By Lambert Strether of Corrente.
Since the announcement was for 2:00:
“Live Now: Trump Announces Decision on Iran Nuclear Accord” [Bloomberg]. A live blog. As of 2:08: “Scene is still reporters’ chatter and George Washington’s mug.”
2:13 Here we go…
“Top trade officials from the U.S., Mexico and Canada enter their second day of high-level talks at the Winder Building today, as they face heightened pressure to strike an agreement in principle in the next couple of weeks. But pressure or no pressure, Mexico wants to reach a fully renegotiated NAFTA instead of a preliminary deal on a few issues, Mexican Economy Minister Ildefonso Guajardo said Monday” [Politico]. “Guajardo’s push for a complete rewrite comes amid intense deadline pressure. Time is running out for any renegotiated deal to make it through Congress this year, on one hand, and on the other, Mexico and Canada will soon be forced to pay tariffs on steel and aluminum if they do not reach some sort of agreement with the U.S. by June 1.”
“U.S. and China each say the other is wrecking the WTO” [Reuters]. “China and the United States blamed each other on Tuesday for risking the destruction of the World Trade Organization, with Beijing’s ambassador decrying U.S. hostage-taking and Washington’s envoy calling China’s claims ‘Alice in Wonderland.’ U.S.-China trade talks will resume next week after failing to reach agreement last week, the White House said on Monday.”
“American agriculture exporters can already see the deterioration of U.S.-China trade relations in their order books. Chinese importers have canceled purchases of corn and cut orders for pork while dramatically reducing soybean purchases in the past month and scaling back orders for sorghum, a grain used in animal feed. …[T[he chill in agriculture trade comes ahead of threatened tariffs from Beijing, and it is sending jitters through a U.S. Farm Belt that has been sending trade missions to China for years to cultivate the market” [Wall Street Journal].
“Understanding the Decline of U.S. Manufacturing Employment” (PDF) [Susan Houseman, Upjohn Institute for Employment Research]. This looks important:
The apparently robust growth in manufacturing inflation-adjusted (real) output and productivity are driven by a relatively small sector—computers and electronic products, which account for only about 13 percent of value-added in manufacturing. Without the computer and electronic products industry (hereafter referred to simply as “the computer industry”), real GDP growth in manufacturing was less than half that of the private sector average from 1979 to 2000, and only 12 percent in the 2000s. And without the computer industry, manufacturing labor productivity generally has been no higher or only somewhat higher than that of the private sector.
The computer industry, in turn, is an outlier and statistical anomaly. Its extraordinary output and productivity growth reflect the way statistical agencies account for improvements in selected products produced in this industry, in particular computers and semiconductors. Rapid productivity growth in this industry—and by extension the above-average productivity growth in the manufacturing sector—has little to do with automation of the production process. Nor is extraordinary real output and productivity growth an indicator of the competitiveness of domestic manufacturing in the computer industry; rather, the locus of production of the industry’s core products has shifted to Asia. Manufacturing’s declining employment share has mirrored its declining share of output (nominal GDP) and to a large degree reflects the fact that, in most manufacturing industries, there has been relatively little growth in the amount of goods made in American factories for the past 40 years. The recent precipitous decline in manufacturing employment is a distinct phenomenon, and a growing body of research examines whether—and the extent to which— international trade can explain it. Although none of the studies comprehensively examines the various mechanisms by which trade and the broader forces of globalization may impact employment, collectively they find that trade has played a significant role in the collapse of U.S. manufacturing employment in the 2000s. In contrast, research to date finds no support for the hypothesis that automation was responsible.
