GDP fell by 3.5% in the year 2020, the worst annual decline since 1946. Trade deficit in Q4 hit new all-time worst.
By Wolf Richter for WOLF STREET.
The size of the US economy, as measured by GDP in “current dollars” (not adjusted for inflation), fell to $20.9 trillion in the year 2020, according to the Bureau of Economic Analysis this morning.
In the discussion below, you will see inflation-adjusted figures, with adjustments being made based on “2012 dollars.” In these 2012 dollars, GDP fell by 3.5% in the year 2020, the worst annual decline since 1946 (when it plunged by 11.6%).
In the fourth quarter, GDP grew by 1.0% from the third quarter, adjusted for inflation (but not “annualized”), which left Q4 GDP still down 2.5% from a year ago.
The plunge in Q2 and the jump in Q3 were the sharpest moves ever in the quarterly GDP data, which began in 1947. Before then, there were only annual data. Q4 growth, at 1% (green column), is back in the normal quarterly growth range over the past two decades:
In the headlines this morning, you saw “4%” GDP growth for Q4, which was an “annualized” figure, meaning Q4 growth (1.0%) multiplied by four to project what the growth would be if it continues for an entire year at the same rate, which is kind of silly, but that’s what “annualized” growth rates do. And they sure make things look bigger.
Adjusted for inflation via these infamous “2012 dollars,” GDP in Q4 amounted to a “seasonally adjusted” “annual rate” of $18.8 trillion, same where it had been in Q4 2018:
Consumer spending (69.5% of GDP) edged up just 0.6% in Q4 from Q3 to an annual rate of $13.0 trillion in 2012 dollars. And it was still down 2.6% from Q4 last year:
- Spending on goods eased a smidgen from Q3, to $5.1 trillion (annual rate).
- Spending on services rose 1.0% from Q3 to $8.0 trillion (annual rate).
This produced a very unspectacular uptick after the spectacular plunge-and-bounce in Q2 and Q3:
Gross private domestic investment (18.8% of GDP) jumped 5.8% in Q4 from Q3 to a new record annual rate of $3.5 trillion. This includes investment in residential and non-residential structures, equipment, and intellectual property products such as software, but it does not include investment in financial products such as stocks and bonds:
Private inventories grew by 44.6 billion (annual rate) in Q4, after having ticked down by $3.7 billion in Q3, and having plunged by $287 billion in Q2 and by $81 billion in Q1. In otder words, inventories got partially replenished. Growth in inventories adds to GDP.
Surging Imports, weak Exports produced record trade deficit and dragged down GDP (all in annual rates and 2012 dollars).
Imports of goods and services rose by $213 billion in Q4 from Q3, to $3.4 trillion, fired up by the stimulus economy when consumers can’t spend their money on fancy vacations. Instead, they’re spending their money on imported goods.
Exports of goods and services rose only by $110 billion, not nearly enough to compensate for the surge in imports, to $2.3 trillion.
And the trade deficit (exports minus imports) – or “real net exports” – of goods and services in Q4 worsened to a new worst of -$1.12 trillion. Net exports are added to GDP. Since the amount is negative, it reduces GDP by $1.12 trillion. This is 30% worse than the hit in Q4 2019.
I took the chart back to 1970, even though the details get lost, to show just how far this situation has deteriorated. Anything below the blue line subtracts from GDP. The US stimulus economy – the Weirdest Economy Ever – stimulated the economies in other countries, such as China, Germany, Japan, and Mexico:
Government consumption and investment (17.7% of GDP) dipped 0.3% from Q3 to $3.3 trillion (annual rate), down 0.6% from a year earlier. This includes all governments: federal, state, and local.
But wait… this does not include stimulus and unemployment payments, Social Security payments, government salaries, and other direct payments to consumers, which are counted in GDP when consumers spend this money as part of consumer spending – see the consumer spending chart above.
Government consumption and investment includes the goods and services that the government consumes, from fuel for government vehicles and rent for offices to consulting services. And it includes government investments, such as in infrastructure.
State and local governments have come under heavy budgetary pressures, and in Q4 their consumption and investment declined by $8.5 billion to $1.98 trillion (annual rate, 2012 dollars), after having already declined by $20 billion in the prior quarter.
The federal government’s consumption and investment ticked down by $1.8 billion in Q4, to $1.33 trillion (annual rate, 2012 dollars) with defense up by $10 billion and non-defense down by $11.4 billion:
And so this puts the economy of 2020 behind us…
Not only have the last two months seen supply shortages develop at a pace not previously seen in the survey’s history, but prices have also risen due to the imbalance of supply and demand.” Read… Inflation Is Spreading Broadly into the Economy. Amid Surging Costs, Companies Raise Prices, and Customers Pay them, Despite Weak Economy, 10 Million Missing Jobs
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Not a good year for our world or GDP
World Economic Outlook Update
January 2021
•
•
• The projected growth recovery this year follows a severe collapse in 2020 that has had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors. The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020).
