Parts of the economy are cooling, just as the Federal Reserve would like to see to combat inflation. Freight railroads, for instance, are seeing shipping volumes decline. Construction firms are cutting back on equipment purchases. A vending-machine company’s customers are negotiating prices downward.
Yet the key to a measured, inflation-busting slowdown that doesn’t sink the economy lies in whether companies hold on to workers or lay them off. And the answer, in an economy that otherwise can send repeated mixed signals, is clear: They are making a priority of keeping workers. Apple, for one, is avoiding layoffs despite economic uncertainty.
Hmmm. Here's hiring and firing over the past 18 months:
Hiring is down by more than 400,000 and discharges are up by more than 200,000. The last time this happened was in 2006-07, and we all remember what happened after that, don't we? The hardest of hard landings in 2008.
That might not be what happens this time. But American companies are very decidedly not holding onto workers. A 30-second look at actual statistics is all it would have taken to change the Journal's mind. Why are they so consistently unwilling to do that?
Here is Hilbert lounging on an antique bureau behind the fan that I use to keep cool in bed. I was playing around with the flash unit, which stops the motion of the fan, so I had to take a lot of pictures to get a few where a fan blade wasn't blocking the view. But I succeeded! And you can even see Hilbert's eyes, which he somehow manages to routinely close before I can snap the shutter. I don't know how he does it.
The Wall Street Journal reports today that in 2021 Facebook removed posts saying COVID-19 was the result of a lab leak. This was done due to "pressure" from "the administration and others."
There's no indication of what that pressure entailed, but in a similar case involving vaccine hesitancy it appears to have been public comments from Joe Biden:
Administration officials had come to believe that many Americans were hesitant to get vaccines because of false information they saw on Facebook. “They’re killing people,” President Biden said that July.
....Following the president’s “killing people” comment, the Facebook vice president [Nick Clegg] circulated a memo assessing the difference between Facebook’s content policies and the Biden administration’s demands—some of which the company appeared ready to push back on.
“There is likely a significant gap between what the WH would like us to remove and what we are comfortable removing,” the Facebook vice president said.
....At the same time, Facebook officials appeared to feel pressure to address the White House’s concerns....“Given the bigger fish we have to fry with the Administration—data flows etc—that doesn’t seem a great place for us to be, so grateful for any further creative thinking on how we can be responsive to their concerns,” he said.
As "pressure" goes, this is pretty small beer. As "censorship" it's laughable. Facebook was being criticized all over the place for allowing users to post potentially dangerous disinformation about COVID, and it was common knowledge that the Surgeon General and others were pushing Facebook to be more aggressive. In the end, Facebook responded to some of the criticism but not all of it. The final decisions were clearly in their hands.
Note that this is all based on yet more leaks from a Republican committee in the House, so there's no telling what it leaves out. It's usually something from these guys. Caveat emptor.
Lots of new numbers today. By coincidence, the PCE figures were released the same day as the latest quarterly reading of the Employment Cost Index. According to the ECI, real wages were up at an annualized rate of 1.3% in Q2 but still well below their pre-pandemic level:
In most measures of wages, we see a big spike in 2020 and then a gradual decrease. However, much of this is due to composition effects. That is, the composition of the labor force changed because the lowest-paid workers got laid off first, artificially raising the average wage of everyone left over.
ECI is an important measure because it adjusts for these composition effects. That makes it probably the most accurate measure of wages we have. As the chart shows, real wages are still well below their pre-pandemic level but have grown at an annualized rate of 1.0% for the past three quarters.
Consumer spending grew at an annualized rate of 4.7% in June but remained well below its pre-pandemic trend:
Since the start of the year, spending has increased only 0.65%, an annualized rate of 1.3%. That's a big slowdown from the 4.4% annual rate of the previous two years.
The Fed likes to look at the core PCE rate, and in June it finally fell significantly. It's now running at an annualized rate of 2.0%, which is right at the Fed's target. The headline rate is also running at 2.0%.
On a year-over year basis, headline PCE inflation was down to 3.0% and core inflation was down to 4.1%.
If this news had been available yesterday, perhaps the Fed wouldn't have raised rates yet again. But it wasn't, so they did.
Social networks mostly have two different kinds of feeds: one that's a simple reverse chronological listing of posts from people you follow, and another that's controlled by an algorithm. On Twitter, users are forever complaining that the platform switches them to the algorithm without asking, and I imagine Facebook is the same.
We found that users in the Chronological Feed group spent dramatically less time on Facebook....The average respondent in the Algorithmic Feed group spent 73% more time each day on average compared with US monthly active users, and for those in the Chronological Feed group, this value reduced to 37% more.
....On Facebook, users in the Algorithmic Feed group liked an average of 6.7% of the content to which they were exposed, whereas those in the Chronological Feed group liked 3.1% on average.
Users who are on Facebook's algorithmic feed are far more engaged than those on the chronological feed. You might not like to hear that, but it turns out the algorithm really does know what you like. Those on the algorithmic feed spend more time on Facebook—which means more advertising dollars—and leave likes and comments at about double the rate of those on the chronological feed.
There are also differences in the type of posts generated by the feeds, but they're surprisingly small. And neither feed makes any difference to things like news knowledge or political polarization.
