Month: January 2023

Paul Krugman asks today:

Stagflation or Soft Landing? It Depends Who You Ask.

Hang on a second, pardner. There's also a third option: a plain, old-fashioned recession that lasts a year or so. This is my best guess right now because the Fed's interest rate hikes will start to affect things in a few months and drive a normalish economy down into recession.

I might be wrong about this, of course, and it's hard to stick to your guns when you're relying on an invisible force to explain things. Maybe this time will be different! For now, though, I can't think of any good reason why it should be. Invisible or not, interest rate hikes cool off an economy, and we're already about where we'd like to be. When last year's hikes take effect, the economy will respond in the usual way: by dropping below where we'd like to be.

Generally speaking, I think I'm more confident about sticking to fundamentals than most people. I hope I'm wrong about an upcoming recession, but ordinary old fundamentals tell me it's coming. We'll see.

According to my bird buddy, this is a lazuli bunting female Mountain Bluebird. I found her hopping around the trail markers at Quail Hill park, one of the open-space preserves in this neck of Orange County.

The top photo is a good overall picture of our little bluebird. The middle picture shows that it's not only the early bird who gets the worm. And the bottom picture shows her displaying her plumage.

(I'm not sure why her feathers are teal in the first two photos and blue in the bottom one. It's not my doing. Maybe the light changed? The teal coloring shows up in every frame taken after 3:32 pm.)

UPDATE: Steve_OH says it's a female Mountain Bluebird. So a Mountain Bluebird it is. Also, there are several theories about the teal/blue color change being bandied about in comments.

Here are all of the standard economic indicators that affect people in their daily lives. They look pretty solid!

Growth rates are all annualized.

NOTE: Will everything stay this sunny? I'm a recession hawk myself, so I doubt it. We'll know in about six months.

Are wages skyrocketing so strongly that the Fed needs to continue crushing the economy until workers understand who's the real boss? Let's look at today's latest data:

The Employment Cost Index measures the total cost of employing someone: wages, taxes, office space, health care, etc. In the last quarter it went up at an annualized rate of 4.0%. Adjusting for inflation, it went up 0.8%.

Both of those seem pretty reasonable. Nominal growth has been sliding downward ever since the beginning of 2022, and real growth remains low despite a couple of recent increases.

From the Fed's point of view, the ideal rate is around 3% nominal growth, with 2% inflation producing 1% real growth. We're getting pretty close to that.

I was piddling around with something related to the Tyre Nichols killing—I don't quite remember what—and decided to look at police killings by both race and age. We all know that Black people are killed at much higher rates relative to population than white people, but it turns out that the difference depends a lot on age:

It's not surprising that the rate of fatal police shootings is highest for young age groups, since ages 18-29 are the prime years for criminal activity. But look at the chart. Shooting rates do go down strongly with age for Black people, but only slightly for white people. This strongly affects the difference in shooting rates.

At ages 18-29, police shoot Black suspects at more than three times the rate of white suspects.

At ages 30-44, the difference is "only" a little more than double.

And at ages 45-65 the difference is down to 50%.

Why is this? A couple of possibilities have popped into my head, but neither made sense when I thought a little longer. So I have two questions:

• Why does the Black/white difference go down with age?
• Why does the police shooting rate stay nearly flat with age for white people? It makes no sense that the shooting rate for middle-age white crooks should be only slightly lower than it is for 20-something white robbers and drug dealers.

For some reason—maybe real, maybe not—police are way more afraid of young Black suspects than young white suspects. Conversely, by middle age apparently people of both races are equally scary.

Thoughts?

Here's what the latest NBC poll has to say about what Congress should be doing this year:

Normally polls like this are kind of worthless because the crosstabs invariably tell us that 100% of Democrats think one thing and 100% of Republicans think the opposite. Not exactly news.

But when you get to the edges, you find a few topics that are so widely liked or disliked that they mathematically have to be fairly bipartisan. In this one, the United States is pretty united that Congress should pass a moderate immigration bill and shouldn't screw around with abortion.