“Stormy Daniels is crowding out Democrats’ 2018 message” [Matt Yglesias, Vox]. “Democratic Party leaders, for exactly this reason, aren’t talking about Daniels; they’re talking about issues they think can cut into Trump’s base and/or improve their own image among voters. But they’re having a hard time breaking through.” Poor Democrats, helpless to get their message out! I think Yglesias is carrying water rather too visibly for Democrats here. In fact, Democrats — with the notable exception of their Outreach Chair, Senator Sanders, who Yglesias oddly, or not, does not mention — have been yammering about Russia! Russia! Russia! and Stormy! Stormy! Stormy! for two solid years, and if they wanted to change that narrative, they could have pulled strings with their friends in the press corp at any time, in ways that the Podesta email trove made all too clear. I would urge: (1) the Democrat leaders have belatedly figured out that their tactics over the last two years have failed to reach beyond their own echo chamber, and that (2) although they know wish to pivot, it will be impossible for them to do so, for the simple reason that if you care about issues, that’s what you talk about about, as the Democrat’s Outreach Chair, Senator Sanders — who again Yglesias oddly, or not, does not mention — has been doing for years, which is why he has credibility with the voters in a way that Schumer, Pelosi, Booker, Harris, and all the rest of ’em do not and cannot.
“What’s at Stake in the Midterms” [Charles Cook, Cook Political Report]. “What happens now? A micro-political, race-by-race House analysis suggests that Democrats are headed for pretty substantial gains, perhaps in the 30-seat neighborhood (30 seats would be seven more seats than they need to get to 218). The limitation is that the micro approach works well in normal “all politics is local” elections, but it chronically understates party gains and losses in wave years—when the political sum is greater than the parts. It dramatically understated Republican gains in 1994 and Democratic gains in 2006, for example; when dominos start tumbling in wave elections, they have a cascading effect. A more macro-political analysis, factoring in national and statewide polling and what appears to be a wave, suggests something more like a 40-seat Democratic pickup. Obviously six months is a long time and much can and will happen, but the trajectory seems to be in a single direction and consistent with the party holding the White House losing seats in 35 out of 38 (92 percent) midterm elections since the end of the Civil War. In midterms with a president having job-approval ratings in the mid-40s or less, losses are typically in the 40-seat range. It is premature to say that the GOP majority in the House is toast, but is it in very serious danger? Absolutely… What are the policy implications of these odds? The best-case scenario for Democrats in the House, a gain of 40 or 50 seats, would give them roughly the advantage that Republicans have had for the past two years, when they could pass some things, but even something that unified the majority as much as repealing and replacing Obamacare only passed on the third attempt. The best-case scenario for Republicans would probably be losing 10 to 20 seats, holding onto their majority by their fingernails. In the Senate, a best-case scenario for Democrats might be a net gain of three seats, giving them a scant 52-48 seat majority, while a best-case scenario for Republicans might end up with the GOP gaining three or four seats, putting them at 54 or 55 seats. Putting all that together, giving the difficulty of getting anything controversial through the Senate (except under budget reconciliation, when a simple majority is sufficient), between filibusters and President Trump’s veto pen, it’s hard to see the next two years being any more productive than the last two.” Awesome! Even if they win, Democrats won’t have to govern!
“When this election cycle began, handicappers repeatedly pointed out that 10 Democratic Senate incumbents from states carried by Donald Trump would be on the ballot in 2018. That count was accurate, and the point behind it obvious — Republicans had a long list of opportunities” [Inside Elections] “But now even the most partisan Republicans are acknowledging that the list of serious targets is shrinking to five or six states. Indiana, Missouri, West Virginia, North Dakota and Florida are certainly in play, but how are the other competitive Senate races holding up?”
WV Senate: “Who is Paula Jean Swearengin?” [Register-Herald]. “[Swearengin] pointed a finger at Manchin, as well as two of the Republican candidates running for the U.S. Senate seat — Evan Jenkins, currently a U.S. representative, and Patrick Morrisey, currently West Virginia Attorney General. ‘They’re funded by Big Pharma and industry. We deserve clean water, clean air, and for sewage to quit running through our creeks. We have the right to the American Dream and a living wage. But none of that will happen when they’re only serving the wealthiest in the country and state. The working class deserves working class representation.’ She says her campaign has been funded solely by individuals. Her campaign account has a balance of roughly $300,000, and the average donation has been $15.”
