The Economic Consequences of a Donald Trump Win Would be Severe [feedly]

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The Economic Consequences of a Donald Trump Win Would be Severe
// Economist's View

Larry Summers (Update: Washing Post link)

... What I find surprising is that US and global markets and financial policymakers seem much less sensitive to "Trump risk" than they are to "Brexit risk". Options markets suggest only modestly elevated volatility in the period leading up to the presidential election. ...

Yet, as great as the risks of Brexit are to the British economy, I believe the risks to the US and global economies of Mr Trump's election as president are far greater. If he is elected, I would expect a protracted recession to begin within 18 months. The damage would be felt far beyond the United States. ...

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Trade Deficit at $37.4 Billion in April [feedly]

PK says Fed's plan to raise interest rates, and spike in dollar following, may be st fault

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Trade Deficit at $37.4 Billion in April
// Calculated Risk

Earlier the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $37.4 billion in April, up $1.9 billion from $35.5 billion in March, revised. April exports were $182.8 billion, $2.6 billion more than March exports. April imports were $220.2 billion, $4.5 billion more than March imports.

The trade deficit was smaller than the consensus forecast of $41.0 billion.

Note: There were major revisions in this report, mostly exports were revised up for the last several years.

The first graph shows the monthly U.S. exports and imports in dollars through April 2016.

 Click on graph for larger image.

Both imports and exports increased in April.

Exports are 11% above the pre-recession peak and down 5% compared to April 2015; imports are 5% below the pre-recession peak, and down 5% compared to April 2015. 

The second graph shows the U.S. trade deficit, with and without petroleum.

 The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $29.48 in April, up from $27.68 in March, and down from $46.47 in April 2015.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012.

The trade deficit with China decreased to $24.3 billion in April, from $26.8 billion in April 2015.  (Note that there were labor issues last year, and the ships were unloaded in March and April - pushing up imports from China).  The deficit with China is a substantial portion of the overall deficit.
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Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama [feedly]

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Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama
// Calculated Risk

By request, here is another update of an earlier post through the May 2016 employment report including all revisions.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Note: We frequently use Presidential terms as time markers - we could use Speaker of the House, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Reagan's 2nd term saw about the same job growth as during Carter's term.  Note: There was a severe recession at the beginning of Reagan's first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter's term (gas prices increased sharply and there was an oil embargo).

TermPrivate Sector
Jobs Added (000s)Carter9,041Reagan 15,360Reagan 29,357GHW Bush1,510Clinton 110,884Clinton 210,082GW Bush 1-811GW Bush 2415Obama 11,921Obama 28,385¹¹40 months into 2nd term: 10,062 pace.
The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term, and President Obama is in the fourth year of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.

 Click on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 811,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 396,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,966,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 1,921,000 more private sector jobs at the end of Mr. Obama's first term.  Forty months into Mr. Obama's second term, there are now 10,306,000 more private sector jobs than when he initially took office.

 A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 503,000 jobs). This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama's first term, and increased the most during Reagan's 2nd term.

TermPublic Sector
Jobs Added (000s)Carter1,304Reagan 1-24Reagan 21,438GHW Bush1,127Clinton 1692Clinton 21,242GW Bush 1900GW Bush 2844Obama 1-708Obama 2205¹¹40 months into 2nd term, 246 pace
Looking forward, I expect the economy to continue to expand through 2016 (at least), so I don't expect a sharp decline in private employment as happened at the end of Mr. Bush's 2nd term (In 2005 and 2006 I was warning of a coming down turn due to the bursting of the housing bubble - and I predicted a recession in 2007).

For the public sector, the cutbacks are clearly over.  Right now I'm expecting some increase in public employment during the remainder of Obama's 2nd term, but nothing like what happened during Reagan's second term.

Below is a table of the top three presidential terms for private job creation (they also happen to be the three best terms for total non-farm job creation).

Clinton's two terms were the best for both private and total non-farm job creation, followed by Reagan's 2nd term.

Currently Obama's 2nd term is on pace to be the 3rd best ever for private job creation.  However, with very few public sector jobs added, Obama's 2nd term is only on pace to be the fourth best for total job creation.

Note: Only 205 thousand public sector jobs have been added during the first forty months of Obama's 2nd term (following a record loss of 708 thousand public sector jobs during Obama's 1st term).  This is about 15% of the public sector jobs added during Reagan's 2nd term!

