Q3 growth stronger, but other places are moderating, and the Fed may finally back off

Got the first set of revisions to 3rd Quarter GDP today, and it showed that growth was even stronger than we knew over the Summer.

Gross domestic product increased at a 2.9% annualized rate, the government said in its second estimate of third-quarter GDP. That was revised up from the 2.6% pace reported last month. The economy had contracted at a 0.6% rate in the second quarter.

Economists polled by Reuters had forecast GDP growth would be raised to a 2.7% rate.

The upward revision reflected upgrades to growth in consumer and business spending as well as fewer imports, which offset the drag from a slower pace of inventory accumulation.

Not bad at all, but I'll note that there was some wide disparities in GDP changes for Q3, based on the type of industry.

Changes in GDP, annual rate Q3 2022
Goods +8.2%
Services +3.2%
Motor vehicle output +2.5%
Structures -16.1%

That reflects the big declines in housing starts, which seems to be directly related to the overheated housing market and the Fed-induced rise in interest rates. And speaking of the Fed, they were also in the news today.

The Federal Reserve could pull back on the pace of its aggressive rate hikes as soon as December, Fed Chairman Jerome Powell said Wednesday at an economic forum.

“The time for moderating the pace of rate increases may come as soon as the December meeting,” he said in remarks at the Hutchins Center on Fiscal and Monetary Policy, his last public appearance before the central bank enters a blackout period ahead of its December 13-14 policymaking meeting.

Since rate hikes can take months, even years, to flow through the economy, the Fed now appears to be adopting a “lower and slower” model of smaller rate hikes over a longer period. Ideally, that approach will lead to the proverbial “soft landing,” reining in inflation while avoiding recession or significant layoffs.

“I do continue to believe that there’s a path to a soft or softish landing,” Powell said Wednesday. “I think it’s still achievable.”

About damn time you started to back off, Jerry. And Wall Street liked it as well.

And we've seen quite a bit of evidence that inflation continues to flatten out. Now that election season is over, US gas prices have fallen 11 cents in the last week and 27 cents in the last month, and housing prices continue to deflate. And while this isn't great for workers, today's GDP report revised wage and salary growth for Q2 down from $182.9 billion to $132.5 billion. So why would we want to keep tightening when it looks like there is moderate growth and moderate inflation?

But you know what the GDP report showed still was inflated? Corporate profits, which stayed near the record $3 trillion annual rate it hit in Q2, and profit margins, which also stayed at record levels in Q3.

There's not too much the Fed can do about that inflation, but Congress and the Federal Trade Commission sure can. And as 2023 looms, it seems like that's the next step that needs to be taken (or at least threatened) in order to return gains to the workforce that helped to make it happen, while still allowing growth to continue.

Updated job numbers show Wisconsin still growing, but Milwaukee lagging, and more people needed

We got the latest report of the "gold standard" jobs report in America right before Thanksgiving, aka - the Quarterly Census of Employment and Wages (QCEW), and while it wasn't as strong as the nation's growth rate of 4.0% between June 2021 and June 2021, Wisconsin did gain nearly 46,000 jobs in that time period, for a gain of 1.6%.

But it's worth noting that Wisconsin also didn't lose as many jobs as the rest of the US did as the COVID pandemic broke out in Spring 2020, and when you take into account the COVID losses and the following recovery, we've fared better than most of our Midwestern bretheren.

The QCEW's job growth also is in line with the state's job reports that showed 1.5% job growth in the same time period, which makes me think that the decline in "Wisconsinites employed" in much of 2022 in the household survey isn't right, and will be revised with benchmarking in March 2023.

The initial QCEW release also gives information on the most-populated Wisconsin counties (the rest of the them will be released next week). And I noted that all 6 of those counties had lower job growth than the state's 1.6% overall growth.

When we look at the urban counties over 3-year COVID era, you'll see that Dane County bounced back faster than the rest of the state before leveling off, but Milwaukee County has badly lagged behind, and vs the middle of 2019, still was down more than 6% at the end of June.

I'm starting to wonder if that deficit helps to explain the miserable levels of turnout in Milwaukee for the midterm elections, and if there has been some kind of general exodus that we haven't fully seen show up in the population numbers. Maybe we should stop handcuffing the state's largest county and quit starving them of resources? Just a thought.

Given that the state's unemployment rate is still at a low 3.3%, it seems that our state's bigger concern should be in trying to attract more people to locate to Wisconsin, in order to increase our capacity for job growth. And we're not going to be that attractive as long as we have a gerrymandered GOP Legislature that is more concerned with playing political power games and pandering to dimwitted MAGAts on Faux News garbage that does nothing to solve any economic problems or constraints.

We got billions in our bank and can change the game in this state, and get us into a place where Wisconsin can break out of its current limitations. Do we have a Legislature that cares to even try to work with our Governor to do that?

Wis urban areas got even bluer in 2022, and sticks got redder. But low MKE turnout also an issue

Now that the Wisconsin Elections Commission has certified vote totals from across the state, I was able to dig into the data and come up with some more findings from this month's election.

The first is that the City of Milwaukee and Milwaukee County in general continues to make up less of the electorate in Wisconsin. The City fell to its lowest point yet, at less than 6.7% of all votes, well below the over 9% that they took a decade ago.

At the same time, both Tony Evers and Mandela Barnes got nearly 81% of the votes in the state's largest city, the highest levels in time frame shown. So if they could have kept up that pace (or even 75%) and gotten that 2012 or even 2018 turnout share, it would have given a bigger boost to both candidates. And likely would have knocked Ron Johnson out of the US Senate.

On the other side, not only did Dane County take up its largest share of votes, Evers and Barnes both cleaned up there with the largest Dem share of Dane County votes in recent history (Evers 78.6%, Barnes 77.1%).

Craig Gilbert of the Milwaukee Journal-Sentinel noted that this election continues trends that we have seen since Donald Trump first became the GOP's presidential nominee 6 years ago, where Democrats do better in urbanized areas, and GOPs have become dominant in rural areas.

Beginning in 2016, Wisconsin’s smaller and more rural counties have gotten redder and its bigger metropolitan counties have gotten bluer, reflecting a widening education gap, a widening gap between religious and secular voters, and a chasm between more densely populated places and less densely populated places.....

Of the 15 counties that produced the most votes, 12 of them moved in a Democratic direction from the 2018 race for governor to the 2022 race for governor. Of the 40 counties that produced the fewest votes, 37 of them moved in a Republican direction.

But the effects were not symmetrical.

The vote shift in the 40 smaller counties produced a net Republican gain of about 17,000 votes over 2018.

The vote shift in the 15 biggest counties produced a far larger net Democratic gain of about 87,000 votes. Most of this came from just three counties — the state’s largest: Milwaukee and Dane, which got bluer, and Waukesha, which got less red.

That's the gamble Republicans made in embracing the MAGA-dom - that they could win more of the vote in the sticks to counteract Wisconsinites in other areas that got pissed off by MAGA BS. In the Governor's race, that strategy failed big-time.

In fact, Evers did even better than Biden did in 2020 in the WOW Counties, and also in the key Fox Valley cluster of Brown, Outagamie and Winnebago Counties (aka the BOW Counties). But it's noteworthy that Barnes got 2% less than Evers in both of these areas, which is consistent with the 4.5% difference in margin between those two candidates.