This is good to know, but I wish someone would ask about support for mandatory E-Verify. As you know, this is my hobby horse on immigration policy, and I'm a little surprised that it never gets much attention. Immigration arguments are almost exclusively about the wall, DACA, and a pathway to citizenship. But why stop there? We should also talk about E-Verify, which might actually reduce illegal immigration, and massive reform of the asylum process. Unfortunately, the former is opposed by the business community and the latter would cost a bunch of money, so even if you had significant Democratic support you'd never get any Republican support. "Might actually work" is just not anyone's top priority.

I am amused by this chart on international obesity rates:

Every country in the top 15 uses weights based on measured data. But what happens when you ask people to self-report their weights (red asterisks in the chart)? Their countries all end up in the bottom 20.

This is why anything based on self-reporting should be taken skeptically. It's not always wrong to use self-reported data if it's done carefully, but it's always likely to be biased by all the usual foibles of human nature.

This is what poor old Notre Dame looks like these days. Maybe if we come back to Paris for the Olympics they'll have it all fixed up for us.

John Herrman says that Amazon still works pretty well for most people:

But, at the core of that experience, something has become unignorably worse. Late last year, The Wall Street Journal reported that Amazon’s customer satisfaction had fallen sharply in a range of recent surveys, which cited COVID-related delivery interruptions but also poor search results and “low-quality” items. More products are junk. The interface itself is full of junk. The various systems on which customers depend (reviews, search results, recommendations) feel like junk. This is the state of the art of American e-commerce, a dominant force in the future of buying things. Why does it feel like Amazon is making itself worse? Maybe it’s slipping, showing its age, and settling into complacency. Or maybe — hear me out — everything is going according to plan.

Quite so. My own gripe is that Amazon's search interface just flatly doesn't work. Herrman starts his piece with an example: looking for a spatula. That should be no problem, and generally speaking it's not. Type in "spatula" and you'll get loads of people selling spatulas. But type in "metal spatula" and . . .

OK, I just did this and it worked fine. The first three pages of search results were exclusively metal spatulas.

Fine. But trust me, this is not always the case. Last night, for example, I searched for oversize blankets. But even when I used Amazon's own suggested search terms, no more than 20% of the results—I'm being generous here—were actually oversize. The rest were just ordinary blankets of an ordinary size. When I added "cotton" to the search, only about half the results were cotton.

I am savvy enough to ignore all the sponsored results, since I know they'll show up if they're even in the same ballpark as my search terms. But even the normal results don't match your search most of the time.

But here's the thing: I did, eventually, find a couple of blankets that fit my search. I was annoyed that it took so long to click through all the junk, but really, I only spent five or ten minutes. And if it weren't for e-commerce, there's a good chance I'd never have found what I was looking for even if I'd spent all day running around town to various sellers of household goods.

So Amazon has a huge array of products that produces a very long tail. This means that even if you're looking for something unusual you can probably find it. But that huge array also means it might take a while to sort through the junk. Easy come, easy go.

The Wall Street Journal reports today that "The U.S. Consumer Is Starting to Freak Out." Let's take a look!

Spending on durable goods, like cars and washing machines, soared during the pandemic and has since flattened out. But it's still way above its pre-pandemic level.

Spending on nondurable goods, like clothes and food, also declined slightly last year, but remains well above its pre-pandemic level.

Housing— Well, we all know what's happening to housing. As it happens, spending on housing has increased over the past six months because housing prices have gone up enough to make up for reduced buying.

Finally, we have non-housing services, which account for half of all spending. And it's increasing! It's still slightly below its pre-pandemic trend, but over the past 18 months it's been slowly getting there.

So are US consumers freaking out? Personally, I think they should be, but there's little evidence of it. Durable goods are reverting down to the mean while services are reverting up to the mean. Looking to the future, however, the big question mark is household savings. Households bulked up their savings during the pandemic thanks to federal stimulus checks, but have been spending that down ever since:

The good news is that savings went up in the fourth quarter and that only barely affected consumption.

It really doesn't look to me like consumers are freaking out. In fact, if you ask me, they're a little too complacent. But that all depends on whether you think we're headed for a recession later this year or if you're a soft-landing optimist. I'm the former.