5 ms·

Because, we have a supply recession, not a demand recession. We haven't had one in living memory (except, kind of, the oil supply shocks in the 70's), so we do

Because, we have a supply recession, not a demand recession. We haven't had one in living memory (except, kind of, the oil supply shocks in the 70's), so we don't seem to recognize it. Some people think it obviously feels like a recession is happening, but others point to things like this graph to say that it sure doesn't look like it. But that's because this measures demand for labor, not supply. We are seeing a broad-based depression of economic activity, caused by supply problems, and the supply of labor is one of those problems. We've aged, a lot of boomers retired a bit early at the onset of the pandemic, and there are a lot more people on disability than we once had. The labor force participation rate has never returned to pre-pandemic levels, and even that was low by 21st century standards: https://www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm https://www.bls.gov/charts/employment-situation/civilian-lab... Ominously, most of what world governments have been doing to try to help the economy, has been about goosing demand. In a supply recession, that's like giving an electric blanket and a hot drink to somebody with a dangerously high fever...

mjburgess 4y ago
The central banks, harassed by the fed, are however, pouring a cold bath.
mapmap 4y ago
>We've aged, a lot of boomers retired a bit early at the onset of the pandemic, and there are a lot more people on disability than we once had. The labor force participation rate has never returned to pre-pandemic levels And more than a million Americans have died from Covid.
- Ancapistani 4y ago
  True, but relatively few of those million were in the workforce.
bagacrap 4y ago
Stimulus packages may have goosed demand but low interest rates should in theory* increase supply, since capital must be applied to useful purposes rather than sitting in a bank collecting interest. *unfortunately, subsidizing ride shares is probably not a "useful purpose"
whimsicalism 4y ago
Some supply recession we've got here https://fred.stlouisfed.org/series/DGORDER https://fred.stlouisfed.org/series/DGORDER It is exceedingly obvious to anyone looking at the trends that there is a simultaneous demand and supply shock going on.
- randomdata 4y ago
  Manufacturing moving "back home" is how we are attempting to deal with the supply shocks, so it is true that domestic demand is increasing but I expect the parent considered that as part of the supply shock. This doesn't necessarily suggest a demand shock on the global scale. Places like China are seeing decline in exports.
  - whimsicalism 4y ago
    https://fred.stlouisfed.org/series/PCEDG https://fred.stlouisfed.org/series/PCEDG Happy to keep sending graphs until the point is clear.
    - randomdata 4y ago
      That measures price. Inflation isn't a big secret... The original comment alluded to inflation being caused by supply shocks. Look forward to your next attempt.
      - deleted 4y ago
        [deleted]
      - whimsicalism 4y ago
        There has not been a 40% rate of inflation for durable goods. Real PCE https://fred.stlouisfed.org/series/PCEDGC96 https://fred.stlouisfed.org/series/PCEDGC96
        randomdata 4y ago
        That's the same chart, except in real dollars. It still only provides price. Price does not tell us anything about the supply and demand components individually. Price is the product of supply and demand put together. It's okay, I'll wait.
matrix_overload 4y ago
"Supply recession" is a shortage of people willing to produce meaningful stuff for the going price. Majority of Gen Z wanting to become CEOs, youtubers and luxury bloggers is very indicative of that. We kinda plugged the hole by letting China produce cheap trinkets, Saudis pump cheap oil and Russia get cheap gas, but it only kept working as long as that money came back to the West through various laundering schemes. Except now that Russia and China are showing military ambition, this arrangement is done with, so we truly need more domestic supply. Except now it's a cultural problem: if you give 10 youtubers and 1 baker one extra dollar, the price of bread will go up, but it won't convince a single youtuber to go stand in front of a hot oven all day. We won't fix it by printing more money. We could fix it by destroying easier ways to make money, but it will be painful and will take time.
- aschearer 4y ago
  Pesky lazy kids. Begs the question, though, why did they turn out that way? Or was there just something in the water 20 years ago?
  - matrix_overload 4y ago
    Incentives. For the past couple of decades the deal has been "mom and pop have it all figured out, so get out of the way and we'll buy you off with some cheap toys". So yeah, we have a generation that knows how to throw a perfect tantrum to get their next Lego set and expects the store to somehow never run out of them.
- pixl97 4y ago
  Automation fixes the oven problem, and we've been doing it in the US for a long time in applications where low cost of energy in the US allowed. But thinking we're going to bring lots of jobs for $5 an hour so they can try to afford $3000 of rent per month is just going to get cities burned down in mass.
  - matrix_overload 4y ago
    Automation creates a much bigger problem. If you had 10 independent bakers, the price of bread would be limited from both sides: * The bakers would rather quit than keep earning less that what easier jobs pay, pushing the prices up. * If the price went too high, someone would setup another bakery to get a market share, pushing the prices down. With automation and consolidation we have 1 corporation owning 1 automatic bakeries and 10 completely disposable bureaucrats on near-minimum wage. If the demand goes up, jacking up the prices is easier than setting up the 11th bakery (what if the demand goes down later? too risky!). If a new player enters the market, they will just sell the bread in that neighborhood at a loss until the competitor is out, then get the prices back. Rinse and repeat for a decade and here you go: assets prices are through the roof, salaries are stuck, there is a shortage of everything, prices are going up, competence is lost art, nobody knows what to do. Artificially created jobs won't pay for a decent house because they don't come with a bargaining power. We could print money and turn $5/hr vs. $3K rent into $50/hr vs. $30K rent, but it won't change the balance of power. If you want to change it, we need to crack down on centralization and make small businesses competitive again.
JamesianP 4y ago
The analysis I've seen always has supply crashing (lock-downs, which are over) then recovering and in the case of manufacturing, being higher than even before the pandemic. Inflation should have mostly stopped if that was all there was to it (or never happened because demand would go down too when people can't get paid). However demand crashed less, recovered more, and has kept right on going up way above per-pandemic levels and faster than the increasing supply.
ramesh31 4y ago
Also people seem to forget that over 1 million Americans died an untimely death over the last two years. That has to be factoring into this.

