A Dud Called Bidenomics
They had an ex-Biden economic policy official on bubblevision this AM crowing about the success of Bidenomics and instructing the Fed to “stick to the data, not the dogma”.
The implication was that inflation has been whipped and the economy is humming a goldilocks tune—so it’s time for the Fed to take its foot off the brakes. In particular, the humming part was that Q2 productivity came in strong, implying that even the robust 4.4% wage growth rate reported this morning is no sweat: Labor cost growth will be purportedly absorbed by productivity gains, not passed on to consumers in higher prices.
As might be expected, none of the CNBC hosts challenged this bit of tommyrot because they are always in the tank for Rosy Scenario—the better to talk-up the stock averages. In the real world, however, not so much.
In fact, since Q2 2020 average hourly earnings (purple line) have risen by +16%, while productivity (black line) is actually –1%. If that’s “goldilocks”, we’ll take our pease porridge cold!
Still, how does a PhD “economist” come up with a productivity-will-let-the-Fed-off-the-hook story in the face of a chart like the one below?
Simple. Just cherry-pick the latest “incoming” data point, and assume that the audience is too stupid to wonder whether the world actually started on April 1, 2023.
Of course, productivity in the latest quarterly installment was up but by the same amount as it was down in Q1, thereby consummating a see-saw pattern that has been underway for the last three years. So with the black productivity change line flat on its ass over that extended interval and the purple wage growth line climbing steadily skyward, the real conclusion is the opposite of that peddled by the Biden shill. Namely, there is a bow-wave of unrecovered unit labor costs building up in the domestic economy, and that means, in turn, that inflation hasn’t been KO’d at all.
Change In Average Hourly Wages Versus Productivity, Q3 2020 to Q2 2023
For want of doubt, here is the resulting unit labor cost change pattern through Q2 2023. That doesn’t look much like goldilocks is coming to town, either.
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