Just look at that trade deficit! Good thing other countries still love taking dollars. Let’s hope it never ends…
US “diplomacy” is trying very hard to end it, especially under Mike Pompeo!
Why is everybody so concerned about increase of GDP?
Most of the increase in GDP, adjusted for inflation, is created from debt.
What one should look at is the GDP from private sector and that of public sector.
And 70% of GDP is consumerism. Debt fueled.
Is nothing produced anymore….actually created or produced?
In China, yes… we don’t need to worry about North America. The center is shifted from west back to east, as is the nature of such things. Even though certain leader is the east did his best to try to self sabotage.
But the inertia and the legacy of DXP is much greater than the efforts of XJP.
Fiestaware? But heavily mechanized manufacture. Still at Homer Laughlin’s Plant #7 site across the river from the old East Liverpool Ohio original works. Of course, I also have a bottle opener made from wood and a nail by some local craftsman…can’t guarantee where the nail and magnet came from, but it works.
Fiesta is separate from HLC now I think.
Thankfully Fiesta is still made in WV, USA.
HLC was bought out and I want to say they now manufacture “you-know-where” but I can’t remember for certain.
The food service division of HLC and Hall China (which had been acquired by HLC in 2010) were sold to Steelite, a British tableware manufacturer and supplier in March 2020. Fiestaware is the retail and manufacturing side of the business and and is still family owned, still made in the USA.
A lot of the HLC food service division products are sold to US government and military service needs. So, it’s not made in China stuff.
Not clear why they wanted to divest themselves of the food service division while retaining retail and manufacturing operations, but that’s what happened. Maybe having to do with the headaches of maintaining large government contracts?
Gandalf, I’m not sure everything you said was right. I’m a Fiesta fan and that doesn’t sound quite right. I was thinking Fiesta is the only line remaining in WV. I have a feeling my memory is serving me right, but don’t want to publish it.
Gandalf, my memory is right. I researched certain dinnerware products HLC makes—-made in CHINA and MEXICO. I don’t know if any HLC is made in USA any longer. Like I said above, Fiesta is.
If you think “A lot of the HLC food service division products are sold to US government and military service needs. So, it’s not made in China stuff.” is correct, please research to verify. I don’t know the product lines you’re referring to so I can’t.
noname,
Well, if you actually have a Homer Laughlin by Steelite dinnerware piece and the package says “Made In China”, or “Made in Mexico”, then you’ve got me.
I searched long and hard on the internet to try to figure that one out – and no real definitive answers.
The webrestaurantstore.com website, which carries what appears to be the entire line of Homer Laughlin by Steelite dinnerware sets. On that website, the main page of the Homer Laughlin dinnerware sets says:
“Homer Laughlin by Steelite International offers a diverse range of dinnerware, all designed with the needs of commercial chefs and restaurateurs in mind. Their dedication to quality is underlined by the fact that every single one of their products is manufactured in the United States, making them an all-domestic vendor. In the past century, Homer Laughlin by Steelite International china has become well known in the foodservice and retail industries for their quality products.”
However, these online retailers are frequently not updated and not accurate, I understand.
According to a news story from the heraldstaronline.com, the Wells family sold off its food service line in March 2020 because:
“This difficult decision was made after long and careful deliberation by our leadership team. Our food service division had not been profitable for some time, and the situation was no longer sustainable. We made the decision to help protect our company for the next generation of owners, employees and customers”
Steelite International’s main china factory is a 500,000 sq ft facility in Stoke-on-Trent, UK. They have a website that gives a photographic tour of the factory where it states proudly that their dinnerware is “100% Made in Britain”.
Steelite International is also mainly in the business of high end food service dinnerware, so it seems more likely that they started doing the manufacturing of the Homer Laughlin by Steelite and Hall China by Steelite lines, and that this dinnerware is now Made in Britain.
In-restaurant dining has been severely impacted worldwide by the COVID pandemic, and so I would imagine the sales of restaurant dinnerware has plummeted in the past year.
Anyway, I was so curious about what the truth was that I’ve fired off a bunch of emails about this to the companies involved to see if I could find out more. I’ll post back if I get any answers
Gandalf,
Sorry I missed your reply. All you have to do is call the manufacturer with a product number and they will tell you where it’s manufactured. Look on their website for this. Each item number begins with “HL”.
“ Paulo
Jan 28, 2021 at 8:31 pm
And 70% of GDP is consumerism. Debt fueled.
Is nothing produced anymore….actually created or produced? “
Jan. 29, 2021
OK, Paulo, let’s just look at whether there are companies with the goal of mining, in the U.S., a “green” metal or metals. Further, we’ll say, (for the micro-cap holding mining rights on land which has been drilled, and evaluated) that the answer to the classic question, “Will it make a mine ?” looks likely to be “Yes”’).
