Economics

You cannot turn an economy off, then turn it back on. Here are the results when hubris makes you think you found the magic switch. Part 3.

Image courtesy of Adobe Stock.

The supply chain for so many of the things we buy is messed up at every step of the logistics system. Former CEO of Walmart pointed out the steps in the supply chain that are tangled up:

  • Loading ships at ports in Asia.
  • Ships are stuck in the water waiting to unload.
  • Unloading at ports in the US is another chokepoint.
  • There are not enough truck drivers.
  • Not enough labor and the various points in the distribution system inside the United States.
  • Shortage of people to put stuff on the shelves.

Essentially every stage of the distribution channel is tangled up. Biggest thing that could be done to get things moving normally would be more people to work at every step of the distribution system. Labor shortages, in other words.

This post discusses two articles:

  • California has imposed restrictions on trucking which has drastically reduced the number of trucks which can be operated in the state.
  • One article provides us a survey of a dozen other articles, each of which describes a different aspect of the supply chain disaster.

Part one of this series can be read here. Part two here.

The Last Refuge – 10/14/21 – The California Version of The Green New Deal and an October 16, 2020, EPA Settlement With Transportation is What’s Creating The Container Shipping Backlog – Working CA Ports 24/7 Will Not Help, Here’s Why Author spent three days researching reasons for the backlog of containers here in California. Checking resources, researching details, and other research showed some surprising things.

Consumer Price Index increase for September 2021 continues strong, with 12 month inflation running at worst rate since 1990.

The Consumer Price Index, or CPI, shows a 0.4% increase in September 2021 for all-items with a core increase of 0.2%.

The rate of inflation for the last 12 months is 5.43% for all items and 3.86% for core inflation without food and energy.

Graph at top of this post shows the monthly increase in the all-items index along with the core change. Graph also shows an average of the preceding 12 months for all items.

Watch the green line increase from around 0.1% up to over 0.4% for the last five months.

The trailing 12 month average is also grim. It shows:

What’s likely to happen with inflation? More of it and for extended time.

Rising costs and constrained shipping capacity is driving inflation and disrupting supply chain across the economy. Image courtesy of Adobe Stock.

Indicators I can see suggest inflation is going to continue at a high rate for quite some time. Here are a few of the articles I have read recently pointing towards ongoing rise in prices:

  • Rent component of CPI will increase substantially over the next year because of the way the index is calculated.
  • Shipping costs have already skyrocketed.
  • Multiple food producers are struggling with rapidly increasing costs.
  • Major food producer expects their costs go up 11% in the next year with prices they charge to go up by 4%.
  • The phrase “stagflation” is back in play. Oh joy, a possible (likely?) return to the Carter administration.

Asia Times – 8/27/21 – US rent hikes will explode consumer inflation in 2022 – Anecdotal information indicates rental prices are skyrocketing.

A friend of mine priced the apartment they are living in to help a relative who was moving into the area. Price for this exact unit is 50% more than when they signed their annual lease a number of months ago.

An acquaintance reports the price for renting a particular house went up while they were thinking about it for a day or so.

Two friends report landlords renting apartments expect six months rent in advance and some landlords renting houses are expecting a year in advance. A year.

Article mentioned above says the reports floating around in the media indicate rent hikes overall are around 10%. Yet the CPI shows only 2% increase in rent.

How can that be?

Fascinating detail of how the CPI is calculated explains the anomaly and also points towards dramatic increase in the rent component of CPI over the next year.

You cannot turn an economy off, then turn it back on. Here are the results when hubris makes you think you found the magic switch. Part 2.

Modern cargo container ship giving an idea of the amount of cargo that can be carried. Each of those containers is one semi-load on the freeway. Image courtesy of Adobe Stock.

Seems like most industries have a tangled supply chain. The entire transportation system is sorely distressed.

The elitists in federal and state governments have a staggering level of hubris. They think waving their hands, clicking on their laptops, issuing press releases will make the entire economy bend to their will. What they accomplish is willfully causing disruption in your life and in my life.

Here are merely a few of the recent articles describing the tangled impact of Covid dictats and sundry government policies:

  • Lots of cargo ships are waiting to unload off the California coast.
  • Large port operator expects disruptions to last into 2023.
  • Workers in transportation sector warn of possible system collapse.
  • Chip shortage for carmakers will last into late 2022.

