Monday, September 30, 2024

Profits also revised higher, and illustrates the GREEDflation of the 2020s.

In looking at the all the upward revisions in last week's GDP report, I noticed a significant part of the big increase in previously reported national income over the year was unreported corporate profits.

Sure enough, if you compare the "before and after" numbers on corporate profits in the last 2 years, you'll see that there was very little decline in profits at the end of 2022, unlike what was originally reported. And the increase in profits since the end of 2022 is more than twice what we originally knew them to be.

And that puts an interesting light on any report of "inflation", as the backup data in the GDP report shows more than ever that much of the post-COVID price increases have been nothing more than greedflation. For example, look at how gross profit margins have jumped since the end of 2019, after not changing much in the 7 years before then.

We also see that total pre-tax profits are up more than 50% in the last 4 1/2 years.

These numbers show that corporations have had plenty of pricing power in recent years, and it has cost Americans a lot of money as a result. The least these businesses can do is to have some of that profit-hoarding incentive taken away by returning corporations to the higher tax rates than they had before 2017's GOP Tax Scam. And it shows that Senator Tammy Baldwin was on the right track when she was introducing bills that would crack down on noncompetitive price-gouging and "shrinkflation" in the food industry.

It's not higher costs or "overspending" that has been a big culprit in the post-2019 increases in American prices. It's the greed, stupid. And only Democrats are going to do something to stop that greed.
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Saturday, September 28, 2024

Biden-Harris economy grew even more than we knew, while Trump policies = stagflation, job loss

In addition to the strong positive revisions in disposable income (which I detailed in this post), we found out this week that economic growth under the Biden-Harris Administration was even stronger than we already knew it to be.

For 2019, the increase in real GDP was revised up 0.1 percentage point, from 2.5 percent to 2.6 percent, primarily reflecting an upward revision to consumer spending (Table 2).

» For 2020, the decrease in real GDP was the same as previously published at 2.2 percent, primarily reflecting an upward revision to government spending that was offset by a downward revision to consumer spending.

» For 2021, the increase in real GDP was revised up 0.3 percentage point, from 5.8 percent to 6.1 percent, primarily reflecting an upward revision to consumer spending.

For 2022, the increase in real GDP was revised up 0.6 percentage point, from 1.9 percent to 2.5 percent, primarily reflecting upward revisions to consumer spending and nonresidential fixed investment.

For 2023, the percent change in real GDP was revised up 0.4 percentage point, from 2.5 percent to 2.9 percent, primarily reflecting upward revisions to consumer spending, nonresidential fixed investment, and residential fixed investment.
This revises away most of the inflation-related decline in real GDP that was originally reported for the first half of 2022, and shows a very good track record of growth in the Biden-Harris years.

American incomes are also significantly higher than what we originally knew, especially in the last couple of years.

However, I'll note that much of that increase in income for 2023 comes from even-larger corporate profits vs increases in wages and salaries. Which tells me that corporations can afford to return to the higher pre-GOP Tax Scam tax rates that they would face in 2025, and that a whole lot of 2022's and 2023's inflation was indeed greedflation.

Know what could derail this good economy and unwind these trends? ELECTING DONALD TRUMP. Especially in light of a new analysis which says Trump’s plans (or “concepts of plans”) would cause significant damage to the US economy and re-ignite inflation.
The Trump agenda would cause weaker economic growth, higher inflation and lower employment, according to a working paper released Thursday by the Peterson Institute for International Economics. In some cases, the damage could continue through 2040.

“We find that ironically, despite his ‘make the foreigners pay’ rhetoric, this package of policies does more damage to the US economy than to any other in the world,” the Peterson Institute working paper from researchers Warwick McKibbin, Megan Hogan and Marcus Noland concluded.
Well that doesn’t sound like a good idea at all. Why would Trump’s policies be such a self-inflicted wound?

Even in a “low” scenario where only 1.3 million undocumented workers are deported and other countries opt not to retaliate against Trump’s tariffs, employment (measured as hours worked) would fall by 2.7% in 2028 relative to a baseline forecast, according to the paper.

Inflation would climb to 6% by 2026, the researchers found. By 2028, consumer prices are [cumulatively] 20% higher…..

The researchers also modeled a “high” scenario that incorporates retaliatory tariffs from other nations and 8.3 million undocumented workers getting deported. In that scenario, employment would be 9% lower than baseline by 2028 and inflation would surge to 9.3% by 2026. GDP would be 9.7% lower than otherwise.
Here’s the report for yourself. Feel free to dig in for yourself and see what other tidbits you find in it.

I do note a couple of charts that show the effects on specific industries, and one industry in particular that could lose a lot of jobs is durable manufacturing.

Now, the argument with tariffs and deportations by Trump is that the workers that are left will make more money, and that more items will be made in America because it becomes more cost-effective to do so. But in order for that to work, you need demand for all products (US and otherwise) to stay near where they would have been, which means that people aren’t thrown out of work, and businesses can still grow.

The Peterson Institute says that wouldn’t happen, and the price spikes would be an extra hit to a whole lot more Americans beyond the 4 million+ (based on 2.7% decline in baseline employment) thrown out of work.

Sure, the Peterson Institute has a neoliberal point of view, where they think free trade is best for everything and that nothing should be done to protect American industry or workers. So have a grain of salt with this report. But we also lived through Trump's tariffs and border controls of 2018-2019, when US manufacturing fell into recession and this was a common headline in our part of the country.

We're coming up on the 5 year anniversary of Trump's AG Secretary telling farmers to "get big or get out" at the World Dairy Expo, by the way.

Let's not return to the bad old days of Trump-onomics and keep going in the right direction with Kamala Harris and other Dems, shall we?
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Friday, September 27, 2024

US incomes in Biden-Harris era better than we knew. We are in great shape today vs Trump years

Friday had the release of the always-important income and spending reports. And the numbers for August looked good all around.

Not only was both types of inflation in the report still in check (and heading downward) in the Summer of 2024, but real disposable incomes continued to rise, and spending continued to increase at a solid level for August, It portends good Q3 growth numbers for the economy as a whole.