WV Senate: “Outmatched in Experience and Funds, Swearengin Remains Undeterred in Primary Against Manchin” [West Virginia Public Broadcasting]. “That record puts him at odds with the national Democratic Party. Manchin has voted against a majority of Senate Democrats 29.3 percent of the time in the 115th Congress, according to Propublica’s Represent, a web app that tallies congressional voting records. He ranks first among all senators in voting against his party — with the average Senate Democrat breaking against the majority of the party’s vote 10.1 percent of the time…. ‘He calls himself a West Virginia Democrat, but I’m not sure if he knows what that means,’ said Paula Jean Swearengin, a native of Mullens, West Virginia who identifies as a coal miner’s daughter and coal miner’s granddaughter. ‘The reason to take him on is because he’s not adhering to the platform of the Democratic Party and he’s not serving the working class,’ she said. After asking Manchin in person for help with the economy in southern West Virginia and to tackle environmental issues like water quality, Swearengin says she felt unheard and overlooked. She took her pleas to U.S. Senator Bernie Sanders when the Vermont politician made a stop last spring in McDowell County for a taping of a town hall on MSNBC’s ‘All In with Chris Hayes. ‘The reason that I went to go see Bernie Sanders is because I was begging him for hope. I mean, I’ve begged for this state for years and I admired him because he was the only senator to sit down with me and talk to me like I was a human being,’ Swearengin said.” Hmm. Those town halls…
NFIB Small Business Optimism Index, April 2018: “The highest earnings improvement levels in 45 years helped support small business optimism in April after a sharp decline in the previous month” [Econoday]. “The highest earnings improvement levels in 45 years helped support small business optimism in April after a sharp decline in the previous month. Among the positives was higher inventory satisfaction, with the net percent of owners viewing current stocks as too low rising 2 points to a minus 4 percent. Sales expectations also gained ground, rising 1 point to a net 21 percent, as 59 percent of construction firms and 56 percent of manufacturing firms expected higher sales volumes in the coming months, encouraged by wage growth and solid consumer sentiment. Though labor markets remained strong and owners reported adding a net 0.28 workers per firm on average, the third highest reading since 2006, it was job creation plans that led the declining components, falling 4 points to a historically still strong net 16 percent.” And but: “April 2018 Small Business Optimism: Reaches Highest Level In Survey History” [Econintersect].
JOLTS, March 2018: “There are more than enough job openings… to give everyone who’s looking for a job…. a job. [Econoday]. “Openings in this report, underscored strongly by March, have been on a sharp climb and clearly hint at the risk of overheating in the labor market, that demand for labor is surpassing supply. Though wage pressures have remained limited and have been giving the Federal Reserve breathing space to keep on a gradual path of rate hikes, today’s report does invite questions over capacity stress and wage inflation.” And: “The headline seasonally adjusted view shows significant improvement in job openings. Although the unadjusted data analysis shows rate of growth improved, the year-over-year improvement is in the midrange of improvement seen since the end of the Great Recession. JOLTS non-adjusted job openings remain about average for what was seen in the last 3 years” [Econintersect]. And: “For the first time ever, there’s a job opening for every unemployed worker” [MarketWatch]. “According to the latest data from the Job Openings and Labor Turnover Survey, there were 6.55 job openings in March. In March, there were 6.59 million unemployed, meaning there are 1.01 unemployed workers for every job…. The standard retort to that point, is if the job market is so tight, why aren’t companies aggressively raising wages? The fact is companies are increasing pay, though not at the rate typically associated with a tight labor market. While average hourly pay was just 2.6% in the 12 months ending April, the three-month average of median wage growth in March was a stronger 3.3%, according to Atlanta Fed data.”
Credit: “March 2018 Headline Consumer Credit Growth Rate Little Changed” [Econintersect]. “[There has been] a gentle deceleration of consumer credit (blue line in graph below) over the last year.”
Credit: Handy chart [@SoberLook].
