tag:blogger.com,1999:blog-12698960553642195352024-03-18T21:20:24.190-07:00Popular Economics WeeklyPopular Economics Weekly is a weekly financial news wire service that reports and analyzes important economic events for their impacts on national and international economic growth.Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.comBlogger1523125tag:blogger.com,1999:blog-1269896055364219535.post-37632198258764975322024-03-14T07:41:00.000-07:002024-03-14T10:07:42.502-07:00Retail Inflation Is the Problem<p style="text-align: center;"> <a name="_Hlk92958991">Popular Economics Weekly</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>There is a reason the Biden administration wants to prevent the merger of <a href="https://www.latimes.com/business/story/2024-02-26/ftc-sues-to-block-grocery-mega-merger-of-ralphs-owner-kroger-and-vons-owner-albertsons">Kroger
and Albertsons</a> Supermarket chains. It lowers competition at a time when the
largest retailers are now responsible for much of the inflation that has fueled
the Fed’s reluctance to lower interest rates. </p>
<p>How do we know that? Retail companies such as Walmart, Home Depot, Costco,
Lowes, CVS, and Target have reported record profits since the Pandemic,
according to a <a href="https://accountable.us/report-top-retail-companies-profits-soared-by-over-24b-after-raising-consumer-prices/">recent
report</a> by Accountable.us, a nonpartisan 501(c)3 organization that reports on
“special interests that too often wield unchecked power and influence in
Washington and beyond.”</p>
<p>It reports that “a new <a href="https://accountable.us/wp-content/uploads/2022/07/2022-04-04-Largest-US-Retailers-2021-Profits-FINAL.pdf">analysis</a>
of earnings data of the ten largest U.S. retailers by market capitalization
finding that they all raised consumer prices while collectively reporting
<b>$24.6 billion</b> in increased profits during their most recent fiscal years.
These same companies also ramped up spending on shareholder handouts by nearly
<b>$45 billion</b> year-over-year for a total of <b>$79.1 billion</b>.”</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1dohsPMBqQ2B9F0aieO7zGshd0cFiSxswC_Ko5v4oUCY2ZDAnvPVFbotjoepVYIzS7aeXf8tM0R2W3dqeh1hVD4yx58xmxoTzwkXf4q_nltL4QwplMwrAx4MzbwCHdADL9QgR5aksCp-UWfGlMRN1JJeyZ4TPA8ZDfRWr_ODF42_0Hv-WmVjGzdHC/s490/ppifeb.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="118" data-original-width="490" height="96" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1dohsPMBqQ2B9F0aieO7zGshd0cFiSxswC_Ko5v4oUCY2ZDAnvPVFbotjoepVYIzS7aeXf8tM0R2W3dqeh1hVD4yx58xmxoTzwkXf4q_nltL4QwplMwrAx4MzbwCHdADL9QgR5aksCp-UWfGlMRN1JJeyZ4TPA8ZDfRWr_ODF42_0Hv-WmVjGzdHC/w400-h96/ppifeb.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/graph/?id=PPIFIS,#0" style="text-align: left;">FREDppi</a></p>
<p>This is while wholesale PPI price inflation for the raw materials that go
into retail products is close to zero. The PPI approached zero percent in June
2023 and has remained below 2 percent annually since then. Supply may become
oversupply, in other words, continuing to bring down wholesale prices.</p>
<p>This is opposed to the most recent Consumer Price Index of retail prices that
is still hot, with annual inflation rate up slightly from 3.1 to 3.2 percent in
February, and core inflation with food and energy prices now 3.8 percent. </p>
<p>It highlights the chasm between wholesale and retail prices that must factor
in labor and capital costs. But those costs remain largely constant, so much of
the difference must come from higher profit margins of retailers.</p>
<p>Voices are now growing louder for an earlier rate cut than in June that
markets have currently predicted, in part because retail sales are faltering. <a href="https://www.census.gov/retail/marts/www/marts_current.pdf">Retail
sales</a> rose 0.6% in February from the previous month, according to <a href="https://www.census.gov/retail/marts/www/marts_current.pdf">Census Bureau
data</a>, but January<a href="https://ca.finance.yahoo.com/retail-sales-post-steepest-decline-since-march-2023-135941345.html">
retail sales</a> previously posted a surprise -1.1% decrease. They have been
trending downward since September 2023.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_-vsdQJ_o0Doo68CTAih2I5jvPUj0GTbjPQPxYfzCbHGZcZPxZHaoHRFEuti_CJIXMP-qdvt3oowbxNuq-sixR8Q8u6A6IZAZfJB0SqGvFJldjinNJciaZgMt0VhAqpF-5v0S2obwcjFO_JDXP7b0q4hZStKflMoUwXp8jOfCcWKwh-d5jRmF3-vv/s478/retailfeb.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="123" data-original-width="478" height="103" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_-vsdQJ_o0Doo68CTAih2I5jvPUj0GTbjPQPxYfzCbHGZcZPxZHaoHRFEuti_CJIXMP-qdvt3oowbxNuq-sixR8Q8u6A6IZAZfJB0SqGvFJldjinNJciaZgMt0VhAqpF-5v0S2obwcjFO_JDXP7b0q4hZStKflMoUwXp8jOfCcWKwh-d5jRmF3-vv/w400-h103/retailfeb.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/graph/?id=MARTSMPCSM44X72USS,#0" style="text-align: left;">FREDretailsales</a></p>
<p class="MsoNoSpacing" style="text-indent: .5in;">Retail inflation is largely due
to corporate greed, which is out of the Fed’s control.<o:p></o:p></p><p class="MsoNoSpacing" style="text-indent: .5in;">So there are now voices saying
the Fed should pay less attention to its target rate of 2 percent and reduce
interest rates sooner. “Given that the labor market is tight, the economy is
running well and corporate fundamentals are looking pretty good, I’m not sure
we need 2% inflation,” said another economist in a MarketWatch <a href="https://www.marketwatch.com/story/im-not-sure-we-need-2-inflation-how-investors-are-absorbing-tuesdays-cpi-report-29f82645?mod=home-page">interview</a>.
<o:p></o:p></p><p>
</p><p class="MsoNoSpacing" style="text-indent: .5in;">The chorus for rate cuts will
grow louder as further weaknesses in retail sales appear in coming months.<o:p></o:p></p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-61208141692755354852024-03-11T12:54:00.000-07:002024-03-11T13:01:26.581-07:00Consumers Confident No Recession<p align="center"><a name="_Hlk92958991"></a><a name="_Hlk66092990">Financial
FAQs</a></p>
<p>There is a good reason why we have avoided a recession. Consumers don’t
believe it will happen. And consumers drive some 70 percent of US economic
activity. So their attitudes tend to make or break economic growth. When they
decide conditions are worsening, they save more and spend less.</p>
<p>But that isn’t happening today. Consumers continue to spend into the New
Year, and surveys that measure their attitudes show they feel good enough to
continue to spend.</p>
<p>I like the Conference Board’s confidence survey that states, it “…reflects
prevailing business conditions and likely developments for the months ahead.
This monthly report details consumer attitudes, buying intentions, vacation
plans, and consumer expectations for inflation, stock prices, and interest
rates.”</p>
<p>And this is also reflected in their “perceived likelihood” that a recession
is less likely this year.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh0qM38VDNrKjzl92ZksM9FS-dO70WT3EAxj0fUCx5ZVhvvcO1Rv06OyP1HsQY6TSR4eovUo7waM32eCUi-7Co8rTlWs-CeuZVUAMTpPQHbZktkA9RZGCx3oWReMxBKe2n28mojjBg_RQPD_i_1YPjw9hOoBot1VlRxtTry_fZWdsKDfig1ydrjnBIh/s729/febrecess.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="176" data-original-width="729" height="96" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh0qM38VDNrKjzl92ZksM9FS-dO70WT3EAxj0fUCx5ZVhvvcO1Rv06OyP1HsQY6TSR4eovUo7waM32eCUi-7Co8rTlWs-CeuZVUAMTpPQHbZktkA9RZGCx3oWReMxBKe2n28mojjBg_RQPD_i_1YPjw9hOoBot1VlRxtTry_fZWdsKDfig1ydrjnBIh/w400-h96/febrecess.png" width="400" /></a></div><p align="center"><a href="https://www.conference-board.org/topics/consumer-confidence" style="text-align: left;">Conference
Board</a></p>
<blockquote>
<p>“February’s write-in responses revealed that while overall inflation remained
the main preoccupation of consumers, they are now a bit less concerned about
food and gas prices, which have eased in recent months. But they are more
concerned about the labor market situation and the US political environment,”
said<b> </b>its Chief Economist<b> </b>Dana Peterson<b>.</b></p></blockquote>
<p>Their main concern seems caused by the primary elections and sloganeering
that goes with the election season. But consumers are beginning to realize they
have benefited from the record number of jobs created over the past two
years.</p>
<p>Consumer spending is the main reason growth has been so strong. Spending was
revised upward from 2.8 percent to 3 percent annually in last week’s Personal
Consumption Expenditure survey. </p>
<p>The University of Michigan’s <a href="http://www.sca.isr.umich.edu/">sentiment survey</a> also followed by
economists (and pundits) is even more upbeat.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgdnEruzExuQD88XX3ySS59f6qSgQvknmQqo9WnpOLOPc2PE6wNVEvHZ2HYdOlFX9zKqg8qHNG9l2iyS41wmu-YEKp3jeMg2lqUZaMZ-O6-ZY1OQnUwkCNE8SJlENvH4t8BV_2tR6W7cj6ip7tTdyFVdvw_JLaY2W4PXymOhxFTxuJIWMOaoa9hyUzb/s474/febumich.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="119" data-original-width="474" height="100" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgdnEruzExuQD88XX3ySS59f6qSgQvknmQqo9WnpOLOPc2PE6wNVEvHZ2HYdOlFX9zKqg8qHNG9l2iyS41wmu-YEKp3jeMg2lqUZaMZ-O6-ZY1OQnUwkCNE8SJlENvH4t8BV_2tR6W7cj6ip7tTdyFVdvw_JLaY2W4PXymOhxFTxuJIWMOaoa9hyUzb/w400-h100/febumich.png" width="400" /></a></div><p align="center"><span style="text-align: left;"></span></p><blockquote>Survey Director Joanne Hsu commented, “Consumer sentiment moved sideways this
month, slipping just two index points below January and holding the gains in
sentiment seen over the past three months. Expected business conditions remained
substantially higher than last autumn, with short-run expectations now 63% above
and long-run expectations 46% above November 2023 readings.”</blockquote><p></p>
<p>Consumers seem to remain one step ahead of the pundits and pay less attention
to the headlines and hysteria generated by mass media and more attention to
their personal financial wellbeing. </p>
<p>This is a heartening sign that facts can win over fiction and consumers will
keep the post-pandemic recovery alive.</p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a> </p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-82187788073125999862024-03-08T10:04:00.000-08:002024-03-08T10:04:57.612-08:00It's A Soft Landing<p style="text-align: center;"> <a name="_Hlk92958991">Popular Economics Weekly</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>A terrific February employment report is further evidence the US economy has
made a soft landing. </p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFgGSjNCBG8ktCVQv6oHRO_K4jyyfGlwFJ0D_WxZIUms7dBchCu8Zx9z8Mz6KGMsml0Yp2eXs8ZYMMgVJ0ADQdPzR89Pt9KNoTSVehhAhwn6-7vJUCZhyphenhyphenY2WMSrxV984cssWHU5YEMzYp5gPVRij-JXpxPbT43CIicVjyumR9xNEdVV6y5eriCYYpB/s481/jobsfeb.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="176" data-original-width="481" height="146" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFgGSjNCBG8ktCVQv6oHRO_K4jyyfGlwFJ0D_WxZIUms7dBchCu8Zx9z8Mz6KGMsml0Yp2eXs8ZYMMgVJ0ADQdPzR89Pt9KNoTSVehhAhwn6-7vJUCZhyphenhyphenY2WMSrxV984cssWHU5YEMzYp5gPVRij-JXpxPbT43CIicVjyumR9xNEdVV6y5eriCYYpB/w400-h146/jobsfeb.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/PAYEMS#0" style="text-align: left;">FREDemployment</a></p>
<p>Total nonfarm payroll employment rose by 275,000 in February, and the
unemployment rate ticked up slightly to 3.9 percent from 3.7 percent, the U.S.
Bureau of Labor Statistics <a href="https://www.bls.gov/news.release/pdf/empsit.pdf">reported today</a>. Job
gains occurred in health care, in government, in food services and drinking
places, in social assistance, and in transportation and warehousing.</p>
<p>Education and Health created 85,000 new jobs, Leisure & Hospitality
58,000, and Government 52,000 more jobs. Construction, Retail trade, and
Transportation- warehousing created another 62,000 jobs in February.</p>
<p>What does this really mean? That employment and economic growth have
stabilized in a very good place, with more good new jobs created, the
unemployment rate still below 4 percent and average hourly ages rising faster
than inflation.</p>
<p>American consumers and Fed officials can breathe easier this year, and the
Fed can begin to lower interest rates to hedge against the damage from future
shocks to the economy, rather than worry about higher inflation ahead (i.e., the
danger of deflation rather than inflation). </p>
<p>Former St Louis Fed President James Bullard believes Chairman Powell’s Fed
will now lower interest rates sooner. Otherwise the Fed may get behind on rate
cuts if the economy normalizes over the second half of the year, he said <a href="https://www.marketwatch.com/story/bullard-says-february-job-report-increases-chance-of-fed-cutting-interest-rates-sooner-fb58b33e?mod=economy-politics">in
an interview</a> with MarketWatch’s Greg Robb. It would be awkward for the Fed
to have inflation close to 2% with the Fed’s benchmark policy rate in the range
of 5.25%-5.5%, Bullard said. </p>
<p>This is while “The <b>price index for gross domestic purchases</b> (GDP)
increased 1.9 percent in the fourth quarter, compared with an increase of 2.9
percent in the third quarter. <b>The personal consumption expenditures (PCE)
price index</b> increased 1.7 percent, compared with an increase of 2.6 percent.
Excluding food and energy prices, the PCE price index increased 2.0 percent<u>,
the same change as the third quarter</u>.”</p>
<p>Why has inflation fallen so dramatically? I’ve been saying there are a number
of reasons, beginning with the fact that the supply chain of goods and services
has caught up to the demand by consumers and companies after the pandemic. But
also, labor productivity, the amount of goods produced per worker-hour, has
risen sharply, largely because of new technologies such as AI, which has
stream-lined supply chains and shortened delivery times.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilh0-DLVVh4jK0PyB1HcHVt7-tKz5WLnjNpt90hglDHeA4RdRgDX9mq9BKeBwCJQOXjwxqLNH68orCp2blCCqIYsymypOpJIxm7FX2wM4NsdqSzRxecN3QqDQ5iWSaTdkxTtpndn3o8hKP8D4kTr6LEGm_avbjCzAGaAYKtP5eeZYdHqEP_33oHVEP/s478/prodfeb.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="126" data-original-width="478" height="105" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilh0-DLVVh4jK0PyB1HcHVt7-tKz5WLnjNpt90hglDHeA4RdRgDX9mq9BKeBwCJQOXjwxqLNH68orCp2blCCqIYsymypOpJIxm7FX2wM4NsdqSzRxecN3QqDQ5iWSaTdkxTtpndn3o8hKP8D4kTr6LEGm_avbjCzAGaAYKtP5eeZYdHqEP_33oHVEP/w400-h105/prodfeb.png" width="400" /></a></div><p align="center"><span style="text-align: left;">FREDlaborproductivity</span></p>
<p>The productivity of American workers rose at a 3.2 percent annual rate in the
fourth quarter. Year over year, productivity has increased by a revised 2.6
percent. That’s the largest increase since the first quarter of 2021.</p>
<p>This will keep inflation low for the rest of this year, maybe too low if the
Fed doesn’t listen to Bullard, and the unemployment rate continues to tick
higher in months ahead.</p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-85383602910430324552024-03-06T10:32:00.000-08:002024-03-06T10:32:48.755-08:00More Jobs in Year Ahead?<p style="text-align: center;"> <a name="_Hlk66092990">Financial FAQs</a></p><p align="center"><a name="_Hlk92958991"></a></p><p>The US economy hasn’t slowed. Fourth quarter Gross Domestic Product (GDP)
growth was revised downward from 3.3 percent to 3.2 percent in the second
estimate, and predictions for first quarter 2024 GDP growth are hovering between
2-3 percent.
</p><p>The focus now shifts to Friday’s upcoming unemployment report. Today’s Job
Openings and Labor Turnover Survey (JOLTS) will help to predict the jobs
picture. The JOLTS report is holding at 8.9 million job openings, same as last
month, so Friday’s unemployment rate should remain at a very low 3.7 percent.
</p><p>Calculated Risk’s wonderful graph gives us the best visual portrayal of
monthly changes in job creation. The black line portrays <b>job openings</b>,
dark blue line portrays <b>hires</b>, and red bars show <b>total
separations</b>. Net job formation has been in a downward trend since the Fed
began to raise interest rates.
</p><p>“The number of job openings changed little at 8.9 million on the last
business day of January, the U.S. Bureau of Labor Statistics <a href="https://www.bls.gov/news.release/pdf/jolts.pdf">reported today</a>. Over
the month, the number of hires and total separations were little changed at 5.7
million and 5.3 million, respectively.”
</p><p>The difference between hires and job separations is closer to the actual
number of new jobs created in February—400,000 in this case. But after seasonal
adjustments that attempt to ascertain the increase over last year at this time,
new nonfarm payrolls jobs should be around 200,000 in Friday’s report, a very
strong jobs report.
</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFWy3-rsC7SCECVbLidMfU4xqjLriYPaWNkqnAqKsaPavbgNc_6jtLwZYmTKitwI9rbM3KdHvYuBSsUzwwzfLBxsdfSHinIgBIOtPmlGwhLPsgIGqRKfKkoxw06pHmrlDB60FnVSHWULC-wxI2xWE2oXMWJyWghZlufytFCCOihCq5YSb81Qp6rrHN/s472/febjolts.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="161" data-original-width="472" height="136" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFWy3-rsC7SCECVbLidMfU4xqjLriYPaWNkqnAqKsaPavbgNc_6jtLwZYmTKitwI9rbM3KdHvYuBSsUzwwzfLBxsdfSHinIgBIOtPmlGwhLPsgIGqRKfKkoxw06pHmrlDB60FnVSHWULC-wxI2xWE2oXMWJyWghZlufytFCCOihCq5YSb81Qp6rrHN/w400-h136/febjolts.png" width="400" /></a></div><p align="center"><a href="https://www.calculatedriskblog.com/2024/03/bls-job-openings-little-changed-at-89.html" style="text-align: left;">Calculate
Risk</a></p><p>It shows us why there has been a record number of jobs created over the past
two years.
</p><p>Consumer spending is the main reason growth has been so strong. It was
revised upward from 2.8 percent to 3 percent annually in last week’s Personal
Consumption Expenditure’s report.
</p><p>Inflation has been tamed as well. The<b> personal consumption expenditures
(PCE) price index </b>increased just 1.8 percent, an upward revision of 0.1
percentage point. Excluding food and energy prices, the PCE price index
increased 2.1 percent, an upward revision of 0.1 percentage point.
</p><p>So why is the Fed waiting any longer to drop interest rates? They seem to be
wanting consumers to spend less. Yet regional banks that specialize in
commercial loans have been hurting since commercial office vacancy rates have
soared. They need lower interest rates so they can refinance all those
commercial loans about to come due.
</p><p>Fed Chair Powell in his latest congressional testimony, said "What we want is
just more evidence that will give us more confidence that inflation is on a path
down to 2% sustainably."
</p><p>But annual inflation is already below 2 percent with the PCE and wholesale
Producer Price Indexes. What more evidence do they need?
</p><p>The Fed is again playing its historical role of being the last to react to
changing economic conditions—in this case the possibility of more bank failures
if they don’t begin to lower short term interest rates soon.
</p><p align="center">Harlan Green © 2024
</p><p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-86849982687751869962024-03-01T10:58:00.000-08:002024-03-01T10:58:37.690-08:00Inflation Is Going Nowhere<p style="text-align: center;"> <a name="_Hlk92958991">Popular Economics Weekly</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>I said recently that the US economy has made a soft landing. Here is further
proof with the release of the government’s Personal Consumption Expenditure
Index (PCE) that measures consumer spending.</p>
<p>Inflation has flattened and been stuck close to the Fed’s 2% target rate for
months. This has reassured consumers enough as measured by consumer sentiment
surveys that they have kept up their spending patterns, giving a boost to strong
first quarter growth.</p>
<p>The <b>January PCE price index increased 2.4 percent year-over-year
(YoY)</b>, down from 2.6 percent YoY in December, and down from the recent peak
of 7.1 percent in June 2022.</p>
<p><b>The PCE price index, excluding food and energy, increased 2.8 percent
YoY</b>, down from 2.9 percent in December, and down from the recent peak of 5.6
percent in February 2022.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYf7So0T6V2b_NFSYtXKvd59-zwxUrXlaOhCsCiL0vc1bEbXbXFHNqSSO-MLHrDI2xu2_wpHphflqxoB7NwwU8yZZz5KVh-jr0W1lGsTGWK2gfhea5HZOvCLO0u-pi5SinnSLxLp501czJfuZH3k0C4wNsJx0JWKMXXJsune8EZTaQrNFuB_Azen25/s470/pcejan.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="173" data-original-width="470" height="148" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYf7So0T6V2b_NFSYtXKvd59-zwxUrXlaOhCsCiL0vc1bEbXbXFHNqSSO-MLHrDI2xu2_wpHphflqxoB7NwwU8yZZz5KVh-jr0W1lGsTGWK2gfhea5HZOvCLO0u-pi5SinnSLxLp501czJfuZH3k0C4wNsJx0JWKMXXJsune8EZTaQrNFuB_Azen25/w400-h148/pcejan.png" width="400" /></a></div><p align="center"><a href="https://www.calculatedriskblog.com/2024/02/pce-measure-of-shelter-slows-to-61-yoy.html" style="text-align: left;">FRED/CalculatedRisk</a></p>
<p>And the 6-month index PCE Price Index is up 2.5%, Core PCE Prices: 2.5%
<br />Core minus Housing: 1.8%. That means inflation will probably remain stuck
somewhere between 2 to 2.5% for the foreseeable future.</p>
<p>American workers are fully employed, and wages are rising slightly faster
than inflation. Next week’s release of the monthly unemployment report should
confirm nothing has changed.</p>
<p>This is why consumers remain optimistic, per the University of Michigan’s
consumer sentiment survey:</p>
<blockquote>
<p>“<a href="http://www.sca.isr.umich.edu/">Consumer sentiment</a> moved
sideways this month, slipping just two index points below January and holding
the gains in sentiment seen over the past three months,” said survey director
Joanne Hsu. “Expected business conditions remained substantially higher than
last autumn, with short-run expectations now 63% above and long-run expectations
46% above November 2023 readings.”</p></blockquote>
<p>This should also answer the question why <a href="https://populareconomicsblog.wordpress.com/2024/02/28/higher-growth-ahead-2/">fourth
quarter</a> 2023 GDP growth was holding at 3.2 percent in its second reading.
</p>
<p>The <b>price index for gross domestic purchases</b> (GDP) increased (just)
1.9 percent in the fourth quarter, compared with an increase of 2.9 percent in
the third quarter. <b>The personal consumption expenditures (PCE) price
index</b> increased 1.7 percent, compared with an increase of 2.6 percent.
