The increase would come from a pool of pandemic relief aid that the federal government sent to the state health department specifically for assisted living and home-based care industries.
The Wisconsin Department of Health Services earlier this year sought to increase Medicaid payments to providers. But doing so first required review from the Republican-controlled Joint Committee on Finance.
That additional legislative oversight resulted from an effort by former Republican Gov. Scott Walker and allies to erode gubernatorial power during a lame-duck session in late 2018 before Evers succeeded him.
Walker signed a series of laws that increased the oversight authority of several legislative committees. That included giving the finance committee veto power over administration proposals to significantly increase Medicaid reimbursements.
The finance committee refused to schedule a hearing on the latest proposal after a member anonymously objected in April, blocking it from implementation. Committee leaders say they worry about the annual $103 million general revenue cost of maintaining higher Medicaid reimbursement rates once pandemic relief runs out.
In a time period when long-term care needs in Wisconsin continue to grow, and there is already a lack of caregivers in the state, there needs to have drastic action taken to improve quality of life for the most vulnerable. And yes, that requires real money to be invested to bridge the gaps in coverage and workforce.
And we can't allow GOPs to prevent these needs from being met, especially in such a scuzzy, anonymous manner where only 1 member of the gerrymandered JFC can say no, and none of the GOPs in the Legislature ever have to vote YES OR NO on the subject.
If we're able to vote down these pathetic amendments tomorrow, we then get a chance to take another step toward affording and meeting our health needs in this state, by getting a legitimate Legislature in place that will finally expand Medicaid, and have the Feds make available and pay for more of the services that older and disabled Wisconsinites are in need of.
It also should remind you that while the damage from the Walker era has been contained with some progress made in the last 5 1/2 years, there is still a lot of work left to be done to get us back to where we can and should be. And we can prevent having another barrier to progress happen if enough of us VOTE NO tomorrow.
With July's inflation figures coming due this week and election season starting to heat up, it might be a good time to remind ourselves about where gas prices stand today, compared to where they've been in the last 2 Summers.
As AAA reminds us, national gas prices are much less than they were in 2022, and a notable amount less than they were this time last year. And a big reason why is a combination of record US oil production combined with lower usage of gasoline.
According to new data from the Energy Information Administration (EIA), gas demand fell from 9.25 million b/d to 8.96 last week. Meanwhile, total domestic gasoline stocks rose from 223.8 to 225.1 million barrels. Gasoline production increased last week, averaging 10.0 million barrels per day. Crude oil production hit an all-time high of 13.4 million barrels per day. Lower gasoline demand, rising supply, and stable oil costs may lead to sliding pump prices.
Today’s national average for a gallon of gas is $3.45, five cents less than a month ago and 37 cents less than a year ago.
That was what it looked like on Thursday. AAA says that national gas prices have dropped by another penny since then, while in 2023, prices were bumping up by 2 cents. This means we are now down 40 cents from this time last year, a decline of more than 10%, which likely means the CPI reading in September (which comes right before that month's Fed meeting) will be a tame one.
Which makes it all the more ridiculous to try to see Republicans like Eric Hovde try to make "high inflation" something that's a major problem in 2024, and tries to blame the spending of Tammy Baldwin and other DC Dems for higher costs. It's just not true, and a big reason why is because of bills that Senator Baldwin and Dems pushed which encouraged alternative uses of energy and reductions in gasoline consumption.
But when you're Republicans, and you really don't have any solutions on the ecconomy, you gotta try the "baseless whining" and hope the low-info voters fall for it, I suppose.
If you're one of the 5 regular readers of this site, you have probably figured out that I'm a straight white male approaching 50 years of age. And as a midde-aged white guy, I often end up shaking my head at what seems to be a large number of dipshits that fall in my demographic (both gender-race wise, and in the age demo).
There are two excellent columns from this week that discuss this, both of which ask "WTF is going on with these dudes?", especially the right-wing version of this type of weak, whiny white guy. The first is from Ross Rosenfeld of the New Republic, who notes that Trump is Going All in on Weird, Lonely Young Dudes Who Hate Women, and the article centers on a recent meeting between the GOP nominee and some dork on YouTube named Adin Ross.
