Claims of election fraud have a long history in the US. They exist for 3 reasons. Losers hate to lose. Fraud claims support efforts to restrict voting by opponents. Fraud claims undermine the legitimacy of US democratic processes (Russia).
TRUTH
Historically, without “checks and balances” or other controls, political parties and machines had taken advantage to ensure that they won. We’re mostly talking about 1820-1900. Even in the 20th century, there were states and cities where one party had control and could “deliver” votes at the city, state or national level. This kind of fraud largely ended by the 1960’s based on journalists, lawyers, political opponents and activists overturning this corruption of democracy. Then and now, the numbers of fraudulent votes were very small as a percentage of the votes cast, less than 1%. Fraudulent votes are effective in a democracy only when their small share can tip the election. Most claims of voter fraud are based on a misunderstanding of voting, statistics or logic.
History
In 2007, before the partisan push for photo-ID’s and Trump’s 2016 and 2020 pre-emptive and post-emptive claims of fraud, the Brennan Institute consolidated the research and concluded that voter fraud was statistically irrelevant, 1 in 10,000 or 1 in 1,000 at the most.
We are blessed with an incredibly low level of election fraud in the US for the last 50 years. With a simple two-party system, partisans from both sides have ensured that fraudulent voting is difficult to do, highly punished if discovered and easy to discover (and therefor highly disincentivized). US voting is largely managed at the lowest levels: counties, cities, precincts, where citizens know their neighbors. It is effective because enough Americans of various political beliefs today believe in this process and volunteer their time to make it effective.
Analysis
Republicans generally take a negative view of human nature, expecting individuals to actively pursue their self-interest. Hence, they expect that Democrats, with influence over the election process in some venues, will take steps to optimize their results. In an earlier age this was partially true. But, in the modern world (post 1920’s), several factors work against this direct pursuit of self-interest. The country’s laws make voting fraud a felony with significant penalties. Local election officials are elected. In a two-party system it is relatively easy to engage both parties to monitor the election process. The US has very many lawyers ready to assist their preferred party. Election results are public. Statistically improbable results are very easy to identify today. Each precinct has a historical preference which is unlikely to change materially in any single election, so any fraudulent voting is easily identified.
The number of retirees, aged 65+, has increased by more than 50% since 2008, from 20M to almost 31M.
The retirement age population has grown by 4% of the total population in the last 14 years.
The retired 65+ population has grown a little faster than the total 65+ age group. The initial pandemic impact in 2020 was a 5% increase in the retirement rate, indicating about a 2.6M increase in early retirements in 2020.
The retirement rate in 2020 was about 2% higher than the trend, indicating an extra 1.2M extra retirees. The percentage of retired individuals has since fallen back below the trend line.
Later estimates indicated about 1M early retirements, and then a reversal in late 2021 – 22 as individuals chose to defer their retirements due to the uncertain economic conditions.
Bloomberg noted that new Social Security filings did not increase, so even though there were some retirement candidates with adequate resources to delay claiming Social Security benefits, it was unlikely that there were 3M extra early retirees.
CNBC documented the late Pandemic swing towards more potential retirees deferring this step.
The Washington Post’s approach shows a peak of 2 million extra retirees, falling back to about one-half million in 2022.
Summary
The US economy, political system and social norms have supported the number of aged 65+ retirees growing from 20 million to more than 30 million since 2008. Some of the increase in “retirees” at the start of the pandemic was not voluntary and some retirees have returned to work in the last year as the labor market remains tight and workers worry more about economic conditions. However, overall, an extra 10 million individuals have chosen to retire from active employment and enjoy their retirement years.
The Department of Labor’s monthly survey provides various measures by industry. I’ve broken down the data into 15 industry segments. Eight (8) of these segments account for 5/6ths of all positions and I’ll focus on these 8.
The number of open jobs in the last year, July, 2021 – July 2022, is lead by Professional Services (2.0), Health (1.9), Leisure (1.6), Retail (1.1), Manufacturing (0.9), Government (0.7), Logistics (0.5) and Finance (0.5).
Seven industries accounted for 5/6ths of the increase from 4.6M openings in 2006-7 to 11.2M open jobs today. Health (1.2), Profl Svcs (1.2), Leisure (1.0), Retail (0.6), Manufacturing (0.5), Government (0.4) and Logistics (0.4) are the open job gainers.