Excluding food and energy prices, the PCE price index increased 2.0 percent<u>,
the same change as the third quarter</u>.</p>
<p>Inflation has fallen dramatically, in other words. The supply chain of goods
and services has caught up to demand. But also, labor productivity, the amount
of goods produced per worker-hour, has risen sharply in the last 12 months.</p>
<p>And, though I’m repeating myself, health care spending is soaring, as a
record 21.3 million people have officially signed up for <a href="https://www.cms.gov/newsroom/press-releases/historic-213-million-people-choose-aca-marketplace-coverage">healthcare
insurance</a> through the HealthCare.gov Marketplace for 2024, marking a third
consecutive banner year for the program.</p>
<p>HHS Secretary Xavier Becerra said, “Once again, a record-breaking number of
Americans have signed up for affordable health care coverage through the
Affordable Care Act’s Marketplace, and now they and their families have the
peace of mind that comes with coverage.”</p>
<p>So, I would add another reason for the improving mood of consumers: a
healthier workforce is a more productive workforce.</p>
<p>Maybe economic stability at home is what we need with the rest of the world
in turmoil.</p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-17692368310115169182024-02-28T11:38:00.000-08:002024-02-28T11:38:16.122-08:00Higher Growth Ahead?<p align="center"><a name="_Hlk92958991"></a><a name="_Hlk66092990">Financial
FAQs</a></p>
<p>The US economy hasn’t slowed down. Fourth quarter Gross Domestic Product
(GDP) growth was revised slightly from 3.3 percent to 3.2 percent in the second
estimate, but predictions for first quarter 2024 growth have increased. </p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhkp09cww6KRl2ZL4t-0U4iMyS2RzfYHIP_e99MyuFyJ-45fU1f2lhS-kYnvloXgWlF408bjjoCZGAILyalhkSu53vx6XOiKeCRK_LasCTN3LivzPRwEiVh8ElJxB-UvbHuZxJI3VFue5X3kr72tML_hF8RMV04WW01oyv9AvFqed013-icAkF1d1dA/s474/jangdp.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="136" data-original-width="474" height="115" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhkp09cww6KRl2ZL4t-0U4iMyS2RzfYHIP_e99MyuFyJ-45fU1f2lhS-kYnvloXgWlF408bjjoCZGAILyalhkSu53vx6XOiKeCRK_LasCTN3LivzPRwEiVh8ElJxB-UvbHuZxJI3VFue5X3kr72tML_hF8RMV04WW01oyv9AvFqed013-icAkF1d1dA/w400-h115/jangdp.png" width="400" /></a></div><p align="center"><a href="https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-second-estimate" style="text-align: left;">BEAgdp</a></p>
<p></p><blockquote>“The increase in <b>real GDP</b> (in Q4) reflected increases in consumer
spending, exports, state and local government spending, nonresidential fixed
investment, federal government spending, and residential fixed investment that
were partly offset by a decrease in private inventory investment. Imports, which
are a subtraction in the calculation of GDP, increased,” said the BEA.</blockquote><p></p>
<p>Consumer spending is the main reason growth was so strong. It was revised
upward from 2.8 percent to 3 percent annually.</p>
<p>Inflation has been tamed as well. The<b> personal consumption expenditures
(PCE) price index </b>increased just 1.8 percent, an upward revision of 0.1
percentage point. Excluding food and energy prices, the PCE price index
increased 2.1 percent, an upward revision of 0.1 percentage point.</p>
<p>The PCE price index is the best measure of inflation, since the GDP covers
total domestic economic output.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIO1Rq3ON93WtiARg1tOjeEsbCzaDipbLwvEafWZadpcY78MKeZFnXkaxnFAFHkJlfOtFukK9Q3i0JawXf4RvcX7NED_07kfzBqjzHDjDVt0VoFDKrFyvuYvzTnxGoOZcuBnmEOLnhrmY859Ly8Z5lK8EYipfBL6P5mjPJzk8aQTmyOfc_Z2BPCHTN/s478/janatfed.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="141" data-original-width="478" height="118" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIO1Rq3ON93WtiARg1tOjeEsbCzaDipbLwvEafWZadpcY78MKeZFnXkaxnFAFHkJlfOtFukK9Q3i0JawXf4RvcX7NED_07kfzBqjzHDjDVt0VoFDKrFyvuYvzTnxGoOZcuBnmEOLnhrmY859Ly8Z5lK8EYipfBL6P5mjPJzk8aQTmyOfc_Z2BPCHTN/w400-h118/janatfed.gif" width="400" /></a></div><p align="center"><a href="https://www.atlantafed.org/cqer/research/gdpnow.aspx?utm_medium=email&utm_source=mailchimp&utm_campaign=cqer-research" style="text-align: left;">AtlantaFed</a></p>
<p>And the Atlanta Federal Reserve’s GDPNow estimate of first quarter 2024
growth was just raised. This has proven to be one of the most accurate future
growth predictors, as I’ve been saying. </p>
<p></p><blockquote>“The GDPNow model estimate for real GDP growth (seasonally adjusted annual
rate) in the first quarter of 2024 is <b>3.2 percent</b> on February 27, up from
2.9 percent on February 16,” said the Atlanta Fed. “After recent releases from
the US Census Bureau and the National Association of Realtors, the nowcast of
first-quarter real gross private domestic investment growth increased from 2.5
percent to 4.6 percent.”</blockquote><p></p>
<p>Gross domestic private investment is the other driver of growth, as the
Inflation Reduction and Infrastructure Act $billions in government spending
have seeded the increase in private investments. </p>
<p>And the US economy has been fully employed for more than two years, so
there’s a scarcity of workers. Employers have needed to invest more in capital
expenditures—whether its AI or more efficient factories—to meet the demand for
their products. </p>
<p>This translates to workers being more productive, as I said recently.</p>
<p>Average employee salaries are also higher, and are now rising faster than
inflation—as much as 2 percent above inflation in some sectors—which means even
more demand for products, thus creating a positive loop. Higher salaried
employees spend more, so companies will produce more. </p>
<p>That is why the cost of money has to come down, so companies can finance
their projects. I said last week that James Bullard, former St. Louis Fed
President, believes Powell’s Fed Governors need to begin to shrink interest
rates sooner rather than later.</p>
<p>Bullard, <a href="https://www.marketwatch.com/story/powell-needs-to-avoid-a-honey-i-forgot-to-shrink-the-policy-rate-moment-f6c7b277?mod=economy-politics">in
an interview</a> with MarketWatch’s Greg Robb, said Powell doesn’t want to wait
until inflation is actually at the 2% rate. “That would be the ‘Honey I forgot
to shrink the policy rate’.” It is a phrase credited to Chairman Powell, who
feared that the Fed would react too slowly to the rapidly plunging inflation
rate, causing perhaps a recession.</p>
<p>The Fed’s benchmark rate is now in the range of 5.25%-5.5%. The neutral rate
is below 4%. There are only three Fed policy meetings before the third quarter
of the year. “The math is not adding up that the [interest rate] is going to be
at the right level,” said Bullard.</p>
<p>And we have an upcoming budget crunch and possible government shutdown if our
political parties can’t agree on next year’s budget in the next couple of weeks!
That is the major uncertainty that could inhibit growth this year.</p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a> </p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-52126750089608387912024-02-23T14:22:00.000-08:002024-02-23T14:22:00.632-08:00Global Connections TV Interview<p style="text-align: center;"> <a name="_Hlk66092990">Answering
Kennedy’s Call</a></p><p align="center"><a name="_Hlk92958991"></a></p>
<p>Here is <a href="https://www.globalconnectionstelevision.com/video-gallery/2024/2/16/harlan-russell-green">Global
Connections Television interview</a> about <b>Building Community: Answering
Kennedy’s Call,</b> a memoir of my years of public service. </p><p><strong>Global Connections Television (GCTV), the only talk show of its type in the world, has featured a myriad of guests ranging from leaders at the UN to the private sector to academics to non-governmental organizations.</strong></p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjwKgfgDtStFnMS7wHbG98lTRbAeb6A3phRzmu-nqWPoAHSRCS7sMFFCy6-SqLlmHDwAwnUT0BDlMyyKv3zoB2ub0h6EGr9nijRzBr7u4b_WwKI1Sgd6lRkl2GqrMryRsmUfxuaJg4tRMfDNe7dDaNRYrdhd26DaZ84sZ3mBYe1jmltsNeQfFrBFsfV/s320/kennedy.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="320" data-original-width="213" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjwKgfgDtStFnMS7wHbG98lTRbAeb6A3phRzmu-nqWPoAHSRCS7sMFFCy6-SqLlmHDwAwnUT0BDlMyyKv3zoB2ub0h6EGr9nijRzBr7u4b_WwKI1Sgd6lRkl2GqrMryRsmUfxuaJg4tRMfDNe7dDaNRYrdhd26DaZ84sZ3mBYe1jmltsNeQfFrBFsfV/w266-h400/kennedy.jpg" width="266" /></a></div>
<p>Harlan Russell Green, a former Peace Corps Volunteer in Turkey, is the <a href="https://peacecorpsworldwide.org/2023-winner-of-the-peace-corps-writers-publishers-award/">2023
Winner of the Peace Corps Writers’ Publisher’s Award</a> for his latest book on
“Building Community: Answering Kennedy’s Call.” Mr. Green is a Rotarian, retired
Mortgage Banker, and Editor/Publisher of Popular Economics Weekly, a financial
wire service he began in 2000.</p>
<p>The US Peace Corps put him on an international trajectory that provided
unique opportunities to work with the US Environmental Protection Agency, Caesar
Chavez’s United Farm Workers of America, and several community development
projects to create sustainable, livable areas. </p>
<p>One of his award-winning films was the “The Great Clean Air Debate.” With the
UFWA, he produced “Fighting for Our Lives” and “Why We Boycott.” He also worked
on projects with Rotary International and Partnering for Peace, an organization
of Returned Peace Corps Volunteers who are now Rotarians that strive to connect
Rotary Clubs with Peace Corps Projects. </p>
<p>I began writing this memoir in 2017, after wondering how it was possible that
Americans had elected a president suffering a severe mental disorder. Did it
mean our democracy was dying or already dead, and Americans now wanted a
demagogue as president who believed that he was above all laws and the
constitution? </p>
<p>It reminded me in many ways of the 1960s when there was just as much social
unrest and different ideas of democracy. This was the era of McCarthyism and
communist witch-hunting, right wing against left wing political views, the civil
rights movement, and an unpopular war in Vietnam that was fracturing American
communities. </p>
<p>We coped with the dysfunction and cynicism then by searching for communities
that could mirror our values and ideals, and when we found them, to contribute
to their growth. </p>
<p>Former President Obama challenged Americans to inspire the youth to a life of
service in 2017 after he left the presidency; and the youth he talked about are
my target audience. He said then: </p>
<blockquote>
<p>“We have some of the lowest voting rates of any democracy and low
participation rates that translate into a further gap between who’s governing us
and what we believe. The only folks who are going to be able to solve that
problem are going to be young people, the next generation. And I have been
encouraged everywhere I go in the United States, but also everywhere around the
world to see how sharp and astute and tolerant and thoughtful and
entrepreneurial our young people are. A lot more sophisticated than I was at
their age. And so the question then becomes what are the ways in which we can
create pathways for them to take Working to develop successful communities is as
important today because of the deep divisions and the possibility of future
wars.leadership, for them to get involved?”</p></blockquote>
<p align="left">Working to develop successful communities is as important today
because of the deep divisions and cynicism today and possibility of future wars.
</p>
<p align="center">Harlan Green © 2024 </p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-35245967753004593422024-02-22T10:21:00.000-08:002024-02-22T10:21:00.780-08:00Another Housing Recession?<p style="text-align: center;"> <a name="_Hlk92958991">The Mortgage Corner</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>The 30-year conforming fixed rate has again risen above 7 percent in just one
month, and the effect is immediate. Housing construction <a href="https://www.nahb.org/news-and-economics/press-releases/2024/02/housing-starts-decline-in-january-on-multifamily-weakness">has
slowed</a> once again, in spite of the severe housing shortage. Construction is
14.8 percent below the revised December estimate of 1,562,000 and is 0.7 percent
below the January 2023 rate of 1,340,000, according to the National Association
of Home Builders, and we know why.</p>
<p>The just-released Fed minutes from January’s FOMC meeting showed how timid
the Fed Governors have become. They want a complete surrender of any inflation
before declaring victory. Inflation will only be conquered in their eyes when it
has already surrendered.</p>
<blockquote>
<p>“In discussing risk-management considerations that could bear on the policy
outlook, participants remarked that while the risks to achieving the Committee's
employment and inflation goals were moving into better balance, <a name="_Hlk159486939">they remained highly attentive to inflation risks</a>. In
particular, they saw upside risks to inflation as having diminished but noted
that inflation was still above the Committee's longer-run
goal.”</p></blockquote>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtLWq_w1werDtZwOIZEwTCaQRmG73LmYG9WJ51nLYYlKd4pd8j3PDwhyRy1ioIeaNGGkDkZKu7MgmjMq9Q6LM_waOOM_uVyS3V0Zu0qxddge0kZJAt8Sh2p6FUna0ufI2IVCQ5CHKcV3yv4zavbz3hSS2tVkOTCxMxZKk2aOruDsnejjOWQMkDCvOn/s358/homesales.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="136" data-original-width="358" height="153" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtLWq_w1werDtZwOIZEwTCaQRmG73LmYG9WJ51nLYYlKd4pd8j3PDwhyRy1ioIeaNGGkDkZKu7MgmjMq9Q6LM_waOOM_uVyS3V0Zu0qxddge0kZJAt8Sh2p6FUna0ufI2IVCQ5CHKcV3yv4zavbz3hSS2tVkOTCxMxZKk2aOruDsnejjOWQMkDCvOn/w400-h153/homesales.png" width="400" /></a></div><p align="center"><a href="https://www.calculatedriskblog.com/2024/02/housing-starts-decreased-to-1331.html" style="text-align: left;">Calculated
Risk</a></p>
<p>Wholesale prices tell us which direction inflation is trending and service
inflation has slowed considerably in the past year, with wholesale service
prices rising by 2.2 percent in 12 months.</p>
<p>The cost of wholesale goods, meanwhile, fell for the fourth month in a row
and is down 1.7 percent in the past 12 months. The decline was led by gasoline.