Look at these dweebs.
...the biggest overlap is their respective fan bases: predominantly white, aggrieved, disaffected young men with Gulf of Mexico–size reserves of anger toward women. As Jonathan Haidt discusses in his recent book, The Anxious Generation, many of these young men grew up attached to screens and never developed the social skills to communicate with employers or women. Many are incels, addicted to porn and video games. (Ross himself was banned from Twitch after visiting the site PornHub while livestreaming the Super Bowl.) Threatened by diversity and the elevation of women in the workplace and society, they yearn for a return to a world of male domination.
Many are also racist and antisemitic and hold extreme right-wing political views. So it is no surprise that they gravitate toward the only presidential ticket that represents their views. We might take inspiration from Tim Walz and call them “weirdcels.”
The Trump campaign and supporting PACs have been trying to tap into this group for a while, back before a middle-aged, biracial woman replaced an old white guy atop the Democratic ticket. But now—rather than attempting a course correction, to appeal to the women voters shifting toward Harris—the Trump campaign and its allies seem to be doubling down on their outreach. Last week, a pro-Trump PAC called Send the Vote launched with a goal of raising $20 million for outreach to men under 30. The effort is headlined by the Nelk Boys, right-wing Canadian American vloggers and podcasters who recently sat down with J.D. Vance, in a rather awkward fashion, looking like bar bros meeting with a Goldman Sachs exec.
But it is Vance himself, the too-online weirdo of “childless cat ladies” fame, who is perhaps the ideal figure for the type of demographic the campaign is trying to reach. He’s a Marine veteran and former venture capitalist who claims (somewhat disingenuously) to hail from Appalachia and who, much like Trump, doesn’t hesitate to equate femininity with weakness. The idea of a strong woman is frightening to him just as it is to the young men they’re trying to reach.
Any man who serves under a woman cannot be a real man, as they see it. That’s why they’ve taken to calling Harris’s running mate “Tampon Tim.” The nickname seems to have originated with former Trump adviser and close ally Stephen Miller, and quickly became a meme. Trump posted a clip Wednesday of Jesse Watters using it as a slur. The Trump team claims the term is a critique of Walz’s support of a Minnesota law he signed that mandated tampons in both girls’ and boys’ bathrooms (since transgender boys can still experience periods), but it seems rather convenient that the nickname fits into their overall message of emasculation.
Look, I was once a sexually frustrated young guy, so I get some of this. But the difference is that I would blame myself for not getting any action, and use feedback to figure out what I was doing wrong.
By comparison, these whiny dopes stay in their basements, think they're just fine, and blame women and "others" for their failures in life. Nah, dudes, it couldn't have anything to do with the fact that you don't work and seem incapable of having any type of level, one-to-one relationship with a female, nooooo.
The other article I want you to check out is from the always-excellent David Roth of Defector, with the great title of "Men on the Edge of a Nervous Breakdown," and how GOP dudes have become increasingly pathetic and repellent as they try to come up with more things to be angry about.
The result of that work is a chunky slurry of gossip and fantasy and rank bigotry blasting from a thousand gilded hydrants at every hour of the day; it amounts to a grim sort of fan service catering to an even grimmer fanbase. This has limited public appeal, just in the sense of not being the sort of thing that most people are interested in hearing about, let alone to the exclusion of any other topic and in the most vexed n' fervid keening imaginable, and that poses an obvious problem for a political party that has entirely given itself over to the making of this kind of noise. The bigger issue, though, is that these imperatives only run in one direction—louder, uglier, more confrontational, further out, more. If the obvious tactical challenge here is that this shit absolutely sucks and most people hate it, the more fundamental one is that the internal incentives are such that it can only ever get worse.
The fantasy of a chastened or refined Trump is, and has long been, the dumbest dream of political media dorks; the followers that put this prissy old dunce at the center of their world, and the mediocrities and opportunists who identified his rancid charisma as their own tickets to ride, know that they can only ever and always do more. This is the nature of this type of content-creation gig, which can never turn off or calm down, but also this is the dead end that conservative politics was steering towards long before Trump took the wheel. A politics whose most fundamental idea is Make Progress Stop Happening would inevitably find itself fetishizing the torment of having to live in a world in which other people, who are not even you, are somehow supposed to matter just as much...