“Green metal/metals” (because the Democratic Party is currently in power: they hold the reins of regulation; they are traditionally anti-mining), so that we make the question of permitting as easy as possible for them. Time frame ? Delays in permitting could kill the micro-cap. And so on, not to mention fine-tuning the metallurgy, etc. etc..
Let’s also take quick note of the GameStop phenomenon, and the growing anxiety that this is feeding on Wall Street. Mining is capital-intensive, so finding financing during development and start-up is key to survival, even if you run a tight ship.
Existing companies that have been in production for a long time? Well, they may have to weigh the challenges of additional, and new, U.S. production against the challenges of production in Argentina, Chile….and so on . (Elon Musk was talking about mining in the western U.S., but right now he’s looking like Shanghai Dreaming.)
So, Paulo, we got bright, hardworking guys in the U.S. who still want to go mining. And are working towards that goal. Will we let them ?
You know that answer.
Most would be $$ wiped out by the permitting process. When the govt. does not want to come out and say no, they will continue moving the goal posts until you throw in the towel, or run out of $$. And then the lawsuits and delays.
“since 1946 (when it plunged by 11.6%). ”
One of the best examples ever of how G defined GDP measures “activity”…not progress.
Digging and filling in holes = double GDP growth.
Building single purpose weapons and blowing capital invt sh*t up = double GDP growth.
*Not* blowing high cost capital invts up = 0% GDP growth.
Sitting calmly, figuring out how to make capital goods production more efficient = 0% GDP growth.
Actually *improving* capital goods productive efficiency…*negative* GDP growth.
I think maybe we should spend some time on coming up with a more useful central metric…
Kinda partial to the World Happiness Index.
saw this from US News and World Report:
Canada
#1 in Quality of Life Rankings
No Change in Rank from 2019
US was at #15
Paulo:
That is because Canada remains frozen!
That’s because you have the Worlds two best sports, Hockey and Box Lacrosse.
“Canada” – Unfortunately, just so frigging cold except in a tiny handful of extremely expensive places.
And metro housing prices that have had a sustained nutso-ness, that even the US can’t touch.
It’s from exchange. We get useless coins in our change, you guys must have got the good ones. Over a half century of this dumping has transferred our entire wealth. And then Canadians use it to buy up land here. We’re being nickle and dimed by the loyalist crowd. Ban their beer! It’s a bacon war!!
Paulo,
with all due respect… this ranking does not seem very objective
Russia above Bulgaria
Russia above Slovakia
Russia 34 Estonia 45
India 30
Luxembourg 13
give me a break :)
Someone forgot to mention the frozen squirrels resulting from the over night temperatures, in the Canadian summers. lol.
However, if we’re into satire/irony/lazy comic comments, then real reason Canadian is #1, is, we were smart enough to legalize marijuana, and the survey results were influenced accordingly, lol
An example of the GDP problem: a few years ago, not many, the UK narrowly missed a predicted recession: 2 quarters of negative GDP. But it was a cold winter and higher fuel bills were just enough to push GDP positive.
Obviously it would have been better for households NOT to spend extra money on heat. So it would have been better for the real economy to have had lower GDP.
This example enables us to tune the ‘broken window’ theory of economic activity, i.e., breaking windows is good in that creates jobs and raises GDP. But you don’t have to break them, you just leave them open in winter.
As a measure of economic health, GDP should be scrapped.
Also getting people to buy a new car on expensive credit – pushes GDP up
Increasing population – pushes GDP up
Neither necessarily confers long term benefits to the economy
Making and advertising pesticides that cause cancer and then the pesticide victim borrowing on a credit card and paying interest to treat the cancer, all raise GDP. What value is that to the world?
What we observed in a trip to Costco yesterday was lots of people stocking up on household goods like dishwasher tabs, batteries, soap, packaged food, pills, still only one toilet paper, as though they were preparing for what happened last February/March.
Without this wise preparation, spending on goods would be plummeting.
Imagine a large earthquake. Mr. Jones has 100 lbs of rice, enough tuna for a year, batteries, emergency lights, sardines, water, you name it. His neighbor Ms. Alpert depends on Safeway delivering groceries as she needs them. Power is out for weeks, stores closed. Guess who loses weight fast?
In my neighborhood we would pool resources and feed everybody, just like we always have. Rural people have always had to depend on each other for survival, even the ones we don’t like very much.
What’s wrong with Mr Jones’ and Ms Alpert’s neighborhood?
Perfect timing for the aliens to show up… Then we can blame that on the opposing party as well.
There is nothing weird about the economy. This is what a printing press economy looks like!
P.S. Waiting for someone to move into Wolfe’s handyman wreck!
If it was there when I started building my off grid home, I could and would have made use of it.
Nobody is going out and nobody is spending. Our Xmas budget was larger than usual because we didn’t go out for birthdays, anniversary, or Xmas dinner. While we spent more than the previous year, we were careful not to be wasteful. Mostly, gifted items that were needed.