The wholesale cost of partly finished goods fell slightly last month and is 3.8
percent lower compared with a year ago. The cost of raw materials is down an
even sharper 15 percent compared with a year earlier. </p>
<p>This indicates inflation <b>that continues to trend down</b>, rather than
“stubborn” inflation. And that is puzzling many economists, because the higher
retail CPI focuses on rents, for instance, some 40 percent of it, and is making
an outsize influence on the inflation index when there are other more balanced
inflation indicators that we have been talking about.</p>
<p>This particularly irks Realtors and the National Association of Realtors
since high interest rates are the main cause of the housing shortage, with
housing barely out of its own recession.</p>
<p>“One big source of stubbornness to further calmness is that housing shelter
inflation is rising at 6% (per the CPI). That’s a bit of a mystery since
apartment rents are no longer rising and single-family rent growth is at low
single-digits,” said Lawrence Yun, chief economist at the National Association
of Realtors, in a statement.</p>
<p>January existing-home sales aren’t heartening. Home sales rose slightly
because home buyers jumped on mortgage rates that were below 7% at the start of
the year, says the NAR. </p>
<p>Sales activity rose to the highest level since August 2023 as total <a href="https://link.mediaoutreach.meltwater.com/ls/click?upn=VeAO2BDYBwMOIcllAbzjl9Mu29OECpf-2FOakHhS8jdcKQe5UqG3QgEeHh1QBCPGGJtAcWLxKuqEB-2BFUUCiLNlFQ-3D-3DoxOW_O3XWFiAdWrzzrOIt72qAuJDPg2dZlMUROevelgfEmd0LSm7sJH0igQcDNENo0ynJjQGlEgW7tBFcWoyp-2FmCWv1Hb-2B9CapeMTsI-2Bxj0SC5Nx9s1Tn1ygi-2Be0WimG88cj-2Bo9wt8TTzTbFdE7oklDIy6W-2FysCbw4bf-2Fixgih2lJmSZm6iBKbjQFC8IehvFAbhRXB9BsiiLaiS4y694pmNzs3BwfWvxj0GBQuoBoHthkdf9znW8UEQCZFxlTwnQRcRu7IYhFzu0PkgkMBLaIlOVNCBf17JMCAP3Wc9S6towXqMHveUhkbYmHG3KBBtXPUI1TJ1jkN6y68Inm6sMZjSMrYp88ADTItanMd3M5O0qEMan-2Bj3xB5vz9PiwGNy-2BV773iyfaYuy8BF-2FcykvANo-2FniXA-3D-3D"><strong>existing-home
sales</strong></a><a name="_ednref1"></a><a href="file:///C:/Users/USER/Documents/#_edn1"><sup>[1]</sup></a> – completed
transactions that include single-family homes, townhomes, condominiums and
co-ops – elevated 3.1% from December to a seasonally adjusted annual rate of
4.00 million in January. Year-over-year, sales slipped 1.7% (down from 4.07
million in January 2023).</p>
<blockquote>
<p>“While home sales remain sizably lower than a couple of years ago, January’s
monthly gain is the start of more supply and demand,” said NAR Chief Economist
Lawrence Yun. “Listings were modestly higher, and home buyers are taking
advantage of lower mortgage rates compared to late last year.”</p></blockquote>
<p>But how long will the Fed’s intransigence last if Chair Powell keeps
repeating his mantra that they “remained highly attentive to inflation risks?”
The risk could be a collapsing housing market that is just beginning to
recover.</p>
<p>The Fed wants to keep up the inflation battle even after the inflation dragon
has been slain. In their fear that they won’t be taken seriously, they risk not
being taken seriously if their efforts cause another housing recession.</p>
<p>This happened once before and resulted in a busted housing bubble and the
Great Recession. I am hopeful Chair Powell and the Fed Governors will see a
hopeful light at the end of the inflation tunnel.</p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-21923603293139597232024-02-19T12:45:00.000-08:002024-02-19T12:45:20.700-08:00Higher Productivity the Key<p style="text-align: center;"> <a name="_Hlk66092990">Financial
FAQs</a></p><p align="center"><a name="_Hlk92958991"></a></p>
<p align="left">There is a major reason the US economy is doing well in so many
ways—with plunging inflation, surging consumer spending, and the highest
economic growth of developed countries—that is often overlooked in economic
reports. </p>
<p>Labor productivity has been surging lately. It is the seed of our present
prosperity as well as future growth. Non-supervisory workers are producing more
per hour in the last three quarters that at any time since the COVID
pandemic.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhndAr7UxkdfeNcJ5oXplzFaNJQarGcwm5pgLLszfWT0yGU3Rf1EDI4jTdbKz3Zr6h1KHP9Fcehnkb9ecARrfNqndVOpkLIHOLxttE-COiP3qtUs7kdJDETBXfuQn-x0BJMpDCkFMQW9Z0TX5rjj5TsDvWKjIIMH_7WxnGoSnzcbGeVK2fs4hJ5UZAd/s481/prodjan.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="170" data-original-width="481" height="141" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhndAr7UxkdfeNcJ5oXplzFaNJQarGcwm5pgLLszfWT0yGU3Rf1EDI4jTdbKz3Zr6h1KHP9Fcehnkb9ecARrfNqndVOpkLIHOLxttE-COiP3qtUs7kdJDETBXfuQn-x0BJMpDCkFMQW9Z0TX5rjj5TsDvWKjIIMH_7WxnGoSnzcbGeVK2fs4hJ5UZAd/w400-h141/prodjan.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/OPHNFB/#0" style="text-align: left;">FREDlaborproductivity</a></p>
<p>Non-farm labor productivity has soared from a low of -2.4% to +2.7% annually
in eighteen months (Q2 2022 to Q4 2023) as portrayed in the above FRED
graph.</p>
<p>Why? Most economists say it’s because the US economy has been fully employed
for so long—more than two years—that there’s a scarcity of workers, so employers
have needed to invest more in capital expenditures—whether its AI or more
efficient factories—to meet the demand for their products. This translates to
workers being more productive, as they are running the new machines and software
services.</p>
<p>Average employee salaries are also higher, and are now rising faster than
inflation, which means even more demand for products, thus creating a positive
loop. Higher salaried employees spend more, so companies will produce more. </p>
<p>That is why Jame Bullard, former St. Louis Fed President, believes Powell’s
Fed Governors need to begin to shrink interest rates sooner rather than
later.</p>
<p>Bullard, <a href="https://www.marketwatch.com/story/powell-needs-to-avoid-a-honey-i-forgot-to-shrink-the-policy-rate-moment-f6c7b277?mod=economy-politics">in
an interview</a> with MarketWatch’s Greg Robb, said Powell doesn’t want to wait
until inflation is actually at the 2% rate. “That would be the ‘Honey I forgot
to shrink the policy rate’.” It is a phrase credited to Chairman Powell, who
feared that the Fed would react too slowly to the rapidly plunging inflation
rate, causing perhaps a recession.</p>
<p>The Fed’s benchmark rate is now in the range of 5.25%-5.5%. The neutral rate
is below 4%. There are only three Fed policy meetings before the third quarter
of the year. “The math is not adding up that the [interest rate] is going to be
at the right level,” said Bullard.</p>
<p>Another reason for the Fed to move more quickly in dropping rates is that
wholesale prices are now falling more quickly due in part to higher
productivity.</p>
<p>The Producer Price Index (PPI) for wholesale goods and services <a href="https://www.bls.gov/news.release/pdf/ppi.pdf">continues to plunge</a>. PPI
Final Demand is now up just 0.9 percent in 12 months, far below the Fed’s 2
percent target. It jumped 0.6 percent in January but monthly prices declined 0.1
percent in December 2023 and advanced just 0.1 percent in November.</p>
<p>And it is still trending downward. So where is risk of higher inflation down
the road if the cost of raw materials is declining? There’s a disconnect in the
reasoning of those who see a danger of higher inflation ahead, so let us hope
that Powell means what he says and doesn’t forget to shrink the policy rate.</p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-72327474361253876452024-02-16T10:21:00.000-08:002024-02-16T10:21:23.134-08:00Slower Retail Sales, Lower Inflation?<p style="text-align: center;"> <a name="_Hlk66092990">Financial
FAQs</a></p><p align="center"><a name="_Hlk92958991"></a></p>
<p>The New Year is proving to have lots of ups and downs as consumer spending
slows from the holidays. Tax season is afoot, of course, a time when consumers
tend to save more and spend less. </p>
<p>That’s why retail sales fell sharply in January, while November and December
sales were revised down. Financial markets rallied because it could mean the Fed
cuts rates sooner if such weakness continues.</p>
<p>Wholesale inflation has also fallen sharply, is now close to zero percent
annually, yet the financial markets continue to misread the data, fearing the
Fed will put off rate cuts until later this year.</p>
<p>The Calculated Risk-enhanced retail sales graph is a great picture of what
has happened since the COVID pandemic—incredible swings in activity that
continue to confuse both Main Street and Wall Street, thereby mudding the
economic waters.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioXpExrLv2jsHd8AYv21N7TpcWatxmXdqyDkSb1yXwoH2Gc4gE3FiLFuwEfedpwFLH8yDGLmEtqpNijAqJykKtyALoC1OxD4AUUCCUEn5okrWgelQzxGBkX0TOfLzUfuZk7YvvcnlfJDbvSnw30R1o9_V-nHHelps0-0TSAdSq2BB4n9Nh4SJ8T35e/s473/retailjan.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="198" data-original-width="473" height="168" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioXpExrLv2jsHd8AYv21N7TpcWatxmXdqyDkSb1yXwoH2Gc4gE3FiLFuwEfedpwFLH8yDGLmEtqpNijAqJykKtyALoC1OxD4AUUCCUEn5okrWgelQzxGBkX0TOfLzUfuZk7YvvcnlfJDbvSnw30R1o9_V-nHHelps0-0TSAdSq2BB4n9Nh4SJ8T35e/w400-h168/retailjan.png" width="400" /></a></div><p align="center"><a href="https://www.calculatedriskblog.com/2024/02/retail-sales-decreased-08-in-january.html" style="text-align: left;">FRED/BLS.gov/CalculatedRisk</a></p>
<blockquote>
<p>“Advance estimates of U.S. retail and food services sales for January 2024,
adjusted for seasonal variation and holiday and trading-day differences, but not
for price changes, were $700.3 billion, down 0.8 percent from the previous
month, and up 0.6 percent above January 2023,” said the Census
Bureau.</p></blockquote>
<p>Sales were up 3.1 percent from a year ago, below the 5 percent longer term
average. Should this be worrisome? It isn’t adjusted for inflation, so retail
sales were flat when adjusted for retail inflation that is running at 3
percent.</p>
<p>It means consumers could be taking a break in the first quarter of 2024. Why
not? Blizzards in the northern states, tornadoes in the south and midwest, are
certainly reasons for consumers to take a pause.</p>
<p>Meanwhile the Producer Price Index (PPI) for wholesale goods and services <a href="https://www.bls.gov/news.release/pdf/ppi.pdf">continues to plunge</a>, as
I said. This is the cost of goods and services that go into retail (CPI)
inflation, which means overall inflation will continue to fall as well. </p>
<p>PPI Final Demand is now up just 0.9 percent in 12 months, far below the Fed’s
2 percent target. It jumped 0.6 percent in January but monthly prices declined
0.1 percent in December 2023 and advanced just 0.1 percent in November.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCgFnhqRZAe3A6ieiJPqVQzku6NhTtDMdXuQPtpOBskqy00cN0_R__FFtAg6IUQ5T9bNgzq6XmpJAfVeDrrT1xZphraOnEhrq9_uB5fvjcnEh2itOUK05mPrbrWh-ekZ9kK2pDBOaFdgUXD2aMaiCvtCGMubx9L0BbB7GQbRrevvc3m0DZYkNeI4eR/s451/ppijan.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="161" data-original-width="451" height="143" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhCgFnhqRZAe3A6ieiJPqVQzku6NhTtDMdXuQPtpOBskqy00cN0_R__FFtAg6IUQ5T9bNgzq6XmpJAfVeDrrT1xZphraOnEhrq9_uB5fvjcnEh2itOUK05mPrbrWh-ekZ9kK2pDBOaFdgUXD2aMaiCvtCGMubx9L0BbB7GQbRrevvc3m0DZYkNeI4eR/w400-h143/ppijan.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/PPIFIS/#0" style="text-align: left;">FREDppi</a></p>
<p>That is why economists are saying the inflation dragon has been slayed and
consumer confidence is improving. One hint of what’s in store for the New Year
was the New York Fed’s 2024 <a href="https://www.newyorkfed.org/microeconomics/sce"><i>Survey of Consumer
Expectations</i></a>, which shows improvements in households’ perceptions and
expectations of their financial conditions and credit availability.</p>
<p>Of particular note was that perceptions about households’ current financial
situations improved in January with more respondents reporting being better off
than a year ago and fewer respondents reporting being worse off. <b>The
percentage of respondents expecting to be financially the same or better off 12
months from now is 76.5%, its highest level since September 2021. </b>(my
emphasis)<b></b></p>
<p>This is a major reason consumer confidence has been rising over the past
several months.</p>
<p>I reported last week that the University of Michigan’s sentiment survey, for
instance, also reported consumers much more optimistic about their finances and
the inflation outlook.</p>
<blockquote>
<p>“Consumer sentiment confirmed its early month reading, surging 13% to reach
its highest level since July 2021, reflecting improvements in the outlook for
both inflation and personal incomes,” <a href="http://www.sca.isr.umich.edu/">said survey</a> director Joanne Hsu.