But maybe the most remarkable part of this report wasn’t in what was happening in August 2024, but in what we found out about what happened earlier this year, and in the time period of the entire Biden-Harris Administration.
Today’s release presents results from the annual update of the National Economic Accounts. The revisions for income and consumer spending estimates begin with January 2019. Monthly estimates for January through March of 2024 include revisions resulting from the incorporation of first-quarter wage and salary data from the Bureau of Labor Statistics (BLS) Quarterly Census of Employment and Wages program. Estimates for wages and salaries for April through July of 2024 have been updated to reflect revised monthly data from the BLS Current Employment Statistics program.
Much like where we saw in Thursday’s report, it showed that the economy in the first 3 years of the Biden-Harris Administration were even better than we knew of. That’s especially true when looking at real disposable incomes starting in the middle of 2022, and especially wages and salaries at the end of 2023 and in early 2024.

That’s a significant difference, with inflation-adjusted disposable income per capita nearly $2,000 higher than we thought it was. It also shows that real disposable income per capita restored its 2021 non-stimmy-check highs at the start of 2023, and has beaten inflation by more than 3.5% in the 18 months. This change means that the savings rate wasn’t under 4% for most of 2023, but instead was mostly over 5%, which makes for a more balanced and healthy economy, and means perhaps American consumers aren't as close to the edge as the earlier data indicated.

Yes, people are annoyed by higher prices, but they have the incomes to handle it, and a large portion of Americans are making more at their jobs than they did 4 and 5 years ago, even after inflation. UMass economist Arin Rube points out how everyday line workers have had larger gains since the start of 2020, and are seeing their inflation-adjusted incomes continue to beat the 21st Century trend.

So when the Trump campaign tells Americans they’re suffering under “inflation” and “hard times”, they’re trying to incept something that doesn’t match the situation that people are living through in September 2024. And like a lot of this election, it seems like the result will heavily correlate to whether you base things on what MAGA wants you to believe, or if you believe in the things that are actually happening.
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Tuesday, September 24, 2024

Harris campaign isn't playing the Coastal media's game, and takes it to the voters

Great article from writer Drew Magary in SF Gate that gives a rightful kiss-off to the insular fools at the New York Times.

It finally happened. The Times had managed to write itself completely out of relevance. I wrote about it. www.sfgate.com/sf-culture/a...

[image or embed]

— Drew Magary (@drewmagary.bsky.social) September 24, 2024 at 8:06 AM

...The Times cares more about its place in the power structure than in actually affecting that power structure. It gladly cedes prominent column space to bad faith politicians who would like to eradicate whole demographics of the American population. It dabbles in trans panic as a sort of weird hobby. And it scoffs at criticism from the progressive wing of the Democratic Party while going out of its way to heed criticism from a Republican Party that would drop a load of napalm on Times headquarters if ever given the authority.
That is an excellent paragraph. In 2024, the Times are about their own elite Coastal circles, and their own self-interests. They are NOT about telling the public the truth about what is going on.

And the Harris campaign has picked up on this, as they are refusing to play the 20th Century-era game of "bow to the demands of the Acela Corridor media", which Magary approves of. Especially given how the Times could play a major role in exposing fascism and evil in our politicis, given the large number of downsized newsrooms across the country. But it chooses not to.
...I work in an industry that’s been gutted from the inside out this century — you’ve heard about that part, too — leaving the Times as the dominant primordial beast in the serious newsgathering business. It has the biggest readership of any paper by far and, as such, critics like me have treated hate-reading the Times as an act of public service. My opinion was that the Times’ influence was so vast, especially among higher-ups in both the federal government and the private sector, that it had to be called out anytime it failed to call things as they clearly were (daily). To dump on the Times was to speak truth to power.

I no longer hold that opinion. Harris is winning this election right now in large part because she has avoided legacy outlets, the Times foremost among them, altogether. Her team understands that it behooves these outlets to have a close race, which means that they’ll seize on any gaffe Harris makes if it gives them a chance to falsely equivocate her remarks to those of Trump screaming, “THEY’RE EATING THE DOGS!” to kick up a racial holy war. Team Harris has no interest in helping the Times sanewash Trump more than it already has, so they’ve decided that the only way to win the game is not to play.

It was the right move, and it’s proven that the Times’ influence is exactly as large as you and I pretend it to be. It has a big-ass readership, but that readership is mostly there to play Wordle and, as ESPN’s Mina Kimes noted, the vast majority of them are already in the bag for Democrats anyway. Republican presidential nominee former U.S. President Donald Trump debates Democratic presidential nominee U.S. Vice President Kamala Harris for the first time during the presidential election campaign, at the National Constitution Center on Sept. 10, 2024, in Philadelphia.
Instead, the Harris campaign is speaking directly to the voters and reporters in the places where this election will be decided.

Including here.

And made some news along the way.

That's what you need to do, Kamala. Not only in speaking to outlets that reach the voters you need to reach (instead of the comfortable Coastal Wordle-doodlers that read the New York Times), but also in recognizing that Federal politics is also not working under our antiquated systems, and that they're in need of real change as well.

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Monday, September 23, 2024

Madison deserves more PMS thrown their way from the state.

Was pleasantly surprised to see Isthmus discuss an issue that is in the weeds of state government policy, but has a significant effect on my hometown. That involves the state’s Payments for Municipal Services (PMS) program, which is intended to be a make-up for what local communities give in aid for state properties.

State-owned facilities are generally exempt from paying property taxes to their host city. But Wisconsin’s municipal services payments program, administered by the Department of Administration, reimburses cities for police, fire and waste removal services provided to local state facilities. The DOA calculates the amount owed from annual financial reports submitted by municipalities and makes its recommendations annually by Nov. 15.

When the Legislature allocates less than what is recommended for municipal payments, funds are decreased by a uniform percent across all cities. The program’s 2023-25 budget appropriation was 61.8% short of what was needed, which is how Madison received just $8 million for $20.8 million in services.
Madison is obviously the community that gets the largest of these PMS payments, given that we have the flagship UW school and a large number of state office buildings. And while those state-owned facilities are exempted from paying property tax, it does mean that the city of Madison gets an essential part of its budget from these payments.
According to DOA data from 2022, Madison has 658 state facilities eligible for the program, which total nearly $8 billion in value. Numerous state agencies have their headquarters in Madison, and UW-Madison also falls under the municipal service program’s jurisdiction.

The program’s payment goes into the city’s general fund and represents 1.9% of 2024 general fund revenues. Municipal services payments are the third-largest source of Madison’s intergovernmental revenues this year, representing 17.5% of the $45 million Madison brings in from state-level aid.
Which is why it is a screwjob to Madison in particular when the state doesn’t increase its Payments for Municipal Services while land values and overall costs go up, and means the state pays less of the costs that the local communities have to pick up.
But since 2011, with the Legislature and Joint Finance Committee, which writes the annual state budget, under Republican control, the program’s appropriation has dropped from covering 51% to 38% of submitted costs.

Governor Tony Evers tried to increase the amounts in the PMS program by $2 million in the 2021-23 budget, and $1 million in the 2023-25 budget. But the gerrymandered WisGOP Legislature turned down both requests, despite a multi-billion dollar budget surplus in each of those budgets.

I’ll also point out that WisGOPs in the Legislature approved a significant increase in shared revenues as part of another bill passed in the Summer of 2023. But as the Wisconsin Policy Forum noted, the largest increases went to rural communities, while Madison and Milwaukee got far less per person in shared revenue.
…due in part to its relatively high property values, Madison’s total county and municipal aid [CMA] will amount to just $28 per capita, the third-lowest amount of any municipality in the state. Save for Waukesha ($34 per capita), the remaining eight largest cities in the state will receive at least $76 per capita in CMA, and seven of those eight will receive at least $100 per capita.

While those per capita amounts are not insignificant, they pale in comparison to those received by many smaller communities. The Village of Big Falls, the smallest incorporated municipality in the state with a population of just 58, received $29,283 in CMA in 2023, or a little over $500 per resident. Act 12’s formula for supplemental aid tended to favor small municipalities and guaranteed that each town, village, and city would receive at least $30,000 total. Consequently, in 2024, Big Falls will receive $60,291 in CMA, for a per capita total of $1,040 that is the largest in the state by more than $100. There are 31 municipalities – Big Falls included – that will receive at least 20 times more per capita in CMA in 2024 than Madison.
WisGOPs will gladly take in all of the additional income and sales taxes that come in as a result of the fastest-growing city and county in the state, and then tie the city of Madison’s hands from actually being able to invest more from that growth with levy limits and in preventing Madtown from levying its own sales tax, like they did for Milwaukee in 2023, and for several small tourist towns in the years before then.

As a property tax payer in Madison, this disparity in funding from the state vs what my city adds in is obnoxious. And it demand significant changes when we get an ungerrymandered Legislature after this November’s elections, both in the PMS program, and in the shared revenue situation.

It’s also why I’m strongly considering not voting for the multiple referenda on my ballot in 2 months, because why should we keep having to pay for a Legislature that wants to screw over my town? I’d rather have things go bad, maybe lessen city services around the Capitol so the legislators can be the ones who feel the difference, and force action where the state either gives more back to Madison from general tax dollars, or allows the city to grab some sales taxes from all of the events that go on here.

It won’t add revenues from all the Bama fans that came in earlier this month, or in all of the other expansion of business that comes from being in the fastest-growing region in Wisconsin, and the 2nd largest tourism draw. But can we work on taking some of the burden off of the locals in Madtown sooner than later, OK?

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Sunday, September 22, 2024

Fed Board member reminds us "inflation" isn't just CPI. And it got us the 50-point cut

I thought it was interesting to see Federal Reserve Governor Christopher Waller explain why he ultimately went along with most of the FOMC to have a larger interest rate cut this week.

Financial media had all but written off the chances of a ½ point cut when the Consumer Price Index for August said core inflation (which takes out food and energy prices) was up by 0.3%. But Waller took note of the Producer Price Index (PPI) report that came out the next day, which told him that businesses weren’t facing any inflationary pressures at all.
….Waller said the producer-price index data for August, released the next day, suggested that the core measure of the Fed’s preferred personal-consumption expenditures index will run under a 1.8% annual rate over the last four months.

“Everybody was focused on core CPI, but what they weren’t, really, was looking at how that CPI report and the next day’s PPI report were going to feed into total core PCE inflation,” Waller said in an interview with CNBC.

The two reports showed him that “inflation is softening much faster than I thought it was going to. And that is what put me over the edge to say, look, 50 is the right thing to do,” he said.

Waller added that economic growth is fine, the labor market is solid and the half-point cut was not done out of a concern that the Fed was “falling behind the curve” and seeing the economy weakening too much as it kept interest rates too high.

In fact, “what’s got me concerned is inflation is running softer than I thought,” Waller said, noting that he doesn’t want inflation to get too low.
Sounds odd, but if prices and revenues go lower, it means there is little incentive for businesses to expand, and likely will lead to worker layoffs.

If you need further explanation, let’s go back to Paul Krugman’s history lesson about the last great era of deflated prices in this country.

And let me re-up my take from late last week, where I said the tame PPI data as well as a report showing import prices had dropped meant there weren't any economic reasons to bump up inflation any time soon. It makes me glad that Fed Chair Waller actually looked at the reality instead of caving to Trump trash, and did the right thing with a 50-point rate cut that’ll soothe some of the pain American consumers have had due to these excessive interest rates.

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Thursday, September 19, 2024

Big job gains and 2.9% unemployment for Wisconsin in August

Another Wisconsin jobs report dropped with August's figures today. And the topline numbers gave great news.
The Wisconsin Department of Workforce Development (DWD) today announced new record highs for jobs and employment during August 2024, according to preliminary estimates from the U.S. Bureau of Labor Statistics. This is the fourth consecutive monthly record for state employment, highlighting the unprecedented number of workers participating in Wisconsin's economy. During the same time, the number of nonfarm jobs reached a new all-time high.

Preliminary employment estimates for August 2024 showed Wisconsin's seasonally adjusted unemployment rate was 2.9%, which is 1.3 percentage points below the national unemployment rate of 4.2%. The state's labor force participation rate held steady at 65.5% in August while the national rate stayed at 62.7%.

Place of Residence Data: Wisconsin's unemployment rate was 2.9% in August, 1.3 percentage points below the national rate of 4.2%. Wisconsin's labor force decreased by 100 over the month and decreased 2,100 over the year. The number of people employed increased 2,100 over the month to a record-high 3,051,900 employed.

Place of Work Data: Total nonfarm jobs increased 11,600 over the month and increased 35,300 over the year to 3,047,300 jobs, the highest number on record.
I got a bit triumphant as a result.

