When is a declining GDP not a recession? In very weird times

Well, is the "R" word now a reality in America? Let's check today's GDP Report and find out!

BREAKING: The U.S. economy shrank for a second straight quarter, contracting at a 0.9% annual pace and raising fears that the nation may be approaching a recession. https://t.co/dYUTWSjd80

— The Associated Press (@AP) July 28, 2022

Oh, noooooo! Two straight quarters of declining (real) GDP growth, that must mean the economy is in recession. All the books tell me so, and I'm sure the pros agree.

JUST IN: Fed Chair Powell says the US is NOT in a recession

"I do not think the US is currently in a recession," he says. "The reason is there are too many areas of the economy that are performing too well."

(He points to a "very strong" labor market) pic.twitter.com/aGmmZoTrkE

— Heather Long (@byHeatherLong) July 27, 2022

As proof of that, the US gained 1.1 million jobs in the Q2 that allegedly had negative growth. And while jobless claims are off their 50-year lows, they are still barely above 250,000 new claims a week - well below the 350,000-400,000 a week that has presaged recessions over the last 40 years.

So what's a good paralell to our current situation? I think this explains it well.

The Two Quarter GDP Decline of 1947 https://t.co/oPy55CTv94 pic.twitter.com/FU5CusXjzb

— Menzie Chinn (@menzie_chinn) July 26, 2022

We've been talking to clients a lot recently about how the current period mirrors 1945-1950. Supply chain issues, huge change and surge in consumption. Big inflationary spike the Fed had to tamp down. Real GDP shrinkage with strong nominal GDP growth.https://t.co/SwynkmoDNf

— Rob Spivey (@spiveyvalens) July 28, 2022

And what happened back then? A transition from a prior wartime economy to a post-war economy, and one that had almost over-full employment with a gap in the amount of available workers and supplies to keep up with the high demand. This needed some sorting out, but was also a very strong time for the economy overall.

Feels pretty similar today, doesn't it? That high 7%+ nominal GDP doesn't seem as likely to go down as much as inflation seems likely to do, given how gas and home prices are correcting. I was also grabbed by the reality that consumer spending still topped the level of inflation for Q2 2022 - +1.0% real increase, and +4.1% for services. Consumers adjusted their habits to the higher prices of goods by not getting as much food at home and gasoline, but still spent more in other areas.

And reports from this week show higher levels of new manufacturing orders and higher inventories for June, along with a declining trade deficit for goods. That's the direct opposite of a "high-inflation + recession" scenario.

So my thoughts? If this is a recession, it's the oddest, least-painful one I can recall. One with job growth, consumer adjustements and shortages instead of a need to cut back on the business side. We'll see if things start to level out in July and for the rest of Q3.

Happy FOX-CON-IVERSARY

5 years of epic failure and hundreds of millions of dollars of wasted infrastructure.

“Gov. Walker has been a key player in making this deal happen; but it all started with President Trump. I would like to thank them both for their leadership, and for bringing this transformational economic opportunity to Wisconsin.” 2/2

— Gordon Hintz (@GordonHintz) July 26, 2022

A reminder that everyone who said Foxconn was bullshit was right and everyone who claimed it wasn’t bullshit was 100% wrong. pic.twitter.com/vg1oISC5Md

— Scot Ross (@rossacrosswi) July 26, 2022

Never forget, and never forgive.

Up North again

It's that time of year again to catch up with family and friends above Highway 8. I still cant understand how anyone can vote for Toxic Tom Tiffany...especially when this is your best advantage.

But I'm definitely keeping an eye on the economic news, which is coming fast and furious in the coming days.

And I will say this - I've never been in a recession that was filled with "Help Wanted" signs, sales and backlogs still high, and home values up double digits. And 2022 won't be the first.

Indexes showing RECESSION coming? Or just a healthier balance?

In the latter half of the week, we got a couple of economic reports that gave worrying signs about what might happen to the economy in the second half of 2022. The first was on Thursday, and showed a second straight drop in leading economic indicators go down.

The Conference Board Leading Economic Index® (LEI) for the U.S. decreased by 0.8 percent in June 2022 to 117.1 (2016=100), after declining by 0.6 percent in May. The LEI was down by 1.8 percent over the first half of 2022, a reversal from its 3.3 percent growth over the second half of 2021.

"The US LEI declined for a fourth consecutive month suggesting economic growth is likely to slow further in the near-term as recession risks grow,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Consumer pessimism about future business conditions, moderating labor market conditions, falling stock prices, and weaker manufacturing new orders drove the LEI’s decline in June. The coincident economic index which rose in June suggests the economy grew through the second quarter. However, the forward-looking LEI points to a US economic downturn ahead.”

“Amid high inflation and rapidly tightening monetary policy, The Conference Board expects economic growth will continue to cool throughout 2022. A US recession around the end of this year and early next is now likely. Accordingly, we’ve downgraded our forecast of 2022 annual Real GDP growth to 1.7 percent year-over-year (from 2.3 percent), while 2023 growth was downgraded to 0.5 percent YOY (from 1.8 percent).”

In looking at what caused the Leading Index to decline, a lot of it had to do with the Confidence Fairy – which was at a low point in June as consumers were especially grumpy with gas prices and inflation reaching their peaks.

. So that decline in consumer expectations may not be as bad when the July report comes out, and the S&P 500 stock index has bounced back by about 5% so far this month (hope I didn’t jinx that).

On the flip side, the yield on the 10-year note has fallen in recent weeks, and the Fed Funds rate is likely to be 75 or 100 points higher after next week’s meeting. That will put a significant cut into the Leading Index, so I’ll call it a draw until more July reports come in.

However, the same report did not indicate the current economy had actually fallen into recession last month, and instead was merely slowing down.

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased by 0.2 percent in June 2022 to 108.6 (2016=100), after increasing by 0.2 percent in May. The CEI rose by 1.2 percent in the first half of 2022, the same rate of growth as in the second half of 2021.

But then we saw the Purchasing Managers’ Index (PMI) report on Friday indicating that perhaps things already were in decline.

US private sector firms indicated the first contraction in business activity since June 2020 in July, according to latest ‘flash’ PMI™ data from S&P Global. The downturn in output signalled a further loss of momentum across the economy of a degree not seen outside of COVID-19 lockdowns since 2009. The downturn was led by a steep drop in service sector activity, though production at manufacturers also fell marginally, down for the first time in over two years.

YIKES! What caused that? Let's start on the services side.

Following a slight contraction in June, new business returned to expansion. The marginal upturn in client demand was much softer than that seen in the last two years, however. Inflation and weak demand conditions reportedly continued to weigh on new sales. At the same time, new export business decreased for the second successive month amid challenging economic conditions in key export destinations.

Manufacturers were also reporting weak future demand in this report.

