Wednesday, July 24, 2024

Famliar sights, good things, and not-so-good things

Well, looks like we've got a sure sign that we're on the back half of the Summer. And that some things are still normal.

Also things weren't so bad south of the border.

But then we also get reminded not to get too happy-clappy, and that things will never be as easy as they seem.

Just keep finding a way, Crew. Find a way.

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Tuesday, July 23, 2024

Wisconsin Number 1 for wage growth in the last year?

I had mentioned that things are going well in Wisconsin's job market. But I didn't know that we were having the best wage growth in America?
Gov. Tony Evers, together with the Wisconsin Department of Workforce Development (DWD), today announced Wisconsin ranked first in the nation for inflation-adjusted hourly earnings growth during February, March, and May 2024, and second in the nation during April, according to the preliminary data on private sector worker earnings released by the U.S. Bureau of Labor Statistics. The news comes as, last week, Gov. Evers and DWD announced preliminary data show Wisconsin hit its second consecutive monthly record for employment.

“Whether we’re looking at our nationally top-ranked wage growth, our record-high employment, or our strong workforce participation, it’s clear that Wisconsinites are working and working hard, and our economy continues to have positive momentum,” said Gov. Evers. “We’ve made it a priority to build a strong 21st-century workforce to support a strong 21st-century economy, and it’s making a difference for working families across our state. This accomplishment reflects not only the dedication and resilience of our employers and our workforce, but it also shows that together we’re building a more prosperous future for our state.”

For February, March, April, and May, year-over-year statewide earnings growth totaled 7.9 percent, 6.4 percent, 4.4 percent, and 6.2 percent, respectively, based on data from the U.S. Bureau of Labor Statistics’ Current Employment Statistics (CES) program and the Consumer Price Index. The CES survey covers hourly earnings by workers at private sector establishments.

Statewide, the average hourly earnings for May 2024 totaled $33.76. The Milwaukee-Waukesha-West Allis area led the state with average hourly earnings of $34.97, followed by Madison at $34.48 per hour and Eau Claire at $31.63 per hour.
I'm trying to find the data table, which seems to be derived from the Occupational Employment and Wage Statistics (OEWS), which get compiled by the Bureau of Labor Statistics. But the last thing they have published is from May 2023 for Wisconsin's metro areas and the state as a whole.

UW-Madison Professor Menzie Chinn has a similar story up on Econbrowser, but it's got a longer-range view, which shows that inflation-adjusted average wages had slipped after the end of the COVID pandemic, and only the rally in the last year has allowed real wages to exceed pre-COVID levels.

You wish the early 2020s hadn't seen the erosion that it did. But there's no doubt that as inflation has gotten under control in the last 12-18 months, Wisconsin's workers are seeing gains in their pay, and it seems like we should try to keep these good times going as best we can.
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Sunday, July 21, 2024

Thank you Mr. President. Now LET'S BEAT THE BAD GUYS

Well, there is this.

And then this.

That's what had to be done, Mr. President. It's not fair, but sometimes the voters aren't going to reward good results, and aren't going to latch onto you no matter what you say or do. And to be honest, Jpe Biden only got nominated in 2020 because calls from the big wigs were made telling many of the other Dem candidates to drop out endorse him (including Kamala Harris), Most Dem voters went along with it so we could get on with the business of beating Trump.

So the shoe went on the other foot here, where the big wigs and insiders told Biden to get out to improve the chances of beating Trump. And I assume Biden's immediate endorsement of VP Harris was part of the deal that was made. Don't fuck around in Chicago, just do the right thing and agree to back Harris, pick a good running mate, and get back to the mission at hand.

Do that, and the whole "senile old white man who is cringy to watch" factor now lies with Trump. MAGAts may not care about that, but the other 2/3 of America likely will, and have it be part of their voting calculations. Throw in a heavy dose of Project 2025 talk, and the inevitable racist/misogynist BS that will tick off anyone with a drop of decency, and I think the Dems chances of winning at all levels in November just went up by quite a bit.

LET'S DO THIS.
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Friday, July 19, 2024

June Wis jobs report - things are really good

Right before Donald Trump spoke in Milwaukee on Thursday night, we got a big Wisconsin jobs report for June.
Place of Residence Data: Wisconsin’s unemployment rate remained at 2.9 percent in June, 1.2 percentage points below the national rate of 4.1 percent. Wisconsin’s labor force decreased 100 over the month and increased 4,000 over the year. The number of people employed increased 600 over the month to a record-high 3,048,600 employed.

Place of Work Data: Total nonfarm jobs increased 9,400 over the month and increased 30,900 over the year to a record 3,048,000 jobs. Private sector jobs also increased, adding 6,700 over the month and 25,100 over the year to a record-high 2,639,000 private jobs.
In addition, 1,200 of the seasonally-adjusted loss of 1,500 jobs in May was revised away, so this is a net gain of 10,600 jobs over the last state jobs report.

And it was largely good news throughout the report. Construction gained 900 jobs and 500 were added in manufacturing, meaning there was even more people added in those sectors than you usually get in June. Professional and Business Services had a large increase of 4,100, and leisure and hospitality also had higher than normal Summer hiring (+1,600 on a seasonally adjusted basis, and +17,200 in raw numbers).

State government also contributed 3,800 jobs to the June gains, but that comes after 4,600 jobs in that same sector were lost in May. Both seem related to the fact that UW schools let out earlier than normal, meaning jobs were “lost” earlier than the models would anticipate, and then come back as “gains” as June. Still a net loss of 800 in state government over the 2 months, but no biggie either way.

For the household survey, it continued a trend we’ve seen for the last three months – labor force staying around the same, and a slight increase of Wisconsinites listing themselves as “employed”.

That’s a good combination to have, but also shows a state that is likely near its capacity, and continues the challenge of attracting people to our state.

One way is through better wages, which does seem to have been happening in the last 12 months in our state, to a point where inflation-adjusted wages are well above where we were before the COVID pandemic.

I don't think we're going to continue at a pace of 9,400 jobs gained a month. But it's undeniable that Wisconsin's jobs market is in a great place, and if anything, it's gotten better in 2024, in contrast to the slowing down that we've seen in the national jobs stats. ).

