Giving Thanks

On the eve of Thanksgiving we were told that during the month of October US personal income increased 0.5 percent and the number of new unemployment claims had fallen to the lowest level since November 1969. Total unemployment is estimated at well under five percent (about 7.4 million people) with over 10 million jobs available.

Productivity is obviously a key related factor and recent results are not encouraging, but I am very tentative about drawing conclusions while being in the middle of the current great churn.

In October Americans spent 1.3 percent more than in September. During the third quarter of 2021 the annual rate of spending was $5.5 trillion on goods and $10.5 trillion on services. This is a fast recovery from the doldrums of 2020’s second quarter ($4.35 trillion on goods and only $8.64 trillion on services). Pandemic proportions continue to lean towards goods compared to services. For example, during 2019 Americans spent about $4.5 trillion on goods and almost $10 trillion on services. That 2.2-to-1.0 ratio of services to goods has characterized much of the 21st Century. Our current ratio is 1.9 to 1.0.

Since Spring 2021 Americans have mostly been spending what we did not spend on services during 2020 (plus those US Treasury checks most of us got). In September the Personal Saving Rate was 7.3 percent, well within the typical range since 2010 (down dramatically from 26.6 percent in March 2021 or over 33 percent in April 2020).

Our increased demand for goods — especially durable goods for which purchases are up nearly one-quarter since 2019 — has pushed prices higher. Since April spending on durable goods had been softening, but bounced again in October. Some suggest this increase reflects improved availability as some durable goods supply chains have recently enhanced capacity and flow.

Supply chains still strain to deliver substantially more than ever before. But in the last three weeks there have been early signs of progress at the ports. Despite extraordinary demand, business inventories have improved. Walmart and Target each claim they have plenty of stock-on-hand to answer Christmas demand.

There are still not enough trucks or truckers to fulfill current volumes and, especially, velocity of demand (more). But this intensity of demand will not long persist, so there should be some reduction in freight market friction by March/April. For demographic and structural reasons (many pre-existing the pandemic) truckload capacity utilization is likely to remain high, but more often very hot rather than explosive.

As previously outlined, the United States is struggling with the burdens of abundance. These are very real problems with treacherous personal and global implications. And… there are millions of Americans (and others) who would be delighted to trade their problems for these problems. I pause to give thanks for the burdens of abundance.


Black Friday Late Afternoon Postscript

In pre-dawn post-Thanksgiving as I tried to finish what’s above, I was aware that European headlines and the US futures market were signaling considerable concern regarding a coronavirus variant known as B.1.1.529 Omicron.

Earlier this week I was sent the cut-and-paste of a credible twitter comment that described a, “very small cluster of variant associated with Southern Africa with very long branch length and really awful Spike mutation profile.”

While that sounds like a pull quote from the first page of a science fiction novel, our last several years have been so cinematic that I now have considerable rhetorical immunity. I checked NextStrain and decided to watch but not worry.

I am still watching.

My synthesis above is an effort to discern future possibilities based on retrospective data. Even with the best data, there are no guarantees. You know that. You would not, should not, make major financial trades on the basis of my eight paragraphs. So far, the Omicron findings strike me as a blip that has revealed more about investor anxiety — and prospective panic — than about the variant itself. [And as a result, for better and worse, gasoline prices have fallen over 12 percent.]

We should not be surprised by another variant. But investor (and some political) reaction suggests many are surprised. This and other viruses will continue to mutate. Future outbreaks — especially where vaccination is anemic (such as South Africa or West Virginia) — will hurt and kill. The more transmission, the more mutation, the more likely a variant will emerge that effectively resists current vaccines. This is not new. This is our shared experience — reinforced by about three-thousand years of written history (more).

We don’t yet know what Omicron will deliver. But we do know that modest behavioral adjustments can significantly reduce our shared risk. We now have much better diagnostic and therapeutic resources than one year ago. We have a sophisticated arsenal of several vaccines. (I am still mystified by the paucity of at-home testing in the United States).

Rather than descend (ascend?) into a meditation on Aristotelian prudence, I will point-out that the stock market crash that began on 02/20/2020 was a scream that distorted a wide range of business decisions that are still afflicting us today. Many of these choices were stupidly self-subverting, especially in terms of decisions that unnecessarily disrupted fundamental flows of demand and supply.

Today’s scream — Bloomberg headlined “surging fear” — ought not do the same. We have (potentially) learned a great deal since February 2020. We should not be surprised. We need not make the same mistakes again. While watching and listening for what may be ahead is always appropriate, this remains a better moment to pause and give thanks than to rush lemming-like over a self-created cliff.