Is Working from Home Really Good?

 

via GIPHY

Granted, working from home seems like a novel idea and has been used extensively these past 24 months. Also, there seems to be a move to continue after the pandemic abates. But is it really good in the long term view?

I don't care how productive you may be from home, it hampers advancement within any organization. Seriously, the advantage of playing golf with the boss, is not about talking work while golfing, but rather talking a bit of golf during work. It is an entry into an interaction with the boss. That's an element that is missing with working from home. Out of sight is out of mind in most workplaces.

So you're not worried about advancement and are perfectly content with your current freedoms given to you by working at home. Do you have a clue about how any money making enterprise functions. A new enterprise is about expansion and a mature enterprise is about reducing costs. 

Working from home introduces the novel idea of  that home being anywhere in the world. How wonderful for you... until someone realizes you can be replaced by cheap foreign labor, that is also working from their home. 

Think your work is too valuable for something like that to happen? Which person is more likely to get the axe... someone that interacts on occasion with the boss or someone the boss rarely sees?

Out of sight... out of mind.

Near End of the Month, So January 2022 Inflation Numbers and Other Stuff.

 

ALL the inflation numbers are in and they are pointing upward, with the exception of PPI, which was flat. But the leading indicators of PPI are still in double digits. 

Quite a bit of chatter regarding energy prices and how they will ramp up inflation. There is no denying that, but every single number that excludes food and energy is up as well. Don't be misled by headlines screaming energy costs are going to cause double digit inflation. 

We might very well see double digit inflation, but if everything stays flat and energy were to drive up the overall inflation... then crude would need to be in the $180 @ bbl. We will be in recession, well before that occurs. Energy is a part of inflation, but not the entire story. Attempting to backward blame inflation on solely energy and current geo-politics, is to ignore the inflation prior to these events.

Those inflation factors are still prevalent and really no let up going forward the next couple of months. Previously the inflation was anticipated to peak in February (numbers due out in March), but those energy related and geo-political issues might edge up succeeding months. We were in the May/June timeframe of any year over year relief... which is prior to certain current events.

There is talk of the FED backing off rate hikes but maybe a bit premature. Granted the FED is looking for any excuse to avoid lifting rates, but they are behind the curve, so will raise rates, to make room for lowering them later on. 

As for Ukraine... they are not a member of the EU or of NATO, but a member of the UN. 30+ years ago, Iraq invaded Kuwait, which was also a member of the UN. A coalition was quickly and rapidly formed to kick Iraq out. Kuwait had oil, Ukraine not so much. 

Not sure how this thing will turn out, but it will soon become old news and everyone will move on. That is the sad state of things. There will be a period of media pictures and videos of bombs exploding, missiles being launched, but then this will become boring and no longer a driver of news ratings. 

Not unlike Covid, which still has a high death rate, but somehow is cured... at least to the extent it does not make more than a ripple in the news. Everyone is racing to get back to normal, which means accepting certain unpleasant facts. 

Currently the forecast for February CPI numbers (Due out in March 10th) stands in the range of 7.63% to 7.9%. 7.62% was the annual rate in February 1982. January 1982 was 8.39%.

Retail Trade Report for January-2022

 

The Census Bureau released the advance data for January Retail. Woohoo, it was up 3.8% AFTER a downward revision of last month by -2.5%. (Which wasn't the only revision.)

This was last month's graph...

In any case the 3.8% would appear to be stellar until you realize it is not adjusted for inflation. When looking at the past few months... it becomes clear that the amount of "stuff" we are buying has plateaued, while the cost of the same amount of "stuff" has simply risen. 

Frankly, I don't understand the hoopla surrounding this report. Of course, I am just an ignorant hillbilly and know nothing of these matters. 

Producer Price Index for January 2022

 

The Producer Price Index as released by the BLS, this A.M. 

The Producer Price Index for final demand increased 1.0 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.4 percent in December 2021 and 0.9 percent in November. On an unadjusted basis, final demand prices moved up 9.7 percent for the 12 months ended January 2022. 

In January, the index for final demand services rose 0.7 percent, and prices for final demand goods moved up 1.3 percent.

Again, an ever so slight deceleration in upstream stages. (note the Eurostat for US is my estimate as the actual info has not been published).

The retail report tomorrow, while also backward looking, could provide some indication of future activity.

Just read an article that said $115 per barrel of oil could drive inflation to 10%. My calculations indicate a figure nearer to 8.4%, which leaves the over 92% of the remaining to increase above that rate. Let's not fixate on just one part of the consumer purchasing basket, imo.