By comparison, in the 62 counties in the state that are outside of the top population areas, you'll see Evers basically got the same percentage as he did in 2018, but Barnes did even worse than either Hillary Clinton or Joe Biden did against Trump.

So RoJo's racist strategy peeled off just enough Evers voters to squeak by. But good luck sustaining that as MAGAts continue to die off and get replaced by 21st Century decency. And I'm betting outstate Wisconsin can't maintain 46%+ shares of the electorate in the near future, either.

I now want to bring back this remarkable map, which compares Evers' margins in 2022 with how he did in 2018 (while gaining 2.4% statewide). You can not only see the changes we mentioned before, but you can see how Evers gained in counties with college towns (Eau Claire, La Crosse, Oshkosh), but fell behind in places that are filled with less-educated white people.

I think a lot of folks may consider that to be the case, yes — it is also home to UW-Stout, so some elements of a college town. Fwiw, Politico had outdated/incorrect numbers for Dunn, so this is updated pic.twitter.com/ePCxz4tRmx

— Ari Brown (@AriB83) November 10, 2022

And now Alberta Darling is retiring in an area of the Milwaukee suburbs that used to be big-time red, but has high levels of college-educated people and is moving rapidly toward parity between the two parties (especially the closer you get to Milwaukee).

Tim Michels, who underperformed in the Milwaukee area suburbs, won this district with about 52% of the vote: https://t.co/2Vw7L9LFNw

— Dan Shafer (@DanRShafer) November 23, 2022

Along with the State Supreme Court election, this State Senate election in April will be our next sign of data to see if the Trump-era shifts in Wisconsin are permanent, or if there are some vestiges of the Scott Walker electorate that still exists.

What can Wisconsin do with these billions? I have some ideas

I mentioned yesterday that we got new estimates yesterday from the Evers Administration indicating that we may have as much as $6.6 billion in the state's bank account by the end of June, and nearly $10 billion by the end of the next state budget in June 2025.

With that in my, here is a quick wish list of the 3 big things that came to my mind (obviously, there is a lot more topics to cover, but we'll go over those things as they come up).

1. Get local governments and school funding off of the property tax. Cities and other municipalities have a limited method of raising funds for their services that basically restricts it to property taxes and a few fees, with counties unable to charge more than 0.5% in sales taxes, and most municipalities can’t put in any sales tax at all.

I alluded to this in my post over the weekend, but the state of Wisconsin has let down local communities by basically freezing shared revenues for the last dozen years. Then (Republicans) added to that problem with imposing revenue caps that limited how much property taxes were allowed to go up.

That needs to be changed. And not just by adding to shared revenues. We need more flexibility on the revenue limit side (you may have heard that costs have gone up in the last 24 months), and we need to allow communities to spread some of those taxes over to consumers via sales taxes instead of jamming so much onto homeowners.

As for K-12 schools, I’d use state funds to pay for more of special education costs (currently the state covers around 30% of special ed costs, vs the state covering about 2/3 of general costs) and add a sizable amount of General Aid. Half of that increase in General Aid could be used to increase school resources through higher revenue limits, and half of it would be used to reduce property taxes. This should also reduce the need of communities and schools to go to referendum just to maintain what they have, while shifting what pays for those services towards consumption and income and away from land taxes.

2. Help WisDOT fix the roads. Remember that there is a separate Transportation Fund where money is set aside to pay for highway projects and tries to take pressure off of the property tax for local needs like transit funding and street work. This is separate from the General Fund that has this multi-billion surplus.

There is already a boost happening in this next budget as a result of the federal Bipartisan Infrastructure Act. But we also need to stop relying so much on the gasoline tax and registration fees to pay for these services. Gasoline consumption continues to decline, and registration fees are generally regressive in this state (since we charge the same regardless of how much your vehicle is worth), so it’s not a long-term way to pay for increasingly expensive road repairs.

Why can’t we move some of those extra General Fund dollars to make for a more stable revenue situation in the Transportation Fund? And there is a local government reform that can be part of this as well, since one of the few non-property tax sources that communities can use are wheel taxes, which a lot of them have put in place since Scott Walker and WisGOP came to power in 2010.

Not only should we be sending more funds to local communities to help them fix their local roads and streets (those funds are not susceptible to state-imposed revenue limits), but why can’t we set up an incentive program that rewards local communities for getting rid of their local wheel tax, with 75% or more of the cost “paid for” with additional state funding.

And if you’re a community that’s been able to avoid putting in a wheel tax, you also get bonus funding equal to $10 or $20 a registration as long as you keep wheel taxes at $0. A lot of people don’t even make the connection to the local wheel tax being added onto their annual registration fee, so this might look good to a lot of legislators who can claim to constituents “You’re paying less to register your car!”

3. Income tax cuts? Yes, there likely should be some kind of income tax cut, but I’d have a lot of it go to expanding the Homestead, EITC and Child Care credits for low-income workers and homeowners vs cutting tax rates for the rich.

You'll likely hear a lot of talk in coming months about tax rates, especially with GOP leaders giving big talk about reducing the state's top tax rate, and likely trying to flatten out rates across income levels in general. So it's important to remember where we are starting from, to take it from there.

Not saying you can’t have lower taxes to the rich, but I'd prefer it be something like reducing the 7.65% top rate to 7.25%, while also reducing the 5.3% rate that most of us pay (or eliminating it entirely), and getting the lowest rate down near 3.2%

I am just spitballing numbers here, but you get the idea. I’d limit the price tag to around $1.25 billion a year so that we can still be at or near a structural surplus even after all of these moves. And if something has to be taken out, have it be the tax cut on the rich. Given how many millions the Hendrickses and Uihleins just dumped on our elections, I think they and other rich folks are surviving just fine, thank you.

Do I think any of these things will happen? They should, they seem like win-wins for both Democrats and Republicans. But I’m not going to count on it, given who’s running the show in the gerrymandered Legislature (these dipshits are already trying to use impeachment as a threat). However, the funds are out there to remake our outdated funding systems, if we so choose.

$9.75 BILLION? How did Wisconsin get this much in the bank?

2-3 weeks after general elections in Wisconsin, the state’s Department of Administration summarizes all of the requests from state agencies for the upcoming state budget, and projects how many revenues will be available to pay for it.

We got those numbers for 2023-25 today, and it reiterated that we are in unchartered territory in this state.

BREAKING: @GovEvers now projects budget surplus for 2022-23 will hit $6.6 billion.

New report expects revenues to grow $323.8 million in '23-24 and another $855.1 million in '24-25.

— JR Ross (@jrrosswrites) November 21, 2022

A report released today by the Wisconsin Department of Administration (DOA) estimates state revenues are expected to moderately increase over the next biennium, with a record-high surplus and an all-time high Budget Stabilization Fund. DOA projects a gross general fund balance of $6.576 billion at the end of the current fiscal year. This record-setting figure does not include the roughly $1.734 billion currently in the state’s budget stabilization (“rainy day”) fund.

State general fund balances for the next biennium are estimated to be $8.421 billion at the end of the 2023-24 fiscal year and $9.757 billion at the end of the 2024-25 fiscal year.

These are incomprehensible numbers. Let’s look at the report and see how we got there.

What’s remarkable is that the DOA report assumes a sizable increase in costs over the next 2 years.

…If all requests were approved, agency budget requests alone would increase total spending (on an all funds basis) from the adjusted base of $44.165 billion in the current year to $47.669 billion (7.9 percent). For fiscal year 2024-25, agencies are seeking $48.856 billion, an increase of $1.187 billion (2.5 percent over fiscal year 2023-24.

