Saturday, July 2, 2022

Manufacturing and construction activity starting to unimpress. Blip or sign?

Manufacturing in the US has had a big comeback in the last 2 years, both in employment and activity. But a new report on Friday showed that manufacturing’s previously-robust growth wasn’t so strong in June.
"The June Manufacturing PMI® registered 53 percent, down 3.1 percentage points from the reading of 56.1 percent in May. This figure indicates expansion in the overall economy for the 25th month in a row after a contraction in April and May 2020. This is the lowest Manufacturing PMI® reading since June 2020, when it registered 52.4 percent. The New Orders Index reading of 49.2 percent is 5.9 percentage points lower than the 55.1 percent recorded in May. The Production Index reading of 54.9 percent is a 0.7-percentage point increase compared to May's figure of 54.2 percent. The Prices Index registered 78.5 percent, down 3.7 percentage points compared to the May figure of 82.2 percent. The Backlog of Orders Index registered 53.2 percent, 5.5 percentage points below the May reading of 58.7 percent. The Employment Index contracted for a second straight month at 47.3 percent, 2.3 percentage points lower than the 49.6 percent recorded in May. The Supplier Deliveries Index reading of 57.3 percent is 8.4 percentage points lower than the May figure of 65.7 percent. The Inventories Index registered 56 percent, 0.1 percentage point higher than the May reading of 55.9 percent. The New Export Orders Index reading of 50.7 percent is down 2.2 percentage points compared to May's figure of 52.9 percent. The Imports Index climbed into expansion territory, up 2 percentage points to 50.7 percent from 48.7 percent in May."

Fiore continues, "The U.S. manufacturing sector continues to be powered — though less so in June — by demand while held back by supply chain constraints. Despite the Employment Index contracting in May and June, companies improved their progress on addressing moderate-term labor shortages at all tiers of the supply chain, according to Business Survey Committee respondents' comments. Panelists reported lower rates of quits compared to May. Prices expansion slightly eased for a third straight month in June, but instability in global energy markets continues. Sentiment remained optimistic regarding demand, with three positive growth comments for every cautious comment. Panelists continue to note supply chain and pricing issues as their biggest concerns. Demand dropped, with the (1) New Orders Index contracting, (2) Customers' Inventories Index remaining at a very low level, though it increased and (3) Backlog of Orders Index decreasing but still in growth territory. Consumption (measured by the Production and Employment indexes) was mixed during the period, with a combined minus-1.6-percentage point change to the Manufacturing PMI® calculation. The Employment Index contracted for the second month in a row after expanding for eight straight months (September through April), but panelists again indicated month-over-month improvement in ability to hire in June. Challenges with turnover (quits and retirements) and resulting backfilling continue to plague efforts to adequately staff organizations, but to a lesser degree compared to the previous month. Inputs — expressed as supplier deliveries, inventories and imports — continued to constrain production expansion but to a lesser extent compared to May. The Supplier Deliveries Index indicated deliveries slowed at a slower rate in June, which was supported by a slight increase in the Inventories Index. The Imports Index expanded in June after one month of contraction preceded by six consecutive months of expansion. The Prices Index increased for the 25th consecutive month, at a slower rate compared to May.
Dig further into the report and you can see that the businesses said that new orders starting shrinking in June, and reported fewer jobs for the second straight month.

Not a great sign, although a slowing of backlogs and customers’ inventories not being as tight is a nice side effect. As I’ve mentioned before, some of these sectors could use a breather from the torrid demand of 2021 and early 2022 to buy time to get back toward a balanced, less-inflationary business situation.

But another blue-collar area segment also had a negative report on Friday, with (seasonally-adjusted) construction activity having a surprising decline.
U.S. construction spending unexpectedly fell in May as single-family homebuilding stalled, more evidence that the Federal Reserve's aggressive monetary policy tightening was slowing the economy.

The Commerce Department said on Friday that construction spending slipped 0.1% in May after increasing 0.8% in April. Economists polled by Reuters had forecast construction spending would rise 0.4%. Construction spending increased 9.7% on a year-on-year basis in May.

Spending on private construction projects was unchanged in May after advancing 1.1% in April. Investment in residential construction rose 0.2%, though spending on both single-family and multi-family housing projects was flat.
The construction decline is a big warning, especially if it’s an offshoot of higher interest rates. But it also comes on the heels of that sizable increase in April, and a 3.2% total increase over the 3 months between January and April. So this could merely reflect some projects moving forward ahead of the usual seasonal schedule, and we see a return to increased activity in June.

However, it comes after other subpar economic data for the week, so we can’t just blow these reports off. It's possible that the warm weather and strong travel numbers are masking what’s a rough situation in other parts of the economy. Or, maybe I'm not sensing a bad economy because Wisconsin has been chugging along while other areas are struggling, as we saw in another report released this week.

This places Wisconsin 5th among US states for Q1 GDP, with a much smaller decline than the 1.6% drop in (inflation-adjusted) GDP for the country as a whole. And combined with our strong revenue picture, maybe this is why all of the panicky talk I hear in the financial news doesn’t match up with what I’m seeing as I go out and about.

But what if these manufacturing and construction figures are reflections of an economy that isn't just slowing, but actually in recession? And conversely, what if slowing demand and a freeing of backlogs is softening inflation? Then maybe Jerome Powell and company at the Fed should back off after a couple of more rate hikes and make sure they don’t trigger a truly bad economy with sizable job loss, instead of an overheated one that is merely reverting toward a post-COVID version of normalcy.

We can handle a slowing of growth or even a minor “recession” that’s really a meeting of shortages. But a big decline that leads to sizable job loss is worse than the annoying rise in prices we’ve had to deal with in the first half of 2022.

Friday, July 1, 2022

Know how I said I'm not worried till consumer spending slows? Uh oh....

I’ve been saying that I wanted to see actual cutbacks in consumer spending before I started taking any talk of “recession” seriously. Well, after a subpar retail sales report for May, we got the full spending and income picture for that month yesterday. And it’s not good.
Personal income increased $113.4 billion (0.5 percent) in May, according to the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $96.5 billion (0.5 percent) and personal consumption expenditures (PCE) increased $32.7 billion (0.2 percent).

Real DPI decreased 0.1 percent in May and Real PCE decreased 0.4 percent; goods decreased 1.6 percent and services increased 0.3 percent (tables 5 and 7). The PCE price index increased 0.6 percent. Excluding food and energy, the PCE price index increased 0.3 percent.
Real consumption’s decline of 0.4% is bad enough, but this report also included downward revisions of March and April that totaled $104.4 billion (annual rate), so our previously-strong spending levels don’t seem so strong any more.