Top Employment Gains per Presidential Terms (000s)RankTermPrivatePublic Total Non-Farm1Clinton 110,88469211,5762Clinton 210,0821,24211,3123Reagan 29,3571,43810,795  Obama 2¹8,3852058,590  Pace²10,06224610,308¹40 Months into 2nd Term
²Current Pace for Obama's 2nd Term
The last table shows the jobs needed per month for Obama's 2nd term to be in the top three presidential terms. Right now it looks like Obama's 2nd term will be in the top 3 for private employment, but not for total employment.

Average Jobs needed per month (000s)
for remainder of Obama's 2nd Termto RankPrivateTotal#1312373#2212342#3122276
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explain that to me again, Sam

Here is a link from Sam Webb's blog objecting to my support for Bernie Sanders. He is not alone in these thoughts. But I am not persuaded.

Here is my response to this article, posted mostly as it is previously on Facebook.

Sam is one of my best friends. I have respected and admired his careful and generally sober thinking for many years. Yet I fail to understand his entire line of reasoning on Sanders. 

First it implies Bernie Sanders is not focused on the defeat of Trump. That's a false statement I feel there is no need to refute. And it has served, in more than one article, as a cover for damning Sanders entire campaign with faint praise. 

Second, it implies that the main thrust of Sanders' campaign has been splitting the "anti-Right struggle". False again. The campaign serves instead, to make that struggle mean something besides hot air to working families. 

Third, it implies that that the "well articulated" anti-right campaign should just shut up for now about the class issues related to austerity, #BlackLivesMatter, Fergusons, corporate domination of political institutions, and the absence of a goddamn raise in 40 goddamn years for the median worker, etc. Maybe we should mosey on another 40 defeating the right without a raise. To hell with that! 

Fourth, it suggests that sectarian "anyone-but-Hillary" forces -- half of whom are Republican operatives, IMO -- are actually being directed by Bernie -- a charge he has repeatedly renounced. Also false. 

Fifth It implies Bernie is on the verge of doing a Nader and effectively electing Trump -- another charge Sanders has repeatedly renounced. 

Sixth, it implies that the composition of Bernie's campaign is too narrow among African Americans to support, Really? And thus the composition of Hillary's campaign trumps (no pun intended) all these "too soon in the great strategic struggle to mention class questions" issues and truths Bernie has raised??? The composition of his campaign has steadily improved as people found out more about him -- he comes from a rural state and was virtually unknown outside Vermont and northern New England until last year. 

Seventh -- not in this article-- but in others, the surge in California and the west is dismissed as too late to do anything but increase tension at the convention. Message to socialists and progressives: Run, but don't run to win. Campaign, but not to the limit. This argument refutes itself and more than anything reflects the alienation and marginalization of so much of the Left from real electoral politics, or even an NLRB election campaign.

I reject all these implications. But most of all I question the concept that there is the slightest meaning to an "anti-right" campaign that does not address the class questions of inequality, racism, austerity, peace, and the excessive billionaire-too-big-to-fail-corporate power. I can't imagine what such a campaign. would consist of. It would be to the right of Hillary's current positions -- both her own original positions, and not a few others that have been taken BECAUSE of the Sanders campaign surge. A campaign against Trump that does not raise these questions will, IMO, have not the slightest effect on the forces moving in a fascist direction in this country. Even if he is defeated, another, and another, and another will rise from the wastes spreading in this economy and political paralysis. Such a campaign will have the slimmest of coattails and is highly unlikely to reverse the stalemate in congress. If anyone thinks that African-American, Latino, or women voters supporting Hillary Clinton will tolerate continued stalemate on these vital, life and death matters, they should head immediately to Colorado and stay stoned so the consequences won't be so horrifying. 

What should Bernie do after endorsing Hillary (he has promised to do that if she is the candidate) -- still shut up about the "class" questions? It would be a campaign with demands too shallow to actively enroll the 8 million votes, not to mention the huge mobilized crowds Sanders has drawn across the country, needed to truly roll back the R catastrophe. 

A Sanders-less Clinton campaign would -- this is my worst fear -- be just like the speech she gave in San Diego on Foreign Policy and national security --- virtually no substantive policy vision, but loads of rhetoric exposing Trump's personal unfitness for ANY political office. Gail Collins thought it was HRC's finest hour. To me, it just reinforced the appearance of cold war style tendencies and an "I can pull the trigger" attitude, which, IMO, is her WEAKNESS, not her STRENGTH. Hillary's strength actually IS policy expertise. She is reported to be among the most astute and competent, evidence-based policy wonks in the world. 

