Month: October 2018

Via Cliff Mass’ Weather and Climate blog,

During the past several summers there have been major wildfires in Washington State producing a lot of smoke.  And many people have been asking an important question:

To what degree is anthropogenic global warming contributing to Washington State wildfires?

If 90% of the blame for Northwest wildfires is due to anthropogenic (human-caused) global warming and 10% is due to fire suppression, poor forest management, or people starting more fires, then the logical response is to put most of  our efforts into reducing atmospheric CO2.   A climate-dominated problem.

If 90% of the blame is due to past fire suppression, forest mismanagement, invasive species, and human encroachment, then we should put most of our efforts into fixing the forests and other non-climate measures. A surface-management problem.

And yes, the percentages could be somewhere in between.

Supporters of the carbon fee initiative (1631) are suggesting that the recent wildfires are mainly the result of anthropogenic climate change and using the fires to push their carbon fee plan.

And Governor Inslee has stated explicitly that the fires have been made much worse by climate change.

In contrast, others, including a number of folks in the forestry community, have suggested that poor forest practices are the main cause of most of the wildfires over the eastern side of the state.

It is important to note that relative role of global warming in influencing the threat of wildfires may change in time.  For example, global warming could be relatively unimportant today for wildfires, but of great importance later in the century when temperatures will be much warmer.

The Need for Better Information

There is actually very little limited quantitative information on the role of global warming on Washington State wildfires.   Which is kind of strange considering the importance of the issue and the authoritative statements being made by some.  A lot of hand waving, but not much data.

So let’s examine the issue in some depth, using a more quantitative approach than most.  But before I do so, let me give you the bottom line.

Human-caused global warming has played only a minor role regarding  Washington State wildfires through today, but will become much more important later in this century.

Now let me provide some evidence for this conclusion.

How Has Global Warming Changed Washington’s Summer Climate?

Before we look at the correlation of global warming and wildfires, we need to know how much Washington State climate has changed during the past half century or so, and then  estimate how much of that change is due to anthropogenically forced increases in greenhouse gases. To gain some insight into this, I secured the official NOAA/NWS climate division data averaged over Washington State for summer (June through August).

First, consider daily mean temperatures from 1930 to today..  Very little warming until the mid-70s and then perhaps 2°F overall during the past 40 years.

Summer average maximum temperatures have similar  pattern of change–again roughly 2F warmer since the mid 1970s.

There is a substantial research that suggested that the radiative effects of increasing CO2 in the atmosphere became significant for climate forcing something around the 1970s.   And there was an important shift in a mode of natural variability, the Pacific Decadal Oscillation (PD0) during the mid-70s:  a shift from the cool to warm phase of this oscillation, which would have resulted in warming over the Pacific Northwest.

Now the question is how much of the recent warming shown above is due to anthropogenic global warming and how much is due to natural variability.

A group of researchers at the UW (including myself) are working on this question, using the most sophisticated approach applied to date:  an ensemble of high-resolution regional climate runs forced by the best global models.  This is the gold standard for such work.  We started with global climate models driven by the most aggressive increase of greenhouse gases (RCP 8.5) and then ran a high-resolution weather prediction model (WRF) driven by several climate models over time (1970-2100).

I don’t have this output interpolated to the exact boundaries of WA state (working on this now), but let me show you the projections for summer max temperatures from the high-resolution model for two sides of the state (Hoquiam, HQM, and Spokane, GEG) forced by several climate models (see below in colors).  I also show the observed temperatures during the contemporary period at these location).  Virtually all of our simulation show greater warming at Spokane then along the coast, so let me show you that first.

Between 1970 and roughly 2000 there is very little change in observed or modeled temperatures at Spokane, and roughly1.7F warming between 2000 and now in most of the simulations.  Since natural variability will differ between the simulations, the 1.7F average of all of the runs is a reasonable estimate of the impact of global warming until now.   And note how the warming revs up later in the century if the aggressive increase in greenhouse gases continue s(about 7F warming!).

At Hoquiam, near the WA coast, the warming is less for both the recent decades and into the future.  Perhaps 1F of warming through this year.

Now, I could show you a lot more material, but my conclusions from looking at a lot of high-resolution model data is that anthropogenic global warming due to increasing greenhouse gases may well have warmed up the state as a whole by roughly 1-1.5F during the past half-century, with any additional warming coming from natural variability (e.g., the PDO).   I really doubt that there would be much disagreement about this estimate from members of the atmospheric community.

What about changes in precipitation?

Summer (June to August) precipitation has always been relatively modest (4-5 inches) in our state (our summers are very dry), and there appears to be a modest wetting trend through 1980 and some drying since the late 1990s (see below).  In contrast, annual precipitation has been very constant (also below)

Summer Precipitation for WA State (1930-2017)

WA State Annual Precipitation

What do the climate simulations suggest about precipitation trends?

The annual precipitation will slowly increase according to the models (not shown), but what about summer?  Spokane summer precipitation has always been low (around 2.5 inches typical for June through August) and will remain low.  Any decline is small–a half-inch at most.  The recent dry years look like natural variability.

Let’s compare that to Seattle on the western side of the State.   Summers are equally dry as Spokane, but there is a more clearcut drying– by roughly 2 inches by 2100, and perhaps .5 inches during the past years.  These results are consistent with previous studies by the UW climate impacts group and others indicating a slow increase of total annual precipitation, but a small downward trend in summer precipitation over our area.

So to summarize.   Looking at past climate data and the best model information, one concludes that increasing greenhouse gases may well have warmed out state by 1-1.5F during summer (June through August) over the past half century, had little impact on annual precipitation, and perhaps dried an already very dry summer by perhaps .5 inches.

But how did global warming impact the recent wildfires in Washington State? And how will future warming impact them?

We are now ready to answer this question.

But first we needed a list of the annual area burned and number of fires in Washington State over time.  It turns out this is a difficult information to get–which is surprising considering its importance.  I was able to get an Excel file from Josh Clark of WA State DNR with the fire information from 1992 to the present.  The prior period has not been digitized, with fire information in cabinets somewhere.  Oregon and California has done a better job in creating a long-term digital record of their fires.

OK, we will use what we have.  Here is the number of acres burned by wildfires over WA state since 1992.  A very slow trend upward, except for the HUGE peak in 2015, the year with the big ridge and crazy-warm spring.

The number of fires (see below) have been nearly constant in the long term, with some ups and downs

But now the really interesting part.  Let’s plot the acres burned against warm season (June through September) temperatures (see below).

This is really fascinating.  A very slow increase of fire acres with temperature, with considerable scatter,  showing that acres burned is not that temperature sensitive.  The one big year was the warmest.. 2015 with 61.4 F and nearly 1.2 million acres burned.

Now, let’s put a regression line on this plot and see how much of the variability is explained by increasing temperature. Temperature only explains 22% of the increase in acres burned…so 78% is explained by something else.

The bottom line of all this is that warming temperatures can explain only a small portion of the variability in Washington wildfires.

What about precipitation?   Here is the plot of WA state precipitation for May through Sept since 1992.  A very slight downward trend, with the big fire year (2015) not showing anything anomalous.