Looks like it might take another 15 or 18 months to untangle the worldwide supply chain.

Wall Street Journal – 8/17/21 – Cargo Ships Are Again Idling Off Jammed Southern California Ports – Back in the middle of August the tally of cargo ships sitting off to coast of California was 37.

A tweet I saw this morning (10/9/21) from someone flying out of Long Beach indicated the individual counted 50 ships waiting to unload.

At around 10,000 containers per ship that is somewhere around 370,000 containers waiting to be unloaded back in the middle of August and is now currently somewhere in the range of half a million containers sitting off the coast.

Article says a few months ago it was only nine. Normally it is zero.

You cannot turn an economy off, then turn it back on. Here are the results when hubris makes you think you found the magic switch. Part 1.

Random stock outages are still common. Image courtesy of Adobe Stock.

The supply chain in most industries is tangled up somehow somewhere.

The people in federal and state governments with the staggering level of hubris to think they can wave their hands and make the entire economy do their bidding are willfully causing disruption in your life and in my life.

What is going on around us?

Image courtesy of Adobe Stock.

I am struggling to figure out what’s going on around us in the economy. These are confusing times.

That is why I blog. Digging into news reports and statistics deep enough to write something coherent (hopefully) pushes me towards understanding. At least that’s the concept.

The next several posts I have lined up will explore some economics aspects of this confusing world.

Personal Consumption Expenditure for July 2021 shows increased inflation is still in play.

The Personal Consumption Expenditure (PCE) inflation index shows an increase of 0.4% in July 2021. Since December 2020 this index is shown inflation of between 0.3% and 0.6% each month.

This indicates that inflation is continuing. Good news is that inflation is not accelerating. Bad news is an annualized inflation rate of about 6% is continuing.

The PCE is the inflation index preferred by the US Federal Reserve. An intriguing aspect of the PCE is the numbers are routinely revised. This means prior month’s numbers will shift, sometimes by substantial amounts.

Update: The year over year change in PCE is 3.6%. CNBC reports on 8/28/31 Key inflation gauge rises 3.6% from a year ago to tie biggest jump since the early 1990s. To be specific that matches the increase in May 1991 and is second only to the 4.2% increase in January 1991. Current policies of the White House and Congress have given us the highest inflation in 30 years. Not yet Carter era bad, but there is time to achieve Carter level performance.

The CNBC article also says some of the Fed members are starting to see the immediate inflation just might be more than just a temporary adjustment to the economic shutdown. President of the Atlanta Fed acknowledge such possibility when he said on-air that he is hearing from a many of his business contacts that they expect inflation go to beyond the immediate-term.

Very slow but steady improvement in unemployment as of early August 2021.

New claims for unemployment are down about 60,000 per week since my last post 10 weeks ago. For the week ending 8/21/21 new claims were 353K compared to 412K the week of 6/12/21.

The number of insured unemployed has dropped more substantially, from 3.53M the week ending 6/12/21 to 2.9M the week ending 8/14/21. That is a drop of 672K over nine weeks. For contrast the number of insured unemployed was averaging 1.7M in January and February 2020.

Those numbers reveal a slow improvement although the number of people losing their jobs each week is still running double the average in January and February 2020.

Purpose of these posts on economic statistics is to help all of us keep current on what is going on in the overall economy.

What I’m drawing from the data is the economy is improving one little bit at a time. Seems to me the recovery is slowing.

Revised number of weekly new claims in state programs over recent months shows following trend:

  • 406K – 5/22/21
  • 412K – 6/12/21
  • 368K – 7/10/21
  • 349K – 8/14/21

Following graphs show the devastation from the economic shutdown.

New claims

New claims for unemployment by week since the start of 2020:

Consumer Price Index again showing strong inflation in July 2021.

The Consumer Price Index, or CPI, shows 0.5% price increases in July with a core increase of 0.3%. While that is the lowest increase since February 2021, half a percent in one month works out to about 6% in a year.

Graph at top of this post shows the monthly change in the primary index along with the core change which excludes food and energy. Graph also shows an average of the preceding 12 months.

The average was running around 0.1% a month for most of 2020 after the shock of the pandemic. You can see the rising monthly increase quite visibly, starting in January 2021. Watch the green line increase from around 0.1% up to currently 0.4%.

