Wake Up To Politics - December 8, 2021

by Gabe Fleisher

Good morning! It’s Wednesday, December 8, 2021. Election Day 2022 is 335 days away. Election Day 2024 is 1,063 days away.

There have been a lot of jumbled indicators about the U.S. economy lately. So I asked WUTP’s ace economics contributor, Northwestern freshman Davis Giangiulio, to put together a guide that will help you sort through the conflicting economic data out there right now and hopefully give you a better sense of where things really stand.

Over to you, Davis:

How to think about the current state of the U.S. economy

By Wake Up To Politics economic contributor Davis Giangiulio.

Last year, the economic position the country was in was clear: a deep and severe recession. The unemployment rate was at its worst level since the Great Depression. Even when the economy began to quickly recover from the trough, numbers were still on par with the 2008 financial crisis, and millions continued to file for initial unemployment claims each week. The economic environment was so bad that the government had to come with six separate stimulus measures to mitigate the damage.

Then, earlier this year, it seemed as if things had started to turn around. Unemployment claims were falling, hiring was increasing as the winter Covid wave retreated and vaccinations were ushered in.

But that all came falling apart in April, when a weaker-than-expected jobs report sparked fears of a labor shortage, inflation started to rise, gas prices surged, and a supply chain crisis slowed delivery of goods and services.

And yet: even with this dire picture, jobs are continuing to be created, the unemployment rate and weekly unemployment claims continue to fall, and consumer spending remains high.

So how can the economy seemingly be on the verge of crisis and yet simultaneously be humming along on other measures? To navigate what the economy looks like at the moment, here are some key things you should know when interpreting economic data and coverage of the state of the economy:

→ Initial data throughout the pandemic hasn’t been perfect. When the April 2020 jobs report was released, the official unemployment rate read as 14.7 percent. But that came with a note of caution by the Bureau of Labor Statistics, which released the report: the agency estimated that the actual unemployment rate was 5 percentage points higher, because response rates to their surveys had declined during the pandemic. The calculation problems have plagued BLS for months and consistently led to official figures of uncertain veracity.

Jobs reports, meanwhile, have been frequently revised. Jobs reports when first released are initial estimates, and those figures get shifted around until a final estimate is released two months after the first report. When the August and September jobs reports came out, they showed smaller figures than expected and ones that pointed to a slowing economy. But then revisions over the next two months showed in reality 483,000 jobs were added in August and 379,000 in September.

Revisions have been consistently upward recently, which may mean Friday’s weaker than expected November jobs report may look rosier in the coming months, but these also vary and trends can quickly be erased. Still, it’s clear that you shouldn’t place all your bets on the first data drop.

→ Know what measure you’re talking about. Friday’s jobs report also sparked confusion because the household BLS survey showed a much stronger job gain than the official payroll survey. The payroll survey measures how many jobs are in the economy, while the household survey measures how many people are employed. The figures diverged a ton in the November report, with the official payroll data showing a more muted 210,000 figure job gain, while the household survey showed a million-plus rise.

What happened? The household survey merely caught up to where the payroll survey is in terms of the pace of its recovery, meaning this divergence may not mean much. All in all, it’s a sign that there is a ton of different data pointing in different directions at this moment.

→ The labor force’s weak recovery. While the headline unemployment rate was 4.2 percent in November, this number is actually weaker than what it once used to signify. Consider the last time the unemployment rate was 4.2 percent, which was back in November 2017. Then, the labor force participation rate, which measures the percent of the population who are employed or actively looking for work in the job market, was 62.7 percent. Today that figure is 61.8 percent, which means a lower proportion of people are in the economy than the last time we were at 4.2 percent unemployment.

This means that 4.2 percent, while still strong, represents an unemployment rate of a smaller percentage of our population than before. Until that labor force participation rate number rises further, these strong economic numbers aren’t as spectacular as they were in the past. The good news is in the November report, the labor force grew by nearly 600,000 people, but the participation rate is still less than halfway recovered from its fall from February 2020.

Once that changes, and if these figures remain, then the numbers will reflect an economy that is more soundly moving in the right direction.

→ Inflation is a real, global problem. While first thought of as transitory, even the biggest proponent of that label, Federal Research Chairman Jay Powell, has retired it when referring to inflation. The effects of the inflation surge appear to be more long-term, and are especially powerful since wages aren’t keeping up. In October, inflation rose by 6.2 percent compared to October 2020. But average hourly earnings only rose by 4.8 percent over the same period. That means the purchasing power of workers declined by 1.4 percent compared to last October.