Driving the decrease in the headline index reading were broadly unchanged production levels and a further fall in new order inflows. The seasonally adjusted Output Index dropped below the 50.0 no-change mark for the first time since June 2020, as total new sales and new export orders fell at the sharpest rates since the initial stages of the pandemic over two years ago.

But along with that softer demand is a silver lining, as it's allowing companies to reduce their backlogs, and is start to limit inflation.

...Firms highlighted the pass-through of higher costs to their clients as a driving factor behind greater output charges. A number of firms stated that slower input cost inflation, greater competition and softer demand conditions led to some concessions being made to customers, however, helping to cool the pace of charge inflation to its slowest since March 2021.

A softer rise in hiring activity also stemmed from reduced pressure on capacity in July. Backlogs of work fell for the second month running and at the steepest rate since May 2020. Broadly unchanged levels of work-in-hand at manufacturing firms was accompanied by a solid decline inincomplete business at service providers as softer demand conditions allowed firms to catch up with work outstanding.

What that means is that even if we are in "recession", it's not under conditions that seem recessionary to many. Jobs keep being added and are still in demand, the amount of work available isn't changing all that much (because they're catching up on older orders), and workers are still getting paid at higher wages than this time last year (even if it generally hasn't kept up with inflation over the last year).

The real question to me is if any slowdown in the economy will be severe enough to cause significant cutbacks in everyday business or employment. We haven't had many inflation-driven slowdowns in recent years, and it's a different situation than a slowdown caused by an asset market meltdown and/or a Bubble popping that reveals the economy to have been running on nothing, which leads to significant layoffs that strain demand further.

I don't think this is us. At least not yet.

These reports are another reason why I hope the Fed backs off its aggressive posture of interest rate hikes after next week. There's increasing evidence that US consumers and businesses are rationally adjusting to higher prices by backing off a bit, which is getting the economy back towards balance and decreasing inflation by itself. More data needs to come in to give an idea whether we're merely slowing or outright receding, but a Fed overshoot would be the worst situation that would inflict economic pain for more people, and prolong what should be a relatively brief and comfortable moderation.

Wis june jobs report shows a state at its limits

In today's June jobs report, the Wisconsin Department of Workforce Development chose to emphasize the good situation we were in.

• Place of Residence Data: Wisconsin's labor force participation rate was 66.4 percent in June, 4.2 percentage points higher than the national rate of 62.2 percent in June. Wisconsin's unemployment rate in June was 2.9 percent, near historic lows.

• Place of Work Data: Wisconsin total nonfarm jobs increased by 45,100 jobs and private-sector jobs increased by 44,900 from June 2021 through June 2022. Over the month, total nonfarm jobs decreased by 1,800 and private-sector jobs decreased by 1,700 jobs.

But look at that last sentence – jobs were lost in Wisconsin in June. That seems concerning in a time when the country added 372,000 jobs, and the fact that the household survey showed both total employment (-6,600) and labor force (-4,800) declining in the month is also not a great sign.

However, I will note that these are seasonally adjusted totals in Wisconsin for June. In actuality, more people were working in June in Wisconsin than in May, but it wasn’t as much of a jump as is counted on for June.

Change in jobs, Wisconsin June 2022
All Jobs
Seasonally adjusted -1,800
Non-seasonally-adjusted +30,400

Private Jobs
Seasonally adjusted -1,700
Non-seasonally-adjusted +42,200

Employment
Seasonally adjusted -6,600
Non-seasonally-adjusted +18,600

Labor Force
Seasonally adjusted -4,800
Non-seasonally-adjusted +38,100

And that was especially true for touristy types of sectors that usually have large amounts of hiring in the state as Summer kicks into high gear.

Retail Trade
Seasonally adjusted -1,500
Non-seasonally-adjusted +1,700

Arts, Entertainment and Recreation
Seasonally adjusted -3,400
Non-seasonally-adjusted +4,700

Accomodation and Food Services
Seasonally adjusted -1,100
Non-seasonally-adjusted +10,300

I also note that more permanent, blue-collar jobs added positions above and beyond the typical Summer hiring.

Construction
Seasonally adjusted +1,300
Non-seasonally-adjusted +7,400

Manufacturing
Seasonally adjusted +1,400
Non-seasonally-adjusted +7,100

What this indicates to me is that things are actually still very healthy in Wisconsin’s jobs market, but we still can’t find enough people at publicly facing service jobs to have a typical round of Summer hiring. Some of this may be wage-related, but I also think it is due to a demographic issue that the state has been dealing with for several years.

This is something touched on by the Wisconsin Policy Forum as part of a wider discussion of the changes in the state’s jobs market in the COVID era.

In the past, we have discussed how Wisconsin’s aging population, low birth rate, and lackluster net migration figures have led to a reduction in the working-age population (here defined as individuals between the ages of 18 and 64). The Wisconsin Department of Administration projects the state’s working-age population will remain roughly the same size – if not decline slightly – until at least 2040.

Indeed, from 2010 to 2019, Wisconsin’s working-age population declined by 1.0%. While the state’s overall adult population (ages 18 and older) is growing year-over-year, there is a much more rapid increase in those over the age of 65. In other words, Wisconsin’s residents are reaching a typical retirement age at a much faster rate than they are entering the workforce, shrinking the overall labor pool. On top of that, the pandemic caused more people to retire at earlier ages, and it is still unclear to what extent those retirees can be lured back into the workforce.

All of this information indicates we have a state that seems to be maxed out on workers, and needs to find ways to attract more people to come here. But the GOP that the “business leaders” of the state promotes aren’t going to solve that problem as long as they continue to be regressive fools.

You can literally feel young people fleeing #Wisconsin at this point. Good luck with that workforce growth & retention, @WisconsinMC! #wipolitics https://t.co/ZTLuWxR0wB

— Mason T. Becker (@MasonTBecker) July 20, 2022

What we need to do is promoting and protect the state’s advantages. This includes the great natural resources that drives all that Summer tourism, and a strong public education, and a high quality of life that can carry throughout the year. Not only does this improve the current and future work force, it also encourages others to locate to Wisconsin.

And getting more people to come here is the one way we are going to grow a Wisconsin labor market that seems to be at its limits today.

Home building activity slowing. But is that bad?

The US housing market has seen home prices go up by more than 20%. Combined with the recent increase in mortgage rates and high inflation costs, and it makes it a lot harder for people to afford a home, even if they want one.

A recently released report from the Wisconsin Realtors' Association says this is happening here as well. While the statewide average home price is only up 10% vs 20% nationwide, note the significant decline in home sales and listings compared to last year.

This situation explains the bad housing report that we saw (today).

Privately‐owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,685,000. This is 0.6 percent below the revised May rate of 1,695,000, but is 1.4 percent above the June 2021 rate of 1,661,000. Single‐family authorizations in June were at a rate of 967,000; this is 8.0 percent below the revised May figure of 1,051,000. Authorizations of units in buildings with five units or more were at a rate of 666,000 in June.

