Total US spending and incomes keep growing. Why aren't consumers believing that?

We had indications that consumer spending had been holding up well with good retail sales numbers for the last 2 months, and we got more confirmation from that on the larger-scale spending and income report that came out from the Commerce Department yesterday.

In spite of still-rising prices on most goods and services, a Friday report from the Commerce Department finds the pace of consumer spending jumped more than expected in August and is a factor helping buoy a U.S. economy that’s facing elevated inflation alongside a rickety jobs market….

U.S. workers saw their incomes grow by 0.4% in August but their spending rate increased even more, moving up an unexpected 0.6% or just over $129 billion.

“Net, net, consumers literally hit it out of the park with very strong gains in spending not just for August, but June and July as well,” Chris Rupkey, chief economist at Fwdbonds, told CNBC. “Summer was the time for consumer revenge spending after hunkering down in retreat from the shops and malls during the uncertainty and fear produced by the White House tariff rollout in April and May.”

Yet consumers continue to feel worse about the economy. On the same day the strong spending numbers came out, we had another drop in consumer sentiment.

Consumer sentiment confirmed its early-month reading and eased about 5% from last month but remains above the low readings seen in April and May of this year. Although September’s decline was relatively modest, it was still seen across a broad swath of the population, across groups by age, income, and education, and all five index components. A key exception: sentiment for consumers with larger stock holdings held steady in September, while for those with smaller or no holdings, sentiment decreased. This month, sentiment moved down about 9% for independents and 4% for Republicans, whereas it lifted this month for Democrats. Nationally, not only did macroeconomic expectations fall, particularly for labor markets and business conditions, but personal expectations did as well, with a softening outlook for their own incomes and personal finances. Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year. Interviews this month highlight the fact that consumers feel pressure both from the prospect of higher inflation as well as the risk of weaker labor markets.

I bolded the part about rich investors because I think it explains a lot about how the overall numbers are still good while everyday consumers don’t think things are going well. Keep that in the back of your mind as your read on.

I’d also quibble with saying that “workers” saw incomes rise by 0.4%, because wages and salaries had their 2nd lowest increase in the last 12 months, at $33.0 billion (+0.25%), as part of a general cooling that we’ve seen in both hiring and wage growth for much of 2025.

Instead, we saw a sizable increases in Medicare benefits (+$10.7 billion), income for farmers (+$15.8 billion), which continues a trend of a large amount of income growth coming outside of wages, salaries and benefits that workers get from employers.

What I think we may be seeing is richer Americans using their stock gains as part of a growing inequality of consumption, but while the people who rely on wages for the income (aka – people who work) are spending increasing amounts of their income just to get by, and are worried that they won’t be able to do even that in the near future.

Alicia Wallace at CNN went deeper on this subject, noting that prices for staples keep rising, hitting lower-income Americans, and causing cutbacks in discretionary spending while richer people are spending more than ever.

Recent months’ data and company earnings reports show that Americans are putting an increasing share of their dollars toward essential areas — particularly health care, housing and insurance — as they pull back on other spending, said Adam Josephson, a longtime paper and packaging analyst who publishes a newsletter on consumer spending and other economic trends….

“You’ve been seeing it for the past year among all manner of consumer companies, whether it’s [consumer packaged goods] companies, retailers, restaurants, airlines, hotels, you name it, any company that sells something that could reasonably be considered discretionary seems to be having a problem,” he said. “If these companies that sell to the consumer economy are experiencing growing difficulties, what are they likely to do? They’re likely to contract, cut costs, which means lay people off, shut facilities,” [Josephson said].

Josephson pointed to Starbucks as a prime example.

The nation’s largest coffee chain announced plans Thursday to close 400 underperforming shops nationwide. Although the closures account for barely 1% of Starbucks’ footprint, the cost-cutting includes the layoffs of roughly 900 employees.

The recently-released retail sales report echoes that analysis. Even with "core" retail sales outside of autos and gasoline going up by 0.7% in August, we saw furniture stores, health and personal care stores, and department stores all have declines in that month, and building supply/gardening stores and department stores had a 3-month decline in sales vs the previous 3 months (before we account for inflation), and grocery store sales aren't going up by any more than the rising prices inside the stores.

So that's why these good numbers for income and spending may not feel right when you take into account your own experience and your community. Because it isn't acting like a 3%+ GDP economy in most of America, since much of the income growth isn't coming from jobs, and much of the increase in consumer spending isn't being done by everyday people.

Housing market struggling in much of US, but red-hot in Milwaukee!

Nationwide, the housing boom of the 2020s appears to be over, and is in danger of teetering downward.

Notes from the Fed meeting in July highlight discussion between committee members on slow economic growth in the first half of the year, due in part to a decline in residential investment. Members reflected on weakening housing demand, more homes for sale and falling house prices….

According to the National Association of Realtors, existing-home sales ticked up just 0.8% year over year in July, but inventory (15.4% increase) and months’ worth of supply (4.0 to 4.6) rose significantly from a year earlier — signals that the market is slackening rather than roaring back.

The rate of new-home sales, seasonally adjusted, fell year over year in July, per the Census Bureau. The months’ supply rate also increased to 9.2 months, compared to 7.9 months last year.

That same Census Bureau report showed prices of new homes have declined in a majority of months over the last year, including a 5.9% year-over-year decline in July.

But one state that’s not seeing a decline in their housing markets is Wisconsin. In fact, recent articles say our largest metro area is the hottest housing market in America!

The typical U.S. home waited for a buyer for 60 days, a full week longer compared with a year ago, according to the August 2025 Housing Market Trends report from Realtor.com®.

