Two Faces of National Output in 2019

Look at your profile. Then turn around and look at your profile from the opposite viewpoint. Both profiles are you. But the left one might have a mole while the other doesn't. Just you -- two different views.

Real GDP is the measure of a nation's output. Real GDP was recently announced for the US for 2019. Depending on the view presented, output rose either by 2.1% or 2.3%. That doesn't sound like a large discrepancy. Either way, 2019 looks pretty anemic when compared to the past. While anemic, it was not a recession, and so many of us are happy for that.

As the table below reveals, if you dig down a bit, there is much more to the differences for 2019 than the  2.1 v 2.3 shows. These differences are more than academic. The differences may give us some insight into 2020.

Why differences? At the end of each year, the Bureau of Economic Analysis presents two ways to describe economic change within the year. The first is called year-over-year growth. Call that YOY. YOY is obtained by averaging the GDP growth rates of the four quarters of each year. Underline the word average. To get YOY 2019, you take the average of the four quarters of 2019 and compare that to the average of the four quarters of 2018.

As such, YOY 2019 does not emphasize change in any one of the quarters of the year. It averages them. It is equally using, therefore, eight quarters of change.

The second way to describe growth in 2019 is to use only two quarters -- you look at the change in real GDP from the fourth quarter of 2018 to the fourth quarter of 2019. You don't give a peep about the other six quarters. For example, if growth in GDP was low in the fourth quarter of 2018 but it popped really high in the fourth quarter of 2019, then you might get a very large 4Q to 4Q growth rate in that case. The average of all four quarters for both years might be exactly the same. But because of the special changes in those two terminal quarters, you might get an eye-popping rate of change. YOY in that case would be zero, while 4Q to 4Q might be large.

Such fourth quarter end of year activity doesn't always act so crazy. When it does, you can be sure that the YOY and 4Q to 4Q measures will differ.

Which one is right? Neither. They are both right, just as your left side with the mole and the right  side without the mole are both right. They are both you.

Some of us think it is very important to see where we have gotten during the year. How the year ends is very important to you. Thus 4Q to 4Q is preferred. More often, we want to compare the whole year. How much stuff did we produce in 2018? How much in 2019? How much bigger is that total pile in 2019? In that case, YOY is preferred.

Okay -- I hope I helped you get much needed rest and a good nap. Why does this matter? 2.1 versus 2.4. Who cares?

Look at the table below. Look at real GPDI -- this is a critical component of national output that measures housing construction, and spending on plant, equipment, and software. Notice the difference there. YOY says 1.8%. 4Q to 4Q measures -6.1%. That's quite a difference. Activity dramatically tailed off in the fourth quarter of 2019. Drilling down further, you see that was the result of declining production of structures and equipment despite a strong fourth quarter increase in the building of residences.

So what? Structures, which includes building manufacturing plants, and equipment are two sectors responsible for growth in productivity and competitiveness. Maybe those sectors did okay in 2019 but clearly they tailed off at the end of 2019. Does the end of 2019 herald something coming in 2020? If we focused only on YOY, we would never have seen the tailing off and we would have had a very different picture of 2019. Of course, the fourth quarter performance might have been a random event -- maybe it was weather?

You also see that imports and exports of goods declined dramatically from 4Q to 4Q. But we know that is the result of a trade war, a trade war that may or may not be finished after the fourth quarter of 2019.

Which profile is right? They both are. Which one gives us a better indication of what might happen in 2020? We don't know. But having both YOY and 4Q to 4Q gives us more to go on and to think about. To me, the generally slower results for 4Q 2019 are something to follow and might indicate more of the same in 2020. Stay tuned.

Percentage Change in Real GDP 2019
Year over year vs 4th quarter to 4th quarter

                                                                                   YOY        4to4

Gross domestic product (GDP)	2.3	2.1
Personal consumption expenditures	2.6	1.8
Goods	3.8	1.2
Durable goods	4.7	2.1
Nondurable goods	3.3	0.8
Services	2.1	2.0
Gross private domestic investment	1.8	-6.1
Fixed investment	1.3	0.1
Nonresidential	2.1	-1.5
Structures	-4.4	-10.1
Equipment	1.4	-2.9
Intellectual property products	7.7	5.9
Residential	-1.5	5.8
Change in private inventories	..............	..............
Net exports of goods and services	..............	..............
Exports	0.0	1.4
Goods	0.2	-1.1
Services	-0.4	6.4
Imports	1.0	-8.7
Goods	0.2	-11.6
Services	4.1	4.3
Government consumption expenditures and gross investment	2.3	2.7
Federal	3.5	3.6
National defense	4.9	4.9
Nondefense	1.6	1.6
State and local	1.6	2.2

Shiny Objects and the Gold Standard

Recently a new potential appointment to the Fed brought up the topic of the gold standard. One of my faithful readers cornered me and wondered if I had written about the gold standard, so I checked and sure enough, I don’t think I have one post about the gold standard. So here goes.

