tough it out for awhile, without laying off employees or closing stores. But after a certain number of months, the owners cannot absorb further losses, and those stores, restaurants, etc. begin to close. Those laid-off workers now mean that there is even less real disposable income in an economy, and the effect starts to snowball into a serious recession. So, Peter, have you come across any studies showing, in recent decades, what the magic number on months of decline is before there is a tipping point into full recession? I realize that every decline has its own characteristics, but is there some historically average number of months?
There's no magic number of months. Much depends on the magnitude of the decline as well as the variability.
But there is a further complication in that the labor force was forcibly reduced by some 4.7 million workers as a consequence of the Pandemic Panic Recession--that half of the 9 million workers forced out of the labor force as a result of COVID lockdown lunacies who have never returned to the labor force. For whatever reason, that cohort of workers refuses to return to the labor force and at this juncture is unlikely to return to the labor force.
This is what creates the appearance of a "tight" labor market, and thus businesses become even more reluctant to lay off even as they strive mightily to hold labor costs down. If the labor market were truly "tight", then the resolution would be that labor costs would trend up relative to consumer price inflation--that labor costs have not done so except in recent months points to the labor markets being far more "toxic" than "tight".
Thus we have to be even more careful about making projections on future economic trends based on prior economic history. In many ways the current situation is almost without precedent, and so the traditional views of the data, and in particular the headline data, must be taken with massive doses of skepticism and more than a few grains of salt.
This much is certain: declining disposable income and declining investment are not trends that can ever result in future economic growth and prosperity. Therefore we may be certain that the economic prognosis in this country is, to one degree or another, "grim".
This is another excellent and insightful answer, by the way. (But I’m always saying that.)
If it has to be grim, please let it happen well before Election Day so that we can benefit from a change of administrations!