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Wednesday, July 17, 2024

Retail sales, home building shows more proof of a moderate economy

With the case for interest rate cuts growing in the last couple of weeks, we looked to Tuesday's retail sales report for June to see if a Springtime slump in consumer spending was continuing as Summer began.

Pretty good, all things considered. And the drop in auto sales seems to be related to a wave of cyberattacks that hit car dealers last month, so expect a rebound there once things return to normal.

But those numbers also aren't so strong that it should re-fire inflation. In addition, note that part about home building being "softish". That got reiterated on Wednesday with a report that showed home building was up in June, but still down from the month before.
Building Permits
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,446,000. This is 3.4 percent above the revised May rate of 1,399,000, but is 3.1 percent below the June 2023 rate of 1,493,000. Single-family authorizations in June were at a rate of 934,000; this is 2.3 percent below the revised May figure of 956,000. Authorizations of units in buildings with five units or more were at a rate of 460,000 in June.

Housing Starts
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,353,000. This is 3.0 percent (±10.5 percent)* above the revised May estimate of 1,314,000, but is 4.4 percent (±12.7 percent)* below the June 2023 rate of 1,415,000. Single-family housing starts in June were at a rate of 980,000; this is 2.2 percent (±12.1 percent)* below the revised May figure of 1,002,000. The June rate for units in buildings with five units or more was 360,000.

Housing Completions
Privately-owned housing completions in June were at a seasonally adjusted annual rate of 1,710,000. This is 10.1 percent (±10.6 percent)* above the revised May estimate of 1,553,000 and is 15.5 percent (±12.6 percent) above the June 2023 rate of 1,480,000. Single-family housing completions in June were at a rate of 1,037,000; this is 1.8 percent (±10.3 percent)* above the revised May rate of 1,019,000. The June rate for units in buildings with five units or more was 656,000.
The completions are especially interesting to me, as those numbers have been consistently higher in 2024, which could eventually play a role in reducing the lack of inventory that has caused much of the affordability issues in the housing market.

Conversely, permits are significantly lower than where they were at the start of 2022, and while they rose in June, that came after 3 straight months of declines, and the overall trend is still down.

This is yet another reason that I believe the higher interest rates are holding back the economy. And while I think the Fed wants some of that, I think the plan was for that lack of activity to drop home prices due to a lack of demand. Instead, I'd argue that the higher rates are preventing people from wanting to put homes on the market, and the lower amount of permits in 2023 and 2024 will mean lower inventory in the future, and can keep home prices higher than they should be.

I'd hope the Fed would cut rates when they meet in 2 weeks, to get in line with an economy whose GDP and inflation are both running around 2.5%. But sadly I think we are waiting until September for that, assuming things stay on the same trajectory. I just hope it's not caused unnecessary strain on a consumer that has helped keep the economy moving long past what the "experts" have thought.
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Monday, July 15, 2024

A few thoughts on July's Republican get-togethers in Penn and Milwaukee

Needless to say, I’m not going within 75 miles of that cesspool in Milwaukee in the next few days. Especially given that a Walker/WisGOP-era law allows for Meal Team Six types to walk down the streets a few blocks from the FiServ Forum with guns in this time of elevated tension.

Plus, while I still despise Republicans in general, I’m more disgusted with the pathetic people in the DC media and their vapid Insider Club that thinks politics is all a game and that somehow they will be spared from the disastrousness of another lawless Trump presidency - this time with more competent and fascist dweebs in charge! I’d be more likely to want to berate those soulless elitists in alleged political journalism than I would for a lot of the GOP politicians that will be walking around town.

Not that many Republican politicians aren't soulless, mind you, but many are also weak, whiny trash in over their heads, with no skill beyond shamelessness. It's the media that gives legitimacy to GOP idiocy and repression, because you gotta get that access (to the cocktail parties) somehow.

I’ll move over to the shooting in Pennsylvania at a Trump rally over the weekend. I don’t view it as anything different than when some young white guy shoots up a grocery store parking lot, or a school, or shoots into a crowd at other public gatherings. It could have been a Biden rally or a local high school football game, and this guy would have been fine with using the event to take his AR-15 and become (in)famous on his way off this earth.

I think the fact that this shooting happened at a political rally had a lot more to do with delusions of grandeur and “blaze of glory” BS from a 20-year-old guy living in Dad’s basement than any politics whatsoever. But that didn’t stop Republicans from trying to claim it was, including this far-too-quick response from Trump's VP candidate barely an hour after the shooting.

The real message that I take from that tweet is that GOPs want to use this incident to try to make Dems stop talking about the GOP agenda and Project 2025. Telling the truth about those things were clearly landing blows on Republicans at all levels, and Biden had shown signs of recovering any support he had lost in after his bad debate 2 ½ weeks ago.

Know what else Republicans aren't going to want to talk about after this? The fact that it's GOP laws and the GOP crooks on the Supreme Court that allowed this country to get to a place where a 20-year-old freak is able to walk around with an AR-15, just waiting to use it. Thoughts and prayers, guys.

Always know that when GOPs start pleading for “unity” in light of incidents like the shooting in Pennsylvania, it’s a one-way street to them. And New Republic editor Alex Shephard says it is no different this time.
…[W]e know how Donald Trump thinks America should be united: by reelecting him and allowing him and his cronies to ransack the country’s institutions. Indeed, Trump was back to his old tricks on Monday. After a loyalist federal judge threw out the case alleging that he illegally retained classified documents after leaving the White House, he posted this missive:
As we move forward in Uniting our Nation after the horrific events on Saturday, this dismissal of the Lawless Indictment in Florida should be just the first step, followed quickly by the dismissal of ALL the Witch Hunts — The January 6th Hoax in Washington, D.C., the Manhattan D.A.’s Zombie Case, the New York A.G. Scam, Fake Claims about a woman I never met (a decades old photo in a line with her then husband does not count), and the Georgia “Perfect” Phone Call charges. The Democrat Justice Department coordinated ALL of these Political Attacks, which are an Election Interference conspiracy against Joe Biden’s Political Opponent, ME. Let us come together to END all Weaponization of our Justice System, and Make America Great Again!
This brief statement contains an attack on the legal system, a defense of insurrectionists, and the suggestion that his political opponent is leading a sinister plot to destroy him. It is vintage Trump.