Most of us like shiny objects, so of course people like gold. If there is such a thing as a gold standard, then why would we not love it? This should be simple. 

Apparently, in the same vein, President Trump and this new potential appointee at the Fed have exhibited a love for the gold standard. This shiny object seems to have affected even the dullest bulbs in the basket.

Let’s start with some history. The world was on a gold standard back when Nancy Pelosi was just a tiny thing and ended around 1919. Yes, it ended 100 years ago. What else that ended 100 years ago that would you like to return to? Wooden buggies? Muddy streets? World War I?

Anyway, history suggests that people decided NOT to be on the gold standard. It once was, but then it ended.

Like shiny objects that get lost and show up again, after World War II, some really smart people decided we should try the gold standard again but this time they gave it a new name – the Gold Exchange Standard. The new name and perhaps a slightly different arrangement made people who met at a nice place called Bretton Woods think that this gold standard was going to be the be-all to end-all gold standards. It would be better than sliced bread or Elton John.

Somehow, by 1971, the world decided the Gold Exchange Standard sucked dirty water and abandoned that one, too. Keep in mind that President Trump and some of his genius advisors want to return to something that has failed at least twice. Maybe they haven’t heard that saying about three times a loser. Of course, maybe they are just going for another shiny object? Hi Donald, should we have a gold standard? Of course, look at how it sparkles.

What is a gold standard, and why do people want a gold standard? And why do they seem to fail? Lots of cool questions, eh?

A gold standard is essentially a means to control the money supply. A gold standard says that a country cannot print more money unless they "dig up" a bunch of gold. Since it is not easy to get gold, that makes it harder for a country to print too much money. 

We know that too much money is like 12 chili dogs at the Corner Bar and your son throwing up. Too much money can be very bad for the economy. A gold standard is good since it removes the worry that silly central bankers will print money like chili dogs.

Despite a nicely functioning Gold Exchange Standard, the Fed, our beloved Central Bank, found ways to circumvent the rules and printed so much money that they destroyed that Gold Standard right around the time Richard Nixon was breaking into offices and thinking up one of the stupidest programs ever called the Nixon Wage and Price Controls.

I think I answered the above three questions, so what remains is to answer why people want to put us through all this madness again. Sure, it sounds good to have a gold standard. I’d love to find a way to make the Fed manage our money supply responsibly. 

Check out the data now and you will find that the Fed has created enough money since the last recession to fill Bezo’s swimming pool. The problem with wishing for such a system is that the past shows that no matter what system you put in, central banks and governments find ways to cheat and destroy the system. Why would now be any better?

And the real laughable part of this is that Trump is the guy who keeps putting pressure on the Fed to lower rates and increase the money supply. How is it possible that he wants all that money AND a gold standard? I think it all goes back to shiny objects. There is no logic that could explain him wanting things that don’t go together. It would be like him wanting to put Sonny and Cher (or Ike and Tina Turner) back together. Ain’t gonna happen.

I think we have had enough gold standards. Let’s try doing one thing. Tell the Fed to take out all the extra money and then increase the money supply each year by a smidge. Its not hard. No Gold Standard please. 

CNN and Iowa Tomfoolery

Note: I wrote this gaseous essay on February 4th. I had downloaded some data and was all prepared to put myself to sleep writing a blog post on the topic of GDP 2019 when I decided to go to the Green Lake Fitness Center for my daily workout. After touching my toes a couple of times, I decided to get on an exercise bicycle that was located directly in front of a TV monitor that was showing the CNN noon news hour.

The CNN noon news is usually just F’ Trump, F’ Trump, F’ Trump with an occasional Chicago murder or two. But crazy as it seems, I must have ridden almost 17 minutes, and I did not hear Trump’s name one time. What? What is going on? I said to myself.

It turned out that these bastions of very unbiased and serious news (do you detect sarcasm?) were leveling their usual spleen-emptying gargling at the Democratic Party of Iowa. You would have thought that the Democratic Party of Iowa (DPOI) had committed heinous if not Nazi-like sins against mankind. The evil members of the DPOI had ruined America forever and in the most horrible way possible.

For those of you living a real life who somehow have not stumbled on all this minutia, the DPOI had a malfunction when it came to counting votes with a new phone app for the Iowa Caucus. 

Because of this malfunction, we went minutes and hours without knowing how many votes The Bernie got. Thankfully, these goons at CNN took on the mission of telling us every single detail they could muster and they repeated that tiny story over and over and over. And then they introduced guest experts who told us over and over again how the DPOI had destroyed all the Democratic candidates and the whole election, how they had been dumber than rocks in how they used phone apps to count votes, and how possibly the sun would not do its usual circle around the moon (I am not a very good astronomer).