Some economic journalists have noted that price growth seemed to be cooling some (only 0.3% core for May, and 4.8% core over the last 12 months), but even that comes with a caveat, because food prices were up 1.2% for May and energy goods and services were up 4.0% for the month, and overall 12-month PCE price growth went up to 6.7% from 6.5%. So still high, and it translates into real disposable incomes being down 3.3% over that year-long period.

The only other positive in this report is that despite the lame overall consumption numbers, spending in services continues to come back. In fact, the last 4 months have seen a clear movement of spending habits into services and out of goods – which seems to indicate a reversion back toward pre-COVID World patterns.

On the income side, $113.4 billion is a solid increase, but growth in wages and salaries was barely half of that gain, and only a strong bump for business owners and and investment income allowed for the overall number to look good.

This makes me wonder about what the average hourly wage information might look like in the upcoming US jobs report for June. So far, wage (and job) growth has stayed strong, but could the need for hiring labor be calming down? And with it, the need to keep raising wages to find workers?

By the way, that might not be necessarily a bad thing, as a slight decline in demand can be a way to lessen the labor shortages that we’ve been seeing in many areas of the economy. Although the quick shift back into services is likely catching many bars and restaurants short.

I also wonder how much of the decline in spending on goods is related to supply shortages that were hitting hard in the first few months of this year. After all, it’s hard to spend money on things if they’re not there. We know that the value of new orders and shipments for US manufacturers continues to grow (0.7% for new orders and 1.3% for shipments in May), so the slowdown in consumer spending isn’t stopping the need for new products on the business side yet.

Still, a bad report like this combined with information that inventories may be shrinking more than expected led the Atlanta Fed to now project negative growth for Q2 to follow Q1’s -1.6% real GDP figure. But jobless claims have remained very low, and it sure doesn’t look like a recessionary economy when you go out into the world.

There’s a good reason for this, because as this Polish economist points out, the amount of consumer-level and internal business activity is still growing, it’s just that a lot of those products came from overseas in Q1, and might be heading off the shelf in Q2.

It does seem that June has been a time of adjustment, not just in expectations from a jittery Wall Street, but also in an oil market that saw futures drop by $15/barrell over the past 3 weeks. We’ll find out next week if the adjustment includes a lesser-than-normal amount of Summer hiring, and if wages offered are also one of those adjustments.

What’s clear is that we’re in a type of higher-inflation, near-capacity economy that I certainly haven’t dealt with in my adult life, and my fear is still that the Federal Reserve will care too much about the inflation side of the economy and overshoot. Which could well lead to serious damage in a “jobs-and-spending” side of the economy that may already be moderating on its own.

Wednesday, June 29, 2022

GOPs on Supreme Court won't tell Prehn to leave DNR Board. So Tony has to do it himself

I'm not overly surprised by this, but that doesn't stop it from being complete BS.

The justices ruled 4-3 against the request by Attorney General Josh Kaul, who sought last year to force Prehn to vacate his seat on the board, upholding the decision of a Dane County circuit judge

In the ruling, Supreme Court Chief Justice Annette Ziegler said in the majority opinion that the expiration of a term does not create a vacancy, meaning that holdovers in any position appointed by the governor can remain until a confirmation hearing is held by the state Senate.

According to the ruling, vacancies are only created by death, resignation or the removal of an incumbent.
Oh, so I can just skip rental payments and stay in an apartment without consequence? And I'm sure most contractors can just stay on the job and get paid past their end date, as long as there is no replacement, right?

Along with Prehn's willful obstruction, the main culprit here is the gerrymandered GOP Senate, who refused to hold any hearings to confirm Evers' replacement for Prehn over the last 13 months, because that's what those fascist lowlifes do.

And we know that Prehn was conspiring with Senate GOP Leader Devin LeMahieu's staff and failed ex-Gov Walker to stay on the DNR Board, and avoid any votes on his replacement.

However, Governor Tony Evers is not out of options on this situation, despite a lot of gnashing of teeth I see in social media. The 4 Republican "justices" even explained in their decision what could be done.
The ruling also highlighted that Prehn can be removed for cause, meaning inefficiency, neglect of duty, official misconduct or malfeasance in office.

"Although the Governor does not have a free hand to control who sits on the DNR board, the Governor has authority to remove DNR Board members 'for cause' while they serve in office," the decision said.
Seems like the answer is right in front of us.

What would happen if Evers fires Prehn and appoints a temporary replacement? Sure, "Big Fish, Small Ponder" Frederick Prehn will whine and play victim, and Robbin' Vos and other GOP hacks will complain about "playing politics". But otherwise?

I'd guess an explanation of "the guy's term was over and he wouldn't leave" would have about 75% support among voters, and I dare WisGOP to try to call a special session before the election Evers' appointee?

They don't want that attention, and GOPs are already fighting an uphill battle at the top of the ticket - the Marquette Law Poll had them losing the Gov race by 4-17 points, and Ron Johnson trails most potential Dem opponents. And that was before RoJo was named in the 1/6 plot and Roe v. Wade was overturned. They don't want to draw more attention down the ticket and lose more seats out of their illegitimate "majority" in the Legislature

Evers cannot win by "going high" and shrugging off the scum that is your 2022 Wisconsin Republican Party. And Dem voters are dying to see their leaders step up and take action to cut off the power plays of these weenies instead of rolling over (same is true in DC, by the way). So I'd highly recommend that Evers fire Prehn by this weekend, and let the chips fall where they may. Much better than accepting an unacceptable, one-sided situation.

Tuesday, June 28, 2022

Massive Wisconsin surplus likely to grow larger.

You know how Wisconsin is set to have $3.8 billion in the bank when this current budget cycle ends in 12 months?m It looks like that surplus is going to be even larger.
Tax collections for the fiscal year that ends this month are running ahead of projections, putting the state in line for another boost to the general fund.

The Department of Revenue last week reported general fund tax collections through the end of May were up 5.2 percent compared to the same period a year earlier. The Legislative Fiscal Bureau had projected general fund tax collections would drop by 3.2 percent for the fiscal year that ends June 30.

LFB Director Bob Lang yesterday noted corporations make their estimated tax payments largely in four months, including June. Through the end of May, the state had collected $2.4 billion in corporate taxes. That matches what LFB projected in January the state would take in for the full 12-month period.
Income taxes are also going well, The LFB estimated back in January that those collections would be down by more than $1 billion, after tax cuts went into effect for the 2021 tax filing season, then "doubled up" with lower withholdings for 2022.

But with 1 month to go in the fiscal year, FY 2022 still had higher income tax revenues than FY 2021 did at this point.