Again, some of this is just how conservative politics works; in lieu of any solution to any problem, lavishing attention upon the problem and identifying it as what the other guys want becomes the move more or less by default. But the limitations of this approach are not just obvious but overbearing. If the only answer available to the vice presidential nominee when asked What stuff do you like is a tremulous Go fuck yourself, something has gone wrong; if the only possible engagement with any or every other person is to antagonize or dominate, you will wind up lonely. There's no levity or recognizable human brightness to be found here, but there is also no air, nothing but grievance and its performance.
Again, a lot of this is just a politics built around one strange man mirroring that man's decline and serving his catastrophic tastes; as Trump's former insult-comic zest has slumped into recursive and increasingly obscure complaint, his movement has followed suit, to the point where aspirants like Ron DeSantis seem somehow to have un-learned how to smile as a strategic gambit. A political movement built on conservatism's signature combination of servility, sadism, and selfishness would naturally be inclined towards someone like Trump, who authentically embodies those, uh, let's call them "values." But installing someone that relentlessly corrupt and fundamentally unhappy atop a movement so inclined towards degrading mimesis would eventually turn it inward in destructive ways. The crises and anxieties feed on and fight with each other; they multiply, and grow louder and more chaotic. It gets weirder and weirder without any of the people inside of it noticing. They are all always saying the same things, but somehow never in any kind of harmony.
And Republicans continue to climb further up their own asses by the day, talking in some online language that no one with a real life and a real job cares about. And it's why the Harris-Walz theme of "Trump/GOP is a bunch of weirdos" is so effective. It not only is accurate, it also takes away any perceived power and dominance that these dead-enders try to portray to others, because instead of telling others how scary they and their ideas are, it reduces them to mockery.
I think most voters are tired of the constant stresses and idiocy that are a defining characteristic of 2024 Republicans, and want everyday life to be fun and enjoyable. And it's going to be a reason that I think Dems are going to be in a better position as we approach November.
Along those lines, I'm going to try for my own fun and enjoyment in a couple of hours as I join several friends and a few thousand others at the Great Taste of the Midwest.
Have a good weekend, and try not to have the incels and freaks drive you down to their pathetic levels.
Since an already-desperate Republican Party is going to try to stop their bleeding of voters by scaring them with "BROWN IMMIGRANT FEARS", let's look at what immigration has done for the country in the Biden years, and whether it'll cost us more or less today, as well as down the road.
Fortunately, the Congressional Budget Office recently released a report on this. CBO says there has been a sizable wave of immigration to America in the last 3 years, and it's well beyond what was expedcted as President Biden took office.
The number of people entering the United States has increased sharply in recent years. Most of the increase comes from a surge in people whom the Congressional Budget Office categorizes as other foreign nationals. Some of them have received permission to enter or remain in the country, and some have not; more detail on the composition of immigrants in that category is provided below. On the basis of pre-2020 trends, CBO would have expected the net immigration of people in that category to average around 200,000 per year. In the agency’s projections, the net immigration of other foreign nationals exceeds that rate by a total of 8.7 million people over the 2021–2026 period.
And unlike what the longtime trope of “immigration hurts our services and costs us” claims, the CBO says the 2021-2023 increase in immigrants is going to have a mostly positive impact on our economy and overall budget situation. This is mostly due to increased tax payments and economic activity.
CBO estimates that the immigration surge will add $1.2 trillion in federal revenues over the 2024–2034 period. The annual increase in revenues grows over time and reaches $167 billion (or 2.2 percent of total revenues) in 2034 in the agency’s projections. Individual income taxes and payroll taxes paid by immigrants who are part of the surge are responsible for most of the effects on revenues. In addition, the surge is projected to boost economic activity and, in turn, tax revenues.