Plan not to be buying much this year as well. Planning low buy year, with buying only things we need to replace, or really need. Might buy some furniture if the price is right, but willing to wait another year or even two, if I have to.
We are trying hard to only buy American made goods during the pandemic. Stereo gear, furniture, knives vintage cookware ( can never have too much griswold and Corning ware) , bourbon ,craft beer and vinyl albums.
“Vinyl albums” – my grand kids say “what’s that?” Next question, “how do you play them?”
I had to teach my adult son how to play a record on a turntable. One day he wants to learn how to use a rotary phone.
Now see what the grandkids can do with an 8-track tape.
Petunia,
People are still spending, though, if enough B&M stores go out of business, I do think that it’s a factor that will cause people to spend less in the future. Seeing less stores and entering less stores could cause psychological effects as well, that could even effect spending online. Stores (both B&M and online) could become a smaller part of the average persons daily thought process.
The power shoppers do buy online, but for the really expensive splurges they travel to Dubai and other ME locations. Fifth Ave, Rodeo Drive and Worth Ave no longer compete as luxury hot spots.
And the rest of us have to be happy with Target and company. Doesn’t feel like we live in a rich country anymore.
They go to Singapore to shop also. I was there for a convention two years ago and stumbled in to the giant mall next to the hotel I was staying at. Bigger than most large american shopping malls and the most downscale shop in the whole place was a Rolex Store. Every luxury swiss watch maker has its own boutique and the Gucci store was the size of a Macy’s anchor store in the USA. The downside was that a draft craft beer was $18.00.
gotta agree with cb on this one Pet:
sure, as a ”war baby”, one name for the generation BEFORE these young boomer folks, and comparing today with my younger years, this really does feel very rich for all ages in comparison.
we were definitely not at the bottom of socio-economic situation in the 1940-70 era, but equally not anywhere near the top of that heap either, and sometimes mom just had to use the charge accounts for us to eat, and sometimes those accounts were not paid for many months because dad had no work,,, but they always paid them all off eventually
somewhat similar for many folks with today’s credit cards, eh?
meanwhile, always working since first paying job selling the afternoon paper on a street corner, darting into the lanes to deliver to the drivers who looked and nodded, etc., until finally retired mid of ’19, and enjoying the rich life on the SS income only,
because no debts, no mortgage, very simple lifestyle, and a spouse who is even better at shopping the thrift stores, squeezing the pennies, etc
really and truly folks, beyond the clear negative results of receiving random violence, it is all about choices,,, with a clear demonstration that each and every choice made also limits future choices
to think and choose otherwise, (other than to do your best to put the best available food and water into your body for example, etc., etc.,) is to give up your personal autonomy, and to choose otherwise also exacerbates and increases the rate of increase of your loss of autonomy and freedoms,
including, perhaps with equal importance, is walking away from toxic relationships, be they employment or any other kind, without regard to financial or economic results, only with total regard for the results that harm your body, mind, and, eventually your soul ( or whatever is the current politically correct name for the concept of soul.)
old saying that applies, ”you always have choices, even at the point of a gun”
Petunia,
The opposite for me.
I have moved to Thailand. I concluded Europe is finished economically.
I am building a workshop/warehouse and buying a 4×4 pickup, tractor, Kubota digger and various equipment on the basis of:
1) being prepare to grow my own food for self sufficiency
2) worry about leaving cash in a bank
3) buy everything now in case of inflation and later not being able to afford them.
Instead of buying consumer geegaws and shiny trinkets courtesy of Amazon et. al. in coming year I will be buying food supplies, seeds, tools, and things that will shelter and warm me.
I know what is coming down the pike.
And just think what the graph for U.S. GDP is going to look like in 2021 when the Monetary Feds and the Fiscal Feds cannot keep printing like 2020’s $3 to $5 Trillion in free money via a multitude of devious ways. You can almost hear the tremors building in the U.S. banking system as American landlords of all stripes become more and more delinquent on their mortgages as rent & mortgage forbearance is pushed now to March 31st. Debt obligations must be serviced as written for the financial system to work. Would anyone in their right mind lend to an American with this precedent being set for landlords.
No matter what not-so-Magic Wands are being waved into the air by Biden and Powell for the media’s and American serfs’ benefits, there is a tidal wave of systemic defaults in the $100’s of Billions building into a Debt Collapse scenario (could be $Trillions, but don’t want anyone to panic!). The Fed and Government cannot make everyone whole in this Pandemic America Ponzi Scheme.
Can’t wait for revisions to 2020 GDP. It is in the current Administration’s best interest to paint the final year of the Trump Presidency in the darkest light possible, and show that they inherited a giant mess as Obama blamed Bush, Jr. for in 2008. History does rhyme at least.
“tidal wave of systemic defaults”
A financial crisis is a break in the chain of payments. There are now so many weak links that the crisis could start anywhere.