Yet in Milwaukee the median for-sale property remained unsold for just 32 days—roughly half the national days-on-market figure for August, making it the fastest-selling metro among the top 50…. In August, the median listing price in Milwaukee inched up just 0.2% from a year ago to $399,900, well below the national median of $429,990, which was flat year over year.

Meanwhile, Brew City’s inventory of for-sale homes edged up 6% compared with August 2024—but new listings saw a 3.4% year-over-year dip.

On top of that, Milwaukee had the lowest months of supply in June, at just 2.7, putting it squarely in the seller’s market column.

And data from the Wisconsin Realtors’ Association backs up that southeastern Wisconsin is still seeing steady and significant growth in housing prices.

And that’s with the number of housing sales being no different than we saw at this time in 2024, and more than 30% below the amount of sales that were happening at this time in 2021, which underscores the still-tight inventory of homes in the 414 and 262 area codes.

More-expensive Dane County has had a boom trend that resembles the higher-priced markets in other parts of the country. And like other parts of the country, the price boom seems to be leveling off in the Madison area.

So maybe Dane County's plateauing is a sign of what might happen in the smoking Milwaukee market in the next year. And these still-strong housing trends in Wisconsin make me wonder how bad the economy must seem in parts of the South and West that are seeing significant declines in prices.

Why would Fed keep cutting rates after this week? Is it because of bad home-building numbers?

As you likely heard, the Federal Reserve's Open Markets Committee met last week and voted to cut interest rates for the first time in 9 months. But to me the more interesting part is the economic projections that the Fed put out along with the statement to lower the Fed Funds rate by 1/4 point. If you look at the Fed’s economic projections, and compare it to the one that they had back in June (which also included their March projections), it shows that they expect GDP growth for 2025 to be slightly more than they did in June (1.6% now and 1.4% in June), but less than the 1.7% that was projected in March. And a similar pattern of “better than June but worse than March” also appears in the Fed’s projections for unemployment.

But in those same projections, the Fed said inflation would stay elevated for this year and that 2026’s inflation will be even higher than they thought in June. And both years are now expected to have notably higher inflation than what was projected in March.

But despite that change in outlook, the Fed is now saying they will do more rate cuts for the rest of this year, and that next year’s interest rates will be the same as projected in March?

How does that make sense, at least in a world where a couple of these Fed officials aren’t trying to get on Donald Trump’s good side by saying they’ll do more rate cuts? Either the real economy is going to be near or in recession to warrant those additional rate cuts, or we are going to see inflation go higher due to higher demand.

Fed statement makes it official: Stagflation is in the room. "Job gains have slowed, and the unemployment rate has edged up... Inflation has moved up and remains somewhat elevated. "

— Justin Wolfers (@justinwolfers.bsky.social) September 17, 2025 at 1:10 PM

Perhaps the Fed is also giving extra attention to the bad news that keeps coming for the housing markets. Home construction continued to decline in August, indicating that the recession in that sector may be worsening.

Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,312,000. This is 3.7 percent below the revised July rate of 1,362,000 and is 11.1 percent below the August 2024 rate of 1,476,000. Single-family authorizations in August were at a rate of 856,000; this is 2.2 percent below the revised July figure of 875,000. Authorizations of units in buildings with five units or more were at a rate of 403,000 in August.

Privately-owned housing starts in August were at a seasonally adjusted annual rate of 1,307,000. This is 8.5 percent (±10.7 percent)* below the revised July estimate of 1,429,000 and is 6.0 percent (±9.7 percent)* below the August 2024 rate of 1,391,000. Single-family housing starts in August were at a rate of 890,000; this is 7.0 percent (±8.2 percent)* below the revised July figure of 957,000. The August rate for units in buildings with five units or more was 403,000.

Privately-owned housing completions in August were at a seasonally adjusted annual rate of 1,608,000. This is 8.4 percent (±19.2 percent)* above the revised July estimate of 1,483,000, but is 8.4 percent (±22.4 percent)* below the August 2024 rate of 1,755,000. Single-family housing completions in August were at a rate of 1,090,000; this is 6.7 percent (±11.7 percent)* above the revised July rate of 1,022,000. The August rate for units in buildings with five units or more was 503,000.

This means multi-year lows for permits and homes under construction, and a lower number of housing starts than we had in any non-COVID month between 2020 and 2023.

Even that increase in completions over the last 3 months isn’t great news, because it reflects projects which were started 1-2 years before then, and we aren’t seeing as many new jobs in the pipeline to keep the demand for work going.

We’ve already seen the construction sector start losing jobs in recent months. Even if you account for the recent (downward) benchmark revisions of job growth, construction still had gains of 104,000 jobs over the 12-month period ending in March. But in the reports since March, construction has lost 8,000 jobs, including losses in each of the last 3 months.

So even though the Fed said little about what seems to be a housing recession, is that a main reason they would continue to cut interest rates, even though rising inflation would indicate that they shouldn't be doing that?

Incomes up in 2024, but higher costs led more to feel poor, and choose Trump. Can't think it's better now

This week featured the release of the Census Bureau's annual reports on US incomes, US poverty, and health insurance in America.

On the income side, real US median household incomes lost ground to inflation in 2021 and 2022, but regained all of those losses as inflation ebbed in 2023 and 2024. This enabled a new all-time high for real median household income to be reached by the end of Joe Biden's term in office, at $83,730 (in 2024 dollars).

Also worth noting, there was inflation-adjusted income growth for all deciles in the US income range in 2024, from lowest 10% to highest 10%.

Wisconsin also saw it's inflation-adjusted median household income go up last year, from $81,750 to $82,680 (1.1%). But that wasn't the case for half of the other Midwestern states last year, and interestingly, higher-income Minnesota and Illinois were the only 2 states in our region that had lower real median household incomes than they had in 2020.

