Fed raises rates as prices rise, but rest of economy seems mediocre

I've been tied up with March Madness and the festivities that come with it, but there was a slew of economic data that hit in the later part of this week that I wanted to catch up on.

One of those pieces of data was February's retail sales information, which indicated a slowdown for at least the last month.

U.S. retail sales in February posted the smallest gain in six months, indicating a tempering of the consumer spending that’s been carrying the economy.

Purchases rose 0.1 percent, matching the Bloomberg survey median estimate, after a 0.6 percent increase in the prior month that was stronger than previously reported, Commerce Department figures showed Wednesday. Just four of the 13 major retail categories saw gains in February sales.

Estimates for retail sales in the Bloomberg survey ranged from a 0.3 percent decrease to a 0.5 percent advance. The January reading was previously reported as a 0.4 percent rise.

The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, rose 0.1 percent. That followed the prior month’s 0.8 percent increase in the so-called retail control group.

And the mediocre retail sales figures look even paler when followed up with this week's release of the February numbers for the Consumer Price Index. While the Bureau of Labor Statistics says that consumer inflation was relatively tame in February itself, January's CPI increase was 0.6%, meaning that real retail sales haven't increased at all in 2017. In addition, the year-long trend of inflation continued to go up, reaching its highest level since March 2012.

The all items index rose 2.7 percent for the 12 months ending February; the 12-month increase has been trending upward since a July 2016 trough of 0.8 percent. The index for all items less food and energy rose 2.2 percent over the last 12 months; this was the fifteenth straight month the 12-month change remained in the range of 2.1 to 2.3 percent. The energy index rose 15.2 percent over the last year, while the food index was unchanged.

12-month CPI, 2011-2017

The increase in inflation also ate into the earnings of American workers, and while there was a slight increase in real earnings in February due to the tamer inflation, but January's 0.6% increase in inflation still leaves workers behind for 2017 so far. And over the last year, the average American worker hasn't gained anything.

Real average hourly earnings for all employees increased 0.1 percent from January to February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from a 0.2-percent increase in average hourly earnings combined with a 0.1-percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings increased 0.1 percent over the month due to the increase in real average hourly earnings combined with no change in the average workweek.

Real average hourly earnings were unchanged, seasonally adjusted, from February 2016 to February 2017. The unchanged real average hourly earnings combined with a 0.3-percent decrease in the average workweek resulted in a 0.3-percent decrease in real average weekly earnings over this period.

With these numbers in mind, the Federal Reserve Bank raised interest rates this week another 0.25%, and Federal Reserve Chair Janet Yellen said that the fact that the US economy was near full employment and still gaining jobs allowed them the latitude to tighten money.

"We have seen the economy progress over the last several months in exactly the way we anticipated," Yellen said in a press conference following the end of a two-day policy meeting. "We have some confidence in the path the economy is on."

The Fed also stuck to its outlook for two additional rate increases this year and three more in 2018. The central bank lifted rates once in 2016.

Stock markets extended gains and bond yields fell on the benign economic outlook and the continued steady path of rate rises signaled by the central bank. The dollar was trading lower against a basket of currencies.

Fed policymakers noted that inflation was now "close" to the central bank's 2 percent target, and that business investment had "firmed somewhat" after months of weakness.

However, they did not flag any plan to accelerate the pace of monetary tightening, with the policy-setting committee reiterating and Yellen emphasizing that future rate increases would be "gradual." At the current pace, rates would not return to a neutral level until the end of 2019.

I'm a little more skeptical of the strength of the economy, because of these limited wage increases and retail sales being mediocre, but I do think it's nice that savers will get a little more from their investments in coming months, because God knows they haven't gotten much in recent years.

The bigger question to me is when the lack of earnings and numerous retail store closings start to bleed over into other parts of the economy, and start to prick and deflate the Trump Bubble we are seeing on Wall Street. It needs to be sooner than later, before the damage becomes too great to avoid hurting large amounts of people.

Indiana basketball firing shows yet again that Tom Crean = Scott Walker

As I was making my way into the Bradley Center for March Madness games, I found out that Indiana University had fired head basketball coach Tom Crean. In fact, IU wanted to get rid of Crean so badly that they spent an extra $3 million to blow him out yesterday vs firing him after July 1.