Requests for GPR expenditures of $20.808 billion are included in fiscal year 2023-24 and $22.148 billion in fiscal year 2024-25. These figures reflect overall agency annual GPR requests of $1.143 billion (5.8 percent) in fiscal year 2023-24 over fiscal year 2022-23 and an increase of $1.339 billion (6.4 percent) in fiscal year 2024-25 over fiscal year 2023-24.

That seems like a large increase in spending, but let’s not forget that some of this is to make up for the loss of COVID relief funds from DC, and some of it is to “catch up” from the jump in inflation in 2021 and early 2022 which was never accounted for in the 2021-23 state budget.

I’ll add that the overwhelming majority of that requested increase is from the Department of Public Instruction, which was announced by Superintendent Jill Underly back in September with approval from Governor Evers. And the amount of K-12 school spending and where it goes is sure to be one of the central fights in this upcoming budget debate.

I think it’s appropriate to graph out how this breaks down, because it reiterates how we not only have a lot of money in the bank, but we have a structural surplus where well over $1 billion more is expected to come into state government vs what is being spent.

Not that we didn't know there was a ton of money available, but these new and larger estimates mean tbhe door is wide open to try serious and needed reforms to how we handle a lot of things in this state. It is a once-in-a-generation situation to do real change that doesn’t involve screwing over Wisconsin workers, and actually benefits the great majority of us and our communities.

So what do we do with it? I'll need some space to go into that one, so let's just step back and appreciate the absurd amount of money that the State of Wisconsin has and is projected to have available to it, and I'll get to the solutions in a bit.

It's time to fix Wis local government funding. And not just in MKE

After elections earlier in November, it's time to look at things in Wisconsin's local communities, who are finalizing their budgets for next year. And let's look ahead to something that re-elected Governor Evers and the State Legislature should deal with when they start their new terms - fixing Wisconsin's broken system of funding local government.

That was the subject of an event held in Milwaukee this week featuring Mayor Cavalier Johnson and County Executive David Crowley. Both the County and City are seeing the one-time boost of COVID aid from DC go away, while these communities are limited in their abilities to raise funds under state revenue caps, and both are calling for the state to allow for an additional local sales tax that would increase the available resources for those communities, and make out-of-towners pay some of the burdens they put on the state's largest target of tourism dollars.

County Executive David Crowley is currently considering the budget that the County Board passed earlier this week, which included reductions to behavioral health and transit as resources were limited in a time of rising costs. Crowley pointed out that giving Milwaukee the ability to raise its own funds wouldn't require any extra state tax dollars, but would give needed flexibility to improve the ability of their community to thrive.

"What we're asking for is something that doesn't have a statewide impact," he said of the tax. "We're just asking for the tools to give us the ability to invest back into our home."

He said in the first part of next year Milwaukee leaders would be going to the state Capitol to talk with legislators from across Wisconsin, trips that will follow a visit by Johnson and Crowley to Green Bay to make their case in recent weeks. The two took to the road not only to seek support of elected leaders there but also to help businesses headquartered in other parts of the state understand how Milwaukee's challenges could affect their bottom lines, Crowley told the Journal Sentinel.

Other communities, too, are facing similar challenges but at a different scale, Johnson and Crowley said.

Their comments followed a panel discussion in which business, real estate and tourism leaders relayed their concerns about how the loss of services, particularly in public safety and parks, would affect their ability to invest and draw people to the area. And Milwaukee Fire Chief Aaron Lipski highlighted the cuts his department has experienced in the last 20 years, including potentially in next year's budget.

This is where I remind you that the City of Milwaukee receives less money in shared revenue from the state than it did 23 years ago, which is a main culprit behind the loss of those services, and the inability to maintain the same levels of police and fire protection.

But Milwaukee is far from the only community that is dealing with these issues, as the Wisconsin Policy Forum documented last week. A sizable number of Wisconsin communities asked their voters earlier this month to allow them to go over their property tax limits just to continue their everyday operations.

...Eighteen of 23 municipal, town, and county referenda (78.3%) were approved this November and an additional 11 passed in other elections throughout the year. The total of 29 local measures approved in 2022 was more than double any other year on record (see Figure 2).

After combining the 18 fall and 11 previous referenda, the $23.8 million in new annual levy authority approved in 2022 is by far the most in a single year and more than triple the amount of the next highest year. Though still a relatively modest part of overall municipal and county levies, which typically grow by $120 million to $150 million per year, these referenda could have much greater effects if taken up by more large communities.

Voters approved fewer than seven measures in each year from the implementation of levy limits in 2006 to 2017. In 2018, however, 14 municipal, town, and county referenda passed in total. Still, the amount of new levy authority approved in 2022 ($23.8 million) is nearly equal to the total amount approved from 2006 until last year ($25.6 million).

In 21 of the 23 referenda on local ballots last week, the questions to voters noted that some or all of the tax dollars would be spent on public safety – police, fire protection, emergency medical services (EMS), or all three. This included all four referenda in cities: Chippewa Falls (police, fire protection, and EMS personnel and wages), Eau Claire (additional police, fire, and EMS personnel), Middleton (additional police, parks, and communications staffing), and Whitewater (fire and EMS staffing). Each of these four referenda passed by at least a 12 percentage point margin and together authorized $4.5 million in additional taxes.

Given that we have a $5 billion budget surplus, and given that inflation has raised costs well beyond what revenue limits accounted for 2 years agpo, you could say that this is a logical time to give a big boost to shared revenues to rebalance the source of funds and reduce the property tax burden. The 2023-25 budget should also adjust revenue limits to make up for the inflation-induced issues of the last couple of years, with a 5-6% annual increase seeming to be in line.

But that's a temporary thing and won't change the basic problem of local governments having limiting areas that they can draw funds from. So why not use the state budget to allow local communities more flexibility to raise their own funds, mostly through permitting additional local sales taxes. And if GOPs want to make sure the sales tax money goes to fund public safety, I'm fine with that.

I'd argue that reforming the method we fund local governments and schools might be the biggest issue out there for the next legislative session. And it's something worth holding up the rest of the state budget for, because this situation can't go on. Especially given that there is unlikely to be any more bailouts coming from DC, and the bills coming due in 2024 and 2025.

Job growth takes a breather in Wisconsin in October

Got a new Wisconsin jobs report for October, and it wasn't so great.

Place of Residence Data: Wisconsin's labor force participation rate declined to 65.3% in October from 65.6% in September, but was still 3.1 percentage points higher than the national rate of 62.2%. Wisconsin's unemployment rate in October was 3.3 percent, 0.4% below the national rate of 3.7%.

• Place of Work Data: Over the year, Wisconsin added 58,800 total nonfarm jobs and 54,600 private sector jobs. From September to October 2022, Wisconsin private sector jobs decreased by 1,600 and total nonfarm jobs declined by 2,200.

Notice how the loss of jobs in October was buried at the end of that? Not great in a month when the country as a whole added 261,000. But after Wisconsin added a (revised) 11,000 private sector jobs in September, I suppose we would expect some reversion to the norm.

But the divergence between the household survey (that determines the unemployment part of the report) and the payrolls survey (which is the “jobs change” part) continued in October in Wisconsin, and there is a major difference between the two since May.

