Yep, yep, yep and yep! Three-month moving average of payrolls is about 150K, markedly softer than the 300-350K range earlier in the year. More participation to boot. This is the good way to get a cooling labor market as opposed to from layoffs. Fingers crossed.

Expand full comment

Hrmm. RGDP ending in 2Q23 was 2.4. Old-school empop (NSA) is 60.4, almost the same as August 2018. 25-54 empop (NSA) is 80.9 - above January 2020. OECD 15-64 Employment rate (NSA) is 72.12, just above 4Q19, but still below 4Q06. Old school CPI is 3.3%, sticky core CPI (July) is 3.2, above July 2019 but below August 2019. Wheee!

IF you were primarily interested in running the economy for the benefit of right-wing billionaires, what you are looking for is ultra-low inflation, easy acquisition of new employees due to having a large reserve army of the poor, and super-cheap loans so you can fund all your idiot ideas and pay yourself giant bonuses even when your company never makes any money. So what you´d want to do here is raise rates while muttering about getting inflation to the 2% (read: re-inflicting the 2% ceiling), and maybe talk about the employment market is way too tight and you are obviously at ´full employment´ (whatever TF ´full employment' means aside from ´I want to inflict some pain on workers´), and maybe mutter something about people not wanting to work, the national debt and really needing to remove tariffs on trade with China.

If, on the other hand, you wanted to maintain steady growth while leaving some cushion for external shocks (oil prices, China), a rate cut to 5% seems like the extremely conservative response here. Maybe go to 4.5% instead given that CPI is 3.3, employment growth is starting to sputter, you had a minor banking crisis in the spring, and oil prices are stable at the moment, plus you are perhaps clued in to the fact that all that muttering about hyperinflation and bitcoin is a marketing scam.

I know which way I´d bet on the Fed going. (Also, Macron seems to think he should get a third terms, which is a completely predictable thing for Davos Men to want.)

I´d like to add here, Brad, given what you said a couple of months ago: personally I think Powell´s driving kind of sucks. He gets the bone in his month and he just keeps on going way past any need to do so. By my count he´s down for trying to kick off two (unnecessary) recessions - the whole ´silent financial crisis´ of August 2019 that presumably would´ve turned into a recession in 2020 if we hadn´t been awarded Covid instead. Now we´ve got the double dip Almost-Recessions of 2022 and maybe 2023. (I´d add, given that this activity is all about being obsessed with inflation - we had action by hostile foreign powers in August 2021 and the again in 2022 to drive oil prices as high as possible. We also had the Fed itself pumping 60 billion a month into the mortgage market in 2019 and continuing through Feb. 2022, even though housing prices recovered to pre-pandemic levels in early 2021. We had the Thing Nobody Mentions As A Cause of Inflation in the form of 2.2 billion for business relief in April 2020. We also had various and assorted supply shocks due to shipping jams and the like. There was also the requirement to turn the economy ´back on´ when the vaccines became available. So yeah, we got a burst of inflation. Such is life during pandemics and wartime. Not really seeing how peeling out and merging in an overly aggressive way, weaving in and out of traffic like a maniac and then slamming on the brakes qualifies as good driving. Luckily, the American economy, unlike Ex-Twitter, Elon Musk´s mind, neo-classical models and econodudes mental states, is extremely resilient.)


the strangeness of our current difficulties seems to stem from so many old people being lost in right-wing fantasias

Expand full comment

I'm sure the Fed will recklessly raise interest rates again after the inflation numbers came out. I'm just glad not to be a working economist who tries to predict things these days.

Expand full comment

Median duration of unemployment remained unchanged at 8.7 weeks while the average duration fell from 20.6 to 20.4 weeks. People may be finding a job as quickly, if not quicker, than in the prior month. So, the increase in the participation rate bodes well for the future employment situation.

Expand full comment

Looks like you are lumping the 2nd revision for June into July. Regardless, all five of the 1st and 2nd revisions for May-July are downward. The media keeps reporting that employment beats expectations, but after the downward visions I'm pretty sure actual undershoots the predictions.

Also, the highly predictive quit rate has now fallen to 2.3, exactly where it was pre-Covid. If we could stabilize the labor market right here, then fine, but for the long and variable lag of rate hikes.

Highly leveraged firms that could raise their prices with inflation faster than the Fed raised rates have been OK up to now, but now they can't pass those higher interest rates on. Those at most risk should be those who are heavier on labor inputs and lighter on commodity inputs, since commodity prices aren't sticky. And China may un-stick commodities even more.

Expand full comment

This would be bad news except that with he Fed itching to raise rates again, bad news is good news.

Expand full comment