That’s the real (and really depressing) takeaway from Saturday’s events. Nothing has changed. Trump remains the biggest threat to democracy in this country. He will continue to encourage political violence in service of his political project, which is built on hatred and retribution. The attempted assassination has left him and his devotees emboldened as they attack their rivals and attempt to shut down dissent. There is no effort to lower the temperature—only to justify one side’s political attacks while silencing the other’s. And the longer Democrats cower in the wake of Saturday’s shooting, the stronger the autocrat becomes.
And how dare the GOP start complaining about tone after the last 15 years of their winks, nods, and outright support of violence against Democrats and anyone else that opposed them. There is a great post on Daily Kos that goes over 40 times Donald Trump encouraged others to physically hurt and/or kill others as a way of resolving issues.

In addition, Republicans in Congress sure like to pose with guns and call Democrats Satan in order to show how they will "fight” against….national health care and equal rights?

When it comes to acceptance and encouragement of violence, it ain’t close to the same galaxy between the two parties.

And Dems cannot listen to “concerns” given by pro-Trump corporate media, and instead should ask why media is even trying to “both sides” a tone debate. In this case, I’d argue Dems have not been nearly harsh enough on GOPs, given the horrible stuff Trump and GOPs would like to do, while GOPs are allowed to get away with (in some cases literally) condoning/encouraging violence and murder.

If I hear GOPs shed crocodile tears and say “We need to calm things down”, the Dems response should be “Oh yeah, GOP? You first.” And Dems cannot back down from telling the TRUTH about the repression and fascism that is associated with Project 2025 and the retribution that Trump promises to impose on those who called out his crookedness and hateful garbage. Dems need to be doing this today, all throughout this week, and for the next 3 ½ months, non-stop.

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Saturday, July 13, 2024

As the RNC comes to SE Wis, never forget Foxconn

Excellent segment by Ronny Chieng on The Daily Show reminding us of the epic scam and failure that Republicans pushed on this state 7 years ago. And how I bet no one else in national media will mention this debacle when Donald Trump gets renominated on Thursday, and talks about "making things in America."

Props to The Daily Show for keeping the part where local anti-Foxconn activist Kelly Gallaher mentions that the land and highways and related infrastructure was given to Foxconn, at a cost of significant debt for the local yokels in Mount Pleasant along with the relocation of homes to clear the way for this white elephant. And how the segment goes into how Foxconn kept changing their plans as to what they were going to allegedly build in Racine County.

Which tells you that both Foxconn and the WisGOPs that allowed this deal to go through had nothing to begin with, and that Scott Walker and Paul Ryan and Robbin' Vos and Donald Trump didn't care about that reality, as long as they got a headline and media event out of it.

There's another great part where Chieng is interviewing former Foxconn exec/grifter Alan Yeung, where Yeung basically says there was no real plan for Foxconn in SE Wisconsin (well, beyond "get the money, the land, and the PR"), but wants credit for....trying?
YEUNG: It really is trailblazing and making pioneering decisions, even though it might not make sense...

CHIENG: Even though it makes absolutely no sense.

YEUNG: Well, OK, absolutely no sense. But right now, I think we're in chapter two or chapter three of the whole thing.

CHIENG: Chapter 11 of the thing, right?
Yeung also follows with a line where he says "you really shouldn't care if you build potato chips or microchips." Ummmm, I think it does matter, Alan. I don't think we'd have given billions and golden shovels to process potato chips and claim it was the "eighth wonder of the world", like Trump did.

Gallaher later brings up the new multi-billion dollar development in Mount Pleasant, a massive Microsoft data center, which doesn't have as much in subsidies as the Fox-con did. And let's just say Chieng is skeptical about the long-term benefit of that.
GALLAHER: It's going to be an AI data center.

CHIENG: Wait, an AI Center is going to take jobs. They're going to replace workers. You're going to end up with less jobs than before.

GALLAHER: Well, it's better than nothing.

CHIENG: Actually, no. Because no jobs would be zero. This will be negative jobs because it'll be taking other people's jobs. GALLAHER: All I know is that these are 2,000 real jobs.

CHIENG: Oh these goddam villagers and their "jobs", man! You guys talk about anything else here? (theatrically walks away).
Given that I am fast going into the "AI is just another scam by grifting tech bros intended to grab profit and add nothing useful" camp, I hear ya Ronnie.

The giveaways and look even worse in the 2020s, now that there has been a real industrial policy put in place for modern manufacturing under President Biden, with a boom in construction of new factories.

And hey, it's a strategy that doesn't rely on giving away entire townships to companies in exchange for empty promises to desperate communities and doesn't give massive tax cuts (beyond some investment incentives) to corporations! Seems like a better plan that what Repiublicans cooked up 7 years ago, isn't it?
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INFLATION WATCH out, RATE CUT watch in?

After a drop in the rate of inflation in May and evidence of the economy softening in recent weeks, many were looking at Thursday's update of the Consumer Price Index to see if US central bankers would be given more reasons to loosen their tight monetary policy.

They sure did.

And if you dig into the actual CPI report, there's good news all around. The "core" inflation rate also moderated, transportation prices dropped, and we even saw a long-awaited moderation in rent prices in this CPI report.
The index for all items less food and energy rose 0.1 percent in June, the smallest increase in this index since August 2021. The shelter index increased 0.2 percent in June. The index for rent rose 0.3 percent over the month, as did the index for owners’ equivalent rent; these were also the smallest increases in these indexes since August 2021. The lodging away from home index decreased 2.0 percent in June, after falling 0.1 percent in May….