Another “scatterplot”, this time of acres burned versus precipitation, is presented below.  Very poor relationship, with the suggestion of a decline in burned acreage with greater rainfall.  And the precipitation only explains about 2% of the variability of acres burned!  This is not surprising because our region is naturally dry during the summer and being a little drier doesn’t make that much of a difference.   Like being a little more dead.

The Essential Message Here

Climate/weather changes do affect wildfires over Washington State.  Warmer temperatures and lesser precipitation correlate with increasing acreage, but the relationship is not a strong one.  The correlation of summer precipitation with wildfire acreage is very, very weak and summer temperature only explains less than a quarter of the variability in wildfire area.  

Then we look at the look at the amount of climate change produced by human-caused greenhouse warming so far, and we find it is relatively small. Perhaps 1.5F for WA State temperatures and a slight drying over the summer.

You put the lack of sensitivity together to temperature/precipitation with the small climate changes due to global warming and one has to conclude that human-caused climate change is undoubtedly NOT a major driver of the increased wildfires and wildfire smoke we have seen during some recent years.

Based on my extensive reading on the wildfire issue, discussions with forestry experts at the UW, and a number of seminars/meetings I have attended, my conclusion is that the real culprits for our invigorated fire/smoke situation include:

1.   Nearly a century of fire suppression and poor forest management that have produced unnatural, explosive forests, particularly on the dry side of our state.

2.  Huge influx of people into the urban-wildland interface and forest areas that help initiate fires and make us more vulnerable to them.

3.  Invasion of highly flammable, non-native species like cheatgrass.

And we should not forget that fire is a natural part of our east-side forests.

Claiming the climate change is the big villain in the current wildfire situation, may be a useful tool for some ambitious politicians and for those searching for arguments to support climate-related initiatives, but the truth is probably elsewhere.  In the FUTURE, as temperatures warm profoundly (particularly during the second half of the century), the influence of human-produced global warming on our wildfires will clearly increase substantially.

Only by a sober, fact-driven approach, such as thinning, debris-removal, and proscribed burning of our east-side forests, with will be able to improve the health of our forests and reduce the potential for megafires and big smoke production.  Even if we could stop anthropogenic climate change in its tracks this year, we still need to  deal with the issues of forest management, human initiation of fires, and human changes at the surface.

PS:  Although we had considerable background smoke from Canada, the really extreme smoke periods (August 21-22 in Puget Sound) was associated with fires over NE Washington, not Canada.  Same thing in 2017, with WA fires resulting in ash falling on Seattle.

PSS:  Some folks might bring up the Pine Beetle issue.  I have read several papers and talked to experts in UW Forestry that suggest that rather than lack of cold temperatures, unnaturally dense east-side forests and lack of fire allowed the Beetle kill.  In any case, peer-reviewed papers suggest that pine beetle infestation does NOT contribute to fires.

*  *  *

A local forest landowner named Michael August has written a very interesting perspective on NW forests and smoke, found here.

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The Associated Press (AP) has revealed a troubling story of the largest ever homeless encampment site mostly made up of Native Americans has quickly erected just south of downtown Minneapolis, Minnesota.

City officials are scrambling to contain the situation as two deaths in recent weeks, concerns about disease and infection, illicit drug use and the coming winter season, have sounded the alarm of a developing public health crisis.

“Housing is a right,” Mayor Jacob Frey said. “We’re going to continue working as hard as we can to make sure the people in our city are guaranteed that right.”

The AP said approximately 300 people are living in the camp that is situated beside 16th Ave S & E Franklin Ave.

Earlier this month, a team of AP reporters visited the camp and found dozens of tents lining the city street.

To their amazement, most of the residents were Native American.

The homeless camp — called the “Wall of Forgotten Natives” because it lined a highway sound barrier, is in a section of the city with a large concentration of American Indians that are suffering from extreme wealth, health, and education inequality. The AP said the tents stand on what was once considered Dakota land.

“They came to an area, a geography that has long been identified as a part of the Native community. A lot of the camp residents feel at home, they feel safer,” said Robert Lilligren, vice chairman of the Metropolitan Urban Indian Directors.

The camp illuminates the inequalities (mentioned above) that face American Indians in the state. AP provides a shocking statistic that American Indians make up 1.1% of Hennepin County’s residents, but 16% of the homeless population, according to government data from April.

It is also a community that is being decimated by opioids. Minneapolis officials in July sued a group of opioid manufacturers and distributors, alleging their actions to promote prescription opioid drugs, such as OxyContin, have caused an addiction crisis straining the city’s resources.

AP said one end of the camp had been designated for families, while adults — some of whom were high on drugs — were on the other end. In the middle, an organization called Natives Against Heroin, a tent where volunteers handed out bottles of water, food, and clothing. The group also provides addicts with clean needles, and most volunteers carry naloxone to treat overdoses.

“People are respectful,” said group founder James Cross. “But sometimes an addict will be coming off a high… We have to de-escalate. Not hurt them, just escort them off. And say “Hey, this is a family setting. This is a community. We’ve got kids, elders. We’ve got to make it safe.”

With hundreds of people living in close quarters, health officials fear an outbreak of infectious diseases like hepatitis A. Local support groups have started administering vaccines. Earlier this month, a woman died when she did not have an asthma inhaler, and one man died from a drug overdose.

Local government agencies have set up areas to provide medical assistance, antibiotics, hygiene kits or other supplies. There are tents advertising free HIV testing, a place to apply for housing, and temporary showers. Portable restrooms and hand-sanitizing stations had also been positioned around the camp.

The Minneapolis City Council voted Wednesday to move the camp to a 1.5-acre commercial property owned by the Red Lake Nation. The decision came five days after Mayor Jacob Frey and representatives of ten tribes said the industrial site was the best place to relocate the tent city.

The new site at 2105-2109 Cedar Ave. South will not be ready until December because demolition work will take several months, according to David Frank, the city’s Community Planning and Economic Development director.

“We will go as quick as we can to have the interim navigation center operational and ready,” Frank said. “We have our permitting people standing by. We have our housing team, our facilities team and our projects management all lined up to do this work.”

The cost of preparing the site with living accommodations for dozens of people will be between $2 million and $2.5 million, Frank added.

Minneapolis’ homeless explosion comes as no surprise. The much larger trend at play is the nation’s homeless population increasing for the first time since 2010 — driven by housing affordability issues, and widening inequalities. But do not tell President Trump the real economy continues to deteriorate.

In 40 different venues over the last three months, President Trump declared the economy is the greatest, the best or the strongest in US history.

— Trump, in a speech at a steel plant in Illinois, July 26

“This is the greatest economy that we’ve had in our history, the best.”

— Trump, in a rally in Charleston, W.Va., Aug. 21

“You know, we have the best economy we’ve ever had, in the history of our country.”

— Trump, in an interview on “Fox and Friends,” Aug. 23

“It’s said now that our economy is the strongest it’s ever been in the history of our country, and you just have to take a look at the numbers.”

— Trump, in remarks on a White House vlog, Aug. 24

“We have the best economy the country’s ever had and it’s getting better.”

In a recent, Bank of America note titled “The Thundering World,” a major theme in development for the 2020s could be “the epic wealth inequality” that is plaguing the economy.

BofA says quantitative easing amplified income and wealth inequality over the last decade. The distribution of wealth is the widest ever. The top 1% own 40% of the global wealth; the bottom 80% own 7%.

