Noisy Political Signals
The big question facing the market right now is whether the economy has turned a corner this is simply another in a series of “bear market rallies” in a long depression. Jeffrey Snider has laid out the fundamental case for the recent optimism being transient. His latest focuses on the labor market and Fed:
Gradual tightening? Suggestive? How long does it take? In March 2014 there were signs that slack was diminishing if not nearly diminished enough. In March 2017, there are still signs. This is nothing more than obfuscation of the first order. She is using the unemployment rate as Fed officials have for the last several years, to suggest an economy that cannot and will not be found outside those particular BLS data points. What’s more, she knows it.
That is why the Fed raised rates for a third time yesterday, as it has nothing to do with the continued precarious state of the US economy. Three years post taper is far more than enough to realize that which was once claimed, recovery, is now impossible without something like divine intervention (which would still need to take the form of currency reform to actually be successful). All there will ever be from here on is the “suggestive” about what the public believes of recovery and what Janet Yellen clearly refuses to clear up as to how wrong that expectation is. She’s purposely avoiding the confessional.
To place even further emphasis on this devious divide is recent wage and earnings data that combined with oil prices belie even the “signs” of labor improvement. Nominally, wage and earned income gains continue to be stuck – if they were anything more than that Yellen would not need to emphasize the “suggestive”, she could state it outright and be believed. With oil prices rising, this temporary burst of inflation forces wage statistics back to a negative sign, and a negative commentary on the whole economy as well as “slack.”
What does social mood say? It’s messy if we look at shifting political opinion.
But since the election, there has been a noticeable increase in the flow of dubious and unsupported claims among liberals. One widely circulated post on Medium portrayed the Trump administration’s fumbling rollout of a travel ban in late January as an elaborate “trial balloon for a coup d’état.” Brooke Binkowski, managing editor at the rumor-tracking site Snopes, recently told The Atlantic that she has been seeing more false reports aimed at liberals or from liberal sources — “a lot of dubious news, a lot of wishful-thinking-type stuff.”
Even some prominent liberals like Robert Reich, the former Secretary of Labor under Bill Clinton, seem open to conspiracy theories of the sort typically espoused by figures like Alex Jones and Glenn Beck. (After the recent violent demonstration at the University of California at Berkeley, Mr. Reich raised the possibility that the far right “was in cahoots” with the agitators, writing a blog post titled “A Yiannopoulos, Bannon, Trump Plot to Control American Universities?”)
A simple explanation for this shift is that misperceptions often focus on the president and are most commonly held by members of the other party. Just as Republicans disproportionately endorsed prominent misperceptions during the Obama years (like the birther and death panel myths), Democrats are now the opposition partisans especially likely to fall victim to dubious claims about the Trump administration.
Or that Russia is somehow involved with Trump. The only reason why people don’t think that claim is insane is the mainstream media is running it 24/7 since even before Election Day. After months of claims, there’s still more evidence that Obama was born in Kenya than there is of a Trump-Russia conspiracy.
Another indicator influenced by politics is consumer confidence. Democrats and Republicans have flipped their opinions, while independents are slightly more confident.
Finally, the survey cautions that “the post-election surge in consumer confidence was based on political promises, and not, as yet, on economic outcomes. Moreover, over the past half century the surveys have never recorded as dominant an impact of partisanship on economic expectations. When the same consumers were re-interviewed from six months ago, the survey recorded extreme swings based on political party affiliation, with Democrats becoming much more pessimistic and Republicans much more optimistic. Such divergences will ultimately converge since consumers hold economic expectations.”
But the divided America is extremely evident. Republican consumers in America have not been this ‘comfortable’ since January 2008, Democrats are the least ‘comfortable’ in 10 months.
The big swings in mood are generally indicative of negative social mood. People feel as if there are two sides. When one side is in control they are optimistic, when out of power they are pessimistic. These opinions have little to no bearing on reality, rather it reflects how politics has become a battleground and a way of expressing negative mood.