Privately‐owned housing starts in June were at a seasonally adjusted annual rate of 1,559,000. This is 2.0 percent (±9.0 percent)* below the revised May estimate of 1,591,000 and is 6.3 percent (±10.2 percent)* below the June 2021 rate of 1,664,000. Single‐family housing starts in June were at a rate of 982,000; this is 8.1 percent (±12.2 percent)* below the revised May figure of 1,068,000. The June rate for units in buildings with five units or more was 568,000.

Privately‐owned housing completions in June were at a seasonally adjusted annual rate of 1,365,000. This is 4.6 percent (±11.7 percent)* below the revised May estimate of 1,431,000, but is 4.6 percent (±13.4 percent)* above the June 2021 rate of 1,305,000. Single‐family housing completions in June were at a rate of 996,000; this is 4.1 percent (±11.1 percent)* below the revised May rate of 1,039,000. The June rate for units in buildings with five units or more was 366,000.

This comes on the heels of another report that indicated homebuilders aren’t feeling good on where things are going.

Confidence among builders in the nation’s single-family housing market fell in July to the lowest level since the start of the pandemic.

The National Association of Home Builders/Wells Fargo Housing Market Index, a survey designed to gauge market conditions, found builder sentiment dropped 12 points to 55. That marked the largest single-month drop in the survey’s 37-year history with the exception of April 2020, when the reading plummeted 42 points to 30 after the start of the Covid-19 pandemic.

Any rating above 50 on the index is still considered positive, but sentiment has now fallen 24 points since March, when mortgage rates began moving higher. The average rate on the 30-year fixed mortgage has nearly doubled since January and is now hovering just below 6%....

Of the index’s three components, builder sentiment about current sales conditions dropped 12 points to 64, while sales expectations for the next six months fell 11 points to 50 and sentiment about buyer traffic declined 11 points to 37. That last component is now solidly in negative territory.

“Affordability is the greatest challenge facing the housing market,” said Robert Dietz, NAHB’s chief economist. “Significant segments of the home buying population are priced out of the market.”

But isn’t that just a typical market correction to an overheated situation? If home prices leveled off or even dropped some, would that be such a bad thing?

Likewise, we were hearing about a record backlog of homes 3 months ago. So a decline in starts and permits might get the market back toward efficiency and equilibrium. Construction employment continues to grow (13,000 more jobs in June, and 33,000 more in May), and I also want to point out the gap between the larger number of starts and the smaller, steadier number of completions.

Would this end up being a situation where there really isn’t any difference in work and employment related to housing? Instead, a loss of future demand could wring out shortages and excessive costs, and help to cool the ongoing problems of affordability and availability.

I know much of our modern economy is based on this mentality of GROWTH, GROWTH, GROWTH, but maybe it shouldn’t be. A slowdown can be timely in an overheated industry like homebuilding, and there still will be needs for labor instead of layoffs.

As long as any home price declines are orderly and not drastic crashes that lead to people losing their homes and/or banks losing large amounts of interest income when people stop paying, I don’t see where this decline in future housing activity would cause any notable economic harm. And might make the housing market more healthy in future years.

Wisconsin's not as bad as other places, but BA.5 is also being felt here

While it's nowhere near the disastrous levels that we saw each of the last 2 winters, COVID cases and hospitalizations are coming back on the rise in the US in Summer 2022.

Wisconsin is fortunate to be having its outdoors season right now, and we have largely avoided the big COVID numbers that are hitting the South and the West Coast these days. But we also have seen new (reported) cases rise following the 4th of July, and are still much higher than they were in April.

We also have seen hospitalizations increase here in the last month. Not to a drastic level, but up around 15% since the start of July. And that increased rate of hospitalization has caused the number of Wisconsin counties with "high" levels of community to jump from 1 at the start of the month to 14 today.

Maybe I'll keep it around the family and friends when I go up North in a couple of weeks.

Deaths also rose in June after bottoming out at the end of April. Still well below anything we saw in the Winter, but it's also slightly above what we were seeing this time last year (y'know, when we figured COVID was over).

It's obnoxious, but I also don't sense any appetite for any kind of mandates or restrictions from anyone. Even Milwaukee's health deaprtment merely issued an "Advisory" on mask-wearing when the county ended up at the "high" community level on Friday. We gotta be smart and aware, and staying boosted so if we do get hit with BA.5, COVID is an annoyance rather than a serious problem.

But I'd like to see cases fade down as the Summer goes on. Let's see if it does after the data distortions of the 4th of July sort out, stay on your toes, and keep on bobbing and weaving.

US consumers adjusting where prices are rising the most, and still buying where they're not

After a weak retail sales report for May, yesterday’s release was going to give an indication as to whether consumer spending wasn’t keeping up with inflation in June. And the answer is…. an improvement, but still a bit lacking.

Consumer spending held up during June’s inflation surge, with retail sales rising slightly more than expected for the month amid rising prices across most categories, the Commerce Department reported Friday.

Advance retail sales increased 1% for the month, better than the Dow Jones estimate of a 0.9% rise. That marked a big jump from the 0.1% decline in May, a number that was revised higher from the initial report of a 0.3% drop.

Unlike many other government numbers, the retail figures are not adjusted for inflation, which rose 1.3% during the month, indicating that real sales were slightly negative.

It’s worth pointing out that even with prices going up, the dollar increases in retail sales have calmed down after a significant increase in early 2021 after people were able to be vaccinated and COVID-related constraints were relaxed (and another jump in early 2022, as travel bounced back).

This indicates that the post-COVID and stimulus-fueled bump that happened for consumer spending has now faded, and policymakers should expect us to be back in a more neutral situation (albeit with higher prices and nominal wage growth than the pre-COVID era).

A little over 1/3 of June's (dollar) increase in retail sales happened at gas stations, but it’s worth noting that the 3.6% increase in gasoline sales vs May was much less than June’s 11.2% increase in gasoline prices that was central in the Consumer Price Index report released earlier this week.

Along the same theme - grocery stores had a 0.6% increase in retail sales for June, while prices for “food at home” were up 1.0% last month. So does that indicate Americans are buying less food at the grocery store, or are we seeing something that the Chicago Fed noticed in this week's Beige Book Report.

...One contact noted that when higher costs were passed through to consumers, lower income shoppers were trading down and buying more in-store brands, while higher income shoppers were buying more goods in bulk.

So are people not necessarily cutting back,but instead are "downscaling" and lowering their per-unit costs? That’s an important question to answer, because it’ll affect different products and businesses in very different ways.

Interestingly, retail sales outside of gas stations were up 0.7%, and June’s increase in CPI outside of energy was…0.7%. Bars and restaurants had a 1.0% increase in retail sales, and the CPI increase for “food away from home” was….0.9%.

