Moody's Assessment of the Tax Overhaul

[carpedm9587]

I told you earlier: When you said, "As expected, raising salaries and adding jobs is not something a business seeks to do. Managers will tell you it is always the course of last resorts and is done only when a business has no additional room to squeeze efficiency enhancements, or is expecting increased demand beyond what they can meet with efficiency enhancements. When a business gets more money, they do not immediately think, "let's make more jobs." " in the opening post.

Yes - I said that, and stand by it. That is how businesses operate. That is even MY philosophy in MY business. There is nothing unethical about this approach, and no conflict with social justice. It does not make a company "bad." It is a fiscal reality. A business does not WANT to hire. Payroll is the most expensive part of most business' operating budget. No business I have ever encountered is actively seeking to hire unless they have increased demand they cannot meet by any other means (e.g., temp workers, contractors, efficiency increases, etc.).

And we're seeing it unfolding in the shadow of the tax cuts. Although some businesses have announced plans to "grow the business" with the cuts, it is yet unclear how many jobs that will result in. Most businesses appear to be planning to use the new cash for stock-buy-back, increased dividends, mergers and acquisitions, and debt reduction. None of those things will create jobs.

[Sparko]

Yes - I said that, and stand by it. That is how businesses operate. That is even MY philosophy in MY business. There is nothing unethical about this approach, and no conflict with social justice.

Yet when I asked you if that is how you worked you said "no"

Carpe It is very hard to pin you down. It is like nailing jello to the wall. That is what people seem to have a problem with. You can't just stick to some viewpoint. You make sweeping statements, then when asked about it, you back down, then you seem to go right back to them. And I am sure you will back right back down again when you reply to this post and say I am misunderstanding you or something. It is very frustrating.

[Mountain Man]

Actually, I don't believe I have "walked back" anything I've said. I have clarified when someone misunderstood, I have acknowledged confusion when I introduce it, I been wrong and said as much, and I have expanded on concepts when the discussion calls for it. But I have not "walked back" anything I can think of. If you can think of an instance, please provide the links. I am not aware of them.

It's like:

"I believe X."
"Wow, really? Because X means this, that, and the other thing."
"That's not how I use X. When I say X, I really mean Y."
"But X doesn't mean Y."
"It does when I use it."
"So why not just say you believe Y?"
"Because I believe X."
""

[Sparko]

From Seer's post in another thread:

Private payrolls grow by 234,000 in January, vs 185,000 expected: ADP/Moody's Analytics

Private companies hired 234,000 jobs in January, well above expectations for 185,000, according to ADP and Moody's Analytics.

Service-related industries led with 212,000 new jobs; manufacturing added 12,000 and construction 9,000.
The report often differs significantly from the government's more closely watched nonfarm payrolls count, with ADP reporting growth of 242,000 in December vs. the Labor Department's 148,000.

https://www.cnbc.com/2018/01/31/priv...analytics.html

[carpedm9587]

Yet when I asked you if that is how you worked you said "no"

Carpe It is very hard to pin you down. It is like nailing jello to the wall. That is what people seem to have a problem with. You can't just stick to some viewpoint. You make sweeping statements, then when asked about it, you back down, then you seem to go right back to them. And I am sure you will back right back down again when you reply to this post and say I am misunderstanding you or something. It is very frustrating.

I think you are crossing two different things with one another. I don't think I was unclear, but if you show me the links that left you with that impression, I'll review them.

The "no" was about prioritizing fair wages as a business practice, not about using additional revenue to create jobs. I don't need to use the tax return to increase wages because I have always paid a fair, living wage. It's why I'm not a multi-millionaire.

So, to be clear, two separate things: 1) creating jobs, 2) paying fair wages for those jobs. Like all other businesses, I do not create jobs unless I absolutely need them, and I certainly won't use the tax return to "create jobs." Until my business NEEDs more positions, I'm not jst going to create them because someone gave me some extra money. But when I DO create them, I prioritize paying a living wage above maximizing company profits. THAT is what is relatively rare in the market.

Your feedback is heard, Sparko, but I frankly don't think that is what is happening. If you want my opinion, I think people around here are used to arguing with people who never ever backdown, and are used to disengenuous arguments. There are MANY people on this site who do exactly that, on both sides of the political divide. So when someone misinterprets something I've said and I clarify, it seems to be interpreted in those terms. I make an effort to define how I am using terms, and clarify when I am not hearing people say back to me what I said correctly. When I do the latter, I intentionally look for different words, assuming it is useless to use the same words because they clearly did not convey the message correctly the first time.

