Tuesday, May 7, 2024

Social Security fully funded till 2035, and much longer than that. Unless we choose not to

Saw this headline yesterday.

Heather, I usually like your stuff. But this time...


WRONG!

2035 is when the trust fund that pays for Socal Security is not able to pay the same amounts of benefits that it would pay out today. That is NOT "insolvency" for Social Security, as the trust fund will still be paying benefits (83% of them, based on the estimates), and Americans will be entitled to the benefits they have earned, unless laws are changed that reduce the amount of benefits that they have had . If no laws change, no benefits change. We'd just have to figure out another place to pay for the rest of it.

Let's go into the summary of the report from the Social Security Administration, and see how they explain the reason for improvement of the combined OASDI trust fund (which we generally call the "Social Security fund").
The projected long-term finances of the combined OASDI fund improved this year primarily due to an upward revision to the level of labor productivity over the projection period and a lower assumed long-term disability incidence rate. These improvements were partially offset by a decrease in the assumed long-term total fertility rate. The revision to labor productivity was based on stronger economic growth in 2023 than had been anticipated in last year’s reports. The Trustees lowered the long-term disability incidence and fertility rate assumptions based on continued low levels in both series.

The projected long-term finances of the HI Trust Fund also improved this year relative to last. This improvement was due to several factors, including a policy change correcting for the way medical education expenses are accounted for in Medicare Advantage rates starting in 2024, higher payroll tax income resulting from the stronger-than-expected economy, and actual 2023 expenditures that were lower than projected last year.
But it's worth remembering that "Social Security" is really two separate programs - Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). And the Trustees' report says what actually runs out is the OASI trust fund, while Disability's trust fund will be just fine.
The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits.

• The Disability Insurance (DI) Trust Fund is projected to be able to pay 100 percent of total scheduled benefits through at least 2098, the last year of this report's projection period. Last year's report projected that the DI Trust Fund would be able to pay scheduled benefits through at least 2097, the last year of that report's projection period.
In fact the Social Security Administration says that, Disability's trust fund is projected to keep growing throughout the next 75 years, unlike OASI and Medicare's Hospital Insurance fund (HI).

Isolating the numbers to last year, we see that DI added $29 billion to their trust fund in 2023, while OASI's trust fund lost more than $70 billion.

This leads me to ask a simple question - why don't we change how much of our Social Security taxes go into OASI vs Disability? This would extend the years that OASDI's trust fund is able to be around (likely to 2035), and raises the amount of interest-earning funds that are in there over those 11 years. This is something the US did to help Disability's situation in 2016, so it's not unprecedented.
On November 2, 2015, President Barack Obama signed into law the Bipartisan Budget Act of 2015 (H.R. 1314; P.L. 114-74). Among its many provisions, the act authorized a temporary reallocation of the Social Security payroll tax rate between the OASI and DI trust funds to provide DI with a larger share for 2016 through 2018. Specifically, the DI trust fund’s share of the combined tax rate increased by 0.57 percentage point at the beginning of 2016, from 1.80% to 2.37%. Because the act did not change the combined payroll tax rate of 12.40%, the portion of the tax rate allocated to OASI decreased by a corresponding amount. This means that OASI’s share of the combined tax rate declined by 0.57 percentage point at the start of 2016, from 10.60% to 10.03%. For 2019 and later, the shares allocated to the DI and OASI trust funds are scheduled to return to their 2015 levels (i.e., 1.80% to the DI trust fund and 10.60% to the OASI trust fund).
As that passage mentions, the pre-2015 allocations went back into effect in 2019, and have stayed there since then. There's no reason we couldn't change the allocation again, to adjust to the decline in Disability costs.

Of course, there's one overriding thing I want to reiterate with all of this talk about Social Security's finances. We are talking about these programs' trust funds, we are not talking about the programs' ability to continue. If Congress does nothing, Social Security and the amount of its benefit payments will NEVER go away.

We'd just have to pay for the extra funds beyond what the trust funds would cover, likely by doing the same thing we do for most things that the Feds pay for - regular income taxes and deficit spending. The Congressional Budget Office already includes Social Security and Medicare in their budget projections, so there's nothing that would change from that perspective. It would just be changing the nature of a program that "pays for itself" and instead make it more like any other federal spending. We'd just have to decide if we'd want to keep funding it as-is, fund it more or less than today, and figure out if we want to pay the taxes or fund the deficits to keep it going.

Like most things, if we taxed the rich like we did in the 1990s (or especially if we did it like we did back in the glory days of the 1950s), this would be taken care of without having to worry for pretty much the rest of our lives. And if you hear anyone try to insist Social Security is "going broke", THEY ARE LYING OR STUPID, and should be ignored from that point forward.

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Saturday, May 4, 2024

Do higher interest rates in 2024 make inflation ...HIGHER? Makes sense to me

All the way back to high school, we're taught that the Federal Reserve raises interest rates to slow inflation, with a slower economy as a side effect becasue of higher borrowing costs. But what if that doesn't work in 2024, and in fact, the higher interest rates are causing housing prices to be higher than they'd otherwise be?

That's a theory that I saw floated out a few weeks ago, and it's starting to add up to me.
The Federal Reserve raised rates the most in decades to bring down inflation. High borrowing costs are supposed to put the brakes on the economy to keep consumer prices from rising too quickly. But Jack Manley at JPMorgan Chase argues that the Fed’s current rate range of 5.25% to 5.5% are actually inflationary at this point, and that prices won't stabilize more until the the central bank starts cutting.

“A lot of what’s going on with inflation today can be linked very closely with the level of interest rates,” Manley said. “You slice and dice inflation and whether you’re looking at the headline number, whether you’re looking at the core number, you’re removing the goods equation — so much of it has to do with the rate environment.”...

Oppenheimer’s John Stoltzfus hinted last week at the idea that lower mortgage rates would prompt more people to sell their homes, leading to more supply and potentially softer prices. If people could afford to buy homes, they wouldn’t need to rent as much, and rents could stabilize. Manley pointed to housing and also to inflation from auto and other insurance premiums, which he also noted was somewhat tied to rates.

“You’re not going to see meaningful downward pressure on shelter costs until the Fed lowers interest rates, mortgages come down to a more reasonable level, and supply comes back on line, because people are willing to step into that market,” Manley said.
Here's the interview clips on Bloomberg where Manley goes into his theory some more, and how March's gasoline-driven increase in inflation is something the Fed should largely ignore when making future decisions on what to do with interest rates.