In fact, bars and restaurants have been a consistent standout in these retail sales reports for more than a year, indicating that the higher prices for gasoline and food aren’t keeping people from going out for those types of "fun" activites.

To further this point, the increase in retail sales over the last 12 months is at 8.4% - which is a good nominal number. But it is also not as much as the 9.1% increase in inflation over the same time period. I’d say it’s not as much of a consumer recession going on as much as it is people not needing as much of the things that they already acquired earlier in the more-homebound parts of the COVID era, and being pickier about what they want to get today.

To me, the retail sales report is an indication that we can get the "soft landing" where demand levels off enough to allow supply and labor shortages to catch up, but that we don't have to deal with significant job loss and other horrible things that would come with a serious recession. And with gasoline now down below $4 here in Wisconsin (just saw $3.85 today), does the Fed need to continue with a series of big rate hikes to break inflation when prices already seem to be on the way down?

The inflation of June might be a lot more than the inflation of today. And the future.

You may have heard that there was a bright red flashing inflation alert this week! Let's start with the Consumer Price Index, and not surprisingly, energy was a big driver behind the increase.

The energy index increased 7.5 percent in June after rising 3.9 percent in May. The gasoline index rose 11.2 percent in June after increasing 4.1 percent in May. (Before seasonal adjustment, gasoline prices rose 9.9 percent in June.) The index for natural gas rose 8.2 percent in June, the largest monthly increase since October 2005. The electricity index also increased in June, rising 1.7 percent.

The energy index rose 41.6 percent over the past 12 months. The gasoline index increased 59.9 percent over the span, the largest 12-month increase in that index since March 1980. The index for electricity rose 13.7 percent, the largest 12-month increase since the period ending April 2006. The index for natural gas increased 38.4 percent over the last 12 months, the largest such increase since the period ending October 2005.

But much of the energy increases are lagging information, as anyone who has been driving anywhere in the last couple of weeks can tell you that gas prices are falling.

That's what I paid last Saturday, and the same stations are $4.09 or even lower today.

However, the reality of smaller increases won't do much to slow down the “9% inflation” talking point, because July, August and September 2021 had a slowdown in CPI growth compared to other months, so the year-over-year figure won’t decline much at all.

In another key sector the continued jump in food prices made a strong contribution to the increase in CPI for June.

The food index increased 1.0 percent in June following a 1.2 percent increase the prior month. The index for food at home also rose 1.0 percent in June, the sixth consecutive increase of at least 1.0 percent in that index. Five of the six major grocery store food group indexes rose in June. The index for other food at home rose 1.8 percent, with sharp increases in the indexes for butter and for sugar and sweets. The index for cereals and bakery products increased 2.1 percent in June, with the index for flour rising 5.3 percent. The dairy and related products index rose 1.7 percent over the month, following a 2.9- percent increase in May…..

The food at home index rose 12.2 percent over the last 12 months, the largest 12-month increase since the period ending April 1979. All six major grocery store food group indexes increased over the span, with five of the six rising more than 10 percent. The index for other food at home increased the most, rising 14.4 percent, with the index for butter and margarine increasing 26.3 percent. The remaining groups saw increases ranging from 8.1 percent (fruits and vegetables) to 13.8 percent (cereals and bakery products).

If there's some solace on the CPI side, the core index wasn’t as bad (+0.7%), and the year-over-year increase is under 6% for the first time in 2022.

The second shot of inflation news happened this morning, and it caused stock markets to tank at the open of trading (it later recovered most of those losses and thwe NASDAQ even eked out a tiny gain). The Producer Price Index also showed a sizable topline increase for June, but I took a look at the details of the report, and noticed that last month’s increase mostly came from one side of the economy.

The Producer Price Index for final demand increased 1.1 percent in June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.9 percent in May and 0.4 percent in April. (See table A.) On an unadjusted basis, final demand prices moved up 11.3 percent for the 12 months ended in June, the largest increase since a record 11.6-percent jump in March 2022.

In June, three-fourths of the advance in the index for final demand was due to a 2.4-percent rise in prices for final demand goods. The index for final demand services increased 0.4 percent.

That’s an interesting divide there between goods and services. And almost all of that increase in PPI for goods in June came from one area.

… Nearly 90 percent of the June increase can be traced to a 10.0-percent jump in prices for final demand energy. The indexes for final demand goods less foods and energy and for final demand foods advanced 0.5 percent and 0.1 percent, respectively.

Product detail: Over half of the June increase in the index for final demand goods is attributable to gasoline prices, which jumped 18.5 percent. The indexes for diesel fuel, electric power, residential natural gas, motor vehicles and equipment, and processed young chickens also moved higher. In contrast, prices for chicken eggs dropped 30.2 percent. The indexes for iron and steel scrap and for jet fuel also decreased.

The 0.1% increase in foods is a very good sign that the large consumer inflation in that area may be subsiding in the future, although it comes on the heels of big increases between 2.1% and 3.1% in every month between January and April, so it may still take a bit to work through, as stores and producers will still try to make up for lost margins at the start of the year.

However, a look at futures prices for several types of food products indicates that not only will prices stop skyrocketing, but they may well drop. Let’s start with milk prices, which have had a sizable runup in the first half of 2022, but the futures markets are indicating that this rise will tumble back down in the coming months and then some.

Among other food futures, corn was down by more 6% on Thursday\, should fall by quite a bit more in the next 2 months, and stay at that lower level through the rest of the year. And wheat prices should stabilize, even with the uncertainties over what (if anything) might be available from Ukraine.

A positive side of the CPI report were declines in both beef (-2.3%) and pork (-1.6%) prices after both products had big increases beforehand. And pork futures are indicating that prices will fall even further for the rest of 2022.

So while the inflation reports showed that prices kept going higher in June, we’ve also seen indications that a reversal of that is happening in July. And there seems to be a good possibility that the price hikes from earlier this year will also be reversed in some key sectors. If that’s the case, and if consumers are already adjusting to higher prices by substituting products or simply consuming less of them, then there is danger of moves being made to react to numbers that may not reflect reality anymore.

That’s why I hope the Federal Reserve doesn’t raise interest rates by a full point next week, which is something an increasing number of Wall Streeters are discussing. That would be a significant shock to home markets and people who borrowed with flexible interest rates, and would be piling onto a situation where consumers and markets already seem to be adjusting, and levelling out inflation.

A 100-point Fed increase would also sends a message that the economy is unstable, when I don’t think that’s true. Jobs continue to be added at a brisk pace, and wage growth is continuing at a decent nominal number (albeit not enough to catch up to inflation…for now). I also expect to see decent levels of consumer spending continue, especially in service-related industries that haven’t been seeing the price hikes that goods have in recent months.

I don’t want to see the Federal Reserve force a harmful recession when one might not be required to get inflation back to a level that doesn’t put strain on everyday Americans’ pocketbooks or businesses’ spending decisions. As I’ve said before, 4% unemployment and 5% inflation is a whole lot better than 6% unemployment and 2% inflation, and I would hope you would agree with that.