I also experience a LOT of instances of people misunderstanding something I said, and then accusing me of not being truthful, changing my story, back-pedaling, hand-waving, etc. when I post that what is being said does not accurately reflect the meaning I was trying to convey.

[Sparko]

I also experience a LOT of instances of people misunderstanding something I said, and then accusing me of not being truthful, changing my story, back-pedaling, hand-waving, etc. when I post that what is being said does not accurately reflect the meaning I was trying to convey.

That should give you a clue. If everyone is telling you the same thing, maybe the problem is not with them but you.

[Zymologist]

That should give you a clue. If everyone is telling you the same thing, maybe the problem is not with them but you.

I think the folks in this thread are getting a bit...moody.

[carpedm9587]

From Seer's post in another thread:

Private payrolls grow by 234,000 in January, vs 185,000 expected: ADP/Moody's Analytics

Private companies hired 234,000 jobs in January, well above expectations for 185,000, according to ADP and Moody's Analytics.

Service-related industries led with 212,000 new jobs; manufacturing added 12,000 and construction 9,000.
The report often differs significantly from the government's more closely watched nonfarm payrolls count, with ADP reporting growth of 242,000 in December vs. the Labor Department's 148,000.

https://www.cnbc.com/2018/01/31/priv...analytics.html

We've seen these surges in other months too, Sparko. January numbers are not out yet, and even Nov/Dec numbers are still considered "projected." (https://data.bls.gov/timeseries/CES0..._view=net_1mth). In the 11 months from Feb-Dec, 1.839M jobs were created, averaging 167+K/month. 150K/month is considered "healthy" for the economy. Five out of 11 months were below that number, but the average is in the "healthy" range, and Trump keeps crowing about it.

Placed in context, however, the same months in 2016 saw the creation of 2.114M jobs (192+K/month) jobs. It might be tempting to attribute that to a Trump bump at the end of the year, but job growth actually slowed at the end of the year (which is normal). Going back to 2015, the same period saw the creation of 2.479M new jobs (225+K/mo). Job growth has actually slowed under Trump. The reason, of course, is fairly straightforward. When Obama left office, unemployment was near record lows. It actually crossed that boundary under Trump, but it does not have much more room to drop without becoming a bit of a problem. Meanwhile, we saw stagmant wage growth under Obama. That makes sense, because wages are not usually increased when unemployment is high. Once we hit the low numbers at the end of 2016, we began to see an uptick in wage growth. That continued into 2017. Trump is taking a lot of credit, but since unemployment dropped 5.2% from the 10% it hit by March of 2010 to the 4.6% it hit the month Trump was elected (0.8% per year, on average), and it has only dropped another 0.5% in the 13 months since then (0.48%/year), there is a significant question about he gets the bulk of the credit (if you subscribe to the theory that presidents have much impact on ANY of this).

As for GDP, in the 24 quarters from 1Q2011 through 4Q2016, we saw an average GDP growth of 2.041%/quarter. In the 4 quarters of 2017 the average has been 2.525%. That is a bit higher, but also a pretty small sample size. 2014 saw an average of 2.725%. So we don't have enough data, yet, to know if we are going to see a sustained increase. 4Q2017 was back down to 2.6 (https://www.statista.com/statistics/...gdp-in-the-us/), which is a level many economists say should be the "new norm." But that is a misleading statement. If you look at GDP numbers back to the 1950s (https://tradingeconomics.com/united-states/gdp-growth), you see that GDP used to see a LOY more year-to-year variation, sometimes peaking above 15% and sometimes cratering at below -10%. The running average has never been significantly different than it is now. We saw a surge during the period of the Internet bubble, and again during the housing bubble. Beyond that, GDP has hovered, as an average, in the 2-3% range for the past seven decades. Why anyone thinks that is going to change, when previous (even larger) tax cuts did not produce that result, is beyond me.

Despite his claims otherwise, Trump actually inherited a fairly healthy economy by most quantifiable metrics, and it has not improved significantly beyond that so far.

[Sparko]

We've seen these surges in other months too, Sparko. January numbers are not out yet, and even Nov/Dec numbers are still considered "projected." (https://data.bls.gov/timeseries/CES0..._view=net_1mth). In the 11 months from Feb-Dec, 1.839M jobs were created, averaging 167+K/month. 150K/month is considered "healthy" for the economy. Five out of 11 months were below that number, but the average is in the "healthy" range, and Trump keeps crowing about it.

