Thursday, April 11, 2024

INFLATION WATCH heats up for March, which freaks out the Street

As 2024 began, there was an expectation that the calming of inflation that we saw in 2023 would continue, which would allow the Federal Reserve to cut its Fed Funds borrowing rate from the 5.25%-5.5% level that it’s at today.

But then the Consumer Price Index grew by 0.3% in January and 0.4% in February, and that made people look to this week’s CPI report for March to see if inflation was back on the rise, or if the interest rates were indeed going to come down soon.

The result?

Uh oh. Now a lot of people are worrying, and “inflation” is going to re-emerge as something the media is going to want to talk about. It’s the worst back-to-back month of increases since last Summer. Over the last 8 months, this means the CPI has risen by 2.5%, which comes out to an annual rate of around 3.8%.

Not great, but a check under the hood of the topline numbers doesn't indicate to me that inflation is going to any point that’ll limit our real economy. First of all, take a look at the large culprits behind March’s 0.4% increase in the CPI. In addition to the gas and rent increases, there also appears to be some convenient price hikes from big insurance and medical care.
The motor vehicle insurance index rose 2.6 percent in March, following a 0.9-percent increase in February. The index for apparel increased 0.7 percent over the month. Among other indexes that rose in March were personal care, education, and household furnishings and operations.

The medical care index rose 0.5 percent in March after being unchanged in February. The index for hospital services rose 1.0 percent over the month and the index for physicians’ services increased 0.1 percent. The prescription drugs index rose 0.3 percent in March.
Go out to 12 months, and we see that car insurance is up a whopping 22.2% in the last year, hospital services are up 7.5%, and home care for the elderly and disabled is up 14.5%. That’s something that seems worthy of public hearings on the state and federal levels, and in need of stiff regulation and/or added competition.

The apparel increase is especially odd, as men’s and boys’ apparel dropped by 1.0% in March, but women’s and girls’ apparel went up by 1.7%, and female-targeted clothing is apparently 55% more expensive than male-targeted apparel, according to the CPI market basket of goods and services.

And the 12-month inflation story for clothes is the opposite – men’s/boys’ apparel up 1.0%, and women’s/girls’ apparel down 0.1%. So I don’t think clothes’ prices are going to the roof, and that March’s fluke increase will not continue in the next CPI report.

I also note that prices for “food at home” stayed flat for the second straight month in March, and are only up 1.2% in the last year. Yes, it’s still up more than 20% since March 2021, and that’s something that everyday people still will notice (along with allowing for a lot of food companies and grocers to get strong profits). But the rate of increase has definitely gone back to pre-COVID normals since the end of 2022, while wages have increased by 2-3 times as much over that same time period.

The other item that makes me think that inflation isn’t going to stay at the 4-5% level for the rest of 2024 (at least in the current situation) is that the lagging indicator of shelter continued to run high in March at 0.4%. When you look at recent trends in new home and rental prices, those increases are ending, so we should see shelter’s CPI level off in the coming months.

However, Wall Street seems to think that this CPI report and the strong jobs numbers will scare off the Federal Reserve from lowering rates off of their 23-year highs anytime this Spring and Summer. And that reversal of belief is a main reason behind the selloff that we’ve seen throughout the month of April, with the DOW down as much as 1,500 points until some of those losses were pared in the second half of today's trading.

I think delaying rate cuts from these high levels is wrongheaded, and I have strong suspicions that much of these increases have little to do with shortages (well, beyond a shortage of competition and regulation). And today's report of a relatively tame 0.2% increase in March for producer prices backs up my thought that we aren't looking at a chain reaction of continued price hikes that have to work its way through in the future.

But we also have to admit that the economic news of the last week does mean that we’re getting another season of INFLATION WATCH, no matter how legitimate or BS the CPI increases may be.
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Tuesday, April 9, 2024

"Job creator" Conagra takes Wis tax dollars, then cuts Wis jobs 5 years later

Remember how I referenced Conagra Brands’ improved earnings and profit margins last week, and how they credited “cost-saving” measures as a reason for their positive earnings outlook?