The immigration surge adds $0.3 trillion to outlays for federal mandatory programs and net spending for interest on the debt over the 2024–2034 period in CBO’s projections. Annual outlays for certain mandatory programs increase over time as more immigrants in the surge population and their children who are born in the United States receive benefits. In 2034, those benefits add $23 billion (or 0.4 percent) to total mandatory spending. In addition, the economywide effects of the surge boost annual spending by growing amounts that reach $27 billion in 2034. Most notably, spending for interest on the government’s debt increases, primarily because of the higher interest rates resulting from the surge in immigration. In total, projected outlays in 2034 are boosted by $50 billion because of the surge.
The “higher interest rates” part seemed odd to me, but the CBO argues later on in the analysis that the increased economic activity causes more demand for housing and capital needs, and squeezes rates higher by 0.1%. On the flip side, the CBO says the lower budget deficits due to immigration will lower debt costs in the later 2030s and early 2040s.
The CBO concedes that there may be other parts of the US budget that will require more funding for US Border Patrol and other agencies to deal with the higher amount of costs needed to encounter a larger number of immigrants, and that a higher overall population in America likely would lead to more costs for services.
CBO expects the immigration surge will put pressure on the budgets of many programs and activities funded through discretionary appropriations, including some administered or undertaken by the Department of Homeland Security and the Office of Refugee Resettlement (in the Department of Health and Human Services). Funding for certain discretionary activities related specifically to immigration totaled $37 billion in 2024—an increase of $1 billion from the 2019 amount after the effects of inflation are removed—and the Administration has requested additional funding for 2024.
In addition, the surge is likely to affect other discretionary programs whose operations are affected by the size of the population, including those that provide funding for elementary and secondary education, income support, and infrastructure. If discretionary funding for the broad budget categories that are likely to be affected by a larger population was increased in proportion to the increase in the population from the surge, those funding increases would total $24 billion in 2034 and $0.2 trillion over the 2024–2034 period, CBO estimates.
But CBO says the biggest effect of the increased amount of people coming to America is that our economy and total wages paid grows by quite a bit more over the next 10 years.
Some of the projected budgetary effects of the immigration surge stem from broader changes in the economy that the surge is expected to bring about. In CBO’s projections, the surge boosts total nominal gross domestic product (GDP) by $1.3 trillion (or 3.2 percent) in 2034 and by $8.9 trillion over the 2024–2034 period. The surge increases the total amount of wages paid each year by a percentage that grows steadily over that period and reaches about 3 percent in 2034. Those additional wages are a major contributor to the boost in revenues because they are subject to both payroll and income taxes. In addition, two main factors resulting from the surge—faster growth of the labor force and greater demand for residential investment—boost the rate of return on capital and put upward pressure on interest rates. The increases in interest rates are a major contributor to the boost in federal spending.
Along those lines, the Federal Reserve Bank of San Francisco says that the early 2020s' jump in immigration means more jobs have been able to be added in recent years beyond what we would expect.
Short-run breakeven employment growth is estimated to be higher than long-run growth under each scenario, as shown in Figure 3. Under the baseline scenario, short-run breakeven employment growth is estimated to be around 140,000 jobs per month in the first quarter of 2024 (dark blue line). It is somewhat more elevated under the high immigration Census scenario at 151,000 jobs per month (not shown) and significantly higher at 230,000 jobs per month under the CBO high immigration scenario (red line), reflecting the recent surge in immigration that is projected to largely continue in the near term. Under the baseline projections, short-run breakeven growth will converge on the long-run breakeven growth rate (gray line) by the end of 2025. However, this return to the long-run trend stretches further out to 2027 for the CBO high immigration scenario.
These estimates are largely consistent with other contemporaneous work. Edelberg and Watson (2024), for instance, estimate the recent surge in immigration as estimated by the CBO caused an upward shift in short-run breakeven growth of 100,000 jobs per month in 2024, pushing the upper range of the estimate to 200,000 jobs per month (see also Feroli 2024). The estimates in Walker (2024) also are in concordance with our conclusions under the baseline scenario, with an estimate of long-run breakeven growth of 75,000 jobs per month, and a short-run breakeven rate of 125,000 per month in 2024.