Placed in context, however, the same months in 2016 saw the creation of 2.114M jobs (192+K/month) jobs. It might be tempting to attribute that to a Trump bump at the end of the year, but job growth actually slowed at the end of the year (which is normal). Going back to 2015, the same period saw the creation of 2.479M new jobs (225+K/mo). Job growth has actually slowed under Trump. The reason, of course, is fairly straightforward. When Obama left office, unemployment was near record lows. It actually crossed that boundary under Trump, but it does not have much more room to drop without becoming a bit of a problem. Meanwhile, we saw stagmant wage growth under Obama. That makes sense, because wages are not usually increased when unemployment is high. Once we hit the low numbers at the end of 2016, we began to see an uptick in wage growth. That continued into 2017. Trump is taking a lot of credit, but since unemployment dropped 5.2% from the 10% it hit by March of 2010 to the 4.6% it hit the month Trump was elected (0.8% per year, on average), and it has only dropped another 0.5% in the 13 months since then (0.48%/year), there is a significant question about he gets the bulk of the credit (if you subscribe to the theory that presidents have much impact on ANY of this).

As for GDP, in the 24 quarters from 1Q2011 through 4Q2016, we saw an average GDP growth of 2.041%/quarter. In the 4 quarters of 2017 the average has been 2.525%. That is a bit higher, but also a pretty small sample size. 2014 saw an average of 2.725%. So we don't have enough data, yet, to know if we are going to see a sustained increase. 4Q2017 was back down to 2.6 (https://www.statista.com/statistics/...gdp-in-the-us/), which is a level many economists say should be the "new norm." But that is a misleading statement. If you look at GDP numbers back to the 1950s (https://tradingeconomics.com/united-states/gdp-growth), you see that GDP used to see a LOY more year-to-year variation, sometimes peaking above 15% and sometimes cratering at below -10%. The running average has never been significantly different than it is now. We saw a surge during the period of the Internet bubble, and again during the housing bubble. Beyond that, GDP has hovered, as an average, in the 2-3% range for the past seven decades. Why anyone thinks that is going to change, when previous (even larger) tax cuts did not produce that result, is beyond me.

Despite his claims otherwise, Trump actually inherited a fairly healthy economy by most quantifiable metrics, and it has not improved significantly beyond that so far.

those WERE January's numbers, Carpe, according to the link. This sounds like more rationalizing to me. The numbers directly contradict your conclusion in the OP.

[carpedm9587]

those WERE January's numbers, Carpe, according to the link. This sounds like more rationalizing to me. The numbers directly contradict your conclusion in the OP.

No Sparko, they can't be. It is a projection. The Bureau of Labor and statistics has not even finalized it's Nov/Dec numbers. They certainly do not have January numbers when we haven't even finished the month.

And I don't know why you keep coming back to "rationalizing." It's beginning to sound like a convenient way to simply dismiss a post. I was careful to research the data related to the economy, break it down, explain why I thought it means what I claim, and provide the links to the resources so others could double-check my conclusions. If you have a counter, I am happy to listen, but "it's just rationalizing" is a dismissal with no value, pure and simple.

And I just went back and reread the OP. I'm afraid I am not seeing how this "directly contradicts" what I said in the OP. Indeed, I'm not even seeing how the two are related. The OP was about what companies are likely to do with tax cuts. This is about economic indicators. So...

[Sparko]

No Sparko, they can't be. It is a projection. The Bureau of Labor and statistics has not even finalized it's Nov/Dec numbers. They certainly do not have January numbers when we haven't even finished the month.

And I don't know why you keep coming back to "rationalizing." It's beginning to sound like a convenient way to simply dismiss a post. I was careful to research the data related to the economy, break it down, explain why I thought it means what I claim, and provide the links to the resources so others could double-check my conclusions. If you have a counter, I am happy to listen, but "it's just rationalizing" is a dismissal with no value, pure and simple.

And I just went back and reread the OP. I'm afraid I am not seeing how this "directly contradicts" what I said in the OP. Indeed, I'm not even seeing how the two are related. The OP was about what companies are likely to do with tax cuts. This is about economic indicators. So...

When a business gets more money, they do not immediately think, "let's make more jobs."

vs.

Private payrolls grow by 234,000 in January, vs 185,000 expected: ADP/Moody's Analytics

Private companies hired 234,000 jobs in January, well above expectations for 185,000, according to ADP and Moody's Analytics.

Service-related industries led with 212,000 new jobs; manufacturing added 12,000 and construction 9,000.
The report often differs significantly from the government's more closely watched nonfarm payrolls count, with ADP reporting growth of 242,000 in December vs. the Labor Department's 148,000.

