Too often, we stop at national data to spin our story about the economy. Even though it's the local economy where workers and small businesses live. Plus, it might be the early warning of a recession.
There is a problem here, not with the analysis which is economic science at its best, but with the assumption that it will be used to effect fiscal stimulus at the time when it is needed.
We have just gone through a major political debate in which our Congress decided that depriving some very poor people of food stamps is the way to reduce the fact that the US cannot raise enough revenue to pay for its expenditures. (Suffice it to say that the deal preserves the ability of the State to bond its debts.)
What the deal also says is that faced with evidence that a recession is upon us Congress will demand that the poor suffer through it. It will not do a direct deposit into their bank accounts.
What history shows us is that our ruling class can agree on one form of economic stimulus, military Keynesianism. War with China or Russia seems the more logical option for our brilliant politicians or at the very least privatization of Medicare and means tested social security along with further tax cuts to “stimulate investment”.
Jun 13, 2023·edited Jun 13, 2023Liked by Claudia Sahm
FYI: In person, on the ground economic forecasting: I was in San Francisco last weekend. (1) Personal experience - I crossed the Bay Bridge at 5pm on Friday evening unimpeded at 50 mph, an experience impossible for more than the last 10 years. (2) The WaPo reports the Hilton, Union Square and a major office building have stopped making mortgage payments, dumping the properties on their banks. (3) The largest shopping mall in downtown San Francisco is still open with fewer merchants and has stopped paying its mortgage. Sure, there is more working from home, but the magnitude of these facts makes the center of the powerhouse California (driving the USA) economy look like a house of cards.
It's great that you soldiered on through the nonsense brought to you by ghouls that inhabit the internet. I subscribed in Phoenix to what was called the Blue Chip Newsletter (probably issued through ASU, I don't recall) for about five years (1990-1995) and if memory serves, it seems that an annual increase in the CPI and CPI-U were rarely below 4% and more likely nudging 5%. So, am I wrong to think now that our current level of, in actuality, 4.1% is not a devastating problem?
Unique insight, animated by deep care. This is why I subscribe to SAHM. Thanks Claudia. FWIW I work in tech on the west coast and know a lot of friends who are unemployed. Was at a BBQ this last weekend and half the people I spoke to were out of work but previously employed in the tech industry.
I'm glad you mentioned the late bill spriggs. Its too bad we don't have more economists like him that understand the human side towards throwing people out of work and understood how historic black unemployment was coming down. As today's CPI has shown once again we don't need a recession. We've come a long way from the near 9% inflation in June of last year. On a side note, that 2% inflation mandate really does sound silly.
What does anyone think about the MMT idea of government job projects in a recession which they call Employer of Last Resort . Federal funding for local projects managed by local government.
> I do not hear my peers—who say we “need” an unemployment rate of 6 percent or more—offering ways to break inflation without harming the working class and people experiencing poverty.
I understand this point, but I think most economists would argue either a) increasing interest rates won't substantially harm the working class and people experiencing poverty (think of soft landing rhetoric) or b) it *is* a cost but it's a short-term cost preventing higher, longer-term costs-- and monetary policy is still the best way to affect the economy (think of rhetoric comparing the current situation to the 70s with Volcker).
Not to assign you additional work but have you noticed a threshold in the number of states above the Sahm rule as a recession indicator for previous cycles?
I am in Australia and in a regional/rural area, more rural I guess, about 4 hours travelling time from a major city and I've always considered rural areas to be a bit of a bellwether for recessions and there has been a lot of businesses close down and shop fronts empty out. So I figure based on my location, we're less than a year out from a recession. It always takes a considerable amount more time before it hits metropolitan areas.
No idea if it factually and empirically works but that's my heuristic observations. My two cents in other words.
There is a problem here, not with the analysis which is economic science at its best, but with the assumption that it will be used to effect fiscal stimulus at the time when it is needed.
We have just gone through a major political debate in which our Congress decided that depriving some very poor people of food stamps is the way to reduce the fact that the US cannot raise enough revenue to pay for its expenditures. (Suffice it to say that the deal preserves the ability of the State to bond its debts.)
What the deal also says is that faced with evidence that a recession is upon us Congress will demand that the poor suffer through it. It will not do a direct deposit into their bank accounts.
What history shows us is that our ruling class can agree on one form of economic stimulus, military Keynesianism. War with China or Russia seems the more logical option for our brilliant politicians or at the very least privatization of Medicare and means tested social security along with further tax cuts to “stimulate investment”.
I’m only trying to be a realist here.
FYI: In person, on the ground economic forecasting: I was in San Francisco last weekend. (1) Personal experience - I crossed the Bay Bridge at 5pm on Friday evening unimpeded at 50 mph, an experience impossible for more than the last 10 years. (2) The WaPo reports the Hilton, Union Square and a major office building have stopped making mortgage payments, dumping the properties on their banks. (3) The largest shopping mall in downtown San Francisco is still open with fewer merchants and has stopped paying its mortgage. Sure, there is more working from home, but the magnitude of these facts makes the center of the powerhouse California (driving the USA) economy look like a house of cards.
It's great that you soldiered on through the nonsense brought to you by ghouls that inhabit the internet. I subscribed in Phoenix to what was called the Blue Chip Newsletter (probably issued through ASU, I don't recall) for about five years (1990-1995) and if memory serves, it seems that an annual increase in the CPI and CPI-U were rarely below 4% and more likely nudging 5%. So, am I wrong to think now that our current level of, in actuality, 4.1% is not a devastating problem?
Unique insight, animated by deep care. This is why I subscribe to SAHM. Thanks Claudia. FWIW I work in tech on the west coast and know a lot of friends who are unemployed. Was at a BBQ this last weekend and half the people I spoke to were out of work but previously employed in the tech industry.
I'm glad you mentioned the late bill spriggs. Its too bad we don't have more economists like him that understand the human side towards throwing people out of work and understood how historic black unemployment was coming down. As today's CPI has shown once again we don't need a recession. We've come a long way from the near 9% inflation in June of last year. On a side note, that 2% inflation mandate really does sound silly.
What does anyone think about the MMT idea of government job projects in a recession which they call Employer of Last Resort . Federal funding for local projects managed by local government.
> I do not hear my peers—who say we “need” an unemployment rate of 6 percent or more—offering ways to break inflation without harming the working class and people experiencing poverty.
I understand this point, but I think most economists would argue either a) increasing interest rates won't substantially harm the working class and people experiencing poverty (think of soft landing rhetoric) or b) it *is* a cost but it's a short-term cost preventing higher, longer-term costs-- and monetary policy is still the best way to affect the economy (think of rhetoric comparing the current situation to the 70s with Volcker).
Not to assign you additional work but have you noticed a threshold in the number of states above the Sahm rule as a recession indicator for previous cycles?
Off topic question. Has Sahm rule indicator applied to developed countries like UK & EU states? How does it hold?
I am in Australia and in a regional/rural area, more rural I guess, about 4 hours travelling time from a major city and I've always considered rural areas to be a bit of a bellwether for recessions and there has been a lot of businesses close down and shop fronts empty out. So I figure based on my location, we're less than a year out from a recession. It always takes a considerable amount more time before it hits metropolitan areas.
No idea if it factually and empirically works but that's my heuristic observations. My two cents in other words.