The pre-pandemic increase averaged 40% of the total 15-year increase for most industries. The Manufacturing industry showed job declines between 2006 and before the Pandemic, so 80% of it’s openings increase has been since the pre-Pandemic peak. The Business and Professional Services industry has also grown faster since the Pandemic, with 68% of its job growth in recent years. The Retail industry shows an opposite pattern, with 60% of it’s job growth before the Pandemic and a relatively weaker 40% post-Pandemic (on-line sales growth impact).
Total Positions Available by Industry
Total positions increased by 12M, from 138M in 2006-7 to 150M in the last year. Just 4 industries account for all of the growth, lead by Health (5.1), Profl Svcs (4.0), Logistics (1.9) and Leisure/Hospitality (1.8). The migration from ag/extraction to manufacturing to pure services is accelerating.
Open Positions Rate by Industry
The open positions rate more than doubled, from 3.3% in 2006-7 to 4.5% in 2018-19 to 7.0% in the last year. Unfortunately, the larger and growing industry sectors have above average open position rates. Leisure and hospitality shows an incredible/unsustainable 9.8% job openings rate. Professional and business services and Health Care report nearly as high 8.6% vacancy rates. The Logistics industry has a higher than usual rate of 7.4% as it adds jobs at a faster rate in the home delivery era. The Retail and Manufacturing industries show elevated 6.4% open jobs rates. The Government and Finance industries exhibit 5.4% openings rates.
Changes in the Job Openings Rate
The overall job openings rate more than doubled from 2006-7 to the last year, from 3.3% to 7.0%. Keep in mind that 2006-7 was the peak of that business cycle with job openings at a cyclical low point. The Leisure and Hospitality industry had the largest increase, from its usually relatively high 4.3% to an “other worldly” 9.8%. The pandemic drove down travel and it has slowly recovered. The Logistics industry displayed the second highest increase, from 2.7% (it’s usual Manufacturing-like rate) to 7.4% as the Pandemic drove individual shipments to consumers. The Health Care industry continued its labor intensive growth, doubling from 4.3% to 8.6% of open positions. The Manufacturing industry evolved from its usual low 2.3% all the way up to 6.4% as labor demand in other industries grew and attracted its workers. The Professional and Business Services industry kept growing, resulting in a 3.8% increase in unfilled roles, from a typically high 4.8% to a very high 8.6%. The Retail and Government sectors had lower increases at 3%. The Finance sector had a lower than average 2% increase in open jobs.
Just a “Mix” Variance?
The US economy is very dynamic. Industries with low, medium and high job openings rates in 2006-7 each employed about 45M people. The low job openings rate industries (Govt, Manufacturing, Mining, and Educn Svcs) actually LOST 1.4M positions between 2007 and 2022. The middle rate of job openings industries (Logistics, finance, trade, other) added 2.6% net new jobs (1.7M). The high job openings rate industries (Health, Leisure, IT and Profl/Bus Svcs) added an incredible 10.8M jobs (22%)! The US has moved from agriculture to extractive to manufacturing to services employment. The personal and professional services industries are both the fastest growing and the most difficult to staff today.
What Happens During a Mild Recession?
Business and Professional Services openings drop by 3% of the total or 600K people. Health industry jobs decline by a smaller 1% as they are less sensitive to the business cycle, falling by 100K. Leisure and Hospitality are very understaffed and this is harming their growth. They might trim their employment by 2% or 300K positions. The Retail industry is in a long-run decline, so a 2% decline is likely, eliminating 300K jobs. Manufacturing is more cyclical than other industries, so its labor demand will fall more sharply, 3%, removing 400K job postings. The Government sector is somewhat buffered from recession pressures, so job openings might fall just 1% or 100K. Logistics firms are struggling to deliver, so a 2% job decline is the most I see, cutting another 100K positions. The Finance sector has been less volatile, so I estimate a 1% decline and 100K dip.. The remaining industries are likely to fall in tandem, requiring an additional 400K open jobs decline to meet budgets. This total 2.4M open position trim reduces the balance to 8.8M, far above the 7.1M pre-Pandemic level in 2018-19. I don’t think that the labor market will play its usual role in transmitting/amplifying negative finance, banking, housing, international trade, energy and other disruptions through the American economy.
