Whose Recession is it Anyway?

In the movie classic, “The Wizard of Oz”, as the Wicked Witch melts after being doused with a bucket of water, by the saucy, and ever brave, Dorothy Gale from Kansas, she exclaims, “What a World! What a World!” and  this seems to sum up financial news from the US these past few days, as a worried President Donald Trump pooh-poohs the idea of a recession, in the absence of any real data. And, as much of the world knows, that has never stopped him before.

What is news is that the long predicted, and curiously much desired by some, recession is not just around the corner and not being released from Pandora’s box, but economists, in a recent survey did waffle a bit, with some saying, in effect, hang on it’s coming, to others saying, with a shrug, not to worry, leaving many to wonder what is really going on.

It’s not too hard to imagine that Trump is worried that his signature plank in the 2020 election platform might be crumbling and NBC’S Morning Joe capsulized that with news of closed door meetings, on the topic, but it also shows, once again, a certain amount of naivety about his own actions, and number one is the Chinese tariffs that he imposed threaten a recession, not simply in the US, but also a global reaction.

“I don’t think we’re having a recession,” Trump told reporters Sunday, according to the Associated Press. “We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut, and they’re loaded up with money.”

Circling back to what economists have said, we have some that give it a greater chance than some believe, and “Nearly 3 out of 4 economists surveyed by the National Association for Business Economics expect a recession by 2021, according to poll results released Monday. The outlook reflects growing skepticism among economists and investors that the U.S. economy will be able to withstand a protracted trade war with China without serious harm amid a weakening global outlook,” reported The Washington Post.

Leading the pack is “Hedge fund manager Ray Dalio, the founder of Bridgewater Associates, told CNBC last week that he now believes there’s a 40 percent chance of a recession before the 2020 election. In February, he had estimated that figure to be 35 percent.”

While 74 percent of economists in that survey said they expect a recession by 2021, the data seen is less than comprehensive and none of them can say that the president is wrong, and there is some serious waffling, with Michelle Meyer of Bank of America saying in a private note to investors that she sees only a 20 percent chance; she then does a quick turnaround and says subjectively there is closer to a one in three chance of a recession.

"Our official model has the probability of a recession over the next 12 months only pegged at about 20%, but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance,” as reported by CNN.

If that is not soothing news, then let’s hear this: “It's important to note that others have sounded more optimistic -- including Goldman Sachs chief executive David Solomon, who told CNN in an interview last week, "I think at the end of the day, the underlying economy, as we discussed, is still doing okay. I think the chance of a recession in the near term is still relatively low. But we have to watch what's going on with tariffs."

Harkening back to undergrad macroeconomics, and even basic statistics class, we have the following to reflect on: “Caution is warranted. The survey period mostly took place before the Federal Reserve cut interest rates on July 31. And NABE simply distributes the survey to 1,780 members of the organization, regardless of their level of experience or their position, then tallies the responses of the people who choose to participate.”

For those in the know, what CNN is saying is that this was a small sample n=1780, skewed to a restricted population, and that the methodological results give caution due to multiple variables.

If you raised your hand to say, “yes” - then that is the best answer you can give, and we will award you bonus points for class participation.

Trump has tried to soften the blow from the tariffs, by saying that further actions will be delayed to December, and add a cut in payroll taxes, not, as many have noted, as President Obama did to stimulate the economy, but to soothe worries from his political base; and, remembering that despite enjoying some off-time to write his memoirs,  the former president is still on the 2020 ticket, for those who care.

What needs to be remembered is to view the US in the context of global economics and that Trump’s actions, and statements can affect world markets.

To that effect, while America's economy has grown by the end of this past month, for 121 months; but, what follows it is a jumble of contradicting information: 224,000 jobs created last month, yield curve inversions as the rate of return on long term investments begin to shrink and a wary manufacturing base, and while The Economist correctly identified this, as to be expected, much of “it is also owing to deeper changes in America’s $21trn economy.”

While we are spared, all but the memory, of derivatives, there is more than one conundrum, with average GDP, 2.3 percent, “much lower than the 3.6% that was seen in America's three previous expansions.”