Yes, most of the $562.3 million gap between the two fiscal years that was there in December has been mostly erased. But I’m not thinking that there will be a $1 billion decline in June elections, so that should be several hundred millions of dollars above estimates right there.

Then note that growth in both corporate taxes and sales taxes is also running well beyond what LFB thought we'd see back in January.

If we get the same amount of June corporate revenues that we got in June 2021 (technically a decline, since it would be lower than inflation), we’d still beat LFB estimates by $433 million there. And we only need a sales tax increase of $3.0% for June to match the LFB's estimates, which would be a jump well below the 8%+ increase in prices that we have seen in the last 12 months.

Add those better-than-estimated numbers to the $3.8 billion surplus that the LFB estimated for the 2021-23 budget, and I would guess that we would be somewhere around $4.5 billion to $5 billion available. But naturally, the GOP chairs of the Joint Finance Committee don’t want to do anything with all this money before the November elections.

Rep. Mark Born, R-Beaver Dam, said taxes on businesses and consumers are higher due to inflation. Meanwhile, Sen. Howard Marklein, R-Spring Green, also stressed that sales tax collections are strong, in part, because prices are higher due to inflation.
There's some truth there, especially with sales tax collections and higher corporate profits, and some expenses will likely have to be adjusted in the 2023 Fiscal Year and the 2023-25 budget to deal with the cost side of inflation.

Of course, a recession would make things not-so-easy from a fiscal side, and that’s the excuse Marklein is giving for not doing anything with all of this extra money.
[Marklein] warned there are “lots of clouds on the horizon” with the possibility of an economic slowdown.

“I think we need to be cautious about spending it,” Marklein said. “I think a year from now when we’re wrapping up our budget, I think we’re going to be glad that we’ve got the resources.”
I am skeptical we will be in much of a recession at all, let alone anything that puts a significant dent into a $4.5 billion-$5 billion surplus. And if Born and Marklein are so concerned about paying for permanent increases in spending, then why not approve of one-time moves such as Evers' plan to give a $150 rebate to each Wisconsinite (which could be paid for by the amount of revenues above the LFB's estimates), or filling in the revenue loss from a gas tax holiday, which would allow road repairs to continue at an elevated rate?

We have no excuses to not give one-time relief to Wisconsinites that may be getting stressed due to inflation, whether that's targeted to the gas pump, or just in giving them check to pay off some of those higher costs. But then that would make Evers look good and have Wisconsinites not have to be as worried about making ends meet, which is definitely something WisGOPs DON'T want. So we'll see several billions of dollars languish in the bank for the last half of 2022, no matter how much it would help.

Monday, June 27, 2022

Recession? Not in manufacturing, not in the job market

Even with all of the blaring of INFLATION and RECESSION fears, we saw on Monday that there’s strong demand for durable goods continues in America.
New orders for U.S.-made capital goods and shipments increased solidly in May, pointing to sustained strength in business spending on equipment in the second quarter, but rising interest rates and tighter financial conditions could slow momentum.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.5% last month. These so-called core capital goods orders gained 0.3% in April. Economists polled by Reuters had forecast core capital goods orders would climb 0.3%.

Those orders were up 10.2% on a year-on-year basis in May. Last month's increase reflected a 1.1% rise in machinery orders. There was also strong demand for primary metals as well as computers and electronic products. But orders for electrical equipment, appliances and components fell 0.9%, while demand for fabricated metal products was unchanged.

The better-than-expected increase in core capital goods orders underscored underlying strength in manufacturing, which accounts for 12% of the economy, despite weak factory surveys. A survey from S&P Global last week showed business confidence dove in June to the lowest level since September 2020.
That 10.2% increase over the last year is still above the rate of inflation in the same time period, and it is similar to a divide that we've been seeing with US consumers, where sentiment is at the lowest levels in more than a decade, but actual spending and activity continues at high levels.

This survey adds more evidence to my belief that all of this recession talk is overblown, at least as of now. Jobless claims are still very low, with job gains still expected in this Friday’s report for June. And AAA is predicting that this weekend’s 4th of July travel will get back near 2019’s record levels, with more Americans choosing to drive for that travel than ever.

UW's Menzie Chinn put up this recently-updated list of economic indicators, and while it's not the torrid growth we were seeing this time last year, it is still growing in many key areas.

And now we’re starting to see gas prices level off and start declining in the last week (I saw rates as low as $4.24 this weekend). Yes, they are still quite high, but it’s something that will level off inflation numbers, and let’s see if that changes some of the gloomy mentality that has overhung Wall Street in much of Q2 2022.

Sure, inflation is still a concern and it is still disrupting businesses and consumers. It's no fun. But let's not pretend that it's 1980 with double-digit price hikes and 8% inflation. We are nowhere close to that, and the economic data continues to show that much of the economy is chugging along.

Friday, June 24, 2022

Wisconsin's incomes rising fast, and above the rest of US

Earlier this week, we got a look at income growth by state for Q1 2022. And look who did really well!

See Wisconsin in the dark orange? That means we were in the top 10 out of all the states for income growth in Q1 2022, at 6.7% income growth (annual rate).

Given that Iowa, the Dakotas, Nebraska and Minnesota also scored high, I had suspicions over why the increase was so much. And indeed, farm earnings took a big jump in the Heartland for the first 3 months of this year.

Change in farm earnings (annual rate), Q1 2022
Iowa +$1.56 billion
Minn +$1.34 billion
Wis. +$1.28 billion
Neb. +$1.08 billion
S. D. +$0.73 billion
N.D. +$0.59 billion

But while that amount of earnings is large among all of these states, Wisconsin also got a lot of increased income from other areas, and had non-farm earnings give a bigger contribution to the gains than any of these other 5 states.

This report also had revised figures for all 4 quarters of 2021. Every state had a big jump in income in Q1 2021 and then dropped off severely in Q2 of last year because of stimulus checks that were sent out in March, so I think it’s fair to start from Q3 and look at how Wisconsin’s income growth has fared vs other states in the 9 moths measured since then.

When you do that, you’ll see that Wisconsin did quite well for income growth, beating the US average in all 3 quarters, and up more than 15% (annual rate) in that time.

Yes, inflation eats away some of those gains. But still about half of those gains are real, which may help explain why state tax revenues continue to fly by estimates and adding to our already-massive budget surplus.

Economic issues seem pretty trite to discuss after what's been going on in this country the last 2 days. But these numbers for Wisconsin might give a good indication why I'm not seeing any evidence of the "recession" theme that so many in GOP/media want to spin. Because things looked pretty darn good on the income side here, at least through March.