While it was true that many Americans were better off than they were 5 years ago due to higher incomes and wealth, as they went to the voting booths, many didn’t think things were better because they were paying more. And all of the states that had higher real household incomes in 2024 vs 2020 ended up voting for Donald Trump last November.

It’s why I think another one of the Census Bureau’s reports is instructive as to why some might have felt this way. The US poverty report has two separate measures - the "official" poverty rate, which has been measured for more than 60 years, and the Supplemental Measure of Poverty (SPM), which was more recently developed. Note the difference in the two rates in the 2020s.

The SPM adjusts for various costs of living for Americans in different parts of the country, and also accounts for various welfare policies that help provide needs and services that might keep someone from being destitute.

The SPM allows us to estimate how including different resources and expenses affects the number of people in poverty and the poverty rate. Figure 10 (Tables B-6 and B-7) shows how adding or subtracting different factors from the resource calculation would affect the number of people in poverty in 2024. Some of the programs in the figure—cash programs such as Social Security and unemployment insurance benefits—are included in both the official poverty measure and the SPM. Others—such as refundable tax credits, SNAP, and housing subsidies—are only included in the SPM. Necessary expenses—such as taxes, medical expenses, and work-related expenses—are also deducted from SPM resources but are not considered in the official poverty measure.

To evaluate the effect of programs that add to resources (e.g., Social Security and cash and noncash transfers), we subtract the value of each component from a unit’s resources and recalculate poverty status. In contrast, to evaluate the effect of expenses, we add back the value of each component to a unit’s resources. Poverty status changes if subtracting a program benefit decreases individuals’ resources below their poverty threshold or if adding an expense takes them above their poverty threshold. These additions and subtractions are done independently and assume no behavioral changes such as shifts in employment status and expenses.

On the other hand, the SPM also accounts for expenses that weren’t looked at when the original poverty measure was figured more than 60 years ago.

The SPM subtracts amounts paid for child support, income and payroll taxes, work-related expenses, and medical expenses from resources, which increases the number and percentage of individuals in poverty. Of the subtractions, medical expenses had the largest effect, pushing 7.5 million individuals into poverty in 2024. This effect varied by age. For those 65 years and older, subtracting medical expenses raised the poverty rate by 3.7 percentage points. The effect was smaller among 18- to 64-year-olds (1.8 percentage points) and children (2.1 percentage points).

Notice that big decline in the SPM in 2020 and 2021 and then the big jump up in 2022? That’s the result of expanded SNAP subsidies and child tax credits as well as boosts to unemployment benefits that we saw during the COVID pandemic, and then those forms of assistance ended as the pandemic faded. Combined with the jumps in prices that happened in the first part in 2022, and you can see where a lot of people feel they fell behind and never caught up – even if their incomes would tell you they did.

You can really see it when you take a look at the state-level poverty numbers, which came out on Thursday.

See how states like California, Arizona, Texas, Georgia, Florida, New York, and Massachusetts are in a higher tier of poverty on the SPM scale? Those are states with large metro areas that are more likely to have people with higher incomes (so they don't show up in the "official" poverty number), but also more likely to have higher everyday expenses that may make people with above-poverty incomes qualify under the SPM. Likewise, some more rural states with high levels of SNAP, Medicaid, and elderly-based assistance had lower SPMs than the official poverty rate.

Wisconsin scores well on both measures, with an "official" poverty rate of 8.3% in 2024, and an SPM of 7.7%. Only Minnesota has lower levels in both measures in the Midwest, and Wisconsin had the 3rd lowest SPM rate and 8th lowest official poverty rate in America last year. Pretty good spot to be in.

But if the SPM-coded issues of affordability were a reason some voters decided to return Donald Trump to the White House last November, I can't think things are better for those people in 2025. Many cost-of-living expenses continue to rise, inflation-adjusted wages aren't going up as much as they were this time last year, and health insurance costs are set to spike this Fall while government assistance for benefits will decline.

Gee, no wonder why consumer sentiment numbers are back near multi-year lows, and down 21% from where they were in 2024. We may not be seeing as much of the bad stuff in Wisconsin, but nationwide, things are not good at all when it comes to what Americans think about the economy. And knowing that things are worse than the already not-great situation we were in for 2024 explains a lot.

A few things on our August floods and the FEMA funds heading to our state

Just over a month ago, southeastern Wisconsin was hit with record rainfall and widespread flooding. This led to numerous houses and businesses being damaged and some destroyed, some roads washed out, and the last day of the Wisconsin State Fair was cancelled.

In a matter of incredible timing, the Wisconsin Policy Forum released a breakdown of US and state flood policies within a week of the floods, and how much Wisconsinites have (or have not) needed to recover from damages caused by previous events.

Long-term changes in rainfall intensity and continued urbanization and land use changes have led to more destructive flood damage across the state and spiking damage claims. This is a key takeaway from our analysis of data from the National Flood Insurance Program, which offers subsidized coverage to property owners and renters. This federal program helps cover part of the costs associated with rebuilding after disasters like the massive flooding in Milwaukee and surrounding communities that took place on Aug. 9 and 10 as a result of near-record rainfall....

Beginning in 1997, the state has seen a series of massive flooding events that resulted in spikes in total damage claims by flood insurance policyholders, as shown in Figure 1. These surges in claims occurred without a substantial increase in the number of policies held in the state. Each of these spikes was associated with extreme rainstorms, during the worst of which more than 10 inches of rain fell over the course of a few days. These storms caused rivers and streams to overflow their banks and destroy buildings and infrastructure and caused flash floods, where water that flowed off of roofs and pavement inundated buildings, roads, and bridges built in low-lying areas. Current projections show a substantially increased likelihood of days with heavy rains over the next 20 years in most of the state, making spikes in property damage more likely to occur in the future.