This also seems to help explain how the US could be adding more jobs than we were in the 2 years before the COVID pandemic broke out, but are seeing unemploynment rise above 4% instead of staying at the sub-4% levels that we had for most of 2018 and 2019.
Even with slightly higher (albeit still low) unemployment, I'd argue that the better growth and larger capacity from our early 2020s immigration surge is a good thing, both for keeping growth going now, and for our future economic outlook. It beats stagnation from low population growth and a lack of workers to replace the large population of Baby Boomers that have already retired, and the large number that will retire over the next few years.
Lastly, the fact that we've had a large number of new immigrants coinciding with a significant decline in violent crime during the Biden years should be pointed out by anyone that hears Republicans trying the "IMMIGRANT CRIME" scare tactic. And isolated incidents and stories from GOP hacks don't override the boost to the economy and the overall increase in public safety that we've seen in the last 3 years of surging immigration.
Because hell on earth for conservatives is a world with compassion, free food for children, IVF created families, protected trans people, strengthened education and strong unions https://t.co/2dXd9oagQLpic.twitter.com/kYsqAb8Gns
RADICAL, CRAZY stuff there! I've even heard Wisconsin Republicans say "we don't want Wisconsin to turn into Minnesota" as some kind of attack line. Then I see how Minnesota has a bunch of things that Wisconsinites want (like higher wages and better funded schools and lower property taxes and realioty-based gun safety laws and 21st Century social polciies), and I think "Go ahead with that, WisGOP. Your gerrymander isn't around to save your regressive BS this time." (Related note, VOTE NO in the next 7 days to stop the gerrymander from living on with these BS amendments that the GOPs are trying to sneak through).
I watched the Walz part of the rally introducing him as VP today, and he seeemd to be having the time of his life, and the Philly crowd was going nuts for him. I think a lot of that is because of the type of guy Walz is, and is not.
Real living rebuke to the incessant, droning insistence that there’s somehow no model of masculinity for young men that doesn’t entitle them to dominate and humiliate women. Yes there is. He’s holding a piglet.
As a GenX white guy, it is embarassing to see what so many guys in my demographic (and younger!) have become, at least on the political stage. Regressive jerks who are stuck in a toxic combo of "1980s shameless yuppie" for work with beliefs on gender roles that are set back around 1952. But also being whiny little bitches whenever they get called out for being such absurd and arrogant dimwits. These are not people I would ever want to be around, let alone imposing their rules onto the rest of the country.
Watching Walz and Harris speak at the VP-intro rally in Philly, both talked about "joy" as something that was important to have as an attribute. I think that's going to play really well when compared to the angry, whiny white men, self-absorbed fundies, and basement-dwelling incels that the GOP parades out on a daily basis.
and for those knuckleheads who say progressives can't win in middle america, how did Walz win in MN, how did Evers win in WI, how did Whitmer/Nessel/Benson win in MI, how did Fetterman win in PA??? https://t.co/kbhN5KZGtk
It reminds me of a line I heard WisDems Chairman Ben Wikler give. "Wisconsin has a red Legislature, votes purple, and has a blue, progressive heart."
100% true. What voters believe in, is progressive. And when you get progressive (or even somewhat-progressive) stuff done, people like it. Do you hear Republicans saying in public that they want to continue 2017's tax cuts for the rich or ban abortion or throw out Obamacare these days? NO WAY! They know it's electoral suicide to tell the voters what they (and their oligarch donors) really want them to do.
I just watched Walz say "I learned to compromise, without compromising my values." YES! EXACTLY! And you get elected to get things done, not to grab power and give out funds to your donors.
It's why Dems in the Midwest recognize that you have to make changes happen when you get the chance to do so, instead of caring more about staying in power and making connections over doing actual policy (LOOKING AT YOU COASTAL DEMS). And boy would I love a chance to see my state get a fraction done that Walz has been able to do across the St. Croix.
This feels great. And you can tell the Republicans have no clue how to answer the momentum that the Harris-Walz ticket has, beyond tired lines and cultural BS that is out of step with the Real America. We just need the good folks to keep pounding for the next 13 weeks, speaking up for the right things, and never apologize for it.