The index for airline fares fell 5.0 percent in June, following a 3.6-percent decrease in May. Over the month, the used cars and trucks index fell 1.5 percent, the communication index decreased 0.2 percent, and the new vehicles index declined 0.2 percent.
The drop in prices last month also means that real wages had a solid rise for June, more than reversing the declines we saw earlier in the year. Inflation-adjusted wages are now at their highest level since the end of 2021, a time when many low-wage food service and retail jobs had yet to return from their eradication during the COVID pandemic (which skewed average hourly wages higher in 2020 and 2021).

Inflation-adjusted wages are also now more than 1% ahead of where we were in Feb 2020, right before the pandemic broke out (aka the time that Donald Trump claims was the “greatest economy ever”).

Not a bad spot to be in. And then on Friday, we saw producers dealt with slightly higher prices in June, but nothing that is worth pancking over.

But that increase was largely driven by business-to-business sales and services related to machinery and information technology. In fact, producer-level prices for foods aznd energy continued to fall in June.

Wall Street traders took those two inflation reports, and ran with it on Friday.

I know the "experts" are all forecasting a September rate cut, but there's zero reason for the Fed not to cut at their next meeting in 2 1/2 weeks. With evidence of a slowing consumer (and watch to see if that continues in next week's retail sales report), and slowing home construction, people have had enougb of interest rates that punish borrowers with Fed Funds rates that are double the rate of inflation.

And it also wouldn't be a bad time for President Biden and the Dems in DC to start laying some pressure down on the central bankers to point people's rightful frustration in the right direction. After all, then-President Trump did the same thing from a much lower interest rate environment 5 years ago.
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Wednesday, July 10, 2024

Contradictory messages from the Fed Chair. But maybe a corner being turned?

With June’s CPI report looming for (Thursday), the head of the US’s central bank was at the Capitol giving his breakdown of where things stand. And on Tuesday, he seemed determined to stay on the Fed’s current course, no matter how much it hampers some people.
Aspiring homeowners in the U.S. face one of the most challenging periods to buy a home. Home prices are at a record high and mortgage rates are over 7%.

And there is no respite for the time being. Federal Reserve Chair Jerome Powell told Congress on Tuesday that he was committed to keeping interest rates high enough to fight inflation in the broader U.S economy.

“There’s no question that higher interest rates are making it harder to buy homes in the short term,” Powell said. “But in the longer term, this is the best thing, particularly for younger people who are not yet in the housing market.”

via GIPHY

Oh? Comfortable Acela corridor bankers know that prospective homeowners should be prevented from being able to afford a house, because they need to take this yucky medicine? That’s the “problem” that needs to be solved?

I’d argue that higher interest rates are a big reason why homes continue to be unaffordable for many Americans. Few home owners will want to sell their current homes when there’s a lot more risk and cost in having to live in another home. As I’ve said before, my wife and I have a 3% interest rate on a lower-cost mortgage. Why would I look for another house, pay more, and have to pay 7% on money that we borrow?

Powell went on to claim that keeping the higher rates will continue to bring the housing market and other prices into balance.
The goal of higher rates is to “get back to 2% inflation for the whole economy,” Powell added, “so that the housing market can be on a better foundation.”

Hence, higher rates are “the absolute best thing we can do for the housing market and for the economy [so as] to sustainably bring inflation back down, so that people aren’t talking about it anymore,” he stated.
Again, the housing affordability issue is a SUPPLY PROBLEM, and that’s largely due to people not being willing to put their existing homes on the market because it means they stop reaping the benefits from a lower, locked-in interest rate. We've also seen a leveling off in home construction in recent months, as the higher rates may be making people back off from building more.

I don’t see how a lower amount of consumer inflation for food, gasoline, or other everyday items would do anything to change that reality (and it may make it worse if “lower inflation” also means lower wage gains).

There’s another reason that Powell’s comment about how lower inflation lets the “housing market [be] on a better foundation.” is a really bad take. When the casual person thinks “inflation”, they often are thinking “these things cost more than it used to”. And they care if that higher costconstrains them from doing what they want…especially when it comes to major purchases like a home or a car.

While I think inflation talk is intentionally overblown for political reasons, an arbitrary difference of 1% in CPI between 2% and 3% isn’t going to stop people from being frustrated with the cost of certain things.

What will make them feel better is the ability to make more money and opportunity at their jobs, and being able to afford houses and jobs. And keeping interest rates at a 23-year high is making it more difficult to be able to do so, while also handcuffing earlier owners of homes and autos from moving on from the low interest rate they are currently enjoying on their asset.

That might not be what they teach in the econ books, but I sure think that applies to our situation in the Summer of 2024. And the Federal Reserve needs to deal with that reality sooner than later, and get rates down to a more reasonable level. If not, the current annoyance over higher prices will be made worse if an economy that currently is only in “decent growth” mode downshifts further, and the slowdown in spending and job growth starts to become outright cutbacks.

But then today, Powell seemed to admit that maybe jobs and economic growth are important.
“I think for a long time, we've had to focus heavily on the inflation mandate," Powell told House lawmakers, referring to one side of the central bank's dual charge to maintain both stable prices and maximum employment. "But I think now we're getting to the place where the labor market is getting pretty much in balance to where it needs to be, and so we're looking at both sides.”…

Powell's acknowledgment of those risks in the labor market is a sign to Fed watchers that a rate cut is nearing, perhaps as early as September.

Yet the central bank head stopped short Wednesday of being specific about when any cuts could begin, making it clear that more data about cooling inflation is still needed.

Powell said he has some confidence that inflation is on its way down to target, but it’s more a question now of whether the central bank is sufficiently confident inflation is coming back to the goal of 2%.
And Wall Street ran with that admission of reality from the Fed Chair, with most of today's big gain happening in the final hour of trading after Powell’s comments to Congress.

The S&P 500 (^GSPC) rose 1% for a 37th record close this year, breaching 5,600 for the first time. The Dow Jones Industrial Average (^DJI) jumped 1.1%, while the tech-heavy Nasdaq Composite (^IXIC) gained 1.2%. The S&P and Nasdaq were each higher for the seventh straight session.

Tech's biggest names continued to rise, powering the gains of the broader market. The AI darling Nvidia (NVDA) advanced more than 2%, while Apple, (AAPL), Microsoft (MSFT), and Google (GOOG, GOOGL) each gained more than 1%.