Chart: US credit managers now see deterioration in credit; NACM US Credit Managers Dollar Collections (<50 = deterioration) – pic.twitter.com/5NGB45elqm
— (((The Daily Shot))) (@SoberLook) May 6, 2018
Credit: “US Credit Managers Service Sector Dollar Collections For April Decline Below 50 (Signals Downturn)” [Confounded Interest]. “The NACM US Credit Managers Service Sector Dollar Collections SA declined to 47.30 in April. The index value above 50 represents growth in the economy. It was the biggest decline since November 2008, smack in the middle of The Great Recession. The CMI is based on a survey of about 500 credit managers during the last 10 days of the month with equal representation between manufacturing and service sectors. The survey asks respondents to comment on whether they are seeing improvement, deterioration, or no change for various favorable or unfavorable factors.” Survey says… We’re in the middle of a recession? Now?
Real Estate: “Las Vegas Real Estate in April: Sales Up Slightly YoY, Inventory down 19%” [Calculated Risk]. “This is a key distressed market to follow since Las Vegas saw the largest price decline, following the housing bubble, of any of the Case-Shiller composite 20 cities…. Watch inventory. Last year, inventory declined almost 500 homes from March to April, this year inventory was up slightly from March to April. The inventory decline might be nearing an end in Las Vegas (and elsewhere).”
Shipping: “New employment figures show signs of potential turmoil in the transportation and logistics sector. Trucking companies hit the brakes hard on hiring in April… slashing 5,500 jobs from the month before on a seasonally-adjusted basis. The pullback raises questions about the direction of capacity growth in a freight market marked by sky-high demand and tight constraints on roads and rails” [Wall Street Journal]. “Trucking companies have flexed their new financial muscle by scaling up orders for big rigs, but the jobs numbers back up statements by some carriers that they are having a tough time getting new workers behind the wheel. Companies focused on e-commerce aren’t facing that problem: Couriers and warehouse operators added a combined 12,300 jobs last month. Hiring in trucking had been growing, but the recent figures suggest the sector’s trends may not be built for the long-haul.”
Shipping: “Teamsters float proposal for Sunday deliveries by UPS; three officials canned for opposing it” [DC Velocity]. “A proposal by the head of the Teamsters union’s package division to allow UPS Inc. drivers to work on Sundays for the first time, and to create a two-tier driver structure to do it, has led to three members being dismissed from a Teamster committee negotiating a new contract with the transport and logistics giant because they opposed the proposal.” Oh, great. A two-tier structure.
Shipping: “Automated invoice and payment systems in shipping could wipe out billions of extra costs” [The Loadstar]. “A new white paper from Drewry claimed that as shipping costs are further squeezed more attention should be diverted to ‘inefficiencies’ in payment processes, where it calculates some $31bn in transaction costs is incurred annually. The maritime consultant estimated that the global container shipping industry earned revenues of $166bn in 2017, generated from the movement of 207m teu across 400 liner services, requiring the raising of a staggering 1.26bn freight invoices. ‘We conclude that the prevailing inefficiencies pose a significant market opportunity for technological disrupters,’ said Drewry. It added: ‘In particular, we believe that tremendous efficiency gains can be achieved through technological solutions.'”
Shipping: “Freight Operators Dismiss Threat of Digital Startups” [Wall Street Journal]. “According to PitchBook Data Inc., venture capital firms invested nearly $1.2 billion in freight-related firms in 2017, up from $200 million five years ago…. C.H. Robinson executives say they haven’t been sitting back on their heels. The company says it is spending about $150 million a year on technology, and operates an internal “innovation lab” in which employees can test and vet ideas…. XPO Logistics Inc. said it would spend about $450 million this year on technology ranging from automation and robotics to data analysis and the company’s digital freight marketplace, which launched earlier this year and now has about 100 large customers and 2,500 carriers.”
Shipping: “Industry divided on low sulphur fuel availability in 2020” [Splash 247]. “As it stands 46% of Splash readers believe there will not be enough low sulphur fuel come January 1, 2020 when the new IMO regulations kick in, with a slim majority, 54%, believing there will be enough to go around.”
The Bezzle: “Uber unveils ‘flying car’ prototype for a future air-taxi service” [MarketWatch]. Oh, stop. Just stop.