What does this all mean? Well, decades of failed economic and social policies are about to come home to roost. The explosion of homelessness in Minneapolis over a short period, is an example of the breakdown of the social fabric that will strain many more municipalities across the country in the years ahead. The America that we knew will not be the same by 2030.

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Authored by Meadow Clark via Daisy Luther’s Organic Prepper blog,

The New York Times is reporting that 80,000 Americans died of the flu last winter and that it’s the highest death toll yet. Scary articles like these are thinly veiled attempts to push Americans into the vaccine regime (get your flu shots or your going to die!) out of fear, panic, and hysteria. Maybe it is the highest death toll yet, however, there is more than meets the eye.

The Big Pharma-media-government conglomerate has a lot staked in keeping you unwell, scared and dependent. Frightened, self-doubting, and unhealthy people are much easier to control.

But first, it’s not just about money…

A lot of people point to the billions that Big Pharma rakes in annually as a reason for why they push their drugs and don’t care about injuries and death that could result from them: vaccines, opioids, antidepressants, etc.

Sure, but money is just a tool for a bigger goal.

This desire for omnipotence is what drives the vaccine marketing campaigns. Why else would there be cohesive actions among giant multinational corporations, the government, and the media? Did you know that most University medical research is brought to you by pharmaceutical companies? Think of how much power an entity wields over the masses if it can control the flow of information and its perception.

What other companies enjoy tax-funded compensation courts just for the injuries caused by their product instead of allowing injury victims to sue the manufacturers themselves?

If you are injured or die from vaccination, you cannot sue the vaccine makers or the medical practice you rely on. Once it’s done, all responsibility thereafter is dumped on the person who allowed themselves to get the vaccine. This is one of the few examples where consumers have few rights and the sellers have too much leverage over the individual. Many employees don’t even have basic rights over the bodies while they are at work anymore…

The media steamrolls the public with questionable death toll numbers of people who succumbed to the flu. Sadly, they downplay the numbers of vaccine injuries such as the 4250% increase in fetal deaths that occurred after flu vaccines were deemed “safe” for pregnant women…

Big Pharma Propaganda Tactics

Fear: Pumped up death toll statistics and horror stories. (See below.)

Lies and astroturfing:

Think those viral Facebook posts are organic? Is that a real Facebook comment or a paid troll? Check out this short talk by journalist Sharyl Attkisson about Big Pharma’s astroturfing to trick consumers.

Guilt:

Attempting to make everyone feel responsible for everyone else’s health (“herd immunity”)when in actuality, the myth of vaccine effectiveness has created a lack of self-responsibility in society. And herd immunity is a misfire because it was based on a different premise than what’s presented, not vaccination. Although Big Pharma makes people feel they’ve “done their part” for society when they vaccinate, they’ve actually outsourced their own and everyone else’s health without fully comprehending the dire consequences to health.

Language:

Calling Flu a Season Like It’s a Foregone Conclusion – Last time I checked, we only have four seasons. Flu and flu-like illnesses can happen at any time. The flu is not a season…

Get Your Flu Shot – My flu shot? No, that’s your flu shot, Big Pharma. It doesn’t belong to me and I’m not buying it.

Emotional Warfare:

Vaccine-pushing trolls use horror stories and graphic imagery to sway “undeciders” to go ahead and vaccinate.

It’s been admitted before that medical workers are prompted to emotionally push parents into vaccinating their children in order to “train” them into coming back for “wellness” visits and that the vaccines in the first year of life are meaningless to the underdeveloped immune system.

Omission:

Earlier this year, the CDC chief said, “85% of children who died from the flu this season were unvaccinated.” But that doesn’t mean never vaccinated, it could mean they didn’t receive “this year’s vaccine.”

Then there are the “authority figures.”

People vaccinate to get a job because it’s “the rule.” Or they vaccinate their children because they tell themselves they “have to.” They don’t connect the dots between the earaches, seizures, constant sicknesses, food allergies, and learning disabilities that weld them to their pediatrician’s office for the next 18 years.

The truth is – most humans are afraid of authority and confrontation and it’s easier to acquiesce when someone who acts like an authority comes down on you with forceful tactics. But the more you say “No” the easier it gets. Office managers, school officials, pediatricians – none of them should be able to controlwhat you do with your body.

For live virus injectable vaccines (typically other vaccines besides the flu vaccine), newer technology“allows live virus vaccines to be  introduced as a vector or ‘trojan horse.’ In this type of vaccine,  the live virus introduces a piece of DNA into the body…” You cannot unvaccinate. How can you truly remove foreign DNA?

This vaccine modality is alarming when you consider that Epstein Barr virus and other herpes viruses are DNA viruses – why would you want a weakened live virus vaccine to work the same way? Is that real immunity or is that having the disease itself? My speculation seems too weird of a coincidence for my comfort.

And although the media likes to say that it’s a myth that you can’t catch the flu from the vaccine, I’ve seen many a coworker call in sick with flu-like symptoms after getting a flu vaccine even though the injection type of flu vaccines are not the live virus kind. FluMist, however, is a live virus vaccine administered nasally. At the very least your body is fighting off the toxicants from the ingredients and that can make someone sick.

Do tens of thousands of Americans actually die from the flu each year?

Tens of thousands of people are said to die each year from the flu. But are those claims really true?

In this article called The Influenza Deception, the writer points out:

First, it is important to point out the difference between Influenza (Flu) and Influenza-like illness. Both the flu and flu-like illnesses reveal themselves by the manifestation of the same symptoms, i.e. fever, runny nose, headache, body aches, etc. Both are caused by viruses. However, the flu is caused, logically, by the influenza virus of which there are three different types (A,B, and C) while flu-like illness is caused by a variety of other viruses.

Unfortunately, the majority of individuals who manifest these symptoms and who make a trip to their medical doctor are diagnosed with the flu, with no further testing to confirm this diagnosis…

Furthermore, the percentage of people who actually end up having had the flu actually test at a much smaller percentage than those who are prematurely diagnosed with the flu. The average percentage rate of the actual flu virus infection during the 15 years between 1997 and 2012 is 15.05%*.

Keep in mind that many of the deaths attributed to flu are from pneumonia. In this chart from the National Vaccine Information Center, it shows these pneumonia deaths that were lumped in with flu deaths over the last 40 years. Keep in mind that the influenza deaths in the chart may actually be from flu-like illnesses.

Guess how many people were really proven to have died from the actual flu in recent memory?

Did you know that only 216 people have died as a result of the confirmed flu in the 13 years between 1997 and 2010?

Here is a list of those who died as a result of confirmed influenza:

• 1997-1998 6

• 1998-1999 13

• 1999-2000 9

• 2000-2001 7

• 2001-2002 7

• 2002-2003 31

• 2003-2004 18

• 2004-2005 19

• 2005-2006 18

• 2006-2007 13

• 2007-2008 16

• 2008-2009 43

• 2009-2010 16

*Note from source article: “These numbers were a result of the calculations of the figures provided by the CDC and two sets of numbers as calculated by Dr. Sherri Tenpenny. These numbers, although accurate, should be taken as an approximation. The actual numbers may be slightly higher or lower by a measure of hundredths or tenths of decimal points. These numbers, however, can be confidently used as a representation of the number of flu infections during these years.”