Bets on interest rate cuts have helped keep stocks roaring as signs of slowing in the US economy pile up.

Wall Street also looked to Washington for more optimism. In his semiannual testimony to Congress, Powell hinted the stage is almost set for lowering interest rates from two-decade highs, pointing to a cooling in inflation and in the jobs market. He also cautioned that keeping rates elevated for too long could weaken the economy, giving hope to rate-cut-hungry investors.

But a key test for stocks and rate-easing prospects lies ahead in the crucial consumer inflation report due Thursday. While a cooler reading will cement the likelihood of a Fed policy shift in September, a too-cool print could revive concerns about a recession and the labor market.
Oh, now we don’t want inflation in the June CPI because it might mean recession? You just can't win with some people.

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Monday, July 8, 2024

New Orders, construction take a step back in May

In addition to a "meh" June jobs report, we also got more evidence last week of slower growth for Q2 when we found out construction spending took a step back in May.
Construction spending during May 2024 was estimated at a seasonally adjusted annual rate of $2,139.8 billion, 0.1 percent (±1.0 percent)* below the revised April estimate of $2,142.1 billion. The May figure is 6.4 percent (±1.6 percent) above the May 2023 estimate of $2,011.8 billion. During the first five months of this year, construction spending amounted to $836.3 billion, 8.8 percent (±1.2 percent) above the $768.6 billion for the same period in 2023.

Private Construction Spending on private construction was at a seasonally adjusted annual rate of $1,652.1 billion, 0.3 percent (±0.7 percent)* below the revised April estimate of $1,656.7 billion. Residential construction was at a seasonally adjusted annual rate of $918.2 billion in May, 0.2 percent (±1.3 percent)* below the revised April estimate of $920.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $733.9 billion in May, 0.3 percent (±0.7 percent)* below the revised April estimate of $736.5 billion.
After strong runups over the last year or so since the end of 2022, we've seen some recently leveling for both residential construction, and the sector in general.

In addition, the Census Bureau reported that new orders in manufacturing also dropped.
Summary
New orders for manufactured goods in May, down following three consecutive monthly increases, decreased $3.0 billion or 0.5 percent to $583.1 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent April increase. Shipments, also down following three consecutive monthly increases, decreased $4.2 billion or 0.7 percent to $584.8 billion. This followed a 0.8 percent April increase. Unfilled orders, up forty-six consecutive months, increased $3.1 billion or 0.2 percent to $1,402.8 billion. This followed a 0.1 percent April increase. The unfilled orders-to-shipments ratio was 7.18, up from 7.11 in April. Inventories, up five of the last six months, increased $1.8 billion or 0.2 percent to $860.1 billion. This followed a 0.1 percent April increase. The inventories-to-shipments ratio was 1.47, up from 1.46 in April.
And in Friday's jobs report, a gain in manufacturing jobs for May was revised away, and 8,000 manufacturing jobs were lost on a seasonally-adjusted basis in June. It continued a flatlining in jobs for that sector since late 2022, in contrast with a construction sector that still keeps hiring.

The good news is that wage growth in both manufacturing and construction has been well above the rate of inflation, and the jobs market overall (as I pointed out in this post), but there does seem to be some softness sinking in to both sectors, and it gives more evidence to me that if the Federal Reserve wants to keep the economy nmoving forward, it needs to cuts rates sooner than later.

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Friday, July 5, 2024

"Meh" for a June jobs report, as we settle into our new post-COVID normal

With some evidence of weaker economic data in recent weeks, a new US jobs report came out on Friday. And it was....meh

I'll point out that given that this is from June, and that the seasonal adjustment deflates the number of jobs added in a lot of sectors. This includes leisure and hospitality, which had 436,000 more jobs overall in that sector, but because it is expected to have 429,000 jobs added in June, that's not very special. No biggie either way.

Yes, unemployment went up again (although the “4.1%” is really 4.05%, which makes me wonder what would have been the meme if the number was 4.04%), and it’s more evidence that we are in a balanced jobs market where any COVID-era adjustments have been absorbed into a new normal for the mid-2020s. The Biden Boom in the both the economy and the jobs market is over, and we are merely in a solid growth mode.

Still, that “new normal” is a better place than we had before COVID became a thing.

Not only that, but I also wanted to look at what things looked like after both President Trump and Biden were able to get their signature economic policies in place, and after the COVID-related job losses of 2020 had been largely recovered. So I did a comparison of what 3-month job growth was starting from January 2018 (when the unemployment rate of 4.0%) and January 2023 (unemployment rate 3.4%).

As you can see, we’ve generally been adding more jobs under Biden than Trump, even starting from a lower unemployment rate in 2023.

I also note that the jobs report indicates that wage growth kept up in June, 0.3% increases in overall average hourly wages, and in non-supervisory positions. With food and gas prices staying stable over the last month (if not outright falling), I would think this translate into another month of real wage growth in June.

The wage growth is especially impressive in the construction and manufacturing sectors, where the 12-month increase in wages is above the 3.9% average rate for all private sector jobs, and the work week has also increased since June 2023.

Average hourly wage, June 2024 vs June 2023
Construction +4.9%
Manufacturing +4.8%

Average weekly wage, June 2024 vs June 2023
Construction +5.7%
Manufacturing +5.1%

At the same time, the annualized rate of wage growth for both the last 3 months and last 12 months is now in the high 3%s. This is a “Goldilocks” scenario where wage growth above almost any time in the Trump era, but also not so high that it would fire any kind of cycle of high inflation.

So what the hell is the Fed waiting for when it comes to lowering interest rates like they did from a much lower level in 2019? Back then, Trump was ramping up for his re-relection campaign and started screeching about Fed policy, despite wage growth and inflation that wasn’t much less than we have today, and with unemployment 0.5% below what we have today.

The Fed caved to Trump’s public pressure back then, but seems to be set on keeping rates at these punitive levels ahead of our 2024 election. To be fair, Biden hasn’t been putting pressure on them to do so, and I think he and other Dems have been wrong to stay silent, because I definitely see a different standard at play here.