Something missing re: inflation vs. unemployment tradeoff debate is who bears the brunt of contractionary policy.

There are those who will never feel the effects of a recession and that clouds their analysis. pic.twitter.com/QUtPML8Tmi

— Gbenga Ajilore (@gbenga_ajilore) July 13, 2022

Sorry GOPs, but shrinking deficit, stronger dollar under Biden is LIMITING inflation. Not causing it.

Tomorrow, we will see June's inflation report, and it is expected to have another sizable increase (remember what gas and other prices looked like a month ago?). And when it hits, you can bet Republicans in Congress are poised to say stuff like this.

Top issues concerning Wisconsinites
🚨40-year-high inflation
🚨Skyrocketing gas prices

Democrats’ solution? More reckless deficit spending. pic.twitter.com/jqwVj24oo6

— Senator Ron Johnson (@SenRonJohnson) July 12, 2022

But those same Republicans were given a report by the Congressional Budget Office today that showed the US budget deficit is at its lowest level in at least 4 years, and is down more than 75% compared to last year.

And total outlay spending is down nearly 18% this year, causing a majority of the decline in the deficit (although the strong tax revenues from a booming jobs market helps as well).

And you know what other headline from today shows that our inflation has nothing to do with our (shrinking) budget deficit? This one.

Euro touches parity with the dollar for the first time since 2002 https://t.co/PgnAwNZ7Vs

— Ken (@QldProgressive) July 12, 2022

That's certainly not what you'd be seeing if other countries were thinking the US's currency was worthless because so much of it was flowing around. It's the exact opposite - they WANT dollars, and it makes imports cheaper. That reality doesn't cause inflation, it limits it.

I'm not saying we still shouldn't care about inflation (although I do think that June's report is already outdated, given the drop in gas prices since then). But I am saying that if you hear any Republican say it's due to "Democrat spending", know that THEY ARE LYING.

Recent gas, inventory trends should calm inflation

After the 4th of July, we finally started to see gasoline prices fall back to a level that was more in line with the actual supply-and-demand levels throughout the country. This is what I paid on Saturday here in Madison.

And if you look at the latest consumption data from the Energy Information Administration, Americans were using less gasoline in the week before the 4th of July in 2022 than they were in pre-COVID times, continuing a trend that we have seen in recent months since gas spiked higher following Russia's invasion of Ukraine.

And as I’ve noted before, gasoline supplies weren’t any tighter than they were in most pre-COVID years, and even wasn’t much different than it was last year. I've added the labels to reflect the figures for the week before the 4th of July for the last 9 years.

(I’ll note that pre-4th of July week of 2021 had record travel, as people were able to finally have a full Summer holiday weekend post-vaccination. Because we figured the COVID era was over, right?).

We’re also seeing evidence that inventories are rebounding in manufacturing and other wholesale sectors, which should relieve price pressures in those areas.

Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading day differences, but not for price changes, were $878.6 billion at the end of May, up 1.8 percent (±0.2 percent) from the revised April level. Total inventories were up 24.7 percent (±1.2 percent) from the revised May 2021 level. The April 2022 to May 2022 percent change was revised from the advance estimate of up 2.0 percent (±0.2 percent) to up 1.8 percent (±0.2 percent)….

The May inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.26. The May 2021 ratio was 1.22.

That followed a 2.3% increase in the value of wholesale inventories in April, and products such as furniture, electricals, hardware, machinery and clothes have had inventories grow faster than that. We should be seeing lower prices start to show in those areas as soon as this week’s June CPI report, and certainly in future months.

I look at things like this, and I am starting to get more optimistic about the chances that inflation can moderate in the 2nd half of 2022 while not slamming the economy into a sudden recession, which is precisely the “soft landing” scenario that the Federal Reserve and others would like to see.

Of course, that would include the Fed not overreacting to past inflation by raising rates so high that it causes severe (and unnecessary) damage to some sectors of the economy, and that part I’m not as sure of.

US jobs market keeps rolling. Hope the Fed doesn't screw it up

While some bits of economic data indicate a possibility of softer consumer [real] spending as prices went up in the first half of 2022, I don't buy that we are in any kind of recession. And here's the main reason why.

BREAKING: The US added back 372,000 jobs in June –beating expectations. The job market remains strong and shows few signs of slowing yet (May was 384,000).

The US unemployment rate remained at 3.6%

**Overall, 98% of jobs lost during the pandemic are now back**#jobs

— Heather Long (@byHeatherLong) July 8, 2022

And to take it one step further, we are at a new all-time high for private sector jobs in America, passing the pre-COVID peak that was set in February 2020.

In addition, take a look at this note from the full jobs report.

Employment in manufacturing increased by 29,000 in June and has returned to its February 2020 level.

Which means that employment in both manufacturing and construction is now past the pre-COVID peaks, and that hiring continues above the already-high level that is expected for Summer in these fields.

And this is perhaps the most heartening statistic from Friday's jobs report.

Incredible news from the June jobs report: "The number of persons employed part time for economic reasons declined by 707,000 to 3.6 million in June and is below its February 2020 level of 4.4 million."

Translation: People who want full-time jobs can get them.

— Heather Long (@byHeatherLong) July 8, 2022

That means the U-6 unemployment rate (which includes this type of under-employment) dropped from 7.1% to 6.7%, an all-time record for the 28 years that the statistic has been tracked. That's a booming, full-employment economy, Not one in recession.

As a result, (nominal) wage growth is continuing, particularly among the lower-ends of the wage spectrum.

In June, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3 percent, to $32.08. Over the past 12 months, average hourly earnings have increased by 5.1 percent. In June, average hourly earnings of private-sector production and nonsupervisory employees rose by 13 cents, or 0.5 percent, to $27.45.

The non-supervisory workers have seen an average hourly wage gain of 6.5% in the last 12 months, and while that's not quite the rate of 8%+ inflation, it's still not bad. Add in the still-large amount of job openings reported for May along with the good jobs report for June, it indicates workers have an upper hand and can press an advantage, if they want to.

But is wage growth strong enough to push a wage-price spiral? Doubtful. And especially in the areas that might have been dealing with such a spiral beforehand.

Notable: Wage growth is starting to cool.

Check out leisure and hospitality.
Hourly workers were getting 15%+ (annual) pay increases this winter. Now it's 10.2%

This is frustrating for workers dealing w/inflation.
But it's showing some of the cooling the Federal Reserve wants pic.twitter.com/hqu5f9s1vC

— Heather Long (@byHeatherLong) July 8, 2022

Combine this with gasoline prices finally starting to fall back to reality, and food prices moderating while food futures tank, why are some officials at the Federal Reserve talking about hiking interest rates as high as 100 basis points later this month to shut down inflation?