The Bezzle: “Tesla’s Factory in a Fishbowl” [Wall Street Journal]. “I took a tour on Thursday, observing the body shop where 1,068 robots were welding, gluing or riveting together parts for dozens of Model 3 sedans…. The result is a car company that looks more like a software company—making changes as it goes along and pushing through product updates to cars already on the road. Doug Field, a former Apple Inc. and Ford Motor Co. engineer who is now Tesla’s engineering chief, notes that, rather than ‘batch large changes all at once,’ Tesla continues to make tweaks after a product launches, much as the software industry does…. In some ways, Tesla is updating the Japanese principle of ‘kaizen,’ or continuous improvement,” an approach to manufacturing that swept the auto industry in the ‘80s and ‘90s. Mr. Field said Tesla practices ‘continual disapproval’ of its processes and is ‘almost religious’ in sweating over everything from seat costs to the best way to attach a roof rack to its $35,000 sedan…. [Ford Motor’s chief of markets, Jim Farley] is also watching Silicon Valley’s production process. “This is where a lot of tech companies do a better job—they observe the customer and they change quickly,” he says. “They put something out and it doesn’t work and they fix it and they put it out again, constantly figuring it out and fixing.” Why pay to debug the product when you can get your customers to do it for free?
UPDATE The Fed: “Fed debates new vocabulary as it shifts away from loose policies” [Reuters]. “One issue under consideration is the continued use of ‘forward guidance,’ a communication tool used by central banks across the globe during the era of ultra-low rates in which they pledged to do “whatever it takes” to reflate the economy…. [F]orward guidance, which mitigates risk for financial institutions, spurring needed investment during an economic slowdown, may be controversial as it is not seen as appropriate for ‘normal’ times when it can stoke instability. Speaking in Zurich on Tuesday, Fed Chairman Jerome Powell said the central bank ‘will communicate our policy strategy as clearly and transparently as possible to help align expectations and avoid market disruptions.'”
Five Horsemen: “Apple is trading at a fresh record high as Amazon eases down from yesterday’s record close” [Hat Tip, Jim Haygood].
NakedCap Mania-Panic Index: “The mania-panic index rose to 54 (complacency) as the put-call ratio fell from its May 1st spike” [Hat Tip, Jim Haygood]. (The NakedCap mania-panic index is an equally-weighted average of seven technical indicators derived from stock indexes, volatility (VIX), Treasuries, junk bonds, equity options, and internal measures of new highs vs new lows and up volume vs down volume … each converted to a scale of 0 to 100 before averaging, using thirty years of history for five of the seven series.)
“The Very First Animal Appeared Amid an Explosion of DNA” [New York Times]. The headline in the original is… different: “Reconstruction of the ancestral metazoan genome reveals an increase in genomic novelty” [Nature]. From the abstract: “Here, using extensive genome comparisons between metazoans and multiple outgroups, we infer the minimal protein-coding genome of the first animal, in addition to other eukaryotic ancestors, and estimate the proportion of novelties in these ancient genomes. Contrary to the prevailing view, this uncovers an unprecedented increase in the extent of genomic novelty during the origin of metazoans, and identifies 25 groups of metazoan-specific genes that are essential across the Animal Kingdom.” Back to the Times: “[T]he animal kingdom arose…with an evolutionary burst of new genes. These may have played a crucial part in transforming our single-celled ancestors into creatures with complex bodies made of many kinds of cells. The new genes also proved to be remarkably durable. Of all the genes in the human genome, 55 percent were already present in the first animal.”
Our Famously Free Press
“Newsonomics: Alden Global Capital is making so much money wrecking local journalism it might not want to stop anytime soon” [Nieman Labs]. “Is there any chance Alden Global Capital might change course?…. Today we can reveal some key financial numbers from the very private company that shows just how successful Alden and [Digital First Media (owned by Alden)] have been at milking profit out of the newspapers it is slashing to the bone. DFM reported a 17 percent operating margin — well above those of its peers — in its 2017 fiscal year, along with profits of almost $160 million. That’s the fruit of the repeated cutbacks that have left its own shrinking newsrooms in a state of rebellion…. Most astounding within a decade of unending bad business news for newspaper publishers: In seven years, Alden has doubled its Bay Area News Group profit (including its main Silicon Valley properties, but not others on the region’s outskirts) from $20 million to $40 million. In 2011, its profit margin was 7 percent, one-third of what it is now. And in that time, the group has shed about 220 newsroom staffers, now down to about 160.”
