Wednesday, July 31, 2013
Laughing So Hard I Can Barely Type
I'm not going to write about what I am doing, because it is a tool for doctors - you put this stuff out on the internet, and who knows who is going to read it and do something stupid to his- or herself, or to someone the person loves? But I'm not going to quit doing it, either, because we think we're getting somewhere. Nor is this anything that can be passed on to anything but other superdocs for explication, because it isn't going to make any pharmaceutical companies any money, as far as I can see. In the US, medical research is mostly focused on making money and drug interventions. This is a clinical intervention, and our system is almost set up to prevent that.
So what I am posting about today will be GDP. That's what has me laughing. BEA is revising data, and I'm not going to use their revised data. I think this last set of revisions is highly entertaining.They showed up in this GDP release for the first time.
Of course, BEA explained these revisions earlier, and I had developed a prospective way of coping with them. I have to go through the revised figures with a fine-tooth comb for the next couple of releases to see how well that is going to work in practice. Worse yet, BEA has fubarred GDI with some of these changes. The major changes are explained well in the current release.
For the time being, the best figure to use will be final sales of domestic product and final sales to domestic purchasers, both real and current.
The trajectory for real final sales of domestic product for the last three quarters are 2.2, 0.2 & 1.3, with the 1.3 being Q2 2013.
Not too bad, really. There's an old joke about economizing which basically consists of the punchline "Assuming a housing recovery...." Hahaha! It never gets old, because it is so true.
We do have a housing recovery, but the problem is that the housing recovery is going to be slow and mild, except for the investor-Fed-spawned surge of cash sales. That wears out on its own, but until it does the other part won't have tons of momentum. Rising mortgage rates and rapidly rising home prices are a big wet blanket for first-time purchases.
If you do look at the report, you'll see that sequestration a la government spending wasn't nearly as much of a factor as purported.
More about this later, but for now I've got to run.
Friday, July 05, 2013
Employment Report Is Unremarkable In Every Respect
So what's the same? The unemployment rate is not dropping, but that's because workforce participation is increasing. Since April it's moved from 63.3 to 63.5. The emp/pop ratio is at 58.7, which exceeds last year's 58.6. That's all mildly good news.
Mildly bad news on the Household figures is a 350K increase in slack work part-timers.Discouraged workers show a big YoY increase. Marginally attached workers likewise. The 25 and over unemployment rate ticked up .1%, but at 6.2% it isn't bad at all and this month's uptick seems to be related to graduations.
Good news on the Establishment Report is that we peg in +195K jobs, just about the exact level we've had for three months. Bad news is that increases are too weighted toward the low-paid services (leisure, hospitality, retail), which generates strong suspicions that restrictions on part-time hours to reach the oh-so-sacred not-more-than-29 hour level are generating much of this increase. (The delay of the ACA employer mandate to 2015 won't change this, because the determination of the fines is from the prior period, so it's the previous year or previous six months. Employers are going to stick with and increase their part-time controls to avoid the fines.)
The manufacturing diffusion index has been in the 40s for months. It had improved in May, but in June it moved down again to 46.3. Still not awful. This is not a very strong economy at all. There are a lot of constraints, chiefly tax increases.
But it's stable. Increasing construction is not brilliant, but enough to generate some activity. And increasing construction always sells trucks, which is good news for the domestics. Huge profit there.
Can this economy withstand a hefty increase in oil prices? NO! No.
But whether we can avoid a ratchet up in oil and inflation is questionable - this economy is strong enough to generate inflation on that side as the great Fed-cycle Flight of the Bondholders darkens our financial skies, but of course it will knock through the bottom supports. The shift up in oil is purely a migratory phenomenon, and it will end as all such do - either by the Fed tapering fast enough to knock the slats out or by recession. It may be recession. We have too much money in the system to control.
Discretionary spending is poor due to tax increases and employment isn't strong enough to really help spending capacity very much. On a YoY basis, we have gained a bit under 1.4 million full-time jobs. In June 2012, on a YoY basis we had gained about 2.7 million full-time jobs. Weakness is developing, and it will have to be watched. We are still close to 5 million jobs lower than in June 2007.
So my conclusion is that fundamentally we are in recovery. If it were not for that very scary Fedwad sitting out there, waiting to start rolling down the hill a la Indiana Jones, I'd be relatively confident for another year. As it is, I am not. This is an acutely imbalanced system and almost anything can happen. One of the worst problems we face is that there have to be international migratory shifts due to problems in other global powerhouses.
China is in such a deep hole that anything can happen. Growth keeps slowing while loans keep increasing. All that talk about correcting lending must be only talk - the moment the banks stop advancing new money on all those non-paying loans the whole edifice comes crashing down. HARD landing. Very hard. I imagine many are trying to quietly remove exposed positions and get them to safety.
Japan is seeing slight improvement but most of it is illusory. Exports actually aren't doing very well at all when you adjust for currency. And the new money isn't circulating domestically. I don't think it can. Japanese manufacturing has been gutted, the power problems aren't going to improve, and weakening the yen is not going to accomplish much because it subtracts from money domestically circulating.
Intermodal freight in the US is just slowly walking down, which means our demand doesn't bail out China. Europe is still in angst, and cannot improve much this year.
Tuesday, July 02, 2013
An Ode To Three-Dimensional Chess
Here, here, here. What's being said about the basis for this decision is clearly nonsense. Not only that, but it makes nonsense of the individual mandate and the subsidy provisions on the exchange, because the subsidy provisions depend on whether you are offered "affordable" coverage by the employer.
What's really going on is that, as I have maintained, ACA can never really go into effect because we literally can't afford it.
What's probably forcing this announcement (this is the leak - not the official announcement, which is no doubt scheduled for 4:30 PM on Friday of July Fourth weekend, when all the reporters are already drunk) is the problem of Medicaid/Medicare reimbursement rates for low-paid health care workers. These reimbursement levels are set by the government, but they do not allow enough money to pay for insurance, or pay the fines for not having insurance.
So we have a situation in which either these staffing agencies have to go all part-time (extremely difficult), or the government has to pay them more money so they can at least pay the fines. Not doable, and can you imagine what the political upshot would be? But the alternative is unthinkable - what would happen to nursing homes? Would they boot out the Medicare/Medicaid crew?
And you can't run one of these places on 29 hours a week. The problems are immense - three eight-hour shifts amount to 24 hours already, and the workers are paid so little that they won't even eat on that.
But, as I pointed out, the individual mandate makes no effing sense without the employer mandate (to cover and report), nor do the exchanges. even function. So the joy doesn't stop here.