Those are through claims processed by the Federal Emergency Management Administration's (FEMA) flood insurance program, and the Policy Forum mentions that some of this is mandatory in flood-prone areas, and others can buy into the program (though not many do).

Policies are managed by both FEMA and private insurance companies and require premium payments like other insurance policies, but these premiums are subsidized by the federal government. Insurance costs to policy holders vary according to the risk of flooding in a specific location, property value, and other factors. Recent efforts by FEMA have changed how premium prices are set, based on property-specific risk assessments instead of flood maps alone. As of 2023, the median flood insurance policy for a single-family home in Wisconsin cost $804 annually, just above the national average of $786.

State and federal officials visited southeast Wisconsin to make damage assessments throughout the rest of August, and Governor Evers and Wisconsin's Congressional delegation from both parties sent requests to FEMA asking President Trump to declare a disaster from the rain events in August, which would allow for more types of aid to head to Wisconsin to clean up and recover from the damage.

And while I don’t give much credit to Donald Trump and whoever works for his Administration for nearly anything, on this one, I’ll make an exception. Because FEMA officially has agreed to offer financial assistance for help Wisconsinites!

At 7:48 p.m. CT [Thursday], the Evers Administration received official notice that the Trump Administration has approved Gov. Tony Evers’ request for a major disaster declaration for counties impacted by recent severe storms and flooding, which preliminary damage estimates determined caused 1,500 residential structures to be destroyed or sustain major damage with total damage costs estimated at over $33 million, as well as more than $43 million in public sector damage throughout six Wisconsin counties….

The governor’s request to receive Public Assistance to help support emergency work and the repair or replacement of disaster-damaged facilities in Door, Grant, Milwaukee, Ozaukee, Washington, and Waukesha Counties remains under review by the Trump Administration. Additionally, the Trump Administration is also still reviewing the governor’s request for assistance under the Hazard Mitigation Grant Program, which helps support flood mitigation measures, such as structure acquisition/demolition, structure elevation, and storm sewer upgrades, to provide opportunities to avoid future loss of life and eliminate repetitive, expensive flood damage in these communities.

The anticipated nearly $30 million reportedly approved is the federal share of the validated damage submitted in the governor’s Individual Assistance request. Once the Individual Assistance application process starts, the actual monetary amount of benefits will be based upon eligible applications that are submitted and approved through the process.

So as of now, individual Wisconsinites can receive funds to pay for the damage to their homes and any relocation expenses that were required.

What hasn’t been approved yet by the Trump Administration is any assistance available to the state or for local governments to fix the estimated $43 million in Wisconsin roads, infrastructure and facilities damaged by the flooding. And if the Trump Admin doesn’t give any more FEMA funds, then it’ll fall to the state and those local communities to pass their own assistance package, or delay other projects as the funds for those have already gone to repair the damage from those floods.

And that might be something our State Legislature could need to go back and deal with if the Trump Administration says Individual Assistance is all we are going to get from the record rainfall and floods of August. As the Policy Forum’s report mentions, here's a way the state can step in to take care of flood-related expenses.

In addition to federal funding, the state offers two major programs that provide aid to help local governments rebuild after disasters like floods. One is specifically for roads damaged by floods, and the other is a general disaster aids appropriation through the state’s Department of Military Affairs. Aid through Military Affairs cover costs for local government repairs where federal funding is not available.

State aid to rebuild local roads after floods and other disasters is distributed through the state Department of Transportation. Cities, villages, counties, and towns can all apply for funds to repair roads or bridges destroyed by a natural disaster. Initially, this program only applied to flood damage, but that definition was expanded in 2017 to include other natural disasters. While this aid can be helpful, payments are capped at 75% of the total costs of replacing the destroyed roadway. As Figure 4 shows, state road damage aids tend to jump in response to major flooding events, while general disaster aids, which cover costs beyond road repair, don’t follow as closely with flood damage. This speaks to the impact floods can have on the state’s bridges and road network.

The amount of aid provided by these programs is typically much smaller than what is available from the federal government. For example, in 2018, when inflation-adjusted payments from the federal government totaled nearly $60 million and flood insurance claims topped $20 million, state payments through the Department of Military Affairs were only $1.8 million. While state costs for disaster aids have grown, they’re still a relatively small portion of the state’s $22.6 billion general tax revenue in 2026. However, these costs will likely grow over time, and state and federal aid do not cover all the expenses associated with damage to local infrastructure. So, state leaders may feel compelled to cover a greater share of flood-related costs as they grow with more frequent events.

If you read the Legislative Fiscal Bureau's explanation of the Wisconsin’s Disaster Damage Aids program, it mentions that the governor could transfer General Fund dollars to the Transportation Fund to pay for repairs to roads and infrastructure that exceed $1 million. But that can't happen until after July 1 of next year, so if there isn't a second FEMA disaster declaration to help the state and local governments of Wisconsin, the Legislature might want to do something to designate funds for flood-related repairs sooner than later.

So while it's great to see the homeowner assistance get approved, which will help southeastern Wisconsinites get back on their feet after this extreme weather event, there's still the question of whether more help is coming from our roads and related public works, or if state and local taxpayers will have to take up those burdens.

INFLATION WATCH shows higher numbers, and now Wall Streeters don't care?

This week brought back INFLATION WATCH, including today's release on consumer prices. Not surprisingly, it confirmed consumers were paying more in August, with the trend going the wrong way.

The latest data from the Bureau of Labor Statistics showed that the Consumer Price Index (CPI) increased 2.9% annually in August, a rise from July's 2.7% increase and on par with economists' expectations.