That said, even if job growth stays at a decelerated rate of 175,000 that we have been at for the last 3 months, that’s a lot like what we had in the 6 years before COVID.

So when you hear complaints about a “softening” job market, know that it’s merely slowing from the best growth we had in decades over the first 3 years of the Biden Administration. We’re still adding jobs at a good pace, and unemployment is still historically low. I’ll take it.

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Thursday, July 4, 2024

Happy 4th! Can we fight the bad guys like we did in 1776?

After a few days in Colorado for sightseeing and baseball, I'm back in Wisconsin for our country's birthday. And so (as is my tradition in this blog), it seems to be a good time to go back to the text of our country's Declaration of Independence, and see what were part of the "long train of abuses" that King George imposed on the American Colonies, which led to the point of breaking away that we celebrate today.
He has refused his Assent to Laws, the most wholesome and necessary for the public good.

He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.
Oh? The King put himself above the law, and ignored large swaths of the country? Sounds like an Orange Blob that we know well in 2024.
He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

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.
Ignoring the results of elections? Limiting immigration for political purposes? That tracks.

Oh, and here's the Project 2025/Crooked SCOTUS part of our country's Declaration!
He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.

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

He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.

He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.

He has affected to render the Military independent of and superior to the Civil power.

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:

This is what makes it all the more ridiculous when you see MAGAts call back to the Founding Fathers as a shield for their "reasoning". Because in 1776, the MAGAs would be working for the British Crown, to put those liberals to heel, and ignore the desires of everyday people in favor of an elite few who impose the rules onto everyone else.

In response to what was going on, America's political leaders stepped to the forefront in the Summer of 1776 to lead with action against those arrogant tyrants. We now need political leaders to be fighting the bad guys every bit as hard now as they did 248 years ago, instead of laying back and hoping the people do their job for them at the ballot box in November. Dems need to rise to the challenge over the next 4 months, or else I'm not sure we make it to 250 intact.

As another Madison native well-put it.

So, Happy 4th? Well, at least most of us don't have to work today, right?
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Sunday, June 30, 2024

Inflation flat, incomes up, spending mediocre. So why keep rates so high?

The always-important income and spending report came out on Friday, and if you have a certain point of view, there were good numbers all around.

That increase in savings is a good sign, for both moderate (but not crazy) spending growth, and higher income growth. However, the one down side I saw in this report is that spending was revised down for both March and April, indicating slower GDP growth than we originally thought for Q2 (although there still is growth).

Not surprising that the Boom part of Bidenomics is over after 3 years of stimulus and job growth, and record run of sub-4% unemployment. But steady growth around 2% is fine, especially if income growth continues at a good pace.

Comversely, if you're someone who was looking for signs of what Federal Reserve policymakers may be doing in the near future, you had to like the flat inflation numbers, and the long-term trend it shows as well. Core inflation has been the high 2%s for the last year, and overall PCE inflation is also only up 2.6% over the last 12 months. In fact, since January 2023, we've not had one month where overall PCE inflation has been above 0.4%, and we've had as many months of 0.0% PCE inflation as we have 0.4% (3 each).

That's a big enough sample size to me to show that the main disruptions are over in our post-COVID economy, and if our new normal is 2.6% inflation instead of 2.0%, with solid wage growth and unemployment staying low, that's not a bad thing. The biggest economic headwind is the cost of housing, and I'd argue high interest rates are a CAUSE more than a mitigation of that at this point.

So why does the Fed continue to punish everyday Americans for inflation that peaked 2 years ago? And because I don't think Fed officials are morons, I have to ask what's the real reason the Fed is refusing to lower rates, and does it relate to November's election?

Damn straight I'm going there, especially after they caved to pressure from Donald Trump and dropped Fed Funds rates in the latter half of 2019 when they were at levels less than 1% above the core rate of inflation. That was in a time when unemployment was at similar levels to what we have today, and inflation was just under 2%. If the same rules applied in 2024 (1% Fed Funds rate above core inflation), the Fed should be dropping rates by 1.5% from where they are today.

Friday's report shows we remain in a good, growing economy, but one that isn't booming with a consumer that isn't as willing to spend as much as they did in 2023. We need a Fed that understands that growth is what is endnagered right now and not one that keeps chasing ghosts of the past, and do its job in keeping the economy on the right track.
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Thursday, June 27, 2024

US keeps adjusting habits, so it's cheaper to hit the road for the 4th this year

As the Fourth of July nears, it also means that we are in the Summer driving season. With a record amount of drivers expected to hit the road for the Holiday week, it seems to be a good time to check back and see what things look like on the oil and gas fronts.

One thing I've noticed is that> oil futures have gone up a bit recently, increasing by nearly 12% since hitting their lows at the start of this month. That includes another sizable increase on Thursday.
Oil futures settled higher on Thursday on worries about global crude supply disruptions as geopolitical pressure in the Middle East and Europe mounted, while a surprise increase in U.S. crude and gasoline inventories gave prices a ceiling.

Brent crude oil futures settled up $1.14, or 1.34%, to $86.39 a barrel. U.S. West Texas Intermediate crude futures settled up by 84 cents, or 1.04%, at $81.74.....

Cross-border strains between Israel and Lebanon's Hezbollah have been escalating, fanning fears that a widening war could draw in other countries including major oil producer Iran.
So the recent rise is due to nothing besides speculation and traders bidding things up.

It's sure not related to supply-and-demand, especially when it comes to gasoline usage in America. Even as travel amounts have generally gone up, Americans are using less gas than we did this time last year, and noticeably less than we did in the late 2010s. In addition, gasoline is more plentiful now than in June 2023.

So why would oil be trading 17% higher than it was a year ago? I know the oil market is not necessarily the same as gasoline, but it’s a pretty good correlation. Where’s the indication that there’s going to be some kind of supply tightness or explosion in gasoline usage in the near future?

In fairness, it looks like the gasoline futures have yet to be much different than what we had a year ago, so maybe pump prices for the rest of this Summer won’t reflect the runup in oil. And in fact, AAA says Americans are paying less than they were in gas at this time in 2023, a whole lot less than they were in 2022, and not that much more than they were at the end of June 2021.