New figures show Wisconsin added 11,600 jobs in August, to reach a record high, and unemployment dropped to 2.9%. Gas is under $3 a gallon in most parts of the state. Things are really good here. @chrislhayes.bsky.social @kleinman.bsky.social #economy

— jakemadtown.bsky.social (@jakemadtown.bsky.social) September 19, 2024 at 1:41 PM

On a total job growth scale, it looks very good, recovering all of the 5,900 jobs lost in July and then some. And there were 2,300 jobs added in construction, getting us back to our (seasonally adjusted) highs in March.

And while those figures are strong and true, when I dug into the report, I found it was merely good. That's because there was only 3,600 seasonally-adjusted private sector jobs added overall.

The other 8,000 jobs came in government, with 7,900 of those in state government. If I were to hazard a guess, it would be related to the fact that August 15 came during the survey week for the payrolls report, and new UW System jobs started up at that time, and the models weren't expecting that to show up until September's report. This may well mean we get a significant "loss" of state government jobs in the next report, and a possibly misleading loss of jobs overall.

Still, you can't deny the strength of the household survey and its 2.9% unemployment rate. And it was for a good reason, a gain of 2,100 Wisconsinites identifying as "employed", while the labor force remained largely the same. And the total number of unemployed in Wisconsin has declined by more than 12,000 people in the last 12 months.

When you see reports like this, it makes MAGA/GOPs look pathetic and desperate when they try to claim times are tough in Wisconsin. Because most states would gladly trade places with what we have, and our main job market concern isn't with a lack of job growth, but instead that we need more people to come here to keep the growth going.
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Wednesday, September 18, 2024

50 points? Well that's a nice surpise!

Well alright, alright, alright!
With both the jobs picture and inflation softening, the central bank’s Federal Open Market Committee chose to lower its key overnight borrowing rate by a half percentage point, or 50 basis points, affirming market expectations that had recently shifted from an outlook for a cut half that size.

Outside of the emergency rate reductions during Covid, the last time the FOMC cut by half a point was in 2008 during the global financial crisis….

In addition to this reduction, the committee indicated through its “dot plot” the equivalent of 50 more basis points of cuts by the end of the year, close to market pricing. The matrix of individual officials’ expectations pointed to another full percentage point in cuts by the end of 2025 and a half point in 2026. In all, the dot plot shows the benchmark rate coming down about 2 percentage points beyond Wednesday’s move.

“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the post-meeting statement said.

Yes, our economy is in balance, and we should care as much about job growth continuing and keeping unemployment low as we do the still-falling rate of inflation. Although I’d still argue that 2% inflation is an arbitrary number and our economy has been fine at 3-4%, let alone the 2.5% or so that we’re at today.

Two of the biggest economic headwinds right now are high debt costs and a lack of available housing inventory that is driving up home prices. Both should be less of a problem with lower Fed Funds rates. We may already be seeing hints of this, as mortgage rates had already gone down ahead of this meeting in anticipation of future Fed Funds cuts. And new home construction bounced back from a weak July and had a strong August, along with an increase in permits for August to the highest levels in 5 months.

But you can also see that the number of housing permits is still down compared to where we were a year ago, which indicates that the Fed’s high rates likely were holding people back from taking action, and limiting growth in the construction industry as a result.

More good news on the housing inventory front came with a sizable jump in the number of home completions, up 9.2% (annualized basis) from July and up more than 30% from August of 2023, with last month’s increase in completions coming from multi-unit complexes. So hopefully that allows for more supply to hit the market and help to moderate high home prices.

You’d think that Wall Street would have been overjoyed with cheaper borrowing, but after an early pop on the news of the rate cut, the stock market gave up those gains and had a rare losing day in September.

Seems odd, but apparently some of it was cashing in gains from front-running the rate cut. And it looks like some of it was because the Fed’s future guidance indicated more cuts (and questionable levels of growth?) coming.
Markets are now fully pricing in a cut of at least 25 basis points at the Fed's November meeting, with a roughly 35% chance for another 50 basis point cut.

"It’s amazing to me how even when markets get what they seemingly want, they immediately want more," said Steve Sosnick, chief market strategist at Interactive Brokers in Greenwich, Connecticut.

"It’s important to note that stocks are not rocketing ahead (at least not yet) after getting what they wanted. After 7 straight up days, a lot of good news was priced in."

Like WaPo writer Heather Long, I was pleasantly surprised that the Fed did the right thing, instead of pre-emptively caving to whatever Trump and JV Vance and the rest of the GOPs might say in the wake of a 50-point rate cut. The GOP's whole economic argument is to say that inflation is still raging and that Americans are struggling, and the Fed just nuked that theme with this rate cut today.

We sure JV Vance has "fans"? At least among people who get outside of their basements? Maybe people forced to be there by Trump/GOP....

The decision by the Fed to admit reality and catch up to their lack of action in July is the right one. It's a good day today, and should make things easier and less frustrating for Americans who have been penalized by these excessive interest rates for too long.
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Monday, September 16, 2024

Incomes beat inflation by a lot in 2023, and many are now better off than the Trump years

Now that Republicans are losing ground in the election, and are the party stuck with the tired old man as a candidate, they’re trying anything to gain an upper hand on Democrats. And if it’s not flat-out racism and xenophobia, their other strategy is to complain about prices being higher than they were under Trump.

Of course that’s true, but as Paul Krugman reminds us, prices have generally gone up under every president in the last 100 years - with one exception that we do not want to repeat.

The real question is whether it is easier for most people to make ends meet now compared to the pre-COVID times. And generally, I think the answer is yes.

We got more proof of this with the release of the Census Bureau’s annual report on US household incomes last week. These numbers are adjusted for inflation to reflect 2023’s dollars, and it showed that for the typical American household, a lot of the COVID-related losses of 2020 and the inflation-related setbacks of 2021 and 2022 were recovered in the last year.

Median household income was $80,610 in 2023, 4.0 percent higher than the 2022 estimate of $77,540…This is the first annual increase in median household income since 2019, before the COVID-19 pandemic began. The 2023 median household income is not statistically different from the 2019 median household income of $81,210. Household income in 2019 was the highest since 1967, the highest ever recorded in this report.
even more interesting is that the largest inflation-adjusted gains in 2023 came to the Americans at the lowest income levels. And with a big jump in asset prices, the richest Americans gained a slightly higher percentage of income than the median US household.
The median represents the midpoint of the household income distribution. Changes in income at other points in the income distribution provide additional information about the economic well-being of households above or below the median. Household income rose across the income distribution. Household income at the 10th percentile increased 6.7 percent between 2022 and 2023, and household income at the 50th and 90th percentiles increased 4.0 percent and 4.6 percent, respectively. Household income also increased at all other deciles between 2022 and 2023. This indicates that income increased at the bottom, middle, and top of the income distribution in 2023.
While most income levels weren’t entirely all the way back to inflation-adjusted 2019 levels at the end of last year, most of the lowest 30% of earners were, and the rest wasn’t too far behind.