And a trillion dollar a year trade deficit. Damn. That is some scary stuff. Wonder how Jerome is sleeping these days…
A certain hat must be selling well in China right now ;)
The focus of China’s President: the economy and other important stuff.
The focus of America’s President: GME stock.
ROFL.
Xi’s main motivation is to remain diictator for life. In order to accomplish that, he has done many things such as destroying china’s international finance center (Hong Kong) and trying to exploiit a pandemic that the CCP’S incompettence caused and will continue to do horrible destructive things to hold onto power at great cost to China.
But I guess some will live in some twisted fantasy land and not understand reality.
;)
One government brought out hundreds of millions of people out of poverty (the creation of a middle class). The other is doing the opposite (the destruction of the middle class).
Talking about living in fantasy land ;)
ROFL.
There is no lower and middle class in the UK anymore.
They are the same.
Lower class dependent on state benefits.
Middle classes wages down and dependent on debt and paying that debt.
So financially equally as badly off.
Middle management jobs are disappearing fast as replaced by automation and software and electronic payment.
Those made redundant, if able to find a new job, are going to be on minimum wage or a quid (dollar) above minimum wage.
MonkeyBusiness,
Pretty sure foreign countries setting up factories in the Chinese mainland was what brought China out of poverty, not the CCP. The CCP has entirely destroyed china’s economy before (“”great leeap forward””) and it’s on the path to doing that again. As it stands the middle class in China is shrinking, but, the CCP isn’t gonna let any negative press leak out. That’s why tens of millions of cell phones lines were mysteriously were ended last year in a very short time period.
“China middle class still growing”
– MonkeyBusiness (Jan 28, 2021)
Rofl ;)
Well, at a minimum, the world has learned a lesson about at least moderately diversifying away from Chinese sole sourcing…even if it costs a bit more.
Everyone will think of it as insurance.
China has accomplished a lot in 25 years…but a lot of it was accomplished through an abusive gaming of the international trade system that deprived the past generation of China’s workers of the full fruit of their efforts (thru currency and monetary manipulation) and causing massive dislocations in economies around the world.
The US for its part, suffered significantly from its long rotted political and business leadsh*t classes.
Over time, things will tend to even out (if the bullsh*t from both gvts continues to stop being bought).
Thomas Roberts, what a load of bollocks. You can bring factories go anywhere. Does not mean that it would work. The Chinese made it work at a huge scale.
Tim Cook : “China’s no 1 quality is people”. Now of course he’ll say that, but there’s truth to that as well.
The most successful consumer app of the last 10 years is also Chinese. Heard about TikTok? Mark Zuckerberg admitted himself that he should have copied Chinese apps much earlier.
The US now just leads the world only in trolling (Twitter, Facebook) at scale. And wars.
But yeah keep living in your delusion. ROFL.
I find this all so surreal. To say that “real” GDP is rising or only fallen by a fraction or in English words that is productivity is rising or only fallen by a little bit, is absurd. There is what some 30 Million on unemployment, a real decline in the workforce participation by how many millions, and people only “employed” because the government pays them to stay at home and claim they are “working”. What 20-30 percent of workers are gone, and half the others are claiming they are as productive being on a computer all day in their home as being in their office?. Even a cursory look at the numbers, not to mention the empty offices, shops and restaurants, tells you we are in a depression. Just so tired of this fake world, Unemployment 6%, inflation, 1.5%, manufacturing index up, retail investment up, GDP rebound, V-shaped recovery……of course maybe I live on another planet and have gotten lost in the wrong solar system…..this is Earth right?
Augusto
With everything closed, I guess you could say we are entering the greatest depression the world has ever seen but they won’t say that as it’s not “West Coast” thinking. Funny enough it may turn out to be the most expensive depression the world has ever seen, just with vaccine costs alone, never mind that few businesses will be paying tax….. Remember, madness always appears to be wisdom, until it don’t…
Want a good paying job not dependent on the 1% ? Get in the trades. Lots of retiring happening and much work going undone. Soon you will be able to charge the techies and other propeller heads a $100 bucks an hour to replace the flapper in their toilets. If it’s not digital, most of them can’t do it.
endeavor, if it is an Eco-Flapper, digital version, that sends you a text message when it is done, then maybe techies can handle it. But they will have to get their hands wet, oh my, oh my.
last time friend in Berkeley called a plumber, it was $170 to show up and the first 20 minutes… after that $140 per hour — NON union shop…
Your advice is exactly correct e!!
endeavor,
The trades are important, but, there is only so much trade work to go around. If the number of trade workers goes up by say 50% their pay will plummet. The main issue with choosing a trade is that it can takes years to become certified and those skills, especially a plumber, usually don’t transfer to anything else. Even if the number of tradesmen stayed consistent, less new construction work and small design changes here and there, could lead to less work and plummet pay.
If tradesmen wages remained high, the 1% would probably come up with a scheme involving cheaper immigrants or something like that to bring down wages. Average everyday people might also use uncertified tradesmen for small fixes, which, could also plummet pay.