Given that new weekly unemployment claims are still running 2,000-3,000 below the same time the year before, and total unemployment claims being just above half of the levels of October 2021, I’m inclined to buy the payroll increase over the drop in “employed” Wisconsinites. But that doesn’t mean we shouldn’t be aware that we could be a “maxed out” state with low population growth, and do policy with that in mind.

I’ll note that Wisconsin’s goods producers kept hiring in October, with the construction and manufacturing sectors each adding 1,800 jobs last month. And professional/science/technical services went up by 2,400, and 11,600 jobs since October 2021. Those are well-paying jobs and a good sign for the state’s economy.

But the big loser in this jobs report gives a red flag beyond just one bad month. Health care/social assistance shed 4,200 jobs in Wisconsin in October, in a month when the US added more than 71,000 jobs in the same areas. We’re also down 1,200 jobs in that sector in the last year, and it’s something we likely should look more into, given the caregiver and nursing shortages that we frequently hear about in our local news sources.

This is the challenge that I see in general for the next state budget and our state's future economy in general. We seem to be leveling off on what we can do, after strong job growth of the last 2 years. Now we need to find ways to get people to want to come here, and I would hope that the prospect of 4 more years of Tony Evers in office would have regressive WisGOPs back off of some of the stupid garbage that repels people from wanting to relocate (or stay in) Wisconsin.

I'm not expecting that, mind you. But it would be a wise thing to do if we want to improve on what are already good times in Wisconsin, and improve our economic capacity.

More good signs of growth, tamer inflation as 2022 winds down

We know the RECESSION talk is already done with (not that there ever was much to it), but it was still good to see that US retail sales were strong in October.

U.S. retail sales increased more than expected in October as households stepped up purchases of motor vehicles and a range of other goods, suggesting consumer spending picked up early in the fourth quarter, which could help to support the economy.

The solid retail sales reported by the Commerce Department on Wednesday and signs of a slowdown in inflation raised cautious optimism the economy could avoid an anticipated recession next year or just experience a mild downturn.

Retail sales rose 1.3% last month after being unchanged in September. Economists polled by Reuters had forecast sales rising 1.0%. Retail sales are mostly goods and are not adjusted for inflation. They increased 8.3% year-on-year in October.

It was the strongest increase in retail sales in a few months, even as inflation stayed at a relatively tepid 0.4% for October. And bars and restaurants had an especially strong month, with sales up 1.6% in October, continuing the industry's robust recovery from its COVID-era losses.

The “slowdown in inflation” mentioned in the article was backed up by a good report on producer prices on Tuesday which indicated costs continued to level off for businesses. And that should reduce pressure to raise prices for consumers.

The produce[r] price index, a measure of the prices that companies get for finished goods in the marketplace, rose 0.2% for the month, against the Dow Jones estimates for a 0.4% increase….

On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in September and off the all-time peak of 11.7% hit in March. The monthly increase equaled September’s gain of 0.2%.

Excluding food, energy and trade services, the index also rose 0.2% on the month and 5.4% on the year. Excluding just food and energy, the index was flat on the month and up 6.7% on the year.

That “core” increase of 0.2% was the 5th straight month of 0.3% or below, and producer prices for food moderated to a 0.5% increase for October, and 3.3% total in the last 6 months measured.

That doesn’t mean there weren’t big increases at the producer level for a few types of food, including fresh vegetables (+22.7%), fresh fruits/melons (+11.5%) and eggs (+15.0%). But we also saw producers get lower prices for several types of meat.

Meat price changes, PPI October 2022

1-month change
Beef and veal -2.1%
Processed chickens -12.5%
Pork -0.2%

12-month change
Beef and veal -15.9%
Processed chickens -9.2%
Pork +1.2%

Unfortunately, prices for turkeys are an exception to this, up 1.9% in October, and nearly 40% vs October 2021. So that might be an annoyance to you over the next week if you already haven’t bought your Thanksgiving bird, but there should be hope for relief at the grocery store for more items soon enough.

Good retail sales and moderating inflation pressures sure seem like a good situation to me, and with jobs still being added and unemployment under 4%, I don’t see why the Fed or Congress should want to impose further tightening to crush an inflation that is already fading.

Inflation watch! It kept fading in October

Now that election season is winding down, back to the actual economy, and the big economic news from late last week.

The Consumer Price Index rose 7.7% for the year ending in October, a much slower pace of increase than the 8% economists had expected and the lowest annual inflation reading since January.

The stock market skyrocketed on the news, with Dow futures surging by more than 800 points on hopes the Fed would dial back its aggressive rate hikes.

And the market kept surging from there on Thursday.

On a monthly basis, prices rose by 0.4%. That’s on par with the previous month’s increase of 0.4%. Economists were anticipating the monthly figure to grow, given energy prices marched upward in October amid a move by OPEC+ to slash oil production and ongoing uncertainty in Russia’s war in Ukraine.

There also appeared to be some gains made in a measurement watched even more closely by the Fed: Core CPI, which excludes the more volatile categories of food and energy, measured 6.3% for the year ended in October, down from the 6.6% increase posted in September.

Month-on-month, core CPI increased 0.3%. It had logged monthly increases of 0.6% in both August and September.

It was that decline in Core CPI inflation that set the market off, as it indicated to Wall Streeters that the leveling in inflation is happening economy-wide, and not just because gas prices had fallen back.

Digging into the CPI report, there are a lot of good signs. 4 of the 5 lowest monthly CPI changes in the last year have happened since year-over-year inflation peaked at over 9% in June.

I also note that food at home had its smallest one-month increase in 2022, at 0.4%. It's still up 12.4% for the last 12 months, which is certainly a strain for a lot of people, but shows signs of the price increases are at least slowing down going forward.

What's even more heartening is that the CPI was moderate even with gasoline going up 4.0% in October (remember those interestingly timed refinery shutdowns and the Saudis cutting back production 1 month before the midterms? I do). That's going to unwind now that gas prices have gone back down in November, which sets up another month of good inflation numbers in the next report.

On the "core" side, there was another month of declines for used cars and trucks (-0.4%), showing that the supply issues that jacked up new and used car prices for much of 2021 and 2022 are going away. Also, we saw clothes prices go down 0.7% in October, and are only up 4.1% in the last year.

There are still places of concern regarding inflation - shelter was up another 0.8%, fuel oil was up 19.8% in October and over 68% for the last 12 months (a worrying sign as Winter is coming), and eggs had an increase of more than 10% in October as avian flu and other complications sprouted up.

But I do think the hysteria Republicans tried to stir up over higher prices in this Fall's campaign aren't matching the reality of recent months in America. Prices are up at a 3% annual rate since June, which tells me that the Fed shouldn't be raising its Fed Funds rate much higher (or any higher) than the 3.83% it's at today. Combined with the 3.7% unemployment rate and still-decent consumer spending, it's not a bad spot to be in as (ugh) the Holiday shopping season begins.

Election reflections pt. 2

A couple other reflections of Tuesday's election results (pt. 1 is here) -

The College kids are back.

I had mentioned previously that when some pundits looked at what to expect from the Wisconsin electorate, they weren't accounting for the fact that a lot of college students weren't on UW campuses in Fall 2020 due to the COVID pandemic. And I think that bore itself out in some of the results in Western and Central Wisconsin.