I am also pretty sure the gains in inflation-adjusted household income have continued in 2024, as inflation has continued to level off, and real average hourly earnings are up nearly 0.8% so far this year. So as we stand today, it’s likely that a majority of the bottom half of income earners in America are now making more than they did in 2019, even after inflation.

As for the upper earners that are still behind on the income side, those people are likely to have benefitted the most from the 15% increase in US household wealth that has happened since. And they’ve likely not had to deal with as much inflation as the nation as a whole, as they spend a lower share of their dollars on food and were more likely to have locked in a low-interest mortgage on a home, limiting the impact of higher home prices.

But I watch Republican ads that make it seem like it’s still 2022 and that most people are still falling behind. I don’t think that’s true, and while unemployment has risen a bit in the last year, 4.2% is still a historically low number. There are also 6.2 million more jobs in America than we had at the end of 2019, even if you assume the downward revision of 818,000 jobs that was revealed in the last month.

In another one of those Census reports, we found that the percentage of Americans that don't have health insurance are as low as it was during Trump's "greatest economy ever" (8.0% uninsured in both 2019 and 2023), which translates to another 7 million Americans with health insurance compared to 2019. Yet Trump doesn’t offer much more than the GOP’s dream of leaving more Americans vulnerable and at the mercy of health insurance companies and employers when it comes to their benefits.

(Wait, Trump says he has the “concepts of a plan” on health care that will be revealed at some later point. This guy was in the White House for 4 years and has been running for President for the last 9 years)

Knowing these numbers and looking out at how people are living in this country, it makes the GOP's attempts to create a 2022-era theme of "Americans are in hard times due to Biden-Harris inflation" seem like desperate bullshit. Not only is inflation significantly down and incomes significantly up from 2 years ago, but we have a more robust safety net that has gotten more people to have health insurance. And in addition, Kamala Harris and the Dems are the only candidates that have solutions such as breaking up monopolies, increasing competition, and reducing our energy consumption that help to reduce the prices that Americans pay.

Republicans like to complain, but they never offer any answers for Americans' concerns besides yelling about "scary dark-skinned people". Beyond that, all if I've found when it comes to a plan to roll back prices is...

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Sunday, September 15, 2024

PPI and import prices show inflation is going to fall further. Another reason for a 50 point cut

The Consumer Price Index (CPI) is often the item we look at when we want to talk about where "inflation" is in this country, and those numbers have leveled off in recent months, with no readings above 0.2% in any of the last 4 months, and the lowest 12-month increase (2.5%) in 3 1/2 years.

That certainly is important, but it's also not the only part of the inflation picture. There also is the costs and prices that businesses pay for their products, before consumers ever buy those items at stores and dealerships. And there was even good news on that side on Thursday.
The Producer Price Index for final demand increased 0.2 percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in July and rose 0.2 percent in June. (See table A.) On an unadjusted basis, the index for final demand advanced 1.7 percent for the 12 months ended in August.

The August rise in the index for final demand can be traced to a 0.4-percent increase in prices for final demand services. The index for final demand goods was unchanged.

Prices for final demand less foods, energy, and trade services advanced 0.3 percent in August, the same as in July. For the 12 months ended in August, the index for final demand less foods, energy, and trade services moved up 3.3 percent.
Not only was final demand PPI staying low (especially for goods), but further up the supply chain, costs are actually going down.

Also add in sizable increases in productivity, with a 2.5% annual rate of increase for the 2nd quarter of 2024, and year-over-year productivity increases of more than 2.4% for each of the last 4 quarters. So if anything, inflation will be diminishing further. And that there is room for both profit as well as wage growth that gives some of those productivity gains back to the workers that made it possible.

Then on Friday, we got even more indications that inflation will stay low in the coming months, as lower oil prices from overseas led to a general decline in import prices.

So there is nothing to cause inflation to gear back up in the coming months, and the real near-term threat is that higher debt costs are causing Americans unneeded financial strain.

It also means that if we had a proactive Federal Reserve that realizes that inflation will stay low and likely decline in the coming months, we will be cutting by 50 points this week. In addition, the weakening in manufacturing and other interest-rate sensitive sectors indicates a need for relief from interest rates that are more than twice the level of current inflation, and possibly triple what it will be in September and October.

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Wednesday, September 11, 2024

INFLATION WATCH sends Wall Street on a ride. Does Fed get scared?

After a soft jobs report, and other tepid economic data in recent months, today’s release of the Consumer Price Index update for August would give an indication as to whether inflation had stayed under control as Summer wound down, and if the Federal Reserve might do a sizable cut of interest rates when it meets next week.

When the numbers came down, it showed inflation staying low overall, but not in all areas.

The number that got attention from the financial media was the 0.3% (actually 0.28%) increase in the core CPI. Wall Street sheep traders decided that this core stat meant the Federal Reserve was only going to cut by 25 basis points next week, and sold off hard in the morning.

Then things reversed throughout the afternoon.
A rally in the world’s largest technology companies spurred a stock-market rebound in a volatile session that had Wall Street traders digesting faster-than-anticipated inflation data.

It was the first time since October 2022 that the S&P 500 and Nasdaq 100 each erased an intraday loss of at least 1.5%. Chipmakers led gains on Wednesday, with Nvidia Corp. up 6.5%. Financial, energy and industrial shares underperformed. Treasury yields edged up on bets the Federal Reserve will move gradually with rate cuts. Swap traders have fully priced in a quarter-point Fed reduction next week.
Sounds like the experts don’t know where this is going after next week, and they’re just throwing money around from place to place. But the overall trend is the CPI increasing at a lower level than we saw in the first 3 months of the year.

With underlying inflation of 2-2.5%, and gas prices falling in September, there’s no reason the Fed shouldn’t cut by 50 points with the Fed Funds rate being 3% higher than that. But as I have stated earlier, I suspect the Fed will be scared off by how Republicans will whine, and only do 25 points before the November elections.

