At some point, the thing actually has to happen. You can only keep talking about the thing for so long before people start to get wise. And most people, especially those in the public who understandably don’t following the thing closely, or the things related to it, are incredibly patient. Time and time again, they prove willing to give experts, officials, anyone with the “right” pedigree substantial leeway.
It’s temporary, dare I write “transitory” though.
In 2018, we kept hearing about the economic boom and the inflation it would throw off. That was actually backward in a sense, not that it would matter since it never happened – the inflation afterward would’ve confirmed the boom was real. Actual recovery and then some.
Thus, at some point the boom had to actually boom in reality rather than fiction. It couldn’t remain as nothing more than the product of increasingly detached hysterical media stories drawing attention to ridiculous anecdotes trying to pass for some LABOR SHORTAGE!!! easily disproved by perception, data, and an overwhelming set of contradictory facts. The more 2018 dragged onward, even though the unemployment rate went lower and lower, suspicions grew and then hardened (before being proven beyond any doubt in 2019).
Here we are yet again, a crucial juncture that in many ways shares the same fundamental misconceptions as well as background setting. The economy is said to be rebounding, and has been said to have been rebounding sharply. A “V” from a very low bottom.
However, as before, at some point the rebound has to prove itself as real; the rebound better rebound. As in 2018, there’s the Fed’s and its fictions trying to maintain the illusion as long as it can.
More than anything, that’s where the confusion comes in. Even when the public can tell it isn’t the way the media says people have trouble identifying exactly what the disconnect is and where it is coming from. In the end, it doesn’t matter much that over time central bankers at the Fed have come clean (where inflation was concerned, as well as how the unemployment rate had for years mislead their views).
Trust is a fickle thing; credibility, as the central bankers call it.
Massive QE, a “flood” of “money printing” since the middle of March was supposed to have been hugely inflationary. Even today, many remain convinced and won’t stop talking about it. On top, the Federal Reserve altered its procedures, a grand strategy review whose results said monetary policy was, for the first time in half a century, going to tolerate huge amounts of inflation.
The purpose of both those things was the same thing – to thoroughly convince consumers/workers as well as their employers and prospective employers that inflation was as foregone conclusion, and that things would be good to great because of this in the near future. Thus, worrying instead about higher labor costs, in particular, in that near future, everyone starts spending, hiring, and investing today before costs of all those things rise too much.
But like 2018’s boom, it was all a lie; a carefully constructed story because, quite frankly, that’s what central banks in the modern age actually do. They don’t do money, and in lieu of money in monetary policy all central bankers have at their disposal is stories (and the bank reserves they can create which are the equivalent of high-quality artwork accompanying the fiction).
Again, people are willing to give this the benefit of the doubt until, at some point, they have to see the boom actually booming – or the rebound still sharply rebounding. Once enough time passes, then you start to get contrary even from a friendly, typically-compliant mainstream:
The number of Americans filing new claims for unemployment benefits fell to a seven-month low last week, but the pace of decline has slowed and further improvement could be limited by a raging COVID-19 pandemic and lack of additional fiscal stimulus…Despite claims dropping to their lowest since March, they remained above their peak of 665,000 during the 2007-2009 Great Recession. Weak demand, especially in the services sector, is forcing employers to shed workers.
“Weak demand” tied to still record levels of jobless claims is not something that goes along with a rebound still rebounding. On the contrary, it forces people to pay closer attention and begin asking serious questions and acting according to their (lack of) answers. Second and third order effects, in other words.
Initial jobless claims last week did fall to their lowest since March, but that really doesn’t’ mean much at all as even Reuters here correctly interprets. It’s been the same thing every week; lower claims, but still higher than any other week in history before this year’s disaster. How can it be into the first week of November, eight months later, and this is still true?
The technical reason is what you see above; the rate of improvement in initial claims obviously slowed way down at the end of August (right when Jay Powell unveiled average inflation targeting). Something changed.
In terms of continued claims, the improvement there has accelerated if only because the unfortunately unemployed are exhausting their state benefits. Several million have already rolled instead onto the federal government’s pandemic emergency assistance program (PEUC).
The labor market just isn’t getting better at anywhere near the pace we need. What’s more, workers as consumers can tell this isn’t adding up. Consumer confidence remains much closer to the March trough than to the prior peak despite all these months in between and the absurd number of stories which stated conclusively how easy “V” shaped recovery had been guaranteed and then more just inflationary nonsense whether or not a “V” shows up.
As if QE has ever accomplished something small let alone a task so monumental.
What’s happened into November is pretty simple when you stand back and realize how we’ve seen these things all before; and not all that long ago. The “V” never really stood much of a chance, and the inflation stuff has become all played out. More and more the public, the business public, the financial public, they all can see and appreciate all these as the fictions they always were.
We’ve got big problems, and they’ve been here the whole time. Survivor’s euphoria spurred on by gigantic positive economic numbers obscured that fact. As Europe, Pfizer’s very welcome discovery doesn’t change much or any of this.