I look at our current situation with our home as an example of this. We're not looking to move, but if we did, it would take a whole lot more to justify it than normal. We're locked into a 3% refinanced mortgage from 2020, based on what we paid for our house 11 years ago. Our recent home assessment has our house's value at twice the amount we paid for it, which is nice for net worth, but really doesn't do much for us now beyond giving us more ability to take out a line of credit for a Home Equity Loan (albeit at a higher rate than 3%).

And if we wanted to move, we'd have to either pay in all-cash at these elevated prices (not possible for us) or take out mortgage loans at 7% vs the 3% we are paying now, so us and a lot of others are staying in our homes. Manley notes that this decreases supply of homes on the market, and drives up prices for homes even further. It also means more people aren't willing or able to buy houses, so they have to rent, which means demand and prices for rental housing go higher.

Reuters also had a rundown of this theory which cited a study by the Fed itself which indicated that higher interest rates can indeed inflate housing prices.
....a discussion paper by economists Daniel Dias and Joao Duarte, [was published] by the Fed's Board of Governors in 2019, less than a year before the onset of the COVID-19 pandemic.

The study concluded that "housing rents increase in response to contractionary monetary policy shocks" and that "after a contractionary monetary policy shock, rental vacancies and the homeownership rate decline."

Put another way, the research showed that rental costs tend to surge as rising mortgage costs force those put off from buying houses to rent instead - while also reducing the number of potential homes to rent.

And reinforcing the peculiarity of the response of rent, the paper showed all other main components of the consumer price index (CPI) either decline in response to tighter monetary policy or are not responsive.
Reuters includes this chart which shows that the higher interest rates have effectively brought down inflation for goods in this country over the last 18 months, but housing and services are up by more.

And a huge driver of that increase in services? The higher cost of car insurance and repairs and maintenance of both autos and homes, which is a downstream effect of cars and homes having higher values. If lowering rates freed up the chances of more purchases of newer assets and and moves, maybe those industries couldn't charge as much either. Just a thought.

Much like how "the experts" kept anticipating a recession that never came in 2022 and 2023 in the wake of these higher interest rates, maybe we need to recalibrate what is causing inflation in 2024, and that higher interest rates might not be the way to limit price increases. In the current rate situation, I think many Americans feel trapped, and that they're being pulled on a ride that limits the comfort they should have from steady employment and growing wages.

A more affordable supply of both housing and vehicles would help to alleviate one of the few real problems in this economy - where things that were regular bills in the standard of living now feel like annoying burdens to many. Cutting interest rates from their 23-year highs might well be a way to lessen those burden, and expand the possibilties. It's all the more reason that the Fed should be dropping interest rates sooner than later, because that move would seem likely to increase the options for both homeowners and renters, encourage more supply of homes and vehicles to go onto the market.

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Friday, May 3, 2024

A weaker jobs report excites Wall Street, and still looks good vs the Trump years.

Hey, it’s jobs Friday! What did we get?

Lotta “meh” with this report. The 175,000 jobs added is the lowest monthly gain since October and the 3rd lowest since 2022. The 0.2% increase in April’s hourly wages follows a downward-revised 0.1% increase in February, and a 0.3% increase in March, and accounts for the lowest three-month run since President Biden’s first three months in office in early 2021. Which makes all of the panic we had earlier in the week about a 1.1% increase in Q1 wages look even more foolish

In addition to the slowing wage growth, my other main concerns with the report is that nearly half of the gains were concentrated in health care and social assistance (+87,000), and construction only added a seasonally-adjusted 9,000 jobs instead of the 23,000-a-month pace that we’d seen in the 12 months before April 2024. With the construction numbers, I wonder if that slowdown corresponds with a slowdown in sector spending for March, or if warm weather simply pulled forward some seasonal hiring that usually would happen in April (March was up 40,000, so it's on trend if you average the two months).

On the flips side, if you want the Fed to cut interest rates sooner than later, but still want the economy to keep growing, this is exactly the type of report you’d be looking for. Wage growth slowing but still continuing, in the same April where gas prices leveled off and oil futures fell to their lowest levels in 6 weeks. None of that indicates inflation should continue at the elevated level we saw in Q1, which means the 2-3% annual rate we were seeing for much of 2023 should resume.

The jobs report’s reporting of tamer wage growth caused the yield on the 2-year bond to drop by nearly 0.2% today. And the prospect of lower inflation giving space for interest rate cuts got traders to buy up stocks, reversing all of the sizable losses from earlier in the week.

US stocks surged on Friday as upbeat earnings from Apple (AAPL) lifted spirits and a weaker-than-expected jobs report revived bets that the Federal Reserve could cut interest rates sooner than thought.

The Dow Jones Industrial Average (^DJI) jumped 1.2%, or about 450 points, while the S&P 500 (^GSPC) rose 1.3%. The tech-heavy Nasdaq Composite (^IXIC) increased 2%....

The report pushed up bets on a sooner-than-expected rate cut from the Fed. According to the CME FedWatch tool, traders see a roughly two-thirds chance of a rate cut in September.
But even though the jobs numbers were lower than what we've been used to or what the "experts" were expecting, it's still a good report if we compare it to the pre-COVID times. Half of the 18 months from June 2018 to the end of 2019 had job growth lower than 175,000. (You know, the times that Trump claims was “the best economy ever”.) And 12-month job gains averaged less than 175,000 a month for an entire year between early 2019 and early 2020, before the COVID pandemic would hit the economy and jobs market full force.

So while it's not the blowout numbers that we saw in the first three months of the year, 175,000 jobs and 0.2% wage growth would be considered a pretty good jobs report before the 2020s. And while job growth likely will continue to soften from the strong pace of Q1 2024, staying below 4% unemployment is still a great place to be in Spring 2024.

We will need more data from April to see if other parts of the economy go along with this slower hiring in that month, or if output and spending kept rolling along. And we will need to see inflation figures over the next couple of weeks to see if we might get back toward real wage growth, or if wage growth has failed to exceed inflation for a third straight month. If it’s the latter case, then we have an economic concern that’s worthy of paying attention to, because that's a real reason for American consumers to be gloomy, as opposed to complaining about inflation that seems to be heading back down.

Things are generally good, and we are still at/near full employment. And just because MAGAs might want to believe things are bad, that doesn't make it true in the Real America.
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Wednesday, May 1, 2024

New data should JOLT us and the Fed away from inflation fear

And even Fed Chair Jerome Powell pointed to this and the reduction in openings when he gave his press conference I looked into the JOLTS report, and saw that March’s drop in job openings was almost entirely due to 2 sectors – construction, and finance/insurance.