Combine that with an ageing workforce, and retiring baby boomers that has de-escalated the workforce, plus slow productivity and “Big firms [that] hoard profits and invest less,” then there are further problems despite the good news of less energy and less reliance on manufacturing, and an increase in services.

We have something further to talk about: the good tempered by low wages that have crawled to a weak 3 percent, and more is needed than an explanation, from Trump, or the proclamation from another Hollywood movie heroine, Scarlett O’Hara, who shouted, in “Gone With the Wind” that “We’s rich!”

The specter of a weakened supply chain shaken, not stirred, by the trade war makes investors even more nervous, as does the rate of total private debts at 250 percent of the GDP.

Finally, both policy and politics are sitting on a seesaw, and “the greatest threat to America’s long and placid expansion is that of a new era of wild policy may just be beginning.”

Can U.S. Senate pass gun background checks?

Credit: The White House 

A tweet by any other name is just a tweet? Not says Chicago’s new mayor, Lori Lightfoot after a tweet by Ivanka Trump, as she confronted President Trump’s daughter, about Chicago violence, in contrast to the tragic mass murders in Texas, and Ohio, a move that many see as another diversionary tactic from her father’s playbook.

While it’s safe to assume that she is a “Daddy’s Girl” in protective mode, it also shows that Lightfoot unfortunately fell for the diversionary tactic, and has to remember, say administration critics, that none of the Trump family can be trusted.

In a weekend of horrors that claimed the lives of over 25 people and over 20 wounded, it is revealing, as it was the case with the president’s words after visiting El Paso and Dayton, that the race to retain the White House is in full throttle and nothing else really matters, but the fear that independent voters might vote with the Dems.

For those that might have missed the tweet, here it is: “With 7 dead and 52 wounded near a playground in the Windy City - and little national outrage or media coverage - we mustn’t become numb to the violence faced by inner city communities every day,” she wrote, misstating facts and leaving her open to Lightfoot’s scathing remarks, noted the Chicago Sun-Times.

The mayor was quick to point out the facts: the shootings were not in one incident near a playground, a park, and the numbers were spread out over the weekend.

As most in the media have noted, the truth does not matter, when it comes to the Trump family, but appealing to the Republican base does, and that’s all that matters.

The run up to November is nothing to be risked, and the Trumps are getting nervous, and what better way than to highlight violence, black violence, in a town with its only second black mayor, redolent of the attacks on Rep. Elijah Cummings, and the city of Baltimore.

To stem the tide, so to speak, Trump’s office released a statement, that did a “circle back” with just a soupcon of regret --- “A White House statement released on Tuesday night acknowledged that to an extent: Ivanka Trump’s quote was “misleading in implying that all of the shooting incidents occurred in one location,” while underscoring the larger point that seven were shot to death, even if not a mass killing.”

In an exchange with the local dean of political reporters, Fran Spielman, of the Times, was this:

“Ivanka Trump has not signaled if she is using her considerable clout to influence the president to take stronger action on guns.

I asked, “Is there anything Ivanka Trump wants to suggest for Chicago?

The reply from the White House official: “She wants to ensure that we as a country do not become numb to gun violence that occurs in our inner cities on a daily basis.

“When she (met) with Mayor Lightfoot, they had a productive and positive meeting covering issues ranging from workforce development and vocational education to economic revitalization. They also discussed at length criminal justice and parole reform as well as crime prevention and looks forward to collaborating on these issues.”

Their anxiety about all of the negative publicity surrounding the shootings, but also the blowback after the careless remarks of the president that don’t focus on the tragedy, but himself, as a recent CNN report from Anderson Cooper showed.

Certainly any attempt at background checks has been curtailed by the Senate, and in a statement from Mitch McConnell, he said that they would not come back from recess, to discuss a bill, despite the urging of Democratic leaders, Nancy Pelosi and Chuck Schumer.

Then he backtracked in a statement, that some see as disingenuous, that he was “willing to consider background checks for gun buyers,” to a Kentucky radio station,WHAS radio, and even further, ‘what we can’t do is fail to pass something.”

Close on the heels of these remarks is the NRA who has said, in no uncertain terms, that they will not support a bill that increased background checks, nor is there support from the Senate, despite some reports from the White House, that the “red flag” laws the president might want to consider, in light of the early warning signs that most of the perpetrators have shown to have, might be considered.

It’s been firmly established that the NRA played a key role in the election of Donald Trump and that in a sense, he owes them, when he told reporters, “We’ll see where the NRA is,” adding that there are “good people” in the NRA, and “I have a great relationship with the NRA.”

Meanwhile, the killing fields continue, and the lack of early intervention has been established by psychologists, yet the public will has not always been behind it, and school officials, perhaps cowed by lawsuits over privacy concerns have muted any action on that.

Dayton shooter Connor Betts had this in his background, and “In interviews with The Associated Press, two former high school classmates claimed the shooter was once suspended for compiling a "hit list" of those he wanted to kill and a "rape list" of girls he wanted to sexually assault.”

There was no response from the Bellbrook High School, Betts attended, when AP made their report.

Surrounding the tragedy has not been solely the drumbeat of criticism after Trump’s self-serving remarks, the now beleaguered president has some damage control to do, and his spin, and outlandish statements saying that the Texas shooter was a fan of Democrat, Elizabeth Warren, and Bernie Sanders, an Independent, and, for good measure, a member of Antifa, are not indicative of a present reality.

NRA head Wayne LaPierre “has not detailed his discussions with Trump this week, he said in a statement that "the NRA opposes any legislation that unfairly infringes upon the rights of law-abiding citizens."

This statement could be read in a myriad of ways, but not one that might be supportive of increased background checks, or show much hope to slow the steady growth of mass murders in the United States.

July Jobs Report takes a little off the top

What a difference a month makes, as the Labor Department released its figures, on Friday, for the July job numbers that showed an accurate prediction by economists for 164,000 jobs that sent those that were worried about May’s dismal numbers, that there was a ray, or several rays of sunshine, that gave hope to the many economists and academics that want to see the good news of the American economy preached wide and far.

As usual the much ballyhooed unemployment rate of 3.7 - the best since 1969 produced a joyful noise from the Trump Administration: “July's Employment Situation Report demonstrates the steady and consistent growth of the American economy,” said Acting Labor Secretary Patrick Pizzella. “With Labor Day a month away, we have not seen an unemployment rate this low on a Labor Day since 1952.”

There are the cheerleaders, like Pizella, but there are also the naysayers who as they pull back from the screen and look at the details, and the most salient shot, is once again low wages, that increased by only by 8 cents, on average.

The household survey, the real barometer of the unemployment scene was 7 percent, which puts the view in perspective, that the economy is slowing down, not to a grinding halt, but is more of a walk, than a run.

CNN reported that, "After an acceleration in 2018, job growth in 2019 is somewhat slower but still solid," [and] Gus Faucher, chief economist for PNC Financial Services, wrote in a note to clients. "A tight labor market that is making it difficult to find workers; reduced fiscal stimulus, trade tensions, slower global growth, and business uncertainty are all weighing on the labor market."

The increase in wages, as we have seen for months is the sticking point and with only an increase of 3.2 percent, resulting in an hourly wage increase of $27.98, that has barely outpaced any cost of living increase.

When adjusted for inflation, workers are only making 1.6 percent less than they were a year ago.

Some Americans are wondering about what some economists and conservative columnists have described as a “boom”; and Heather Long, writing in The Washington Post, earlier this month, noted that there is a “two-tier” recovery” that has 60 percent of the population benefiting, while 40 percent “have seen paltry or volatile wage growth, rising expenses for housing, health care, and education and increased levels of personal debt.”

Let’s add to that an increase of food, and the picture has darkened, and while clothing and utility costs felt, the result was that afterwards, inflation fell to 1.6 percent, having adverse effects on wages.

Adding some good news is “workers also continue to jump into the job market, with 370,000 people entering the labor force in July. And people are finding jobs faster after losing one: The average duration of unemployment dropped to 19.6 weeks, which is the lowest it's been in this economic cycle.”

Then some bad news: “The goods-producing sector, however, has been sagging all year. The Institute for Supply Management's manufacturing index, which measures optimism among manufacturing companies, declined to a three-year low in July as uncertainty around trade policy continued to make future planning difficult,” added CNBC.