Month over month, prices rose 0.4%, an uptick from July's 0.2% increase and higher than economists' expectations of a 0.3% monthly gain. The rise was driven by stickier gasoline prices and firmer food inflation.

Core inflation, which strips out volatile food and energy, rose 3.1% year over year in August, unchanged from July and in line with estimates. On a monthly basis, core prices climbed 0.3%, matching July's increase, which was the strongest monthly rise in six months.

So your higher grocery bills in the last month are indeed showing up in this data, and there is evidence tariffs are being passed through to store shelves. Auto parts and equipment were up 0.6% last month and 2.1% over the last 3 months, and tools, hardware and outdoor equipment went up 0.8% in this report, and 2.6% since May.

The inflation was especially obvious for groceries, as food at home jumped by 0.6% last month, the largest one-month increase in nearly 3 years. That included the largest meat price increase since October 2021, jumping by 1.8% in August, a cumulative increase of nearly 4% in the last 3 months, and 7.3% over the last year.

And with some meats, prices are going up much more than that.

Hey, remember when Trump would go on and on about the price of bacon this time last year? Someone should follow up on that one.

And businesses are also still paying higher prices, as yesterday's Producer Price Index report may have had a 0.1% decline on the topline, but that was driven by a 1.7% decrease in margins for wholesalers and retailers, as well as a drop of 0.4% in energy. Take that and food out, and the PPI went up 0.3%, and a 2-month gain of 0.9%.

And prices went up in August between business reception and final production (as shown by Stage 3 and Stage 4 in this chart), and followed a large intermediate increase in July.

That includes a 2.8% increased in processed meats and a 4.9% increase in processed poultry around Stage 4. So those prices should be continuing to go up in at least the next few weeks.

So with higher inflation being confirmed with these reports, that should discourage the stock market, as it’ll lessen the desire of the Federal Reserve to cut interest rates, right?

WHAT IS GOING ON HERE?

US stocks closed at record highs on Thursday as the latest reading on inflation showed consumer prices ticked up in August and jobless claims rose to their highest level in nearly four years. Together, the data helped set expectations for the pace of interest rate cuts this year. The Dow Jones Industrial Average (^DJI) led stocks higher, rising 1.4%, or over 600 points, and closing above 46,000 for the first time. The S&P 500 (^GSPC) rose over 0.9%. The tech-heavy Nasdaq Composite (^IXIC) gained around 0.7% for its fourth-consecutive record close and first time closing above the 22,000 mark....

The [inflation] print isn't expected to dissuade the Federal Reserve from lowering rates at its meeting next week, as recent federal data has shown cracks in the labor market. An update on weekly jobless claims on Thursday continued to paint the picture of a weakening jobs landscape, with applications for unemployment benefits jumping to 263,000, the most in nearly four years.

Traders see a greater than 90% chance of a quarter-point reduction next week, and the vast majority expect the central bank to cut rates three times before the end of the year.

I get that the jobs market is really weak and in a near-recessionary place (especially after seeing the major downward revisions for early 2025 announced this week), but how did today’s news change what we thought was going to happen with interest rates? All of those traders thought there would be a rate cut yesterday, and the chances of a 50-point rate cut (per the CME’s probabilities) went down from nearly 9% to just over 5% with the 0.4% CPI number.

Do they think the bad jobs market is going to override the higher inflation we are likely to deal with for much of the rest of this year? And they think the Fed will agree with that and lower interest rates to a point where we have real rates at or below 0%? That sounds like some coked-up bros trying to wish something into reality, more than any kind of honest assessment of our economic situation.

Even if the economy gets re-started from rate cuts, it would make it even more damagin when reality sets in for our already-large AI and stock market Bubbles, and those Bubbles burst. And if the Fed realizes that prices need to be brought under control, and stops cuts or even raises rates to hold down inflation, I’d figure there would be an even-sooner huge run to the exits on both of these Bubbles, since the easy money they were counting on isn't going to happen.

This is how you get stuck in stagflation, and that sure seems to be a good description of the place the Trump/GOP economy is heading toward, if we're not already there.

New revisions show that first 3 months of Trump's time in office also sucked for job growth!

If you’re an econ-watcher, you had marked today as a big one in understanding the US jobs market. Because today was going to feature updated information on jobs numbers in late 2024 and early 2025, and give an early look at what total revisions to the jobs market might look like. Famously, these numbers at this time last year said that there was 821,000 fewer jobs than had previously been reported, something that Donald Trump was glad to point out, claiming the Bureau of Labor Statistics had been making the Biden Admin's record look better than it was (while ignoring that the BLS was the one reporting the lower revisions).

Well, what did we find out for this year’s prelim revisions? That the BLS had overstated job growth again, including during Trump's first 3 months in office.

The U.S. economy likely created 911,000 fewer jobs in the 12 months through March than previously estimated, the government said on Tuesday, suggesting that job growth was already stalling before President Donald Trump's aggressive tariffs on imports.

The preliminary annual benchmark revision estimate to the closely watched payrolls data from the Labor Department's Bureau of Labor Statistics followed on the heels of news last Friday that job growth almost stalled in August and the economy shed jobs in June for the first time in four and a half years.

The revision estimate is equivalent to 76,000 fewer jobs per month. It implied that nonfarm payroll gains averaged about 71,000 per month, instead of 147,000. Economists had expected the estimated revision to be between 400,000 and 1 million jobs.

"This means labor market momentum is being lost from an even weaker position than originally thought," said James Knightley, chief international economist at ING.

Well then!

Those topline numbers would indicate the jobs market was already maxed out in 2024, and the original reports of moderate growth of 1.76 million jobs between March 2024 and March 2025 were more than cut in half, down to 847,000, or just over 70,000 jobs a month.