The thing is, I would argue that a 50-point cut would help calm down the inflation in shelter that is the main negative of this August report, because it could encourage some people with low-interest mortgages to put their homes on the market and increase inventories.
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Tuesday, September 10, 2024

Wis tax revenues come in higher than expected

Lost in the shuffle of the large amount of stuff going on around Labor Day was us finding Wisconsin tax revenues for Fiscal Year 2024 came in surprisingly high.
Preliminary information regarding general fund tax collections for the 2023-24 fiscal year is now available. According to the Department of Revenue (DOR), collections totaled $21,329.6 million in 2023-24, which was 1.7% higher than the previous year.

This office's final estimate of 2023-24 tax collections (projected on January 24 and adjusted for subsequent law changes) was $21,053.9 million. Actual collections were $275.7 million, or 1.3%, above the estimated amount.
Everything I had seen in previous months indicated that the numbers were going to be in line with those January projections. But it looks like the “cleanup” for the end of FY 2024 was much larger than the end of FY 2023. Perhaps a capital gains thing or more quarterly payments due to underpayments on 2023 taxes due to capital gains? Not entirely sure.

Go back to May, the LFB projected the year-end General Fund balance to be $3.8 billion under the previous revenue estimations. So add in the $275 million+ of additional revenues, and we are over $4 billion before we account for FY 2024's expense totals and some miscellaneous revenues.

This also puts us ahead of the revenue curve for year 2 of the 2023-25 biennium, meaning we only need a revenue increase of 1.65% in FY 2025 instead of nearly 3% to meet the LFB’s projections. Even if you assume we only reach those January projections for this current fiscal year, that means we still would be well above $3.4 billion at the end of this budget cycle, and expands the cushion in the next budget.

Good spot to be in, and it certainly means that there is room for more investments into K-12 schools and/or higher education (the UW System’s administration is asking for an additional $855 million, for example), or to help pay for roads or child care services, or other needs.

It also allows for more room for tax cuts, if that’s to be an emphasis for the next budget. Although if we use the large amount of permanent tax cuts that the GOP put together from last year, it would mean there is little left in the General Fund to deal with inflation or any kind of additional spending of note in a $46 billion+ budget.

And given the large number of school and local government referenda that’s looming for November, there’s still work on shared revenues that needs to be done in the next budget, and it needs to go beyond giving more money to unincorporated towns.

Still, the state remains in great fiscal shape, and resources are not going to be a reason to avoid dealing with big issues. Hopefully a fairer-mapped Legislature is going to lead to a better chance of lawmakers being responsive to these needs.
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Monday, September 9, 2024

Another "meh" jobs report means we need a 50 point rate cut

Things have been hectic and odd over the last week in my life (mostly in a good way), but I did notice an important jobs report dropping on Friday before I hit the road for the weekend.

Meh. Pretty mediocre, and while it's not recessionary, it's also not strong by any means. We'd already seen downshifts in job growth in the monthly reports in 2024, and then we got news a few weeks ago that preliminary benchmarking from the Bureau of Labor Statistics would reduce job growth by 818,000 jobs through this March.

So if you apply that benchmark decline evenly for every month, it shows that growth has flattened out by quite a bit since 2022.

Most of the sectors of the economy still saw jobs added in August, which is a good sign for keeping overall growth going. Hiring in construction stayed strong, with another 34,000 jobs added last month, and is now 620,000 jobs above pre-COVID levels, even with the revised benchmarked numbers.

But manufacturing wasn't one of those growing sectors, losing 24,000 jobs in August. That decline came after the prelim benchmarks indicated that past job growth in manufacturing had been overestimated by 115,000 jobs, and if you distribute those losses over the 12 months of the benchmarks, it shows a significant shedding of manufacturing jobs from the start of 2023 to today.

And manufacturing is extremely sensitive to interest rates, as it frequently involves large purchases of machinery and consumers buying large-ticket goods. It doesn't seem like a coincidence that manufacturing jobs started to go down in the wake of the Fed aggressively raising interest rates in 2022 and the first half of 2023.

Heather Long of the Washington Post says that this middling August jobs report, the downward revisions of past job growth and increasingly tame inflation underscore that the Fed should be cutting rates, and by sizable amounts.
There’s an easy way for the Federal Reserve to stop this deterioration and prevent a recession: Cut interest rates decisively.

The Fed has its benchmark interest rate sitting at a two-decade high of nearly 5.5 percent. This has resulted from purposeful increases made over the past two years to fight inflation. And they worked; all the latest data indicate that inflation has come way down. Now the Fed must turn its focus to the labor market and take quick action to stave off a spike in layoffs. Over and over again, Fed Chair Jerome H. Powell has told the world that the Fed would do whatever it took to get inflation down. His message needs to be that the Fed will do what’s necessary to avoid more job losses.

I’ve covered the Fed for years, and I think it is very likely that Powell will choose the modest option of a 25-basis-point cut. He and other Fed leaders will say the economy still looks solid, and they don’t want to scare anyone. They will rationalize that they can take a first small step and follow it with more cuts later this year if the labor market >worsens. Already, Powell’s top deputies are laying out this case. New York Fed President John Williams said Friday that interest rates should move down “over time, depending on the evolution of the data.” Fed Gov. Christopher J. Waller put it this way on Friday: “If subsequent data show a significant deterioration in the labor market, the [Fed] can act quickly and forcefully to adjust monetary policy.”

This is a mistake. The biggest risk lies in not doing enough. By making a larger cut this month, the Fed could signal that it is taking the warning signs seriously and wants to prevent the worst-case scenario. It would quickly restore Americans’ confidence in the economy. What’s missing from Fed leaders’ speeches is any mention of who gets hurt if they get this calculation wrong.
I agree with all of this, and would add that a 50-point rate cut is also needed because the Fed needs to catch up from failing to cut rates by 25 points in July. Since then, we have seen inflation decline in June and the benchmark revision of -818,000 for previous job growth.

A rate cut also might mitigate the job losses we've been seeing in manufacturing (and encourage equipment purchases for all the new factories that have been built in the last year), and reduce the burdensome debt costs that are annoying so many Americans these days.

But like Long, I am also skeptical that the Fed will do the right thing, and not as much because they're out of touch with the reality of weak spots in our still-growing economy. But instead, I'd bet they decide on a 25-point rate cut largely out of fear of how much Donald Trump and other Republicans would whine about how this return to balanced monetary policy will make voters happier with the economy before the November election (and GOPs have no chance if voters are calm and happy).

