“Steel prices are surging and American manufacturing is paying the price—literally, thanks in part to the ongoing consequences of former President Donald Trump’s tariffs, which President Joe Biden has not removed.”
“The economy added 266,000 jobs in April according to today’s report from the Bureau of Labor Statistics (BLS), while the unemployment rate ticked up slightly to 6.1 percent, from 6 percent.
These numbers are well below forecasts from economists who predicted that April would see the addition of around 1 million jobs, and the unemployment rate falling to 5.8 percent. The BLS report notes that we’re still far away from a pre-pandemic labor market, when the jobless rate sat at 3.5 percent.
Despite persistent levels of high joblessness, other metrics show signs of a labor market that’s increasingly tight.”
“job openings and the number of workers quitting their jobs were at record highs and that wages were growing at 2019 levels (when the country’s economy was booming).
Employers, meanwhile, find themselves in increasingly dire straits trying to find new workers.”
“what’s causing this weird mismatch between labor supply and demand?
Furman and Powell cite three possible explanations: continual health concerns about contracting COVID-19 at work encouraging some people to stay home, school closures keeping parents out of the workforce, and generous unemployment benefits.
The $300 weekly unemployment supplement provided as part of the March-passed American Rescue Plan pays some 42 percent of workers more than what they made at their old jobs, according to a University of Chicago analysis.
That $300 supplement will continue until September 2021. Today’s jobs report has business interests calling for ending it now.”
“The consensus among economists is that high unemployment benefits were not producing high unemployment rates earlier in the pandemic, when there were so few jobs available, health concerns were more acute, and there was greater uncertainty about when the economy would improve.
Workers who found themselves in that precarious situation would jump at any employment opportunity they could find, even if it paid less than unemployment benefits, the thinking went.
The situation today is much different.
Vaccinations and falling cases and deaths should ameliorate many of the health concerns people have about returning to work. A wealth of job opportunities also means people receiving unemployment benefits now won’t automatically take whatever work they can find. Instead, they can afford to hold out for higher wages or a job that’s a better fit for them.”
“”Amid surging lumber prices that are already adding an average of $36,000 to the construction cost of new homes, the Biden administration is moving forward with plans to double tariffs on lumber imported from Canada,” Reason’s Eric Boehm reported last week.
While former President Donald Trump is often rightly criticized for his protectionist policies, and did, in fact, impose a 20 percent tariff on Canadian softwood lumber in 2017, his administration slashed that duty to 9 percent last year as lumber prices soared. The Biden administration, on the other hand, proposes to hike tariffs once again, to over 18 percent for many firms, based on the premise that Canadian producers “made sales of subject merchandise at less than normal value” (we should be so lucky).
“It is a particularly egregious move, seeing as how lumber prices are still near multi-decade highs (still, despite a recent dip, up over 300% from one year ago) and US timber firms remain unable to sate demand,” points out Peter C. Earle of the American Institute for Economic Research. “The increased costs will ultimately fall upon American citizens in the form of higher prices and decreased availability of goods and services.”
That is, in the midst of soaring prices and short supply of lumber in the United States, the federal government is doing everything in its power to choke off other sources of the stuff that might fulfill demand and help to bring down costs.”
“robust as the response was, the crisis exposed the fragility of the UI system. Technically, America’s process for handling unemployment claims was built on antiquated computer systems (some written in COBOL, a language largely abandoned in the 1980s), and millions of workers endured weeks of delays in getting their benefits.
So a major priority for Congress in 2021 has to be reforming the UI system: improving its functionality and making it more generous.”
“For millions of Americans, the pandemic has been a nightmare. But many have also found that the country’s safety net actually caught them.”
“The country is recovering quickly from the economic shock of the pandemic.
And we did so despite botching our response to the crisis itself. Using aggressive social distancing, testing, and contact tracing to contain the virus — as nations like South Korea and Australia did early on — had huge economic benefits, and the US’s failure to contain its outbreak had enormous economic costs.
But many other large, rich countries also botched their response to the pandemic. If you compare the US to the five most populous countries in Europe, it fares roughly the same in terms of deaths from Covid-19. Germany does better, but the UK, Italy, Spain, and France are right there in the muck with the US.
If this past year is any indication, countries are not always going to be able to contain future pandemics. If and when that happens, they need to be able to manage the economic fallout.”
“the US is near the top when comparing countries for the scale of their stimulus responses. What makes the US response more unusual is its focus on spending to increase the incomes of its residents, as opposed to backstopping businesses.”
“Reasonable people can disagree on whether the fiscal programs to assist Americans during 2020 and 2021 were excessive or merely generous. What’s inarguable, though, is that they were massive, and enough of them worked to make the overall economic response incredibly strong.”
“When the pandemic hit in the spring of 2020, many people in the lumber industry assumed business was about to go sour. Millions of people were out of work, businesses across the country were shuttered, and the country was in a recession. And so, producers reacted accordingly.
“They really dialed back, thinking that demand would fall, and the reality is that demand never slowed,” said Dustin Jalbert, senior economist and lumber industry specialist at Fastmarkets RISI.
Instead, things sped up. People stuck at home because of Covid-19 shutdowns across the country decided it was a good time to take on home improvement projects repairing and remodeling their homes — they put up fences, added on decks, built out offices, refinished basements. The DIY trend helped drive stellar sales numbers at stores such as Home Depot and Lowe’s.
Many of those who weren’t busy fixing up their homes went looking for new ones. And where they couldn’t find preexisting homes, they started to build. Whatever initial slowdown there may have been in construction pretty quickly subsided. “Us being capitalist America, if people want to buy a house because they want to move out of the city and move to the suburbs, someone will build it for them. They’ll figure out a way,” said Michael Wisnefski, CEO of MaterialsXchange, an online marketplace for lumber and plywood.”