Change in job openings, March 2024
Total, US -325,000
Construction -182,000
Finance/insurance -158,000
ALL OTHER JOB SECTORS +15,000

Those other job sectors accounted for more than 7.85 million or the 8.49 million job openings in March. That number is slightly below where it was at the end of 2023, with declines in January and February, and eking out that slight gain of 15,000 in March. Interestingly, comparison finance/insurance has bounced up and come back over the same time period, while openings in construction were steady until its large decline hit last month.

This would indicate that the job market is still growing, but with less urgency to hire. That would be consistent with a “soft landing” and should moderate wage pressures – which the Federal Reserve allegedly wants to see before they cut interest rates. In fact, Fed Chair Jerome Powell pointed to the reduction in openings in JOLTS when he gave his press conference after the Fed meeting let out this afternoon as a sign that rates didn’t need to go higher at this time.

So how did construction still add 39,000 jobs in March, continuing its impressive string of gains over the last 2 years? Because the amount of layoffs and discharges in construction dropped by 63,000 in March, and stood at just over half the level it was at in March 2023.

Likewise, there was an overall decline in layoffs and discharges in America in March. That decline more than offset a drop in hiring over the first three months of 2024, and total separations (mostly quits and layoffs) have declined almost as much as hiring has.

This helps to explain how job growth increased in Q1 while fewer hires were happening.

So what I’m seeing out of this JOLTS report is a still-strong jobs market, but one that isn’t overheating, and with labor demand slowly softening. This JOLTS report seems comforting if you fear inflation, as the underlying figures indicate that the demand for labor isn’t as strong and immediate as it was this time last year – we just haven’t had a need for as many layoffs and fewer workers are quitting. This also indicates to me that Tuesday’s freak-out on Wall Street over the 1.1% increase in employment labor costs for Q1 wasn’t warranted, and we aren’t heading back to the inflation levels we saw in 2021 and the first half of 2022.

Let’s see if the lower openings in March translate into softer job numbers for April when the monthly numbers come out on Friday, and if so, let’s see if that moderates wage growth as well. Although I’d argue that even if we were stuck at 4.5% wage increases and 3.5% inflation, that’s still a pretty good situation in the Real World....if that kind of thing matters.

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Tuesday, April 30, 2024

Workers making more + lower consumer confidence = lower market. Doesn't add up to me.

A usually mundane economic report freaked out some finance types today.

​

A 4.2% annual rate to pay and keep employees? THE HORROR! Let's see more from the actual report.
Compensation costs for civilian workers increased 1.2 percent, seasonally adjusted, for the 3-month period ending in March 2024, the U.S. Bureau of Labor Statistics reported today. Wages and salaries increased 1.1 percent and benefit costs increased 1.1 percent from December 2023. (See chart 1 and tables A, 1, 2, and 3.)

Compensation costs for civilian workers increased 4.2 percent for the 12-month period ending in March 2024 and increased 4.8 percent in March 2023. Wages and salaries increased 4.4 percent for the 12-month period ending in March 2024 and increased 5.0 percent for the 12-month period ending in March 2023. Benefit costs increased 3.7 percent over the year and increased 4.5 percent for the 12- month period ending in March 2023.

Compensation costs for private industry workers increased 4.1 percent over the year. In March 2023, the increase was 4.8 percent. Wages and salaries increased 4.3 percent for the 12-month period ending in March 2024 and increased 5.1 percent in March 2023. The cost of benefits increased 3.6 percent for the 12-month period ending in March 2024 and increased 4.3 percent in March 2023. Inflation-adjusted (constant dollar) compensation costs for private industry workers increased 0.6 percent for the 12-month period ending in March 2024. Inflation-adjusted wages and salaries increased 0.8 percent for the 12 months ending March 2024. Inflation-adjusted benefit costs in the private sector increased 0.1 percent over that same period.
I don’t get what’s so concerning or surprising about this. The monthly jobs reports have already told us that average hourly earnings went up by 1.0% for the first 3 months of 2024, and 4.1% over the last 12 months. And I would figure that a lot of the reason behind Q1’s higher-than-trend increase in benefits was because companies tend to re-set their insurance rates at the start of the calendar year.

Also, wage and salary increases that are above inflation ARE A GOOD THING, and helps explain why consumer spending and economic growth continues well after the “experts” thought it would taper off. But Wall Streeters and central bankers want the good things to end for everyday workers, because that’s the data points that they are looking for to believe that the Federal Reserve will drop interest rates from their 23-year highs.

Then a second bout of bad news hit later in the morning, and turned a minor selloff into a significant loss of 570 points in the DOW Jones Industrial Average.

The Conference Board's Consumer Confidence Index® fell to its lowest level since July 2022. The index retreated to 97.0 this month from March's downwardly revised 103.1. This month's reading was lower than expected, falling short of the 104.0 forecast.

The Present Situation Index, which is based on consumers' assessment of current business and labor market conditions, declined to 142.9 in April from 146.8 in March. Meanwhile, the Expectations Index, which is based on consumers' short-term outlook for income, business, and labor market conditions, fell to 66.4 in April from 74.0 in March. Note that a level of 80 or below for the Expectations Index historically signals a recession within the next year.

“Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income,” said Dana M. Peterson, Chief Economist at The Conference Board. “Despite April’s dip in the overall index, since mid-2022, optimism about the present situation continues to more than offset concerns about the future."

“In the month, confidence declined among consumers of all age groups and almost all income groups except for the $25,000 to $49,999 bracket. Nonetheless, consumers under 35 continued to express greater confidence than those over 35. In April, households with incomes below $25,000 and those with incomes above $75,000 reported the largest deteriorations in confidence. However, over a six-month basis, confidence for consumers earning less than $50,000 has been stable, but confidence among consumers earning more has weakened.”

Peterson added: “According to April’s write-in responses, elevated price levels, especially for food and gas, dominated consumer’s concerns, with politics and global conflicts as distant runners-up. Average 12-month inflation expectations remained stable at 5.3 percent despite concerns about food and energy prices. Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months rose slightly in April but is still well below the May 2023 peak.”
Inflation expectations are running at 5.3%? That’s well above the 4.5% annual rate that we’ve seen in the “elevated” numbers for the first quarter of 2024. And there isn’t a lot to indicate that the increased trend in inflation is going to continue in April, as the runup in gas prices has leveled off, and oil futures are at their lowest levels in 6 weeks.