A lot of the price increases that we saw earlier in 2022 seems to be sorting themselves out in Summer through demand that is moderating and a closer eye on profiteering keeping companies in line. I suppose the Fed could say they need the jobs market to cool off even more, since there are still clearly labor shortages in many sectors. That would give time for these businesses to "catch up" to the demand and create a more balanced situation.

But I also think American consumers are figuring it out themselves, and the danger is more than the Fed overdoes and forces a recession when a mere slowdown of a strong jobs and spending situation is all we need....and likely will get without the Fed's "assistance".

Wisconsin's Way once meant strong public schools. Not anymore, and we gotta bring it back

I noticed the recent report from the Wisconsin Policy Forum on school spending by the state’s preK-12 schools. And over the last 2 decades, lawmakers in this state have refused to keep up our investments in public education to an alarming level.

Per-pupil spending on public PreK-12 schooling in Wisconsin grew from $8,574 per pupil in 2002 to $12,740 in 2020, an increase of 48.6% that was the third smallest rise of any state (after Idaho and Indiana). Over the same time period, the nation’s per-pupil spending grew by 75.2%, from $7,701 to $13,494 (see Figure 1). These figures are not adjusted for inflation, which rose 43.9% over those years, or somewhat less than the increase in Wisconsin’s per-pupil spending…..

From 2002 to 2020, public PreK-12 school enrollment across the country increased by 1.8%. In comparison, Wisconsin’s enrollment declined by 3.8%. The state’s loss of students means that Wisconsin’s current per-pupil spending figures look better than they would if both state and national enrollment had held steady since 2002.

So Wisconsin does even worse compared to the rest of the US when you look at total resources spent overall on public education, with that number being at or even below the rate of inflation.

Instead of staying economically competitive by improving education, wages and our work force, our state has generally decided to "increase competitiveness" in a different way over that time period.

The drop in the state’s per-pupil spending rank occurred over the same years that Wisconsin was reducing its tax burden, or the share of residents’ income paid in state and local taxes. From 2002 to 2019 (national figures are not yet available for 2020), this percentage dropped from 11.2% to 10.3% ....This drop of 0.9 percentage points may seem relatively insignificant, but it amounted to $2.59 billion less in state and local tax revenues collected in 2019 alone.

State and local taxes are the primary funding source for PreK-12 public education in Wisconsin and nationally. For example, in 2019, state and local revenues funded 93.4% of Wisconsin’s school spending and 92.3% of the nation’s. In addition, PreK-12 education is the largest expense for state and local governments combined, both in Wisconsin and across the country. That relationship makes it difficult to hold down taxes without consequently limiting education spending.

There’s a direct line in this relationship via the strict revenue limits from Republicans in the Legislature over the last dozen years, which restrict the amount of money that districts are able to raise via property taxes, as well as the amount of money public school districts can spend.

Not surprisingly, this means that Wisconsin went from being above the national average for investing in its public schools to below it in less than 20 years.

Additional data from the Census Bureau’s school finance survey provide further context. In 2002, 4.8% of state personal income went toward current spending on public PreK-12 education (compared to 4.2% nationally). By 2019, that share had dropped by 1.15 percentage points to 3.6% of Wisconsinites’ personal income, a hair below the national average. (The latter also rounded to 3.6%, a drop of only 0.6 points from 2002.) As Wisconsin has lowered its relative tax burden for residents, one consequence has been less spending on [public] education compared to the rest of the country.

As a side note, voucher schools in Wisconsin have received a much larger increase in state resources over the same time period, and have no such revenue limits to control their tuition. If that sounds like one-sided BS, that’s because it is.

If you dig into that Census Bureau school finance survey, and adjust for income (which matters as a tax base for resources), you find that Wisconsin is consistently in the bottom half of US spending and revenue in a number of areas.

Wisconsin rank in preK-12 spending per $1,000 of income, FY 2020
Revenue
Overall revenue 31st ($41.20 vs $41.90 US)
Federal sources 37th ($2.67 vs $3.14 US)
State sources 20th ($22.62 vs $19.69 US)
Local sources 27th ($15.91 vs $19.07 US)

Spending on Operations
Overall spending 27th ($20.99 vs $22.01 US)
Instructional Salaries 32nd ($13.16 vs $13.42 US)
Employee Benefits 26th ($5.65 vs $5.93 US)
General Administration 25th ($0.78 vs $0.69 US)
School Administration 42nd ($1.82 vs $1.98 US)

And in looking at those stats, one state kept coming showing up at the bottom of these stats over and over. The RW “free state” of Flori-duhhhhh.

Florida rank in preK-12 spending per $1,000 of income, FY 2020
Revenue
Overall revenue 50th ($28.70 vs $41.90 US)
Federal sources 31st ($2.96 vs $3.14 US)
State sources 50th ($10.90 vs $19.69 US)
Local sources 32nd ($14.84 vs $19.07 US)

Spending on Operations
Overall spending 49th ($15.15 vs $22.01 US)
Instructional Salaries 50th ($8.62 vs $13.42 US)
Employee Benefits 50th ($2.69 vs $5.93 US)
General Administration 50th ($0.23 vs $0.69 US)
School Administration 49th ($1.34 vs $1.98 US)

And yet, look who thinks that “49th/50th in investment in our public schools” is something we should copy!

Sure, but how’s your ice fishing?

Florida is thriving under conservative reform. Wisconsin is next when I’m governor. https://t.co/DgWOUjaxqY

— Rebecca Kleefisch (@RebeccaforReal) July 6, 2022

1. Most of those "rankings" come from 2019, and pretty much pre-dates DeSantis' "reforms". I'm guessing Fla won't look so good when those rankings get updated.

2. Hey Becks - we saw how this state floundered under your first round of GOP “reforms”, and how getting rid of the advantages we once had in public education and quality of life/services had us fall behind for job and wage growth. We sure as hell shouldn’t be looking to turn our state into a 3rd World Banana Republic(an) cesspool like Florida.

Florida’s “use tourism and toll roads to fund stuff while de-investing in social services and let the rich get away with paying very little” isn’t a model that will work for anywhere long-term. And that’s especially true for a state like Wisconsin that’s 1. An icebox for several months and 2. In severe need of a growing work force. Instead, we have to rebuild us back into a high-quality of life place that people want to move to and raise families in.

That includes ending the defunding of our community schools, disrespect of teachers and resentment of education that Republicans have done throughout the 2010s and 2020s. Add in the fact that stimulus funds run out in the next 2 years and huge resource constraints are set to return to our schools unless we change course, we need to bring back the Wisconsin Way that so many of us took pride in when we grew up here in the 20th Century. Which won't happen if GOPs are allowed to be in charge anywhere.

Oil drops on "recession" fears, but demand for air travel and manufacturing isn't recessionary at all.

