by Gary Alexander

May 25, 2021

To pass three multi-trillion-dollar rescue packages, you’ve got to have an economy in crisis, so the top-level Biden economists who drink the (presumably potable) Potomac water have to invent (or create) negative statistics where few exist. When you don’t have any obvious “crisis” to exploit, they invent one.

While I spent the last three weeks here mired in deep rice paddies of the big picture of “who will win the 21st Century – China or the United States?” the two closest economic advisors to President Joe Biden were assuring us that three separate $2 trillion “rescue” packages were necessary to “save the economy.”

Executive Orders and Big Spenders Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Let’s turn to the comments of two leading economists in early May:

First, on Sunday May 2, Cecilia Rouse, Chair of the President’s Council of Economic Advisors, appeared in a 12-minute segment with host Chris Wallace on “Fox Sunday Morning.” Wallace opened the grilling session with a chart his team created of three responses to historical economic crises in the first 100 days.

Adjusted for inflation, he said, FDR’s “New Deal” in 1933 cost $856 billion; President Obama’s 2009 response to the 2008-09 “Greater Recession” cost $1.8 trillion, and Joe Biden’s plans cost $6.0 trillion.

Three Democratic Presidents and Their Responses to Three Crises
President Year Crisis Response Cost (adjusted for inflation)
  Franklin Roosevelt  1933   Great Depression   New Deal Programs   $856 Billion
  Barack Obama  2009   2008-09 Recession   Great Recession Recovery   $1.8 Trillion
  Joe Biden  2021   Covid Recession   Biden’s First 100 Days   $6.0 Trillion
  Source: “Fox News Sunday with Chris Wallace,” May 2, 2021

After showing this data on the screen, Chris Wallace’s asked the President’s leading economist to explain.

Chris Wallace: Ms. Rouse, do you really need to spend seven times as much as what was spent to get us out of the Great Depression in the 1930s?

Cecilia Rouse: Let’s be clear. The first part of what President Biden was spending was part of The American Rescue Plan. We’re in an economic recession caused by a pandemic…

“WHOA” I said, at that point. “We are in an economic recession”? This hearkens back to the Clinton era, when he asked what the meaning of “is” is. A recession is two consecutive quarters of negative growth, as measured by the Gross Domestic Product, so the last recession came early 2020 and ended a YEAR ago,

Quarter GDP Growth (annualized)
  1Q’2020   -5.0%
  2Q’20   -31.4%
  3Q’20   +33.4%
  4Q’20   +4.3%
  1Q’21   +6.4%
  Source: BEA, Statista

Are we in a recession? No. It ended exactly a year ago, in May 2020. June was gangbusters. The current quarter looks like double-digit (10.1%) growth, according to the Atlanta FED GDP Now model, so Ms. Rouse seems to be bending the facts to defend the President’s over-spending plans for political reasons.

Robust Growth Indicators Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Janet Yellen Delivers More Opinions than Facts on Jobs

Since gaining unanimous acceptance to her post at Treasury, Janet Yellen has also been a good team player. After the lame jobs report came out on Friday, May 7, Secretary Yellen joined Jen Psaki at the press conference podium covering the release. Here, she explains why extra benefits for not working had nothing to do with the fact that only 266,000 returned to work in April rather than the expected 1,000,000.

Yellen: “Let me be clear: 266,000 jobs added in April represent continued progress. We saw promising growth of 331,000 jobs in leisure and hospitality, which includes the restaurants and bars that have been so badly battered by this pandemic. The labor market is volatile from month to month, and I think the best thing is to average through and say we’ve been creating over 500,000 jobs a month, on average….”

“It’s a challenge for parents to manage schedules where one child is in school a couple of days a week and another child is in school some different days during the week. So caregiving responsibilities and absence of childcare are still important reasons why people are unable to return to work. You know, concern about the pandemic and the health consequences, I think, remains a factor for many. I don’t think that the addition to unemployment compensation is really the factor that’s making a difference.*

“There’s no question that we’re hearing from businesses that they are having difficulty hiring workers, but when we look across states or across sectors or across workers – if it were really the extra benefits that were holding back hiring in states or for workers or in sectors where the replacement rate due to UI is very high, you’d expect to see lower job-finding rates. And in fact, what you see is the exact opposite. **

“We’ve just seen motor vehicle production shut down in some places because of a shortage of semiconductors. There was a loss of jobs there this month. There were setbacks in the lumber industry because of shortages there. So, you know, starting up an economy again, trying to get it back on track after a pandemic in which there are a lot of supply bottlenecks is going to be, I think,* a bumpy process. But I really don’t think* the major factor is the extra unemployment.”

*Yellen cites some facts to support her case, but when it comes to unemployment checks, she says “I think…” Instead, all she needs to do is ask workers and employers, who could tell her the truth
** Yellen cites data about the states, but that data turned out later in May to be demonstrably false.

Secretary Yellen (and others in the Biden administration) keep saying that there is no “measurable” evidence that the extended unemployment bonus is discouraging unemployed people from seeking work. Well, let’s test that. Governor Greg Gianforte of Montana said Montana would forgo the $300 a week bonus – before the May 7 downbeat jobs survey was released. The governors of many other states have followed his example, reasoning, “Why not pay a bounty for getting and holding a job rather than paying for not having one.” Businesses in these states are grateful to have workers come back. So are customers.

According to an article in The New York Times that is cleverly mistitled to appeal to their core bias (“The Myth of Labor Shortages,” May 20, 2021), some companies have responded to the labor shortage – which the Times blames on low wages – by imitating Congress and throwing out “helicopter money.” The Bank of America, for instance, said it would raise its minimum wage to $25/hour and insist that its contractors pay at least $15 an hour. The Times cited several other companies that raised wages dramatically to lure new workers. However, that only underlines their handicap in competing with lofty government benefits.

Job Hires versus Job Openings Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Over eight million jobs are still going begging. On May 11, the Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) for March. It showed a record 8.1 million job openings, an increase of 600,000 openings in March, after new hires picked up by just 200,000 – strong evidence that the $300-a-week in additional unemployment benefits is discouraging people from returning to work.

The river running through DC isn’t the Potomac – it sounds more like that river in Egypt – Denial.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

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Chances for Yellen’s “World Corporate Tax” Diminish

Income Mail by Bryan Perry
The Search for Green Energy-Related Income

Growth Mail by Gary Alexander
Some D.C. Economists are in Denial

Global Mail by Ivan Martchev
Sun Tzu Strikes Again, Blockchain-Style

Sector Spotlight by Jason Bodner
He Profits Most Who Learns How to Wisely Wait

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About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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