This article was published by The McAlvany Intelligence Advisor on Monday, January 8, 2018:
He lives in a world that is behaving much differently than he expected or than he apparently wants. He wants the Trump tax reform law to fail. He must admit that the economy is working much better than he ever expected it to. But, in the end, he says that it’s all a mirage, temporary, that the resurgence measured by nearly every metric isn’t going to last.
He is establishment to the core, and perhaps that’s why he’s willing to go to the mat for a worldview that is being overturned and increasingly discredited: that statists can control things much better than an uncontrolled “free” economy can.
He admitted in an article for CNBC that things are going just swimmingly: “December’s disappointing employment gain [reported by the Department of Labor’s Bureau of Labor Statistics] of [just] 148,000 [jobs] was well below expectations and inconsistent with every other statistic on the strength of the job market and [the] broader economy during the month.” He added that “underlying job growth remains closer to 175,000 jobs per month. And it is likely to shift higher, at least through the summer, as the impact of … tax cuts filter through. The fiscal stimulus [from letting workers keep more of their money after taxes] should provide a temporary boost to growth and jobs … and ensuring this year will be another year of two-million-plus job growth.”
Temporary? Why would the benefits from workers getting to keep more of their money only be temporary? Zandi doesn’t explain.
What he sees is unemployment continuing to drop further. He can’t deny this. After all he works for Moody’s Analytics, which helps ADP put together its monthly employment report. He wrote:
At this pace of job growth, unemployment … will continue to decline. Sub-4 percent unemployment seems likely by spring, and mid-3 percent unemployment is very possible by this time next year.
So what’s the problem? He notes that “there are already a record six million open job positions … in nearly every industry and occupation.” Shouldn’t this draw unemployed or partially-employed people back into the labor market? After all, doesn’t nature abhor a vacuum?
Nope. According to Zandi, those people aren’t going to be hired because so many of them are dopeheads, in jail, or on disability:
Hopes that lots of prime-aged workers sidelined since the Great Recession will re-enter the workforce to take these open job positions will likely be frustrated. Some are coming back, but certainly not in the numbers necessary to forestall further declines in unemployment and the looming specter of significant labor shortages. The problems many of these workers face in getting back to work are very difficult to overcome, including opioids, incarceration, and disability.
Concludes this Keynesian without a shred of evidence to prove it:
While the disappointing job gain during the month is likely a statistical fluke [too low, perhaps much too low], and will eventually be revised higher, it does highlight an important point: namely that after the temporary boost from the deficit-financed tax cuts fade later this year, job growth is destined to slow sharply.
And it’s Trump’s fault:
With no more unemployed or underemployed to hire, fewer immigrants coming into the country to work, and the boomers retiring, job growth will significantly throttle back. By early in the next decade, months in which job growth comes anywhere near December’s 148,000 gain will be the fluke.
The man should be taken out behind the barn and horse-whipped for writing such drivel. All it does is expose his worldview for a world that isn’t behaving the way he thinks it should.
And just how is that world behaving? There were three jobs reports released last week: two from the Labor Department’s Bureau of Labor Statistics (one based on its “household” survey, the other on its “establishment” survey) and one from ADP based upon its payrolls data.
ADP’s numbers came in first on Thursday, showing job growth in December exceeding forecasters’ predictions at 250,000. This was followed by the BLS’ report on Friday, showing 148,000 new jobs in December. They both said that the unemployment rate held steady at a record low 4.1 percent.
These numbers came in on top of other evidence that the economy is just catching its breath and is getting ready for a massive acceleration in its output of goods and services. For the record, all three jobs reports last week showed that low-paid temp jobs showed the least growth, that the real growth was in mining, manufacturing and construction.
They showed that wage growth is keeping ahead of inflation with many free market observers predicting that businesses will shortly be forced to raise wages further in order to attract the kind of highly-skilled and highly-motivated people they need as the economy accelerates. Free market observers are suggesting that Trump’s tax reform bill will add at least a third of a percentage point to the economy’s growth rate in 2018, pushing it closer to the 4 percent GDP growth that the president promised (and for which he was highly and repeatedly criticized).
There’s another benefit: as workers sidelined by the Great Recession return to the labor market, and those working part-time are being promoted to full-time work, they will come off of welfare rolls and begin to man-up once again in taking on meeting their financial responsibilities. Statists like Zandi no doubt see the threat: less dependency on government means more individual responsibility and less need for statists like Zandi to manipulate and manage the economy.
There’s one other benefit. The economy is ignoring entirely the rantings of Zandi and his sycophants and continues to ramp up for a new year that will extend the gains that have already been made.
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Sources:
The New York Post: US economy added 250,000 jobs in December
BLS.gov: Employment Situation Summary released December 5
The Hill: Expect unemployment to hit near-50-year low in near future
Forbes: Don’t Worry, Wage Gains Should Be Just Around the Corner
CNBC.com: Zandi’s rant: Why this ‘disappointing’ jobs report will soon look good
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