I think a lot of the gloomier sentiment is caused by financial media being disappointed as indications came that the Fed would delay interest rate cuts until later in 2024, if any rate cuts were to happen at all.

In addition, I think a sizable amount of people are frustrated that the wage increases of 2023 and 2024 aren’t resulting in a significant change in the amount of cushion people have when it comes to paying their bills. This situation still beats layoffs and recessions, but with home prices back on the rise and inflation still above the levels we had gotten used to for the last 20 years, there are people thinking they should be much better off than they are (and I get that).

That grumpiness exists even though wage gains are beating inflation just as much as they were in Trump’s “great economy” of the late 2010s, with better job growth than we had 5 years ago. And negative sentiments haven't translated into a cutback in consumer spending when we've had similar downturns in consumer confidence over the last 3 years. Given that strong US wage growth in 2024 should keep consumer spending rolling along as the Summer beckons, if we get any kind of calming of inflation back to the 2-3% annual rate we saw for much of 2023 (which I think will happen, barring some serious corporate fuckery), and I think some of the unhappiness for both Wall Streeters and Main Street Americans that existed in April 2024 should fade over the next couple of months.

But that won't stop some annoying economic analysis that is sure to come from the "experts" in the next couple of weeks. I just hope Jerome Powell doesn't say something to make these hotshots freak out more when he meets the media after the Fed meeting gets out tomorrow.
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Monday, April 29, 2024

Did the warm Winter freeze finances in some Wisconsin counties?

You may recall that many Northern Wisconsin counties were reporting a significant drop in tourism during the Winter of 2024, because of a lack of snow and record warmth. This resulted in Governor Evers encouraging affected businesses to apply for disaster assistance through a program that usually is applied to droughts.

That declaration came in February, and I wanted to check and see if the lack of business was showing up in sales tax figures for these parts of the state. There is usually a two-month lag between the months when sales tax is originally paid (usually at the point of sale) and when those funds are distributed down to counties that the transactions are charged to.

So with April’s county sales tax distributions in place, is there an area that is suffering in collections? Let’s also add in March’s distributions, which reflect transactions in January, and compare it to those same two months in 2023, and here are the 9 counties with the biggest losses in sales tax revenue.

Most of these counties are rural and several are in the 715, but not all of them. I’m especially surprised by the double-digit drops in Dane and Brown Counties, and am not sure what’s going on with that, although my instinct is that it's just an odd item that isn’t a sign of anything long-term.

I also looked to see if there was a corresponding drop-off of sales taxes at the state level for January or February, to see if these double-digit drops were just the worst of a bad two months. But instead, the state had year-over-year increases in sales taxes, albeit tepid ones and below the 12-month inflation rate (1.95% for January, 0.56% for Feb), so some of that could be the drop in Winter tourism.

In contrast, there were big increases in state sales taxes the first 2 months of 2023 vs the same time period in 2022, so counties should be pulling in more sales taxes in 2024 than in 2022.

But combined county distributions for March and April were no different in 2024 than they were in 2022, and if you take out the 49% increase in Milwaukee County (due to their new sales taxes taking effect), they’re actually down more than 10% over that time. Given that the higher sales taxes haven’t trickled down to the county level, some of this might just be a lag in collections and/or distributions, and there should be a sizable increase in May that starts to make up for this. Especially since state sales taxes went up by 5.7% in March 2024 vs March 2023 (likely helped by an earlier Easter in 2024).

So the warm Winter of 2024 has had some effect, and lowered county sales taxes in several parts of Wisconsin. But with strong numbers at the state level for March, I’m going to wait to see what gets sent back to counties in the next couple of months before I think there is a significant fiscal concern. Counties are also slated to get a bit more in sales taxes starting in July, due to a provision in the Brewers stadium bill that reduces the share of money that the state keeps in exchange for collecting and sending out the local sales taxes for the counties.

In all, we can hope the setbacks of the Winter are short-term, and that we see a strong Summer for both everyday consumers and tourists which prevents any of that damage from being permanent declines with job losses, and a lack of resources for the counties to fix their roads and improve other infrastructure and services.

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Sunday, April 28, 2024

Kikkoman and Purina putting up big expansions in Jefferson County. Worth it?

Last week, we got a big jobs and plant investment announcement here in Wisconsin.
Japanese soy sauce maker Kikkoman Corp. announced on Wednesday that it will build a $560 million plant in Jefferson, which will be the company’s third plant in the U.S. to go along with nine production facilities overseas.

Gov. Tony Evers announced that the Wisconsin Economic Development Corp. pledged $15.5 million in tax credits to expand a plant in Walworth and build the new facility in Jefferson. It is expected to create 83 jobs in 12 years.

Kikkoman plans to build a 240,000-square-foot steel frame facility on a 100-acre site and make soy sauce and soy-based seasonings, according to plans. The sauce maker wants to start construction in June and expects to start shipments in fall of 2026. The company will invest in construction over 10 years.

Kikkoman Foods Inc., a subsidiary of Kikkoman Corp., bought the parcel on Industrial Avenue from Jefferson County, state records showed. The new plant will be 37 miles north of the Walworth facility, which was first established in 1973.
I'm generally skeptical of these incentive deals in general, and especially after the Foxconn debacle set up by the Walker/WisGOP folks in 2017, which gave very few benefits while costing state and local taxpayers hundreds of millions of dollars. So I took a look at WEDC's explanation of the expansion plans at Kikkoman. What I found most interesting about it is that most of the investment isn't in the size of factory itself, but in the equipment that's required to handle the extra business.

And it's the capital investments that the WEDC analysis says is the main "job generator" of the Kikkoman expansion. The are only expected to be 83 permanent jobs added at Kikkoman itself along with the 201 jobs that will stay in Wisconsin, but the work related to construction and equipment is expected to add a lot more.
Per the IMPLAN report, the capital investment for the Jefferson project could directly support 1,612 jobs, $131,561,461 of labor income and $148,450,488 in value added products and services upon project completion. Considering the multiplier effect, the project could support 2,593 jobs , $197,928,073 of labor income and $260,958,648 in value added projects and services through the end of the project.....

Per the IMPLAN report, the capital investment for the Walworth project could directly support 183 jobs, $16,121,747 of labor incokme and $18,955,640 in value added products and services upon project completion. Considering the multplier effect, the project could support 440 jobs, $34,508,980 of labor income and $47,182,358 in value added products and services in total through the end of the project.
Likewise, there would only be $1.1 million of the tax credits that would go to Kikkoman for adding jobs, and $14.4 million in tax credits set aside for the $800 million in capital expansion costs. In essence, this kicks most of the benefits to the construction and equipment businesses beyond Kikkoman, which seems to be a lot better than the direct giveaways that Foxconn got in 2017.

Also like Foxconn, Kikkoman is getting local tax breaks from the City of Jefferson, but it only adds up to around $10 million in infrastructure and another $5 million to other incentives as the plant opens and hires people. That's a lot less than the hundreds of millions of dollars in investment that was dumped down into the Foxconn region for a company that still isn't able to tell you much about what they are doing or what they are producing. Then two days later, we got news of more development at that Jefferson industrial park.

Oh? Tell us more about this one.
The Wisconsin Economic Development Corporation (WEDC) is supporting the project by authorizing up to $1.7 million in performance-based business development tax credits over the next five years. The actual amount of tax credits Purina will receive is contingent upon the number of jobs created and the amount of capital investment during that period.

Purina’s $195 million project will increase production of wet pet food brands in Jefferson by nearly 50 percent, including Pro Plan, Fancy Feast, and Beneful IncrediBites, and add 35,000 square feet to the facility. Purina has operated in Jefferson for nearly 115 years and today employs more than 250 local associates.
It also looks like the city of Jefferson is giving $2 million to Purina in TID incentives. That's quite a bit of debt for a city of less than 8,000 people, but I imagine it would give a big boost to the tax base once the expansions are complete. Just hope the local homeowners don't have to pay much more in the meantime.

But it is quite a bit of development and new jobs for a low-population part of the state, so it seems like a big deal. However, you wouldn't know that from the two Republicans that represent Jefferson today - Representative Scott Johnson and Senator Stephen Nass - or from the 2 Republicans who are hoping to represent the city of Jefferson after November 2024, Sen. John Jagler and Rep. William Penterman. None of them have released anything on last week's announcements of new jobs and expansions in their districts.

Wisconsin writer Dan Shafer found that and the "business as usual" reaction by the Evers Administration to the job announcements to be in major contrast with what happened with similar (and sketchier) jobs announcements from the previous Guv.

Also not hearing much on the developments in Jefferson from the "business leaders" at Wisconsin Manfacturers and Commerce. Isn't that wild?

On the whole, I'll take it, and if it comes to fruition, it's going to be good growth in a well-located area between Madison and Milwaukee. But like with all of these things, let's check back in 2-3 years to see what's actually happening (or not happening) in these places.

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Friday, April 26, 2024

A day after soft GDP report, we find US spending and incomes growing strong in March

One day after a disappointing GDP number of 1.6% was released from the Bureau of Economic Analysis, the BEA came back today to tell us that Q1 ended strong when it came to income and spending.

Sure, the media wants to make the 0.3% PCE inflation index a major part of this report. But given that the BEA told us yesterday that the same gauge went up by a 3.5% annual rate in Q1, 0.3% would be what we’d expect.

What we didn’t know is that spending and income growth picked up at the end of the quarter, well above the rate of inflation. Real Personal Consumption Expenditures were up 0.5% for March, and Real Disposable Income was up 0.2% last month. Multiply that by 12, and both stats are more than double the Q1 annualized rates of 2.5% consumption growth and 1.0% growth in real disposable income.

Even more heartening is that wage and salary growth had a second straight month of strong growth (0.7%, just like February), which are the largest back-to-back month increases since the Summer of 2022. But we aren’t seeing anything close to the 8-9% inflation rates that we were seeing in the Summer of 2022, so this translates into real wage and income gains instead of catching up to price hikes.

My only concern with this report is the fact that the increase in spending ($172.2 billion on an annual basis) was ahead of the $122.0 billion increase in income for March. This means that the savings rate fell to 3.2%, which is well below the 5.2% rate we had this time last year, and back down to the levels we saw in 2022.

Put it together, and this indicates that we are far away from recession, and in fact, the US economy was likely accelerating as the quarter ended. The one time setback in inflation-adjusted growth and spending that happened in January (largely due to price hikes at the start of the year) has been overcome, and it portends a strong start for Q2.

So no, I don't think the slowdown to 1.6% GDP for Q1 reflects anything beyond a jump in imports, and isn't a sign that we are heading to stagnation for the rest of the year. It doesn't necessarily mean things are clear and easy, and we especially need to see if corporations try to take advantage of the strong consumer spending and wage growth by jacking prices and profits higher. But with oil and gas prices plateauing in April and unemployment claims staying low, I would hope we see some of the economic and monetary fear-mongering calm down as we get the monthly data reports between now and Memorial Day.

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Thursday, April 25, 2024

GDP disappoints and inflation high in Q1. But people have no reason to be freaked out

Today featured the first look at 1st Quarter GDP in the US. And given the strong job and spending growth reports that we've seen, it seemed to be another quarter of good overall growth.

So what did we get?

US GDP for the annualized first quarter grew by 1.6%, well below the forecast decline to 2.5% from the previous 3.4%. It represents the slowest pace of GDP growth since September of 2022, but an uptick in Core PCE in Q1 kicked the legs out from beneath rate cut hopes. Q1 Core PCE rebounded to 3.7%, climbing over the previous 2.0% and overshooting the forecast 3.4%. Headline PCE inflation also overshot, printing at 3.4% versus the previous 1.8% as inflation remains hotter than investors hoped.
Ugh. But then you look at the actual numbers and the components involved in the GDP print, and it doesn't seem too bad to me.
The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
In fact, there was more home-building at the start of 2024 than at the end of 2023, and consumer spending growth stayed at a strong pace. It was only the trade and government sectors that caused the declines in GDP at the start of 2024.

The big jump in imports doesn't seem like a long-lasting drag, especially with more reshoring starting to happen in the country. I'd be a lot more concerned if consumer spending or home-building declined in Q1, but none of that happened.

The flip side of the report that spooked the markets was the inflation figures.
The personal consumption expenditures index, the Fed's preferred inflation gauge, rose at a 3.4% annual rate last quarter — much higher than the 1.8% in the fourth quarter of last year and the hottest print in a year.


The price index for gross domestic purchases — prices paid not just by U.S. consumers but also businesses and government agencies — rose at a 3.1% annual rate, up from 1.6% in the final months of 2023.


That led investors to further push back their expectations of when the Federal Reserve might cut interest rates and a new spike in bond yields. Two-year U.S. treasury yields rose 0.05 percentage points Thursday morning to a hair below 5% (4.995% as of 10:30am ET, to be precise).
But we already had indications inflation had risen in Q1. Two weeks ago, we got a third straight monthly reading of 0.3% or above, and the 3-month annualized increase of CPI was around 4.5%. So why would a 3.4% bump-up in the PCE index change what we thought our situation was?

Seems pretty stupid, and given that oil prices have leveled off in the last month, I'm not overly concerned with inflation running away to a higher level. I think it'll be more likely that it heads back toward the 2-3% level that we were at since last Spring.

Wall Streeters are still trapped in a 1970s mentality where inflation is caused by a lack of capacity and that it somehow cripples everything else. In reality, a lot of this will likely be one-time factors and "greedflation" where corporations tried to reset prices at the start of the year to hit the quarterly profit numbers. But reality-based or not, it caused a selloff on Wall Street today, and likely guaranteed a very bad April for the market, which is annoying in its own right.

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Tuesday, April 23, 2024

Your assessments are likely up, but your property taxes? It depends.

Given my geekdom on the subject, I’ve had a few friends and relatives ask me over the years about how property taxes get figured in Wisconsin for each parcel of property, and how it relates to their assessments. And given that you may have recently gotten a new property assessment for this year (as we did in Madison over the weekend), you might be especially intrigued right now.

Fortunately, Forward Analytics has put out a good explainer that lays out how a community’s total levy interacts with the assessments that individuals get.

To begin with, let’s go with this one-sentence summary from FA.
The key to understanding the property tax bill is this: Your share of total assessed property value equals your share of the property tax.
That’s because state law requires all properties that reside in a certain taxing area (school district, municipality, county, etc.) to have the same “base” tax rate, which calculates the total gross property tax. Forward Analytics uses a cute scenario to explain it further.
A simple three house example (base scenario) illustrates why revaluations are needed when assessed values are out of sync with market values. The village of Badgerville has three residents: Ashley, Ben, and Carol, who each own a house. Ashley’s house is assessed at $200,000, Ben’s at $300,000, and Carol’s at $500,000. There is no other taxable property in the village, so the total assessed value in Badgerville is $1 million with the three residents owning 20%, 30%, and 50% of the total, respectively.

The total property tax levy in the city is $10,000. Recall that the share of total assessed values is the same as the share of total property tax. Since Ashley’s property is 20% of assessed values, she pays 20% of the levy or $2,000. Ben pays $3,000 (30%) and Carol pays $5,000 (50%). The left side of Table 1 on page 7 displays this situation.

While this “share” method is critical to understanding revaluations, property owners are more familiar with property tax rates. In this case, the assessed tax rate (tax per $1,000 of assessed value) is $10. Applying that rate to each property yields the same tax liability.

And then when property is revalued, and communities change their total tax levies, the taxes change proportionally.

You can see where Ashley’s property went up by 20%, but her taxes went down by $214 in the first scenario, and even as the total levy went up by $1,000 in the second scenario, the taxes she pays to her community still went down.

Why? Because Carol’s property value assessment went up by a higher percentage, and now takes up a larger chunk of the community’s property value. Carol’s taxes go up by more than the 10% that the total levy is going up by as a result.

I’ll take this down to my personal example for the house my wife and I own here in Madison. Our property assessment went up a little over 9% for this year (uh oh!) and the total citywide assessment of property values went up …a little over 9%.
Locally assessed real estate increased 9.3% for 2024. Commercial assessments increased 10.5% ($15,584 to $17,223 million) and residential assessments increased 8.5% ($25,826 to $28,021 million). Steady growth and continued development contributed to the increase.
So in theory, if the total property tax levy for Madison stays the same for this year vs last year (HAH! I kid!) this would means our property taxes paid to the city would also stay the same. Or if the city’s property tax levy goes up by 2%, our taxes should also go up by 2%, and so forth. It also likely means that our property tax rate will continue to go down (unless we get an increase in the tax levy of 9%!).

The frustrating part to me is not that we are paying higher property taxes than we were a decade ago. Higher costs that the city needs to cover and a lack of increase in state funding means that property taxes take on some of those extra costs – it happens. But we have to pay almost all of these additional property taxes in full, with very little allowed to be written off.

The maximum state tax credit for homeowners and renters has been frozen at $300 for 24 years, and on the federal side, the SALT exemption (which includes state income taxes and local property taxes in Wisconsin) has been frozen at $10,000 for joint filers since the GOP Tax Scam was put in place in 2017.

About the only break we get is that our increased school taxes give us higher School Levy and Lottery Tax Credits – a credit that the Wisconsin Policy Forum notes is regressive in nature, as people that have higher property values end up being the ones with a higher write-off.
These provisions will help hold the statewide property tax increase much closer to those seen in the years preceding the pandemic – likely about 2% to 3% – while allowing a healthy increase in local revenues. The school levy credit is distributed based on how much in K-12 property taxes is paid in each community. As a result, the increase in the credit will deliver the most benefit to communities such as Brookfield or Madison with high property values, since they tend to pay more in property taxes for K-12 schools.

Lawmakers could have placed the money for the credits into state general school aids instead, and doing so would have produced a similar statewide benefit for property taxpayers as a whole. The school aids formula, however, distributes more of this type of funding to communities with low property values per pupil. So that alternate approach would have sent more of the benefit to communities with low property values such as Beloit and Milwaukee.
It wouldn’t help us as much in Madison, but I’d rather trade more state funding being distributed into the general aids, and not having property taxes be as much of a basis in funding for K-12 schools overall. Seems a lot easier vs having these extra kickbacks and credits that aren’t needed. But those are policy debates that won’t have any changes passed into law before the next property tax bills come out in 7 1/2 months.

In the short-term, what I’d tell you is to remember that when it comes to property taxes, it isn’t as much the increase in your assessment that matters as how much you’re going up compared to everyone else in your community. Given that increases in property tax levies are still severely limited at the local level (barring referenda or a lot of new construction going online in 2024), that big jump in property value isn’t likely to mean a bunch of sticker shock when your property tax bill comes.

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Monday, April 22, 2024

In almost all aspects, Wisconsin's finances are in great shape

Wanted to riff on a recent report from the Wisconsin Policy Forum on the state's strong fiscal situation. One positive side-effect of the state’s ongoing budget surplus is that there’s less of a need to take on debt. The Policy Forum notes that Wisconsin’s debt has plummeted over the last decade, and especially since 2017.

But some of that is due to paying bills that were put off by the Doyle and Walker Administrations as the state dealt with and recovered from the Great Recession. This meant that the state’s expenses going to pay off debt jumped in the rest of the 2010s, and only recently has declined to give the budget more breathing space.
In times of economic stress, however, the state is most immediately affected not by its total outstanding debt but by its annual debt payments, which can reduce the funds available for other spending priorities or put upward pressure on state taxes. The state has long sought to keep annual debt payments made with its main tax revenues, or General Purpose Revenue, to less than 4% of total spending to avoid crowding out other state priorities. (These figures are calculated using reports aligned with the state budget, not with the state’s comprehensive financial reports).

The state exceeded this target after it delayed making GPR debt payments during and immediately after the Great Recession from 2008 to 2012 to make it through those hard times (see Figure 7). That meant higher payments in later years. During the decade since, the state has been paying down GPR-funded debt and since 2017, it has largely avoided delaying these debt payments. Even during the chaotic pandemic, the state only delayed a relatively small part of its 2020 payment.

The result has been impressive. The share of GPR spending going to debt payments fell below 2.7% in both 2021 and 2022. With the exception of years in which the state skipped making debt payments because of budget challenges, that is the smallest share since 1984, according to the Legislative Fiscal Bureau (LFB) and Forum records.
One area that still has a sizable amount of expenses going to debt is in the state's Transportation Fund. Some of this has been mitigated in recent years with some of the General Fund surplus being used to pay for items in the Transportation Fund, and due to the borrowing spree of the Walker years ending in the last 6 years.

And with added infrastructure spending from the Feds starting to fade out in the next couple of years, it may be a good chance to see if there needs to be more funds sent over on the state level to further lower those debt payments in the Transportation Fund. And if so, will the General Fund surplus continue to be tapped to keep paying for that.

The Policy Forum notes that while the record bank balance is being reduced in this current budget, it is being done in a way that lessens the chances of future budget problems.
During the current 2024 fiscal year that closes on June 30, the state’s general fund is projected to spend nearly $3.3 billion more than it takes in from taxes and fees, according to LFB. As a result, the general fund balance (according to the cash-based accounting used for state budgeting) will fall from nearly $7.1 billion on June 30, 2023 to a projected $3.8 billion at the end of June 2024.

To some degree, spending down at least part of this sizable surplus can be seen as appropriate. Despite the drop in the general fund balance, the state’s rainy day fund will still retain an additional $1.8 billion to bolster state reserves. In addition, much of this new spending in 2024 is temporary or one-time in nature rather than permanent (such as expenditures for constructing and repairing state buildings). Also, the projected drop in the fund balance for 2025 is smaller at $551 million.
It also helps explain why it makes sense for Governor Evers to veto the $2 billion-a-year in permanent tax cuts that the GOP Legislature tried to get through. Because that would have taken away any ability to respond to an economic downturn, and would have put the state back into a deficit after we had finally gotten back to a solid fiscal situation.

We will find out in the coming weeks what tax season did for the state's revenue and overall budget for what is left in the 2024 Fiscal Year. So far the numbers have beem tepid, which is why the Legislative Fiscal Bureau had already reduced its revenue outlook back in January. But let's see if the big stock market gains of 2023 lead to a need for Wisconsinites to send in large amounts of tax payments in April 2024, which may help the state's bottom line, give expanded breathing room and perhaps allow us to continue on the right path going into the 2025-27 state budget.

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Sunday, April 21, 2024

Warm winter giveth to Feb home-building, and takes from it in March

One of the few items that made Wall Streeters give a temporary pause to the thought that interest rate cuts would get delayed was when home-building info showed a sizable drop in activity in March.
Privately‐owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,458,000. This is 4.3 percent below the revised February rate of 1,523,000, but is 1.5 percent above the March 2023 rate of 1,437,000. Single‐family authorizations in March were at a rate of 973,000; this is 5.7 percent below the revised February figure of 1,032,000. Authorizations of units in buildings with five units or more were at a rate of 433,000 in March.

Housing Starts
Privately‐owned housing starts in March were at a seasonally adjusted annual rate of 1,321,000. This is 14.7 percent (±9.9 percent) below the revised February estimate of 1,549,000 and is 4.3 percent (±9.4 percent)* below the March 2023 rate of 1,380,000. Single‐family housing starts in March were at a rate of 1,022,000; this is 12.4 percent (±12.5 percent)* below the revised February figure of 1,167,000. The March rate for units in buildings with five units or more was 290,000.

Housing Completions
Privately‐owned housing completions in March were at a seasonally adjusted annual rate of 1,469,000. This is 13.5 percent (±11.0 percent) below the revised February estimate of 1,698,000 and is 3.9 percent (±13.5 percent)* below the March 2023 rate of 1,528,000. Single‐family housing completions in March were at a rate of 947,000; this is 10.5 percent (±10.1 percent) below the revised February rate of 1,058,000. The March rate for units in buildings with five units or more was 502,000.
Whoa, are the high interest rates leading to further pullback in home construction?

I don't think so, because some of this seems to be a natural adjustment to new housing construction that was “pulled forward” in a warm February. Housing starts is a very good exampkle of this, with the 14.7% decline being a snapback from a 12.7% increase in February.

One red flag that I do notice is that we have the smallest number of total housing units under construction in over a year, despite having the most single-family units being built since last Spring. That's because housing projects of 5 or more units have had a sizable drop since last Summer.

There was a similar theme from the National Association of Realtors, as they reported that existing home sales fell in March.
Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – receded 4.3% from February to a seasonally adjusted annual rate of 4.19 million in March. Year-over-year, sales waned 3.7% (down from 4.35 million in March 2023).

"Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves," said NAR Chief Economist Lawrence Yun. "There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market."

Total housing inventory registered at the end of March was 1.11 million units, up 4.7% from February and 14.4% from one year ago (970,000). Unsold inventory sits at a 3.2-month supply at the current sales pace, up from 2.9 months in February and 2.7 months in March 2023.

"More inventory is always welcomed in the current environment," Yun added. "Frankly, it's a great time to list with ongoing multiple offers on mid-priced properties and, overall, home prices continuing to rise."
But if you take away February's numbers, the 4.19 million sales rate was also the fastest since May, and the 3.80 million in single-family sales was the fastest since March 2023. Looking over the last year, it appears sales got pulled ahead into February, and that the overall trend is moderate growth for the last 6 months after a decline in sales in the middle half of 2023.

It’s also intriguing that housing sales continue despite mortgage rates bouncing higher in the early part of 2024, as the prospects of a softer economy and a quicker start to Fed rate cuts began to fade. Let's see if that one continues for April.

I do find the trends of higher inventory and more completions and construction on single-family homes to be a good sign, as housing affordability is one of the few real headwinds in the current economy, and that's been compounded by the higher interest rates that exist in early 2024. But it's still nowhere near as good for potential buyers as it was 3 years ago, both in cost and interest rates, and while it's nice for millions of us to have large levels of housing wealth "banked", there still aren't a lot of places to turn to if we wanted to cash in those gains.

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Wisconsin loses most jobs in U.S. in March??!! But Feb revisions show a strong Q1

Got a new Wisconsin jobs report for March this week. And not all that great, to be honest.
Place of Residence Data: Wisconsin's March 2024 unemployment rate held steady at 3.0%. The labor force decreased 3,500 over the month, to 3,140,000. The number of people employed decreased 800 over the month, to 3,047,100. The number of unemployed people decreased 2,600 over the month, to 93,000.

• Place of Work Data: Total nonfarm jobs decreased 1,700 over the month and increased 22,700 over the year, to 3,034,400 in March. Private sector jobs decreased 2,900 over the month and increased 14,300 over the year to 2,623,400. Construction jobs grew by 3,100 jobs over the month, to a record high 143,900 jobs.
The construction boom in Wisconsin and nationwide is a story that isn’t told enough, as nearly 8,000 jobs has been added in that sector in our state since October, and over 15,000 have been added since the start of 2022.

But as good as construction was for hiring, manufacturing employment was just as bad for losses, down by 2,900 in March, and over 5,000 below our post-COVID peaks. It also gave away much of the recovery that sector had been seeing for jobs since bottoming out last September.

Add in the loss of 1,800 jobs in warehousing and 1,300 jobs lost in Health Care and Social Assistance in a month when 2 hospitals closed in the Eau Claire area, and you get a bad month for March. Remarkably, Wisconsin was 1 of only 6 states that lost jobs last month, with our total loss of 1,700 being the largest drop in jobs out of any of those 6 states.

In looking at the reports from other US states, Wisconsin’s loss of jobs in March is in complete contrast to what happened in the rest of the Midwest, which had strong job growth in all of the other states in our part of the country.

Job growth, March 2024
Ill. +12,700
Minn +11,000
Ohio +11,500
Mich +6,100
Iowa +4,400
Ind. +4.100
Wis. -1,700

But I also looked back and noticed that February's job gain was revised up by 5,200 jobs, for a newly reported increase of 8,400 jobs in that month, and a total of 14,300 for the first 2 months of 2024. So perhaps March just reflects a correction to what is a still a strong 1st Quarter of job growth in our state.

We also haven’t seen much of an increase in unemployment claims in the state during April. In fact, Wisconsin had a drop of nearly 1,800 initial unemployment claims last week, the second-largest drop in new claims in the US. Continuing claims in Wisconsin declined by more than 2,100 the week before, and reversed an unusual increase for March.

If claims continue to decline for the last 2 weeks of April, I’ll think that March’s disappointing jobs numbers was a blip likely triggered by the closings of hospitals in the Eau Claire area, and a snapback from big numbers in a warm February that pulled forward some work that usually ticks up in Spring.

So I'm not going to worry too much about whether Wisconsin's strong job growth is suddenly reversing, unless the bad trend continues in April and May. We just need to keep trying to attract talent and expand our capacities, as we aeren't likely to get much further below the 2.96% unemployment we had last month.

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Wednesday, April 17, 2024

US economy is doing too well? The Fed and Wall Street seem to think so

As 2023 ended, there were questions as to whether the strong US economy that we've been in for the last 3 years was going to continue. We'd seen softening numbers for both inflation and consumer spending growth, and even job growth had fallen off some in the later part of 2023.

But for the first three months of 2024, we've seen US job growth pick up and inflation bump up to its fastest 3-month increase since last Summer. And that's leading to some changes in outlook. For example, International Monetary Fund said this week that the US is going to outpace the rest of the developed world in economic growth this year.
The IMF revised its forecast for 2024 U.S. growth sharply upward to 2.7% from the 2.1% projected in January, on stronger-than-expected employment and consumer spending. It expects the delayed effect of tighter monetary and fiscal policy to slow U.S. growth to 1.9% in 2025, though that also was an upward revision from the 1.7% estimate in January.

European Central Bank President Christine Lagarde has cited the stark divergence between the U.S. and Europe, which is facing slower growth and faster-falling inflation.

The latest IMF forecasts bear this out, with a downward revision to the euro zone 2024 growth forecast to 0.8% from 0.9% in January, primarily due to weak consumer sentiment in Germany and France. Britain's 2024 growth forecast was revised down by 0.1 percentage point to 0.5% amid high interest rates and stubbornly high inflation.
Soon after that IMF report came out, we got confirmation that US consumer spending in America was robust for the 1st Quarter of 2024, coming in above what the "experts" were predicting.

This strong economic performance and outlook led Fed Chair Jerome Powell to say this week that interest rate cuts are going to come later in 2024, if at all.
Federal Reserve Chair Jerome Powell cautioned Tuesday that persistently elevated inflation will likely delay any Fed interest rate cuts until later this year, opening the door to a period of higher-for-longer rates.

“Recent data have clearly not given us greater confidence” that inflation is coming fully under control and “instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said during a panel discussion at the Wilson Center.

“If higher inflation does persist,” he said, “we can maintain the current level of (interest rates) for as long as needed.”…

In the past several weeks, government data has shown that inflation remains stubbornly above the Fed’s 2% target and that the economy is still growing robustly. Year-over-year inflation rose to 3.5% in March, from 3.2% in February. And a closely watched gauge of “core” prices, which exclude volatile food and energy, rose sharply for a third straight month.

As recently as December, Wall Street traders had priced in as many as six quarter-point rate cuts this year. Now they foresee only two rate cuts, with the first coming in September.
Not great if you're a borrower, or if you were anyone else counting on interest rates dropping from their 23-year highs. It's also spooked the stock market, which has seen all of the gains of the first three months of the year go away in April, as the odds for rate cuts have declined.

I'm not going to complain about increased job and consumer spending growth, and you shouldn't either. Unless inflation stays at or above a 4% annual rate for the next 3 months, there's not much that's going to cause real concerns in the actual economy. I'd still argue that our current rates are too high and are making the market for single-family homes even tighter than it already was, but I'm also starting to accept the reality that those rates won't go down any time soon. So adjust and invest accordingly.
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