I had mentioned that Friday's US jobs report would be a big one, given that an election is on the horizon and that there had been evidence of economic growth slowing down. And that report definitely moved the needle.
#NewsToday: Weak jobs report fuels recession worries
— Cambridge Credit Counseling Corp (@CambridgeCredit) August 3, 2024
Omigod! Are we now thinking about RECESSION? Especially when the increase in unemployment has now triggered one Rule that says we are already going down!
The Sahm Rule Recession Indicator triggered in July; Fed Chair Powell said it's not an economic rule, but a statistical regularity. In any event, here we are. pic.twitter.com/ZhSHx2qbJt
But then others were saying we this time may be different. Including the economist who set the Rule.
Sahm admits the trend in unemployment is not our friend, which I would agree with. However, I would also point out that the unemployment rate is actually 4.25% . And while that may sound like lame hair-splitting, I wonder what would be said if unemployment was at 4.24%, and reported as 4.2%, which would not have triggered the Sahm Rule.
There's another reason why this time may be different, and that's because the main source of the rise in unemployment isn't fewer Americans identifying as working, but instead is due to growth in the labor force. This was true in both June and July, where the number of "employed" grew in both months, but the labor force grew by much more, and UW Econ Professor Menzie Chinn notes that it is different than when we in the 2 non-COVID recessions in the 2000s.
Let's also note that jobs still grew in July (which usually won't happen in a recession), but the lower amounts of jobs being added is worth acknowledging. Job growth has kept getting smaller throughout the Biden presidency, and while we knew the post-vaccination and stimulus job booms of Biden's first 18 months in office were going to fade, growth has also declined in each 6-month period for the 2 years since then.
It's also the first time that we've had 2 straight months in the post-COVID world where the 3-month average for job growth was under 200,000 jobs a month. As you'll see, we are now back to a level of job growth that is similar to what we had in most of the Trump years, and in the year prior to Trump taking office. I'm going to give extra weight to the job totals from this year, along with 2019, which was Trump's last pre-COVID year in office.
The US stock market saw Friday's jobs report, and it freaked out.
Stock market today: Dow drops 800 on weak jobs data as a global sell-off whips back to Wall Street https://t.co/ch9rNlJgD5
The S&P 500 sank 1.8% for its first back-to-back losses of at least 1% since April. The Dow Jones Industrial Average dropped 610 points, or 1.5%, and the Nasdaq composite fell 2.4% as a sell-off for stocks whipped all the way around the world back to Wall Street.
A report showing hiring by U.S. employers slowed last month by much more than economists expected sent fear through markets, with both stocks and bond yields dropping sharply. It followed a batch of weaker-than-expected reports on the economy from a day earlier, including a worsening for U.S. manufacturing activity, which has been one of the areas hurt most by high rates.
It was just a couple days ago that U.S. stock indexes jumped to their best day in months after Federal Reserve Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for cuts to rates to begin in September.
Now, worries are rising the Fed may have kept its main interest rate at a two-decade high for too long. A rate cut would make it easier for U.S. households and companies to borrow money and boost the economy, but it could take months to a year for the full effects to filter through.
“The Fed is seizing defeat from the jaws of victory,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Economic momentum has slowed so much that a rate cut in September will be too little and too late. They’ll have to do something bigger than” the traditional cut of a quarter of a percentage point “to avert a recession.”
Go back to one of the charts from above, and you can see that job growth in Spring and Summer 2024 is basically the same as the last half of 2018 and all of 2019. But as I've said a number of times before, there are a couple of notable differences in 2019 compared to today.
1. In 2019, the US unemployment rate was under 4%, and if anything, was going lower. In August 2019 it was at 3.6%, while today, unemployment is at 4.25% and has gone up 3/4 of 1% in the last year.
2. In Summer 2019, the Fed Funds rate was at 2.25-2.5%. And then in late July, the Fed gave in to Donald Trump's whining and started cutting interest rates below that. By comparison, the current Fed Funds rate is at 5.25%-5.5%, and the Fed decided against cutting rates in their late July meeting this year.
