Misery is supposed to love company, so why can't we get along? [Republished]
Misery is supposed to love company, so why can't we get along? [Republished]
5 great datas on maps, renewables, smashing the debt ceiling, JPM says we're fine, and leggings + lipstick. Plus, OMG China how are we not besties?!
Random Walk is on vacation, so I’m firing up the wayback machine to May 23, 2023 just for fun. I was only writing 2/week back then, and used a different format/structure. This was a fun post though, and a good example of the old flavor. Welcome to all the new subscribers. Just remember that you are smart enough, you are curious enough, and doggone it, people like you. This is the Random Walk way.
Actually, no, this is the Random Walk way:
First, 5 datas to make the ladies swoon:
Maps on maps on maps;
Wind & Solar
Smashing the debt ceiling (part deux)
JPM says we’re FINE
Of leggings and lipstick
Then, the words without the pictures:
OMG China! We’ve got so much (misery) in common! We should be friends! (Or “Why Peter Turchin gets 0 points from me.”)
Please read and enjoy. Leave comments. Tell your friends. Obey.
Scatterplots
Maps on maps on maps
The census published its updated migration map, so Random Walk will publish all the maps, starting with that one:
Coming and going. Survey says people are still moving to and from the same places they did before, albeit with slightly less enthusiasm than in 2021:1
Coming and going, metro-areas edition:
Dodge, we have a problem Clearly much of the movement wasn’t out-state, so much as out-city-to-nearby-suburb—i.e. big reds, surrounded by little greens. The sunbelt, on the other hand, really stands out as a sea of green.2
NFP Corridor. “Not-for-profits” apparently hate the warm weather:
Profits hate the cold Outside of northeast Minnesota (and seriously, what’s happening up there?), it sure seems like the longer you’ve been profiting, the more
government-subsidized-featherbedding-and-networking-eventsnot-profiting you get. In all events, the geographic concentration of the NFP world is not in your imagination.3 Everyone really does work in Minnesota.Stay right there: The more NFPs you have, the longer you stay in your home because that’s how causation works—looking at you again NE Minnesota:
The places with the longest tenured homeowners are also the places with the most out-migration, which sure sounds like a housing shortage (my recent skepticism, notwithstanding).
Home prices. declining from peaks:
Declines off pandemic peaks is mostly a story of astronomically fast growth tapering a bit (e.g. Arizona, Florida), but parts of the left coast just look grim.
Cava locations. Go where the mouths are:
…and now, of course, the question is can Cava grow where the mouths aren’t?
Most expensive neighborhood in every state:
Horace Mann died decades before Idaho was even a state, and yet he still gets the ritziest neighborhood in Boise named after him. Some people really do have it all.
RW thinks there are some broader inferences one can draw about these maps, taken as a whole (and indeed, I frequently try to draw them). This is Scatterplots, however, and attention spans are expected to be short.
Wind and Solar
The share of electricity generated by wind and solar are reaching record highs in parts of Europe:
Random Walk hasn’t checked, but I do wonder how much of this observation is driven by less energy consumption overall.
Going Broke Smashing the Debt Ceiling (part deux)
The more we spend beyond our revenues, the more we borrow, which means the more we spend (to pay for our borrowing). Unless making interest payments is somehow going to drive revenues (and how could it?), then this gap just gets wider and wider:
It’s a vicious cycle, where the worse it gets, the worse it gets (which is probably why they call it a vicious cycle). As a reminder, raising taxes isn’t going to help all that much:
Politics has a corrosive effect on data, so there’s reason to be skeptical, but RW is unaware of any math where the future looks very different. The deficit is growing and it’s rapidly becoming the thing that grows the deficit.
The simple phrase for this is: living beyond our means.
“Borrowing more to pay for our borrowing” doesn’t make sense, no matter who is doing it (and no, calling it the “risk free rate” doesn’t actually make it risk free). Would you lend to someone like that? Not willingly, that’s for sure. There are of course other ways to raise revenue, but that’s probably not a great outcome either. Something has to give, but it could take a while, of course, especially when we keep making it a future-someone’s problem.
JPM says everything is FINE
JP Morgan, which is happily buying all the banks, wants you to know that everything is just fine. Consumers have:
more cash than before;
more breathing room than before;
more income than before (but actually not really, unless you’re in the lowest income bands)4
All true, and reasons to be optimistic, that even if asset prices fall, people can still make ends meet (even if there will surely be knock-on effects from asset prices falling).
Also, notice (again) the pressure coming from the top down. A perma-labor shortage and premium to service and trade workers pushes low-end wages up (albeit a cost everyone bears), while a capital-shortage pushes returns down for the titans of capital.
The rich get less-rich and the poor get less-poor. Hooray?
Of leggings and lipstick
There is a somewhat apocryphal exception to the retreat of discretionary spending in a recession. It’s called the lipstick effect: when times are grim and everything else goes, we still make sure to look pretty.
Ulta ULTA 0.00%↑ Beauty, still crushing it:
As it turns out, so is Lululemon LULU 0.00%↑ which has kept its head remarkably above the fray:
I’m highlighting Lulu (a) because it’s in the same report; (b) because it confirms my priors about trading down more broadly (even if Lulu itself bucks the trend); and (c) because Lulu is just a wild company that’s impressed me before for the devotion it inspires.
I mean, who thinks “I’m going to get my tax refund and immediately buy leggings and running shorts?” Apparently, lots of of people:
I’d love to know if this observation endures YoY at all (or if those bars stack entirely differently year in and year out). I doubt that it does, but it would be fun if it did.
Great Wall of Text
Disappointing re-opening? OMG China, we’ve got so much in common!