Let’s look into today's release from the Bureau of Labor Statistics and see what might be have caused this. And let's see if there are signs of interference and excuses from TrumpWorld to deflect from the even-worse jobs numbers that have come after March.

Each year, CES employment estimates are benchmarked to comprehensive counts of employment from the Quarterly Census of Employment and Wages (QCEW). These counts are derived primarily from state unemployment insurance (UI) tax records that nearly all employers are required to file with state workforce agencies.

The preliminary benchmark revision reflects the difference between two independently derived employment counts, each subject to their own sources of error. It serves as a preliminary measure of the total error in CES employment estimates from March 2024 to March 2025. Preliminary research, which is not comprehensive and is subject to updates in QCEW data, indicates that the primary contributors to the overestimation of employment growth are likely the result of two sources—response error and nonresponse error. First, businesses reported less employment to the QCEW than they reported to the CES survey (response error). Second, businesses who were selected for the CES survey but did not respond reported less employment to the QCEW than those businesses who did respond to the CES survey (nonresponse error). Estimates of other errors, such as the forecast error from the net birth-death model, are not available at this time.

Ok, now that further data has made the number go down, let’s go into the QCEW database and see what the newly-released numbers for Q1 2025 have to say.

UGH! The overall 12-month increase in jobs nationwide over this time period was a paltry 675,355 (+0.44%), which isn't much different than the 53,000 jobs a month that we’ve averaged in the 5 jobs reports since then. This would make for an easy argument from Trump/GOPs that the US economy had flatlined before they came back into power, and therefore they shouldn’t be blamed for the lame results that have happened since then.

EXCEPT, take a look at the same QCEW map for the December 2023-December 2024 time period.

Look at all that blue, including 3 of the 4 Midwest states that had losses from Q1 2024 to Q1 2025 (let's hear it for GOP-dominated Iowa for being a two-time loser!). Overall, the QCEW says the US gained nearly 1.39 million jobs for all of 2024, or 0.89% - more than double the year-over-year rate of Q1 2025.

Or put another way, 12-month job growth started diving as soon as Trump got elected in November 2024, both nationwide and in our state. And then it really went down the tubes after Dimwit Donnie took office and he and the DOGE dweebs started wrecking things.

The QCEW data puts a different light on the revisions that were based on it, and means that a sizable portion of that -911,000 revision should be recorded as happening at the start of 2025. So the 3 months of 6-figure job growth that was originally reported at the start of this year likely didn’t happen.

That also means that 2025 is likely to end up being the weakest non-COVID year for US job growth since at least 2010, and bears a striking resemblance to the “declining growth” year of 2007.

Which yet again makes me think of this picture as an apt description for the US jobs market and overall economy these days.

Things going well for AmFam Field and the Brew Crew

The Milwaukee Brewers aren’t just speeding toward another division title, and seeing more attendance at American Family Field on the way to doing so. Things are also going well for the Crew when it comes to funding the ballpark, as we found out last Friday.

On Sept. 5, the financial and operations committee for the Wisconsin Professional Ballpark District met jointly to discuss capital expenditures and finances for American Family Field, home of the Milwaukee Brewers.

The ballpark district budgeted to receive $4.9 million from the city and county this year, and each entity is on pace to provide more than $5.7 million. The payments are required under legislation passed to keep the Brewers in Milwaukee.

The increase was driven largely by the sales tax revenue in the city. The stadium funding package included a reduction in a sales tax administrative fee the state charges the city and county that is intended to help cover the annual payments.

The money will be used for regular maintenance at the Brewers’ stadium, along with replacement of the 100 and 200-level bleachers beyond the outfield walls, and upgrades at the Little League field outside of the stadium.

Things are looking up!

But I remembered how the Brewers’ ballpark bill was set up, and the Journal-Sentinel’s write-up seemed confusing to me, so I wanted to look back to the Legislative Fiscal Bureau’s summary of the 2023 action to see what was really going on.

What this is related to is the amount of money that the Wisconsin Department of Revenue keeps in sales taxes that all local areas in Wisconsin send on. They use some of that money to pay the workers who collect sales taxes from retailers and send the funds down to the local level for their portion of that sales tax. But instead of paying the remainder of that fee to the state, Milwaukee’s remainder will go to the ballpark.

2023 Act 41 requires that from the monies received from municipal taxes collected by DOR, 1.75% will continue to be retained by DOR for administrative fees, with the unencumbered balance at the end of each fiscal year paid to the newly-created baseball park facilities improvement segregated fund, for the purpose of making the City's required payments to the District. DOR will make the deposits but may not deposit a cumulative amount that exceeds $67,500,000. These deposits, are estimated at $100,000 in 2023-24 and $2,400,000 in 2024-25.

Then combine that estimate of $2.4 million from the City with a required contribution of $2.5 million from the County, and you get the $4.9 million figure quoted in the Journal-Sentinel article.

What’s not written correctly is that “each entity” would pay $5.7 million to the ballpark next year. From what I can tell, the number is $5.7 million TOTAL between the City of Milwaukee (who now would send $3.2 million) and the $2.5 million from Milwaukee County (which is set by law as part of the Brewers bill).

This likely also means the City of Milwaukee is getting larger-than-expected amounts of revenue from its new 2% sales tax, which would take some pressure off of the property tax and other constraints in paying for police, fire, pensions, and other needs. It also could mean that if sales taxes continue to grow faster than expected, that the City would stop paying toward the stadium before its original projected end date of 2045.

That provision also ended up being a bonus to almost every other county governments in Wisconsin, because the administrative fee for counties with sales taxes got dropped by 1%, with the locals being able to keep those extra funds.

2023 Act 41 reduces the percentage of county taxes that are deposited into DOR's administration of county sales and use taxes appropriation from 1.75% to 0.75%, beginning on July 1, 2024. It is estimated that this reduced rate would reduce fee revenues, and the corresponding transfer to the general fund, by $6.5 million in 2024-25, and will likely increase each year thereafter.

Prior to Act 41, 1.75% of county sales and uses taxes collected are deposited into the DOR's collection of taxes - administration of county sales and use taxes appropriation to cover the costs of administering county taxes. This appropriation is provided $3,183,700 PR in 2023-24 and $3,186,300 PR in 2024-25 under 2023 Act 19. At the end of the fiscal year, any revenues collected in excess of expenditures in this appropriation are transferred to the general fund. In 2022-23, $10.8 million of fee revenue was deposited into this appropriation, $2.9 million was expended, and $7.9 million was transferred to the general fund.

It is estimated that the 68 counties that currently impose the local option sales and use tax [in 2023] would, as a result of DOR's administrative fee being reduced from 1.75% to 0.75% on July 1, 2024, see total distributions increase by $3.6 million in calendar year 2024 and $7.5 million in calendar year 2025.

The biggest beneficiaries of this are projected to be Milwaukee County (getting another $1.95 million from this) and Dane County (getting $884,000), but in 2025, 70 of the state’s 72 counties are now seeing some benefit from this part of the Brewers stadium bill.

We got a 1% cut in sales tax administrative fees!

Now let's see if we finally can get more than 1 round of playoff baseball in Milwaukee for October, and in addition to more funds rolling in to pay for AmFam Field's capital projects, maybe that'll lead Mark Attanasio and the rest of ownership to invest more in players for 2026 and.....oh, let's not talk too crazy here.

Heck with it, let's just enjoy this Brewers run for the coming weeks, as it's been a lot of fun so far.

Jobs Friday! Job growth gets even smaller, even as workers are more productive

It’s Jobs Friday again. Recall that after the bad numbers in the last one, it led to the Trump Administration freaking out and firing the director of the Bureau of Labor Statistics for confirming what all other data had been showing – the US economy is stalling out.

Well, let’s see if this latest report shows anything different (and whether there’s any funny business going on).

Total nonfarm payroll employment changed little in August (+22,000) and has shown little change since April, the U.S. Bureau of Labor Statistics (BLS) reported today. The unemployment rate, at 4.3 percent, also changed little in August. A job gain in health care was partially offset by losses in federal government and in mining, quarrying, and oil and gas extraction….

The change in total nonfarm payroll employment for June was revised down by 27,000, from +14,000 to -13,000, and the change for July was revised up by 6,000, from +73,000 to +79,000. With these revisions, employment in June and July combined is 21,000 lower than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)

So really no difference, other than the fact that we had a (seasonally-adjusted) loss of jobs in June after revision. That’s the first decline since December 2020 – a time when COVID winter had caused further shutdowns and retrenchment, and TrumpWorld was busy plotting ways to overturn the election they had just lost.

The last 6 months have added an average of less than 70,000 jobs a month, less than half what was being gained in the 6 months prior to that, and well below what we were seeing in the prior 3 1/2 years under Joe Biden.

The bad numbers include losses in both construction and manufacturing. Jobs have been getting lost in manufacturing for the last 2 years, but now construction jobs are also on the slide, matching a general decline in activity in the country. Construction lost 7,000 jobs in August and lower-than-usual hiring for June and July led to small seasonal-adjusted losses in those months.

US blue-collar job growth has completely stagnated, hitting the lowest level since the onset of the pandemic—manufacturing is currently losing jobs at a rapid pace, and growth in construction/transportation has slowed to a crawl

[image or embed]

— Joey Politano🏳️‍🌈 (@josephpolitano.bsky.social) September 5, 2025 at 7:56 AM

Two sectors kept the August jobs report from showing its second loss in 3 months – health care/social assistance (+46,800) and leisure/hospitality (+28,000). In addition, the leisure/hospitality “growth” was actually lower-than-normal late Summer layoffs (87,000 fewer jobs before seasonal adjustment). So even the good news isn't that great.

The household survey also showed a slumping situation, with a second straight increase of 0.1%, this time to 4.3%. If there’s a positive, the labor force and number of people working both went up (labor force +436,000, employed +288,000), but we also are nearing 7.4 million unemployed, which is the most we’ve had in nearly 4 years. Just in time for higher premiums for Obamacare insurance to appear, and for millions to be cut off of Medicaid.

Nominal wage growth is holding up, but only at a moderate pace.

Average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3 percent, to $36.53 in August. Over the past 12 months, average hourly earnings have increased by 3.7 percent. In August, average hourly earnings of private-sector production and nonsupervisory employees rose by 12 cents, or 0.4 percent, to $31.46.

If July’s increase in prices at the business level result in higher prices for consumers in August, that 0.27% increase in hourly earnings will be a loser in real wages. The only post-COVID time we have had lower than 3.7% wage growth over 12 months was the 3.6% rate in July 2024, when consumer inflation was basically the same as it is now and trending down, but we were being told that the rising cost of living was a huge problem and concern.

So this looks like a US jobs market that has flatlined. If you need lower interest rates to refinance a bunch of debt (the situation a lot of oligarchs and tech companies are in), that's a good thing for you. But it's not so great if you actually are trying to work for a living and/or make ends meet.

I’ll note one other report from this week, one which showed an upward revision in Q2 productivity.

Nonfarm business sector labor productivity increased 3.3 percent in the second quarter of 2025, the U.S. Bureau of Labor Statistics reported today, as output increased 4.4 percent and hours worked increased 1.1 percent. (All quarterly percent changes in this release are seasonally adjusted annualized rates.) From the same quarter a year ago, nonfarm business sector labor productivity increased 1.5 percent in the second quarter of 2025…

Manufacturing sector labor productivity increased 2.5 percent in the second quarter of 2025, as output increased 2.4 percent and hours worked decreased 0.1 percent. In the durable manufacturing sector, productivity increased 3.2 percent, reflecting a 3.5-percent increase in output and a 0.3-percent increase in hours worked. Nondurable manufacturing sector productivity increased 1.9 percent, as output increased 1.3 percent and hours worked decreased 0.6 percent. Total manufacturing sector productivity increased 1.6 percent from the same quarter a year ago. This is the largest four-quarter gain in manufacturing productivity since the second quarter of 2021, when it increased 4.8 percent.

If businesses are using technology and other means to squeeze out more products per worker, that would help explain a couple of riddles that have been in the 2025 economy in the last 6 months or so. These companies may be simply using machines and productivity to avoid hiring, and letting the jobs dwindle through attrition while grabbing the profits….or to absorb some of the higher costs of tariffs without having to pass much of the cost onto consumers.

Using productivity vs adding workers for output growth certainly seems to be the case with manufacturing.

See the lower hours worked but higher outputs and productivity? Maybe this also explains why all the new US construction of factories during the Biden years hasn’t translated into growth of manufacturing jobs over the last 3 years. But that doesn't seem like a sustainable way to run an economy, especially one that won’t give health care or other supports to the workers that CEOs want to use technology to replace and/or stagnate wages with.

And as I’ve asked before – what’s going to re-accelerate the economy in the coming months to change this course? Wage and job growth is flatlining as prices go up, consumer spending is currently sluggish and the one-time boosts to get ahead of Trump Admin changes are going to end sooner than later (especially as federal incentives for electric vehicle purchases run out at the end of this month).

Sure, interest rates might get a bit lower for borrowers. But if there’s no money available to buy things and asset prices fall as these Bubbles deflate, how is that going to make the real economy grow? Maybe we’re not in recession at this time, but it sure doesn’t feel like things are trending up, do they?

Construction, manufacturing still struggling in the Summer

On Tuesday, we got our first look at US construction spending for July, and it continued the down trend that we have seen for much of 2025.

Construction spending during July 2025 was estimated at a seasonally adjusted annual rate of $2,139.1 billion, 0.1 percent (±0.8 percent)* below the revised June estimate of $2,140.5 billion. The July figure is 2.8 percent (±1.5 percent) below the July 2024 estimate of $2,200.7 billion. During the first seven months of this year, construction spending amounted to $1,232.7 billion, 2.2 percent (±1.0 percent) below the $1,259.9 billion for the same period in 2024.

Private Construction
Spending on private construction was at a seasonally adjusted annual rate of $1,623.3 billion, 0.2 percent (±0.5 percent)* below the revised June estimate of $1,626.3 billion. Residential construction was at a seasonally adjusted annual rate of $886.5 billion in July, 0.1 percent (±1.3 percent)* above the revised June estimate of $885.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $736.7 billion in July, 0.5 percent (±0.5 percent)* below the revised June estimate of $740.4 billion.

The positive in this report is that the declines for May and June weren’t as severe as initially reported, and that might give a minor boost to Q2 GDP in its later revisions (if we haven’t already seen it). But it still shows that things are still going the wrong direction in the construction sector. And that's especially true if you take away all of the new construction of data centers in the last couple of years.

Also on Tuesday, we got a report that showed US manufacturing continued to be in the doldrums.

U.S. manufacturing contracted for a sixth straight month in August as factories dealt with the fallout from the Trump administration's import tariffs, with some manufacturers describing the current business environment as "much worse than the Great Recession."

The Institute for Supply Management (ISM) survey on Tuesday also showed some manufacturers complaining that the sweeping import duties were making it difficult to manufacture goods in the United States. President Donald Trump has defended his protectionist trade policy, which has raised the nation's average tariff rate to the highest in a century, as necessary to revive a long-declining U.S. industrial base.

The ISM said its manufacturing PMI edged up to 48.7 last month from 48.0 in July. A PMI reading below 50 indicates contraction in manufacturing, which accounts for 10.2% of the economy. Economists polled by Reuters had forecast the PMI would rise to 49.0.

Not the right trajectory there, and the same report said prices continued to increase, and remained at inflationary levels that haven't been seen in 3 years.

The ISM® Prices Index registered 63.7 percent in August, decreasing 1.1 percentage points compared to the previous month’s reading of 64.8 percent, indicating raw materials prices increased for the 11th straight month (though at a slower rate compared to July). The Prices Index has increased 11.2 percentage points over the past nine months. In the last six months, the index reached its highest levels since June 2022, when it registered 78.5 percent. All of the six largest manufacturing industries — Machinery; Food, Beverage & Tobacco Products; Computer & Electronic Products; Petroleum & Coal Products; Transportation Equipment; and Chemical Products, in that order — reported price increases in August. “The Prices Index reading continues to be driven by increases in steel and aluminum prices that impact the entire value chain, as well as tariffs applied to many imported goods. Higher prices were reported by 33.5 percent of respondents in August, down from 35.4 percent in July. The share of respondents reporting higher prices trended up from November 2024 (12.2 percent) to April (49.2 percent), which was the highest level since June 2022 (65.2 percent),” says Spence. A Prices Index above 52.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

An even bigger indicator of August's economy will be the jobs report that comes out on Friday (assuming the numbers are legitimate). But these manufacturing and construction reports show that things were still a struggle in these sectors, with tariff-affected higher prices still being felt by manufacturers, and a lack of building activity isn't going keep the jobs coming in construction sector either.