So that's it. Social media companies want you on their algorithmic feed because it keeps you engaged and makes them more money. Nothing complicated about it.
David Broder has a good piece in the New York Times today about the extremist right-wing government that's now running Italy. Prime Minister Giorgia Meloni has certainly moderated her rhetoric since being elected, he says, but underneath you'll still find the same old animating radicalism. This is particularly true of her government's animus toward migrants, which is now shared throughout Europe:
Ms. Meloni’s administration has spent its first months accusing minorities of undermining the triad of God, nation and family, with dire practical consequences for migrants, nongovernmental organizations and same-sex parents....Ms. Meloni’s government isn’t just nativist but has a harsh authoritarian streak, too.
For Italy this is bad enough....In Sweden, a center-right coalition relies on the nativist Sweden Democrats’ support to govern. In Finland, the anti-immigrant Finns Party went one better and joined the government....Conservatives in Britain echo Ms. Meloni’s obsession with favoring birthrates over migration; French anti-immigrant politicians like Éric Zemmour cite Italy as a model of how to “unite the forces of the right”; and even in Germany, the Christian Democrats’ long refusal to consider pacts with the Alternative for Germany is under strain.
It's commonplace to observe that Europe has been more or less at peace for 80 years now—surely a record for the continent. Credit is usually given to wise postwar politicians or to alliance-building projects like the EU, but this misses a more fundamental reason: the ruthless resettlement of ethnic groups to their home countries after World War II. This is not something most people know about—or care to remember—but it happened. And ruthless though it might have been, it accomplished its purpose. With postwar European countries relatively homogeneous, tribal conflicts waned and peace reigned. It's notable that the only exception to Europe's peaceful 80 years came in the former Yugoslavia, where tribal tensions erupted after Josip Broz Tito died and there was no longer a leader with the iron hand to keep them in check.
But 80 years is a long time, and eventually Europe's ethnic homogeneity was bound to break down as more and more migrants made their way in. Every lesson of history suggests that this was certain to ignite, if not wars, tensions short of war. And it has. We can blame right-wing parties all we want, but they've merely been conduits for a historical inevitability.
The seemingly endless fence separating Mexico from the southwestern US.
This is why I don't support the extreme pro-immigrant position adopted over the past decade by the US left. I am, needless to say, decidedly opposed to the deliberate cruelty toward migrants that's manifested by so many Republicans. Our policies should be as humane as possible at all times. But at the same time that we should keep fighting against the baseless fear of migrants from south of the border, a reality-based approach demands recognition that we will never eliminate this fear. We can only mute it, and that only by restricting its flow.
There's a level of migration—legal and otherwise—that's low enough to keep anti-immigrant fervor in check. At a guess, it's about a tenth of a percent of the country's population per year. We're currently at five times that rate, which makes a furious tribal response almost unavoidable.
I admit that this is an ugly conclusion. But short of deliberately embracing a fantasy-based view of the world, I'm not sure what alternative there is.
The time to become skeptical of something is when, after a long period of fruitlessly waiting for the opposite to happen, everyone finally gives up and agrees it must be true. That's the current state of things regarding the sudden consensus predicting a "soft landing" for the economy. Jeanna Smialek has more in the New York Times:
The term “soft landing” first made its way into the economic lexicon in the early 1970s, when America was fresh from a successful moon landing in 1969. Setting a spaceship gently on the lunar surface had been difficult, and yet it had touched down.
I did not know that!
In 1994 and 1995, the Fed managed to slow the economy gently without plunging it into a downturn in what is perhaps its most famous successful soft landing.
This is the only soft landing in recent American history.
In late 1989, an economic commentary newsletter from the Federal Reserve Bank of Cleveland asked the question that was on everyone’s mind after a series of Federal Reserve rate increases: “How Soft a Landing?” Analysts were pretty sure growth was going to cool gently and without a painful downturn — the question was how gently.
In late 2000, a column in The New York Times was titled “Making a Soft Landing Even Softer.” And in late 2007, forecasters at the Federal Reserve Bank of Dallas concluded that the United States should manage to make it through the subprime mortgage crisis without a downturn.
Within weeks or months of all three declarations, the economy had plunged into recession. Unemployment shot up. Businesses closed. Growth contracted.
Plus 1973 and 1980, of course, which were also hard landings. Why?
The episodes all illustrate a central point. It is hard to predict what might happen with the economy when rates have risen substantially.
Interest rates are like a slow-release medicine given to a patient who may or may not have an allergy. They take time to have their full effect, and they can have some really nasty and unpredictable side effects if they end up prompting a wave of bankruptcies or defaults that sets off a financial crisis.
Stay skeptical! Everything takes longer than you think, but conventional wisdom is impatient. It's been waiting on a recession for the past year and now it's exhausted. So fuck it. Soft landing it is.
Maybe so. I don't have a crystal ball, and it's true that the economy looks to be in decent shape—though it's been slowing since January. That said, a year is not such a long time. I continue to think it's likely that Fed tightening will start to bite later in 2023. We'll see.
Hiring is down by more than 400,000 and discharges are up by more than 200,000. The last time this happened was in 2006-07, and we all remember what happened after that, don't we? The hardest of hard landings in 2008.