“January's gain has been exceeded only five times since 1978, one of which was
last month at an even larger increase of 14%.”</p></blockquote>
<p>So contrary to what the financial market are reacting to, both wholesale and
retrial inflation continues to trend down. But it’s a bumpy ride,, one Fed
Governor warned, and as illustrated in the graphs.</p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-31549802130931553212024-02-14T11:49:00.000-08:002024-02-14T11:49:43.065-08:00Why the Inflation Debate?<p style="text-align: center;"> <a name="_Hlk92958991">The Mortgage Corner</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>This month’s Consumer Price index looked hotter at first glance, but it
wasn’t. It was slightly cooler, so there was no real reason for the DOW’s 500
pt. plunge.</p>
<p>That’s where the debate is raging these days. Looks matter more than
substance in the financial markets. The CPI inflation data had actually
improved. So why the market pessimism?</p>
<blockquote>
<p>“The all items index rose 3.1 percent for the 12 months ending January (red
bar in graph), <b>a smaller increase than the 3.4-percent increase for the 12
months ending December, </b>said the Bureau of Labor Services. The all items
less food and energy index rose 3.9 percent over the last 12 months (green bar),
<b>the same increase as for the 12 months</b> ending December. The energy index
<b>decreased</b> 4.6 percent for the 12 months ending January (black bar), while
the food index <b>increased 2.6 percent</b> over the last year (blue bar).
“(bold emphasis mine)</p></blockquote>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQTEWoPZjW8MWARKpIhOT-ePuQne64i3AWVeE1RtHOIuczbkzf0CQpXpNUDsp9VqAi6uYpda3uK8hJOnGOAqXhyphenhyphenMr3_g-mg_EjBDgeXqF_D1jz4a2QvipuRk1EuOnptGV2Jal5ex8Kd3iDMSoSHkKr2sUQtCMX4_-QBydueK_1vGoCAZJUqtyoWINl/s479/jancpi.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="230" data-original-width="479" height="193" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQTEWoPZjW8MWARKpIhOT-ePuQne64i3AWVeE1RtHOIuczbkzf0CQpXpNUDsp9VqAi6uYpda3uK8hJOnGOAqXhyphenhyphenMr3_g-mg_EjBDgeXqF_D1jz4a2QvipuRk1EuOnptGV2Jal5ex8Kd3iDMSoSHkKr2sUQtCMX4_-QBydueK_1vGoCAZJUqtyoWINl/w400-h193/jancpi.jpg" width="400" /></a></div><p align="center"><a href="https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category.htm" style="text-align: left;">BLS.gov</a></p>
<p> </p>
<p>This indicates inflation that continues to trend down, rather than “stubborn”
inflation. And that is puzzling many economists, because the CPI focuses on
rents, some 40 percent of it, thus making an outsize influence on the inflation
index, when there are other more balanced inflation indicators that we will talk
about later.</p>
<p>This particularly irks Realtors and the National Association of Realtors
since high interest rates are the main cause of the housing shortage, with
housing barely out of its own recession.</p>
<blockquote>
<p>“One big source of stubbornness to further calmness is that housing shelter
inflation is rising at 6% (per the CPI). That’s a bit of a mystery since
apartment rents are no longer rising and single-family rent growth is at low
single-digits,” said Lawrence Yun, chief economist at the National Association
of Realtors, in a statement.</p></blockquote>
<p>The US economy has landed with the huge Q4 GDP growth spurt of 3.3 percent
and 335,000 nonfarm payroll jobs created, and inflation that’s approaching the
Fed’s 2% target rate. </p>
<p>And the Atlanta Fed GDPNow Q1 2024 growth prediction is now 3.5 percent, so
growth continues this year.</p>
<p>What may irk Fed officials who are particularly recalcitrant to call victory
over inflation is that wages continue to rise higher, even as inflation is
falling. A majority of Fed officials seem to subscribe to former Fed Chair Paul
Volcker’s edict that strong wage growth and a 2% inflation target can’t coexist.
But that has been happening for the past two years.</p>
<p>Another misconception is what happens when inflation is ‘held’ at 2 percent.
The post-Great Recession era of 2009-2020 was called the era of ‘great
moderation’ because the inflation rate averaged 2 percent over that time. But
what was the cost?</p>
<p>The unemployment rate had skyrocketed to 10 percent at the end of the Great
Recession, and didn’t go below 4 percent until August 2018, averaging between
5-6 percent during that decade.</p>
<p>Job growth and wage growth were muted because the Obama administration
emphasized policies that paid down the debt rather than higher growth when
Republicans engineered a total government shutdown . The result was Hilary
Clinton and the Democrats losing in 2016, as they were hammered on the weak
growth and employment numbers.</p>
<p>Another economist, Duke Finance Professor Campbell Harvey, gave a more dire
prediction if the Fed didn’t move faster to cut interest rates. </p>
<p>“All the hikes in 2023 were justified by inflation being outside the comfort
zone. … It’s the same mistake and we know that higher rates are not good for
economic growth,” Harvey said in <a href="https://www.marketwatch.com/story/we-need-to-snap-out-of-it-the-fed-is-being-misled-again-by-inflation-numbers-says-professor-behind-popular-recession-predictor-f2458d5a?mod=home-page">a
MarketWatch</a> interview. </p>
<blockquote>
<p>“It increases the cost of capital, it means less investment, it means higher
borrowing costs. All of this is anti-growth,” he added. “So we need to snap out
of it.”</p></blockquote>
<p>Two other inflation indexes, for Personal Consumption Expenditures (PCE), and
Producer Prices (PPI) are already in the 2 percent target range or below.</p>
<p>It means the Fed would rather look tough and endanger a recession than
recognize that decent growth and a fully employed economy paying good wages can
coexist without causing a recession.</p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-60146742117026572212024-02-09T11:11:00.000-08:002024-02-09T11:11:24.390-08:00Inflation Still Too High?<p style="text-align: center;"> <a name="_Hlk66092990">Financial
FAQs</a></p><p align="center"><a name="_Hlk92958991"></a></p>
<p>In an excellent piece in MarketWatch, Jeffry Bartash quoted Fed Chair Powell
on remarks he made last week in a <a href="https://www.cbsnews.com/news/full-transcript-fed-chair-jerome-powell-60-minutes-interview-economy/">60
Minutes</a> interview. Why do Americans still seem unhappy with the economy in
many surveys?</p>
<p>“People are going to the store, and they’re paying much more for the basics
of life than they were two years ago, three years ago. And they’re not happy
about it. And it’s fine that inflation is coming down,” he added, “but the
prices they’re paying are still high.”</p>
<p>Bartash showed the reason why consumers still complain in a chart, though
they see inflation improving in the New Year. Among commodities; flour, steak
and butter prices are still high; sporting events and care insurance highest in
the service sector. </p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2t1Ke1-cNTaYxH5x6qqve8bMOPyqD2-Zv2Cjcxx2KAy7TF6anIeQUPVn5TbkwmPXIt6G1aOTAXa2OvogbSf11EEjgc74po7BML0-l2VsKwtw_w2KdcSNdSuuwSSZIoisMLK1Z70QJ_FXMc_SiDlR0iNmEdWtkDloyxxRRnJciYjuR77iWZxHw4-1i/s481/prices.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="257" data-original-width="481" height="214" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2t1Ke1-cNTaYxH5x6qqve8bMOPyqD2-Zv2Cjcxx2KAy7TF6anIeQUPVn5TbkwmPXIt6G1aOTAXa2OvogbSf11EEjgc74po7BML0-l2VsKwtw_w2KdcSNdSuuwSSZIoisMLK1Z70QJ_FXMc_SiDlR0iNmEdWtkDloyxxRRnJciYjuR77iWZxHw4-1i/w400-h214/prices.jpg" width="400" /></a></div><p align="center"><a href="https://www.marketwatch.com/story/inflation-is-slowing-but-americans-are-still-paying-the-price-2c13d7a0?mod=mw_latestnews" style="text-align: left;">MarketWatch.com</a></p>
<p>The University of Michigan’s sentiment survey, for instance, reported
consumers much more optimistic about their finances and the inflation
outlook.</p>
<blockquote>
<p>“Consumer sentiment confirmed its early month reading, surging 13% to reach
its highest level since July 2021, reflecting improvements in the outlook for
both inflation and personal incomes,” <a href="http://www.sca.isr.umich.edu/">said survey</a> director Joanne Hsu.
“January's gain has been exceeded only five times since 1978, one of which was
last month at an even larger increase of 14%. <b>Consumers expressed gains in
their views on their personal finances as well as the macroeconomy; the
short-run business outlook soared 27%</b>.” (my bold)</p></blockquote>
<p>She said year-ahead inflation expectations eased to 2.9 percent, down from
3.1 percent in December and 4.5 percent in November. The current reading is the
lowest since December 2020 and is now within the 2.3-3.0 percent range seen in
the two years prior to the pandemic. </p>
<p>Maybe this is why Fed Chair Powell was so ambiguous at his last post-FOMC
press conference, reporting the Fed Governors decided no more rate hikes were
warranted. But they needed to be more confident that inflation had been tamed
before actually cutting their Fed Funds rate.</p>
<p>Can the Fed really hope to bring down the inflation rate(s) down much further
(there are several inflation indicators to choose from) without causing a
recession? There have only been three ‘soft landings’ since the 1960s—i.e., when
the Fed’s credit tightening didn’t cause a recession.</p>
<p>Why? Because it would in fact take a serious recession for prices to fall
back to pre-pandemic levels in the time frame the Fed Governors would like.