[carpedm9587]

When a business gets more money, they do not immediately think, "let's make more jobs."

vs.

Private payrolls grow by 234,000 in January, vs 185,000 expected: ADP/Moody's Analytics

Private companies hired 234,000 jobs in January, well above expectations for 185,000, according to ADP and Moody's Analytics.

Service-related industries led with 212,000 new jobs; manufacturing added 12,000 and construction 9,000.
The report often differs significantly from the government's more closely watched nonfarm payrolls count, with ADP reporting growth of 242,000 in December vs. the Labor Department's 148,000.

OK, a couple of things. First, you are assuming that job growth as reported is a function of the tax cut. You have nothing here but correlation, which is not causation. You also have numbers that are not substantially different from any other month. We had months under Obama with 350K+ job growth, and there was no tax cut. I stand by my statement: companies do not take extra money and say, "let's add some positions." If they can justify a business expansion with the funds, they will add positions if and only if they cannot serve the growth by other means (efficiency, automation, etc.). Hiring is pretty much always the last choice.

Second, Moody can report anything they wish, but the numbers can only be preliminary and projections. Sparko - the month isn't even done! Today is the last day! And I go by the official Bureau of Labor numbers, which is what I reported on in my post. Even if you add your Moody/ADP January numbers into the mix, Trump is still averaging below job growth in 2013-2016 by a significant amount. As for the Moody/ADP numbers, the Bureau numbers for Nov and Dec, as I noted, are preliminary numbers. They have not been finalized and should not be taken as such. If ADP is correct, they will be adjusted upward when they are finalized. If ADP is off, that will be reflected as well. I can rerun the numbers without the preliminary months if you wish, but I am certainly not going to include numbers for a month that is not even finished. Bureau numbers tend to run 2-3 months behind before they are finalized.

[Sparko]

OK, a couple of things. First, you are assuming that job growth as reported is a function of the tax cut. You have nothing here but correlation, which is not causation. You also have numbers that are not substantially different from any other month. We had months under Obama with 350K+ job growth, and there was no tax cut. I stand by my statement: companies do not take extra money and say, "let's add some positions." If they can justify a business expansion with the funds, they will add positions if and only if they cannot serve the growth by other means (efficiency, automation, etc.). Hiring is pretty much always the last choice.

Second, Moody can report anything they wish, but the numbers can only be preliminary and projections. Sparko - the month isn't even done! Today is the last day! And I go by the official Bureau of Labor numbers, which is what I reported on in my post. Even if you add your Moody/ADP January numbers into the mix, Trump is still averaging below job growth in 2013-2016 by a significant amount. As for the Moody/ADP numbers, the Bureau numbers for Nov and Dec, as I noted, are preliminary numbers. They have not been finalized and should not be taken as such. If ADP is correct, they will be adjusted upward when they are finalized. If ADP is off, that will be reflected as well. I can rerun the numbers without the preliminary months if you wish, but I am certainly not going to include numbers for a month that is not even finished. Bureau numbers tend to run 2-3 months behind before they are finalized.

sigh. Your OP was that Moody was predicting that businesses were NOT using the tax money to expand business and help employees and create jobs. Then they actually report the opposite. And you still can't just say "I was wrong"

SMH.

[Teallaura]

Moody is apparently confirming to its customers that the Tax overhaul will have minimal impact on the economy because (as was predicted) the vast majority of businesses are prioritizing stock buy-backs, mergers and acquisitions, and paying down debt. (https://www.marketwatch.com/story/ta...ays-2018-01-25).
....

“We do not expect a meaningful boost to business investment because U.S. nonfinancial companies will likely prioritize share buybacks, M&A and paying down existing debt,” said Moody’s analysts led by Rebecca Karnovitz. “Much of the tax cut for individuals will go to high earners, who are less likely to spend it on current consumption.”

Prediction, not confirmation.

[Teallaura]

No. I won't keep the money. I do disagree with the structure of the tax cuts, their impact on the deficit (I don't believe this "the economy will pay for it"), and their disproportionately low impact on the low and middle income. But with the current administration in power, I will take the cuts and direct them to those who have been least helped by this tax cut, perhaps using some for the work we are doing in Haiti.

So the cut does do some good.

Having not so long ago been in the position where $25 makes a big difference, your argument is compelling but the other way. Those small gains will likely go into the economy (have you seen gas prices lately?) and they add up. If I remember Econ 101, increased demand eventually translates into more jobs.