Breakdown of CPI DATA and Real Earnings, January 2022

 

The BLS report for January, Indicated a 7.5% yoy inflation rate with the month on month being 0.8% unadjusted or 0.6% after adjustments.

With this release comes a variety of other numbers...

I am at the 5.7% annual rate...

Not as bad as the overall, but nothing to be joyful about. Food was up, but the biggest portion was attributable to medical costs. Much of that was beginning of the year co-pays and deductibles. Hopefully, the following months will recede to rather low levels of medical inflation... compared to year's past. 

I had previously forecast January to fall between 7.04% ~ 7.40%. That 7.5% was a bit of a shock and now brings the 7.62% rate in February 1982 into play. The current forecast for February numbers, due out in March are 7.59%~7.9%, 7.74% as median. 

On to the earnings report.

The hourly real earnings (earnings after inflation adjustment) edged up 1¢. This would seem to indicate that earnings are at least keeping up with inflation. However...

Real weekly earnings slipped, due to a decrease in hours worked. This is the 2nd straight month and is not reassuring, imo.

As for the CPI forecast, more will be clear on Tuesday, with the PPI release. Let's keep our fingers crossed. 

Near End of the Month, So December 2021 Inflation Numbers and Other Stuff.

It's all the inflation numbers in one chart. As always, the MPI is most important to me, as it is what I spend.

The forecast across the board for January is upward... except maybe for the PPI. It's hard to imagine consumer spending slipping, inventories jumping and orders lagging... resulting in anything other than a deceleration of the PPI. But the experts seem to think May is when things will start to decelerate for all the above. In fact the PPI is forecast to reverse in May, back to 5 months ago range, which will somewhat stagnate the monthly CPI... not a reversal.  

BUT... a bit of history. Last year, there was consensus on helicopter money directly to the masses. Our leaders wanted it to jump start the economy and the FED said do it, we've got your back. The the term transitory became a popular word... until it was decided it might no longer be applicable to the current situation. 

So the FED is fixing to do something and the knives are out. Who knows what will happen?

Unfortunately for a lot of Americans on fixed income, it will not help, as the die is already cast. A fixed income limits any increases in spending and reduces the amount purchased. The alternative would be adding debt, which would now be costlier, if the rates are raised. It is a never ending cycle, imo.

Enough of the depressing news. I'll go watch some YouTube comedians or take a nap... or both.

2021 GDP Results and First Look at 4th Quarter 2021

GDP from the Bureau of Economic Analysis.

Real gross domestic product (GDP) increased at an annual rate of 6.9 percent in the fourth quarter of 2021 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.3 percent.

...

Real GDP increased 5.7 percent in 2021 (from the 2020 annual level to the 2021 annual level), in contrast to a decrease of 3.4 percent in 2020 (table 1). The increase in real GDP in 2021 reflected increases in all major subcomponents, led by PCE, nonresidential fixed investment, exports, residential fixed investment, and private inventory investment. Imports increased  

 All of which sounds really good and seems to be "great" news. Being the contrarian, I seem to find things that trouble me. The inventories and correlation to consumer spending. They look stellar on the annual basis, but 4th quarter seems troubling to me. 

The inventory numbers made up about 73% of the 4th quarter numbers. The difference being a chabe for the 6.9% annualized to something akin to 1.8% annualized. Which even at that lower number was better than the meager 0.48% rise in the goods category sans services and 3.2% annualized with services. Rah! Rah!

The report does make note of certain durable goods making up the increases in inventory, yet overall consumer spending in this category is barely making gains. That is not surprising, given the past year, but not sure how consumer spending will react going forward. 

Setting aside the inventories and intellectual property products... the Gross private domestic investment category slid -1.2% annualized. 

Personal consumption expenditures rose 3.2% annualized, but on the back of services with a respectable 4.8% annualized rise. Without the services... 0.36% annualized.

My small brain cannot find all that "wonderful" news, but I may be overthinking it, considering my small brain. 

To summarize, the consumer spending, which is the driver of the economy, is slowing considerably; the private sector sans the aforementioned... is slowing. 

So if inventory is rising dramatically, then one of the following would seem the likely cause...

• The supply chain snarls are finally becoming unsnarled
• Suppliers have increased production
• Consumers are slowing their purchases

Not real sure how this can be seen in such a positive light, especially with the doldrums of winter upon us, the negative outlook of the consumers, etc. Unless the latter weighs on inflation and slows it down a bit.