Bottom line, Americans have adjusted their oil/gas consumption habits in the 2020s, both due to changing workplaces, but also in response to incentives the Biden Administration has put out for electric vehicles and higher fuel efficiency. It's the right direction, which insulates us from further shocks and variances in the market, and we need to stick with it.
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Sunday, June 23, 2024

August Constitutional amendment is more WisGOP scumbaggery. VOTE NO

In 51 days, Wisconsin voters are going to be faced with an important ballot question that was placed by the gerrymandered WisGOP Legislature, with the intent of not slipping it through without much attention. Which is a big reason why it should be given attention, and a resounding NO vote.

The ballot question seems to be tame on the surface.

Now you might think "doesn't the Legislature already do this?" And indeed, much of this is determined part of the state budget, and are OK'd by both parties without much concern, because it keeps these needed services going without having to use state tax dollars to do it. Many of these federal dollars are automatically allocated by formula through acts of Congress, and while WalletHub says Wisconsin's state government is 45th out of the 50 states when it comes to reliance on federal dollars, our most recent state budget still had over $28 billion coming from DC.

Not that the WisGOP Legislature hasn't been able to manipulate where these funds go. Sometimes this is done through budget deliberations, moving Federal block funds toward one direction and not another. The Legislature's Joint Finance Committee often has to sign off on increases in federal funding or other allocations as things change throughout the 2-year budget cycle.

For example, in 2022 the GOPs that control the Finance Committee stopped the Wisconsin DOT from using additional Infrastructure Act dollars for the unholy purpose of... improving air quality through more walking and biking trails?
For a statewide $283 million transit and infrastructure package, $4.3 million is not a lot of money.

But Republican legislators on the Joint Finance Committee (JFC), the Wisconsin Legislature’s committee in charge of overseeing the state budget, decided on April 27 to limit the use of those funds. Reversing an element of the state Department of Transportation’s spending plan, the JFC has barred the state from using these funds for bike or walking trails, public transit, basically anything other than highway right-of-way or signaling improvements, setting back initiatives to make communities more walkable, bikeable, and public transit-friendly.

The $283 million was from the federal Infrastructure Investments and Jobs Act, otherwise known as the bipartisan infrastructure bill. The $4.3 million was under the Congestion Mitigation and Air Quality Improvement Program (CMAQ), which allocates funding for states to improve air quality, either by investing in infrastructure to reduce congestion (reducing the amount of exhaust personal vehicles emit while on the road) or to improve alternative forms of transit, such as bikes, walking, or public transit.
So if fed funds are already able to be manipulated by the Legislature, why make it a Constitutional law, which makes it harder to do away with it? Marquette University Professor Philip Rocco does a great job in explaining the real reasons behind it, in an article in The Recombobulation Area.

Taken together, the amendments contained in Question 1 and 2 would eliminate virtually any power the governor has to allocate certain federal funds without approval from the legislature. This would represent a significant enhancement of the legislature’s power, overturning a law that has been in place since 1931, which says that: “whenever the United States government shall make available funds for the education, the promotion of health, the relief of indigency, the promotion of agriculture or for any other purpose other than the administration of the tribal or any individual funds of Wisconsin Indians, the governor on behalf of the state is authorized to accept the funds so made available.”

In other words: suppose Wisconsin experiences a natural disaster, an economic crisis, or — as happened in 2020 — both. The federal government rushes aid to the state. Under current law, the governor would be authorized to accept these unanticipated funds and allocate them to impacted businesses, communities, or individuals.

But if the amendments contained in Questions 1 and 2 pass, the state legislature would be able to insert itself into the process, preventing the governor from allocating the funds until the legislature approves.
And THAT'S the real reason the WisGOPs want to put in this constitutional change. Because Governor Evers was able to use billions COVID relief funds without interference from the gerrymandered Legislature (and especially the GOP-dominated Joint Finance Committee) as the state went through the COVID pandemic and its aftermath, it made for an efficient response that sent funds to people and sectors of the economy that were badly in need.

It is not in the GOP's interest to see the federal government and a Democratic governor actively working to get people and businesses back to work and back on their feet, and to have these programs work and have voters demand they continue in the future. So they want to be able to control every extra dollar that comes in after the budget is passed, and I would bet that the GOPs on JFC would use these new powers to do what they do best - ABSOLUTELY NOTHING.

You know, just like how they're holding up $125 million in funds to clean up PFAS in the state, and holding up $15 million in aid to hospitals in the Eau Claire area to maintain medical services in an area that had multiple hospitals and medical providers close earlier this year. Money that has ALREADY BEEN SIGNED INTO LAW, by the way.

This makes the WisGOP attempt to tie up funds scummy enough, but it is especially sleazy because they are trying to sneak through these permanent changes in an August election, as Professor Rocco points out that there will be many fewer voters at that time compared to what we'll see in November.
In 2022, just 27% of voters participated in the state’s August primaries, which was a 40-year high. Since 2000, turnout in November general elections has been, on average, three times higher than it is in partisan primaries.

In just a few months, Wisconsin voters will for the first time vote on whether to amend the constitution in an August primary election. Unlike 2022, there will be no big-ticket contests for governor or U.S. senator. Of Wisconsin’s eight congressional districts, only two (District 3 and District 7) will see a contested Democratic primary. There are three contested Republican primaries (in Congressional Districts 2, 4, and 8). Of the 99 State Assembly districts, only 21 will feature contested Democratic primaries. In the Republican column, there are 24 contested primaries. In short, August elections will likely see a turnout rate lower than in 2022.
If the WisGOPs in the Legislature believed that casual voters would go for this idea, they'd be glad to promote it as part of their re-election campaigns in November. They're not, and that should tell us a lot.

Plus, it is likely that WisGOP is trying to shove through this BS before the new legislative maps are in effect, with Dems finally having a legitimate chance to win the State Assembly, and are very likely to end the GOP supermajority in the State Senate. So the WisGOPs are trying to leave behind all of these barriers that make it even harder to reverse the garbage they put into law through their rigged maps and sketchy tactics, and keep Wisconsin from moving in a direction that their voters are asking for.