That’s not exactly warranting of pandemic type reports from the media, is it? While I haven’t looked at recent reports, I don’t believe that there has been a sudden jump from 16 flu deaths to 80,000 deaths.

Whether it’s a vaccine ingredient list or a CDC report – always read the fine print, my friends.

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While the Trump administration cut the corporate tax rate from 35% to 21%, only a fraction of the savings has translated to employees’ wallets, according to the Wall Street Journal. 

Immediately after the December tax-code overhaul, dozens of companies made high profile commitments to one-time bonuses and wage increases for workers – moves which earned praise from the Trump administration. Unfortunately for employees, it appears that most companies have chosen to apply their windfall tax savings elsewhere according to various surveys. 

A new survey of 152 companies by executive-recruitment firm Korn Ferry International revealed 14% were putting part of their tax-cut savings into base salary increases. A poll of 1,500 companies by consulting firm Mercer LLC showed 4% are redirecting tax savings to budgets for bigger paychecks in the coming year. And in a survey of more than 1,000 companies published by human-resources consulting firm Aon PLC, 99% said the tax cuts weren’t prompting them to increase minimum wages. –WSJ

The reluctance to shower employees with cold hard cash is in part because it adds to fixed labor costs, according to compensation experts. “They’re doing everything they can to avoid seeing their permanent payroll go up,” said Adecco Staffing CEO Bill Ravenscroft. 

Around a third of the companies polled by Korn Ferry said they would allocate the savings from tax-cuts to programs such as worker training. 

“Companies are investing in people, but it’s much longer term,” said Korn Ferry senior client partner, Tom McMullen. 

According to nonprofit business evaluator Just Capital, of the 119 companies it tracks in the Russell 1000 index, around 80% are passing some of the tax savings on to workers – however of the combined $59.3 billion or so these companies will save thanks to the tax overhaul – around 7%, or $4.2 billion, will benefit employees directly. 

Roughly 5.8 million people, or 73% of the employees at those companies, have received some extra compensation, be it a wage increase, one-time bonus or bigger retirement contribution, said Rob Du Boff, director of corporate research.

The nonprofit calculates that the companies it is tracking will save a combined $59.3 billion from the tax overhaul. Of that amount, 7%, or $4.2 billion, appears to be destined for workers in the form of bonuses, benefits, wage increases, training or retirement contributions. The rest is being used for things like share buybacks, philanthropy and job creation. –WSJ

The reluctance by US corporations to pass tax-savings along to employees is in part why US workers have seen very little real wage growth this year in spite of a relatively strong economy, according to compensation specialists and economists. 

At 3.9% unemployment, US employers are navigating one of the tightest labor markets in decades. Yet private-sector hourly wages rose 2.9% in august vs. last year – rising at nearly the same rate as inflation in consumer-goods and eroding the wage gains. 

So where is the money going?

Businesses are spreading their tax savings across investments that will allow them to baton down the hatches if the business climate worsens. According to the Korn Ferry survey, nearly half of the companies said they would use the tax savings to boost capital investments at a faster pace, while 41% are adding to cash reserves and nearly a third were raising shareholder dividends. 

And despite the headline-generating flood of companies rushing to announce bonuses tied to the Trump tax cuts, less than 10% of the companies surveyed said they planned to offer one-time payouts to employees over the next year, or had already done so. 

AT&T Inc. paid a one-time bonus of $1,000 to about 200,000 U.S. employees after the tax-code changes became law, but didn’t announce pay raises linked to the tax changes. The company said most employees who received bonuses have their wage increases negotiated in labor-contract talks.

In a September interview, Chief Executive Randall Stephenson said AT&T awarded the bonuses, in part, to show employees the benefits that corporate tax cuts would pass on to labor, capital investments and the like. “It was a civics lesson,” he said.

Pfizer Inc., likewise, said it would pay $100 million in bonuses to nonexecutive employees and would make a $500 million contribution to its U.S. pension plan as a result of the tax cuts, but didn’t tie any sustained pay increases to tax savings. In addition, it plans to invest $5 billion in capital projects over the next five years because of the savings. –WSJ

At least the average taxpaying household will receive a tax cut too…

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Democrats voted for this → “Trump tax cut benefits all congressional districts, up to $44,697 per family” https://t.co/cwFuydNS4p

— Kevin McCarthy (@GOPLeader) July 23, 2018

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Authored by Robert Murphy via The Mises Institute,

I am a long-time critic of NYT columnist and Nobel laureate Paul Krugman. In addition to my podcast “Contra Krugman” (co-hosted with Tom Woods), over the years I’ve also written dozens of online articles pushing back against our era’s most influential disciple of Keynes. Some of my favorite essays are now available in my new book, Contra Krugman: Smashing the Errors of America’s Most Famous Keynesian. The book is 600+ pages, grouped together by topic, including such issues as fiscal stimulus, the Fed’s QE programs, climate change policy, the minimum wage, and Krugman’s bogus history of the Great Depression.

Besides pointing out the economic fallacies in his arguments, I also document the numerous examples of Krugman’s inconsistency. Indeed, on my blog I’ve had to invent a new term for this practice: a Krugman Kontradiction. It’s not a literal contradiction, but rather the type of assumptions and points of emphasis that change from argument to argument, so that Krugman always ends up promoting more government intervention (at least if it’s from a Democrat).

In the present article, I’ll list some examples of Krugman Kontradictions. For more details, and for other examples (which don’t lend themselves to a pithy summary in the present list), I refer you to my new book.

On Bond Vigilantes:

Nov. 10, 2012:

“I argued yesterday that even if the heretofore invisible bond vigilantes materialize one of these days, their attack won’t have the effects the deficit hawks imagine. Because America has its own currency and a floating exchange rate, a loss of confidence would lead not to a contractionary rise in interest rates but to an expansionary fall in the dollar.”

March 11, 2003:

“With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.”

On World War II as Example of the Keynesian Multiplier:

Aug. 15, 2011:

“World War II is the great natural experiment in the effects of large increases in government spending, and as such has always served as an important positive example for those of us who favor an activist approach to a depressed economy.”

Jan. 22, 2009:

“[T]he prospect of a Keynesian stimulus is having a weird effect on conservative economists, as first-rate economists keep making truly boneheaded arguments against the effort.

The latest entry: Robert Barro argues that the multiplier on government spending is low because real GDP during World War II rose by less than military spending.

Actually, I’ve already taken that one on. But just to say it again: there was a war on. … I can’t quite imagine the mindset that leads someone to forget all this, and think that you can use World War II to estimate the multiplier that might prevail in an underemployed, rationing-free economy.”

Is Social Security a Ponzi Scheme?:

Oct. 22, 2012:

“Take the common claim on the right that Social Security is a Ponzi scheme because the system has few real assets. It’s true that Social Security is mainly a system in which each generation pays for the previous generation’s retirement, in the expectation that it will receive the same treatment from the next generation. But like monetary circulation, this process can go on forever; there’s nothing unsustainable about it (yes, demography, but that’s about the levels of taxes and benefits, not the fundamental nature of the scheme). So there’s nothing Ponziesque at all.”