Tuesday, June 21, 2022

Ron Johnson - buffoon and accomplice to 1/6's plot

I was expecting that there would be some Wisconsin connections mentioned in today's hearing of the January 6th Committee. Especially since this meeting was focusing on the scheme to use state officials to overturn the election, and we know that Wisconsin Republicans sent a fake slate of electors to DC as part of the plot to overturn the election.

But I wasn't expecting this.


And this wasn't some random coffee boy trying to talk big game. This guy is Ron Johnson's Chief of Staff, and had worked 5 other years for RoJo before spending a year in Trump World.

Nice ALEC gig right out of college, by the way. It's a Big Club, and we ain't in it.

As part of today's hearing, WisGOP state officials were playing dumb about what was going on between November 2020 and January 2021, and claimed it was a White House production. Including this hilarious moment.

Sen. Johnson's staff quickly went into deflection mode.

Does that make a lick of sense to you? Me neither.

And then RoJo himself ran into CNN reporter (and UW grad) Manu Raju and other Capitol reporters, and after being called out for faking a phone call (!), tried the same "I know nothing" BS.

Because who among us hasn't passed along an unvetted package to the VICE PRESIDENT OF THE UNITED STATES on a day the potential for violence and tension was already high?

Oh, and let me remind you that on January 6, 2021, the Chair of the Senate's Homeland Security Committee was....Ron Johnson. And he's randomly just sending documents over to the VP's office without knowing what it is? Give me a f_ing break.

I had always figured Ron Johnson was fine with the plot to overturn the election, given that he was hanging with the My Pillow guy and threatening to vote against certifying the results of the election before 1/6.

What's amazing is that I wasn't expecting RoJo to be the WisGOP member of Congress that got named as being in on the plot today. The Chair of the Wisconsin Dems for the 5th Congressional District reminds us of another evil prick that helped this scheme along.

And also don't forget this part in the lower chamber of the Legislature, and how it comes back around to our senior US Senator.

I want subpeonas and perp walks for these scumbags. By the 4th of July. There's more than enough here.

Monday, June 20, 2022

Gas tax holiday? It's a gimmick, and Biden and Evers should both do it

As the 4th of July looms in 2 weeks and gas prices remaining high, the Prez is thinking of making a move to bring those prices down ….a bit.
President Joe Biden said Monday that he's considering a federal holiday on the gasoline tax, possibly saving U.S. consumers as much as 18.4 cents a gallon.

“Yes, I’m considering it,” Biden told reporters after taking a walk along the beach near his vacation home in Delaware. “I hope to have a decision based on the data — I’m looking for by the end of the week.”…

The Biden administration has already released oil from the U.S. strategic reserve and increased ethanol blending for the summer, in additional to sending a letter last week to oil refiners urging them to increase their refining capacity. Yet those efforts have yet to reduce price pressures meaningfully, such that the administration is now considering a gas tax holiday. Taxes on gasoline and diesel fuel help to pay for highways.

The Penn Wharton Budget Model released estimates Wednesday showing that consumers saved at the pump because of gas tax holidays in Connecticut, Georgia and Maryland. The majority of the savings went to consumers, instead of service stations and others in the energy sector.
I’m generally not a fan of such gimmicks, because you’re taking quite a bit of money out of highway funds, and you gotta make that up somehow. But I’d argue that June 2022 is a good time to do it for 2 reasons.

1. As part of last year’s Infrastructure Bill, the Highway Trust Fund got a one-time shot of $118 billion in General Fund revenues (aka – not gas taxes or registration fees). That’s nearly triple the revenues it gets in a typical year, and so that Trust Fund can handle not getting a few billion of gas taxes for a month.

Of course, that would accelerate the dwindling of the Highway Trust Fund over the next 5 years. But those funds can always be found from numerous sources, and kicking the can down the road shouldn’t be front of mind when you have to deal with gas prices NOW.

2. The infrastructure bill means we are setting aside more money to fix highways and fund transit as it is, and there won’t be a need to cut those projects in 2022 even if there aren’t a few weeks of gas tax revenue.

Again, not having that money in the bank now means you may not be funding everything you planned in 3-4 years. But honestly, so what? A main point of the infrastructure bill is to accelerate things that were supposed to happen later anyway.

So I think a federal gas tax holiday, combined with oversight that makes sure the savings are passed onto consumers, would be something that could be decent policy for the next few weeks. I also think this could be done at the state level in Wisconsin, in a couple of different ways.

The first reason a state gas tax holiday (of some amount) can work is due to the infrastructure bill. Remember that Wisconsin is getting $283 million in additional highway funds for this fiscal year, which is around what the state is slated to collect in gas taxes for 3 Summer months.

Now, you wouldn’t want to avoid adding to the number of road projects, but perhaps cutting the state’s 32.9 cent gas tax in half for the Summer or dumping it entirely for 1 month could work out. There would still be enough funds available to fix more roads and give relief at the pump for drivers in Wisconsin.

That could be done through Governor Evers ordering the Wisconsin Department of Revenue not to collect gas taxes for a certain time period (what, is someone going to sue to make them add price to the pump?) The other way a Wisconsin gas tax holiday could be done in Wisconsin would be for Evers to do something that makes the GOP Legislature put up or shut up.

Evers could call a special session that has one simple purpose – to send a small portion of the state’s $3.8 billion budget surplus to the state’s Transportation Fund, replacing the loss of funds that would result from a gas tax holiday.

This would make the Legislature have to choose between giving Governor Evers what he wants (but also looking decent to voters themselves), or having another issue where they do nothing, giving Evers and Dems an attack angle of “those gerrymandered GOPs won’t do JACK about gas prices. They don’t give a damn about how Wisconsinites are hurting.”

Again, I admit that it’s a gimmick to have a gas tax holiday. I’ll add that I think it is bad policy when we already have longer-term challenges in funding our roads and other transportation needs at both the state and federal levels. And that work needs to resume in a couple of years as those funding challenges will come back to a head.

But in this time of what seems to be a temporary and bullshit spike in gas prices, and with DC’s infrastructure bill giving a fiscal cushion while allowing for more road investments to continue, it can work. I’d say both Biden and Evers should do it, and announce it this week before 4th of July travel ramps up.

Evers can get an extra benefit of bringing more anger against the gerrymandered GOP Legislature. It would go along with a campaign theme that Evers and WisDems really do care about the issues facing Wisconsinites, while GOPs are Big Liars who’d rather play games than solve problems.

So DO IT, Tony!

Sunday, June 19, 2022

COVID cases, community levels dropping in Wisconsin. But some severity still happening

Hadn't mentioned the trends in COVID cases in Wisconsin in a while, so wanted to briefly touch on that.

