On the menu today: Just how bad is the inflation crisis? Right now, America’s small businesses are as pessimistic about economic conditions in the U.S. in the coming year as they were at the start of the Covid-19 pandemic; the North American Electric Reliability Corporation warns that if you live west of the Mississippi River, you’re at high or elevated risk for blackouts this summer; Shanghai residents might be allowed to leave their apartments this week; tech giant Apple reconsiders its relationship with China; and just what is President Biden being told about monkeypox in his briefings?
Fifty-seven percent of small-business owners expect economic conditions in the U.S. to worsen in the next year, up from 42 percent in April and equal to the all-time low recorded in April 2020, according to a survey of more than 600 small businesses conducted in May for The Wall Street Journal by Vistage Worldwide Inc., a business-coaching and peer-advisory firm. The measure is one part of a broader confidence index that in May posted its largest year-over-year drop since the Covid-related shutdowns of April and May 2020.
Today, our Ryan Mills profiles a San Diego towing-company owner who simply can’t afford to stay in business much longer, thanks to runaway gas prices and increases in his tire, oil, and maintenance costs.
For perspective, President Biden’s assessment of the economy on May 10 stated that:
When you look at the economy today, it’s clear that we’ve made enormous strides. And our plans and our policies have produced the strongest job-creation economy in modern times. . . . As I see it, everything — everything across the country is — as I go across the country, our economy has gone from being on the mend to on the move.
In the president’s defense, inflation is moving up and real wages and purchasing power are moving down, so in that sense, yes, everything is “on the move.”
This newsletter is spending a lot of time on economic news lately, because economic news has a tangible effect on your daily life in a way that a lot of other news doesn’t. Whether you’re shopping for groceries, filling up your gas tank, thinking of buying a house, trying to buy a car (if you can find one), or checking your 401(k), you know that what you’re experiencing is extremely abnormal compared to the past 40 years or so. If you’re finally going on that long-delayed, post-pandemic vacation, you’re seeing dramatically higher prices in every possible expense — airline tickets, rental cars, lodgings, restaurant meals. And yes, the national average price of a gallon of regular gasoline hit another record this morning, although today’s increase is just by a fraction of a penny.
What’s more, you know that the squeeze didn’t start recently; you’ve been feeling it for months, maybe almost a year now. Recall that when President Biden made his infamous “there’s nobody suggesting there’s unchecked inflation on the way — no serious economist” comment last July, he said so after a reporter asked, “At what point would you consider inflation unchecked to a point at which you would either consider taking action or you would want to see the Fed take action?” Meaning that last summer, as inflation surpassed 5 percent, people were starting to worry about rising prices.
We are now enduring what should be characterized as a severe energy crisis. High gas prices reverberate throughout the economy, and in fact have been squeezing American households since mid autumn 2021. A few days ago, the North American Electric Reliability Corporation issued its assessment of the power grid for the coming summer and warned that the Midwest Independent System Operator region — basically from the east side of North Dakota over to the state of Michigan, down to the southern tip of Illinois, and including chunks of east Texas, southern Arkansas, Louisiana, and western Mississippi — faces a capacity shortfall that poses high risk of energy emergencies during peak summer conditions. Then, everything west of that region — basically the entire country west of the Mississippi River — is at elevated risk of blackouts, owing to drought conditions impacting hydroelectric plants and greatly increasing the likelihood of wildfires.
You know that it’s weird that every business you enter used to have “help wanted” or “we’re hiring” signs, and now they have “we are short staffed, please be patient” signs, and those signs have been starting to turn yellow from age. The president keeps boasting about how many jobs have been created, but the country has had more than 10 million job openings since last July. We’re up to 11.5 million now. The labor-force-participation rate was down a bit last month, at 62.2 percent, slightly below the pre-pandemic level of around 63 percent, and we’re still way below the 66 percent of the pre-Great Recession years.
The usual argument is, “Employers aren’t offering enough pay.” But what if the problem is that employers can’t increase pay fast enough to keep pace with inflation?
Only after Rep. Katie Porter put bacon in her cart at her local grocery store recently did she notice that its price had spiked to $9.99 a pound. Reluctantly, she put the package back.