1996/97 Issue of Boston Review:

“I like Freeman’s idea of providing each individual with a trust fund when young rather than retirement benefits when old, but we had better realize that this is a significant change in the character of the social insurance system. Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).”

On the Case for Fiscal Stimulus:

Feb. 20, 2014:

“The case for stimulus was that we were suffering from a huge shortfall in overall spending, and that the hit to the economy from the financial crisis and the bursting of the housing bubble was so severe that the Federal Reserve, which normally fights recessions by cutting short-term interest rates, couldn’t overcome this slump on its own. The idea, then, was to provide a temporary boost both by having the government directly spend more and by using tax cuts and public aid to boost family incomes, inducing more private spending.”

1999:

“What continues to amaze me is this: Japan’s current [1999] strategy of massive, unsustainable deficit spending in the hopes that this will somehow generate a self-sustained recovery is currently regarded as the orthodox, sensible thing to do – even though it can be justified only by exotic stories about multiple equilibria, the sort of thing you would imagine only a professor could believe.”

On Whether 2013 Provided a Good Test of Market Monetarism vs. Keynesianism:

April 28, 2013:

“But as Mike Konczal points out, we are in effect getting a test of the market monetarist view right now [in April 2013], with the Fed having adopted more expansionary policies even as fiscal policy tightens.

And the results aren’t looking good for the monetarists: despite the Fed’s fairly dramatic changes in both policy and policy announcements, austerity seems to be taking its toll.”

January 4, 2014:

“Incidentally, these other factors are why I don’t take seriously the claims of market monetarists that the failure of growth to collapse in 2013 somehow showed that fiscal policy doesn’t matter. US austerity, although a really bad thing, wasn’t nearly as intense as what happened in southern Europe; it was small enough that it could be, and I’d argue was, more or less offset by other stuff over the course of a single year.”

Does 1990s Canada Have Lessons for the US During the Great Recession?

September 21, 2014:

“Oh, my. Josh Barro tells us that conservatives are once again touting Canada as a role model, in particular using its experience in the 90s to claim that austerity is expansionary after all.”

March 24, 2012:

“I’d argue that Canada in the 1990s is a good model for America now: a severely depressed economy, suffering very much from lack of aggregate demand, in which the effects of downward nominal rigidity can all too easily be misinterpreted as signs that there isn’t actually a lot of slack.”

Did Krugman Think Alan Greenspan Should Inflate a Housing Bubble?

June 17, 2009:

“One of the funny aspects of being a somewhat, um, forceful writer is that I’m regularly accused of all sorts of villainy…The latest seems to be that I called for the creation of a housing bubble — in fact, the bubble is my fault!…

Guys, read it again. It wasn’t a piece of policy advocacy, it was just economic analysis. What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.”

October 30, 2006:

“As Paul McCulley of PIMCO remarked when the tech boom crashed, Greenspan needed to create a housing bubble to replace the technology bubble. So within limits he may have done the right thing. “

Do Unemployment Benefits Reduce Employment?

Jan. 12, 2014:

“There’s a sort of standard view on this issue, based on more or less Keynesian models. According to this view, enhanced UI [Unemployment Insurance] actually creates jobs when the economy is depressed. Why? Because the economy suffers from an inadequate overall level of demand, and unemployment benefits put money in the hands of people likely to spend it, increasing demand.

You could, I suppose, muster various arguments against this proposition, or at least the wisdom of increasing UI. You might, for example, be worried about budget deficits. I’d argue against such concerns, but it would at least be a more or less comprehensible conversation.

But if you follow right-wing talk — by which I mean not Rush Limbaugh but the Wall Street Journal and famous economists like Robert Barro — you see the notion that aid to the unemployed can create jobs dismissed as self-evidently absurd. You think that you can reduce unemployment by paying people not to work? Hahahaha!”

2010:

“People respond to incentives. If unemployment becomes more attractive because of the unemployment benefit, some unemployed workers may no longer try to find a job, or may not try to find one as quickly as they would without the benefit. Ways to get around this problem are to provide unemployment benefits only for a limited time or to require recipients to prove they are actively looking for a new job.”

On Admitting Error:

October 23, 2017:

“Again, everyone makes forecast errors. If you’re consistently wrong, that should certainly count against your credibility; track records matter. But it’s much worse if you can never bring yourself to admit past errors and learn from them.

That kind of behavior makes it all too likely that you’ll keep making the same mistakes; but more than that, it shows something wrong with your character.”

June 22, 2015:

“Those who can, cite evidence to support their position; those who cannot play gotcha. Events have overwhelmingly supported a Keynesian view of the effects of fiscal policy, but the anti-Keynesians have responded, not by reconsidering their views, but by seeking to discredit the messengers. In particular, there’s a lot of “Krugman said X would happen, and it didn’t, so Keynesian economics is wrong.” 

“I know what the response will be: “But you said blah blah blah!” So what? Even if I did, and even if my remarks aren’t being taken out of context, I am not the Oracle of Keynes, and my fallibility says nothing about how the economy works. If gotcha is all you’ve got, then you’ve got nothing.”

Conclusion

Now to reiterate, my examples above are of Krugman Kontradictions – that’s with a “K,” meaning they are not literal contradictions. Believe me, I am well aware of “what Krugman was trying to say” in each of the above examples. (That’s partly why I’ve provided links to everything — I encourage you to go read the discussion in context.) Nonetheless, I think even the fairest of readers will conclude that Krugman has a disturbing habit of mocking and/or vilifying people who use arguments that he himself employed earlier in his career, or under slightly different circumstances.

Besides the fun of catching Krugman in his flip-flops, my new book shows just how weak the empirical case for Keynesian fiscal policy is. I imagine many Austrian readers will be surprised to see how well the data support their position. Indeed, in several of the chapters I take the very numbers Krugman digs up, and show that they come down on the side of Mises and Hayek, not Keynes and Krugman.

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U.S. Customs and Border Protection (CBP) had made considerable progress developing and implementing a biometric system to monitor and screen international travelers using facial recognition technology. However, it may not be enough.

CBP’s Biometric Entry-Exit Program conducted a pilot test at nine airports utilizing this technology to match only 85% of passengers’ identities at departure gates – well below the agency’s target of a 97% to 100% match rate, according to a new audit by the Department of Homeland Security’s (DHS) Office of Inspector General.

CBP encountered operational challenges that limited biometric confirmation to only 85% of all passengers because of “poor network availability, a lack of dedicated staff, and compressed boarding times due to flight delays,” the audit said.

The audit added, due to missing or poor quality digital images, that CBP could not consistently match individuals of specific age groups or nationalities. The biometric data obtained during the pilot test improved DHS’ ability to verify 105,000 foreign visitors from U.S. airports.

The low 85% biometric confirmation rate addresses questions as to whether CBP will meet its target to confirm all international departures at the top 20 U.S. airports by the fiscal year 2021.

Given the uncertainties mentioned in the audit, CBP must address a series of questions on how the program will be funded and staffed moving forward. With the lack of guidance from DHS, the full implementation of the entry-exit biometric system at airports across the country remains in question.

The Los Angeles Times said that Congress set aside up to $1 billion over a 10-year period from fees charged to foreign visitors to fund the creation of a biometric screening system.