Businesses would then begin to lay off their workers as their profit margins
fell. It happened in Japan with their busted real estate bubble that set
economic growth back for decades, and from which the Chinese economy is now
suffering. </p>
<p>Actual deflation: when prices fall rather than rise more slowly, is a
terrible thing to avoid as past history has shown. </p>
<p>This is why financial markets are now beginning to push back at Powell’s Fed
Governors seeming indecision on when to cut interest rates. </p>
<blockquote>
<p>Mohamed El-Erian, chief economic adviser at Allianz, <a href="https://www.wsj.com/podcasts/take-on-the-week/why-mohamed-el-erian-is-worried-about-a-2024-recession/7f730c91-51a2-4192-82f4-4faded873561">said</a>
in a Wall Street interview: “What consensus has been expecting, has gone from a
soft landing to hard landing, to no landing, back to hard landing, to crash
landing, back to hard landing, back to soft landing. That's an incredible
sequence and it tells you that we've lost our anchors. We've lost our economic
anchors, we've lost our policy anchors, and we've lost our technical
anchors.”</p></blockquote>
<p>And the Philadelphia Federal Reserve in a <a href="https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q1-2024">just-released
survey</a> of top economists, has upgraded their forecast of healthy 2024
economic growth.</p>
<p>It said the near-term outlook for the U.S. economy looks better now than it
did three months ago. The 34 leading economists’ forecast predicted the economy
will expand at an annual rate of 2.1 percent this quarter, up from the
prediction of 0.8 percent in the last survey.</p>
<p>What is the Fed to do with such conflicting data? Will it lower inflation
without creating deflation? </p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-1590477062472361592024-02-06T11:04:00.000-08:002024-02-06T11:04:21.096-08:00Soft Landing, What's Next?<p style="text-align: center;"> <a name="_Hlk92958991">The Mortgage Corner</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>The US economy has landed with the huge Q4 GDP growth spurt of 3.3 percent, 335,000 nonfarm payroll jobs created, and inflation closing in on the Fed's 2% target rate. What happens next? It looks like it’s
about to take off again, if Powell’s Fed Governors allow it to happen.</p>
<p>Today’s Institute of Supply Manager’s survey of the <a href="https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/january/">service
sector</a> shows an economy picking up speed in the New Year. Economic activity
in the services sector expanded in January for the 13th consecutive month as the
Services PMI<sup>®</sup> registered 53.4 percent. The sector has grown in 43 of
the last 44 months, with the lone contraction in December 2022.</p>
<blockquote>
<p>“The overall growth rate increase in January is attributable to faster growth
of the New Orders, Employment, and Supplier Deliveries indexes,” said Anthony
Nieves, survey Director. ‘The majority of respondents indicate that business is
steady. They are optimistic about the economy due to the potential impact of
interest rate cuts; however, they are cautious due to inflation, associated cost
pressures and ongoing geopolitical conflicts.”</p></blockquote>
<p>The manufacturing sector also improved slightly in January, though still in
contraction. Its manufacturing index (PMI) rose 2 pts to 49.1, with new orders
showing the biggest jump.</p>
<p>There are many reasons for the stronger growth in 2023 and its continuing
possibility in 2024. We jump started the US economy more quickly than in other
developed countries, in part by putting so much cash in the pockets of consumers
and businesses, so that consumers have kept spending.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjbDQbXeAzUgOqKvlL-NpLEx9NnVEMVX6VbGMqEr8gJC6myAT69UaCy5zqxFOspkMSFEG4UuVg9sH_ylC2GVT2og7UxVx4Lk-JnE6j8R2fbTNms-lvgX42R3p-s4cFD9ffX9bRwZPCvHJti1d8S9NNVqEpltLfqQ8G3K_Kqib2BcNxfaSmj67Fip2n/s579/pcejan.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="206" data-original-width="579" height="143" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjbDQbXeAzUgOqKvlL-NpLEx9NnVEMVX6VbGMqEr8gJC6myAT69UaCy5zqxFOspkMSFEG4UuVg9sH_ylC2GVT2og7UxVx4Lk-JnE6j8R2fbTNms-lvgX42R3p-s4cFD9ffX9bRwZPCvHJti1d8S9NNVqEpltLfqQ8G3K_Kqib2BcNxfaSmj67Fip2n/w400-h143/pcejan.png" width="400" /></a></div><p align="center"><a href="https://www.bea.gov/news/2024/personal-income-and-outlays-december-2023" style="text-align: left;">BEApcexpenditures</a></p>
<p>Personal consumption expenditures (PCE) are portrayed in the above BEA graph.
The higher orange line is outlays (i.e., increased spending) and shorter blue
bar Disposable Income (after taxes, etc.).</p>
<p>Service-sector spending is especially strong and has increased in the latest
BEA estimate. This is the major reason the US economy continues to expand.</p>
<p>The BEA said the largest contributors to the increase were financial services
and insurance (led by portfolio management and investment advice services),
health care (both hospitals and outpatient services), and recreation services
(led by gambling). </p>
<p>Now a first look at 2024 is the Atlanta Fed’s GDPNow estimate of first
quarter GDP confirms continuing recovery with a huge revision to its first
quarter estimate.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWWBOAoLIQjLVAP25Za3cbdaF66zyDtcg29-ESnSfI7mrvpsWWZfdTvgJzWdTT4IIWQLz2ZiYfPQlBkQqTS8CkLtn7ZUaqbM9ZTkJuwd2uoRQEv_JbmrSKP6P_QH8CcIpvxyv_gEocOwo6nK0Ov-ubxCglHfXdLaDBYeWW_B6IonBgdUIJHSVzkWh5/s480/jangdpnow.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="124" data-original-width="480" height="104" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWWBOAoLIQjLVAP25Za3cbdaF66zyDtcg29-ESnSfI7mrvpsWWZfdTvgJzWdTT4IIWQLz2ZiYfPQlBkQqTS8CkLtn7ZUaqbM9ZTkJuwd2uoRQEv_JbmrSKP6P_QH8CcIpvxyv_gEocOwo6nK0Ov-ubxCglHfXdLaDBYeWW_B6IonBgdUIJHSVzkWh5/w400-h104/jangdpnow.gif" width="400" /></a></div><p align="center"><a href="https://www.atlantafed.org/cqer/research/gdpnow.aspx?utm_medium=email&utm_source=mailchimp&utm_campaign=cqer-research" style="text-align: left;">AtlantaFed</a></p>
<blockquote>
<p>“The GDPNow model estimate for real GDP growth (seasonally adjusted annual
rate) in the first quarter of 2024 is <b>4.2 percent</b> on February 1, up from
3.0 percent on January 26. After this morning’s construction spending release
from the US Census Bureau and the Manufacturing ISM Report On Business from the
Institute for Supply Management...”</p></blockquote>
<p>The Atlanta Fed’s estimate of future GDP growth has been surprisingly
accurate, and more positive than that of most Blue-Chip economists surveyed I’ve
said before.</p>
<p>Such continued growth is fortunate for consumers without job worries, but
maybe not financial markets that rely heavily on borrowed money. </p>
<p>If the Fed now becomes more hawkish about future inflation, and backs off on
the timing of rate cuts, it could hurt more vulnerable regional banks (as
happened last year) that are now worried interest rates may remain too high for
too long. </p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-26093873638766323362024-02-01T11:52:00.000-08:002024-02-01T11:52:08.614-08:00Interest Rates About To Fall?<p style="text-align: center;"> <a name="_Hlk66092990">Financial
FAQs</a></p><p align="center"><a name="_Hlk92958991"></a></p>
<p>Fed Chair Jerome Powell was as ambiguous as ever at yesterday’s post-FOMC
press conference. He reported the Fed Governors decided no more rate hikes were
warranted, but they needed to be more confident that inflation had been tamed
before actually cutting their Fed Funds rate.</p>
<p>When asked by several reporters how much confidence was needed, he responded
they needed “greater confidence” but couldn’t be pinned down on what that
meant.</p>
<p>In fact, Powell’s Fed Governors don’t seem to understand the main cause of
post-pandemic inflation. Most economists today attribute it to the worldwide
economic shutdown that stopped production, which took years to recover,
contributing to the scarcities that scared consumers—remember the toilet paper
shortage?</p>
<p>So what caused such a precipitous drop in inflation, the fastest drop in
post-WWII history? Supply-chains have recovered, and we are beginning to see a
large jump in labor productivity, which is a significant increase in the amount
of goods and services produced per worker-hour.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicAohyeEnBxey8uVnUHm6a4JKFoEHf-uYDOtisdBySzITfXLNFleTeOLxJrJZ9IZuOxPa7YWEgcSG12tPQhBd-v0VCFUEZ48yrGvd1m-U0vwZzRCEYANJLGIBFk_2qHI5_Zolx6ma0g_gkHjHRMKFOIOhjU581jUlrdyFgL_ep7OdnLiIyf-ZBrBIa/s464/productivity.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="146" data-original-width="464" height="126" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicAohyeEnBxey8uVnUHm6a4JKFoEHf-uYDOtisdBySzITfXLNFleTeOLxJrJZ9IZuOxPa7YWEgcSG12tPQhBd-v0VCFUEZ48yrGvd1m-U0vwZzRCEYANJLGIBFk_2qHI5_Zolx6ma0g_gkHjHRMKFOIOhjU581jUlrdyFgL_ep7OdnLiIyf-ZBrBIa/w400-h126/productivity.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/OPHNFB/#0" style="text-align: left;">FREDproductivity</a></p>
<p>I maintain a major reason supply chains have recovered so quickly is the
surge in labor productivity that began in the first quarter of 2023. And why
not? There had been a large increase in capital expenditures in the second
quarter of 2021 as companies ramped up production after the shutdown.</p>
<p>Capital expenditures, or CAPEX, is the seed-money that increases productivity
by investing in new technologies and factories. It fell as per the above FRED
graph when the Fed began to raise interest rates, but corporations were able to
absorb the interest rate increases as their profits soared and the various PPE
and PPI aid money began to filter into the equation.</p>
<blockquote>
<p>“Nonfarm business sector labor productivity increased 3.2 percent in the
fourth quarter of 2023, the U.S. Bureau of Labor Statistics <a href="https://www.bls.gov/news.release/prod2.nr0.htm">reported today</a>, as
output increased 3.7 percent and hours worked increased 0.4 percent.”
</p></blockquote>
<p>This is why financial markets are now beginning to push back at Powell’s Fed
Governors seeming indecision on when to cut interest rates. </p>
<p>MarketWatch reported that Mohamed El-Erian, chief economic adviser at
Allianz, said in a post on X, the social-media platform formerly known as
Twitter, Powell’s decision to push back against a March cut “is fueling more
questions about the risks of the Fed being late again, albeit in a different
direction.” </p>
<p>But the markets like to respond to facts rather than hearsay and we now have
a huge revision to the GDPNow growth estimate from the Atlanta Fed that I’ve
been following. In fact, GDP growth may be accelerating in 2024.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyJVblf8C_cn29mTkqIjFpaWfef6tlANyKDK6WZUIfmaeZhUrsQnG0HWGgllLICozI6rnE51N84bBQbDuVIYnxciQ7ex6rmJvgH61FB3pmTG5yvFvIp6J8if4oC9cnxCelNFyewX9EpueK7UgJ3QRHr6r8ggQk7jFJOovQ9AFkdVcEGoDVHNAF3K7_/s477/q1gdpnow.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="146" data-original-width="477" height="122" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyJVblf8C_cn29mTkqIjFpaWfef6tlANyKDK6WZUIfmaeZhUrsQnG0HWGgllLICozI6rnE51N84bBQbDuVIYnxciQ7ex6rmJvgH61FB3pmTG5yvFvIp6J8if4oC9cnxCelNFyewX9EpueK7UgJ3QRHr6r8ggQk7jFJOovQ9AFkdVcEGoDVHNAF3K7_/w400-h122/q1gdpnow.gif" width="400" /></a></div><p align="center"><a href="https://www.atlantafed.org/cqer/research/gdpnow.aspx?utm_medium=email&utm_source=mailchimp&utm_campaign=cqer-research" style="text-align: left;">AtlantaFed</a></p>
<blockquote>
<p align="left">It’s revision said: “The GDPNow model estimate for real GDP growth
(seasonally adjusted annual rate) in the first quarter of 2024 is <b>4.2
percent</b> on February 1, up from 3.0 percent on January 26.” </p></blockquote>
<p>The revision came after this morning’s construction spending release from the
US Census Bureau and the Manufacturing ISM Report On Business from the Institute
for Supply Management, as well as first-quarter real gross private domestic
investment growth—all showed sharp increases.</p>
<p>So, is the large jump in the Q1 GDP forecast too outrageous? Maybe not,
because construction spending is soaring from the various government
initiatives, such as the Infrastructure and Inflation Reduction Acts, and the
Manufacturing ISM report has turned slightly positive after one year of
decline.</p>
<p>Spending just on construction projects rose 0.9% in December to $2.1
trillion, the Commerce Department reported Thursday. It has risen every month in
2023. It is what the government and private companies spend on projects, from
housing to highways. </p>
<p>And I also reported on the strong Q1 real gross domestic investment (Capex)
growth above.</p>
<p>So, what will higher economic growth do to inflation? It hasn’t hurt the
inflation decline to date. Why, because so much of the spending that goes into
the GDP is on modernizing the US economy, further increasing US labor
productivity.</p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-44291927488775382262024-01-30T08:27:00.000-08:002024-01-30T08:27:31.057-08:00Will 2024 Be Even Better?<p style="text-align: center;"> <a name="_Hlk92958991">The Mortgage Corner</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>The US economy grew either 2.5 percent or 3.1 percent annually in 2023,
whichever GDP growth indicator you choose. </p>
<p>Why such strong growth when the rest of the world is still recovering from
the COVID pandemic? Even China is struggling from its mishandling of COVID-19,
after literally locking people in their buildings for weeks to prevent its
spread.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1JYkGXmDV9RvXudi6L6OWtJwvE-arpxpkY3A1Z3Wsj288ToKTuPPhHRxX40SlxRTNi4ZYajx3eYIEd0U77TJMe2ZeW2H4ROTiY3-Lq3etxyK2NqcjmX0JdTvhyphenhyphenRl1nwKy2A-Ji8vdgSNX381Pcnn60XeDgkIIzPXe_03Gcqubvtq1qdMmaPf4kik-/s745/JOBS.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="310" data-original-width="745" height="166" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1JYkGXmDV9RvXudi6L6OWtJwvE-arpxpkY3A1Z3Wsj288ToKTuPPhHRxX40SlxRTNi4ZYajx3eYIEd0U77TJMe2ZeW2H4ROTiY3-Lq3etxyK2NqcjmX0JdTvhyphenhyphenRl1nwKy2A-Ji8vdgSNX381Pcnn60XeDgkIIzPXe_03Gcqubvtq1qdMmaPf4kik-/w400-h166/JOBS.png" width="400" /></a></div><p align="center"><a href="https://home.treasury.gov/news/featured-stories/the-us-economic-recovery-in-international-context-2023" style="text-align: left;">USTreasury.gov</a></p>
<p>The US recovered more quickly because of the various, bipartisan aid packages
that quickly created vaccines and dumped some $5 trillion in cash into consumer
and business pockets—such as the PPI and PPE payments to cover losses incurred
by the pandemic.</p>
<p>This is portrayed in the US Treasury graph of developed countries’ jobless
rates. Only Japan and Germany have unemployment rates below our 3.7 percent,
which has held now for two years.</p>
<p>That means ‘Helicopter’ Ben Bernanke, Fed Chair Alan Greenspan successor
during the Great Recession, was right. He was nicknamed such because he was
first to advocate the various Quantitative Easing packages that showered (oops,
I mean injected) enormous amounts of cash into the US economy that brought US
out of the Great Recession of 2007-2009, so named because it caused almost as
much damage as the Great Depression.</p>
<p>The Biden administration is doing the same with joint government-private
investments in infrastructure and the mitigation of climate change that are
injecting $ trillions more into the economy in productive ways that will pay for
themselves and more.</p>
<p>Now a first look at 2024 is the Atlanta Fed’s GDPNow estimate of first
quarter growth. It sees a continuing recovery.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPnK0rDkO_rTiL1V_FRV96qahvQ5lLbAY7X_Da1VML6qm2N22W3VxE3WKgdFg8F5ZOAMZ_qn0xB3EjjlnUNalhSnKd_irWB0RRbGMId5It1U5c1lg8JOzazsOVibmjA8wGXJzkg3yiPtnE4snEst0b_6wwYIOuaTWd5mWmcQrvn4D3L_VHJARMuFfq/s468/q1gdpnow.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="147" data-original-width="468" height="126" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPnK0rDkO_rTiL1V_FRV96qahvQ5lLbAY7X_Da1VML6qm2N22W3VxE3WKgdFg8F5ZOAMZ_qn0xB3EjjlnUNalhSnKd_irWB0RRbGMId5It1U5c1lg8JOzazsOVibmjA8wGXJzkg3yiPtnE4snEst0b_6wwYIOuaTWd5mWmcQrvn4D3L_VHJARMuFfq/w400-h126/q1gdpnow.gif" width="400" /></a></div><p align="center"><a href="https://www.atlantafed.org/cqer/research/gdpnow.aspx?utm_medium=email&utm_source=mailchimp&utm_campaign=cqer-research" style="text-align: left;">AtlantaFed</a></p>
<blockquote>
<p>“The initial GDPNow model estimate for real GDP growth (seasonally adjusted
annual rate) in the first quarter of 2024 is <b>3.0 percent</b> on January 26.