Summary
The US economy was at “full employment” in 2006-7 with just 4.6M unfilled positions. The extended recovery after the Great Recession delivered an even lower unemployment rate, but it also delivered a much increased 7.1M open positions. The post-Pandemic economy has returned to an amazing 3.5% unemployment rate, but the unfilled position count has climbed to a much higher 11.2M and stayed there. The current 7% vacancy rate is largely driven by 6 of the 15 industries with the highest rates: Leisure (9.8%), Health (8.6%), Profl Svcs (8.6%), Logistics (7.4%), Manufacturing (6.4%) and Retail (6.4%). American business is slowly learning to manage with a tight labor very market. Demand for labor should fall significantly in the future as firms employ greater technology, processes, capital goods and imports.
US labor force employment grows and grows. 60M employed in the very glorious 1950’s. 80M by the end of the dynamic 1960’s. 100M by the end of the transforming 1970’s. 120M by the end of the conforming 1980’s. Not quite 140M by the turn of the millennium (2M shy). Just 140M at the end of the “oughts” decade. 158M before the pandemic, resuming the 20M new jobs per decade record of the sixties, seventies, eighties and nineties in the teens decade.
That is 100 million net new jobs added in my lifetime. 160M, up from 60M.
A once in a century pandemic? No problem. 27 months later, total employment has been recovered, despite a 20M worker decline! Set aside politics. This is an amazing result for the US labor market, businesses and citizens.
US economy continues to add about 400,000 jobs each month. This is almost 5M jobs per year, more than twice as fast as the usual 2M jobs per year in recent history.
The labor force participation rate for prime aged individuals (25-54) increased from 65% to 84% between 1950 and 1990 as women were accepted into the labor force. 84% was maintained for a decade and 83% for the next decade. The teens decade saw a decline to 81%. The market has remained in the 81-82% participation rate range.
New hires averaged 5M per month in the slower growth “oughts”. New hires dropped further to just 4M per month after the Great Recession. New hires slowly built up to a new record level of 6M per month before the pandemic arrived. The pandemic had just a minor impact on new hires, with a record 6.5M new employees being hired each month in late 2021 and 2022.
Voluntary quits averaged 2%, 1 in 50 employees, during the first decade of the 21st century. Quits dropped sharply to just 1.4%, just 1 in 70 employees, in the 3 years afterwards. The quit rate slowly returned to “normal” by 2016 and climbed further to 2.3% as the economic recovery continued for a full decade.
By October, 2021 quits had returned to the solid pre-pandemic rate of 2.3%. The quit rate jumped up to 2.8% by April, 2021 and has remained at this historically high rate.
Job openings averaged 4M before the Great Recession. They dropped below 3M during 2009-13. They increased to 5M in 2014 and to 6M by 2016. They remained at the 6M level during 2017, before climbing to 7M for 2018-19. By Jan, 2021 job openings had recovered to 7.2M. By October, job openings had increased to a historic 11M and have remained at this unprecedented level.
This is a greater than 50% increase in open positions since before the pandemic, just 29 months ago. This is 120% more than the peak level before the Great Recession.
Most Important Measure
Profit maximizing businesses, managers and HR departments work through internal processes to list/post a job opening only when:
It’s within the annual financial and headcount budget.
Hiring managers conclude that current staff are unable to serve current demands from internal and external customers.
Hiring managers and financial analysts believe that the incremental hired employees will generate incremental measurable profits.
Hiring managers believe that they can hire new staff using existing processes to fill well defined positions.
Hiring managers believe that it is worth their time to go through the firm’s hiring process.
Hiring managers cannot find an “adequate” labor source through stretching existing staff or using temporary, contract, supplier or agent work forces.
11M job openings means that firms believe that they can generate material incremental profits by hiring up to 11M new employees.
11M open jobs is a startling number, but the ratio of unemployed persons to open positions is much more important. The Great Recession created a 6 applicants per job market. This declined to 2:1 in 2014. During the historic extended expansion it declined to just below 1:1, an unprecedented low number. The ratio fell below 1:1 in 2021 to the current 0.5 level. Two open positions for every unemployed job seeker.
Unemployment was quickly driven to the pre-pandemic record low of 3.5% this summer. Unemployment was below its usual minimum of 5% for 5 years just before the pandemic, leading most economists to recalibrate the “non-accelerating inflation rate of unemployment” (NAIRU) down to 4% or slightly below. This is a very efficient labor market.