Tradesmen is a good career path, but, like most others if too many choose it or the work available shrinks, it wont be as great. It’s also possible that in the near future that states could introduce lower level tradesmen programs that allow them to do easier work, but, not say plan out a new construction.
Escaping the rule of the 1% is going to require systematic changes to america. Finding different career paths will temporarily help some people, but, it will only help temporarily. The ways things are headed, big changes are going to be forced to happen, let’s hope they are positive. Otherwise, everybody, including tradesmen, will be in for upto several decades of sh*t. Like always, in places like America, all the nonsense could be ended tomorrow, but, it depends on enough people standing up.
Also, the techies are no more inept at basic stuff like toilet repair than the average person.
>If tradesmen wages remained high, the 1% would probably come up with a scheme involving cheaper immigrants or something like that to bring down wages.
There are already pushes for doing this and on the ground it is already happening in places in California. A bunch of non licenced people (illegal immigrants or unlicensed juniors usually) do the actual work, and the licensed electrician / whatever that owns the company, signs off on the jobs with their own license. Then one electrician can be “doing” 10 or 15 jobs at once..etc. and then profit! No way an honest contractor going up against this can win any bids..
TR
You make many good points about the future of the trades, Demographics are also in play and an aging population, a growing population (high immigration) and a mindset that work should be in front of a computer should keep the trades hopping. WE used to call it supply and demand or something like that,
endeavor,
It’s worth noting that, because, I think most office jobs will be automated away. A greater percentage of jobs in future will end up being blue collar. I’m trying to conceptualize what most jobs will be if a ton are automated away. Not sure yet, but, I do think a smaller percentage will be in front of a computer screen.
I do think that the number of hours people work in a year will have to reduced so that the remaining jobs can be shared between more people. I’m guessing that in such a scenario, the lower level certifications will be required. In a well rounded economy, I imagine tradesmen will remain middle class to upper middle class, but, supply and demand is hard to predict. The lack of transferable skills is the main reason I wouldn’t immediately recommend trades that require years of training. Electricians are probably the easiest to recommend, but, some others like plumbers, if the demand drop. You really are starting back at zero.
I am a techie and do a lot of household maintenance chores on my own
My techie friends do the same .
How is it possible ? It is because of technological aka YouTube
One can literally make a small house alone by just learning from internet
For complicated jobs I call the experts
For small ones internet is enough
I don’t know…there are a *ton* of youtube DIY videos on everything under the sun.
So maybe not toilet flappers…
But…I do agree that (at least for a while) there is real demand for homebuilding (look at cost/rent trends for last decade…vs. salary trends).
Of course, America’s crappy leadership can short circuit the economy’s self correcting mechanisms by illegally bringing in millions and millions and millions of foreign laborers.
Again.
Rubber toilet flappers stiffen from chlorine in water and a build up of slime causes them to not seat and leak.
Remove the flapper from its hooks, scrub slime off, soak round part in paper towel saturated with rubbing alcohol, reinstall. It’ll last another year. Same thing with windshield wiper rubber. Damn, I just reduced GDP by a couple hundred million.
My toilet flapper wore out recently, and I called the apartment management company to send a guy up to fix it. (You should have seen the look on his face!) We laughed and had a good chat. The reason I decided to act like an idiot “professional” was that they had raised my rent during the pandemic, even while some of my neighbors are on moratorium.
GDP seems to be largely just a reflection of amount of consumer and gubvarmint debt and spending— not capital investment and net savings, which are what really count in long run for prosperity.
IMO GDP today is a worthless yardstick to measure US national wealth. Any way you slice and dice it US economy is insolvent, weak, and sick. It is living off fumes from past economic greatness.
I told my wife today we are going to have a “low buy year” (thanks Petunia). She said what’s that? I said no more Amazon stuff!
We will do our part for the good of the country.
I’ll post how this is going about mid year.
If your wife is like my wife, she will just up her “services” spending!
You and I have already lost!
Oh yes, the “services”…..thanks for the reminder! Funny, those type of businesses don’t ever fail around here!
(my Amazon win could be BIG if she lays off the laptop)
That comment brought a smile to my face.
Let’s face it, without women and their unending desires for material goodies and trinkets, men would still be living in trees and loving every minute of it.
Of course, there would today have to be big a** pickups parked under their trees.
Anthony A how did you get to be the boss in your house? :-)
I guess I talk a good game…..I’ll check in mid year and let everyone know how it’s going.
“And so this puts the the economy of 2020 behind us” . Hate to say it but the economy of 2020 was waiting on us before the ball dropped in Times Square to the faux celebrants pretending to be awaiting the new year 2021.
“many signs of a weakening U.S. economy by”
The Fed is plugged in to and monitoring more economic metrics than anybody can conceive of (although employment to Population 25 to 54 is probably the only one they really need…) and they have been running full ZIRP for more or less 20 yrs.