"But Jake, what about INFLATION?" When you're trying help businesses and consumers combat inflation, you need to be looking at how past inflation is causing injury (if it even has) and where is it going in the future. The real problem is that high interest rates are making it harder for businesses to borrow and invest, especially in home-building and manufacturing. Likewise, the high rates are keeping people from wanting to put homes with low-interest mortgages on the market, because it'll cost them more to move into a new place. This is causing the already-high cost of housing to be even higher and more out of reach for people that would otherwise want to buy a home.
It is also driving up the debt costs of a consumer that has helped to keep the economy moving along in 2023 and 2024, defying the "experts" who were predicting a recession 2 years ago. And with wage growth decent-but-not-great, you haev to wonder how much longer the consumer spending growth continues at the solid pace that we had in the first 2 quarters of 2024.
In addition, the inflation rates of Summer 2024 aren't all that much different than Summer 2019. We are told the the Personal Consumption Expenditures (PCE) Index is the number the Fed looks for when it comes to measuring what inflation is truly at. In 2019, PCE was hovering at or just below 2% through the Summer, after being above 2% for a sizable part of 2018. By comparison, since the Fed hiked rates to these multi-decade highs in mid-2023, PCE inflation has generally stayed at or below 3%, except for the first few months of this year, when corporations tried one last run of greedflation prices re-set for 2024 for many companies.
So if the PCE is maybe 1% higher in 2024 than it was in 2018, why are rates 3% higher now? Even if you go with a ratio argument ("PCE is 50% higher at 3% than 2%), explain to me why Fed Funds rates are more than double what they were 5 years ago. And that's BEFORE the Fed started cutting rates in the second half of Trump's last pre-COVID year.
Instead, the Fed has been looking backwards at what has happened with federal stimulus and post-COVID disruptions that spiked prices in 2021 and 2022, and is not looking at the post-COVID normal that we are in now. They have kept rates too high for too long, and now the jobs market has decelerated into "meh" largely due to that mistake.
Lastly, I'll repeat a Twitter observation I made that got a surprising number of responses.
When we had 7% unemployment and 4% inflation in 1984, it was "Morning in America". But #inflation of 2.5% or 3% is too high today? COME ON. #JobsReport
Corporations, central bankers and other members of the Insiders Club had such success in keeping down wages and getting all the benefits of technology without having to pay more for it that they've gotten touchy now that we have a bit of balance returning to the working side of the equation. But I think 4% wage growth and 3% inflation is still fine, and the inflation side has been slipping down for the better part of the last 2 years.
Likewise, job growth is clearly lower and unemployment is creeping up. We aren't in a recession as of now, we are merely in a slower phase of growth compared to the Biden Boom that we had for most of 2021 through 2023, and 4.25% unemployment is still a level that we considered "full employment" up until Boomers started aging out of the work force in the mid-2010s. But it's still an avoidable error from the Fed to realize that we are in this lower-growth mode where keeping people in jobs and making it easier to pay their bils is more important than caring about whether inflation is at 2% or 3%.
Back after a few days up North to get away and see some scenery. But I've still been keeping up with the data and developments in the world, and I'm a bit perplexed as to why our experts at the Federal Reserve aren't picking up on what seems pretty obvious.
That includes this report from the Census Bureau from today.
U.S. construction spending unexpectedly fell in June and the prior month's data was revised lower as higher mortgage rates weighed on single-family homebuilding.
The Commerce Department's Census Bureau said on Thursday that construction spending dropped 0.3% after a downwardly revised 0.4% decline in May...
Spending on private construction projects fell 0.3% in June after dropping 0.4% in the prior month. Investment in residential construction dropped 0.3% after falling 0.7% in May.
Outlays on new single-family construction projects decreased 1.2%. Spending on multi-family housing gained 0.1%. Mortgage rates surged in the spring, depressing homebuilding and sales.
It's not all bad, as April was revised significantly higher, indicating that the warm Winter and Spring got a jump on typical construction activity. But 2 straight months of cutbacks, and especially the decline in interest-rate-sensitive home building, are something that should cause us to at least be worried if the strength we've had in construction in the 2020s is coming to an end.