For example, the DCCC and other DC Dem groups wrote off the House race in Wisconsin's 3rd District, because they noticed that Donald Trump won that district by 4.5% in 2020, and because incumbent Rep. Ron Kind was stepping down. But with students back on campus in cities like Eau Claire, La Crosse, Stevens Point and Menomonie, it turned out that was a much more competitive race than the "experts" thought, as a UW-La Crosse Poli Sci professor pointed out.

There is simply no spinning this: Derrick Van Orden is underperforming expectations in #WI03. And plenty of Democrats are going to be furious at the party organizations and affiliated PACs for not giving Brad Pfaff some help in this one. pic.twitter.com/rvn9bvvRlk

— Anthony Chergosky (@achergosky) November 9, 2022

Got a feeling that Small-D VO is going to be one of the most endangered GOP reps in 2024, because you know that clown isn't going to be able to avoid saying and doing insane BS once he gets to DC. And Dems better be reminding the folks back in WI-03 about Van Orden's idiocy early and often.

I also think this effect showed itself in some State Legislative races that WisGOPs were thinking they could flip, after putting up good numbers in those parts of the state in 2020. But the weirdness of the COVID-affected election may have made the GOP be tricked by Fools' Gold there, and they lost key races that included UW college towns like Eau Claire (Senate District 31), Oshkosh (District 54), and Stevens Pojnt (District 71).

The other point that I want to discuss about the election results has some connection to the one above.

Dem dominance in Dane County continues to grow.

The fastest-growing county in Wisconsin is giving Dems a bigger advantage with each election. Not just by percentage, but in total votes.

That Dane County trend just keeps growing.

Madison gave Evers a 106,373 vote (74-pt) victory in 2022, compared to 97,099 (67-pt) in 2018. pic.twitter.com/Tv5xsdvK37

— John D. Johnson (@jdjmke) November 9, 2022

In the first Wisconsin gubernatorial race I covered in '02, there were 171,686 votes cast in Dane County overall.

Last night, @Tony4WI carried the county by 174,233 votes.

That's why Republicans keep calling me about their Dane County problem in statewide races.

— JR Ross (@jrrosswrites) November 9, 2022

As some Madison musicians might say, "pour that GOP misery down on me"....

I worked the polls just off of campus on Election Day, because I wanted to be in a spot to be in an area that included a lot of college students, to help them through the challenges that they may to deal with. A lot of those challenges have to do with having to register on the day of the election (either through being first-time voters, or because they have moved since they last voted), and in giving proof of their current, on-campus address. In my 7am-1pm shift, I saw a steady stream of new registrants from Gen Z, and I bet it added to what was an already-massive lead that Evers and Barnes enjoyed in Dane County.

Even top Republicans are now admitting they can't afford to get wiped out like they do in the "80 square miles surrounded by reality".

“I think that Dane County is a problem for us,” Assembly Speaker Robin Vos, R-Rochester, told conservative radio host Jay Weber Thursday. “They had a presidential-level turnout and most of the rest of the state did not.”

Actually Robbin', we didn't. We just had the kids back in Buckyville, so Dane County was able to get back toward their 2018 share of the electorate.

Even though Vos admits the GOP is getting smoked, he and his WMC "business leader" allies don't seem to want to find out why no one wants to vote for them in Dane County. And I wouldn't expect them to even try to appeal to the many of us who choose to live in this great part of Wisconsin. So keep losing, guys.

The last thing I want to put together is how outstate turned out, and whether they continued the outsized portion of the electorate that they got in both 2016 and 2020, and whether either Evers or Barnes improved on Joe Biden's 42% share in those areas. But I'll wait for others to accumulate that data because I don't need to spend a ton of hours doing that, so I can't test my "dead rural voters" hypothesis at this time.

Lots more to sort through, but because things returned to (near) normal in 2022, I think this week's results give a better baseline to start our 2024 benchmarks than the 2020 elections did. Especially in looking at what happened in the 1-point win that Ron Johnson eked out vs Mandela Barnes, because there are still plenty of areas of the state Dems can improve in, but if GOPs continue to be Trumpy know-nothings, they're going to have a hard time clawing back with large and growing portions of the Wisconsin electorate.

A review of the key voting numbers that decided Tuesday's elections (pt.1)

Been busy these last 48 hours at work, play and in pretty much everything else. But a few quick thoughts on Tuesday election here in Wisconsin.

Unofficial turnout looks to be just over 2.65 million votes, actually a bit less than I would have expected (and more on that in a second), but similar to what was cast in what was considered a high-turnout 2018 election.

1. I'm very happy about Evers' convincing win and the lack of a GOP supermajority in the gerrymandered Legislature. But Ron Johnson's less than 1% squeaker in the US Senate race kept it from being an amazing Election Night. And the answer to a question I asked on Monday's post makes it extra disappointing.

Will Milwaukee step up, or will its share keep shrinking?

Well...

City of Milwaukee voter turnout was the lowest in a midterm since 2006 according to Milwaukee Election Commission records. 40k fewer than just 4 years ago. @tmj4
2022 - 176,726
2018 - 216,545
2014 - 208,415
2010 - 187,811
2006 - 172,676

— Ben Jordan (@BenJordan3) November 9, 2022

If you assume the City votes 75% Democratic (which is slightly below most years), another 50,000 votes in the US Senate race would have broken 37,500-12,500 for Mandela Barnes, almost entirely making up the lead of around 26,500 that Ron Johnson has today.

That makes it a sad irony that a Black man from Milwaukee is kept out of the US Senate in significant part due to....Milwaukeeans not turning out for him. After the racist and anti-Milwaukee GOP rhetoric and strategy was in both the Senate and Governor's race, it's is mind-boggling to me that Milwaukee voters did not respond by turning out in big numbers to kick the GOP's ass for that. Which means you'll see the same garbage from the GOP in 2023 and 2024.

2. I mentioned there were 5 counties that had voted for 3 of these 4 winning statewide candidates - Donald Trump in 2016, Ron Johnson in 2016, Tony Evers in 2018, and Joe Biden in 2020. Let's see who they voted for in 2022. Door (Evers and Johnson) Vernon (Evers and Johnson) Grant (Michels and Johnson) Kenosha (Michels and Johnson) Sauk (Evers and Barnes) I also targeted was a group of counties in SW and S. Central Wisconsin that did not vote for Ron Johnson in 2016, but did vote for Donald Trump in both 2016 and 2020, and 4 of them voted for Evers in 2018. Columbia Crawford Lafayette Richland Vernon All 5 of these counties voted for Ron Johnson on Tuesday. Evers was able to win Columbia and Vernon, but lost the other 3. Seems worth putting in the memory bank for 2024.

3. While some swingy rural counties may be trending to the GOP, Dems continued to gain in a group of high-population counties that used to give massive gains to the GOP. Those are the WOW (Milwaukee suburban counties of Waukesha, Ozaukee and Washington) and the BOW (the Fox Valley centers of Brown, Outagamie and Winnebago Counties). After going strong for Scott Walker in 2018, Tony Evers cut significantly into those margins in 2022. Likewise, Johnson was not able to run up the huge gains he got on Russ Feingold that he got in these areas in 2016.