I am sure if Bernie loses in California on Tuesday, all who admire the line in Sam's arguments will heave a huge sigh of relief. Personally, I am profoundly disappointed in that poor solidarity and support for the finest electoral performance for a socialist -- and not a phony, bullshit socialist, but a real one -- in the history of this country. Bernie Sanders is good, honorable, and decent man who has NEVER swerved from advocacy and solidarity with the vital interests of working families. Perhaps this is all such new territory to all of us that foundering is to be expected. 

But I am ashamed of it.

John Case
Harpers Ferry, WV

The Winners and Losers Radio Show

7-9 AM Weekdays, WSHC-Listen Live, Shepherd University

Sign UP HERE to get the Weekly Program Notes.

Record Low 4.7% Unemployment Rate Hides Ominous Signs [feedly]

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Record Low 4.7% Unemployment Rate Hides Ominous Signs
// The Economic Populist - Speak Your Mind One Dime at a Time

The May 2016 unemployment report on the surface sounds like great news.  The unemployment rate dropped to an astoundingly low 4.7%.  This is a -0.3 percentage point drop from last month and a level not seen since November 2007.  Yet the statistics which make up the unemployment rate actually shows something terrible.  The unemployment rate dropped because 664,000 people dropped out of the labor force with almost half a million no longer counted as unemployed.

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Weekend Reading: Andrew Batson: What Xi Jinping really said about Deng Xiaoping and Mao Zedong [feedly]

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Weekend Reading: Andrew Batson: What Xi Jinping really said about Deng Xiaoping and Mao Zedong
// Grasping Reality with Both Hands: The Semi-Daily Journal Economist Brad DeLong



Andrew Batson: What Xi Jinping really said about Deng Xiaoping and Mao Zedong: "I looked up the original remarks by Xi, which he made on January 5, 2013...

...in a speech entitled 'Some Questions on Maintaining and Developing Socialism with Chinese Characteristics.'... There is an official summary... including the statement that Browne and Nathan focus on: 'we cannot use the historical period after reform and opening to deny the historical period before reform and opening, nor can we use the historical period before reform and opening to deny the historical period after reform and opening' (不能用改革开放后的历史时期否定改革开放前的历史时期，也不能用改革开放前的历史时期否定改革开放后的历史时期). But I also dug up the full text of the speech... which makes it easier to understand what Xi is getting at. Here is my translation of the most relevant section of the speech:

For our Party leading the people in building socialism, there are two historical periods: before 'reform and opening' and after 'reform and opening.' These are two interrelated periods that also have major differences, but the essence of both periods is that our Party was leading the people in the exploration and practice of building socialism. 'Socialism with Chinese characteristics' was created in the new historical period of 'reform and opening,' but it was created on the basis of New China having already established the basic socialist system and carried out more than twenty years of work. A correct understanding of this problem requires grasping three points.

First, if our Party had not taken the decision in 1978 to carry out 'reform and opening,' and to unswervingly push forward 'reform and opening,' socialist China would not be in the good situation it is today–it is even possible it could have faced a serious crisis like the Soviet Union and Eastern Europe. At the same time, if in 1949 New China had not been established in a socialist revolution, and accumulated important ideas, materials and institutional conditions, gaining both positive and negative experiences, it would have been very difficult for reform and opening to proceed smoothly.

Second, although the ideological direction, policies and practice of building socialism in these two historical periods were very different, these two periods are not separate from each other, and are not at all fundamentally opposed. Our Party has in the process of building socialism proposed many correct positions, but at the time they were not properly implemented; they were only fully implemented only after 'reform and opening,' and we will continue to adhere to them and develop them in the future. Marx said long ago: 'Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.'