We also saw an increase in seasonally-adjusted new unemployment claims to their highest level in nearly a year. And this week's ADP payrolls report indicated that job growth slowed down at the start of the 3rd Quarter of 2024.
As a result and this and other recent soft data, Wall Street gave back a lot of its recent gains on Thursday.
Investors hoping for a quiet summer are being sorely disappointed as turbulence pummels the stock market, spurring outsized swings in US equity indexes with the dog days of August now upon us. https://t.co/S8vqAvt8ob
The DOW Jones Industrial Average dropped by more than 700 points during Thursday's session, and ended up losing 494 points. Today’s selloff was a reflection of how the prospect of a slower economy is now viewed as a negative on Wall Street.
Piper Sandler's chief investment strategist Michael Kantrowitz reasoned Thursday's action showed markets digesting recent economic data as "bad news," despite potentially pointing to steeper Fed rate cuts in 2024.
"When yields go down it could still be a good thing going forward if it comes from lower inflation," Kantrowitz told Yahoo Finance. "But [not] if it comes from higher unemployment, bad [manufacturing data], bad earnings, and bad macro data."
Kantrowitz added that slower economic data may have been "good news a year ago when everyone was worried about inflation — that's not the case today."
And with a September rate cut from the Fed all but certain after Wednesday's policy announcement, investors on Thursday moved to price in even more aggressive moves from the central bank this year. Data from the CME Group showed traders pricing in a roughly 25% of a 50 basis point rate cut in September, up from just an 11% chance one day ago.
But would a September rate be too late to stop our apparent slowdown from becoming a standstill? 3 high-ranking Democratic senators (Elizabeth Warren (Mass.), John Hickenlooper (Col.) and Sheldon Whitehouse (R.I) sent a letter to Fed Chair Jerome Powell giving that concern as the Fed decided not to lower rates from their multi-decade highs earlier this week.
And the 3 Dems hinted that Powell is being scared off from doing the right thing to avoid the anger of Republicans, who don’t want a good economy ahead of the November elections.
In the letter, the senators said the data make clear there is ample evidence a rate cut is merited, as there have been consecutive decreases in the Personal Consumption Expenditures index, which is the Fed’s preferred inflation gauge.
Moreover, the letter adds, “The one-two punch of rising unemployment and slowing wage growth risks erasing the post-pandemic economic gains.”
The FOMC is not scheduled to meet again until [September], with some analysts expecting it will announce a reduction in rates following that meeting. Some Republicans, including Donald Trump, have suggested that doing so would be a political favor to Democrats.
In response, the three Democratic senators said in their letters that not cutting in response to the economic data would “indicate that the Fed is giving in to bullying, and is putting political considerations ahead of its dual mandate to ‘promote maximum employment and stable prices.”
Liz, Hick and Sheldon are right on the monetary policy here. The 12-month change in the core PCE index has been under 3% for all of 2024, and while wage growth is decent, it’s not anything that’ll cause costs to jump back up (in fact, the Employment Cost Index is growing by its lowest rate in 3 years).
And yet Powell and company are keeping the Fed Funds rate at double the rate of inflation in 2024. That’s a marked contrast to 5 years ago, when the Fed was caving to the complaints of Donald Trump and started cutting rates from a much lower level (2.5% vs 5.5% today), in a time when unemployment was lower then than it is today, with an Employment Cost Index and inflation number within 1% of the 12-month change that we are seeing today.
Maybe now that President Biden doesn’t have to worry about facing the voters, he might spend some of his remaining time in office to draw attention to the fact that the Fed was slow to react to higher prices in 2021 (they didn’t start raising rates until gas prices started spiking in March 2022), and had to drastically raise rates to their current, punitive levels to make up for it. Now the Fed is being far too slow in reacting to our post-COVID reality, and keep chasing the inflation that came from a one-time economic disruption (with a big side order of corporate greed) when that situation has long passed.
Tomorrow's July jobs report sure seems a lot more important than it did a week ago. If that comes in weak, watch for the talk of "RECESSION?" to pick up rapidly. Even if we aren't that close to it yet.