The good news is that the number of new reported COVID cases in Wisconsin continues to fall, although the 7-day average is still elevated, at nearly 1,400 cases.

It also looks like the number of Wisconsinites hospitalized has plateaued after rising through much of May. Combined with the decline in reported cases, this has led to the number of counties with “high” community levels falling from 18 at the end of May to 4 today, with a majority of counties now listed as having “low” levels.

But the higher hospitalizations of May are now translating into more COVID deaths than had in April. It’s still nothing near what we had at the start of 2022, and similar to what we were at this time last year. But it's also not single digits, and we're still seeing 4-5 Wisconsinites die every day from this virus.

Perhaps the lower number of (reported) cases and good weather of recent days are going to lessen the chances of more COVID cases and deaths, at least through the next few weeks. But as we've seen far too often, just when we think we've seen the final downturn, some goofy variant comes along to annoy us further. So it's at least worth staying aware of the numbers, even if they're not the headline-grabbers that we saw in other times.

Housing starts crash! But more houses are now available, and might become more affordable

For the "recession is coming" crowd, Thursday's report on new housing starts in the US was a big piece of evidence for their case.
Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,549,000. This is 14.4 percent (±8.9 percent) below the revised April estimate of 1,810,000 and is 3.5 percent (±10.7 percent)* below the May 2021 rate of 1,605,000. Single‐family housing starts in May were at a rate of 1,051,000; this is 9.2 percent (±11.0 percent)* below the revised April figure of 1,157,000. The May rate for units in buildings with five units or more was 469,000.

Yes, April was revised higher to the most (seasonally adjusted) housing starts in 16 years, but 1,549,000 is still the lowest amount of starts in 13 months, and it may make some people wonder if an already-frothy housing market might be boiling over into a 2006-style decline.

On the flip side, the higher amount of housing starts from prior months are becoming homes that are ready to be moved into.
Privately‐owned housing completions in May were at a seasonally adjusted annual rate of 1,465,000. This is 9.1percent (±22.6 percent)* above the revised April estimate of 1,343,000 and is 9.3 percent (±19.0 percent)* above the May 2021 rate of 1,340,000. Single‐family housing completions in May were at a rate of 1,043,000; this is 2.8 percent (±13.6 percent)* above the revised April rate of 1,015,000. The May rate for units in buildings with five units or more was 417,000.
That's a good sign to me, as more inventory is something that many have been calling for as home prices in America increased by more than 20% year-over-year. And it also shows that home construction workers have been plenty busy, so the lack of starts shouldn't lead to layoffs in the near future and may actually result in a bit of relief to get things back towards balance.

The decline in housing starts came in a month when the Federal Reserve gave its first increase in interest rates off of the rock-bottom levels we had seen for the last 2 years. Now that the Fed has raised rates by another 75 points this month, with more likely to follow. So if you're pessimistic, you will likely have concerns about whether higher costs of borrowing are going to combine with already-inflated housing prices to slam the market like we're back in 2006 or 2007. And you know what followed 2006 and 2007....

With that situation in mind, let's look at the stats from the Wisconsin Realtors Association on our state's housing market. Wisconsin has also seen a significant runup in housing prices in recent years, with the median sale price reaching $275,000 in May 2022, which is more than $125,000 above where it was 8 years ago, and over $100,000 more than it was 5 years ago.

This graph from the WRA shows how year-over-year sales prices have risen by sizable amounts since 2017, with noticeable gaps for each of those years.

Conversely, even though there are more home sales in Wisconsin as the weather warms and the school year ends, you can see how Wisconsin's stronger sales in January and February over the last 2 years have flattened out in the months after that (2022 is the thicker black line, and 2021 is the thicker red line). That's a noticeable contrast to the 2010s, where sales took off with the weather.

Here's another way to look at how things have flattened out in March, April and May in the 2020s, by comparing how many more sales happened in those months vs the low-sale month of January. Look at how the gap between years blows up.

My question is "is this a bad thing"? Wages in Wisconsin certainly have not gone up 59% in the last 5 years like median home prices have, and now the higher rates makes those higher prices even less affordable. Some reversion should be expected as a result, and perhaps the higher inventories will also help home prices to come closer to something that more Wisconsinites can safely accept.

The question to me is how far this housing market falls, and how fast. If there's a slight, gradual decline over 12 months, that might be something that not only doesn't affect the wider economy, but actually is welcomed and turns us back toward a more affordable, balanced market. But if people aren't able to pay their mortgages or the construction industry stops quickly and sharply, then we would see a crash in prices and/or demand that becomes a much worse situation, and could shove the economy over into recession.

I think more Americans are locked into lower rates and/or cash vs the 2000s, so that makes me think any damage would be limited compared to the Great Recession. But the coming months will tell us a lot, and I have definite fears that the Fed's is going to raise too much, too fast"" in a time when our overheated housing market is already set to slow down.

Saturday, June 18, 2022

Same old jobs story in Wisconsin - some gains, but maxed out at sub-3% unemployment

Following the trend in the country as a whole, Wisconsin’s job market followed the US jobs trend higher in May.
The Department of Workforce Development (DWD) today released the U.S. Bureau of Labor Statistics (BLS) preliminary employment estimates for the month of May 2022, which show the number of Wisconsinites employed at a historic high of 3,059,300. The data also show an increase in Wisconsin's total labor force for the sixth consecutive month.

• Place of Residence Data: Wisconsin's labor force participation rate was 66.5 percent in May, unchanged from April, and 4.2 percentage points higher than the national rate of 62.3 percent. Wisconsin's unemployment rate in May was 2.9 percent, up slightly from April's historic low due to an increase in active participants in the labor force.

• Place of Work Data: Wisconsin total nonfarm jobs increased from April 2022 to May 2022 by 2,200 while private-sector jobs increased by 1,800 over the same period.
Both “employment” and jobs have grown by decent amounts in the year since most Wisconsinites were able to be fully vaccinated, although the number of jobs has yet to reach the pre-COVID peaks like the number of workers has.

The difference between "employment" growth and job growth may not necessarily be a bad thing either, since wages and supports may be strong enough these days so that some people don’t have to have multiple jobs.

There is a bit of concern in that construction and manufacturing had a seasonally-adjusted decline in jobs for May. But that also seems to be a reflection of lower-than-normal seasonal hiring.

Job change, Wisconsin May 2022
Raw increase +4,900
Seasonally adjusted -1,700

Raw increase +400
Seasonally adjusted -1,200

We saw a similar story in Leisure and Hospitality for May (+16,600 raw increase, +200 seasonally adjusted), and the low unemployment rate will make Summer hiring even more difficult to fill. And if we truly are maxed out on the number of people available to work, we may see job growth may “decline” or "stagnate" in months where employers can’t hire as many people as normal.