The initial estimate of fourth-quarter real GDP growth released by the US Bureau
of Economic Analysis on January 25 was 3.3 percent, 0.9 percentage points above
the final GDPNow model nowcast released on January 19.”</p></blockquote>
<p>The Atlanta Fed’s estimate of future GDP growth has been surprisingly
accurate, in other words, and more positive than that of most Blue Chip
economists surveyed as shown in the Atlanta Fed graph.</p>
<p>Further evidence of a surging economy is rising consumer confidence. The
Conference Board’s <b><i>Consumer Confidence Index</i></b>® <a href="https://www.conference-board.org/topics/consumer-confidence">rose in
January</a> to 114.8 (1985=100), up from a revised 108.0 in December. It was the
highest since December 2021, and marked the third straight monthly increase.
</p>
<blockquote>
<p>“January’s increase in consumer confidence likely reflected slower inflation,
anticipation of lower interest rates ahead, and generally favorable employment
conditions as companies continue to hoard labor,” said<b> Dana Peterson, Chief
Economist at The Conference Board.</b> “The gain was seen across all age groups,
but largest for consumers 55 and over.”</p></blockquote>
<p>And lastly, <a href="https://www.nar.realtor/research-and-statistics/housing-statistics/pending-home-sales">Pending
Home Sales Index (PHSI)</a>* – a forward-looking indicator of home sales based
on contract signings – increased to 77.3 in December. Year over year, pending
transactions were up 1.3%. An index of 100 is equal to the level of contract
activity in 2001.</p>
<p>"The housing market is off to a good start this year, as consumers benefit
from falling mortgage rates and stable home prices," said Lawrence Yun, NAR
chief economist. "Job additions and income growth will further help with housing
affordability, but increased supply will be essential to satisfying all
potential demand."</p>
<p>Lower interest rates will be the key to further recovery. Consumers are
saying they are happier and a strong employment report on Friday should confirm
2024 may be an even better year.</p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-2285371853521781182024-01-25T13:00:00.000-08:002024-01-25T13:00:56.604-08:00US Economy Has Landed<p style="text-align: center;"> <a name="_Hlk92958991">Popular Economics Weekly</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>There’s no longer any doubt with the initial estimate of fourth quarter GDP
growth just in. The US economy has made a soft landing. The economy grew 3.3
percent in Q4 after a 4.9 percent increase in Q3, and 2.5 percent for the full
year.</p>
<p>This is while inflation, as measured by the most comprehensive inflation
indicator for Personal Consumption Expenditures (PCE), has been rising at just 2
percent for the past two months!</p>
<p>Consumer spending was the main engine of growth, which “reflected increases
in services (led by health care) and goods (led by recreational goods and
vehicles),” said the BEA.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLFwRceod1SPKTJTmASvCnxAGkahX-YqDXCVyFpvbrT9pS89GzL9PuMYm2nyrPC8LdtVbN0PL4QRT9CyNKPooSFqBXN8qiLtCP3JsBHMFgbUQk0AAkx2gSndaFD8f_deo4pwps7sreCAA197wqYRSwnimBla_6Vmlp13NE2HBP-bgkcx1PsIukg0wE/s476/q4gdp.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="174" data-original-width="476" height="146" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLFwRceod1SPKTJTmASvCnxAGkahX-YqDXCVyFpvbrT9pS89GzL9PuMYm2nyrPC8LdtVbN0PL4QRT9CyNKPooSFqBXN8qiLtCP3JsBHMFgbUQk0AAkx2gSndaFD8f_deo4pwps7sreCAA197wqYRSwnimBla_6Vmlp13NE2HBP-bgkcx1PsIukg0wE/w400-h146/q4gdp.png" width="400" /></a></div><p align="center"><a href="https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-advance-estimate" style="text-align: left;">BEA.gov</a></p>
<blockquote>
<p>This is while “The <b>price index for gross domestic purchases</b> (GDP)
increased 1.9 percent in the fourth quarter, compared with an increase of 2.9
percent in the third quarter. <b>The personal consumption expenditures (PCE)
price index</b> increased 1.7 percent, compared with an increase of 2.6 percent.
Excluding food and energy prices, the PCE price index increased 2.0 percent<u>,
the same change as the third quarter</u>.”</p></blockquote>
<p>Why has inflation fallen so dramatically? There are a number of reasons,
beginning with the fact that the supply chain of goods and services has caught
up to the demand by consumers and companies for goods and services. But also,
labor productivity, the amount of goods produced per worker-hour, has risen
sharply in the last 12 months, largely because of new technologies such as AI,
which has stream-lined supply chains, shortening delivery times.</p>
<p>Real GDP also reflected increased spending in exports, state and local
government spending, nonresidential fixed investment, federal government
spending, private inventory investment, and residential fixed investment.
Spending and investing has increased across the board. </p>
<p>Why wouldn’t consumers keep buying? Americans are fully employed, and average
hourly wages are rising faster than inflation (+4.1%). Inflation has been
falling particularly sharply over the past 6 months (1.9%-2.5%, depending on
which inflation measure we look at), I said last week. </p>
<p>And health care spending is soaring, as a record 21.3 million people have
officially signed up for <a href="https://www.cms.gov/newsroom/press-releases/historic-213-million-people-choose-aca-marketplace-coverage">healthcare
insurance</a> through the HealthCare.gov Marketplace for 2024, marking a third
consecutive banner year for the program, per the press release.</p>
<blockquote>
<p>HHS Secretary Xavier Becerra said, “Once again, a record-breaking number of
Americans have signed up for affordable health care coverage through the
Affordable Care Act’s Marketplace, and now they and their families have the
peace of mind that comes with coverage.”</p></blockquote>
<p>So I would add another reason for the improving mood of consumers: a
healthier workforce is a more productive workforce.</p>
<p>Oh yes, and U.S. <a href="https://www.census.gov/construction/nrs/current/index.html">new-home
sales</a> rose 8% to an annual rate of 664,000 in December from a revised
615,000 in the prior month, the Commerce Department reported Thursday; even with
very high interest rates.</p>
<p>The median sales price of a new home sold in December fell to $413,200 from
$426,000 in the prior month partly because for sales inventories have risen to
an 8-month supply.</p>
<p>These are all signs of recovery that will accelerate when the Fed governors
finally decide inflation is no longer a danger and begin to lower their interest
rates.</p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-23685080361933115872024-01-23T13:41:00.000-08:002024-01-23T13:41:04.903-08:00Much Less Pessimism!<p style="text-align: center;"> <a name="_Hlk66092990">Financial
FAQs</a></p><p align="center"><a name="_Hlk92958991"></a></p>
<p>Is the <a href="https://populareconomicsblog.wordpress.com/2024/01/16/why-the-irrational-pessimism-part-ii/">Irrational
Pessimism</a> I’ve been writing about finally turning into a more rational
optimism that reflects how consumers see the current economy? </p>
<p>The two major measures of consumer confidence—the Conference Board’s
Confidence Index and University of Michigan’s Consumer Sentiment Index are
showing the mood of most Americans is improving, after the sudden inflation
shock brought on by the COVID pandemic.</p>
<p>Yet there are still doubters that 2024 will cement the recovery. Why?</p>
<p>It’s mainly due to geopolitical uncertainties from regional wars and the
lagging recoveries of EU countries and China still suffering the aftereffects of
the pandemic.</p>
<p>The most recent predictions of the Conference Board’s Index of Leading
Economic Indicators that is supposed to predict future activity is one
example.</p>
<p>“The US LEI fell slightly in December, continuing to signal underlying
weakness in the US economy,” said Justyna Zabinska-La Monica, Senior Manager,
Business Cycle Indicators, at The Conference Board<b>, </b>though six of the ten
indicators have turned positive.</p>
<blockquote>
<p>“Nonetheless, these improvements were more than offset by weak conditions in
manufacturing, the high interest-rate environment, and low consumer confidence.
As the magnitude of monthly declines has lessened, the LEI’s six-month and
twelve-month growth rates have turned upward but remain negative, continuing to
signal the risk of recession ahead.”</p></blockquote>
<p>But interest rates have fallen sharply, manufacturing is showing signs of
recovery, and consumer confidence has just shot up. So maybe the LEI is now
looking through the rear-view mirror, just as consumers still in a foul mood
have been doing because of damage done from the pandemic.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTrz4cmtl7lCojvMVgTuc8unWd0Nt9xq8vXQ6JPNiZfkJXr17Ki9yDyHAaU2Dgy_uF8TcXpMOw7N1rIhHDpHSpB3kQ3PYXqVzz75_aWYd-sxrfhMhjPVFaDcuTMOSlz0KvTpK11-wO8iEQchaO7ObZLnEKbq8mNUfBdlNjVtAgjWcBdn-FNiQM8b-q/s605/umich.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="260" data-original-width="605" height="173" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTrz4cmtl7lCojvMVgTuc8unWd0Nt9xq8vXQ6JPNiZfkJXr17Ki9yDyHAaU2Dgy_uF8TcXpMOw7N1rIhHDpHSpB3kQ3PYXqVzz75_aWYd-sxrfhMhjPVFaDcuTMOSlz0KvTpK11-wO8iEQchaO7ObZLnEKbq8mNUfBdlNjVtAgjWcBdn-FNiQM8b-q/w400-h173/umich.png" width="400" /></a></div><p align="center"><a href="http://www.sca.isr.umich.edu/" style="text-align: left;">UofMichigan</a></p>
<p>The University of Michigan’s survey jump was huge: “Consumer sentiment soared
13% in January to reach its highest level since July 2021, showing that the
sharp increase in December was no fluke,” said Survey Director Joanne Hsu.