Know how I've said that the runup in oil and gasoline prices seems like BS and speculation? Today sure adds a lot of evidence to that theory.

For the first time in nearly two months, crude oil prices have fallen below $100 a barrel, reflecting investors' growing concerns about a US recession that could crimp demand for oil.

The price of West Texas Intermediate crude tumbled as much as 10% Tuesday, to hit a low of $97.43 before closing at $99.50, down 8% on the day. Brent crude oil was down by more than 10% when it hit a low for the day of $101.10 a barrel, before settling at $102.77 at the close.

It's the first time that WTI has been below $100 since May 11. That was also the last time Brent, which typically trades a bit higher, was below $102 a barrel. Brent has not been below $100 since April 25.

Wholesale gas futures fell as well, down almost 10% for the day at the close, or 36 cents a gallon.

These are futures prices, so we won't see a 36 cent drop at the pump right away. But as I mentioned a couple of days ago, gas and oil supplies weren't that tight in America to begin with, and Americans had already adjusted to the higher prices by cutting back on their driving.

Or maybe they're picking their spots better, as travel on the Memorial Day and 4th of July holiday was up, with air travel hitting records for this time of the year.

Airlines sure aren't in recession - fares are up 25%, and the biggest problem in the industry today is large numbers of flight cancellations because airlines lack the crew and planes to keep up with the demand.

And after last week's run of weak data, this news was a welcome sight.

New orders for manufactured goods in May, up twelve of the last thirteen months, increased $8.4 billion or 1.6 percent to $543.4 billion, the U.S. Census Bureau reported today. This followed a 0.7 percent April increase. Shipments, up twenty-four of the last twenty-five months, increased $9.9 billion or 1.8 percent to $544.4 billion. This followed a 0.6 percent April increase. Unfilled orders, up twenty-one consecutive months, increased $3.9 billion or 0.4 percent to $1,110.0 billion. This followed a 0.5 percent April increase. The unfilled orders-to-shipments ratio was 5.98, down from 6.05 in April. Inventories, up twenty-one of the last twenty-two months, increased $10.0 billion or 1.3 percent to $797.9 billion. This followed a 0.8 percent April increase. The inventories-to-shipments ratio was 1.47, unchanged from April.

Even if you figure inflation of 0.7%-1.0% a month, the dollar amount of manufactured goods being ordered has been consistently outpacing that.

Even if we get a softening of orders in the coming months, there are plenty of prior months' demand to get caught up on. Which is yet another reason that I'm not too concerned with Wall Street's moaning about "recession".

But if the fears from speculators cause prices at the gas pump to fall back to reality, and it gets people feeling better about an economy that isn't nearly as bad as they're being told? I guess I'll take that.

Happy July 4th, 2022! Where the elites and Confederates need to be beaten back again

I usually use today to print off the entire Declaration of Independence, because it's still an incredible document with ideas that have signficant relevance for today. But instead I'll leave a few excerpts and thoughts about a more local absurdity.

First, let's go to the opening of the Declaration.

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, -- That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. --Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States.

Author Charlie Pierce went over some of the "long train of absuses" in a recent string of tweets. And Charlie reminds us that the Former Guy bore a lot of resemblance to the type of guy that our Founders fought against 246 years ago.

He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands. pic.twitter.com/xVQdkTdCTY

— Charles P. Pierce (@CharlesPPierce) July 2, 2022

He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries. pic.twitter.com/bOFtEQLCEz

— Charles P. Pierce (@CharlesPPierce) July 2, 2022

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation: pic.twitter.com/8u27WtCeaQ

— Charles P. Pierce (@CharlesPPierce) July 2, 2022

He has abdicated Government here, by declaring us out of his Protection and waging War against us. pic.twitter.com/tpIMXgj61j

— Charles P. Pierce (@CharlesPPierce) July 2, 2022

For a bunch of people who claim to be all about the Founders and Constitutional government, GOPs sure don't like to be reminded of the reality of what this country was like over 200+ years ago. Not just in TrumpWorld, but also up and down the Republican Party in Wisconsin.

Mandela Barnes comments on teaching of slavery and founding of country draw fire from Republicans https://t.co/6VMtyycV0G

— JSOnline - Politics (@js_politics) July 4, 2022

Lt. Gov. Mandela Barnes, who is running in the Democratic primary for U.S. Senate, is coming under fire for comments he made nearly a year ago about the teaching of slavery and the founding of the country.

"Imagine being so ashamed of how we got to this place in America that you outlaw teaching it," Barnes said in an apparent reference to slavery.

"You know, and things were bad," Barnes said in a video clip of an Aug. 19 event in Portage that was posted on Twitter by conservative talk-radio host Dan O'Donnell of WISN (AM-1130).

"Things were terrible," Barnes said. "The founding of this nation? Awful. You know, but we are here now and we should commit ourselves to doing everything we can do to repair the harm because it still exists today.

"The harm, the damage, whether it was colonization or whether it was slavery. The impacts are felt today and they're going to continue to be felt unless we address it in a meaningful way."

No lies detected in Mandela's statements. Adults would deal with that reality to strive for a "more perfect union."

But then again, when I think about what the WisGOP spokespeople on Klan Radio 1130 stand for, I don't think they would have been with the Union 160 years ago.

To be fair, Dumb-o Donnell, Klan-Fisch and most of #wiright would support the Confederacy these days. So this adds up.#wiunion #wipolitics #wisen

— JakeEdwards (@JakeMadtown) July 4, 2022

Republicans certainly don't believe in "consent of the governed" these days. And they have an illegitimate Supreme Court allowing for that non-consensual arrangement to go on steroids, which is why this country's system of government is the closest it's been to collapsing since the Civil War.

And the people charged with making sure this government continues to work and maintain freedoms for Americans aren't doing enough to fight those who want to destroy such things.

WATCH: Health and Human Services Sec. Xavier Becerra says there’s not a lot the Biden administration can do for abortion rights. @SecBecerra: “Unless we’re all going to say the word of the Supreme Court will no longer have value, we have to heed the word of the Supreme Court.” pic.twitter.com/yfbp6j7JIO

— Meet the Press (@MeetThePress) July 3, 2022

WHY? Why should we say the rulings from an illegitimate, out-of-control SCOTUS "has value". Especially when SCOTUS that has ZERO ENFORCEMENT POWER?

That certainly isn't what people put up with in this country 246 years ago, when another unaccountable, unelected group of elites thought they could impose their will on the rest of the nation.

Voting in those who would defend this country and (ALL) its people is part of the equation, and one that everyday citizens such as us must do. But we also need actions from those we elected in the 4 months before the election as well, if we are to "provide new Guards for [our] future security." And to bring down our own monarchs and oligarchs in 2022 who think they are above accountability.

For Brewers future - it's the LAND, not the ballpark. City/County deserve a better deal on that.

