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Industrial Capacity is Back

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When looking for economic data that tells us all how we’re all doin’, sometimes you just can’t beat the classics.

Long ago, the US was a nation that made stuff. Economic expansions or contractions could be measured by industrial output with a rather high degree of precision. Lower output meant that people were losing their jobs and the nation was slowing down.

The industrial capacity figure hasn’t been used much lately because we don’t rely on manufacturing for the bulk of the jobs anymore. At about 12M jobs, it’s just over 10% of all employment. But it still means a lot, and the results are encouraging.

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No Longer Driven by Oil

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A new international war has started in the Middle East as Syria continues to burn. Russia is slowly being strangled by international sanctions that are now cutting off their ability to produce and sell oil. With all of this happening in the world, something remarkable is happening to the price of oil – it’s dropping.

How could this happen? The short answer is that the US continues to move towards energy independence, producing its own oil while consumption is stagnant. It’s a good thing, all in all, but it means that the environmental degradation that was once found only in distant lands, and conveniently ignored by nearly everyone in the US, is now upon us. What can we do?

There’s a decent chance that the free market will actually sort it all out – once it’s been properly regulated to account for the environmental damage, that is.

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Global Policeman, Again

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Another year, another war in Iraq. Like the sunspot cycle, they seem to come ‘round about every 11 years. But this is not a natural cycle – this is caused by the instability built into a planet that is closer than ever before. Artificial “nations” created by outside powers with inherent instability, such as Iraq, are a burden on everyone.

There’s little point going into the strange history of Iraq and other nations like them because as it currently stands there are few ways to fix the problem. The climate of constant war makes redrawing boundaries in the Middle East (or, for that matter, in Ukraine) hard to imagine without making the situation worse in the short run. It usually takes years of peace and stability to contemplate a peaceful transition, such as the one that Scotland will vote on next week.

One question we can contemplate is why the burden always falls on the US. The short answer to that question is that we are by far the dominant military on the planet. But why?

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Job Loss Hits a Milestone

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Of all the various measures of the economy we have at our disposal, one of the most consistent and real-time is the Unemployment Initial Claims, which comes out weekly. It’s nothing more than a measure of how many people filed for unemployment insurance in the previous week, so it’s a solid number that doesn’t come from a survey or other statistical measure.

It still has its problems, however. It’s noisy, bouncing up and down a bit each week – a problem taken care of by looking at a 4-week moving average. Initial Claims numbers also don’t tell us a thing about hiring, but rather how many lost their jobs.

It hasn’t been useful for at least two years as attention turned away from job loss to job creation that would absorb the surplus workers looking for employment. But it’s worth checking in with this handy number one more time because it has hit an important milestone – and may be as low as it will ever go.

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