The Million Dollar Way (The Bakken Oil Blog): Stagflation -- October 10, 2023

Tuesday, October 10, 2023

Locator: 45709ECON.

Stagflation: definition -- inflation, static/declining economic growth, rising unemployment. Wiki.

Links below in order of number of "hits" by readers (popularity of posts):

I think I've been hearing this for the past two years -- stagflation this year, or next year, or maybe the year after that.
Unlike defined metrics for a recession, there are no defined metrics for a stagflation. Apparently it's like pornography: economists know it when they see it.
I was curious. How far back -- in modern history -- have economists been warming about stagflation?
From The Los Angeles Times June 16, 2011, over a decade ago.

One more reason I'm not worried about stagflation. We're gonna have inflation but not "stag."
With surging economy coming out of the Covid-19 lock downs, growth has got to slow down, but growth quarter-over-quarter coming out of a world war or a Covid-19 lock down is less important than comparing historical growth, year-over-year or "four-year periods-over-four-year periods."
According to the definition of stagflation above, Iain Macleod was concerned about three things: inflation, a slowing growth rate; and unemployment that remains steadily high. Two of those three bother me, and one much more than the other.
I don't know anything about macro-economics but I would rather track these three with regard to stagflation: inflation, labor productivity, and unemployment.

Stagflation: this is my pet peeve. A few weeks ago, this was a "thing" on CNBC --

although CNBC seems to have moved on; not mentioning stagflation much any more
there are a couple of different definitions of stagflation
I don't see either definition being met by current use of the word "stagflation" by CNBC talking heads

at least one definition of "stagflation": a key component of "stagflation" is the concept of unemployment

Stagflation: Jim Cramer takes contrarian view on "stagflation." His views are in line with mine which I have posted. Bottom line: neither he nor I are concerned about "stagflation."
Stagflation: headline story today Goldman lowered GDP projections. Scary headline. But did anyone report the numbers? Here they are. Be sure to sit down before looking at this huge Goldman Sachs cut when they revised their 2021 / 2022 GDP forecast:

for 2021: previous, 5.7%; revised, 5.6% -- give me a break; that's a headline story?
for 2022: previous, 4.4%; revised, 4% -- ditto.

Jobs report: expectations and analysis. The WSJ. Before the numbers are reported.
Actual: 372,000! Wow, wow, wow.
Market will collapse. Put more pressure on Fed to keep raising rates.
Participation rate: pretty much unchanged, around 62%.
Interest rate has moved up. Ten-year treasury at 3.07% yield.
Unemployment rate stays unchanged at 3.6%.
Steve Liesman does not see report at inflationary.

Definition: In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment. Wikipedia.
But now, we're talking about depression? LOL.

The term "stagflation" introduced by a Brit. The Brits are hypersensitive to high unemployment; the Americans hypersensitive to high inflation.
September, 2022, numbers: employment in the US continues to surge even as the Fed raises rates to try to kill employments; third-consecutive-75-bp increase in the "Fed rate." Market takes it in stride.
WTI: up over 2%, trading at $88.37.
Market suggests most investors still concerned about recession.

We'll quit here.

October 10, 2023, for the US:

Unemployment, link here, October 10, 2023. During a recession I like to follow U-1, not U-3: