(Partial) Weekly Wrap-Up

There's no way to wrap up this past week.

Because I try to stay in my political-economy lane, I’ll leave it others to run down many aspects of last week’s developments, including the various gut punches to democracy and the non-energy aspects of the next chapter in Middle-East warfare. Suffice it say that, as yesterday’s nationwide protests revealed, there are clearly forces pushing in both directions. No one knows where this abuse of presidential power, unblocked by the very checks and balances designed to do so, is headed or where it lands. The uncertainty engender by that dynamic leads to both a pervasive dread and an economic drag. But as the next entry reveals, resistance is NOT futile.

What Does It Mean When Trump Backtracks?

Trump said he would deport all 20+ million undocumented immigrants and that he would oppose Nippon Steel’s bid to acquire U.S. Steel (as did Biden). Yet, last week he flipped on both. Both of these are good decisions, with positive implications for the U.S. economy. What should we make of that?

To be clear, the immigrant flip is partial; ICE was just told to add a carve out for undocumented workers in hotels, restaurants, ag workers. What happened was a bunch of employers got to the president (through the Sec’y of Ag) re the economic damage this was doing to their businesses, something Trump, a longtime hotelier, should understand.

According to the BLS, there are 33 million immigrants in the U.S. workforce last month, both documented and not. That’s 19% of the total workforce (the “native-born” workforce in May was 138 million).

Here are estimates from the Center for Migration Studies on the undocumented workforce:

…as many as 8.3 million undocumented immigrants work in the US economy, or 5.2 percent of the workforce. They work in construction (1.5 million), restaurants (1 million), agriculture and farms (320,000), landscaping (300,000), and food processing and manufacturing (200,000), among other occupations. Unauthorized workers hail from Mexico (30 percent), Central and South America (20 percent), and Central and Eastern Asia (15 percent). Occupations which will continue to demand undocumented workers over the next decade include cooks, home health/personal care aides, delivery and taxi drivers, and medical/therapy assistants.

Through an economic lens, both this and the trade war are pretty vicious and unnecessary attacks on the economy’s supply side (yes, unfair trade practices and non-secure borders exist; neither are addressed by Trump’s agenda). That’s bad for price (tariffs) and wage (deportation) inflation, something Americans are already anxious about.

So, to me, this gets filed under Trump’s acute self-preservation account. He’s as rabid a xenophobe as ever, and Stephen Miller is still a top lieutenant. But just like the TACO trade, he wants to bend the economy, not break it, and will seek off ramps when necessary.

Greg Sargent sees this policy change as…

…an admission of political vulnerability. Trump plainly grasps that his deportations are now perceived—accurately—as needlessly targeting good people who are contributing vitally to our economy and society, and not primarily the violent “criminal migrant” class that Trump and Stephen Miller keep insisting they’re removing.

…and he urges Ds to take advantage of it.

That may be right and Greg has great political antennae. But a much bigger vulnerability would be the tanking of the good economy he inherited due to his misguided policies.

Same with the Nippon deal. Summarizing a bunch of analysis, my guess is that this deal gives U.S. Steel, its workers, and the United Steel Workers union a better shot at growing and prospering in the future, something rank-and-file workers have seen for awhile, even if USW management isn’t there yet.

So, what does it mean when Trump backtracks? It means he’s seeking economy-insurance for maintaining forward momentum on his authoritarian putsch push. That project is a lot harder in a recession.

This does raise the question of the big, ugly budget. If that passes, I predict it will hurt his standing in this regard, though he may not realize the extent to which the Medicaid and SNAP cuts hurt his constituents. If he does try to mitigate those cuts, that action will go in this same file.

The Dataflow

I already went through this in a Friday post. The data fog is denser than usual but I conclude (as do many others), that a) a set of time-limited factors are holding back the tariffs’ impact on prices, and b) the job market is softening somewhat. I’ve got just two things to add.

• In my list of reasons why the tariffs haven’t shown up in inflation yet, a few folks asked me why I left off the possibility that the Trumpies are cooking the data. The answer is that I very strongly doubt it. The BLS and other relevant statistical agencies have great integrity and would consider such interference absolutely unacceptable, meaning somebody would leak. That said, you can never be sure.

• The oil price jumped 7% to ~$73/barrel on Friday as the Israel/Iran conflict hit energy markets, and that conflict has, of course, escalated since then, including a Saturday Israeli hit to Iranian oil and gas production. Just the $5 jump from Friday adds about $0.12 to the pump price of a gallon (rule of thumb: $10 more per barrel adds ~$0.25 to the pump price). It’s possible that other producers could take up the slack (Iran produces about 3% of the global oil supply) but it’s also possible that Iran could decide to disrupt the fifth of the world’s oil and fuel supply that travels through the Straight of Hormuz, as they’ve done in the past.

  Obviously, this generates new inflationary pressures, and not just for the overall price index but the core as well (higher energy prices do bleed into the core through airfares, transportation services), so the Fed will be watching this too.

That’s all for now, except I’ll leave you with this, which I found totally uplifting, including the interview at the end. Favorite part comes at 2:38 where even Stewie is cracking up at how nuts this is.