When Porter gave an emotional speech about how inflation has been hitting her family for months during a private House Democratic Caucus meeting last week, she said it seemed like the first time the personal toll of high consumer prices had sunk in for some lawmakers in the room.
“Too often, Congress recognizes issues too late,” Porter, a top GOP target this fall in a swing district, said in an interview. “I had a colleague mention to me, ‘We’re not seeing it in the polls’ . . . . Well, you don’t know what to ask.”
Did a Democratic member of Congress really tell Porter that polling was not indicating that constituents were worried about inflation? There are three possible scenarios: that Porter is exaggerating or making this up, that certain Democratic lawmakers are walking around utterly oblivious to the worst inflation in 40 years, or that they believe that Americans are just fine with inflation between 8 and 8.5 percent.
The End of an Era in China
Over in China, Shanghai is sort-of, kind-of loosening its lockdown:
Shanghai has reopened a small part of the world’s longest subway system after some lines had been closed for almost two months, as the city paves the way for a more complete lifting of its Covid-19 lockdown next week. . . . The city of 25 million expects to lift its city-wide lockdown and return to more normal life from 1 June. Most restrictions on movement will remain in place this month.
Shanghai began the increasingly strict lockdown on March 28, so for nearly two months, residents have rarely been allowed outside of their apartments.
But now the worry is that Beijing may be subjected to similar long and strict lockdowns, and Bloomberg News reports that, “China’s ongoing pursuit of Covid Zero means the nation is likely to remain in a loop of lockdowns and swift hard-line responses until at least October’s Communist Party congress, where Presiding Xi Jinping is expected to secure an unprecedented third term in power.” Apparently, the Chinese economy will be on sabbatical this year.
Even the South China Morning Post, a technically independent but usually Beijing-regime friendly Hong Kong–based paper, isn’t sugar-coating the effect on residents:
Shanghai is facing an exodus of talent and labor as thousands of people leave the pandemic-hit city which has been in total lockdown since April 1, knocked by worries that local authorities will backtrack from plans to switch to normal virus control measures in June after achieving a societal zero-Covid goal.
And now it appears that the strict and sweeping lockdowns have done what the genocide of the Uyghurs, the Hong Kong crackdown, the refusal to cooperate on Covid-19 investigations, and every other crime and controversy surrounding the regime in Beijing could not: get corporate America to rethink its relationship with China.
The Wall Street Journal, this morning:
Apple Inc. has told some of its contract manufacturers that it wants to boost production outside China, citing Beijing’s strict anti-Covid policy among other reasons, people involved in the discussions said. India and Vietnam, already sites for a small portion of Apple’s global production, are among the countries getting a closer look from the company as alternatives to China, the people said.
Q: Mr. President, quick question: What have your health advisers told you your level of concern should be about monkeypox and the cases that are in the United States and around the world?
THE PRESIDENT: Well, they haven’t told me the level of exposure yet, but it is something that everybody should be concerned about. We’re working on it hard to figure out what we do and what vaccine, if any, may be available for it. But it is a concern in the sense that if it were to spread, it’s consequential. That’s all they have told me.
Biden made those remarks on Sunday. If you read Thursday’s Morning Jolt, you know that monkeypox is not “something that everybody should be concerned about.” It is nowhere near as contagious as Covid-19; infections occur from “close contact with respiratory secretions, skin lesions of an infected person or recently contaminated objects”; we’ve had several travel-related cases in past decades that did not turn into significant outbreaks; those who are old enough to have been vaccinated against smallpox likely have some protection against monkeypox; the existing smallpox vaccines are effective against this virus; and the most recent outbreaks in the U.K. are among men who have sex with other men — who may well have “prolonged face-to-face contact.”
All of that runs counter to the notion that, “It is something that everybody should be concerned about.”
They keep telling us President Biden is well-briefed and quickly updated, but he doesn’t speak as if he is. Either what the president is getting briefed on is completely different from public reports about the monkeypox cases so far, he isn’t getting very detailed briefings, or he can’t remember what he was briefed on.