But it’s not just the U.S. experiencing this problem: many major economies across the world are experiencing an inflation jump. But the U.S. is having a worse surge than almost any other country, with inflation up 3.6 percent. Even while the U.S. is leading the world in price hikes, the fact that almost every other major country is experiencing a similar phenomenon, albeit not on the exact same scale, shows this is not an isolated problem.

→ Does fixing the supply chain fix inflation? To understand if inflation is a global issue, we have to see if resolving global crises, like the supply chain delays, mediates rising prices. Some have concluded the supply chain is the core cause of this inflationary spike, and if fixing it leads to a decline, which some are predicting, it would prove that the U.S. on its own couldn’t solve the inflationary pressures we’re experiencing here.

Hypothetically, decreasing supply chain delays should increase supply, which then should decrease prices. The good news is the supply chain crisis is not deteriorating any further, according to several indicators, and some are even suggesting that the situation has begun to improve.

With the crisis slowly getting under control, the question is now whether inflation becomes weaker too. If it does in the U.S. and across the world, it shows the constraints of supply with extremely high demand in the post-COVID economy forced prices higher. If inflation continues, it will show that there may need to be more domestic-specific measures, like raising interest rates, taken to slow the surge of prices.

→ What about gas? Gas prices surged this year for the same reason other prices did: increased demand with not enough supply. Fuel demand collapsed in the pandemic as people stayed at home, but as the virus retreated and people went out again it slowly rose. This all occurred while U.S. oil production has remained stuck below pre-pandemic levels.

But there are some signs that gas prices are falling: AAA’s national average is $3.35 per gallon as of Tuesday, a seven-week low. Natural gas prices have sunk too in markets, and combined with increasing hope that there won’t be an oil shortage this winter there are signs a further fall in gas prices could be coming. But energy prices are extremely volatile, so this could change relatively quickly and is worth keeping an eye on.

What else you should know

→ It’s not sounding like Sen. Joe Manchin (D-WV) is getting ready to back the Build Back Better Act any time soon.

→ Mark Meadows, who served as White House chief of staff during the January 6 riot, is no longer cooperating with the House panel investigating the Capitol attack. The committee is threatening to hold him in contempt.

→ The House passed two noteworthy pieces of legislation on Tuesday: the $768 billion annual defense policy bill and a measure that creates a path for the debt ceiling to be lifted.

→ The President Biden’s nominee to serve as Comptroller of the Currency, a post that regulates U.S. banking, has withdrawn. She had faced accusations that she held “Soviet-era views” on nationalizing banking.

Policy Roundup: Global

Every Wednesday, Wake Up To Politics contributor Miles Hession offers a briefing on the week’s top international headlines.

Former Myanmar leader Aung San Suu Kyi was sentenced to jail in the first of many charges raised against her by the generals who deposed her. The junta’s move to charge and convict Kyi was tempered by public backlash, leading to the partial “pardon” that reduced her sentence, but it still represented a stunning affront to growing international and domestic outcry.

While many continued to denounce the treatment of Kyi and she remains largely popular, the shadow government that formed after the coup is looking beyond the former leader. Kyi’s human rights legacy as a onetime Nobel laureate was tainted during her tenure due to the treatment of Rohingya muslims. Many resistance leaders in the country have outlined more progressive policies that would push the country beyond what Kyi accomplished, even embracing policies that are direct challenges to her more controversial stances. While Kyi still remains at the head of the shadow government, her conviction and clear messaging from the government indicate a new direction for the pro-democracy movement.

Olaf Scholz was certified as chancellor of Germany, marking the end of Angela Merkel’s 16-year tenure. Scholz is a center-left politician from the Social Democratic Party (SPD) who has long been active in German politics, including in many of Merkel’s previous governments. Scholz now inherits the European leadership role that Merkel carved out during her time in office, which is facing a potent threat from a more-combative Russia. The new chancellor has already appointed a historic cabinet, giving equal positions to men and women.

A virtual summit between President Biden and Russian President Vladimir Putin resulted in little common ground as lines in the sand were drawn. The summit was spurred by an alarming buildup of Russian troops on its border with Ukraine. Putin gave no assurances that the buildup would cease, while Biden threatened economic action. The meeting was further complicated by Biden’s indication that he would adopt a more combative stance on the controversial Russia-backed Nord Stream 2 pipeline.