Real (inflation-adjusted) wages have reflected this labor market situation. They remained at the $335/week level from 2000 through 2014, reflecting the slow growth of employment and GDP. Wages began to raise in real terms in 2015, reaching $360 by 2019, a 7.5% real increase. Wages were growing rapidly just before the pandemic and climbed to $390/week in the second quarter of 2020, an additional 8% increase in a few months. Real wages have since declined back to the $360 per week level as high inflation has offset higher than usual nominal wage increases. Firms have chosen to live with 11 million open positions rather than increase real wages.
Summary
Firms have 11M open positions that they believe will help them to make greater profits. Real wages are the same as they were just before the pandemic started. Firms have chosen to not increase hiring and regular wages any faster because they judge that this will cost them more profits than allowing 11M positions to remain unfilled. This is the first time in at least 50 years that firms have had to manage a labor market where employees and applicants have some market power. Despite this “standoff” in the labor market, total employment is back to the pre-pandemic level, firms are hiring record numbers of employees and labor force participation is recovering towards the pre-pandemic level, which was at a 10-year high. The overall economy has clearly slowed its growth rate to near zero, but the labor market remains in a very positive state for workers.
In 1942, the US economy employed 41.9 million people in firms. At the end of 2022, the number will be 153.8 million, an increase of 267%. Yes, for very 3 jobs in 1942, we have 11 today. Yes again, almost 4 times as many in 2022 versus 1942, despite the 9 million jobs lost in 2008-9 and the 9 million jobs lost in 2020.
The US economy added 12 million jobs between 1942 and 1960, growing from 42 to 54 million positions. Job growth averaged nearly 700,000 per year or 1.4% annually. This was a period of solid growth, despite the 4 recessions.
The period from 1960 through 2001 showed truly remarkable job growth. The economy added 78 million jobs, almost 1.9 million each year or 2.2% annually. STOP and think about this. The Greatest Generation, WW II saving the planet team was just 40 million employees in the US. The immediate post-war boom increased employment to 55 million when the US was the only advanced economy running at full speed. But employment growth accelerated from 1960 to 200. These 4 decades essentially tripled the size of the US economy.
Overall, the last two decades have delivered much slower job growth. Using 2019 as an ending measure, the economy grew by 21 million jobs, from 131 to 152 million since 2001. This is just 1.1 million per year, or a growth rate of 0.8%, far below the 2% plus rate of 1960-2000. Or, the 21 million added jobs is one-half of the jobs in 1942 in the heart of WW II.
But, these two decades experienced the post-millennium downturn, the great recession and the covid pandemic.
The economic recovery from the millennium (Y2K) was quite slow. The recovery from the Great Recession was slow but strong and extended, allowing unemployment rates to eventually reach 3.5%. The recovery from the pandemic situation was much faster than expected, reaching pre-pandemic levels of GDP and employment within 2 years.
The economy has been adding 400,000 jobs each month since the beginning of 2021, almost an amazing 5 million jobs annually.
Million Jobs Added Per Year in Economic Recovery Periods
1948: 2.0
1952: 2.2
1956: 1.8
1959: 2.0
1969: 1.9
1973: 2.4
1980: 2.2
1990: 2.5
2000: 2.7
2007: 1.6
2019: 2.2
The US economy adds 2 million jobs each year when the economy is expanding. The percentage growth rate is slower through time, but the 2 million jobs added each year remains a solid capacity or capability.
Summary
The US economy added 1.4% new jobs annually from 1942-1960. The jobs growth rate averaged a very strong 2.2% from 1960-2021. It then slowed to just 0.8% annually while digesting the Great Recession and the COVID pandemic. The economy added more than 2 million jobs each year after the Great Recession, pushing unemployment to a very low 3.5%. The economy rebounded from the pandemic much faster than the consensus view,
declining shares for agriculture, mining and manufacturing
greater outsourcing of corporate functions
greater share of contracting, non-traditional employment, part-time employment
lower rates of geographic mobility
lower rates of economic upward mobility
greatly increased political polarization at the state and local level
decreased labor force participation rates
increased opioid and drug damage rates
lower community service participation rates
lower church attendance and membership rates
lower male college attendance and graduation rates
Despite the very many headwinds, the US economy is still able to add 2 million jobs annually during economic recovery periods. It added 9 million positions in 2021 and looks to add almost 5 million positions in 2022 despite the weakening business cycle. Even with a slowing economy, the US is likely to add 2 million new positions in 2023 and 2024.
The US Dept of Labor does not publish a consumer price index specifically for refrigerators, but the category it belongs in showed essentially zero nominal inflation between 1994 and 2018. The real price decline shown in the first chart probably continued through 2018.