Friday’s news that President Trump was willing to slap more tariffs on China added to the worries of smaller companies, whose equally smaller supply chains can further suffer the consequences.

“Manufacturing added only 16,000 jobs in July — not much for a sector with 12.9 million jobs overall — while the number of hours that factory workers work in a week declined to their lowest level since 2014. Mining and logging industries, which have been rocked by volatile oil prices, subtracted 5,000 jobs. Construction employment was also essentially flat, with heavy and civil engineering construction shrinking by 4,300 jobs.”

The much heralded Republican tax cut, has left most families in abeyance, and received only a slight bump, soon to evaporate, while corporations will receive permanent benefits.

“When you take inflation into account, workers’ real wages only grew about 1.6 percent over the past year. This is worth emphasizing: During the longest economic expansion in US history, with record-low unemployment, workers are only making 1.6 percent more than they did a year ago, after adjusting for inflation,” reported Vox.com.

The mixed bag of the tax cuts are to be seen more accurately in the future, but it seems that the panacea for the US economy has not been seen.

In November of last year, The New York Times, noted: “Data from large public companies, however, suggest that most workers received relatively small shares of their employers’ corporate tax savings.

In particular, “The nonprofit research group Just Capital, which is tracking 1,000 large public companies’ reports of how they are spending their tax cuts, calculates that the typical worker at one of those large companies has received about $225 this year in increased salary, a one-time bonus, or both, attributable to the new law.”

Even more baleful is this from their coverage: “Many companies also said they would use tax savings to create jobs. But the Just Capital research finds that, since the tax cuts were passed, the 1,000 largest public companies have actually reduced employment, on balance. They have announced the elimination of nearly 140,000 jobs — which is almost double the 73,000 jobs they say they have created in that time. About half of those net losses came from companies in the restaurant and leisure industries, the analysis found.”

On the corporate side ,the restructuring that the Trump administration has championed a new economy has faded, we now see that while “It’s true that business spending on fixed investment — such as machinery, buildings and equipment — rose, jumping 11.5 percent and 8.7 percent during the first and second quarters. The first-quarter jump was the fastest for investment since 2011. But that pace fizzled during the third quarter. Recently data showed third-quarter business investment rose at an annual pace of 0.8 percent.”

July did see a slight increase in labor force participation from just under 62 percent in June to 63 percent, the highest since March, but as we have seen, this figure is increasingly volatile, despite the recent uptick.

Recalling  what Jim O’Sullivan, chief U.S. economist at economic and research consulting firm HFE said in a note to the WSJ, last month: "The data are unlikely to stop the Fed from easing at this month’s meeting; the well-signaled easing reflects officials’ worries about the potential drag on growth from trade-related 'uncertainties,' along with sub-2% inflation. However, the report adds to the likelihood that the easing will be of 25 rather than 50 basis points."

Federal Reserve Chair, Jerome Powell, now, seems to be on that cautious path, and the recent cut, “its first interest-rate cut since 2008[shows some concern]. Policymakers at the central bank said the job market remains strong, but that they're worried about the U.S. and global economies slowing down and the uncertainty caused by the U.S.-China trade war;” but also as previously noted, this may be a cautious plan for a probable increase in rate cuts, as the Chair mentioned, to keep the Fed on their twinned goals of full employment, and inflation at 2 percent, or below.

Do or Die say Dems in Detroit

For those viewers that wanted to get a firmer grasp of what were the most salient issues for the 2020 presidential Democratic candidates, they were torn between what was on display, the differences between moderates and party progressives, or the issue of the legacy of President Barack Obama, and while some observers were baffled, or thought it “bizarre”, what was seen, and heard, showed the struggle for a platform, be it progressive, or moderate, or was it to be turned to the left, or to the center.

Personifying the center, or the old-guard, was on Wednesday night, its near personification, Vice-President Joe Biden, and the new face of Kamala Harris, who hammered away at Biden, in the previous debate, but it also showed that health care was not only a salient issue, but one that defined the two sides, and in some instances on Tuesday, showed a near willingness to see the reelection of Donald Trump by decriminalizing illegal immigration to the United States, and giving them health care.