That firing also reminded me of a series of articles I have written throughout the years comparing Crean to another obnoxious, self-promoting failure that spent several years heading things in Milwaukee- Scott Walker. Here's the 2011 original, with these points as part of it.

3. Both got their big-time jobs in Milwaukee at a relatively young age, and then lucked into prominence in the early 2000s. Crean rode Dwyane Wade to a Final 4 in 2003, while Walker rode Tom Ament's corruption and Charles Sykes' schlong to County Exec. in 2002.

4. Both make a big show out of how in control [they] are, acting enthusiastic for their cause and knowing how to kiss the right backsides and strike the right poses to impress those of lesser intelligence. But their records in Milwaukee weren't worthy of the adulation their supporters would give them - Walker never got Milwaukee County's finances in order and destroyed the level of services, and Crean won a grand total of ONE NCAA tournament game at MU without D. Wade, and couldn't even make the Big Dance 4 times in 9 years.

I then updated that in 2013, and included these observations.

Sure, weak-minded partisans might be impressed by the way these guys seem so enthusiastic and unflappable, and in the way they can recruit large amounts of talent (or money) their way. But among those of us that actually care about the game (or state) at large, and those of us who are clear-eyed enough to see these charlatans for who they are, we know that there's little to no ability in either of these guys, and if the other folks come strong at them, they'll come up short, no matter how tough they might look on the outside. Us Badgers in Madison know it as well as anyone, and both Crean and Walker rightfully fear that what we know will soon become reality for the rest of their constituencies (much like it did when it came to Iraq or demanding marriage equality or any other number of 21st Century developments that us Madison hippies have been proven right about).

Sure, both Crean and Walker got lucky reprieves in 2012 as a number of things fell their way (Walker convinced enough weaklings that he hadn't deserved to be booted out of office, while players like Oladipo and Zeller saved Crean's job with a Sweet 16 appearance). But even though these guys may be riding high in the eyes of the media, those of us that have a clue know that status is going to be fleeting (Walker's education budget is already blowing up among his GOP backers in the Legislature, and his budget will clearly implode into massive deficits with huge debts costs. Crean will probably lose Oladipo, Hulls and Zeller next year, with nowhere near as much talent ready to replace it). By 2014, both will be on the downslide in the national picture. And while both have delusional dreams of grandeur in 2016, (Crean thinks he's building at empire at IU despite not being half the coach Bo Ryan, Tom Izzo, or Thad Matta could be able, and Gov Dropout thinks he can be president, despite barely being able to crack the top 10 among the bubble-world losers at CPAC.) it's probably more likely that they'll be considered a joke at that point, with their careers effectively over.

Ok, the Thad Matta part of that take hasn't aged well, and I was a year early from calling Crean's demise in Bloomington, but the rest of it sure seems to fit, doesn't it?

And then in 2014, I went a step further.

1. Both seemed to be riding high in 2013, but with outbreaks of hubris and foolishness that foreshadowed the bad things to come.

2. Both are seeing things come crashing down in 2014, leaving only hacks, clueless pundits and red Pom-Pom wavers as their only support.

3. Neither are talented enough to be in the position they're at, and the people in the know recognize them as clueless, classless charlatans.

4. Both are getting big money based on their poses, and a whole lot of contributors of that cash can't be liking what they're seeing around now.

Now Tan Tommy is gone from Bloomington after never getting past the Sweet 16 in 9 years, and missing the tournament entirely in 5 of those years. Walker's Wisconsin has been in the bottom half of US job growth for each of the last 21 quarters, and has consistently been at or near the bottom for growth in the Midwest.



Things have gone so badly for Walker in this category that he said this week he had "shifted" away from discussing his 2010 election goal of 250,000 jobs in 4 ....now that he is still far away from that goal after 6 years in office. And just like how some IU partisans didn't want to admit that Crean was a failure that wasn't up to the standards that should be expected at an elite job like IU, there is still a group of dimwits in this state who don't want to admit that this whole Koch/Bradley-addled experiment in rightwing rule in Wisconsin has set the state back decades, and that we are unacceptably stagnant in a 2010s decade that has featured a relatively strong national economy.

But the number of strong supporters are dwindling over time, and just like how many IU fans came to the conclusion that Crean's tenure was not going to return Indiana basketball to glory, an increasing amount of Wisconsinites have realized that things will never be good for most people in the state as long as Scott Walker is in the Governor's Office. The only question is if enough people in Wisconsin decide to take the final step, and remove the failure at the top, much like how the IU Administration finally pulled the plug on Crean yesterday.

Trump's taxes do reveal something- why we need the AMT

I was among those who tuned into Rachel Maddow last night to watch her discuss a leaked document that showed the topline numbers of Donald Trump's 2005 federal income tax return, and the Trump campaign admitted the documents were legit in a tweet that came out after Maddow revealed she had the tax documents, but before she took the air. I was sort of going to shrug, but then I saw David Cay Johnston was the guy who received the leaked document, and after reading Johnston's 2007 book Free Lunch last week, I had to tune in, because that guy knows his stuff when it comes to corporate crookedness.

As is her style, Rachel spent the first 20 minutes of the show laying out why the public needs to see the tax returns of presidents, going over Trump's numerous connections to sketchy foreign interests, and to find out if there's a potential conflict of interest in his decisions, and connecting it back to prior evasions by Trump. Only around 8:20 did she put Johnston on and give the numbers behind the 2005 front-page of the Trump taxes, and Johnston quickly pointed out that Trump may have been the one who dropped this information off with him, because the document showed that Trump actually did pay quite a bit of taxes on a lot of income in 2005.

But Johnston noted that Trump in 2005 paid $36.5 million in federal income taxes only because he fell under the Alternative Minimum Tax, otherwise Trump would have paid less than 4% in 2005. The AMT talk starts around 5:45 in this segment, and if you're a tax/budget geek like me, it's very interesting.

And as Johnston and the New York Times note, guess what Donald Trump and other GOPs like Paul Ryan want to get rid of as part of "tax reform?" THE AMT!

Nothing in the two pages produced on Tuesday night suggested any ties with Russia. Nor did they provide much information about his businesses that was not previously known. But they showed that the vast bulk of the federal income taxes he paid in 2005, $31 million, was paid under the alternative minimum tax, which Mr. Trump wants to abolish.

That tax serves as a backstop to the ordinary income tax and is intended to prevent wealthy Americans from paying no income tax at all. Without it, Mr. Trump would have paid about $5 million in regular taxes, plus nearly $2 million in self-employment taxes, on $153 million in income in 2005.

And that's another reason why we need to know about Trump's taxes, because we should know if Trump is supporting certain tax and spending policies solely because it would allow him to pocket millions of dollars. That's not even going into specific contracts that could enrich Trump, his family, or those he might owe money/favors to.

And those sort of details were missing from the 11-year-old Trump tax document, because it only showed the totals and topline figures. Those of you that have recently filed taxes may recall the many schedules and other information that would include the SOURCES of royalties and business income , who Trump may have owed interest to, and what transaction his $103 million in reported 2005 losses may have been coming from. This is why the NY Times' statement about "no ties to Russia" is ridiculous- there's nothing in those two pages that says who Trump got paid from or who he paid funds to. That's why we need the details.

While the Trump tax return story wasn't exactly an administration-ender last night, and frankly was way overplayed by MSNBC (it didn't require 90 minutes of special coverage in a time when health care and Russia/China's connections to Trump and his family are bigger issues). But as Maddow pointed out, "if we can get this year of taxes, people can get other years of taxes," and those more recent years are likely to have the REALLY good stuff, especially as the economy collapsed in the late 2000s. And it proved that the Trump Administration was lying when they said their taxes couldn't be released to the public and that they were being held under audit, because they sure were forthcoming when Maddow tweeted out that she had the tax return.

So let's not go all-in on a Trump tax issue that right now is a mere contributor to the bigger issue of Trump corruption and incompetence. The Trump tax return actually is a good card to play when the president*'s budget comes out and is debated through Congress, because Trump's return is proving exactly why we need an AMT, and why the rich aren't in need of even more breaks and advantages than they already receive.

Besides, it might work better to hold these pieces back and only play them as we complete the puzzle, instead of throwing them out in isolation where it becomes easier for the right-wing noise machine to diminish its significance, as well as the larger story that shows the real danger. I want this bum gone as much as the next guy with an IQ over 80, but Maddow and company need to make sure they don't build things up too much and fail to come through, because then the dimwitted citizenry will turn off, and delay the reaching of crucial mass that we need when the real major scandals that are happening in DC blows sky-high.

Self-insurance savings? Pay raises for state workers? Don't bet on it

Given that it's a pre-election budget, it's not surprise that Governor Walker is trying to look good by using the projected savings from health insurance changes to offer more money for state employees, as well as other services. However, a quick look at the details behind those plans shows that a lot of things have to fall in place for the numbers to add up, and given the wreck being made of health care in DC, that already-sketchy plan seems even less likely to work out.

At first glance in the LFB’s analysis (starting on Page 98 of this PDF), it appears that there’s a sizable amount of extra money thrown into the comp reserves for the next budget, including 2% wage increases for many state employees in 2018 and 2019.

Provide, in the 2017-19 general fund condition statement, total compensation reserves of $29,001,600 in 2017-18 and $71,235,800 in 2018-19 for cost increases related to state employee salaries and fringe benefits. Total compensation reserve amounts by fund source and fiscal year are shown in the following table. [Note that compensation reserves do not include amounts for cost increases related to University of Wisconsin-System (UW) employee salaries and fringe benefits. Under the bill, amounts have been separately budgeted within the UW in order to support these costs (see "University of Wisconsin-System")].

The GPR and all funds compensation reserve amounts under the bill related to fringe benefits include the following: (a) $18,818,100 GPR ($38,000,300 all funds) in 2017-18 and $30,841,100 GPR ($62,278,800 all funds) in 2018-19 to support prior period and inflationary increases for employee fringe benefits; (b) -$4,082,700 GPR (-$8,244,400 all funds) in 2017-18 and -$8,165,300 GPR (-$16,488,600 all funds) in 2018-19 associated with savings estimated from an anticipated repeal of the federal Affordable Care Act's health insurer fee (otherwise known as a market share fee or premium tax); (c) -$1,493,500 GPR (-$3,015,900 all funds) in 2017-18 and -$2,987,000 GPR (-$6,031,800 all funds) in 2018-19 associated with savings estimated from the elimination of certain domestic partnership benefits under Chapter 40 of the statutes; (d) -$2,722,200 GPR (-$5,497,100 all funds) in 2017-18 and -$3,433,100 GPR (-$6,932,600 all funds) in 2018-19 associated with savings from the state's high deductible health care plan; and (e) -$357,800 GPR (-$722,500 all funds) in 2017-18 and -$610,300 GPR (-$1,232,400 all funds) in 2018-19 associated with savings from employees opting out of the state's health insurance coverage net of the cost to provide $2,000 annual opt-out incentive payments. [For additional information on the elimination of certain domestic partnership benefits, see "Employee Trust Funds."]

The GPR and all funds compensation reserve amounts under the bill related to salaries for state employees include the following: (a) $15,431,200 GPR ($31,161,000 all funds) in 2018-19 intended to support a 2% general wage adjustment for state employees on September 30, 2018, as well as another 2% general wage adjustment for state employees on May 26, 2019; and (b) $4,200,000 GPR ($8,481,300 all funds) annually to support market wage adjustments for state employees in the classified service.

But those assumptions about $5.7 million in GPR “savings” from the ACA being repealed and another $6.1 million in savings from high-deductible health plans is a hint that not all of these numbers are solid. If ACA repeal fails (and it certainly seems likely that Lyin’ Ryan’s dud of a bill isn’t going through in current form after we found out 24 million people would lose insurance in the next 8 years), then those savings could well disappear over the coming months. This would require some other cuts in the budget, or for the projected salary increases to be taken away.

Oh, and dumping domestic partner benefits for state employees is a nice touch, isn’t it? Sure, the arugment is that marriage equality makes that redundant, but I don’t see any corresponding increase in costs from more people taking on family coverage as a result of this. Seems like a classic Walker budget move of “assume all the savings in one side but don’t pay for the other side.”

Speaking of the other side, here’s the second part of that Comp Reserves equation, which builds in savings to the budget based on a switch to self-insurance for health benefits.

Specify that, if the Group Insurance Board (GIB) executes a contract to provide self-insured group health plans on a regional or statewide basis to state employees for calendar years 2018 and 2019 (other than the current self-insured plan known as the "standard plan"), the Secretary of DOA must calculate the GPR savings in 2017-18 and 2018-19 for state agencies other than the University of Wisconsin (UW) System. Further, specify that if such a contract is executed, the Secretary of DOA must reduce the estimated GPR expenditures for compensation reserves in 2017-18 and 2018-19 by an amount equal to the state agency savings, and lapse the estimated savings to the general fund.

Under 2015 Act 119, the GIB must notify the Joint Committee on Finance if it intends to execute a contract to provide self-insured group health plans on a regional or statewide basis to state employees. Under the act, the Committee is provided 21 working days to review the proposed contract. If the Co-chairs of the Committee notify the GIB within the period of review that the Committee has scheduled a meeting for consideration of the contract, the GIB may not execute the contract without the approval of the Committee. If a meeting is not scheduled, the GIB may execute the contract. The general fund condition statement in the bill assumes lapses of $10,147,000 in 2017-18 and $20,294,100 in 2018-19 associated with GIB executing a contract to provide self-insured group health plans.

First, $30 million in savings is far from a sure thing from self-insurance, and that doesn’t even account for the likely higher deductibles and lower amounts of coverage that state employees will have to pay for to account for those “savings.”

And second, I don’t see any item mentioning that self-insurance would likely get more claims if the Trump/RyanCare bill passes, because spouses of state workers would be more likely to be kicked off of their own job’s health care (or need cheaper health insurance as the GOP bill jacks them on the exchanges), and go onto the state insurance as a result. Those claims would drive the costs of self-insurance up (and there goes your $30 mil in savings), and likely would drive up the premiums that state taxpayers pay as well.

Like a lot of other things, the LFB report indicates that the “savings” of self-insurance seem to be based on a hope and a prayer. And with the fate of health insurance in the next few years being very up in the air due to GOP foolishness in DC, it seems like a very bad gamble to take. This is true both for purposes of balancing the state budget, and also for the ability of state employees and their families to receive adequate health care.

Even the J-S is now asking why Wisconsin keeps failing on jobs

The Milwaukee Journal-Sentinel had a large, front-page story on Sunday regarding Governor Walker's failure to make Wisconsin's economy boom in his 6+ years in power. The flurry of recent jobs releases at the state and federal level spurred the article, which tried to look at why the state still lags behind the results that Walker promised when he claimed Wisconsin would be made "open for business."

For all of 2016, state reports show that employers added 17,200 jobs, by far the lowest annual tally since Walker took office in January 2011.

The total number of jobs created since Walker took office is 185,208, or 64,792 short of Walker's goal of 250,000.

And what's one of the biggest reasons? We can't attract talent to come here.

Marquette University economics professor Abdur Chowdhury agreed that a workforce skills gap was among the factors contributing to what he called a "malaise."

"There are lots of jobs available, but employers are finding it hard to fill those positions. Wisconsin is below average in the percentage of college graduates, ranking 30th, despite being 14th in state and local per capita spending on higher education," he said.

Chowdhury said Wisconsin has suffered from a "significant amount of brain drain," with recent estimates showing that the state loses about 10,000 college graduates each year.

And the results of some of that brain drain was apparent in another report that came out today, which was the January state-by-state jobs report. This January report has an extra bit of punch to it because it includes newly-benchmarked figures for all months of 2016, and as we can see, Wisconsin fared very poorly when compared to the rest of the Midwest over the last 12 months measured.

Private sector job growth, Jan 2016-Jan 2017
Mich +2.11%
Ind. +1.18%
Minn +1.13%
Iowa +0.92%
Ohio +0.73%
Wis. +0.54%
Ill. +0.33%

6th out 7 is bad, and getting doubled up by Minnesota is pretty damn unacceptable. As mentioned previously, this is Wisconsin's worst 12-month stretch of private sector job growth since 2010, meaning it's the worst 12 months for jobs in Scott Walker's tenure in office.

You can see how job growth in the state flattened out in the past year when you look at this chart of the Walker jobs gap, which has now grown well past 110,000 jobs.





And notice that the state would have well added over 300,000 jobs if we had merely kept up with the rest of the nation. Also note that Minnesota has added over 250,000 jobs in the last 6 years (despite starting from a lower number in 2010), while I would be surprised if Wisconsin even hits 250,000 in 8 years.

So tell me, why would anyone think that staying on the same trickle-down mentality with the wage suppression and de-investment in infrastructure and services would turn things around in our declining state? And why should we continue to accept this by keeping these failing, regressive WisGOPs in power?

Good February jobs report, but will it cool with the March weather?

Friday featured another US jobs report, and it ended up being a very good one.

Total nonfarm payroll employment increased by 235,000 in February. Job gains occurred in construction, private educational services, manufacturing, health care, and mining.

In February, construction employment increased by 58,000, with gains in specialty trade contractors (+36,000) and in heavy and civil engineering construction (+15,000). Construction has added 177,000 jobs over the past 6 months.

Employment in private educational services rose by 29,000 in February, following little change in the prior month (-5,000). Over the year, employment in the industry has grown by 105,000.

Manufacturing added 28,000 jobs in February. Employment rose in food manufacturing (+9,000) and machinery (+7,000) but fell in transportation equipment (-6,000). Over the past 3 months, manufacturing has added 57,000 jobs.

The construction and manufacturing pickup is very welcome, and if it's sustained, it's going to fill in a part of the economy that had fallen behind in 2015 and 2016.

But I'd add a note of caution to those strong construction and manufacturing numbers, as they happened in the 2nd warmest February on record in the US, with record warmth in 1/3 of the country's states. That could well have pulled hiring ahead in weather-related areas of those sectors, although there likely is strength underlying some of that.

Construction and manufacturing employment, Dec 2016-Feb 2017
Construction
Seasonally adjusted +98,000
Non-seasonally adjusted -185,000

Manufacturing
Seasonally-adjusted +39,000
Non-seasonally adjusted -40,000

So now that the snow is flying again in March, let's see if that is reflected in "disappointing" numbers in those sectors, since the hiring that would usually happen in March and April may have already happened.

While the jobs report is largely positive, let's also note that retail employment dropped by 26,000 on a seasonally-adjusted basis, with 19,300 of those losses in "general merchandise stores." Yes, some of that reflects larger-than-normal seasonal layoffs after Christmas, but it also doesn't seem likely to improve any time soon, as numerous retailers have announced high amounts of store closings in recent months, as part of a structural shift away from brick-and-mortar stores and more people willing to buy things online.

The unemployment rate side of the monthly jobs report also looked good, as the unemployment rate dropped from 4.8% to 4.7%, as the number of people "employed" and in the labor force both went up by hundreds of thousands of people. Perhaps some of that was also the warm weather, but I'll give the benefit of the doubt and say that things went well in February. Let's see where it goes from here, and if there is any room to the upside.

Naturally, the Trump Administration took credit for the very good jobs report, despite the fact that no new economic policies have generally been changed from the Obama era other than a handful of executive orders. And naturally, actual facts and numbers made the Trump people sound really lame.

Hard to see any Trump bump in these numbers. Nearly identical to last two Febs.
Feb. 2015: 238K
Feb 2016: 237K
Feb. 2017: 235K pic.twitter.com/Mbleugxhmp

— Ben White (@morningmoneyben) March 10, 2017

Bottom line, the US jobs market is still in a pretty good place. But the next three months will seem to give us a better idea whether we return to a strong 2014-2015 rate of job growth, or revert back to the lower levels of 2016.

Weekend reading- Feingold lays it out

Great column in The Nation from the man who will always ve my US Senator, Russ Feingold, in an article titled "The Very Legitimacy of our Democracy is Under Threat."

Between Citizens United , voter suppression, and bought judges, Russ points out why our democracy is broken, and needs to be fixed NOW.

And rubes in Wisconsin thought RUSS was the one that liked the status quo, but the (mo)Ron who knew about Russian interference in the election, but said nothing because it was helping him win.

There's lots of evil being done by our elected officials, but I save more of my disgust for the gutless voters who allow these thugs to take office on the firsr place, instead of voting for true Patriots and public servants like RUSS.