Thursday, July 02, 2020
June Employment Report Quick Take
Congress is going to have to pass programs that involve longer support so that consumers don't pull back spending a lot more. And businesses need some domestic impetus as well. We are on the cusp of a second Great Depression.
The Fed has succeeded in inflating a stock bubble, but without improvement in the underlying economy, that's going to be a repeat of 1929. Older business owners will not go into hock for ten years to try to continue their businesses - they can't afford to do that. Instead many will shut them down.
I doubt bars, restaurants and resorts can stay afloat under the measures dictated. Maybe 1 or 2 in 10?
We have to find a place on Main Street for the money to go where it can be used. Rail data sucks, to be honest.
The Fed has protected the monied interests and neglected Main Street; that will not end well. Congress managed two pandemic bills before it seized up with politics; I hope we'll get a third bill, but hope is not a plan. We badly need an overhaul of unemployment insurance to extend it to cover small business and the gig economy. A functional political system would do that. It is a sign of how dysfunctional our politics are that the obvious issues can't be addressed. That means hope of some sort of Main Street support plan is a mirage.
Yes, we will watch their economy cartwheel into the abyss. Worst mistake ever to let their auto industry (where they could still compete) be run over by the greenies.
It is pretty clear that only re-industrializing can really bring the economy back.
Well, we've just had three months of them not doing that, with how many more to follow? How much of a productivity hit from work from home? How many costs can you cut if you just ... never bring them into a central office? Will the reduced costs make up for the productivity hit? If it becomes the new normal, how much collateral damage to food service, retail, and other businesses in the core districts?
Add a few protests and riots on top of that to encourage consideration of other potential business disruptions. I'm pretty sure core districts are not going to do well in the recovery to come.
Just thought I’d share my personal anecdotal not-so-cheery data for this thread.
The good news is that I’m actually buying a lot more stuff from Costco, Amazon, Target, Chewy, and Walmart lately. Also bought a new bicycle that, due to incredible pandemic demand, won’t actually be shipped to me until August.
The bad news is that I’ve done this before. I had the same behavior heading into the Great Recession. My “apocalypse pantry” is mostly restocked. Only this time, I’m not the only person who sees value in having extra toilet paper on hand. (And for the record, I had more than plenty heading into this pandemic.)
Some might be excited that I bought a bicycle and point to it as a sign of economic strength. However, the bicycle might actually replace my next car. At the very least, it will make my current car last longer. The grocery store is 3 miles from my house. I do not plan to drive my car to the grocery store nearly as often.
Here’s another purchase I made recently. I bought 3 pairs of comfortable flip-flops to replace the 1 pair I often wear. I won’t need to buy more flip-flops for a very, very long time. Behold the power of negative real interest rates on the 30-year inflation-protected treasury bond.
The Fed has once again pulled forward my demand. Going forward, my overall demand will therefore be lower than it would have been.
It’s anecdotal. Better hope there aren’t a lot of other people like me.
This service economy better not be counting on me to help it much. Here’s another purchase that does not bode well: barber scissors. Out of necessity, my girlfriend has been cutting my hair. She’s been doing great and she’s offered to keep doing it even if/when the pandemic is over. We already had clippers and trimmers. She requested better scissors. Request granted, obviously.
The downside is that I can’t help feeling guilty. The business (and its employees) in the strip mall who once cut my hair, is no doubt feeling enormous economic pain right now. Sigh.
As WSJ points out, behavior is going to change. The longer this drags on, the more behavioral patterns will change. The longer the shift, the more likely it is to become a new habit.
Your haircuts are probably not unique; I would imagine that buying patterns will be altered for years by those at most risk.
And then of course there is the problem of having less money... That too forces changes.