“At the center of the back-and-forth was the question that has bedeviled the party since 2016: Will nominating a firebrand progressive from the far left energize enough voters to win back the White House? Or would doing so demolish Democratic hopes by alienating the centrist voters who cast ballots for Trump in 2016?,” wryly noted CNN.

Some observers have seen this as a race to the bottom, or a family squabble in a crowded field, with a cranky uncle, a nerdy nephew, a sassy aunt, and a jockey younger brother.

Separating the wheat from the chaff was Bernie Sanders and Elizabeth Warren, whose take-no-prisoners on a single-payer plan that costs $32 trillion dollars, and wipes out private insurance --- even while 60 percent of Americans, like what private plans they have.

As CNN reported: “Former Colorado Gov. John Hickenlooper warned that if Democrats want to "take private insurance away from 180 million Americans" -- a reference to the fact that Medicare for All would phase out private health insurance -- while guaranteeing that every American could get a government job through the Green New Deal, then "you might as well FedEx the election to Donald Trump."

Former Congressman John Delaney, much to the consternation of Warren pointed out the weakness of the plan, and one that threatens the question of choice for millions of Americans, despite the fiery support of Sanders and Warren.

The tart response, from Warren: "I don't understand why anybody goes to all the trouble of running to the President of the United States to talk about what we really can't do and shouldn't fight for. I don't get it.”

Viewers did see a stronger Cory Booker, who along with Harris, harassed and parried with front runner Biden who seemed anachronistic, and clinging to his resume as Vice-President to Obama, whose legacy some saw, like political adviser, Paul Begalia, as a betrayal.

“While Biden said he would not share details about his private conversations with Obama, Sen. Cory Booker (D-N.J.) interjected, saying he couldn't have it both ways.

“Mr. Vice President, you can’t have it both ways,” Booker said Wednesday. “You invoke President Obama more than anybody in this campaign. You can’t do it when it’s convenient and then dodge it when it’s not,” reported The Hill.

While the book on the 2016 election has not been written, it’s a safe bet that the centrist model promulgated by the defeated Hillary Clinton, and its resonance in the Obama years, won’t work for a complicated future, and especially one that has been compromised by Donald Trump.

“Since Clinton's loss to Trump in 2016, Democrats have struggled with this internal debate about whether they must do more in 2020 to attract the centrist, white working-class voters who voted for Trump or if they can win the White House by embracing a bold, progressive agenda that would dramatically restructure government.”

Moving beyond the Clinton-Obama years to a different venue might be a better bet, even with a waffling Harris, who just this week, moved away from being an acolyte to the Sanders plan, to one that has found some room for private insurance, albeit in abeyance.

“But, in a Democratic Party that has been energized and shifted to the left by social movements such as Black Lives Matter, #MeToo, and the resistance to Trump, many activists are eager to move beyond the policies of the Obama Administration. For all the former Vice-President’s recent efforts to fill out his policy platform with new proposals on health care, climate change, and criminal justice, he is effectively running to extend the Obama Administration to a third term,” noted John Cassidy, in The New Yorker.

In the fiercely industrial Midwestern city of Detroit, the question was this: "Can you guarantee those union members that the benefits under Medicare for All will be as good as the benefits that their union reps fought hard to negotiate?" moderator Jake Tapper asked.

"They will be better because Medicare for All is comprehensive and covers all health care needs for senior citizens, it will finally include dental care, hearing aids and eyeglasses --," Sanders said.

"You don't know that, Bernie," Congressman Tim Ryan interrupted. "You don't know that."

"I do know!" Sanders responded sharply. "I wrote the damn bill."

Ryan, undeterred, continued to make the point about union workers.

"Sen. Sanders does not know the union contracts in the United States," Ryan said. "I'm trying to explain that these union members are losing their jobs. Their wages have been stagnant. The world is crumbling around (them). The only thing they have is possibly really good health care, and the Democratic message is going to be -- we're going to go in, and the only thing you have left, we're going to take and do better. I do not think that's a recipe for success for us. It's bad policy and it's certainly bad politics."