Which helps explain why they're so desperate to handcuff this state while they can. It's a sign of weakness. Needless to say, you should vote NO (HELL NO) to these amendments. And given that it's a lower-turnout election, the more that you can draw attention to this BS to casual voters, the more it has a chance of going down in flames, and further demoralizing a Wisconsin GOP that already seems to be in decline.
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Saturday, June 22, 2024

Housing costs keep going up despite higher interest rates....or because of them

While the overall economy continues to grow, jobs continue to be added, and inflation continue to leveling off, there seems to be one sector of the economy plagued by stagflation in the first half of 2024 - the housing market.

We got more proof of that in the later part of this week.
With the Federal Reserve making no clear commitment to when an interest rate cut may come, homebuilders are scaling back.

In May, privately owned housing starts fell to a seasonally adjusted rate of 1.277 million units, down 5.5% month over month and 19.3% compared to a year ago, according to data released Thursday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD)....

“Builders are in an ‘if you build them, they won’t come,’ market, as continued high mortgage rates keep more potential buyers out of the market,” Robert Frick, a corporate economist at Navy Federal Credit Union, said in a statement.

The number of building permits issued in May also posted monthly and yearly declines, falling to a seasonally adjusted annual rate of 1.386 million units, down 3.8% month over month and 9.5% year over year.
And it's been a consistent decline for both starts and permits in 2024, with drops in activity for multi-family units being even larger than the decline in single-family homes.

But while this portends a drop in the number of homes being completed and added future inventory, current home prices and home sales keep rising, despite the higher interest rates.
The median price of a previously owned US home climbed for the eleventh consecutive month in May, up 5.8% from a year ago, to $419,300, the National Association of Realtors said Friday. That’s the highest price ever recorded by NAR.

“Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers,” NAR’s chief economist Lawrence Yun said in a release. “Still, first-time buyers in the market understand the long-term benefits of owning.”….

The situation could improve somewhat later this year, when the Federal Reserve is expected to begin paring back interest rates from a 23-year high, which should bring down mortgage rates. But Fed officials have penciled in just one rate cut for this year, and the days of ultra-low interest rates are long gone. Economists don’t expect the average mortgage rate to fall below 6% in 2024.

Recent research from Zillow shows that in order for a median-income household to afford a monthly mortgage payment on the typical US home, it would need to save up more than $127,000 for a down payment. That’s roughly double the median salary of a US worker.

Potential homebuyers are indeed facing a tough market, but that doesn’t seem to be deterring some: Sales of previously owned homes in the US are up from the decades lows in the fall and only edged lower by 0.7% in May to a seasonally adjusted annual rate of 4.11 million.
And the Wisconsin Realtors Association says our state is seeing the same trends – higher prices, more sales, and homes becoming even less affordable.
May 2024 home sales rose 11% compared to May 2023, and the median price rose to $315,500, which is a 6.9% increase over the past 12 months.

On a year-to-date basis, home sales were 12.1% higher than the first five months of 2023, and the median price rose 7.3% to $295,000 over that same period.

Improving inventories helped boost sales statewide, with new listings up 4.7% compared to May 2023, and total listings up 5.4% over that same period….

The average 30-year fixed-rate mortgage rose 63 basis points over the past 12 months, hitting 7.06% in May, causing affordability to drop to an all-time low. The Wisconsin Housing Affordability Index measures the share of the median-priced home that a buyer with median family income qualifies to buy, assuming 20% down and the remaining balanced financed with a 30-year fixed mortgage at current rates. The index fell 11.3% from 133 in May 2023 to just 118 in May 2024.

And this is more proof to me that the Federal Reserve is getting it backwards when it comes to the cause-effect situation of higher, less affordable housing prices. What we need to get things more in balance is a higher amount of single-family homes onto the market, but where’s the incentive for people to sell their houses (or buy land and build new ones) when they have to take on much higher interest rates?

I’ll use our situation in Madison as an example. We bought our home in 2013, and the value has nearly doubled in that time period. We also locked into a 3% mortgage through a refinancing 4 years ago. So what incentive do we have to move from our current home to pay more for another home, and at an interest rate more than double what we’re paying now?

But the Fed is more concerned with trying to crush demand for buying homes, and are imposing economic pain and frustration on people who are already getting hurt by high rent prices and a lack of homes on the market. It’s not massive demand that is behind the absurd jump in home prices, and consumers borrowing money certainly wasn’t the reason behind the greedflation that hit the most in 2022 and whose remnants continue to this day.

It really feels like the Fed has used a 1970s playbook for a unique post-pandemic situation in the 2020s. They were slow to start to raise rates when inflation was clearly hitting in 2021, and then had to drastically raise them in order to catch up. Now they’re being caught short in the other way, and aren’t understanding that the effects on consumers and businesses for higher rates is different now (coming off of a time of historically low rates) than if we started from a higher point (like we would have in the 1980s or 1990s).

I also can’t help but notice how Donald Trump was whining about Fed Funds rates in the later half of 2019 that were 3% lower than what we have today, and got them to start cutting even before we knew COVID was a thing.

That was a time period when unemployment was lower than it was today (3.6% then vs 4.0% now) and CPI inflation over the previous six months was only 0.1% a month lower than we have today (1.7% increase today, 1.1% in Aug 2019).

So explain to me why interest rates today are more than twice what we had before the Fed started cutting in Summer 2019? There is zero reason for this beyond an arbitrary desire for the Fed to have inflation be 2% instead of 3% (neither figure would change outcomes much), and the high cost of housing is basically the only negative part of what is still a good economic situation. I know it’s not considered proper for President Biden and Dems to complain about the decisions of the Federal Reserve, but if the Fed’s policies are something that might hurt the Dems’ chances of victory in November, why shouldn’t they be talking about the Fed’s choices? AND DO IT NOW, ahead of the Fed’s next meeting at the end of July.

After all, if Donald Trump can bully the Fed into a wrong policy in 2019, why can't Dems push the Fed to do the right thing, and cut rates in Summer 2024?
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