“demand isn’t just surging in North America; it’s also up overseas, which further strains the industry.”
“Finding lumber workers was challenging pre-Covid-19; during the pandemic, it’s been even harder. Sawmills have had a hard time staffing up and adding shifts, not only because of Covid-related restrictions and safety measures but also because a lot of people don’t want to work those types of jobs. Some people I spoke with suggested expanded unemployment insurance, which adds an extra $300 a week onto state benefits until September 6, may also be a factor — though, of course, sawmills are making so much money now they might be able to afford to pay workers more and court them back.”
“He notes that many people just don’t understand how hard it is to get a sawmill up and running. “They’d like to see our industry respond to these prices and make new lumber, but a new sawmill today is $100 million, it takes two years to build, and there’s no guarantee you’re going to have the raw materials to run it.” Plus, who knows how long this current surge will last.”
“For his part, Barber, in Canada, isn’t seeing much of a bump in his paycheck. “The price of lumber has gone way up, the mill’s making a lot more money, but they’re not paying us any more,” he said. “It’s funny how that works.””
“Some 5.6 million single-family homes sold last year — more than at any time since the housing bubble — and the prices of those homes were up 9 percent from a year before, according to the National Association of Realtors. The organization expects average housing prices to go up another 9 percent this year — another huge jump from the typical 3-5 percent annual price growth and far above the rates at which people’s income is rising.
Though not the root cause, the pandemic did accelerate those costs, as schooling and working from home made having a nice, large living space all the more important.
“It has reminded us all of the importance of home and how essential it is to have a safe space of shelter from the outside world,” Zillow Group principal economist Chris Glynn told Recode.
The pandemic also allowed subsets of Americans who remained employed — usually those who were more gainfully employed in the first place — to save money for a downpayment, as there was less for them to spend their money on.”
“The reasons are demographic as well. Millennials, who make up the largest living cohort, have arrived at the age where they’re forming new households and buying their first and even second homes (though that milestone happened later than in previous generations). And as millennials with growing families flock to the housing market, the supply of homes has not been enough to keep up.
Many people, including older Americans who don’t move as much as young ones or who were afraid to let people visit their homes in the pandemic, are holding onto their homes longer, meaning many existing homes — which make up the vast majority of home sales — have not been entering the market.
Additionally, new home construction, though it has ramped up lately, has been depressed since the Great Recession devastated the construction industry. High lumber prices are also delaying and driving up the cost of new housing.
Finally, investor interest in renting out single-family homes as an asset class has led them to buy up much of the housing stock that individuals once would have. Buying homes to rent means there are fewer to buy to live in, which, by extension, has led more potential buyers to rent.”
“Many Republicans and business groups insist that generous unemployment insurance is a major hindrance to the recovery, arguing that people are sitting out of the workforce because they’re making more money staying home and collecting the extra $300 a week in pandemic benefits put in place by Congress. Half of states, all Republican-led, have decided to shut off unemployment benefits early over the coming weeks. They all made that decision before the May jobs report, a move that even JPMorgan’s economists said was political, not economic.
The evidence suggests that extra unemployment might deter a small sliver of workers but not the vast majority. A working paper out of the Federal Reserve Bank of San Francisco estimated that if seven of 28 workers receive job offers they would normally accept in the early months of this year, just one would say no in order to hold on to the $300.”
“There are plenty of other factors influencing work right now: People are still nervous about the virus, parents lack access to child care, or people are waiting to see if they can get a job at their skill level. A massage therapist who shut down her business at the start of the pandemic told me she doesn’t want to work for minimum wage at McDonald’s; she wants to reopen her business.”
“A corporation’s book profits are actually an unhelpful metric when it comes to assessing what its tax liability should be. While the tax code is far from perfect, many deductions and credits that reduce liabilities serve an important purpose and help make the tax code fairer. Calculating a corporation’s income before factoring these in makes as much sense as complaining that a kid with a summer job gets to avoid paying regular income taxes because of the “standard deduction loophole.”
For example, consider net operating loss (NOL) carryforwards and carrybacks, one of the most common culprits behind these sensational headlines. These are normal features of a smart policy that allows corporations to pay taxes based on a realistic view of their cash flow over time.
Imagine a start-up business that spends two years developing its feature product, only to release it in the next year. If that business ran a deficit of $2 million the previous two years, then made a $1 million profit the third year, it has not actually made a profit in the long term. Disallowing NOL deductions from being carried forward would mean that the business would face corporate income tax liability despite having, thus far, lost money.”
“NOL carryforwards were one reason Amazon had no federal tax liability when those articles appeared a couple years back. Another was the research and development (R&D) tax credit, long a bipartisan favorite. The Obama administration in 2012 identified the R&D credit as a crucial element of business tax reform, claiming that businesses undervalue R&D in the absence of the credit as the social benefit is far greater. It’s deeply disingenuous to incentivize R&D, then wag your finger when businesses respond to the incentives the R&D credit provides.
Then there’s accelerated depreciation. One of the most positive changes in the 2017 tax reform law was the introduction of full expensing of capital investments, which allowed businesses to bypass the complicated system of asset depreciation that requires them to recoup the value of capital investments over timelines as long as decades. Huffing and puffing that businesses use full expensing to zero out their tax liabilities is absurd, because it merely accelerates tax deductions businesses would receive anyway. In other words, the long-term “cost” of accelerated depreciation in terms of revenue reduction is zero. The difference is that businesses, which prefer cash on hand to cash down the line, are then able to reinvest the value of the deduction immediately rather than waiting years to receive the tax benefit.”