(We begin this post with a punny paragraph of hackneyed sports metaphors).

As we near the 4th of July, it is the traditional time of the baseball season to evaluate where a team stands, and the intensity of pennant races often start to ramp up around this time.

With the first-place Milwaukee Brewers, things will not only heat up on the field, but also in the team developing the ways they can maintain and upgrade American Family Field in the near future.

A top Brewers’ exec discussed the situation with reporters recently in Milwaukee, along with the possibility of using a “Beer District” to help pay for future fixups at the ballpark.

Earlier this month, a Milwaukee County Board supervisor submitted a resolution calling for the Southeast Wisconsin Professional Baseball Park District to work with local officials to explore the possibility of creating a nearby entertainment district.

[Brewers President of Business Operations Rick] Schlesinger pointed to the Deer District in Milwaukee and Titletown near Lambeau Field in Green Bay as successful examples of similar developments in Wisconsin.

“Not only does it have to co-exist with the prime goal of the ballpark, which is to provide a beautiful place to go to a baseball game, and to provide tailgating opportunities for our fans … but it has to make sense within the neighborhood, and it has to make sense economically for us,” he said.

Schlesinger said a stadium needs assessment report, conducted by Venue Solutions Group, is expected to be complete this summer. He expects it will highlight a funding shortfall, but declined to speculate on a specific number as the report is still in progress. He also noted the Brewers don’t want to bring back the five-county sales tax that generated over $600 million before ending in 2020.

“We don’t need the five-county tax back,” he said. “There’s other solutions that I think can be creative that require a lot of different analysis … so I don’t look at the retirement of the five-county tax as this horrible disaster that has now created this huge problem. The reality is, we have to be creative in how we fund what we need.”

Here are Schlesinger's full thoughts at the event. He mentions price tags of $435 million over 15 years to renovate Cleveland's stadium and more than $600 million needed for Baltimore's Camden Yards.

But Urban Milwaukee's Bruce Murphy noted that there was a problem if the City or County of Milwaukee gave the green light to some kind of "Beer District". Murphy says such a move could actually could be counterproductive for the team, because it already enjoys a great deal on their property, and doesn't need a TIF exemption because they don't pay taxes on the property anyway.

....the entire idea is based on a misunderstanding of just how all-encompassing the tax exemptions granted to the team are, something only Urban Milwaukee has reported. The stadium and all 265 acres leased to the Brewers are tax exempt, which has tremendous value for the team. Over the presumed 40 year life the stadium, (though it could last longer), the exemption on the stadium will save the team nearly $217 million in taxes and the exemption on the land will save the Brewers $483 million.

But that’s not all that is exempt. The state law funding the stadium includes a property tax exemption that “is very broad,” noted Ryan LeCloux, of the nonpartisan Legislative Reference Bureau, when asked by Urban Milwaukee to analyze the law. The property that is exempted “includes but is not limited to: ‘parking lots, garages, restaurants, parks, concession facilities, entertainment facilities, transportation facilities, and other functionally related or auxiliary facilities and structures,’” LeCloux noted.

“Because of this, a hotel developed on the stadium property would become ‘property consisting of or contained in a sports and entertainment stadium’ and not subject to taxation,” he explained. As for, say, building an apartment complex on the land nearest to the Menomonee River, that, too, “would fall within that exemption,” he said.

Moreover, should the Brewers work with another developers to build any such facilities they would still be tax exempt: “leasing or subleasing the property; regardless of the lessee, the sublessee and the use of the leasehold income; does not render the property taxable.”

With a tax exemption that sweeping, why would the Brewers want to make some of its land taxable, in order to generate funding from a TIF district that would then be paid back through future property taxes paid by the team? As a top local developer told me, no TIF or other such deal would compare to a total property tax exemption: “If you can develop without any tax liability, that is the best-case scenario.”

To review, here's what the Brewers have right now. It's the ballpark, the parking/tailgate lots, and some land east of the east lot toward the Menomonee Valley.

But what the Brewers need is a method to pay for upkeep and repairs to Miller Park AmFam Field, and the surrounding area. So if I am the City of Milwaukee and I am saddled with a bad deal that keeps the City from getting property taxes from the land around the ballpark and the related development, here's what I try to get the team to agree to.

1. The Brewers are allowed to develop the area, and get income from the properties, which goes to fix up the ballpark. But all development is overseen and has to be approved by city officials as well as the SE Wisconsin Ballpark District that previously oversaw the Miller Park tax and the improvements it funded.

2. In addition, all properties in the "Beer District" and at the ballpark itself pay an extra sales tax of 2-4% that doesn't apply to other parts of the City or County. This will also help pay for infrastructure within the district and the ballpark itself. It's similar to how Minneapolis put together a downtown district that helped to pay for the new Vikings stadium and convention center upgrades (among other things).

2a. Maybe have the Brewers trade the land east of the stadium in favor of the team getting land north of the stadium as part of a plan that would turn the Stadium Freeway (Highway 175) into a street-level road where businesses could be developed and accessed. Schelsinger also mentioned that this could be part of increasing the entry-exit areas for the parking lots (which sure would beat sitting in traffic for 30 minutes after a game).

The other option would be to hardball the Brewers, which would come from 2 levels of government.

1. The first would be through the state signing new legislation that makes part or all of the Brewers' land and ballpark subject to property taxes. That's quite a tax bill that they would have to pay each year, but it would give a property tax cut to a lot of Milwaukeeans (since they don't take up as much of the tax base). These added property taxes could also be added to the City's revenue limit, which would allow it badly needed resources to pay for the many services that are offered in Wisconsin's largest tourism center.

2. The state could also allow clarify that the Brew Crew must pay something to Milwaukee, but is solely for the Brewers to develop. They could include a requirement that the Brewers and the City work out an adequate annual payment (say $3 million to $5 million. Or more) that goes to help the City pay for the extra services and infrastructure required for the ballpark and its adjacent properties.

2a. There also could be a clause that says if the team sells off property to someone else (for a business or some other use), that property then is subject to property taxes, instead of being permanently off the tax rolls.

That's just me throwing stuff against the wall, but you know the issue is going to get more urgent as the 2020s progress, the now 21-year old ballpark ages, and the Brewers' option to renew their lease looms in 8 years. And if I'm running for state government this Fall, I'd start talking about the issue, either as a way to ensure that the Brewers stay around, and/or as a way to make a stand against such giveaways and try to recoup some of the benefits that have been given to Milwaukee sports teams (and other big businesses) over the last 25 years.

Look, I want to keep going to Brewers games like I have for 42 of my 47 years on this Earth. And few places in the City draw out-of-towners like AmFam Field does for 85 or so dates every year. But there also needs to be some leveling of the deal that has given a lot to the Brew Crew, and in a resource-starved area like Milwaukee, there comes a time when you can't continue to keep the giveaways going in the hope that they money will come back....some time. Maybe.