Waukesha saw the biggest net vote shift of any WI county from 2018 gov to 2022 gov: almost 29K votes.
2018: Walker wins Wauk by 75K
2022: Michels wins Wauk by just around 46K
second biggest shift: Dane County: 22K
18: Evers wins Dane by 151K
22: Evers wins Dane by 173K https://t.co/GzjIxbRHZD

— Craig Gilbert (@WisVoter) November 9, 2022

Normally the GOP margin for GOV in the 9 other counties in MKE market is bigger than the Dem margin in MKE county. Not this time, due to Dem inroads in inner and outer suburbs of MKE (both blue and red burbs). 2/3

— Craig Gilbert (@WisVoter) November 9, 2022

Evers also improved in the BOW Counties, all of which had margins of less than 10 points, and Tony nearly won Winnebago County outright (losing by 1%).

I think a lot of folks may consider that to be the case, yes — it is also home to UW-Stout, so some elements of a college town. Fwiw, Politico had outdated/incorrect numbers for Dunn, so this is updated pic.twitter.com/ePCxz4tRmx

— Ari Brown (@AriB83) November 10, 2022

You also see that Dems do seem to keep losing ground in rural Western and Northern Wisconsin, including the loss of 2 Assembly seats and 1 Senate seat in NW Wisconsin. This is something that needs attention and may be a flip side of the WOW/BOW shifts in the Trumpian era.

That's my quick dive, but since there's more to do in my real life tonight, I'll pick that up later. Signs are generally good for Dems (especially in statewide races), but this is still a state heavily divided on educated and urban/rural lines. And it is still disturbing that Ron Johnson was able to slide by on a campaign of racism and fear, which means there is much work left to do to restore this state, and help it keep up with the noew all-blue states of Minnesota and Michigan.

The X factors and trends to look for in tomorrow's election returns

1. The swingy places - where are they, and who do they swing to?
I touched on this in an earlier post in breaking down the Assembly districts that have seen some notable changes in outcomes in recent years.

To add onto that thought, there are 5 counties that have voted for 3 of these 4 winning statewide candidates - Donald Trump in 2016, Ron Johnson in 2016, Tony Evers in 2018, and Joe Biden in 2020.

Door (all but Evers)
Grant (all but Biden)
Kenosha (all but Biden)
Sauk (all but Johnson)
Vernon (all but Biden)

Interestingly, there is not one county in Wisconsin that voted for all 4 of those candidates. But that's likely as close to a bellweather as you are going to find.

There are also 5 counties that voted for Trump and Feingold in 2016, and Trump in 2020. And all are in the 608 area code.

Columbia
Crawford
Lafayette
Richland
Vernon

All but Lafayette County voted for Tony Evers in 2018. Not big-population areas, but those seem to be interesting harbingers to me.

2. The students are back, will their votes return with them?
I mentioned this a couple of weeks back, but it bears repeating here. Fall 2020 was a time without a COVID vaccine, and had a lot fewer students residing on college campuses than we have today. This depressed turnout in a heavily-Dem constituency, and included a lot of swingy areas of the state.

A big reason that rapidly-growing Dane County had a lower share of the turnout in 2020 (10.42%) than they did in 2018 (11.02%) was because of significant lagging in growth (or outright declines) in votes in many wards in and around the UW-Madison campus.

In that post, I also noted that assembly districts which included UW campuses in Stevens Point, Eau Claire, La Crosse, and (to a lesser extent) Oshkosh also lagged behind statewide increases in turnout between 2018 and 2020. This may not only have an effect in the statewide races for Governor and US Senate, but it may also mean Dems' chances of holding key seats in the State Assembly in Point, Oshkosh, and Whitewater, and a hotly contested State Senate seat in Eau Claire, are better than what 2020's results may indicate.

I could be taking some hopium here, but in the first post-Dobbs election in a state that has an abortion ban that will be enforced if Dems don't win, this factor has to be put into consideration. Especially when you see pictures like this.

This is the line to #earlyvote at the Memorial Union on UW-Madison’s campus right now. You absolutely love to see it. On Wisconsin! pic.twitter.com/hxBULYW2A2

— Ben Wikler (@benwikler) November 4, 2022

3. The WOW and the BOW
This reflects the Milwaukee suburban/exurban counties of Waukesha, Ozaukee and Washington (WOW) and the Fox Valley counties of Brown, Outagamie and Winnebago (BOW). These areas have accounted for 22-23% of statewide votes in November elections, and gave huge margins to Ron Johnson in 2016. But Dems have gained since 2016 in both areas.

This is the biggest question mark to me in the election. Do the BOW and WOW produce results that are more like the 2016 Senate election, or the 2020 Presidential election. And will there be any differences between the Governor's race and the Senate race?

If the numbers resemble 2016 Senate, GOPs will win. But if Dems do as well as they did in the 2020 Presidential election, or if things keep sliding even more into the Dems' column in BOW and WOW? Dems will win, and might well win downticket.

4. Will Milwaukee step up, or will its share keep shrinking?
. Milwaukee gives Democrats a lot of votes, but it's been a smaller part of the Wisconsin electorate since peaking in Barack Obama's re-election campaign in 2012, with the City barely making up more than 7.5% of the overall number of votes in the State in the 2020 Presidential election.

It's worth noting that Russ Feingold barely got more than 75% of votes cast for Senate out of Milwaukee in 2016, while Obama pulled nearly 79% of a much larger number in 2012, and Joe Biden pulled 78.33% in 2020. If an election that includes Milwaukee's own Mandela Barnes can get an Obama-level share of votes cast, and if the share of the statewide electorate in Milwaukee looks more like an Obama election, or even the 2016 election, then that will put the Dems in great shape statewide.

Here's your challenge, Milwaukee. If you want to stop seeing Republicans have a central strategy of appealing to racist and anti-Milwaukee attitudes, then having a huge turnout in reaction to that racist, anti-MKE rhetoric that causes GOP candidates to lose statewide is the only way to do it.

5. The rest of Wisconsin, and the dead MAGAt factor
Just under half of Wisconsin's votes come from outside of the 10 largest counties in the state. This ranges from places as large as Wausau, La Crosse and Eau Claire all the way down to Menominee County (population 4,255), and Barack Obama won this vote in both 2008 and 2012. But it has shifted hard toward the Republicans in the Trumpian era, with Democrats losing by double digits from 2016 forward.

The GOP also benefitted from huge turnout in the less-populated areas, as their share of the electorate went from 45.3% in the 2018 Governor's race to 46.6% in 2020. But COVID-19 has claimed a lot of people in the last 2 years, and a disproportionate amount of them have been in red-voting rural counties. Here are the counties that are the top 1/3 for COVID death rates in Wisconsin, courtesy of the New York Times.

Every one of those 24 counties voted for Donald Trump, and many of these counties weren't growing before COVID started taking people away. It's morbid but also true that if everything else is held equal, these places should have a smaller effect on the 2022 election, and that's not going to help Ron Johnson and Tim Michels.

But that being said, Dems cannot afford to be down at 40% or below for the "rest of the state" vote tomorrow. And GOPs have been definitely trying to run up the score with a very MAGA-like strategy that kisses up to the Big Lie and has racism resentment be central in their messaging to maximize those voters.

When you have close elections as we do in Wisconsin, a 3-5 point shift in outcome or turnout due to any of these factors could become decisive. And if things go the wrong way, it won't just be bad for the 49% of us whose candidate lost, it'll be awful for 99% of us.

Guess we'll find out soon enough, but hopefully this gives you some kind of reference to look at as the results come in, and know when you really should be happy, concerned, or depressed after 8pm tomorrow.

Johnson, Michels, Musk - why CEOs shouldn't be running bigger things

The last few days have given us quite a bit on how mediocre mega-rich white guys roll, haven't they?