But even with another 54,500 jobs added in the state since May 2021, Wisconsin's 1.9% rate of job growth is less than half the 4.5% rate of growth the nation has seen in that time period. And with 2.9% unemployment in a state that has labor participation more than 4% above the national average, it makes me wonder just how many more jobs can be added in the state today.

June’s report should be intriguing to see if the gap for Summer employment is able to be closed, and why they might or might not be closed (needs lessen? More hiring? Or can’t find people to work at a certain wage rate?). We know for sure that Wisconsin still had a tight labor market in May, and those imbalances aren’t likely to all go away in one month.

It also tells us that the longer-range challenge for the state is to get people to locate to a cold-weather place that traditionally hasn't paid as much as nearby big markets like Chicago or the Twin Cities. And a regressive Legislature that seeks to outlaw abortion and is outright hostile to public education isn't going to get anyone with talent to want to move here, so getting rid of those bums (and certainly not having them in the Governor's Office signing more bad laws) is necessary in order to increase this state's economic potential.

Friday, June 17, 2022

Gas is tight in US today, but it's been tighter before. With Friday's oil crash, we better see relief soon

Wanted to do a quick check back on gasoline usage and supply in America, now that we have a full week of data in after Memorial Day. Sure enough, after a rise over the Holiday weekend due to pre-planned trips, US gas consumption went back down to the lowest non-pandemic level in 8 years.

What also is at its lowest level in several years is the availability of gasoline, which would justify some runup in price. But you'll also notice that supplies were tighter this time of the year in both 2014 and 2015.

But the price at the pump in 2014 and 2015 was under $4 a gallon instead of heading toward $5.

In fact, June 2014 is when that last peak happens, with prices plummeting below $3 gallon by the end of that year and not coming back above it again until 2021. But to fair, things are different we're also pumping out nearly 100 million more barrels a month than we were in June 2014, and US gas usage is lower now than it was in 2015 or 2016, when prices were in the low $2s.

Doesn't really add up, does it? Tells me that a lot of this oil/gas runup is out of whack with reality, and today's action in the oil markets underscored my instinct that this is BS.
Oil prices tumbled about 6% to a four-week low on Friday on worries that interest rate hikes by major central banks could slow the global economy and cut demand for energy.

Also pressuring prices, the U.S. dollar this week rose to its highest level since December 2002 against a basket of currencies, making oil more expensive for buyers using other currencies.

Brent futures fell $6.69, or 5.6%, to settle at $113.12 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $8.03, or 6.8%, to settle at $109.56.
Those "worries" is how Wall Street media describes "speculation", and I strongly suspect that's a lot of what has been driving the oil and gas markets, to the delight of oil/gas companies who get to pull in big profits on the higher prices without having to invest much more (if anything).

Given today's crash in oil prices, I would hope that means we see gas prices level off and possibly start falling by the 4th of July. It certainly warrants a closer eye on what these companies and their distributors are trying to get away with, and will likely try to continue to get away with in the coming months.

Gven how those companies would love to have Koched-up GOP Congress members be able to cut off Biden Admin attempts to reduce our usage of fossil fuel, I also wouldn't doubt some of the recent action is the oil markets has political motivations. And if I was a Dem running for office in 2022, I'd be loudly reminding people that the rise in gas prices has been due to corporate and Wall Street greed, and that pump prices should go down based on this week's crash in oil and the drop in demand.

Thursday, June 16, 2022

Retail sales drop! But I'd wait a bit more before hitting the panic button

You know how I’ve said that inflation has been more an annoyance than a drag on the economy, and that I won’t worry much until I see evidence of a consumer slowdown.

Uh Oh.
Retail sales turned negative in May as consumers pulled back spending while inflation surged, the Commerce Department reported Wednesday.

Advance retail and food service spending fell 0.3% for the month, below the Dow Jones estimate for a 0.1% gain. Excluding autos, sales were up 0.5%, which fell short of expectations for a 0.8% increase….

Sales were well below the pace in April, which posted a downwardly revised 0.7% increase from the initial 0.9% estimate.
That’s a number BEFORE inflation is figured in, and includes a 4% increase in gasoline sales. Take out gas, and retail sales dropped by 0.7% for May, which sounds disastrous, and an indication that those higher gas prices are now leading to cutbacks in other areas.

However, I note that last month's decline came after 4 straight months of solid gains to begin 2022.

And as I dug into the actual report, my initial alarm was calmed a bit. That’s because of our old friend “seasonal adjustment.”

Retail sales, seasonally adjusted vs raw totals May 2022
Total Retail sales
Raw total +2.4%
Seasonally adjust. -0.3%

Retail sales minus gas stations
Raw total +1.5%
Seasonally adjust. -0.7%

Retail sales minus autos, gas stations
Raw total +3.3%
Seasonally adjust. +0.1%

Bars and restaurants
Raw total +3.5%
Seasonally adjust. +0.7%

Building material, garden supply stores
Raw total +9.1%
Seasonally adjust. +0.2%

So we may well be seeing that our “decline” in retail sales is simply lower-than-normal increases in spending that traditionally happen in May. This would explain how we can see many retail sectors with “help wanted” signs despite an alleged “slowdown” in sales.

In a way, this could work out well, as a flatlining of growth allows time for labor shortages to catch up to demand. This would be the “soft landing” scenario that is frequently mentioned, where inflation settles down and there is little/no recessionary results.

But I also can’t blow this off, and it certainly should give us caution about what kind of economic distortions are going to happen this Summer as Americans deal with higher prices at the gas station and in other places. Will the American consumer jump off the merry-go-round that so far has helped us grow through the inflation of the last year?

That possibility illustrates why my hope/fear is for the Fed not to overdo their rate hikes. We don’t need to send the real economy into a nosedive, but I am worried these central bankers might listne too much to the Wall Street doomsayers, and be fine with that. And I'm especially worried that the decline could come right before a midterm election where a blind vote against the party in power (or perceived to be in power) could wreck things in America for a lot longer.

Wednesday, June 15, 2022

75 points! Fed hikes rates in a big way

I was wondering if the Fed would go big in an attempt to slow down our high inflation, and they sure did this afternoon. Ending weeks of speculation, the rate-setting Federal Open Market Committee took the level of its benchmark funds rate to a range of 1.5%-1.75%, the highest since just before the Covid pandemic began in March 2020......

“Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” [Fed Chairman Jerome] Powell said. He added, though, that he expects the July meeting to see an increase of 50 or 75 basis points. He said decisions will be made “meeting by meeting” and the Fed will “continue to communicate our intentions as clearly as we can.”

“We want to see progress. Inflation can’t go down until it flattens out,” Powell said. “If we don’t see progress ... that could cause us to react. Soon enough, we will be seeing some progress.” We haven't been seeing that flattening in the CPI so far, and gas prices have continued to rise in June. If that trend continues, Chairman Powell said the Fed will keep on hiking.
The Fed’s benchmark rate will end the year at 3.4%, according to the midpoint of the target range of individual members’ expectations. That compares with an upward revision of 1.5 percentage points from the March estimate. The committee then sees the rate rising to 3.8% in 2023, a full percentage point higher than what was expected in March.
As you can see above, a 3.4% Fed Funds rate would be higher than at any time since the Great Recession. Guess it's a good thing I locked in my 2.72% car loan last month, eh?

I will add that we did get an indication today that the stronger dollar is blunting inflation in one way, as the price of non-fuel imports dropped by 0.3% in May, and those prices of imports have risen by a total of just over 5% since June. Of course, you gotta have the imports coming in for that to make a bigger impact, but right now I'll take any sign of moderation that I can.

While the Fed reduced its estimates of real GDP growth for 2022 from 2.8% to 1.7%, and bumped up its expected unemployment rate for the year from 3.5% to 3.7%, its statement also said that economic activity was improving after a slow first 3 months.
Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.
But because our inflation is more due to a combination of weird events, I hope the Fed continues to keep an eye on jobs and growth. It's not 1980 - this hasn’t been a long-lasting, ongoing cycle of price hikes. Our inflation has mostly been due more to temporary incidents like COVID disruptions, stimulus, speculation on the financial markets, and European conflicts that mess up supply-and-demand on the World’s (not America’s) oil market.

The markets seemed to respond positively to the 75-point move, but more moves seem certain to come throughout the Summer and Fall, and we'll see what hits the wall first - jobs, prices, assets....or any combination of the 3.

Tuesday, June 14, 2022

As the Big Lie gets demolished in DC, the traveling BS comes to Milwaukee

For today's "Timing Is Everything" award - 1 day after the January 6th Committee quoted numerous Trump Administration officials saying that TrumpWorld's claims of voter fraud in the 2020 election were "bullshit", we get this headline.

Michael Gableman will address a poll watcher training event next weekend organized by a Republican lawyer who played a key role in the legal effort to overturn the 2020 election in favor of former President Donald Trump.

Branded as an "election integrity summit" by lead organizer the Conservative Partnership Institute, the event at a Wauwatosa hotel will include sessions on the recruitment, training and deployment of poll watchers, according to the event's website.

The Wauwatosa summit is the latest in a nationwide effort by longtime GOP lawyer Cleta Mitchell to encourage more conservative activists to poll watch ahead of the 2022 election. Mitchell, a senior legal fellow for the Conservative Partnership Institute, advised Trump during his failed attempt to overturn the 2020 election results.
Cleta Mitchell, you say? One of the stars of this expose from Jane Mayer last year

And the Milwaukee area is a fitting area to have this BS, because Mayer noted a lot of the money of this Big Lie BubbleVerse comes from the Cream City.
Another newcomer to the cause is the Election Integrity Project California. And a group called FreedomWorks, which once concentrated on opposing government regulation, is now demanding expanded government regulation of voters, with a project called the National Election Protection Initiative.

These disparate nonprofits have one thing in common: they have all received funding from the Lynde and Harry Bradley Foundation. Based in Milwaukee, the private, tax-exempt organization has become an extraordinary force in persuading mainstream Republicans to support radical challenges to election rules—a tactic once relegated to the far right. With an endowment of some eight hundred and fifty million dollars, the foundation funds a network of groups that have been stoking fear about election fraud, in some cases for years. Public records show that, since 2012, the foundation has spent some eighteen million dollars supporting eleven conservative groups involved in election issues.....

An animating force behind the Bradley Foundation’s war on “election fraud” is Cleta Mitchell, a fiercely partisan Republican election lawyer, who joined the organization’s board of directors in 2012. Until recently, she was virtually unknown to most Americans. But, on January 3rd, the Washington Post exposed the contents of a private phone call, recorded the previous day, during which Trump threatened election officials in Georgia with a “criminal offense” unless they could “find” 11,780 more votes for him—just enough to alter the results. Also on the call was Mitchell, who challenged the officials to provide records proving that dead people hadn’t cast votes. The call was widely criticized as a rogue effort to overturn the election, and Foley & Lardner, the Milwaukee-based law firm where Mitchell was a partner, announced that it was “concerned” about her role, and then parted ways with her. Trump’s call prompted the district attorney in Fulton County, Georgia, to begin a criminal investigation.

In a series of e-mails and phone calls with me, Mitchell adamantly defended her work with the Trump campaign, and said that in Georgia, where she has centered her efforts, “I don’t think we can say with certainty who won.” She told me that there were countless election “irregularities,” such as voters using post-office boxes as their residences, in violation of state law. “I believe there were more illegal votes cast than the margin of victory,” she said. “The only remedy is a new election.” Georgia’s secretary of state rejected her claims, but Mitchell insists that the decision lacked a rigorous evaluation of the evidence. With her support, diehard conspiracy theorists are still litigating the matter in Fulton County, which includes most of Atlanta. Because they keep demanding that election officials prove a negative—that corruption didn’t happen—their requests to keep interrogating the results can be repeated almost indefinitely.....
Guess who else supports the "Election Integrity Project"?

Funny how the money goes around and around in RW BSWorld, isn't it? Imagine if a fraction of the dirty dollars going to these tax-dodging "non-profits" went to anything useful in society?

"It's a Big Club, and you ain't in it." - George Carlin.

Monday, June 13, 2022

Big Memorial Day weekend of travel has an effect, but lots of gasoline, oil still available

After a weekend of travel that included me choosing a $59 round-trip bus ride over driving to O'Hare and paying for parking and gasoline, I wanted to revisit some numbers on the availability of oil and gasoline in this country.

With gas prices continuing to rise, I wanted to see if this caused any kind of decline in demand for the high-travel Memorial Day weekend. Now that the Energy Information Agency has gotten their figures out for that weekend, let's take a look and see what we have, and compare it to the more "regular" week before (through the Friday before Memorial Day weekend).

As you can see, gasoline usage was down for the week before Memorial Day, but Memorial Day Weekend had the highest gas usage since COVID became a thing. Maybe that reflects pre-planned vacations, and we'll see gas consumption go back to declining when the next EIA consumption report comes out on Friday, but it certainly says that gas prices didn't stop a big increase in travel for that weekend.