That rate cut will at least be a step in the correct direction by the Fed. But it is worth worrying if it'll be enough to stabilize things and insulate the economy from some other negative event that might start a general decline in activity, and raise unemployment past the 4.2% we are at today.

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Monday, September 2, 2024

The State of Working Wisconsin is....pretty good

The worker-focused High Road Strategies Center at UW-Madison released its Annual State of Working Wisconsin report ahead of Labor Day, and says Wisconsin employees are doing better than they have in quite a while.

In particular, the UW-Madison study says inflation-adjusted wage growth was quite strong in 2023, recovering almost all of what inflation took away in 2022, and returning to the uptrend that we saw from 2018 through 2021.
2023 wage increases largely make up for losses in 2022, when inflation spiked and workers’ pay did not keep up. Though nominal wages rose in 2022, inflation rose more rapidly peaking at 9.1% in June 2022. Both nationally and in Wisconsin, high inflation drove the 2022 purchasing power of the median wage below the 2021 level.

Inflation came down to 3% by mid-2023 and has hovered around this level since. As inflation cooled, wage growth surged, especially in Wisconsin. In Wisconsin, median wage growth was especially strong (from $22.93 to $23.90 over 2022-23). Nationally, wages rose but only slightly: up from $23.82 to $23.98. 2023 median wages in both Wisconsin and the U.S. sit just slightly below all-time highs set in 2021.

In addition, High Road Strategies says that in Wisconsin and in the nation as a whole, lower-wage workers have been doing better at beating inflation and improving their real pay in recent years, with the largest rate of wage growth since 2019.
From 2019 to 2023, wages of higher wage workers (workers who earn more than 80 percent of the workforce) grew modestly – Wisconsin wages are up less than 1% and national wages are up 2.5%. For lower wage workers (who earn more than 20 percent of the workforce) wages grew much more rapidly, surging 8.4% nationally and 8% in Wisconsin.

In the last four years, wage increases for lower wage workers are more than three times faster than higher wage workers’ gains. Lower wage workers have seized the opportunity provided by tight labor markets and moved to higher paying jobs and secured higher wages in jobs that they stay in. As a result, our wage distribution is more equal today than it was in 2019.

So that mitigates some of the strain from the fact that lower-wage workers would have been the ones hurt most by the sizable increase in food prices in the early 2020s.

One other item I want to point out in the State of Working Wisconsin report is that Wisconsin women continued to close the pay gap with men in 2023, with solid pay gains vs inflation in both 2022 and 2023. On the down side, Wisconsin men saw their (higher) real pay slide down some in those 2 years, and still aren't back at the (inflation-adjusted) level they were at before the Reagan era.
Since 1979, all workers have seen their wages increase by 16%. However, these gains have not been consistent across demographic groups. Over this period, women’s wages have increased by 28% while men’s have fallen by 8.1%.

The gains in women’s wages have been driven by white women who have seen an astounding 43% growth, with strong growth for Hispanic and Black women at 38% and 14%, respectively.

The lack of real men's wage growth in Wisconsin is a blemish on an otherwise strong situation for Wisconsinites as last year ended. And the good times seem likely to have continued so far in 2024, as jobs have continued to be added, and unemployment has stayed around or below 3% in the state while the US unemployment rate has risen to 4.3%.

Not a bad place to be on this Labor Day, even if there is still a lot of work to be done in terms of taking back what has been taken from so many over the last few decades.
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Sunday, September 1, 2024

Trump in La Crosse - now dumber and more economically illiterate than ever!

I recall Republicans saying that they wanted to talk about "policy" in this election. Fortunately, Henry Redman of the Wisconsin Examiner watched Donald Trump's event in La Crosse this week, and gave us Trump's responses on some important issues.

The first was Trump's newly-announced desperate flail policy on helping Americans pay for Invitro Fertilization (IVF) and similar fertility treatments.....which somehow veered into tax policy before veering back again.
Trump then segued directly into a new topic before returning to the question about IVF: “And as you know, we have no taxes on a thing called tips. You know that? And I said, Tell me, we did three things. We did that, and we did no tax for seniors on Social Security benefits. We want to have that. And I’ve been seeing a lot of IVF, and I kept hearing that I’m against it, and I’m actually very much for it. In fact, in Alabama, where the judge ruled against it, and I countered the judge and came out with a very strong statement for it. And the Alabama [Legislature] they were amazing. The Legislature approved virtually my statement. I mean, full IVF, and it’s really gone — it’s terrific. And I said, so, with the tips and with the Social Security, no taxes on Social Security, I said, maybe for IVF, and I’ve been looking at it, and what we’re going to do is for people that are using IVF, which is fertilization, we are, government is going to pay for it, or we’re going to get or mandate your insurance company to pay for it, which is going to be great. We’re going to do that. Well, it’s big. And you know what? We want to produce babies in this country, right? We want to produce babies. So I think it’s going to be something we told we sort of announced it a little bit.”
A few things to unpack here.

1. Remember how Republicans were all pissy about Obamacare mandating that companies try to cover their employees, or how people were "forced" to buy insurance? How is Trump going to "mandate your insurance company" to pay for IVF? And how much is it going to cost to cover all of these treatement if the government is going to do it?

2. And especially how is the government going to pay for IVF and similar treatments if "a thing called tips" and Social Security benefits aren't taxed? In addition, if employers cut base wages and tell their employees that it's made up for with untaxed tips (a bad enough thing, which is why I oppose both Harris and Trump on not taxing tips), and Social Security benefits aren't taxed, that increases our deficit further and defunds Social Security even more.

3. "We want to produce babies in this country, right?" That's not creepy whatsoever. There's a lot of dark places to take that, but I'll go with this quiet musical interlude instead.

Back to Social Security, as Trump told the audience in La Crosse that he's got that all figured out for the future.
...“I’m the one that’s going to protect the Social Security, but they’re coming. I will tell you, as I did for four years, and there was no age increase, there was not anything they’re going to protect. You know, they destroy you with inflation, and then they want to destroy your Social Security … not going to happen. But this is going to be the most important election in the history of our country. So I just want to say that it’s an honor to be with you tonight. It’s a forum that’s very different, because I have no idea who the hell is broadcasting it, but all we’ll do is we’ll talk because we’re friends. I love this state. I gave them Marinette. We gave them a very big, you know, Tulsi, we have a ship contract. And as you know, we gave Marinette guards, but we gave them a tremendous contract. They wanted her all over the country. I said, we’re going to get it for Wisconsin, and it’s a big one, and they’re doing a great job, I understand. So we got that, and we’re going to have a good time tonight. So let’s go.”
So we're going to save Social Security by...giving more defense contracts to Marinette Marine? (I think that's what Trump is referring to there. If he even knows) That's not really how it works, Donnie.