We got an example of those measures on Monday, to the detriment of a sizable amount of Wisconsinites.

Employees at the Conagra Brands’ Birds Eye facility in Beaver Dam learned Monday that the factory will be shutting its doors at the end of the summer, eliminating about 250 jobs.

“We continually evaluate our overall network of food production facilities to ensure that we are operating as effectively and efficiently as possible so we can remain competitive as a company,” Conagra media representative Daniel Hare said in a statement.

“We have determined that we can continue to meet the needs of the business by making these products in fewer facilities. Therefore, we informed employees that our Beaver Dam facility will close by the end of the summer, which will impact approximately 250 employees,” Hare said.
Gotta hit those numbers to “remain competitive” and make the shareholders happy, you know. And no, don’t count on these cost cuts to lead to lower food prices on Conagra products.

RIP Macho Man.

As I was googling for information and a link to the Conagra layoff story, I noticed some headlines of the past come up regarding the Beaver Dam outfit. And was reminded that the state of Wisconsin gave tax dollars to this same Conagra facility 5 years ago.

Conagra Brands plans to invest approximately $78 million to modernize and expand the current 350,000-square-foot cold storage and vegetable packaging facility on Green Valley Road, which supports the Birds Eye frozen vegetables operation. The Birds Eye operations are supported by almost 800 employees at both the Beaver Dam and Darien plants in Wisconsin.

The Wisconsin Economic Development Corporation (WEDC) is supporting the expansion by authorizing up to $750,000 in state income tax credits over the next five years. The actual amount of tax credits that Conagra Brands will receive is contingent upon the number of jobs created and the amount of capital investment during that period. Like all tax credit awards, the company must first create the jobs and make the capital investment before receiving the credits.

“Birds Eye frozen vegetables have been a fixture in freezers in Wisconsin and around the country for generations, and I applaud the company for continuing to invest and grow in our state,” said Mark R. Hogan, secretary and CEO of WEDC, the state’s lead economic development organization. “As a company with facilities all over the country, Birds Eye was looking at other options for this expansion. Its decision to expand in Wisconsin is a testament to the state’s strong business climate and outstanding workforce.”…
And take a look at who was supporting and promoting that assistance in early 2019.
“With the Wisconsin Economic Development Corporation leading the way, our state continues to remain open for business,” said Sen. Scott Fitzgerald. “Operations expansions like this one prove why Wisconsin is the best place in the country to work, live and raise a family. Thanks to the continued investment of Birds Eye Foods in Beaver Dam, more family-supporting jobs will keep our community prospering and keep Wisconsin moving forward.”

“This exciting expansion plan is another example of strong investments being made in Dodge County because of pro-growth policies enacted over the last eight years,” said Rep. Mark Born. “The 140 new jobs will help support families throughout the area and continue to strengthen our local economy, making Beaver Dam a more desirable place for businesses and families to locate.”
Way to reference the short-term scams and cronyism of the Walker years, guys. And notice Walker’s WEDC Secretary was still in charge at the time, instead of Evers’ choice of Missy Hughes. That seems telling to me.

Since then, Fitzgerald has shuffled off to Congress, and still has the nerve to spread this same “job creator” BS about businesses like Conagra. Born has been the co-chair of the Joint Finance Committee for the last 4 years, and has shot down multiple attempts by Governor Evers to get rid of a Walker-era tax giveaway that reduces the state tax liability of manufacturers like Conagra near zero percent. The “open for business” maneuvers of WisGOP in the 2010s continue to fail us in 2024. And we also need to stop trusting these companies to do the right thing when it comes to either keeping prices in check, or in creating any sustainable, long-term growth when their tax rates keep getting cut and profit-hoarding is encouraged.

You know what’s the best way to stop corporations from imposing greedflation on consumers, and from grabbing state tax dollars for a few years before leaving us with empty factories once the giveaways run out? NOT LETTING IT HAPPEN IN THE FIRST PLACE.