Daybook

All times Eastern.

— President Joe Biden will receive his daily intelligence briefing at 9:30 a.m. He will then travel to Kansas City, Missouri, departing Washington at 10:50 a.m. and arriving in Kansas City at 1:45 p.m.

At 3 p.m., Biden will visit the Kansas City Area Transportation Authority. At 3:30 p.m., he will deliver remarks promoting the Infrastructure Investment and Jobs Act, the bipartisan infrastructure law. The president will then return to Washington, departing Kansas City at 4:45 p.m. and arriving back at the White House at 7:15 p.m.

— White House Principal Deputy Press Secretary Karine Jean-Pierre will hold a press gaggle aboard Air Force One during the flight to Kansas City.

— The Senate will convene at 10 a.m. The chamber will hold a cloture vote at about 11:30 a.m. to advance the nomination of Rachel Rollins to be U.S. Attorney for the District of Massachusetts. At 2:15 p.m., the Senate will vote on Rollins’ confirmation, followed by a cloture vote to advance the nomination of Michael Smith to be CEO of the Corporation for National and Community Service, and a vote on Smith’s confirmation at around 5:15 p.m.

The chamber is expected to hold additional roll call votes later in the day, including a vote on S.J.Res.29, which would overturn President Biden’s vaccine mandate for private companies with 100 or more employees. Under the Congressional Review Act of 1996, which allows Congress to repeal executive branch regulations, the resolution is filibuster-proof and only requires 51 votes to advance.

In a significant break with Biden, Sens. Joe Manchin (D-WV) and Jon Tester (D-MT) have announced plans to join all 50 Senate Republicans in backing the resolution, meaning it will likely pass. The measure will then go to the House; White House issued a veto threat for the measure on in the event it passes the lower chamber as well.

— The House will convene at 10 a.m. The chamber is scheduled to hold a series of votes under “suspension of the rules,” including on three pieces of legislation aimed at China:

1. H.R. 1155, the Uyghur Forced Labor Prevention Act, which would prohibit certain imports from China’s Xinjiang region, where the Chinese government has instituted forced labor camps for Uyghur Muslims
2. H.Res. 837, a resolution “expressing the sense of the House” that the International Olympic Committee “failed to adhere to its own human rights commitments” with its muted response to the disappearance of Chinese tennis player Peng Shuai.
3. H.Res. 317, a resolution “condemning the ongoing genocide and crimes against humanity being committed against Uyghurs and members of other religious and ethnic minority groups by the People’s Republic of China”

The chamber will also vote on 16 other pieces of legislation:

1. H.R. 5545, the REMOTE Act
2. H.R. 5746, the NASA Enhanced Use Leasing Extension Act
3. H.R. 4996, the Ocean Shipping Reform Act
4. H.R. 4616, the Adjustable Interest Rate (LIBOR) Act
5. H.R. 5290, to extend authorization for livestock mandatory reporting
6. H.R. 5608, the Chronic Wasting Disease Research and Management Act
7. H.R. 4489, the National Forest Restoration and Remediation Act
8. H.R. 5609, the Cattle Contract Library Act
9. H.Res. 837, expressing the sense of the House of Representatives that the International Olympic Committee failed to adhere to its own human rights commitments
10. H.Res. 317, condemning the ongoing genocide and crimes against humanity being committed against Uyghurs and members of other religious and ethnic minority groups by the People’s Republic of China
11. H.R. 3537, accelerating Access to Critical Therapies for ALS Act
12. H.R. 5487, the SHINE for Autumn Act
13. H.R. 5561, the Early Hearing Detection and Intervention Act
14. H.R. 5551, the Improving the Health of Children Act
15. H.R. 1193, the Cardiovascular Advances in Research and Opportunities Legacy Act
16. H.R. 1667, the Dr. Lorna Breen Health Care Provider Protection Act
17. H.R. 4555, the Oral Health Literacy and Awareness Act
18. H.R. 5119, to amend title VI of the Social Security Act to extend the coverage of Coronavirus Relief Fund payments to Tribal Governments

→ The Supreme Court will hear oral arguments in two cases.

At 10 a.m., the court will hear arguments in Carson v. Makin, which considers whether a Maine program that pays for some students to attend secular private schools must also include students attending religious private schools.

At 11 a.m., the court will hear arguments in Shinn v. Ramirez, which considers whether prisoners have the right to present evidence in federal court that their trial lawyers mishandled their cases, if the evidence was not already presented in state court.