Refrigerators and appliance prices spiked by more than 10% in 2021 as consumer demand for durable goods grew 20% during the pandemic, supported by government transfer payments.
Refrigerators now account for just 7% of home electricity consumption, down from 14% in 2001.
Opinion writers differ on who gets credit for the improved price/performance results for refrigerators, but it seems clear that both energy standards and inventive firms share credit.
Presidential candidate Ronald Reagan skewered the incumbent Jimmy Carter in the 1980 presidential debate with this question and framing of economic issues.
We are economically better off today than we were in 2019, 2016, 2012 or 2008. As a nation, we need to recognize the strong economy that has been built across several 4-year periods.
Let’s focus on just 2 measures: unemployment and real gross domestic product (GDP).
The US encountered its worst or “tied for worst” economic downturn in almost a century in 2008-9 with the Great Recession.
The economic recovery was relatively slow, but the economic expansion continued for a RECORD 10 years! This was followed by the pandemic recession which drove unemployment up to 15% in a mere 3 months!! In 2 years, with a never before encountered global pandemic raging and evolving, the US unemployment rate dropped from 15% back to 3.6%!!! It has since levelled off at 3.6%, just shy of the 3.5% rate before the pandemic. This is an AMAZING outcome for the economy and our citizens
Since WWII (1947), the real, inflation adjusted, “no fooling”, GDP of the US has increased TEN-FOLD! We can honor the “greatest generation” and the country’s sacrifices to win WWII, but the economy in the 1940’s was less than 10% of the size that it is today. This is a true “order of magnitude” change. The economy has rotated from agriculture to manufacturing to services and trade.
The real economy is THREE TIMES as large as it was when Reagan was debating Carter in 1980.
It is 25% higher in 2022 than it was in 2008, despite two major recessions.
Unemployment measures the available labor capacity that is unused. The Depression saw extended periods of 20% unemployment. The post-war period enjoyed low 4% level unemployment through 1957. The next 7 years were above 5%, setting a new expectation of what the reasonable, long-term, natural, non-accelerating inflation rate of unemployment (NAIRU) was. The next 6 years of Vietnam and social welfare spending drove a 4% average unemployment rate which most economists believed was unsustainable and which eventually drove significant increases in inflation. The 1970 recession drove unemployment above 5% where it stayed for nearly 30 years, before finally starting with a 4 in 1997. Unemployment remained below 5% for 3 years, touching a 4% low before the millennium recession. Unemployment then averaged a sustainable 5%+ for the next 6 years, reaching a low of 4.5%.
So, when unemployment rocketed up to 10% in the Great Recession, no mainstream economist expected it to return to less than 4% soon, maybe never. Unemployment eventually reached 5.0% by the end of 2015. Professional economists were sure that it had reached its bottom. But Mr. Market, Dr. Copper and Senor Economy had news for the pundits. Consistently through the next 4 years, unemployment declined another 30% from 5.0% to 3.5% without triggering increased inflation.
The subsequent reduction of unemployment from 15% to 3.6% in 2 years is an incredible result reflecting a robust economy.
Next, let’s turn to a set of global comparisons to gauge if we are “better off”.
Just 12 Countries Account for 70% of Global GDP
US, China, Japan, Germany, UK, India, France, Italy, Canada, S Korea, Russia and Brazil provide the framework for evaluating global economic results today.
India, France, Italy and Brazil are saddled with 7% unemployment rates, double the US level. Canada and China encounter 5% unemployment. The UK, South Korea and Russia enjoy below 4% unemployment rates with the US. Japan and Germany glory in sub-3% rates. The 12 country average is 5.3%, almost 2 points above the US 3.6% rate.
The most recent 9.1% annualized US inflation rate is above the 7.7% average. Russia and Brazil are struggling with 10%+ inflation. Canada, Italy, India, UK and Germany face 6-7% inflation. France and South Korea encounter 5% inflation. Japan and China see just 2% inflation.
Combining the unemployment rate and inflation rates to create a “misery index”, the US scores 12.7%, just above the 12.2% average.