mjburgess 4y ago

The central banks, harassed by the fed, are however, pouring a cold bath.

mapmap 4y ago

>We've aged, a lot of boomers retired a bit early at the onset of the pandemic, and there are a lot more people on disability than we once had. The labor force participation rate has never returned to pre-pandemic levels And more than a million Americans have died from Covid.

Ancapistani 4y ago
True, but relatively few of those million were in the workforce.

bagacrap 4y ago

Stimulus packages may have goosed demand but low interest rates should in theory* increase supply, since capital must be applied to useful purposes rather than sitting in a bank collecting interest. *unfortunately, subsidizing ride shares is probably not a "useful purpose"

whimsicalism 4y ago

Some supply recession we've got here https://fred.stlouisfed.org/series/DGORDER https://fred.stlouisfed.org/series/DGORDER It is exceedingly obvious to anyone looking at the trends that there is a simultaneous demand and supply shock going on.

randomdata 4y ago
Manufacturing moving "back home" is how we are attempting to deal with the supply shocks, so it is true that domestic demand is increasing but I expect the parent considered that as part of the supply shock. This doesn't necessarily suggest a demand shock on the global scale. Places like China are seeing decline in exports.
- whimsicalism 4y ago
  https://fred.stlouisfed.org/series/PCEDG https://fred.stlouisfed.org/series/PCEDG Happy to keep sending graphs until the point is clear.
  - randomdata 4y ago
    That measures price. Inflation isn't a big secret... The original comment alluded to inflation being caused by supply shocks. Look forward to your next attempt.
    - deleted 4y ago
      [deleted]
    - whimsicalism 4y ago
      There has not been a 40% rate of inflation for durable goods. Real PCE https://fred.stlouisfed.org/series/PCEDGC96 https://fred.stlouisfed.org/series/PCEDGC96
      - randomdata 4y ago
        That's the same chart, except in real dollars. It still only provides price. Price does not tell us anything about the supply and demand components individually. Price is the product of supply and demand put together. It's okay, I'll wait.

matrix_overload 4y ago

"Supply recession" is a shortage of people willing to produce meaningful stuff for the going price. Majority of Gen Z wanting to become CEOs, youtubers and luxury bloggers is very indicative of that. We kinda plugged the hole by letting China produce cheap trinkets, Saudis pump cheap oil and Russia get cheap gas, but it only kept working as long as that money came back to the West through various laundering schemes. Except now that Russia and China are showing military ambition, this arrangement is done with, so we truly need more domestic supply. Except now it's a cultural problem: if you give 10 youtubers and 1 baker one extra dollar, the price of bread will go up, but it won't convince a single youtuber to go stand in front of a hot oven all day. We won't fix it by printing more money. We could fix it by destroying easier ways to make money, but it will be painful and will take time.

aschearer 4y ago
Pesky lazy kids. Begs the question, though, why did they turn out that way? Or was there just something in the water 20 years ago?
- matrix_overload 4y ago
  Incentives. For the past couple of decades the deal has been "mom and pop have it all figured out, so get out of the way and we'll buy you off with some cheap toys". So yeah, we have a generation that knows how to throw a perfect tantrum to get their next Lego set and expects the store to somehow never run out of them.
pixl97 4y ago
Automation fixes the oven problem, and we've been doing it in the US for a long time in applications where low cost of energy in the US allowed. But thinking we're going to bring lots of jobs for $5 an hour so they can try to afford $3000 of rent per month is just going to get cities burned down in mass.
- matrix_overload 4y ago
  Automation creates a much bigger problem. If you had 10 independent bakers, the price of bread would be limited from both sides: * The bakers would rather quit than keep earning less that what easier jobs pay, pushing the prices up. * If the price went too high, someone would setup another bakery to get a market share, pushing the prices down. With automation and consolidation we have 1 corporation owning 1 automatic bakeries and 10 completely disposable bureaucrats on near-minimum wage. If the demand goes up, jacking up the prices is easier than setting up the 11th bakery (what if the demand goes down later? too risky!). If a new player enters the market, they will just sell the bread in that neighborhood at a loss until the competitor is out, then get the prices back. Rinse and repeat for a decade and here you go: assets prices are through the roof, salaries are stuck, there is a shortage of everything, prices are going up, competence is lost art, nobody knows what to do. Artificially created jobs won't pay for a decent house because they don't come with a bargaining power. We could print money and turn $5/hr vs. $3K rent into $50/hr vs. $30K rent, but it won't change the balance of power. If you want to change it, we need to crack down on centralization and make small businesses competitive again.

JamesianP 4y ago

The analysis I've seen always has supply crashing (lock-downs, which are over) then recovering and in the case of manufacturing, being higher than even before the pandemic. Inflation should have mostly stopped if that was all there was to it (or never happened because demand would go down too when people can't get paid). However demand crashed less, recovered more, and has kept right on going up way above per-pandemic levels and faster than the increasing supply.

ramesh31 4y ago

Also people seem to forget that over 1 million Americans died an untimely death over the last two years. That has to be factoring into this.