The trailing 12 month average is also grim. It shows:

Expectations growing that we will see rising interest rates and sustained inflation.

Image courtesy of Adobe Stock.

It isn’t just the current numbers that are hinting that inflation is back. Changes in CPI and PCE are unsettling.

There is also a clear statement from the Fed they will nudge interest rates up earlier than they previous announced. Also indications from two big banks that we will see rising interest rates.

6/17/21 – Dailywire – Federal Reserve Delivers Bad News About Expectations For Inflation, Raising Interest Rates: Report – Previously the Federal Reserve indicated interest rates would not have to be increased until sometime in 2024.

New claims for unemployment are flat and ongoing claims are slowly decreasing as of middle of June 2021.

New claims for unemployment are flat compared to three weeks ago. Ongoing claims for unemployment at the state and federal level are declining, slow though the decline may be.

Number of weekly new claims for unemployment was 406,000 three weeks ago and 412,000 the most recent week. The increase in the most recent week offset the decline in the previous two weeks.

Most recent data shows ongoing claims at the state level dropped from 3,602,000 three weeks ago to 3,518,000 in the most recent week, for a net decrease of 84,000. There was an increase two weeks ago, large drop last week, and essentially no change this week.

The number of new claims is still double the average from before the pandemic.

Purpose of these posts on economic statistics is to help all of us keep current on what is going on in the overall economy.

Revised number of weekly new claims in state programs over the last four months to show the trend:

  • 728K – 3/27/221
  • 590K – 4/24/21
  • 406K – 5/22/21
  • 412K – 6/12/21

Following graphs show the devastation from the economic shutdown.

New claims

New claims for unemployment by week since the start of 2020:

Accelerating inflation rate continues in May 2021.

Changes in the Consumer Price Index have been making a splash in the news lately. Increases over the last three months have been unusually high.

The headline consumer price indicator increased 0.6% in May after 0.8% in April and 0.6% in March. That is a big run of inflation for three months.

The core measure, which excludes energy and food costs, has been on a roughly parallel track with 0.7 increase in May following a 0.9% in April and 0.3% in March.

Graph at the top of this page shows the change in the primary inflation indicator, and the core index along with a 12 month average of the monthly change.

You can see a large drop in prices during the pandemic followed by spikes over the next several months. Price changes returned to normal range in the September 2020 through February 2021 timeframe.

What is behind those numbers? Let’s check out the Wall Street Journal’s narrative:

Monitoring inflation through the Personal Consumption Expenditure (PCE) price index.

Another way to keep track of inflation trends is by watching the price index for the Personal Consumption Expenditure.

Please journey along with me as I continue my education.

In the news yesterday was the April increase which showed a 3.1% year-over-year increase compared to an expectation of a 2.9% increase. For one article discussing the news, check out the following:

I have started to track this data, gathering information back to the start of 2020. The month by month change in the headline index and the core index (which excludes food and energy costs) can be seen in the graph at the top of this post.

Before look at the year-over-year change, we need to look at the nature of the index. There are two main indices used to monitor inflation. The first is the Consumer Price Index (CPI) which everyone knows about. The other is the Personal Consumption Expenditures (PCE).

What’s the difference? Great question.

New claims for unemployment decreasing at end of in May 2021. Ongoing claims are flat.

Since my last post on 4/30/20, a month ago, there has finally been visible progress in the number of people losing their job.

Since 4/24/21 the number of new claims for unemployment has dropped from 590,000 to 406,000 in the week ending 5/22/21. Graph above shows improvement. Average had been running around 800,000 from early October 2020 until late in February 2021.

The number of new claims is still double the average from before the pandemic. As recently as February it was four times, so that is progress. From quadruple for oh so many months to merely double is good. Not great for all those people losing their job now, but at overall level it is progress.

Purpose of these posts on economic statistics is to help all of us sort out what is going on in the overall economy.

Revised number of new claims in state programs over the last four months:

  • 754K – 2/27/21
  • 728K – 3/27/221
  • 590K – 4/24/21
  • 406K – 5/22/21

Following graphs show the ongoing human cost of the economic shutdown.

New claims

New claims for unemployment by week since the start of 2020: