INFLATION WATCH shows prices up more in May, and they're likely to get higher

We knew that gasoline prices kept rising throughout May, and it led to a lot of anticipation of this week’s release of overall inflation data from the Bureau of Labor Statistics. This first shoe dropped on Tuesday.

The consumer price index, a broad gauge of goods and services costs across the U.S. economy, rose at a seasonally adjusted 0.5% for the month, putting the annual inflation rate at 4.2%, the Bureau of Labor Statistics reported Wednesday. Both numbers were in line with the Dow Jones consensus though the monthly number was 0.1 percentage point below the April reading.

Inflation climbed above 4% for the first time in three years, though the increase met expectations amid concerns over how much the surge in energy prices would impact the economy. The level was the highest since April 2023 and above the 3.8% reading from April.

However, stripping out volatile food and energy prices, the so-called core CPI accelerated 0.2% for the month and 2.9% from a year ago. While the annual rate was in line with the forecast, the monthly gain was below the 0.3% estimate and less than the 0.4% April increase.

“Americans are getting squeezed financially by inflation that’s back at a 3-year high,” said Heather Long, chief economist at Navy Federal Credit Union. “The frustration for many Americans is that so many of the basics are up in price right now -- gas, food, electricity, and medical care are all clear pain points that are above 3% inflation. Ending the war in Iran will help to moderate inflation, but the worst is likely still to come for rising food prices.”

A significant difference between now and April 2023 is that consumer inflation was on the way down 3 years ago instead of on the way up like it is today.

And in the shorter term, it looks worse. Since the end of 2022, prices have gone up more than 2% over 6-months exactly once, in February 2023. And then we started dropping bombs in the Middle East in February 2026.

Then combine the 0.5% increase of CPI with a smaller percentage increase in wages, and it means American workers fell further behind in May.

Real average hourly earnings for all employees decreased 0.1 percent from April to May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from an increase of 0.3 percent in average hourly earnings combined with an increase of 0.5 percent in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings decreased 0.2 percent over the month due to the change in real average hourly earnings combined with no change in the average workweek….

In fact, average hourly wages are no higher than they were when Trump came back into office over a year ago, once you adjust for inflation.

Trump's war has wiped out an entire year and a half of wage growth

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— Ben Zipperer (@benzipperer.org) June 10, 2026 at 7:41 AM

And line workers are falling back even more than Americans in general.

Real average hourly earnings for production and nonsupervisory employees decreased 0.3 percent from April to May, seasonally adjusted. This result stems from a 0.2-percent increase in average hourly earnings combined with an increase of 0.6 percent in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Real average weekly earnings decreased 0.3 percent over the month due to the change in real average hourly earnings combined with no change in the average workweek.

But gas prices have fallen by around 10% over the last month, so maybe this rise in inflation is just a temporary thing. That's certainly what Trump/GOP is trying to sell to a public that so far isn’t buying it.

Which is why what came out today may be even worse news for Trump/GOP.

Wholesale prices rose more than expected in May, indicating that pipeline inflationary pressures are percolating higher, the Bureau of Labor Statistics reported Thursday.

The producer price index, a measure of final demand costs, increased a seasonally adjusted 1.1% on the month, putting the 12-month wholesale inflation rate at 6.5%. Economists surveyed by Dow Jones had been looking for a monthly move of 0.7%.

The annual headline inflation rate was the highest since November 2022. The monthly gain matched the April increase….

Taking out food, energy and trade services, the PPI accelerated 0.8%, the biggest one-month move since March 2022. On a 12-month basis, the core excluding trade services rose 5.1%, the most since October 2022.

So that means costs of products are going up for businesses even more than they have been for consumers. Those firms sure as hell aren’t going to eat it and cut their profits by not pushing their cost increases to consumers.

Costs were rising even more “up the line” and closer to the source material, as shown through the intermediate PPI figures.

For example, Stage 4 foods were up 2.8% in May alone and Stage 3 foods were up 4.6%. In Stage 4, this includes a 10.2% increase in grains, and for Stage 3, it includes a 5.4% increase in slaughter cattle and a 9.0% increase in raw milk. That last item might be good news if you’re a dairy farmer, but it also means higher prices when those products get to the grocery stores in the next couple of months.

Intermediate services are also costing more, as truck transportation of freight jumped by 3.4% in May (and is up 17.3% in the last 12 months), and airline passenger services went up another 2.5% (and has risen 14.4% in the last year). And in Stage 3, there were sizable May increases in wholesaling costs for metals, minerals and ores (+7.4%), chemicals and allied products (+6.0%), and food (+3.4%). So tough times for businesses as they try to get things out for sale to the public.

And if you think that June’s slight retracement at the pump is going to drop the elevated prices that are all over the US economy, well, you might be as dumb as Donald Trump in the middle of rambling about how he “loves the inflation”.

The higher PPI also tells me that the gap between wage growth and price growth will likely get larger in the coming months. Not what you want if you’re Trump/GOP and you want lower interest rates and happier workers as November approaches.

So no matter what kind of "relief rally" you see on Wall Street when Trump tries to BS about what'll happen in Iran, know that in the real America, INFLATION WATCH is going to be a thing in the US for the rest of 2026, and likely beyond. Much of the price increase is already baked in, no matter what desperate measures and speculations come.

May jobs report shows good (if uneven) gains. Wall Street hated it.

Been a busy last week, but I wanted to give a note on the recent jobs report for May, which turned out to be surprisingly strong in the face of rising prices.

The US labor market appears to have found its footing: The economy added 172,000 jobs in May, shattering expectations, new data from the Bureau of Labor Statistics showed Friday.

The latest jobs report provided some reassurance that the US labor market may be stabilizing after a year of weak and stilted job growth: Unemployment held steady at 4.3%, while employment gains topped 100,000 for the third consecutive month, a pattern not seen since early 2024.

Job growth was also far stronger than initially thought in recent months. March’s payroll gains were revised up by 29,000 to 214,000, while April’s tally was revised higher by 64,000 to 179,000 jobs added.

Following those upward revisions, employment gains ran at a 188,000-job clip for the past three months and a nearly 114,000-job monthly pace year to date – a far and welcome cry from last year, when fewer than 10,000 jobs were added each month.

It is indeed quite a change in momentum, at least since February.

However, when you dig into the actual jobs report, it turns out that three areas had most of the job growth.

Leisure and hospitality added 70,000 jobs in May, well above the average monthly gain of 14,000 over the prior 12 months. Over the month, food services and drinking places added 48,000 jobs.

In May, employment in local government rose by 55,000, largely reflecting a gain in local government, excluding education (+44,000).

Health care added 35,000 jobs in May, in line with the average monthly gain of 38,000 over the prior 12 months. Over the month, ambulatory health care services added 26,000 jobs, including a gain of 11,000 in home health care services. Employment continued to trend up in hospitals (+6,000).

Take out those three areas, and the other 68% of the US economy added only 12,000 jobs in May, continuing a trend of uneven job growth across sectors.

There was a positive in that manufacturing employment got a gain of 7,000 for May, and up 25,000 since end of 2025. Might we finally be seeing a bottom for job losses after a loss of 295,000 jobs from the start of 2024 to the end of last year?

Or is the 2026 boost in manufacturing jobs a mere blip that’ll reverse as soon as the higher input costs and/or higher interest rates work their way through.

The household survey in the jobs report wasn't as impressive, even though unemployment stayed at a relatively low 4.3%. Yes, there were increases of 149,000 Americans saying they were employed and the labor force rose by 83,000. But that comes after several months of declines in both employment and labor force earlier in 2026, and the trend since April 2025 is still negative.

The household survey for May did feature a decline in the wider U-6 unemployment rate, from 8.2% to 8.1%, after increases in March and April, due to a drop in Americans who could only find part-time work (a measure that had jumped by quite a bit in the previous two months).

But these mostly good signs for the employment market were bad news for the stock market, as a good jobs market gives no reason to lower interest rates, especially as inflation continues to rise. So take a look at what the market has done since the jobs report came out Friday morning, June 5.

And while the growth of jobs has turned upward, wage growth is going the other way. From the BLS's jobs report release:

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents, or 0.3 percent, to $37.53. Over the year, average hourly earnings have increased by 3.4 percent. In May, average hourly earnings of private-sector production and nonsupervisory employees rose by 8 cents, or 0.2 percent, to $32.31.

And Trump/GOP doesn't want to see wage growth continue to suck as 12-month consumer inflation zooms past 4%, with wages barely growing at half the rate they were when we had our last bout of rising inflation in 2022.

The stock market decline and lousy wage growth is why I think the jobs numbers aren't likely to be souped up by the Trump Administration. Because what TrumpWorld doesn't want is for interest rates to go back up, given how strung out on debt they and the tech oligarchs are. And that outweighs whatever good they can spin about a few months where job growth has gone back up to the levels of early 2024 - when many Americans were grumpy about a "Biden economy" that had prices going up at half the rate they are today.

Despite inflation and low wage growth, US jobs market somehow getting stronger in early 2026?

Today, we got more indications that maybe the US jobs market is showing signs of life this Spring?

US private employers added 122,000 jobs in May, payroll processor ADP said Wednesday.

Economists surveyed by Bloomberg had expected an increase of 120,000 roles, an increase from April’s revised level of 105,000, in a further sign of labor market stabilization. Gains were led by education and health services, though eight of the 10 supersectors ADP tracks posted positive movement.

"Hiring was more broad-based in May than we've seen in the last few years,” ADP chief economist Nela Richardson said in a statement. “The labor market continues to show sustained momentum going into the summer hiring season."…

Meanwhile, Tuesday’s job openings and labor turnover report from the federal government offered mixed signals for job-seekers. Though job openings surged in April to their highest level since May 2024, helping nudge the ratio of vacancies to unemployed workers to its best level since the beginning of last year, the openings were largely concentrated in just one sector: professional and business services.

Hiring, on the other hand, slid. And the quits rate, which is often seen as a barometer of workers’ confidence in the job market, also decreased slightly.

The ADP report has generally had good news for jobs in recent months, with private sector job growth averaging nearly 100,000 a month in that survey since January.

If there are solid job gains going on in 2026, that’s an improvement over what we had in 2025. The “gold standard” Quarterly Census of Employment and Wages (QCEW) had its latest release this week, which went through the end of 2025 and uses records from over 90% of payroll-listed employers.

The QCEW says that less than 300,000 jobs were added for all of last year, and more than half of US states lost jobs in 2025.

To be fair, the QCEW number is slightly above the monthly reports that had total job growth at only 116,000 for last year. So if anything, we would be likely to see slightly upward revisions for jobs when the preliminary benchmarks are released in a couple of months.

But notice how the Midwest wasn’t part of that job growth, and Wisconsin was part of that, with a loss of 4,157 jobs in the QCEW for 2025. That’s still quite a bit better than the loss of 19,000 (!) jobs in the monthly reports we have had for Wisconsin, so those numbers seem certain to be revised up for last year.

However, even if the US jobs market has picked up, wage growth hasn’t. ADP reports that 12-month wage growth is stuck at the lowest levels in 5 years. That is much less than workers were getting during the inflation spikes of 2022, with the premium for job leavers going down significantly.

While it is a good thing for the economy that large numbers of Americans aren’t out of work, it’s also more reason that the Federal Reserve might need to raise rates in the near future. If we aren’t in recession, but inflation keeps rising and the stock market in a speculation Bubble, tightening money is an obvious way to get back toward balance.

It sure makes me wonder why we would continue at 170 basis points below where we were 2 years ago - a time when inflation had been at lower rates than today for well over a year.

Our current level isn't cutting off these rising prices in both products and stocks. Which illustrates why times of stagflation are confounding for policymakers. When you have any growth (speculative or otherwise), prices spike up, wage growth often falls behind, and responsible banks tighten up. This inevitably slows down the economy, although the 2020s version doesn’t seem to have as much hiring or firing as we had 50 years ago (at least so far).

There’s also got to be a point where the higher costs and lack of wage growth leads to a lack of demand for other products. We haven’t seen a lot of it yet in 2026, but if Americans can’t get ahead of their bills, it may explain why consumer sentiment is so bad in a time when jobs are still getting added and unemployment appears to stay low.

We get a new monthly jobs report from the Bureau of Labor Statistics on Friday. We'll see if that also shows decent job growth, if unemployment remains in the low 4%s, and if wage growth continues to struggle. I can't think that all of these trends continue, and at least one of them breaks soon. But despite 3 months of war-induced price spikes, the US job market has yet to get hit.

Budget deal Pt. 2- Trump/GOP cutbacks from DC, and Wisconsin's other land mines for 2027

We ended Part 1 by saying that we could pass the "blockbuster" $1.8 billion school funding and tax cut/rebate package in Wisconsin, keep it for the next budget at a cost of $1.6 billion, and still balance the 2027-29 budget if state tax revenues increased by a (very feasible) 4% in each year.

But that number also assumes no increases in costs for the same amount of services from July 1, 2027 through June 30, 2029, and we are already seeing some costs go up for state services in June 2026 . For example, Wisconsin’s Medicaid budget is already projecting a $263.6 million deficit by June 30 of next year, as the Department of Health Services says “costs are trending higher than assumed in [the 2025-27 budget] for several essential healthcare services.” Oops.

Given that the 2025-27 budget was built on a projection of 2.9% inflation for 2026 and 2.2% in 2027 but PCE inflation is running at 3.8% over the last year, so not only have base costs gone up well beyond the 2.9% projection for 2026, but what reason to think that this figure will get back toward 2% for the 2027 Fiscal Year? Higher costs (both fuel and nonfuel) are soon to be passed ahead by businesses for their products, and there absolutely will be an attempt by companies to “re-set” prices at the start of next year to make sure the profit numbers stay strong in 2027.

So the base costs are likely to be higher in 2027 than what you're seeing in the structural budget.

There are also a couple of significant items that aren’t included in that structural deficit calculation that may require more money in the bank to pay for from July 1, 2027 to June 30, 2029. One is the possibility of an explosion in amount of the state’s writeoff for costs associated with the construction of data centers. As the Legislative Fiscal Bureau noted back in March:

The announcements and planned investments from these four certified companies combine for a total investment of more than $36.9 billion, spread over the life of each project (currently planned to occur between 2024 and 2028). It is estimated that an investment this size would result in $1.5 billion in initial foregone state sales tax revenue. Additional foregone state sales tax revenue of $369 million on an annual basis is estimated once these projects are completed. Expenditures eligible for the state tax exemption would also be exempt from local sales and use taxes, resulting in forgone county, city, and premier resort area tax collections, if applicable.

Almost all of that $1.5 billion in reduced sales tax revenue has yet to happen, as many of these projects aren’t didn’t start construction or have to send the information to WEDC until this year or later.

Sure, we also see revenue positives from the boosts in construction activity when it happens, but also note the “$369 million on an annual (aka – “ongoing”) basis is estimated once these projects are completed,” which should show up in the 2027-29 revenue estimates as well as future budgets. And if there’s a cutback in data center activity in 2027-29 (sure seems likely given how these things are hated across Wisconsin), then these facilities start being a drag on state revenues.

Another concern that could lurk over the next budget is the lack of help coming from DC under Trump/GOP, and how the Big Bunch of Bollocks that they made into law (including the votes of likely GOP Guv candidate Tom Tiffany) is going to shove costs down to the state level. That was illustrated again in a large Politico article over the weekend.

The Trump administration is counting on Medicaid work requirements to save the government billions of dollars. But well before the rules formally go into effect Jan. 1, they’re costing already-strapped states millions or tens of millions to implement.

State health departments are having to funnel resources into hiring more staff, paying for overtime, and upgrading their aging technology systems so they can determine which low-income residents are working, volunteering, caregiving, or studying enough hours to keep their Medicaid coverage. They are also building new systems to determine who is sick enough to qualify for an exemption…..

States and the federal government would theoretically save money if the requirements cause millions to drop off the Medicaid rolls, as predicted. However, state officials fear any state savings will be offset or even cancelled out by expenditures to enforce the rules, as well as other impacts of the One Big Beautiful Bill Act passed last summer. “I’m looking at the operational, I’m looking at the programmatic, and I’m looking at the fiscal challenges associated with the implementation of this bill, and it’s taking a significant amount of financial resources away from a system that people depend on,” said Marvin B. Figueroa, the Virginia Secretary of Health and Human Services.

Wisconsin was among the states that have shelled out more funds for these extra costs, giving $72 million over the next 2 years for personnel and technology upgrades to “increase oversight” on programs such as FoodShare and Medicaid (on top of the $263 million Medicaid deficit, by the way). It looks like these costs and positions are assumed as part of the LFB’s structural budget for 2027-29, but this seems far from the last of these items that’ll be cut from the Feds and Wisconsin will have to deal with and likely pay for.

There are also the extra funds Wisconsin has been able to take advantage of under the 2022 Infrastructure Investment and Jobs Act, including $94.3 million of recently granted investments to remove lead from drinking water that Congressman Bryan Steil is taking credit for despite voting against the bill. The 2026 Fiscal Year is the last year for those boosts in investments, and do you think this dysfunctional GOP Congress or the Trump Administration is going to pass something else to keep those funds flowing? Especially with the US Highway Trust Fund expected to run out of money in 2 years? HAH!

That’ll add to the funding strains for a Wisconsin Transportation Fund that already is in need of more money. In the current state budget, there was a one-time transfer of $580 million sent from the General Fund in the 2026 Fiscal Year to pay for items in the Transportation Fund, in addition to ongoing transfers of just over $110 million from items such as a small portion of all sales taxes and specific sales taxes on electric vehicles, along with left-over funds from the state’s Petroleum Inspection Fee.

And without that one-time transfer of $580 million, the Wisconsin Transportation Fund is expected to spend $300 million more than it takes in for Fiscal Year 2027.

Since the Transportation Fund is projected to only have $28.5 million left over in it as the next budget begins, that means another $600 million is needed to make up the difference ($300 million each year). Plus whatever might be cut by Sean Duffy and company from US DOT for whatever stupid reason they make up.

Oh, and have I mentioned that a lot of highway construction cost is related to the costs of petroleum and other oil-related products? Those road projects sure won’t be cheaper when we’re debating the next budget this time next year.

And I haven't even figured in the effects of a recession caused by cutbacks in the face of these higher prices and/or reduced demand. If there is one, or of this inflated stock market ever falls back toward reality, then you likely don’t have that 4% increase in revenues that would at least give a chance of the next budget balancing.

So there are plenty of legitimate reasons why Legislative Democrats and others could voice concerns about using up our budget surplus in 2026 when things are likely to be much tougher in 2027. That doesn’t mean there isn’t merit to giving education-related property tax relief now, when so many Wisconsinites are struggling, and I still remain ambivalent on what's the best option. I get the WisDems wanting more money to be left for 2027, given the strong chances of them running all of state government at that time, but I also get taking care of some of the real strains for taxpayers and K-12 school districts today while we can.

But while you can question whether concerns over future costs should outweigh the need for relief today, you can't say the numbers are made up, because the 2027-29 budget in Wisconsin could be even tighter than the "structural deficit" calculations let on, after the Trump/GOP crew got back in power in 2025.

A few key budget things to understand in Wisconsin's scuttled schools/taxes deal pt.1

Two weeks after the rejection of the tax cut and school funding deal in Wisconsin, it's clear that a lot of people don't exactly know all of the numbers involved, or the difference between budgets of NOW and LATER.

For example, all of the following can be true.

1. If no more bills are passed and if state tax revenues remained in the positive trend we saw through April 2026, we'd likely have more than $3 billion in the bank as the biennium ends on June 30, 2027.