This also means we have to get a new crew in place at the Wisconsin Capitol that will make these businesses pay for a small part of all the stuff they have been taking from us.
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Sunday, April 7, 2024

February brings another good month of construction numbers

One of the big policy and economic successes in the last year has been the growth in the construction sector, both in employment (up 270,000 jobs in the last 12 months measured), and in getting new single-family homes online, which can help with housing affordability.

The total value of construction put into place is up 10.7% year-over-year, and even with a seasonally-adjusted decline with overall construction in the last 2 months, single-family home construction kept rebounding in February, with that part of the sector up nearly 20% from its recent low in April 2023.

While the growth in construction of manufacturing facilities has leveled off in recent months, that part of the sector is still building double the value of facilities that it was building in June 2022.

And June 2022 is one month before the then-Dem controlled Congress passed the CHIPS and Science Act to encourage more tech manufacturing in America.

You can claim correlation isn't causation, but I don't think it's coicidence that this strength is construction has been ongoing in 2023 and 2024. And if we can get the Federal Reserve to stop chasing the ghost of inflation and get interest rates off of their 23-year highs, there might be even more building set to happen.

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March jobs report shows things didn't slow down in Q1, but actually picked up

Looks like we rounded out the first quarter of 2024 with yet another strong US jobs report.

So job growth in Q1 2024 rebounded from what had been a steady drift downward (but was still at good levels).

Going back 3 years, you can see that the passage of the Biden stimulus in March 2021 along with COVID vaccinations becoming widely available led to more than 7 million new jobs in the first 12 months. That number has declined back toward normality as these measures faded away over time, but we've still been seeing job growth stay at rates of nearly 1.5 million over each of the last 2 6-month periods.

And much as we have seen in the last 2 years, health care led the way with hiring, with another 72,000 jobs added in March, and nearly 750,000 in the last year. And the health care sector now has more than 1 million jobs above what they had before the COVID pandemic hit the industry.

Construction also continued its winning streak in March, with another 39,000 jobs added to what was already an impressive group of gains in the last 2 years. Contrasting that, jobs in manufacturing remained flat for March, with slight downward revisions for January and February.

In the household survey, the drop in unemployment happened for the "good reason", 469,000 additional people in the work force, and 498,000 listing themselves as "employed". It's also a positive that we've seen a decline in Americans identifying themselves as "working part-time for econiomic reasons". However, we also saw an increase of 593,000 people working "part-time for non-economic reasons", which is listed as
...persons who usually work part time for noneconomic reasons such as childcare problems, family or personal obligations, school or training, retirement or Social Security limits on earnings, and other reasons. This excludes persons who usually work full time but worked only 1 to 34 hours during the reference week for reasons such as vacations, holidays, illness, and bad weather.
Which makes me wonder if this is due to a large amount of Boomers "downshifting" into part-time work because the economy has gotten good enough that they can retire (which would be good), or if it's because more people are having difficulties in handling child care and other "adult responsibilities", and it's keeping them from wanting full-time work (which would be bad).

The wage picture also had good news for both workers as well as people hoping for interest rate cuts in the near future.

Solid, but not spectacular. Which is what the Fed allegedly wants as part of the soft landing, right?

Interestingly, while the 4.1% overall increase in wage growth over the last 12 months is what we often hear cited, manufacturing, construction and warehousing jobs have had bigger pay raises than that.

Change in average hourly wages, Mar 2023 - Mar 2024
Construction +5.0%
Manufacturing +5.3%
Transportation and Warehousing +6.0%

Change in average weekly wages, Mar 2023 - Mar 2024
Construction +6.1%
Manufacturing +4.9%
Transportation and warehousing +6.5%

Increased construction jobs and higher wages in all 3 of these fields sure seem like something the Biden campaign should seize on, eh? Well, if a certain demographic wants to listen to it, and care about making ends meet instead of claiming they are blue-collar because of "culture".

But I don't think you can deny that America's jobs market was still in a very good place in March 2024. And the lame attempts by right-wingers to deflect from this reality should be seen as the desperation that it is.