The US Remains the “Big Dog” in the Global Economy
At 24% of global GDP, it is first. China and Japan together add up to 24%. The remaining 9 large countries add up to just less than 24%. Being large provides the advantage of a larger domestic market that attracts investors, entrepreneurs, researchers, supplier, labor, traders, etc. On the other hand, continuing to grow in the same percentage terms through history or compared with smaller countries as the largest economy is a handicap. (This is a great graphic worth exploring for a few minutes)
US reports $63,200 per year. Germany, Canada, UK, Japan and France range from $39K – $46K, roughly two-thirds of the US level. Italy and South Korea check-in at $32K, about one-half of the US level. China and Russia earn $10K annually, while Brazil ($7K) and India ($2K) lag further behind.
US Gross Domestic Product Increased 8% from 2019 to 2021
GDP figures are not widely available for the first half of 2022 for countries, so we can use the pre-pandemic 2019 compared with the late pandemic 2021 to gauge recent economic performance.
The US GDP in 2021 was 8% higher than in record breaking 2019. It increased by $1.63 trillion in 2 years. Global GDP in 2021 was $90T. US GDP grew from $21.37 to 23.0 trillion.
China (factory to the world), in a period when demand for durable goods increased by 20% and nondurable goods by more than 10%, grew even faster, from $14.3 to 17.7 trillion, an increase of $3.4 trillion. I believe this is overstated somehow, given other data that indicates 6-7% annual growth in China each year, but it’s first place two-year ranking is clear.
The other 10 major economies combined grew from $26.4 to $27.7 trillion, an increase of $1.3 trillion, totaling less than the US $1.6 trillion growth. Their 5% combined growth rate trails the US 8% growth rate.
In percentage terms, the UK, India and Canada grew by 10% or more. Germany, France and South Korea grew by 8-9%. Russia and Italy grew by 5%. Japan and Brazil endured economic declines.
From the end of 2012 through July, 2022, almost 10 years, the US Standard & Poor’s stock index gained 175%. Fast growing India and previously undervalued Japan reported the same kind of amazing 10 year returns, compounding at more than 11% annually. Germany, France and Brazil grew by a decent 75%. Resource based Canadian and previously overvalued Chinese stocks gained a modest 50%. The UK, Italy and South Korea edged up by 25%, while Russia dropped by 25%.
Stock market returns reflect relative initial evaluations, changes in investor preferences, terms of trade and the underlying profitability/sustainability of each country’s economy. By this measure, the US has a very bright future.
US Leads Short-term Stock Market Returns
Comparing July, 2022 with a pre-pandemic base of December 31, 2019 shows a 25% gain for the US, Japan and India, even with the 20%ish stock market declines in the first half of 2022. Canada and South Korean markets are up a respectable 10%. China and France report a modest 5% gain. Germany and the UK show no gain. Italy, Russia and Brazil are in the 10% loss range. Even with strong gains from 2012 through 2019, the US stock market lead the world through the pandemic recovery period.
Summary: Very Solid US Economy
US inflation has returned to threatening levels and consumer confidence has fallen sharply while confidence in the incumbent president has continued to decline. The current “mood” is negative despite many positive economic factors such as the labor market and growth in GDP, housing and stock values. We are having journalistic, academic and partisan debates about hanging the “recession” label on the economy.
Big picture, the US economy is in great shape. It continues to grow, employ labor, increase wages, export, generate profits and build asset values. The economy worked through a “once in 100 years” global pandemic, with limited long-term economic damage.
There is a risk of a recession, even a moderately painful 3-5% downturn. There is a risk that inflation will remain elevated for more than 1 year, reducing the value of wages and assets. But these are normal business cycle issues, not the “end of the world”. The responses of consumers, investors, suppliers, businesses, bankers, central bankers, regulators and … politicians to the last two recessions were constructive and helpful. We have the ability to work through our current economic headwinds if we choose to do so.
Ongoing defects dropped by 60% from 2001 to 2011 and then dropped by another 20% from 2011 to 2021. The compounded reduction is 68%, a little more than two-thirds of the defects disappearing in 20 years.
JD Powers started its initial quality surveys in 1987 and its Vehicle Dependability surveys in 1990. The summary results are not easily found on the internet. The Consumer Reports defect rates are similarly restricted to paying customers.
In the 1980’s, Toyota and Honda offered significantly higher vehicle quality. Other manufacturers essentially “caught up” in the next 20 years. A snapshot from 1985 illustrates the gap that was closed by 2000-5, before the Vehicle Dependability improvements shown above.
The very disappointing 2022 results are inconsistent with the downward defect trend of the last 20 years, reflecting the pandemic production, supply chain sourcing and vehicle prep problems of the last 2 years.