2. We could give back $1.8 billion of this in the form of income tax rebates, property tax relief for schools, some targeted tax cuts, and increases in funding for special education services, and still have a bit more than $1 billion left in the bank on June 30, 2027.

3. Passing that $1.8 billion package also means we are looking at a significant budget hole starting on July 1, 2027, where expenses would outnumber revenues by far more than the $1 billion+ in the bank at the start of the 2027-29 biennium.

And a big part of this is the issue of one-time vs ongoing, which is always something that should be central to taxing and spending policy analysis, but usually isn't looked at too much by the media. But what is affordable in one year may not be affordable in future years. Or these ongoing, continuing measures might be just fine and doable, depending on how the bigger picture looks.

Within a week of the school funding/tax cut deal's demise, the Legislative Fiscal Bureau released its breakdown of the bill's costs for now and in future years. Note that while the biggest cost would have been in the Fiscal Year that starts on July 1, it would still have more than $1.6 billion in commitments in the next state budget.

This is because while the $870 million income tax rebate and the $20 million in Disaster Assistance Grants are one-time expenses, all of the other items are ongoing, which means those tax cuts and spending will continue into the next budget until something is changed by a later law.

Likewise, Fiscal Year 2026 is slated to spend a significant amount of General Purpose tax dollars above revenues, even if the $300 million in extra revenue that the Evers Administration estimated last month for FY 26 were to come through (and revenue numbers through the end of April would agree that we are ahead of estimates). But if those added revenues were to hold up for the next Fiscal Year at the same 1.5% increase rate that LFB estimated earlier this year, we'd have a 2027 Fiscal Year that would nearly be in balance.

But that's assuming the $3.4 billion bill doesn't get passed. If it does, then the next fiscal year is projected to have a similar one-year deficit to this current one, even if the extra $300 million in revenues come in for both fiscal years.

And that's where we have the "$2.9 billion structural deficit" argument come in, as the LFB put together the $0.5 billion left in the bank to start the next budget if this bill were to pass, then looked at the 2027-29 budget commitments under the base budgets of 2027, and added in the extra spending/tax cuts that would be ongoing. That means expenses exceed revenues by $3.4 billion for the next budget, and $2.9 billion that has to be made up somehow.

However, one argument being made by the Howard Markleins of the world is that revenue growth is not part of those 2027-29 estimates. So let's throw in a 4% growth assumption (which has been attainable in recent years), and see what we get with this bill.

If a 4% increase in revenues does fill in the gap that appears in the “structural deficit”, then we should be able to get by, right?

Ahh, but there are a lot more obstacles to balancing things in a 2027-29 budget that seems likely to be the most difficult one in the 2020s. And we'll get into those in part 2.

Income, spending and profits explain why Americans see a two-sided economy

Thursday featured the release of the always-important income and spending report, and it’s what you likely imagined it to be. Year-over-year inflation still rising, and consumer spending barely growing beyond the price increases.

Inflation-adjusted consumer spending increased just 0.1% last month, while the personal consumption expenditures price index rose 3.8% from a year earlier, the most since 2023, a report from the Bureau of Economic Analysis showed Thursday. The so-called core PCE index, which excludes food and energy items, was up 3.3% from a year earlier.

The numbers suggest consumers are facing increasing pressures as uneven hiring trends and the rising cost of living erodes incomes and savings. The surge in prices for fuel and other materials sparked by the Middle East conflict is reverberating through the economy and has driven consumer sentiment to record lows.

While consumer spending did exceed inflation last month, income growth didn’t keep up with rising prices. That meant Americans continued to reduce their savings rates in April.

Personal income, a metric which is not adjusted for inflation, was flat in April, while wages and salaries advanced 0.2%. Inflation-adjusted disposable income fell 0.5%, marking the third straight monthly decline. The saving rate dropped to 2.6%, the lowest since 2022.

Retailers including Walmart Inc. have warned that high fuel costs are squeezing their bottom lines and may soon begin to show up in prices of products on their shelves. Higher tax refunds have helped support consumer spending in recent months, though they’ve been partly offset by prices at the pump rising to the highest levels in nearly four years.