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Thursday, April 4, 2024

Corporate America still using "inflation" and market control to grab more profit

Before panic about an overly-good jobs report and Middle Eastern tension tanked the stock market today, there was other Wall Street news going on. And in particular this report about Conagra Foods’ strong profit report grabbed my attention.
Conagra Brands topped Wall Street estimates for third-quarter revenue and profit on Thursday, as demand for its pantry staples and frozen food items recovered with more consumers looking to cook meals at home in the face of sticky inflation.

Shares of the Slim Jim beef jerky maker rose about 5% after the company also raised its annual adjusted operating margin forecast and said its cost-saving attempts were paying off….

Easing supply chain concerns have also helped counter the impact from waning price hike benefits. Conagra raised its annual operating margin forecast to 15.8% from 15.6%.

"The efficiency of our operations in Q3 resulted in cost savings that enabled us to fund investment while maintaining gross margin," CFO Dave Marberger said in a statement.
Let me translate that into reality – “we raised our profits in prior years by raising prices of products, and now that costs are being leveled off and cut, we can keep the prices at that same, higher level, and cash in the difference!”

And that goes along with the general trend that we've seen in the country, as we found out last week that corporate profits rose as 2023 drew to a close.

In addition to the higher overall numbers, profit margins per unit also grew in Q4, to their highest marks on record.

That’s an indication of “market power”, aka “a lack of competition allowing a few big corporations to grab more profits”. And it's something the Biden Administration and DC Dems need to be all over this year, in case these corporations try to use that “market power” to jack up prices to anger consumers, and increase their chances of keeping the Trump tax cuts in place that has given added benefits to this profit-hoarding behavior since 2017.

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Monday, April 1, 2024

Wisconsin's income and growth ended 2023 strong, but was weak earlier in the year

Saw this post from UW-Madison Professor Menzie Chinn on Wisconsin's economy at Econbrowser. It includes this graphic that sets the baseline in late 2021, and adjusts the state's wages/salaries and GDP for inflation.

It's quite a remarkable difference between GDP and the coincident indexes (both of which are measures of the overall economy). The GDP figures indicate the state was in recession for most of 2022 and part of 2023, but the coincident indexes show solid and steady growth in the state. So what's right?

I'd trust the coincident indexes, as the jobs numbers also have continued to rise (the NFP numbers), and we saw consistent wage and salary growth above inflation for all of 2023. But you can also see things level off in early-mid 2022 with the spike in inflation, indicating that there was an effect where people weren't necessarily losing jobs, but their wages weren't keeping up with the 10-12% annual rate of price hikes during the first half of that year.

But as inflation has faded, wages and jobs have kept on growing in Wisconsin, and we are generally better off than we were at the end of 2021. And Professor Chinn added the final numbers after last week's state GDP and income report from the Bureau of Economic Analysis. As the GDP figures indicate, growth in that category came back in the second half of 2023 in Wisconsin, and the state actually ended up tied with Indiana for the best GDP growth in the Midwest in the last 3 months of the year, at 4.3%.

But you can also see from the chart at the top of the post that Wisconsin's GDP (allegedly) fell in the first part of 2023, and it means that the state's annual-level GDP only went up by 0.2% for last year. Not great on the 12-month time frame, but pretty good in the last 6 months, creating momentum going into this year.

Unlike GDP, Wisconsin’s overall income grew in every quarter of 2023, and was pretty consistent throughout the year.

The finishing quarter's income growth of 4.2% was 2nd best in the Midwest, and in the top 20 for America.

And even better within that income stat, Wisconsin had the strongest growth in earnings in our part of the country over the last 3 months of 2023.