Systemic failure has been stalking the US for a *long* time…US leadersh*t has just been papering over it.
I can get used to this lockdown life. My assets are worth more, accounts are up, income is fine, costs are WAY down (no restaurants or traveling). Gourmet food is actually very cheap if you cook it yourself.
Amazon/grocery/wine deliveries all nicely socially distanced. All that’s left is enjoy nature, work on the garden, walk the dog, swim in the pool.
I expect US Fed and Biden admin pumping trillions into the global economy will only exacerbate the trend line. Oh yea…. not every economy is in free-fall, some emerging economies are indeed growing, as is China.
I suspect, though, by looking at the current price trajectory of basic agricultural commodities, that the ongoing cheapness of that food isn’t necessarily baked into the cake under such circumstances.
So consumer spending went from 11 trillion to 13 trillion from 2013 to 2018, about 3.6% per year, in consistent 2012 dollars. 70% of GDP is consumer spending. So, shouldn’t inflation be at least 2.5% per year over that time, in an efficient market? Deflationary forces must be coming in from somewhere, or the spending is leaving the country in offshore bank accounts…idk…
Consumer spending doesn’t automatically translate to higher prices if production of goods keeps pace.
True, although a lot of spending is on services. It gives me a headache to try and understand what will happen going forward with more automation.
Consumer Inflation Expectation hit the wire just now as 3.0%.
Lincoln 1858: “You can fool all the people some of the time and some of the people all the time, but you cannot fool all the people all the time.”
Lincoln lacked perspective. He could not conceive that in today’s world one only needs to fool some of the people all of the time in order to get your preferred politicians/policies enacted if you have the cash. Voter suppression helps.
Mondelez snack company CEO just stated on Bloomberg TV that their snack input costs are increasing 2-3%.
So Oreos, Ritz, Triscuts, etc are at twice the inflation as the govt wants you to believe. Hard to fool people’s stomachs and wallets at the same time.
So are they passing on their costs to hungry snackers through price inflation or subtly through shrinkflation?
Likely both.
Time to learn to make homemade crackers. No doubt healthier than all that psuedo-‘food’ crammed within the grocery aisles.
The price of Oreos is something that could finally make Americans wake up to the economic crisis we are facing.
Kinda co-related; seems like GDP will remain somewhat weak, or at least not robust and inline with trend of past decade — however, seems like house prices in key (realtime) demographic areas will continue upward climb, kinda like Gamestop:
“As a result of the 2020 virus crisis, housing’s share of GDP remains elevated. In the second quarter of 2020, due to broader economic weakness, the housing share of GDP was more than 18%. As the rest of the economy recovered during the third quarter, the housing share declined somewhat, coming in at 17.5% of GDP. For the fourth quarter, housing’s share of GDP increased to 17.7% as single-family construction accelerate”
Is it the virus or the Gov’t reaction to the virus that is killing the economy?
Wait until the President with the highest number of vote ever, implements his instructions from the cabal that now drives policy.
The yoke that is being fashioned by the “back room” and to be placed onto the economy is a ponderous one indeed.
What happened to the trade deficit in the mid-90s? We were treading water up until then and totally gave up. Need to return to a more industrialized economy. Can’t keep this up forever. Eventually someone has to sell something concrete other than our real estate to foreign nations. When they all decide to move in it will be too late. Probably already is.
The real problem set in during the 1970’s when the school of crap-thought convinced everyone that the role of government was not to set standards and regulate behavior, but to go on a track of incentivizing and pretend-penalizing. Since then it’s all been an argument over whether the national anthem should sound more like Tom T. Hall or Pete Seeger. They should have paid more attention to Black Sabbath’s Iron Man. Then we might have seen the need to build for the future instead of just carving up old assets and revaluing them to insanity. [If you don’t build it, he will come.] Instead we wallow in an overly expensive celebration of the age of disposable electro-plasticrap to be re-distributed on a promise to make payments to infinity.
Entropy at work, as I see it, Russell.
The US was initially able to support its huge growth in energy consuming activity through its own easily accessed sources of oil. After they peaked, debt started to grow relentlessly (household debt mostly initially, starting to creep up from around the mid fifties or so??) to offset the declining productivity of new oil sources, and also population growth needed to be offset with debt growth (i.e. transfer of energy from other places) to maintain appearances of continued higher levels of prosperity.
Basically we can see it start to impose itself gradually with the decline of the ability of most wage earners to support a whole family in comfort on a single income. The US was just the first country to harness the power of oil on a vast scale to benefit the lifestyle of people more broadly, but others have since joined the party.
The trend now is of decline globally, and of more strife over available productive resources, and I believe the reason we see more dissatisfaction surface around the world, independently of the political leanings of respective governments, is that it’s becoming increasingly noticeable that life is getting far more difficult and insecure for most people.
What happened was the Clintons normalized trade with China, signed NAFTA, and Walmart took down all their in-store “Made In America” banners. Walmart then pressured all their suppliers to move to Mexico and China.