UW-Madison professor Menzie Chinn has a telling graph at Econbrowser, where you can see how inflation-adjusted consumption has kept rising in the last year, while real incomes stayed around the same level for the rest of 2025, and are now declining in 2026.

And on a per-capita basis, inflation-adjusted disposable incomes in America have now fallen below where they were at in November 2024 – when Donald Trump was returned to power in large part because enough low-info American voters thought he would improve people’s economic situation.

Also notice that real per-capita incomes had gone up nearly 9% in the 31 months from that trough in June 2022 to Trump’s election in Nov 2024. And unlike 2022, there aren’t 2 years of stimmy payments in the bank to pay the higher bills in our inflationary times of 2026.

Another report that I was awaiting on Thursday morning was the updated figures for GDP growth for the first 3 months of 2026.

Separate BEA figures showed the economy expanded in the first quarter at a 1.6% annualized pace, slower than previously estimated after downward revisions to inventory investment and consumer spending. The initial estimate last month showed 2% growth.

A new item in the revised GDP report was the first look at what corporate profits were over the first 3 months of the year. And that showed a small increase of just over $40 billion (annualized) for Q1, but up more than $1.85 trillion since the end of 2020.

Along with the small boost in profits, I also see that post-tax corporate profit margins for Q1 2026 were at their highest levels since the end of 2023, maintaining their elevated post-COVID levels.

Let’s see where these profit and margin numbers go with the higher prices and higher costs that have and likely will see for all of the 2nd quarter of 2026.

Speaking of uses of excess profits, let's see what Jeff Bezos is pouring money into these days.

BREAKING: Blue Origin's New Glenn blows up at Launch Complex-36 while attempting to static fire.

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— AZ Intel (@azintel.bsky.social) May 28, 2026 at 8:12 PM

JOB CREATORS, BABY!

Put these obscenely high profits together with the dwindling savings amount and how non-executive Americans are seeing their wage growth falling further below the inflation rate with every month, and you wonder why consumer sentiment is at record lows? Because I don’t.

Stock market up, Americans still driving and spending. So why do consumers hate this economy?

Sign o' the Times from the end of this week.

The gulf between US stocks and Americans’ spirits keeps widening.

The Dow on Friday hit a record high — the same day consumer sentiment hit an all-time low. Beyond pressures from the Iran war, which stock markets have largely shrugged off, AI is a factor in the divergence.

Traders are all-in on AI, but Americans are fretting over its impact on jobs. “The stock market on the moon and households in increasing gloom are reflecting on the same thing,” an economist said: Reduced labor costs may be good for stocks but mean fewer jobs.

The stock market's reaction is noticeably different from the peak inflation times of 2022, when stocks were heading down and growth in jobs and (nominal) wages was much stronger than today.

The odd part about the rock-bottom consumer sentiment is that it isn't translating into an overall recession. New unemployment claims remain at or near multi-decade lows, and even with gas being at similar price levels to the same time in 2022, gas usage stayed elevated through April in 2026, showing little change in habits.

Inflation-adjusted retail sales for the non-car based economy may have dropped in March from February's highs, but they stayed relatively stable in April, even with gas prices going even higher.

But UW-Madison professor Menzie Chinn may have landed on a reason why everyday Americans think the economy sucks so much despite the not-so-bad macro data and the bomming stock market. Professor Chinn found a recent New York Fed survey that indicates that if you're not in the investor class (aka - the bottom 3/4 of Americans by wealth and income), then it probably does feel like a recession, with spending by those groups falling by much more than with richer Americans.

This coming Thursday, we are scheduled to get data that not only reveals April's income and spending for the US economy, but also a revised look at 1st quarter GDP. That GDP report will also include the first look at corporate profits for Q1 2026, which includes the initial rise in gasoline prices.

I suspect we will see a combination of real declines in income combined with contunued increases in profit. It'll be even more evidence of a two-tiered economy that may be giving big gains to a few with the money to gamble with and self-invest, but done at the expense of the typical American who is living paycheck to paycheck, and now has to spend more to get the same things.