I know that China is a very different place faraway across the sea, and a rival with whom we’ll inevitably engage in a world-ending conflagration.5 It’s a shame though, because we seem to have a lot in common, at least when it comes to structural economic and cultural malaise.
These are anecdotes, so discount them accordingly, but still:
On managerial aspirants
We have a “disappearance of white collar jobs,” and a shortage of service and trade workers, and well, so does China:
Last year, Chinese unemployment for those between the ages of 16 and 24 reached 20%—a record high and more than double what it was in 2018. The job shortage is particularly acute for graduates with advanced degrees, people who had expected the most from the job market because their families had sunk up to a third of their income into their education. During last autumn’s hiring season, around 45% of recent college graduates in China received no job offers, according to one published survey.
The problem isn’t that there aren’t enough jobs in China. Rather, it is the acute mismatch between the education and skills of those entering the job market and the jobs that need to be filled.
The manufacturing sector in China is experiencing a severe labor shortage: Four out of five Chinese manufacturers report that their workforces are falling 10% to 30% short of their needs, and the education ministry forecasts a shortage of 30 million manufacturing workers by 2025.
On higher ed
We have prestigious cultural centers exploiting the nation’s largesse—cheered on and underwritten by our fearless leaders—to sell extravagant-but-useless “educational experiences” to unsuspecting youth, and China does too:
Why aren’t these young people filling the gaps? Born since the 1980s and known as the “new generation,” they represent a radical break from the past. They grew up in relative prosperity and—thanks to a 10-fold expansion of the higher education sector over the past 20 years—have become the most educated generation in China’s history. A quarter of the new generation has earned a bachelor’s degree, compared with only 6% of those born in the 1970s.
This expansion of the education sector seemed like the right strategy for a country that lagged far behind on that score 20 years ago. But education has outpaced an economy that is still predominantly manufacturing-based. Rather than advanced degrees, what’s needed is largely technical and vocational training for jobs such as operating complex equipment or running automated systems. That’s why, in contrast to the fate of the best-educated, 95% of vocational graduates are landing jobs right after graduation.
On wage gainers and fallers
We have wage pressure at the top, and a wage premium at the bottom, and so does China:
The glut of diplomas has caused the average starting salary of college graduates to fall below that of workers in the gig economy, such as delivery people. Real estate, finance and IT receive more job applications than they can begin to absorb, and the major online recruiting site Zhaopin.com reports that 90% of applications go to sectors that provide less than 50% of the jobs. Young job seekers face disappointment after disappointment.
On babies
We have broken promises of tomorrow that have scuttled any hope in tomorrow, and so does China:
Members of the young generation increasingly are putting off getting married and starting a family, breaking the traditions of a Confucian society. In 2021, there were only 7.6 million new marriages registered, a 38% drop from 2015. Meanwhile the birthrate has fallen to the lowest the country has ever seen.
You see? So much in common. And I thought misery loves company. Why are we fighting again?
Everything means everything
Peter Turchin writes about a thing he calls “Elite Overproduction.” It’s kind of like an upside-down Malthusian logic whereby prosperous cultures generate more elites than things for the elites to do. Eventually, the idle-handed elites become devilish, and things fall apart. This happens on a cycle, inevitably, every century or so. For those that would see a parallel between “disappearing white collar jobs” in both the US and China, they might score a point for Turchin.
On the whole, however, Random Walk finds the argument unpersuasive because (among other reasons) there’s no reason why “overproduction” of elites (or anything) ought to be some fait accompli. An extended misallocation of talent and/or resources (that “overproduction” would imply) needs something to insulate the allocator from the consequences of their mistake . . . some kind of attenuated buy-now-pay-later feedback loop (or lack thereof) whereby the allocator takes their gains today and offloads their mistakes to some future-someone. You might even call it “delaying the pain trade.”6
In other words, in order to get “overproduction,” it can’t feel like “overproduction” when you’re doing it (otherwise you wouldn’t do it for very long). It only feels like “overproduction” much later, once the future-bills start coming due. It’s the kind of behavior made possible by something like, I dunno, an intergenerational credit card or magic money wand . . . but as a natural and inevitable cultural or economic process? No. RW affords no points for Turchin.
As a reminder, look how many managers we made—just so proud:
Random Walk will admit (again) that, to an Everything Bubble, every “overproduction” is a nail—“everything” is in the name, after all—so the hypothesis is only so useful.7
That said, it’s not crazy to think that unreasonable expectations of forever-free-money could perpetuate the same kinds of "stupid" over here as they do over there. It’s not a cyclical “elite overproduction” problem. It’s a duration mismatch problem, where we borrowed long to lend short. We’ve definitely got at least some things in common, so why not that? If that’s the case, then China’s “disappointing reopening” may be a sneak peak at what’s to come.
Take a bow, Jackson, MI because you beat San Francisco at something:
I also love this visualization of a trend, accelerated:
This distribution (unlike the migration story) does, in fact, match the “Old and Cold” axis, proffered by
.Also, spending is “solid,” revolvers are normalizing, and only the richest are cutting back:
Nice of them to pick Micron, and not, Qualcomm, for what it’s worth:
Delaying the pain trade of a secularly aging population by borrowing more money to spend on old people and then also recruiting more and more immigrants to fill the people-void? Sounds like a plan:
This is by no means an observation about optimal levels of immigration—it is however an observation about “cheap” fixes to kick the can down the road that seem to (re)start in earnest after the GFC.
I also prefer misallocation to overproduction . . . there’s no shortage of things for smart, talented people to do . . . they’re just wasting their time in graduate school or working on newsletters.