How much worse can it get?

A reminder to you Keynesians out there, macroeconomic theory is false from end to end, providing no insight into how an economy works. Other than that, please carry on. From Instapundit.

HORRORS OF THE TRUMP ECONOMY: Skills Gap Gives Workers Unprecedented Power, Perks. “A survey from CareerBuilder reports 25 percent of employers in manufacturing have lost revenue due to unfilled vacancies, and many are offering extended overtime pay to existing workers as they struggle to keep production lines running. Difficult-to-fill production jobs now command a wage premium, partially in an attempt to lure job seekers who might prefer other fields. Industrial engineers and other tech-savvy factory jobs offer four or five times the salary of a floor assembly role. Another key benefit workers have been able to negotiate as their value rises is on-site and in-role training. Employers who could previously depend on trained and certified workers to arrive at interviews are increasingly willing to offer training and certification to less-qualified but more readily available entry-level workers. Training is often paid and may reduce onboarding time by training participants for specific roles and proprietary systems.”

It’s easy to see why they want to impeach him since he is demonstrating that virtually everything our political elites believe is wrong.

Getting the unbalanced just right

On the one hand:

Longtime Trump Org CFO granted immunity...
'Narrow in scope'...
Manhattan D.A. Eyes Criminal Charges...
'We don't know quarter of what's in pocket of Mueller'...
RUDY TAKES SHOT AT PRESIDENT FOR 'FLIPPING' COMMENTS...
LEAK: Aides expect to go rogue on pardon...
DRAMA: George Conway tweets again...
Mueller Muzzles Manafort...
BUCHANAN: We are headed for hellish year...
DAN RATHER: STAY TUNED...
Kavanaugh argued the president can be impeached for lies, cover-ups and refusing to testify...
Dems' midterm strategy: Stop talking about Trump... 

But then on the other:

STOCKS RECORD HIGH...

Onwards and downwards

The problems caused by Keynesian theory is not that you end up with a sudden downturn, but that you squeeze the life out of the economy by a form of slow asphyxiation. If you have a job and a house, and you continue to work and live where you lived before, nothing much changes around you, other than a rise in prices and a slowdown in income after tax. You are affected but not a lot. Those in transitions, either entering the economy to work, looking for better jobs at higher pay or trying to buy a house, all these are at the pointy end. They notice, since the ability to rise up the income scale is obstructed by some invisible barrier. Things just don’t work out. Which brings me to this story: Americans Are Delaying Major Life Events Because of Money Worries. Life is getting harder so corners are being cut.

ABOUT half of American adults have postponed a major life decision in the past year for financial reasons, mainly because they lack sufficient savings or are worried about the economy, or both, a new survey finds.

The survey, conducted for the American Institute of Certified Public Accountants, found that the proportion of people delaying big decisions like buying a home or getting married had risen to 51 percent, from 31 percent in a similar survey in 2007, before the start of the financial downturn.

The change was striking, and the percentages more than doubled in some areas. Nearly a quarter said they had delayed higher education, up from 11 percent in 2007, and 18 percent said they had put off retiring, compared with 9 percent in the earlier survey. Twenty-two percent said they delayed buying a home in 2015, compared with 14 percent in 2007.

That’s the way it goes. And these are the people who might most at the front in encouraging governments to increase their spending to stimulate demand. So onwards and downwards, and no one has a clue why.

“U.S. economy likely shrank in quarter one, but fundamentals strong”

The quote is from Reuters which maintains the delusion that all is well with the American economy. As with the data on unemployment, there are people across the American Government, throughout the public service and at every level of the left media whose job it is to pretend all is well so long as Democrats are in charge. If the White House changes hands in 2017, we will hear a different story. But until then, the good times will continue to be around the corner, as they have been for the past six years.

But some things you cannot hide, which is that U.S. economy contracts in first quarter. The national accounts are, unfortunately, a truly inadequate measure of what you would like to know. If one economy grew by 10% and another by 2%, which one has a higher standard of living? The fact that you cannot tell is one of the signs that the number really doesn’t get to what is actually of interest. And here is a question that is less easy to answer than you think it ought to be. If an economy grew by 10%, just what exactly is 10% bigger this year than it was last year? Again a difficult question that few are ever taught. But it is not what you really want to know if you are interested in prosperity and jobs.

Almost all of our economic measures are incompetent if the aim is to understand present economic conditions and current trends. But there is no disguising this one. A contraction in economic activity is not part of the story of an economy in recovery.

The American economy is a mess

us surprise index march 2015

Don’t ask me what the index actually measures, but it is the worst it’s been since 2009. There is no recovery in the American economy, none at all. It is a complete mess with neither the government, the American economics community nor our existing macroeconomic texts of the slightest use in getting things back on track. This is the first para of the story from which the chart is taken:

It’s not only the just-released University of Michigan consumer confidence report and February retail sales on Thursday that surprised economists and investors with another dose of underwhelming news. Overall, U.S. economic data have been falling short of prognosticators’ expectations by the most in six years.

They however give a pass to economic management because the labour market is doing reasonably well, in their eyes. So it is useful to be reminded of the actual reality once we adjust for falling labour force participation.

us unemployment march 2015 adj for participation rate

The worst part is not the outcome but the lack of insight into what the problem is. Keynesian macro is an economic wrecking ball, but there is not one economist in a hundred who even has an inkling that this is so, never mind why it is so.

“There’s no improvement in the economy!”

The story is about how the hosts at CNBC were stunned by having the truth told to them about the state of the American economy. The truth may not set you free, but at least it might get you to start doing what’s needed, assuming that anyone any longer knows that that is. Here is what they were told:

“There is no acceleration in underlying economic activity.”

“There’s this wrong concept that I keep on hearing about in the financial press about the acceleration in economic growth… It isn’t happening!”