Not the whole story of course but the role of the Clintons and Walmart in wrecking the US economy should not be forgotten.
Instead of focusing on the negative, time to make a list of all the wonderful things that have happened as a result of this pandemic.
These things below kept my sanity.
1. Started cooking at home, eating more healthy foods.
2. Worked on my wildlife refuge site (birds, squirrals, rabbits) in my backyard.
3. Starting reading a lot more books on economics and WWI (becoming an expert on the subject).
4. Simplified household accounting.
5. Upgraded all my computers and home networks.
6. Purged all the junk in my garage, and attic. Donated most of it.
7. Reading Wolf Street blog site comments.
8. Bought a Wolf Street Mug, enjoying a bud light with every evening meal.
Cheers!!!
Lot of bitter and sad dead ends in these comments, along with some Titanic deck chair position arguments.
Green New Industry on the scale of WW2 is ONLY rational move.
But there are million reasons why it isn’t “practical” or “economically feasible”, I’m sure.
WW2 wasn’t either, but they made it become so, and good thing they did. Green New Industry won’t even cost lives, and Capex won’t be literally blown to hell.
However, WW2 level tax schedules will be required, along with extra high “estate tax” considering present situation….but it’s only money…not real….ya know?
Hey, NBay, as anticipated by yourself, here comes a voice preaching its infeasibility. My stance is that trying to do that stuff will just make our future worse than if we simply accept that we must become poorer and fewer over time. I do suspect that evolution does not bring about the capability to come to such an acceptance in a species, however…
I would crudely denote WWI as the peak of coal and WWII as the announcement of the power of oil. Without those incredible energy resources the ability to mobilise resources and effort and destruction on such a scale across the globe would not have been there.
Even the stuff we call renewable energy depends on us deploying a hugely energy consuming set of supply chains for extracting many different non renewable minerals on a massive scale from ever less productive sources, moving the ores around, refining them, shipping the refined products around to parts manufacturers, shipping parts to component manufacturers, shipping components to assembly locations around the world, and building the resource demanding infrastructure to deploy the finished product and distribute the energy converted. And in addition supporting the energy and resource hungry physical, educational and social infrastructure needed to maintain the complex societies and sets of knowledge to produce and maintain all of that.
And then doing it again and again and again on ever greater scale as entropy brings about inevitable decay on existing structures. Not to speak of the vast amount of pollution and waste products and environmental and habitat destruction we generate along the way as we delve ever further and deeper in order to desperately try to go ever bigger…
In essence, the net energy benefit of units converted is both lower and decreasing over time compared to what we accessed in the past. It is simply not comparable to a highly dense, versatile and easily transported energy resource we mostly use now, where nearly all the work to create it was done over aeons in the past, and just seems free to us now.
Uhmm, and in addition I’ll mention in passing the enormous and exponentially growing depletion of soils, aquifers, marine food sources, biodiversity, habitats etc. that our currently developing footprint on the planet demands, regardless of whether we’re heating our environment with fossil fuels or overleveraging our economies and grinding down available resources with so-called renewables.
Look, nobody can beat the Malthusian argument. I always admitted that to ‘Unamused”.
But why not try, and see if the other things like ZPG, etc, can be sorted out from a NEW perspective, or “zeitgeist”, especially since we are still more or less the world leader?
Poorer just means getting by with less “stuff”, and of course that is a big part of the Green New Industry effort.
Less stuff, more sports, and hands on building, is the way I always played it, and the Medical-Industrial complex hasn’t made jack off of me, other than traumatic injury, and insurance that pays the glutton’s tabs there.
And I have the right to bang my head against any wall I want.
And raising insects for extra proteins instead of mammals is A-ok by me, it’s where our closest ancestors picked up some of theirs, raw. Of course all grains grown for feed/(cough, ethanol) become “land banks, like “fossil fuel” banks, used only as needed.
Hell, we most all love lobster, shrimp, crab, etc, anyway. Grind ’em up, add a spice or two, and you have a protein shake. Put horses, cows, sheep, etc in zoo’s or wildlife refuges for kids to pet, and go ,”ewww, people used to eat these?”
I could go on, but you get the gist, Green New Industry is BIG, and scientists can veto all management “visions”.
World War Two was fought to defeat an enemy that was threatening natural resources on one side and more importantly, demonstrating that a country did not need a central bank and bankers to flourish economically. My late father didn’t lose an arm and his health at Anzio to later pay 29% to legalized and institutionalized loan sharks and be dispossessed of all he worked for.
Had G.I.s known what would happen to America, most would have refused to fight.
Excellent point. They all came straight out of FDR WORLD to fight for it.
so true Clarendon. My late father always said ” stay away from the bankers”. He told me that when he was hired as a salesman for Hallmark cards in 1938 J. C. Hall told him he would never take Hallmark public. ” not going to let those boys on Wall Street telling me how to run my business”