Also, Trump says "they destroy you with inflation". I assume he means cost of living doesn't keep up with Social Security benefits? Except Social Security benefits were significantly boosted after the inflation bumps of 2021 and 2022, growing by 5.9% for 2022 and 8.7% for 2023. And you know which presidential candidate has submitted budgets that would have reduced benefits that come from Social Security? DONALD TRUMP.

Sure, Trump never asked for an "age increase" in when people could get Socal Security benefits. Instead, he would have done it by screwing over Americans on Disability and others in severe need. Here's a good example from a budget he threw in midway through his term in office.
The 2019 Trump budget reduces disability programs by $72 billion, including reductions to Social Security Disability Insurance (SSDI) as well as Supplemental Security Income (SSI), which provides aid to low-income individuals with disabilities (as well as low-income seniors).

The budget cuts tens of billions of dollars in SSDI benefits, which are funded out of workers’ payroll taxes and which protect workers and their families if a disability cuts their careers short. One budget proposal cuts in half the retroactive benefits that disabled workers may receive. These are benefits provided to new SSDI recipients to reflect the loss of earnings when they became disabled, even if they delayed applying for benefits because they were hoping to get better and go back to work.

For example, consider a worker whose career is cut short by a car crash, but who hopes she can overcome her injuries and return to work. Under current law, she can receive up to 12 months of retroactive benefits — a critical lifeline that can prevent bankruptcy or homelessness. The Trump proposal would cut that payment in half. A beneficiary who would have qualified for 12 months of retroactive benefits would lose an average of about $7,000 in earned Social Security benefits. Moreover, shortening the period of retroactive benefits can encourage people to apply earlier for SSDI instead of first testing whether they can return to work, since such a test could cost them thousands of dollars in benefits their families may need if they aren’t successful in going back to work.
Let's not forget that by lowering base wages by not taxing tips, it reduces the amount of money going into Social Security and the Treasury in general, which makes it harder to cover the cost of those benefits - or greatly expands the deficit and debts required to pay them. Again, it is not certain if Trump knows this, but the ones that in charge that give Trump money and would handle the actual work in the White House sure do.

And here is Trump's take on energy policy and how he will bring gas prices down.
“I’m supposed to be nice when I talk about the election, because everybody’s afraid to talk about it. ‘Oh please sir, don’t talk about the election, please,’” he said. “You know, if you can’t, if you can’t talk about a bad election, you really don’t have a democracy, if you think about it, right? But what they did, Tulsi, is they took, they took the oil production. The oil started going crazy. That started the inflation. Then they went back. They said, go back to where Trump was. The problem is that we would have been three times that level right now. We would have been so dominant over Russia and Saudi Arabia. Look, Saudi Arabia, Russia, lot of oil. We would have had more. You know, we had something in Alaska, ANWR, that we, that I created. I mean, Ronald Reagan wanted it. You remember, Ronald Reagan wanted it. They all wanted it. And I got it approved. Nobody was able to get it approved. I got it approved. And they, the first week in office, they turned it back. They said, No, it’s the biggest site possibly in the world. Could be bigger than Saudi Arabia. Well, we’re going to start that up. We’re going to become the energy capital of the world. We’re going to pay down our debt, and we’re going to reduce your taxes still further, and your groceries are going to come tumbling down, and your interest rates are going to be tumbling down. And then you’re going to go out, you got to buy a beautiful house. OK, you got to buy a beautiful house. That’s called the American dream.”
Let's back up again.

1. "They took the oil production." WHO IS THEY? And where did they "take the production"? The only US leader I recall asking for a cutback on oil production in the 2020s was...Donald Trump. To his buddies in Saudi Arabia and Russia.

2. In fact, the US is pumping more oil than ever today, at more than 13 million barrels a day. That exceeds the previous records under the Trump Administration, which came after a big increase in oil production in the second half of the Obama Administration.

What has changed since Trump left office is that the Biden-Harris Administration has put together strategies to reduce our country's usage of gasoline, as gas consumption in America is signficantly down compared to the Trump years, even with more people working today.

3. How do we "pay down our debt", "reduce your taxes still further", while groceries and interest rates "tumble down"? The President isn't (supposed to be) able to control interest rate policy, because the Federal Reserve handles that. And I thought Republicans were all unhappy with VP Harris' plans to crack down on price gouging and non-competitive practices in the food industry (at least that's what the Republican hacks that run the Wisconsin Grocers Association say). But how else would Trump going to reduce and regulate grocery prices, especially when he wants to put tariffs on imported foods?

It all seems to come down this as a strategy for Trump/GOP.

I haven't even mentioned how Trump told the audience in La Crosse that immigrants are taking "Black jobs", as well as jobs from Hispanic Americans and union members (there is little evidence that this is happening, and in fact, CBO says that our recent wave of immigrants is increasing growth for the US economy). Redman also relays that Trump said he could end the world's wars "with telephone calls by being smart," (how? He doesn't say) and how he proudly wears the Viktor Orban seal of approval.

When you read what passes for "plans" from Trump, what's concerning isn't the fact that it is obvious BS that doesn't add up in the real world. It's that it's clear that Trump has no idea what he is talking about, which was bad enough when he was a candidate from the outside in 2016.

But THIS GUY WAS PRESIDENT FOR 4 YEARS, and has been basically running for President in the 4 years since then (to stay out of prison). How does he still not have a clue about how things are paid for in this country, what current reality is like for the typical American, or have a clue or care about who may be affected by these policy choices? That's the real red flag here - Trump is a foolish, declining BS artist who is desperately throwing things together without a hint of coherence, and GOP politicians and our ratings-needy media are too compromised to tell this truth.

So feel free to pass ahead the Wisconsin Examiner's rundown of Trump's recent event in La Crosse, which is one of the most damaging attacks that can be done against Trump. Just show others what this idiot is saying, and how out of touch he really is.
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