Seriously, what is wrong with those dudes? I am glad they don’t give those people pea-shooters or other weapons, as I am afraid they might have captured a couple DPOI members and executed them with extra-large feather pillows right there on television.

And can you believe the DPOI told CNN and the world that they didn’t know when they would complete the count but they were trying to get a partial count by the following Friday. WHAT A HEINOUS CRIME! We were going to have to wait three days to get some results. Three days! Rome could burn in less than three days. And then only partial results. My God, no full results for five days? What could possibly happen to the world if we didn’t know Iowa's results? Might Earth crash into Venus?

When is the election? Tomorrow? I heard they were going to have it in November. Yet not knowing the Iowa winners for five days on February 4 is going to ruin everything. Did I say EVERYTHING? Don’t get a haircut or your toenails done in those five days.

All this, and I am betting the Anderson Cooper guy and all those other twerps on CNN do not even have an idea where Iowa is. Wait, is Iowa just Indiana spelled backwards? How can we have so many states that begin with “I”?

Meanwhile Trump and the Republicans got the day off. No Trump F-bombs on CNN. I used to believe in the importance of democracy and a free press. I’m not so sure anymore. Interesting situation coming up. Trump will give his annual address (doesn't he give an annual address daily on Twitter?)  What will the press do? Will they take time out from bashing the DPOI to bash Trump? What a dilemma! By the time you will have read this post, we will all know the answer. 

A Decade of Employment

We all know that the economy has grown slowly since the recession ended in 2009. We all know that the US economy is not growing robustly as we enjoy the longest expansion on record. We all suspect a recession is somewhere ahead of us. These are the facts that we often hear because they seem very relevant to us.

Our weight goes up and down and we jump on the scale to see the latest changes. Even if we haven't gained much weight in the last year, it is of interest to know if we gained at all. So it is with the economy and its changes.

That's what today's blog post is about. December's employment might not have grown a lot. In fact, employment in the last 10 years might not have grown as much as in the previous 10 years. But has it grown at all? And if so, by how much?

I used my friend Google to travel to the website of the Bureau of Labor Statistics to look at employment in the USA. This post and the below table might not satisfy some of you because it represents a start in thinking about employment in the USA over the past 11 years. It's a start because many of you are going to look at this and then ask a lot of questions about what is missing in the chart. That's fine. We can handle those as we move forward.

The table contains the December values of three employment series -- all workers, manufacturing workers, and government workers -- for all the years from 2009 through 2019. They are presented in millions of workers.

The USA in 2009 had 130 million employed workers. Of those, around 11 million were in manufacturing and another 22 million worked for governments (federal, state, and local). The rest were found in the many various non-manufacturing sectors.

Each December found total employment rising. The fact that we have not had a recession in all those years since 2009 implies that in none of those years did employment decrease. It has been a decade of steady increase.

With respect to ALL employment, employment went from 130 million in 2009 to 152 million in December of 2019. That 23-million worker increase amounted to a 17.4% increase. The 17.4% is not a record but you have to admit that 23 million jobs is not a small number. There are only two states that have a population of as much as 23 million -- California and Texas. 23 million is about the size of New York plus Connecticut.

It might have taken 10 years but the US employment increase was large enough to give jobs to nearly all the people in New York and Connecticut. Or you could say it was enough to have employed everyone in the third largest USA state.

A quick look around the world suggests that the USA was not alone in the slowdown of employment -- but more relevant for today is that in most cases of most advanced nations -- employment grew about half as fast as it did in the USA. (I am purposely not citing numbers for this comparison because it is not possible right now to find employment data for relevant countries that match exactly those I am quoting for the USA. To base my international comparison, I used the B tables from the IMF World Economic Outlook Report published in October of 2019.)

Most people wring their hands and say prayers for USA manufacturing employment, but the table shows an increase of about 2 million jobs or a 12 percent increase over those years. OK, that might not have set any records but it is an increase.

The government sector was not so successful. Employment did not increase by even 1 million people and the increase was less than 1 percent.

I can hear some of you wondering out loud. What about skilled versus less skilled? What about the average wage? What about employment of low-wage workers? What about those Sea Hawks?

Anyway, I said this was just a start. The fact that employment increased by more than one New York is not too bad. If it is not good enough for you, then maybe we should ask our friendly idiots in DC to do something about that.

Table. December Employment USA 2009 to 2019 (in millions of workers)

Year	All	MFG	Govt
2009	130	11	22
2010	131	12	22
2011	133	12	22
2012	135	12	22
2013	137	12	22
2014	140	12	22
2015	143	12	22
2016	145	12	22
2017	148	13	22
2018	150	13	22
2019	152	13	23
Chg 2009 to 2019*	23	1	0
% Chg 2009 to 2019	17.4	12.0	0.7

*The change calculations reflect the actual differences before rounding off. 

https://data.bls.gov/cgi-bin/surveymost