I was a wide-eyed young adult when the US last experienced 12% and 15% inflation rates. Our current situation is very different from that sad time 50 years ago. Fiscal policy was much looser, with LBJ pursuing a both “guns and butter” policy and Nixon following along. Monetary policy was slightly accommodating in the 70’s, comparable to today. The “supply shock” in the 70’s was much larger. The US was then much more dependent on foreign oil imports. Today the US is roughly “energy independent”, so subject to global price changes only. In the 1970’s, labor unions had some degree of power against the largest manufacturing concerns and used that power to attempt to maintain workers’ wages. There is no similar labor power today.
Average Inflation is at a Recent High of 8%
Core Inflation, Excluding Food and Energy is Growing at 6%
The inflection point is March, 2021. 2-3% inflation before then. 6% inflation in the last year. 6% is much higher than the 2% trend of the last 2-3 decades, but not a harbinger of spiraling inflation or wage-price spirals or cost-push inflation.
Inflation is Driven by Historically Highly Variable 1) Energy, 2) Commodities and 3) Food Prices.
The doubling of global energy prices since the end of 2020 is apparent. This was driven by the unexpectedly rapid global recovery from the pandemic (good news, overall) and the supply crimp from the Russian invasion of Ukraine. Energy is a 7% weight in consumer prices, so a doubling has a tremendous effect.
US demand for durable goods spiked by 50% within the pandemic, as in-person services were unavailable. This completely unexpected increase in demand for final goods drove a completely unexpected demand for commodity inputs, resulting in much higher prices that continue through today.
Food price increases also spiked. The pandemic interrupted direct agriculture and food processing labor inputs. Raw food inflation reached 16%, while “away from home” food prices grew by just 7%.
Lodging and Vehicle Prices Spiked Due to the Stop/Start Nature of the Pandemic Economy.
Lodging and used car inflation exceeded 20% but is now slowing. New car prices increased by 12%, but this price increase is back down to a 7% annual rate.
But, All Other Sectors Have Experienced “Normal” – Non-accelerating 6% or Lower Price Increases.
6%.
3-4%.
3-5%.
4-5%.
Drugs 2%. Medical Services 6%.
Communication and IT continue their price decreases after a small increase.
1-2% annual inflation.
Household furnishings, up 9% like other consumer durables.
Food away from home, up 6-7%, despite the incredible disruptions in the last 2-3 years.
Summary
Energy, food and commodities prices have increased sharply in the last year. The other dozen price indices have increased by 5-6-7% and then flattened off. Loose fiscal and monetary policy, combined with commodities price spikes have driven quite high consumer price inflation for the last 6-9 months. Inflation will drop from 8% to 6% in the 3rd quarter and then to 4% in the 4th quarter and then lower into 2023.
There is no indication of rapidly increasing prices or a wage-price spiral. US labor unions don’t have the power to respond to the recent unexpected increase in consumer prices with a demand for equal or higher wage increases. Wages have increased by 5% in the last 2 years as inflation has spiked to 8%.
The African-American employment to population ratio has been increasing through time, closing a 5 point gap to just 2 points before the pandemic, and squeezing it to less than 1 point most recently.
Context Since March, 1990 Peak Overall Rate
4 point decline before the pandemic. 1.5% pandemic hit. Almost 50% recovery.
3 point decline for prime age workforce, but 2 point improvement at the end of the prior economic recovery period. 2 point pandemic hit. More than 3/4ths recovered.
6 point slide before pandemic. 1.5 point pandemic hit. Perhaps 1/3rd recovered.
Up 3 points. Down 3 points. Up 3 points. Down 2 points. 80% recovered.
Context: History and Trends Through 2015+ Were Negative or Unclear for African-American LFP
Size, growth and share all matter. Black workers may have quietly reached a “critical mass” where they face less obstacles and benefit from more positive network effects.
Black men have worked full-time schedules about the same as all men, while Black women have worked full-time more often than other women.
Context: The Labor Market
Real wages are up for African-Americans.
From 1975-97, African-American unemployment rates were 10% or higher. They briefly found the 7-8% level at the end of the Clinton presidency/expansion. They popped back up to 10% and recovered to about 8% before the “Great Recession”. They jumped up to 17% and then slowly declined to 10% by 2015. The extended recovery brought them down below 7% in 2018 and to a record low of less than 6%, briefly during 2018-19. The pandemic flirted with 17% rates once again. Instead of taking a decade to recover, unemployment rates have recovered in 2 years.
Good News 