“We had a horrible retail sales number, we had a horrible durable goods number, we’re likely to have a very disappointing retail sales number coming forward, this month we have a strong payroll number we say everything’s great – it’s not great….it’s been the same thing for the last five years, there’s no improvement in the economy!”

“After a string of dismal data on durable goods, retail spending, and inventories, we get a good jobs number and everyone saying the economy’s good – it’s not good!”

For me, this is perfectly in keeping with this story today: US budget deficit running 6.2 percent higher than last year, with actual spending up 8.3%. But for the rest of you, how can it possibly make sense?

What happened to the 5%?

The American economy went back to its dismal rate of growth. The five percent last quarter was understood by everyone, except those who depended on the media to keep them informed, that the uptick was due to a statistical adjustment made necessary by the introduction of the Affordable Care Act. Now we are back to 2.6%.

The economy grew more slowly than expected in the fourth quarter as government spending fell sharply and business investment pulled back.

Gross domestic product expanded at a seasonally adjusted annual rate of 2.6% in the three months ended Dec. 31, slowing sharply from a robust 5% pace in the third quarter, the Commerce Department said Friday. Economists expected 3.1% growth.

For all of 2014, the economy grew 2.4%, up from 2.2% in 2013, after harsh winter weather early in the year caused the economy to shrink in the first quarter.

The story is in USA Today so naturally will not own up to the nature of the problem. But to understand just how dismal things are, there is this statement from the report to remind you that as bad as things are now, they will only get worse: “Measures of business investment, however, have been declining.” This is not the bursting recovery from recession, but about as bad as could be in what is supposed to be a recovery.

If you don’t understand the problem you cannot find the cure

Every so often, you run across someone who puts a new perspective on how badly the American economy is travelling. The caps to spending that came with the sequester have slowed the rot, but the anvil that has fallen on productive activity has not been lifted. The title here is Don’t Believe the Hype—We’re Not Even Close to Full Employment. Where he uses the word “hype”, I might have chosen “lies”, but at least he can explain plainly how far below potential the US economy is performing.

Before the recession, the Congressional Budget Office (CBO) projected we would have 5 million more jobs at the end of 2014 than we actually do. It also projected that the GDP would be more than 11 percent higher in 2014 than it is now. This translates into a difference in annual output of roughly $2 trillion or more than $6,000 per person. They predicted that wage and salary income would be roughly 20 percent higher than it is today. Many economists had similar projections.

Measured against where these people expected the economy to be at this point seven years ago, the economy is indeed awful. Millions of people who should have jobs don’t, and those who do have jobs are working for much lower wages than would be the case in a healthy economy.

Alas, having noted that the economy is barely alive, and that the fact of growth is hardly remarkable in a market economy, he lays the problem on the absence of anything on the demand side to drive the economy upwards. You do have to despair at someone who sees how bleak things are but attributes it to a lack of demand. Demand is subdued because value-adding supply is subdued. Value-adding supply is subdued because there is no direction in which the American economy might move that is not blocked by government regulation and waste. It is a mess all round, but as long as even those who are even willing to notice are unable to see what must be done, how does it end? As bleak as the economy is, reading this kind of thing makes me think there is a lot worse to come.

Who you gonna believe, me or your lying eyes?

The American economy is dead, dead, dead. That’s the reality. But then there is the politics. This is what the president says: Obama Claims His Economy Is A Success. And you know what? It’s hard to fault the politics even for a second. He is ruining the US and it is clear to anyone with the slightest awareness, even those media jerks who will never abandon their man. They all know, but they won’t say. So Obama just gives them copy and a story to run. The rest of us can say he is a liar but he has had six years’ experience walking all over every criticism which he knows he will never be called out on. Incredible to see, but the world always has been a mysterious place. This is the new politics:

President Barack Obama claimed Thursday that “the facts” demonstrate that his economic policies are safely guiding the nation’s towards middle-class prosperity.

“Those are the facts,” he said. “It’s not conjecture, it’s not opinion… I laid out facts,” he told his audience of upper-income progressives at Northwestern University in Illinois Oct. 2.

Obama’s pitch to the progressives combined a mix of flattery, selective data and visceral campaign pitches, including promises of cheap loans for his student audience, more power for would-be regulators and greater wages for women.

“If we make sure a woman is paid equal to her efforts, it won’t just give women a boost; it’ll give their families and the entire economy a boost… Let’s catch up to 2014, pass a fair pay law, and make our economy stronger,” he told his audience, which included many university-trained women, who comprise one of the most pro-Democratic voting blocs.

He also suggested that wise government leadership created many private-sector gains, such as the boom in oil-drilling and natural-gas fracking.

Progressive economic “policies are right for America, they are supported by the facts,” he said.

Why isn’t Keynesian theory dead, dead, dead?

obama gdp recovery v 1981

This comes via Powerline but is taken from a document put out by the Republicans on the Senate Budget Committee: The Obama Economy: a Chartbook. That 92% of American economists surveyed stated that the stimulus had lowered the unemployment rate below the level it would otherwise have been shows that 92% of American economists haven’t a clue which way is up. You really ought to look at the charts. There really is nothing left to say. Not that the American economy was doing all that well before Obama got his hands on it, but since then the decline has been unbelievable.

Yet the theory that has created this mess is still taught as the mainstream view in economics courses across the world. It’s all Keynesian aggregate demand all the time. But if you are curious about what went wrong, might I recommend you have a read of this.

It will also help to explain this, the incredible fall in median incomes.

obama economy median family income

What you are looking at here is evidence that the infrastructure that supports the American economy is crumbling. It’s not just GDP, which is a temporary measure that goes up and down, but the actual stock of capital that is falling to bits.