Third, there must be a correct evaluation of the historical period before 'reform and opening.' We cannot use the historical period after 'reform and opening' to deny the historical period before 'reform and opening,' nor can we use the historical period before 'reform and opening' to deny the historical period after 'reform and opening.' The practice and exploration of socialism before 'reform and opening' built up the conditions for the practice and exploration of socialism after 'reform and opening;' the practice and exploration of socialism after 'reform and opening' is to maintain, reform and develop the previous period.…

The reason I emphasize this question is because this is a major political issue that, if not handled properly, will have serious political consequences. The ancients said: 'To destroy the people of a country, first go at their history.' Hostile forces at home and abroad often write articles about the history of the Chinese revolution and the history of New China–they stop at nothing in attacking, vilifying and slandering, but their ultimate purpose is to confuse people and to incite the overthrow of the Chinese Communist Party and our country's socialist system. Why did the Soviet Union disintegrate? Why the Soviet Communist Party fall from power? One important reason is that in the field of ideology the struggle was very intense–fully negating the history of the Soviet Union and the Communist Party, negating Lenin, negating Stalin, promoting historical nihilism and confused thinking. Party organizations at all levels hardly did anything, and the army was not under the leadership of the Party. In the end, the Soviet Communist Party, this great Party, was scattered, and the Soviet Union, this great socialist country, fell to pieces. This is a cautionary tale!

Comrade Deng Xiaoping pointed out:

On no account can we discard the banner of Mao Zedong Thought. To do so would, in fact, be to negate the glorious history of our Party. On the whole, the Party's history is glorious. Our Party has also made big mistakes in the course of its history, including some in the three decades since the founding of New China, not least, so gross a mistake as the 'Cultural Revolution'. But after all, we did triumph in the revolution. It is since the birth of the People's Republic that China's status in the world has been so greatly enhanced. It is since the founding of the People's Republic that our great country, with nearly a quarter of the world's population, has stood up — and stood firm — in the community of nations.

He also stressed:

The appraisal of Comrade Mao Zedong and the exposition of Mao Zedong Thought relate not only to Comrade Mao personally but also to the entire history of our Party and our country. We must keep this overall judgement in mind.

This is the vision and thinking of a great Marxist statesman. Think for a moment: if at that time we had fully negated Comrade Mao Zedong, could our Party still stand firm? Could our country's socialist system stand firm? If it does not stand firm, then the result is chaos. Therefore, correctly handling the relationship between socialism before and after 'reform and opening' is not just a historical issue, in fact it is mainly a political issue. I suggest that everyone take out the 'Resolution on Certain Questions in the History of Our Party Since the Founding of the People's Republic of China' and read it again.

I think it is not quite right to read this as Xi glorifying everything about Mao, and saying China made just as much progress during the Great Leap Forward as it did after 1978. What Xi is saying is that the legitimacy of the Communist Party China rests on the whole history of its rule, and that if the legitimacy of Party rule is questioned for one historical period, then it can be questioned for other historical periods. Deng felt the same way, and what Xi is doing in this speech is forcefully repeating Deng's own evaluation of Mao. The 1981 resolution on Party history that Xi cites is best known for how it assigned primary blame for the Cultural Revolution to Mao personally. But the resolution's overall assessment of Mao is rather balanced, and Deng himself insisted on this. The quotes from Deng that Xi mentions are remarks Deng made during the drafting of the resolution, and some other Deng comments from the same source make the point very clear:

Comrade Mao Zedong was not an isolated individual, he was the leader of our Party until the moment of his death. When we write about his mistakes, we should not exaggerate, for otherwise we shall be discrediting Comrade Mao Zedong, and this would mean discrediting our Party and state. … What we have achieved cannot be separated from the leadership of the Chinese Communist Party and Comrade Mao Zedong. It is precisely this point that many of our young people don't sufficiently appreciate.

The parallel that both Deng and Xi very clearly had in mind is the Soviet Union, and the backlash against Stalin that began with Khrushchev's famous 'secret speech' acknowledging Stalin's crimes. Chinese leaders clearly view the 'negation' of Stalin that Khrushchev began as fatally undermining the legitimacy of the Soviet Party, and leading inevitably to its collapse in subsequent decades. And they are not alone in this judgment. Here is the historian Orlando Figes on the impact of Khrushchev's 1956 speech, from his excellent Revolutionary Russia, 1891-1991: A History:

The speech changed everything. It was the moment when the Party lost authority, unity and self-belief. It was the beginning of the end. The Soviet system never really recovered from the crisis of confidence created by the speech. How could people continue to believe in a revolution that had killed so many in the people's name? In leaders who had told so many lies? For the first time the Party was admitting that it had been wrong— not wrong in a minor way but catastrophically. How could it rebuild its credibility?

Exactly. I do not see much daylight between Xi Jinping and Deng Xiaoping in terms of their positions on Mao Zedong and Communist Party history. Xi is very much following in Deng's footsteps here, though he may be departing from Deng's legacy in other ways.

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