Elon Musk bought Twitter, fired about 60% of the employees and lets hate speech run wild and is wondering why its losing revenue at an alarming clip pic.twitter.com/7RcA0rkF4u

— Pezell56x (@Pezell56x) November 4, 2022

Elon Musk tweeted a homophobic conspiracy theory that defamed an 82 year old man who was nearly murdered with a hammer…to his 110 million followers and is now blaming “activist groups” for Twitter losing ad revenue. pic.twitter.com/8ez7XO418Z

— Brian Klaas (@brianklaas) November 4, 2022

Musk threatens to go “thermonuclear” against companies who choose to stop advertising on Twitter with a “name and shame” campaign.
Authoritarians think they can lie and punish their way to power.
Aren’t companies “free” to decide where they put their paid speech?

— Duty To Warn 🔉 (@duty2warn) November 5, 2022

the world’s richest man* paid 2x what twitter was worth to spend his first week in charge getting grievously pantsed every single second of every day in full view of every single other important person in the entire world.

— GOLIKEHELLMACHINE (@golikehellmachi) November 5, 2022

Back here in Wisconsin, the rich guy scumminess is more of the good old-fashioned corruption kind, where they take care of their own.

Patrick Michels, president of Michels Corp., gave @wisgop $1 million on Sept. 28, same day Kevin Michels, the vice president of fleet and equipment, donated $500,000.

Next day, @michelsforgov listed a transfer from the state GOP of $800k. He got $600k a week later.

1/ https://t.co/jWFupRKVtZ

— JR Ross (@jrrosswrites) November 1, 2022

They're not thinking of getting any taxpayer-funded contracts kicked back to their business, are they? Noooo, I'm sure this is all in good faith, Just like that Building a Better Wisconsin ad I've seen that is nothing but a 1-miniute infomercial for Michels Corp.

Michels isn't any cleaner in his own personal financial reporting to the public.

NEW: GOP nominee for Wisconsin governor Tim Michels may have failed to report connections to 25 companies in his personal financial disclosure:

“It would appear that Tim Michels is exploiting some confusion surrounding LLCs and campaign finance laws.”https://t.co/NNgekD2X4K

— Heartland Signal (@HeartlandSignal) November 3, 2022

Funny how these rich folks all have these money-laundering ops that they won't entangle when the conflicts are asked about. Speakin

Ron Johnson fought for a tax cut as his family was amassing luxury real estate around the country https://t.co/Z3HLoZuiZe — via ⁦@DanielBice⁩, ⁦@MSpicuzzaMJS⁩ and ⁦@ndrewhahn⁩

— Patrick Marley (@patrickdmarley) November 4, 2022

The Johnson story falls under "call me if this one sounds familiar."

The Johnson family's real estate investments include two waterfront homes with sweeping views worth a combined $3 million on the picturesque San Juan Islands in the state of Washington; four condominiums near a ski resort in Park City, Utah; three Florida houses worth a total of $4 million; a $1.5 million Washington, D.C., townhouse on Constitution Avenue; and two Fish Creek condominiums in Door County.

Johnson and his wife also have an LLC that owns the building and property for Pacur LLC, the Oshkosh plastics firm he sold in 2020. On his U.S. Senate financial disclosure form, Johnson said he receives between $100,000 and $1 million annually in rent on the property valued from $5 million to $25 million. The two Johnson family companies that own the most properties are JFT Investments and Atlas Capital RE....

In 2017, Johnson held up passage of Trump's tax bill by objecting to the plan's already generous tax break for pass-through businesses. Originally, the Trump administration proposed allowing business owners to deduct up to 17.4% of their profits. Johnson fought to increase that to 23%. The figure ended up at 20%.

Under the plan, a business owner who had $600,000 in profits in a year could deduct up to 20% of that sum, or $120,000, depending on the company's payroll and property holdings. There was no such deduction before 2017.

It gets pretty easy to do tax-advantaged investments when you write the tax code that allows you to get bigger write-offs for things you already do, eh? Meanwhile, we haven't been able to write off the mortgage interest on our one home for the last 5 years because of the same Tax Scam.

Maybe we shouldn't trust rich mediocre white guy CEOs to do anything beyond take care of themselves and their companies. They don't care about anything else, and in a lot of cases don't KNOW SHIT ABOUT ANYTHING ELSE.

Those are the last type of people that should be making the decisions that affect hundreds of millions of other Americans. Let's have less of them in charge of things after Tuesday, OK?

Yet another month of good job and wage growth for October.

On the eve of midterms, we got one last jobs report in for October today. And things continued to look very good in the labor market.

JUST IN: The US economy added 261,000 jobs in October – that’s well above expectations and indicates the economy is not in a recession.

The unemployment rate rose to 3.7%.

Wages are up 4.7% in the past year, which is a clear slowdown from earlier this year. #jobs

— Heather Long (@byHeatherLong) November 4, 2022

But 4.7% wage growth (and a 0.4% increase in October) still isn't bad, especially as wages have continued to climb after inflation leveled off after June. We've now seen 8 straight months of average hourly wages going up 0.3% or more, with the biggest gains continuing to be at the lower parts of the wage scale. But we also aren't seeing wages go up by so much that it would trigger a severe wage-price spiral.

Leisure and hospitality led the way with huge wage growth last year. It's slowed markedly since then, but we've seen a bit of an uptick in recent months. Not sure I'd read too much into the short-term moves here, but does suggest wage pressures in the sector remain strong. pic.twitter.com/PlR9YMbZR9

— Ben Casselman (@bencasselman) November 4, 2022

In looking at sectors and job growth, health care has had a remarkable comeback from the huge deficits that hit in the first year post-COVID. The sector has now gained over 500,000 jobs in the last 12 months, and has more jobs in it now than it did before the pandemic.

Hiring still looks strong in many sectors, but not all

Healthcare +53,000
Professional services +43,000
Manufacturing +32,000
Hotels +20,000
Social services +19,000
K-12 education +13,500
Trucking +13,200
Retail +7,200
Restaurants +6,000
Construction +100
Warehousing -20,000

— Heather Long (@byHeatherLong) November 4, 2022

That 32,000 job gain in manufacturing is also notable, especially in contrast to the flat growth in the construction sector. We now have larger job gains in the manufacturing sector since the start of the pandemic than we do in construction, despite the fact that manufacturing had a much larger COVID-era deficit when Joe Biden took office in January 2021.

Despite the Fed's best attempts, this is still a pretty darn good jobs market. But as a UW-Madison economics professor points out, our media stays fixated on an INFLATION that has been cooling off for the last 4 months, to the point that the reality of our great jobs market has become largely ignored.

If Trump were in office, this would be daily front page news, w/ the papers of record proclaiming him FDR v2.0 for saving the country from another Great Depression. But it’s Biden, so enjoy this latest feature w/ Larry Summers on THE INFLATION & the 2012 equivalent gas prices. https://t.co/6XOkn5DrkD pic.twitter.com/sHqSreFM80

— Mark Copelovitch (@mcopelov) November 4, 2022

LIBERAL MEDIA MY ASS!!!

Workers still needed, but cost increases going down. Why wouldn't the Fed want this to continue?

In a week filled with job and wage news, we started off with information that labor was still in very strong demand in America in September.

JUST IN: Job openings *INCREASED* in September to 10.7 million, a surprisingly strong result and up from 10.3 million in August.

The US has had over 10 million job openings for 15 straight months now.