That big jump in usage for Memorial Day weekend tightened the availability for gasoline in America. The days of supply is lower than it has been in past years, but still more available than in 2014 or 2015.

If the days of available supply continues to decline in the next couple of weeks after the high level of Holiday Weekend travel, then we should worry. But that will be due to worldwide constraints more than any lack of supply in America, because this country is pumping out oil at 2019's levels, with more expected to come.

And that, along with the dollar being at multi-year highs, is why US gas prices are generally lower than what Europe and Canada are dealing with today. And the choice not to pick up supply isn't anything related to DC mandates, but is more likely due to Capitalism 101 - maximize profits, not production.

High gas prices suck, and are still causing significant stress for Americans. This has led to a general gloominess of the overall situation, when the economy still is adding jobs and production, with nominal wages still rising. But I also think that the supply-and-demand situation in America doesn't match with those high prices, and if Americans do cut back on their driving, there's no reason for those prices not to go down.

I think it's well past time for the Biden Administration and Dems in DC to hammer this and investigate anti-competitive practices. I also think that direct intervention may be in store, given that it is worldwide issues that are raising the worldwide prices, and do some "America First" actions of our own. This could include redirecting US oil exports back to America, use the Defense Production Act to speed distribution of oil and to increase refining capacity, and putting in a maximum pump price (say, at $4.25) while subsidizing gas stations to make up the difference.

Given the supply-and-demand situation and the adjustments that will lower prices on their own in the coming months, short-term moves like this should be all that is needed.

Saturday, June 11, 2022

Inflation at new levels! But it ain't the deficit and it ain't recession

I was at O'hare AIrport getting ready to fly south to my Dad's Friday morning, when I checked the headlines. And then I saw the top econ story, and said "Well ain't this is a punch in the...."
The Dow (INDU) plunged after a key inflation report missed estimates and showed a higher-than-anticipated increase in the price of consumer goods, closing down 880 points for the day, or 2.5%. The S&P 500 shed 2.7% and the Nasdaq dropped about 3%.

The May consumer price index rose 8.6% year-over-year, its highest level since 1981. Economists had forecast an 8.3% increase. The core index, which excludes food and energy prices, rose by 6%, slightly higher than estimates of 5.9%.

Those numbers sent investors reeling. Already worried about a possible economic downturn, they now fear that the Federal Reserve will recognize inflation as entrenched in the economy and increase interest rates further.
You figured that the CPI was going to be higher after seeing gas shoot up in May, but the more worrying part came from the full release from the Bureau of Labor Statistics, which indicated that there were sizable increases in prices in many ares.
The increase was broad-based, with the indexes for shelter, gasoline, and food being the largest contributors. After declining in April, the energy index rose 3.9 percent over the month with the gasoline index rising 4.1 percent and the other major component indexes also increasing. The food index rose 1.2 percent in May as the food at home index increased 1.4 percent.

The index for all items less food and energy rose 0.6 percent in May, the same increase as in April. While almost all major components increased over the month, the largest contributors were the indexes for shelter, airline fares, used cars and trucks, and new vehicles. The indexes for medical care, household furnishings and operations, recreation, and apparel also increased in May.

The all items index increased 8.6 percent for the 12 months ending May, the largest 12-month increase since the period ending December 1981. The all items less food and energy index rose 6.0 percent over the last 12 months. The energy index rose 34.6 percent over the last year, the largest 12-month increase since the period ending September 2005. The food index increased 10.1 percent for the 12-months ending May, the first increase of 10 percent or more since the period ending March 1981.
This freaked out Wall Streeters, who now figure that "higher and ongoing inflation = recession." Either from a cutback in spending due to prices rising above wages, through jobs being cut because profit growth declines, or because the Federal Reserve raises interest rates so high and so fast that asset markets crash.

UW's Menzie Chinn has a good graph that shows the trends in inflation. All the numbers are rising, both on a 1-month (annualized to a 12-month rate) and year-over-year basis. Even though the 1-month increases in core CPI aren't as sudden as what we saw this time last year (as the economy started taking off with COVID vaccinations and Biden stimulus), it is rising much more consistently and persistently in 2022.

But I'll point out that another report came out on Friday that gave more evidence that our current inflation has very little to do with America's fiscal situation. In fact, the Congressional Budget Office says the US budget deficit is plummeting in 2022.
The federal budget deficit was $423 billion in the first eight months of fiscal year 2022 (that is, from October 2021 through May 2022), the Congressional Budget Office estimates. That amount is about one-fifth of the $2.1 trillion shortfall recorded during the same period in 2021. Revenues were $768 billion (or 29 percent) higher and outlays were $873 billion (or 19 percent) lower than during the same period a year ago.

The deficit at this point last year was much larger because of spending in response to the coronavirus pandemic—mostly for the recovery rebates (also known as economic impact payments), unemployment compensation, pandemic relief through the Small Business Administration (SBA), and the Coronavirus Relief Fund—and because revenues were lower.
In fact, the deficit is lower through May than in any fiscal year that has had the GOP's Tax Scam of 2017 in effect for all 12 months. That's despite a higher nominal GDP in 2022.

In fact, the lower budget deficit and the dollar remaining near 20+ year highs should be keeping inflation down. Which means if any Republican tells you that "Democrat spending" is causing our inflation, you know that they are either:

1. Economically illiterate; or
2. Lying to you.

As for the fears that we are already in recession - we wouldn't be seeing prices for airline fares and new vehicles go crazy like this if there wasn't demand existing that would pay for it. In fact, that seems to be a supply issue where fewer vehicles were able to be on lots and flights able to be staffed to meet the big demand that we still have for these items in America. Restaurants and bars continue to see more business, and most reports indicate consumer spending is still outpacing inflation. In an economy that is 70% consumer, it becomes hard to have much of a downturn if that is still keeping up.

In addition, jobless claims and unemployment have not budged off of their near-record lows. Even last week's jobless claim increase to 229,000 is due to a seasonl quirk due to a shorter Memorial Day weekend - the actual number of claims didn't change at all vs the prior two weeks.

Since inflation is something everyone can see and feel on a daily basis, people think our economy is declining. In reality, the economy is still moving along, and jobs are still plentiful. But that fact is little solace to a lot of people these days.

So the "rising consumer prices/continued attempts to profiteer" parts of our economic merry-go-round continued in May. In the next week, we'll see if the "consumers keep spending" and "rising costs for business/rising wages for workers" parts of the spin continue.

And as I've said before, the part that stops happening first is what tells us whether we actually do end up in recession, or merely come in for a soft landing with continued growth.