“Univision Is A F*cking Mess” [Gizmodo]. The lead: “This is the story of how corporate raiding, complacency, excess, and incompetence are gutting a media company that matters to tens of millions of people. It’s not a novel story, and perhaps not even scandalous by the standards of corporate opulence: A shark-obsessed boss, millions wasted on consultants, and an executive who insisted on publishing softcore porn are more embarrassing buffoonery than insidious greed. The main problem—the billions in debt the company ran up in the process of its owners buying it and weighing it down—is practically routine in media and beyond; that doesn’t make it any less infuriating.”
“Are You in a BS Job? In Academe, You’re Hardly Alone” [David Graeber, Chronicle of Higher Education]. “For a number of years now, I have been conducting research on forms of employment seen as utterly pointless by those who perform them. The proportion of these jobs is startlingly high. Surveys in Britain and Holland reveal that 37 to 40 percent of all workers there are convinced that their jobs make no meaningful contribution to the world. And there seems every reason to believe that numbers in other wealthy countries are much the same. There would appear to be whole industries — telemarketing, corporate law, financial or management consulting, lobbying — in which almost everyone involved finds the enterprise a waste of time, and believes that if their jobs disappeared it would either make no difference or make the world a better place.” This is a must-read.
“‘Like Selling Crack to Children’: A Peek Inside the Silicon Valley Grift Machine” [New York Magazine]. “When a tech company captures an audience, it gets more than the opportunity to sell products and ideas. It also harvests the discretely quantified and collated bits of individual user data that people hand over, wittingly and unwittingly, as they stare at their computer and smartphone screens. As valuable as this information is for what it reveals about individual consumer habits and preferences, it’s even more precious in the aggregate, as so-called big data, which can be used to predict political shifts, market trends, and even the public mood. Who knows, wins, as the old military adage goes — and this is equally true in the world of business. Watch the video, click the link, fill out the form — . The people who carry out this labor consider themselves customers, but they are also uncompensated workers. The process whereby eyeballs get turned into money is mysterious, but not totally opaque — just discouragingly complicated and boring.”
“Before the next videotaped Starbucks disaster, everyone should take implicit bias training” [USA Today]. “Everyone should get tested for implicit bias, and if you’re a public official or receiving public dollars — it should be mandatory. It’s just a matter of time before another black person is abused, arrested, or shot dead for flying, golfing, driving, walking or drinking coffee ‘while black.'”
News of The Wired
“Amazon Froze My Account and I Still Don’t Know Why” [Bards and Sages]. “Most people have suspected for a while now that Amazon was relying way too much on automation. The story you are about to read is evidence of just how ridiculous this has gotten.” And: “Amazon is not a friend of authors. They see us as interchangeable commodities to be used up, worn out, and replaced: like widgets.” Well… of course.
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Readers, feel free to contact me at lambert [UNDERSCORE] strether [DOT] corrente [AT] yahoo [DOT] com, with (a) links, and even better (b) sources I should curate regularly, (c) how to send me a check if you are allergic to PayPal, and (d) to find out how to send me images of plants. Vegetables are fine! Fungi are deemed to be honorary plants! If you want your handle to appear as a credit, please place it at the start of your mail in parentheses: (thus). Otherwise, I will anonymize by using your initials. See the previous Water Cooler (with plant) here. Today’s plant (JB):
JB writes: “Also known as the sensitive plant because touching it leads the leaves to fold up temporarily. Tried capturing a bumble bee doing its thing on the flower but without success. This is the best could do for your efforts of sharing photos of gaia.” Photographing flowers is very difficult, because they are always in motion. It’s almost as if they adapted to catch the slightest breeze! [Instantly worrying about exceptions] Well, the kind of flowers I grow….
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