The CBP processes more than 1 million travelers every day as they enter the U.S. at air, land, and sea ports of entry. The ability to hit the 97% to 100% match rate in pilot tests seems to be in question, at the moment. This gap in future security at airports is a major flaw if the program is rolled out prematurely. It could easily be exploited by terrorists, jeopardize national security, and or degrade the ability to enforce immigration laws.

The next pilot test is expected to complete a 30-day test in October at Los Angeles International Airport. If the match rate continues to underperform the agency’s target of 97% to 100%, the entire program could be in trouble.

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Authored by Peter Korzun via The Strategic Culture Foundation,

US Ambassador to NATO Kay Bailey Hutchison is a highly placed diplomat. Her words, whatever they may be, are official, which includes the ultimatums and threats that have become the language increasingly used by US diplomats to implement the policy of forceful persuasion or coercive diplomacy. Bellicose declarations are being used this way as a tool.

On Oct. 2, the ambassador proved it again. According to her statement, Washington is ready to use force against Russia. Actually, she presented an ultimatum – Moscow must stop the development of a missile that the US believes to be in violation of the Intermediate-Range Nuclear Forces Treaty (INF Treaty). If not, the American military will destroy it before the weapon becomes operational. “At that point, we would be looking at the capability to take out a (Russian) missile that could hit any of our countries,” Hutchison stated at a news conference. “Counter measures (by the United States) would be to take out the missiles that are in development by Russia in violation of the treaty,” she added. “They are on notice.” This is nothing other than a direct warning of a preemptive strike.

It is true that compliance with the INF Treaty is a controversial issue. Moscow has many times claimed that Washington was in violation, and that position has been substantiated. For instance, the Aegis Ashore system, which has been installed in Romania and is to be deployed in Poland, uses the Mk-41 launcher that is capable of firing intermediate-range Tomahawk missiles. This is a flagrant breach of the INF Treaty. The fact is undeniable. The US accuses Moscow of possessing and testing a ground-launched cruise missile with a range capability of 500 km to 5,500 km (310-3,417 miles), but there has never been any proof to support this claim. Russia has consistently denied the charges. It says the missile in question — the 9M729 — is in compliance with the provisions of the treaty and has never been upgraded or tested for the prohibited range.

This is a reasonable assertion. After all, there is no way to prevent such tests from being detected and monitored by satellites. The US could raise the issue with the Special Verification Commission (SVC). Instead it threatens to start a war.

This is momentous, because the ambassador’s words were not a botched statement or an offhand comment, but in fact followed another “warning” made by a US official recently.

Speaking on Sept. 28 at an industry event in Pennsylvania hosted by the Consumer Energy Alliance, Interior Secretary Ryan Zinke suggested that the US Navy could be used to impose a blockade to restrict Russia’s energy trade. “The United States has that ability, with our Navy, to make sure the sea lanes are open, and, if necessary, to blockade… to make sure that their energy does not go to market,” he said, revealing that this was an option. The Interior Department has nothing to do with foreign policy, but Mr. Zinke is a high-ranking member of the administration.

Two bellicose statements made one after another and both are just short of a declaration of war! A blockade is a hostile act that would be countered with force, and the US is well aware of this. It is also well aware that Russia will defend itself. It’s important to note that no comments or explanations have come from the White House. This confirms the fact that what the officials have said reflects the administration’s position.

This brings to mind the fact that the Interdiction and Modernization of Sanctions Act has passed the House of Representatives. The legislation includes the authority to inspect Chinese, Iranian, Syrian, and Russian ports. Among the latter are the ports of Nakhodka, Vanino, and Vladivostok. This is an openly hostile act and a blatant violation of international law. If the bill becomes law, it will likely  start a war with the US acting as the aggressor.

Trident Juncture, the largest training event held by NATO since 2002, kicks off on October 25 and will last until November 7, 2018. It will take place in close proximity to Russia’s borders. Russia’s Vostok-2018 exercise in September was the biggest seen there since the Cold War, but it was held in the Far East, far from NATO’s area of responsibility. It’s NATO, not Russia, who is escalating the already tense situation in Europe by holding such a large-scale exercise adjacent to Russia’s borders.

Russia is not the only country to be threatened with war. Attempts are being made to intimidate China as well. Tensions are running high in the South China Sea, where US and Chinese ships had an “unsafe” interaction with each other on Sept. 30. A collision was barely avoided. As a result, US Defense Secretary James Mattis had to suspend his visit to China when it was called off by Beijing. The security dialog between the two nations has stalled.

Perhaps the only thing left to do is to give up on having a normal relationship with the United States. Ambassador Hutchison’s statement is sending a clear message of: “forget about diplomacy, we’re back to the Stone Age,” with Washington leading the way. This is the new reality, so get used to it. Just shrug it off and try to live without the US, but be vigilant and ready to repel an attack that is very likely on the way.

It should be noted that Moscow has never threatened the US with military action. It has never deployed military forces in proximity to America’s shores. It did not start all those unending sanctions and trade wars. When exposing the US violations of international agreements, it has never claimed that the use of force was an option. It has tried hard to revive the dialog on arms control and to coordinate operations in Syria. But it has also had to issue warnings about consequences, in case it were provoked to respond to a hostile act. If the worst happens, we’ll all know who is to blame. Washington bears the responsibility for pushing the world to the brink of war.

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Tomorrow at 8:30am ET, the BLS will release the September jobs report: payrolls are expected to dip to 185k from 201K and in line with the three month average of 185K. However with record low unemployment and a bubbly labor market fueled by Trump’s stimulus, where labor shortages are said to be the biggest concern to companies, absent some “force majeure” in the words of Elon Musk, markets will ignore the payrolls print and focus squarely on average hourly earnings to see if last month’s inflationary wage pressures (+2.9% Y/Y) persist, rise even further – which would instantly spike yields – or fall.

Here are Wall Street’s consensus expectations:

• Non-farm Payrolls: Exp. 185k, Prev. 201k
• Unemployment Rate: Exp. 3.8%, Prev. 3.9% (NOTE: the FOMC projects unemployment will stand at 3.7% at the end of 2018)
• Average Earnings Y/Y: Exp. 2.8%, Prev. 2.9%
• Average Earnings M/M: Exp. 0.3%, Prev. 0.4%
• Average Work Week Hours: Exp. 34.5hrs, Prev. 34.5hrs
• U6 Unemployment Rate: Prev. 7.4%
• Labor Force Participation: Prev. 62.7%

When it comes to the one number that matters most, average hourly earnings, one bank is pessimistic. Looking at the historical record, Citi notes that we have almost always, since 2010, printed 0.1% or below in the month following a print of 0.4% or larger.  YoY number will see a 0.5% roll off from last September and as such a print of 0.1% will give us a 2.5% YoY print short of the 2.8% YoY expectations. A 0.1% AHE number could promptly reset the recent inflationary expectations and send yields sliding.