Change in net earnings, Midwest Q4 2023
Wis. +5.0%
Ohio +4.5%
Ind. +4.5%
Mich +4.4%
Minn +3.6%
Ill. +3.4%
Iowa -0.1%

But on an annual basis for growth in earnings, we are not as impressive - smack-dab in the middle of the Midwest at 4.6%. We also lagged the US rate of 5.6% for earnings growth. Likewise, our annual income growth of 4.4% falls behind the U.S. rate of 5.2%, which leaves us at 41st in the nation (although we are also penalized due to Wisconsin's lower population growth vs the rest of the US).

So to sum things up using these numbers, it appears that a slow first half of 2023 in the Wisconsin economy picked up steam in the second half of the year. I also noted that recent revisions placed Wisconsin job growth as lower in early 2023 compared to better numbers later in the year. So while we continued to have a slower-but-still growing economy and jobs market last year, the ending kick seems could be something that can build upon itself for the start of 2024.
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Saturday, March 30, 2024

Who's growing and who's losing people in Wisconsin in the 2020s?

Earlier this month, the Census Bureau released their population estimates for all US counties for 2023, and it gives some valuable insights into what is happening in Wisconsin.

I'll let UW-Madison's Applied Population lab give a couple of the highlights, and then I'll discuss more about it.

No surprise that Dane County continues to be the leader among state counties for population growth. It's been that way for most of the last 20 years, and as the graphic shows, Dane County has added more than twice the amount of people as the next closest county. Heck, outside of Dane County the REST OF THE STATE only added 3,400 people over the last 3 years.

But Dane County's growth in the 2020s is dwarfed by what Milwaukee County has lost in the same time period. The state's most-populous county lost more than 23,000 people in this time period, while no other Wisconsin county lost more than 1,662.

As you can guess, a big reason behind that is people moving out of Milwaukee, and into the adjacent WOW Counties. And another big beneficiary of this trend is St. Croix County, the western edge of which is part of the Twin Cities metro area.

The other area of the state that's seeing a large influx of people moving in during the 2020s are areas of Wisconsin with lots of lakes and increasing numbers of reitrees.

Put these two trends together, and it's no surprise who are the state's largest gainers when it comes to net migration from within America.

I did expect Dane County to be on this list, but they just fell short with a domestic migration gain of 1,156. However, Dane County also gained nearly 6,500 people from international migration, and Milwaukee County added nearly 7,700. Those two counties make up well more than half of the nearly 25,000 that net immigration has added to the state's population since 2020.

Dane and Milwaukee Counties are also on the right side of the third leg of population changes, which is the "natural change" of births vs deaths. Both Dane and Milwaukee have sizable gains in this category, and the counties that house Green Bay and (most of) Appleton have also added more than 1,000 people in the 2020s through more births than deaths.

But the state as a whole has had over 2,300 more deaths than births, with much of those losses over this 3-year period being chalked up to the thousands of excess deaths that happened during the pandemic years of 2020 and 2021. I'll also note that this has mitigated some of the gains through migration that some of Wisconsin's counties have seen, with Waukesha County suffering the largest number of losses.

Put these stats together, and it indicates some interesting changes in where people live in Wisconsin compared to 2020. Dane County keeps growing while Milwaukee County keeps losing, and there is a clear replacement of older people in the WOW Counties (where Ozaukee and Washington Counties also had more deaths than births) with others moving in from Milwaukee County and elsewhere. In the rest of Wisconsin, much of the population is stagnant except for places with lots of natural beauty and overall attractiveness for people to relocate to. Might be a good tip for what to invest in to get more people to want to come here, eh?

Demographics in this state still aren't great for organic, long-term growth, but the large-population counties of Dane and Milwaukee buck that trend with favorable demos, if they can hold on to the people that live there. In Milwaukee this has been a challenge with losses that need to be reversed, but Dane County has been able to grow in all areas, with success building upon success.

If you look these numbers for all US states, it could be worse, as Michigan and Ohio still had more deaths than births in 2023, unlike Wisconsin. And the Badger State had the largest increase net domestic migation last year with 2023. Both are good signs for the future, and tells us that Wisconsin could be in a position to keep improving our demographics and population for the rest of the 2020s, if we push our advantages and keep our economy and quality of life in a strong place.
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