Bottom line: The job market still looks strong. No sign of a recession there pic.twitter.com/MAnukDACYR

— Heather Long (@byHeatherLong) November 1, 2022

What an incredible run: The US has had over 10 million job openings for nearly 1.5 years.

Yes, it has slowed *a little*, but it's still strong.

Sept: 10.7 million
Aug: 10.3 million
July: 11.2 mil
June: 11 mil
May: 11.3 mil
April: 11.7 mil
March: 11.9 mil-->Record high

— Heather Long (@byHeatherLong) November 1, 2022

And layoffs continue to remain near 50-year lows, with the latest data coming today.

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market remains strong despite slowing domestic demand amid stiff interest rate hikes from the Federal Reserve to tame inflation.

Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 217,000 for the week ended Oct. 29, the Labor Department said on Thursday. Data for the prior week was revised to show 1,000 more applications filed than previously reported. Economists polled by Reuters had forecast 220,000 claims for the latest week.

Though there has been an increase in layoffs in interest rate-sensitive sectors of the economy like finance, technology and housing, employers have generally been hoarding workers as labor remains scarce in some service industries.

All of that seems fine to me. And it portends for another month of decent job growth to be reported tomorrow, which would go on top of the 10 million jobs that have been added since Joe Biden took office in January 2021.

We also got some indications that the potential for a wage-price spiral lessened in recent months, as the Bureau of Labor Statistics released information on productivity and unit labor costs for Q3 today.

Unit labor costs in the nonfarm business sector increased 3.5 percent in the third quarter of 2022, reflecting a 3.8-percent increase in hourly compensation and a 0.3-percent increase in productivity. Unit labor costs increased 6.1 percent over the last four quarters….

Unit labor costs in the total manufacturing sector increased 3.8 percent in the third quarter of 2022, reflecting a 2.4-percent increase in hourly compensation and a 1.3-percent decrease in productivity. Manufacturing unit labor costs increased 4.3 percent from the same quarter a year ago.

Unit labor costs of under 4% seems pretty good, and in a non-rigged economy would mean that inflation should be settling down, since higher costs don’t have to be passed onto the consumer. (Although in 2022 America, it likely means the company uses these lower cost increases as a way to try to grab more profit).

In addition, that report from the Bureau of Labor Statistics showed that employee-related inflation wasn’t as bad in the first half of the year as originally reported. The bad news is that it was largely due to workers not getting as much as much as originally thought.

Nonfarm business sector productivity was not revised in the second quarter of 2022; a 0.2- percentage point upward revision to output was offset by a 0.2-percentage point upward revision to hours worked. (See table B1.) Second-quarter unit labor costs were revised down 1.3 percentage points to an increase of 8.9 percent, reflecting a 1.2-percentage point downward revision to hourly compensation. While hourly compensation increased 4.5 percent in the second quarter of 2022, real hourly compensation decreased 5.5 percent.

Manufacturing sector productivity was revised down 1.8 percentage points to an increase of 2.9 percent in the second quarter of 2022, reflecting a 0.4-percentage point downward revision to output and a 1.4-percentage point upward revision to hours worked. Productivity was revised down in both the durable and nondurable manufacturing subsectors. In the second quarter of 2022, total manufacturing unit labor costs decreased 0.7 percent rather than 0.2 percent as previously reported, reflecting a 2.3- percentage point downward revision to hourly compensation, which was partially offset by the 1.8- percentage point downward revision to productivity.

A similar story happened in Q1, with overall unit labor costs being revised down from an initially-reported 12.7% annual rate to 8.5%, and also seeing sizably higher revisions for hours worked in manufacturing. But also, the bad part is that real compensation in Q2 was well below the rate of inflation (-6.4% for nonfarm business, and -7.1% manufacturing).

The BLS says that hours worked in non-farm businesses grew in each of the first 3 quarters of this year, with the rate slowly decreasing as 2022 has gone on (+3.6% in Q1, +2.9% in Q2, +2.4% in Q3), which you would expect as unemployment falls to 3.5%. Isn’t this a sign that things are in a positive but less inflationary situation?

And given that unit labor costs have been getting under control, why would you want the Fed to screw up what seems to be a good situation for both workers and employers? But Fed Chair Powell seems determined to do so.

Fed Chair Powell says the labor market is still "overheated"

He wants to see:
-Job openings coming down a lot more
-Job quitting cooling down a lot more
-Wages "coming down" (i.e. not growing at 5%)

"It not obvious to me" that a softening is happening, he says

— Heather Long (@byHeatherLong) November 2, 2022

Hey Jerry, why don't you wait to see how the labor markets react to a 4% Fed Funds rate (a rate above the Q3 increase in unit labor costs), instead of continuing to jack rates higher to solve a “problem” that seems to be working itself out?

Or are the bankers worried that because job openings remain high and layoffs are staying low, that workers are going to be able to demand more of their share of the record profits they have helped produce in 2022? THE HORROR!

Fed keeps jacking rates, because God forbid that workers keep doing well.

So the Fed acted as expected today, raising the Fed Funds rate by 75 points. But that wasn't what people were looking for. Instead, they were looking for hints as to how many more rate hikes were left to come, and how high the Fed Funds rate would go.

Originally, the outlook seemed to be pretty good, as Fed Chair Jerome Powell finally seemed to be looking ahead to current and future conditions to guide policy, and admitted that jacking the Fed Funds rate to 4% was a big deal in itself.

The Fed again raises its main policy rate by 75bps, lifting fed funds to 3.75-4%. "Ongoing increases" will be appropriate to get rates to a "sufficiently restrictive" level, but the future pace will reflect the "cumulative tightening" delivered so far this year and policy lags pic.twitter.com/5uAfKbDp3X

— Colby Smith (@colbyLsmith) November 2, 2022

The stock market jumped, seeing a leveling off of rate hikes coming in the near future, with the DOW Jones Industrial Average exceeding 33,000 at one point. And then Powell spoke to reporters after the Fed's decision was made.

The 3 takeaways from Powell's press conference:

1) The Fed could step down to a slower pace in Dec even if inflation data don't improve much
2) If there had been new estimates of the terminal funds rate released today, they would have moved up
3) Not ready to talk about a pause

— Nick Timiraos (@NickTimiraos) November 2, 2022

And the result on Wall Street....

This is so dumb. Inflation was at a 2% annual rate in Q3 2022, and there is strong evidence of slowdowns in construction activity and housing prices starting to fall. So why keep on tightening at such a heavy pace?

It's rare to see the Fed speaking this clearly about how it works, but here the president of the Kansas City branch says Americans have too much money and that's a problem the Fed's going to solve. https://t.co/s9rG1TvEn9 pic.twitter.com/nM3NZ99xKZ

— Jon Schwarz, Mayor, Arkham MA (@schwarz) November 2, 2022

Yeah, we can't have everyday Americans continuing to have money in their pocket and the country having more than 10 million job openings. That's terrible! We need to restore balance and allow the corporations that are making record profits have a better position to negotiate with the plebes!

Disastrous. A Trump appointee who Biden kept onboard is set on wrecking Biden’s jobs record and maybe giving us a horrible recession. https://t.co/nKNxx5eMJp

— Mehdi Hasan (@mehdirhasan) November 3, 2022

It is infuriating. And it really tells you what the banksters fear most - workers with options. They'd rather wreck the economy than have everyday Americans actually gain ground on oligarchs like them.