Arguing the bullish case is Goldman, which expects a strong September employment report overall (+174K payrolls, below the 185K consensus) with a decline in the unemployment rate, firm average hourly earnings, and a pickup in the underlying pace of payroll growth despite a temporary drag from Hurricane Florence. Goldman also expects upward revisions to August job growth and a sizeable rebound in the household employment measure are more likely than not; it also expects a temporary drag of around 33k from Hurricane Florence, which struck the Carolinas during the payroll reference week. The bank’s economists see scope for a rebound in household employment and labor force participation, as “both measures were depressed in August by seasonal adjustment difficulties related to youth summer jobs.” Finally, Goldman expects average hourly earnings to increase 0.3% month over month in tomorrow’s report, reflecting a boost from calendar effects and possibly a temporary bump from the hurricane; the year-over-year rate is expected to fall by two tenths to 2.7%, though unlike Citi, Goldman said “the risks to that forecast are skewed to the upside.”

More details on what to expect tomorrow, courtesy of RanSquawk:

HURRICANE FLORENCE/INITIAL JOBLESS CLAIMS: Initial jobless claims declined to a new cyclical low of 202k in the NFP survey week, falling from 210k in the August NFP survey period, which augurs well for Friday’s official payrolls data. Some desks have suggested that the impact of Hurricane Florence could negatively impact September’s labour market data. However, Deutsche Bank argues that this may not been the case this time around. “Typically the impact shows up in the initial jobless claims data, but this was not the case last month,” Deutsche Bank writes, “in fact, claims for the September survey week fell to 202k, the lowest level since late 1969. The bank notes, however, that jobless claims did jump up to 215k in the subsequent week (“still low”), with the increase due to rises in North and South Carolina, the states which bore the brunt of the storm; DB said this hints at potential downside risks to its 190k forecast for the headline nonfarm payrolls. But with that said, Deutsche says that any material downside miss is likely to be made up in the months ahead as reconstruction efforts get underway.

WAGE GROWTH: Deutsche Bank also argues that the Hurricane is not expected to have an outsized impact on average hourly earnings. If anything, compositional issues suggest that there could be upside risks, pointing to last year’s Hurricanes Harvey, Irma and Maria, which helped lift the September 2017 average hourly earnings data. “The reason for this is that extreme weather events are more likely to displace relatively lower income workers, such as those in the leisure and hospitality industry, thus artificially goosing the average wage overall,” Deutsche says, adding that any potential spike in earnings would likely be reversed in October.

ADP PAYROLLS: There was no evidence of a negative hurricane impact in the in the latest ADP payrolls data, where 230k nonfarm payrolls were added to the US economy in September, surpassing expectations for 185k; the previous month’s data was also revised higher by 5k. “The job market continues to power forward,” Moody’s chief economist Zandi said, “employment gains are broad-based across industries and company sizes. At the current pace of job creation, unemployment will fall into the low 3%’s by this time next year.” Pantheon’s analysts noted that the data was consistent with all the very strong surveys, including the ISMs, JOLTS and NFIB hiring intentions, but it probably overstates the official data, explaining that “ADP counts names on payroll lists, regardless of whether people were paid anything in the survey period, but the official data only counts people who were paid – anything – in the survey period, adding that “so part-time hourly paid people who were kept away from work by the storm and, hence, did no paid work in the survey week, will temporarily drop out of the official numbers, but continue to be counted by ADP.”

LAY-OFFS: US employers announced 55,285 planned job cuts in September 2018, rising from 38,472 announced in August, and sharply above the 32,346 cuts announced in September 2017. Challenger noted that around half of the intended job cuts were a result of Wells Fargo, which said it would cut between 5-10% of its workforce over a three-year period (which could see 26,500 jobs shed). “As the job market remains near full employment and companies struggle to find workers, large-scale job cut announcements like the one from Wells Fargo will actually provide the workers necessary for companies to gain momentum and sustain growth,” Challenger said, adding that “with the exception of Wells Fargo, low job cut announcements indicate employers are holding on to their staff in a period of expansion.”

BUSINESS SURVEYS: Both the manufacturing and nonmanufacturing surveys were solid, with the employment subindices rising for both. For the non-manufacturing sector, the employment sub-index rose by 5.7 points to the highest since the inception of the sub-index in 1997. The manufacturing ISM’s employment metric ticked up by 0.3 points to the highest since February 2018. “Respondents continued to note labormarket issues as a constraint to their production and, more significantly, their suppliers’ production capability,” ISM said. Markit’s PMI also noted strong labour market activity, stating that services providers suggested greater business requirements were driving job creation, extending the current sequence of employment growth that began in March 2010, and notably, Markit said that September hiring rose at the quickest rate since June 2014.

MARKET REACTION: US rates jumped significantly on Wednesday, driven by better ADP and ISM nonmanufacturing surveys, which painted a solid picture of the US labour market, which nods to the FOMC continue its path of policy normalisation. In terms of a market reaction to the Employment Situation Report, TD Securities says USD should take its cue from the rates market: “The recent melt-up in rates and long USD positioning highlights the asymmetry in reaction should wages fall short of expectations. USDJPY should be the key barometer for broader G10FX, and we would expect 115.00 to be formidable resistance.” On rates, TD says the reaction will be driven by the wages data: “Payrolls pose binary risks for rates after the significant bear-steepening of the curve in recent days,” adding that “given market pricing, we see a bigger rate reaction on a disappointment.”

A quick side note on the ISM non-mfg survey: as we discussed earlier, if payrolls follow the employment component, tomorrow’s jobs number should print in the 500,000 range, the highest since 1983. If that happens, look for 10Y yields to shoot into low earth orbit.

Meanwhile, back to Goldman, the bank lists several factors arguing for a weaker August job report:

• Hurricane Florence. State-level job growth often stalls in the wake of major disasters, and particularly severe hurricanes tend to produce outright declines in the affected states (-0.3% month-over-over on average in our dataset). Florence also struck during the payrolls survey week, as did Hurricane Irma last September which resulted in a 167k monthly decline in Florida payrolls (or -1.9%, see left panel of Exhibit 1). At the same time, the scope of employment disruption appears to have been narrower in the case of Florence, with a relatively smaller decline in electricity usage (that also occurred a bit later on in the survey week, see right panel). Relatedly, over 1 million people were ordered to evacuate the Carolinas by Wednesday of the survey week, whereas 6.5 million Floridians were ordered to evacuate during Irma. We also estimate approximately 20k hurricane-related jobless claims in the Carolinas over the last two weeks (compared to 24k in Florida and Georgia following Irma).

• While uncertainty is high, we estimate that Florence will reduce the level of September payrolls by around 33k (or 0.5% of the 6.7 million nonfarm employees in North and South Carolina). To the extent the hurricane indeed weighs on state-level employment, we would expect a full reversal in October (and perhaps November). The BLS noted a drag from Hurricanes Harvey and Irma in the text of last September’s employment report, and any similar color in tomorrow’s report (as well as the pace of job growth in weather-sensitive industries like leisure and hospitality) will help gauge the actual hurricane impact (the state-level data will not be released until October 19th).
• Job cuts. Announced layoffs reported by Challenger, Gray & Christmas increased by 6k in September to 50k (SA by GS). On a year-over-year basis, announced job cuts rose 20k.

Arguing for a stronger report:

• Service-sector surveys. Service-sector business surveys improved on net in September, with our non-manufacturing employment tracker rising to a new cycle high (+0.5pt to 57.5). In particular, the nationwide ISM nonmanufacturing employment measure surged to a 21-year high (+5.7pt to 62.4). Service-sector job growth rose +178k in August and averaged 151k over the last six months.
• Manufacturing surveys. Manufacturing-sector surveys pulled back on net but they too remain elevated. Our manufacturing employment tracker fell by 1.8pt to 57.8 in September. As shown in Exhibit 2, after sequential moderation in the early summer, employers across the service and manufacturing sectors are now reporting increasingly broad-based gains in employment.[1] Manufacturing-sector payrolls fell 3k in August but have increased 18k on average over the last six months.
• Jobless claims. Initial jobless claims returned to cycle lows on average during the four weeks between the payroll reference periods (206k) and fell to a 49-year low in the payroll reference week (202k). Continuing claims continued to move lower, falling 47k between the survey weeks and reaching a 45-year low during the reference period (1,645k).
• ADP. The payroll-processing firm ADP reported a 230k increase in September private payroll employment—46k above consensus and the fastest pace since February. We view the report as evidence of strong underlying job growth. Importantly though, Hurricane Florence did not appear to affect the report (based on ADP commentary), whereas we estimate a 33k drag on the official BLS measure.
• Job availability. The Conference Board labor market differential—the difference between the percent of respondents saying jobs are plentiful and those saying jobs are hard to get—rose 2.3pt to +32.5 in September, a new 17-year high. JOLTS job openings also rose to a new cycle high in the most recent report (6,939k in July).

Neutral factors:

• Tariff uncertainty. Trade tensions escalated further in September, as the White House imposed a 10% tariff on $200bn worth of Chinese imports on September 24th. However, this occurred after the payroll survey week had already ended (as did the White House announcement on September 17th that these tariffs had been finalized). Accordingly, we do not expect a significant impact on tomorrow’s jobs report.

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Following the recent dreadful auto sales numbers out of the United States, both Germany and Brazil have posted extremely weak auto production and sales numbers, prompting more questions about the state of the global economy.

According to JP Morgan, auto production in Germany has been surprisingly weak in recent months, with the prospects of a recovery delayed until “at least October.” This was unveiled with the German July Industrial Production data for July which was “a disappointment,” as manufacturing slumped 1.9%m/m and 6% annualized below 2Q18. Of this, automotive was the biggest weakness.

The shifting timing and pattern of holidays across the German states over the summer likely knocked the latest IP data around a lot, but this year the new emissions testing regime is adding a real drag. Since 1st September, all new cars need to be certified under the new testing regime, but some German producers appeared to have fallen far behind this deadline. Some car models have temporarily been removed from sales, while others have had to be modified to meet the new standards, resulting in reduced production levels to manage the changeover.

Meanwhile, according to more concurrent car production data from the German Automobile Association (VDA) which is now available for the month of September – and which counts the number of cars rolling out of factories – production has collapsed even further. An additional problem, is that the VDA data had already slumped in July (almost -20%m/m), while the IP data showed a fall of 6.7%m/m.

While the VDA may be overstating the weakness, it is also possible that IP has much further to fall, adding to concerns about Europe’s slowing economy.

Not to be outdone by the United States or Germany, Brazil also posted plunging numbers for September. Auto production in the country was down 23.5% in September M/M, according to Reuters, while sales were down 14.2% over the same period according to the National Automakers Association. Brazil has traditionally been one of the world’s five largest auto markets until the country’s recent economic downturn. Companies like General Motors, Ford and Chrysler all have major operational facilities in Brazil.

And then there is the US, where earlier this week we reported the latest surprisingly poor auto sales numbers for September.

Results from Ford, Honda, Nissan, Toyota and Fiat all tell the story of an industry that had a terrible month, with few silver linings. Three of these names posted double digit percentage declines in YOY sales and three of them missed analyst estimates.

Some details:

• Ford posted an 11% drop, missing analyst estimates of 9.1%. The F-Series pickup line ended a 16-month streak of sales gains. Mustang sales were down 1.3%. 
• Nissan posted a 12.2% drop in September. Nissan and Infiniti brand car sales fell by 36%, including a 28% drop for the Altima sedan as the company prepared to start selling an all-new version this week.
• Toyota sales were down 10.4%, far below estimates of 6.7% for the month. Combined sales for Toyota and Lexus brand cars fell 25.3%. 
• Fiat posted the only true “beat”, as sales rose 15% versus analyst estimates of 8%. However, the Chrysler brand fell 7% to 14,683 vehicles and the Fiat brand fell 46% to 1,185 vehicles. The deficit was made up on Jeep sales, which were up 14%, as well as sales of Ram pickups and minivans.
• Volkswagen of America car sales were down 4.8%
• GM third quarter total sales were down 11%. The company stopped reporting monthly numbers earlier this year, with many suspecting that weakness in the production pipeline is responsible; they were right. 

As discussed previously, the lack of auto incentives was the primary driver for the poor US auto numbers, prompting the question: absent carmaker subsidies, just how strong is the US auto market in particular, and the overall economy in general.

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Japan’s Research and Development Institute of Advanced Industrial Science and Technology (AIST), has developed a humanoid robot that aims to replace difficult human work, like installing drywall.

The HRP-5P robot is almost 6 feet high and weighs roughly 220 pounds. Japanese researchers incorporated advance intelligence into the robot, consisting of environmental measurement/object recognition technology, whole-body motion planning/control technology, task description/execution management technology, and high-reliability systemization technology, which is just enough technology for the robot to complete some tasks at a constructions site.

AIST said HRP-5P is still in the development stage of industry-academia collaboration, it is expected that the research and development for practical use of humanoid robots could soon be transferred into the private/government sector for infrastructure projects and or assembly of large structures such as aircraft and ships.

The robot will debut at IEEE/RSJ International Conference on Intelligent Robots and Systems (IROS 2018) in Madrid, Spain from October 1st to 5th. In addition, the robot will be at World Robot Expo 2018 from October 17th to 21st at Tokyo Big Sight (Koto Ward, Tokyo).

According to AIST, the robot addresses population shortfalls through technology instead of immigration in the country. It is meant to tackle the “manual shortages” expected to stem from Japan’s aging residents and shrinking birth rate:

“Along with the declining birthrate and the aging of the population, it is expected that many industries such as the construction industry will fall into serious manual shortages in the future, and it is urgent to solve this problem by robot technology. Also, at work sites assembling very large structures such as building sites and assembling of aircraft / ships, workers are carrying out dangerous heavy work work, and it is desired to replace these tasks with robot technology. However, at the assembly site of these large structures, it is difficult to develop a work environment tailored to the robot, and the introduction of robots has not progressed. Humanoid robots have a body structure similar to human beings, so it is possible to substitute for human work without changing the working environment and release from heavy work becomes possible.”

BofA’s recent note titled “Watching paint dry,” referred to the percentage of population aged +65, is set to explode from now until 2050, in most of the world.

While Japan is demographically challenged at the moment, Karen Harris, Managing Director of Bain & Company’s Macro Trends Group, discusses the collision of demographics, automation, and inequality, that is expected to displace millions of US workers in the next decade. She said the last time the US experienced a labor shift of this magnitude, it was the early 1900s when millions of workers transitioned from agriculture to industry.

Turbulent times are ahead for Japan, US, and the developed world, as researchers from AIST hope to defuse the demographic time bomb with humanoid robots. Goodluck.

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