“Consumer views were supported by confidence that inflation has turned a corner
and strengthening income expectations. <b>Over the last two months, sentiment
has climbed a cumulative 29%, the largest two-month increase since 1991 as a
recession ended. </b>(my emphasis)<b> </b></p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyeijChM1OiM60SSxGZdXaJtHwOZONi_W7wJaOG2dF8joNi7gsRktXza7GsXHRUDkDqaECzjac_1WG3OqK3lDHlTmF4UiQpZhMTHzv0GuuOlXOk28KAo_2GrpvLVdnvu3VTwHDlNSclM8-pJUgr3b8gEwEIBFokGL6EZgMvBg2iLDBahrN3y7z5wRH/s1442/sffed.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="417" data-original-width="1442" height="116" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyeijChM1OiM60SSxGZdXaJtHwOZONi_W7wJaOG2dF8joNi7gsRktXza7GsXHRUDkDqaECzjac_1WG3OqK3lDHlTmF4UiQpZhMTHzv0GuuOlXOk28KAo_2GrpvLVdnvu3VTwHDlNSclM8-pJUgr3b8gEwEIBFokGL6EZgMvBg2iLDBahrN3y7z5wRH/w400-h116/sffed.png" width="400" /></a></div><p align="center"><a href="file:///C:/Users/USER/Documents/Nobelist%20Paul%20Krugman%20also%20points%20out%20another%20sentiment%20index%20put%20out%20by%20the%20San%20Francisco%20Fed,%20it%20Daily%20News%20Sentiment%20Index%20that%20looks%20at%20200%20publications%20for%20favorable/unfavorable%20coverage%20of%20economic%20news" style="text-align: left;">SFFed</a></p>
<p>Nobelist Paul Krugman in a recent NYTimes Opinion also points out another
sentiment index by the San Francisco Fed, its <b>Daily News Sentiment Index</b>
that looks at 200 publications for favorable/unfavorable coverage of economic
news.</p>
<p>It has been trending positive since mid-year 2023.</p>
<p>Such surveys don’t portend a looming recession, rather the end of one.
Shouldn’t we be listening to consumers that are the final arbiter of business
cycles since they account for 70 percent of economic activity?</p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-41315431851929732742024-01-19T08:14:00.000-08:002024-01-19T08:14:07.098-08:00Housing Recession Over?<p style="text-align: center;"> <a name="_Hlk92958991">The Mortgage Corner</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>Is the housing recession over? The conforming 30-year fixed rate dropped to
6.60 percent this week, according to Freddie Mac. The fixed 30-year mortgage
rate rose to its maximum 7.8 percent in October 2023 before gradually descending
to the current rate.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWgwgVKKUq0R-7Kfm6WD-zD-UcieaiQHZJFit9IJcQdRYRZbIPOSG16j8U42pHf6_xv0pGW4SRikN6NZlWhml8oIG6yxqdvNwufC20oqdZ0sJC_G1VhDyC5JLFle34KicRrt-Snj_kTtjPVIGfAAoRRqMrCCd9mzdwo6H9sWvHrHSp7pxai_XY8AUd/s483/mortdec.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="166" data-original-width="483" height="138" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWgwgVKKUq0R-7Kfm6WD-zD-UcieaiQHZJFit9IJcQdRYRZbIPOSG16j8U42pHf6_xv0pGW4SRikN6NZlWhml8oIG6yxqdvNwufC20oqdZ0sJC_G1VhDyC5JLFle34KicRrt-Snj_kTtjPVIGfAAoRRqMrCCd9mzdwo6H9sWvHrHSp7pxai_XY8AUd/w400-h138/mortdec.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/MORTGAGE30US/#0" style="text-align: left;">FRED30yearfixed</a></p>
<p>It had reached this height largely because bond traders had bought the Fed’s
story that inflation was still out of control and would take years to return to
more normal levels.</p>
<p>This has not been the case. Bond markets are belatedly discovering that
inflation has subsided much more quickly, so that it is already close to the
Fed’s 2 percent target rate. Even New York Fed President Waller has said the
balance between the Fed’s twin mandates of maximum employment with stable prices
is “just about right”.</p>
<p>This will bring down mortgage rates even further. The main effect of
declining interest rates will be to benefit the housing market that is faced
with a severe shortage. This year may see a full-blown housing recovery after a
false start in 2020 during the COVID pandemic when fixed mortgage rates briefly
dipped to 3 percent.</p>
<p>NAR’s chief economist Lawrence Yun had even announced the housing recession
was over last year.</p>
<blockquote>
<p>Yun said at the time, “The recovery has not taken place, but the housing
recession is over. The presence of multiple offers implies that housing demand
is not being satisfied due to lack of supply. Homebuilders are ramping up
production and hiring workers."</p></blockquote>
<p>Yun was perhaps making a rash prediction because pending home sales at the
time, an indicator of homes in escrow but not closed, had risen for the first
time in 4 months.</p>
<p>Home sales are continuing to rise ever so slowly this year, and single-family
starts that power the housing market have been increasing since January 2023 per
Calculated Risk’s graph.</p>
<p>So I believe this year will be the beginning of a real housing recovery, and
perhaps signal that overall economic growth will remain strong, since a housing
recovery has signaled such in the past.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6M24fS8wUHNBQwz22HJNLzD-OgfGf76T-suHiLZRXwBWIp8ZAArLdfd6eYzUFLJpUCqejbGRS2dN8QVIjfIXZV2ocHN6FzAJFRzuI6z6aaDhxmWI6rmpYqg0wmTJf3-MdoVUPstzYAqCNFq_rdC3BEu1GUVS3RK94v8tWc3mkLF_Eh_5Hn6N6gt4l/s479/startsdec.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="165" data-original-width="479" height="138" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6M24fS8wUHNBQwz22HJNLzD-OgfGf76T-suHiLZRXwBWIp8ZAArLdfd6eYzUFLJpUCqejbGRS2dN8QVIjfIXZV2ocHN6FzAJFRzuI6z6aaDhxmWI6rmpYqg0wmTJf3-MdoVUPstzYAqCNFq_rdC3BEu1GUVS3RK94v8tWc3mkLF_Eh_5Hn6N6gt4l/w400-h138/startsdec.png" width="400" /></a></div><p align="center"><a href="https://www.calculatedriskblog.com/2024/01/housing-starts-decreased-to-1460.html" style="text-align: left;">Calculated
Risk</a></p>
<p>Privately‐owned housing starts in December were at a seasonally adjusted
annual rate of 1,460,000. This is 4.3 percent below the revised November
estimate of 1,525,000, but is 7.6 percent above the December 2022 rate of
1,357,000, said the US Census Buteau. </p>
<p>Single-family starts increased 15.8% on a year-on-year basis. Permits for
future construction of single-family homes increased 1.7% to a pace of 994,000
units last month, the highest level since May 2022. </p>
<p>Another reason the housing recession may be over. Consumers are becoming more
upbeat with the University of Michigan’s consumer sentiment survey jumping a
record 13 percent.</p>
<blockquote>
<p>“Consumer sentiment soared 13% in January to reach its highest level since
July 2021, showing that the sharp increase in December was no fluke,” said
survey Director Joanne Hsu. “Consumer views were supported by confidence that
inflation has turned a corner and strengthening income expectations. Over the
last two months, sentiment has climbed a cumulative 29%, <b>the largest
two-month increase since 1991 as a recession ended</b>.” (my
emphasis)</p></blockquote>
<p>It looks like consumers and homebuyers aren’t waiting longer for this
recovery to begin.</p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-23133231359747483132024-01-17T11:16:00.000-08:002024-01-17T11:16:51.750-08:00No Recession At All?<p style="text-align: center;"> <a name="_Hlk92958991">Popular Economics Weekly</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>Ho hum, another good economic number. December <a href="https://www.census.gov/retail/sales.html">retail sales</a> are telling us
why we have avoided a recession this year. It’s because consumers have increased
rather than reduced their spending ways.</p>
<p>Sales at retailers jumped +0.6 percent in December, 4.8 percent annually, to
cap off a very good holiday shopping season and underscore the resilience of the
U.S. economy in 2023. November sales had risen +0.3 percent, 3 percent
annually.</p>
<p>How is that possible with Fed officials still refusing to say exactly when
they will even begin to cut rates this year? Retail sales aren’t adjusted for
inflation, so it means consumers are able to spend just ahead of inflation,
which is running approximately 3 percent annually.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCIl_WVOQy6wD5yJ375k3ueVWSeu0KW40Cx6Bl3MFCDMG8u5eIErKynmYziBqL36lsH7X-lMLSd4zZ2ifacOV8r7Jqd7jAlOV6VDjCmk2Sx2gPmYPJAkpV2uS23nyt8p8zxipq7F4UfSZsj0Xd4cTHuXOVxdSEEzsJh2XGVyO6bJ08eGlPRRmg3-8c/s483/decretail.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="142" data-original-width="483" height="118" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgCIl_WVOQy6wD5yJ375k3ueVWSeu0KW40Cx6Bl3MFCDMG8u5eIErKynmYziBqL36lsH7X-lMLSd4zZ2ifacOV8r7Jqd7jAlOV6VDjCmk2Sx2gPmYPJAkpV2uS23nyt8p8zxipq7F4UfSZsj0Xd4cTHuXOVxdSEEzsJh2XGVyO6bJ08eGlPRRmg3-8c/w400-h118/decretail.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/RSXFS/" style="text-align: left;">FREDretailtrade</a><span style="text-align: left;">sales</span></p>
<p>Why then are consumers still shopping? Americans are tully employed, and
average hourly wages are rising faster than inflation (+4.1%). Inflation has
been falling particularly sharply over the past 6 months (1.9%-2.5%, depending
on which inflation measure we look at). </p>
<p>In fact, the Producer Price Index for wholesale goods (e.g., raw materials)
shows that inflation has become deflation (i.e., turned negative) over the past
2 months.</p>
<p>The Conference Board reported spending on motor vehicles and parts rose a
huge 1.1% in December from November. Spending at gasoline stations fell 1.3%
from the month prior due to further declines in oil prices. Nonstore retail
sales rose a very large 1.5% from the month prior while spending at department
store rose 3.0%, which tells us how much brick-and-mortar retail sales have
declined.</p>
<p>I reported earlier consumer confidence had also improved, another indication
that consumers don’t see a danger ahead for their pocketbooks. The Conference
Board’s <a href="https://www.conference-board.org/topics/consumer-confidence">confidence
index</a> was up 10 points in December.</p>
<blockquote>
<p>“December’s increase in consumer confidence reflected more positive ratings
of current business conditions and job availability, as well as less pessimistic
views of business, labor market, and personal income prospects over the next six
months,” said Dana Peterson, Chief Economist at The Conference
Board.</p></blockquote>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEja-X_YwuuOrS7-x76evEVpFaffjTJkTODPBblnnoLPZRPcGHaldK1HJHN1jZPkXIp86aJh2-1Tbc3kH9Y90zwipTtKX1182i4DM8Eii_FEgIH1rTu75NccukSRcdcy2RT0rsu2d4r7aSFEBBBTpIUWG4EC08rrF5Lb2KiF2RejxaMJYIk8c516tGUF/s477/decgdpnow.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="139" data-original-width="477" height="116" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEja-X_YwuuOrS7-x76evEVpFaffjTJkTODPBblnnoLPZRPcGHaldK1HJHN1jZPkXIp86aJh2-1Tbc3kH9Y90zwipTtKX1182i4DM8Eii_FEgIH1rTu75NccukSRcdcy2RT0rsu2d4r7aSFEBBBTpIUWG4EC08rrF5Lb2KiF2RejxaMJYIk8c516tGUF/w400-h116/decgdpnow.gif" width="400" /></a></div><p align="center"><span style="text-align: left;">AtlantaFed</span></p>
<p>And we now have the Atlanta Fed’s GDPNow model bumping up Q4 GDP growth to
2.4 percent once more, from 2.2 percent due to “fourth-quarter real personal
consumption expenditures growth and fourth-quarter real gross private domestic
investment growth.”</p>
<p>This shows how much consumer spending and retail sales are driving economic
growth.</p>
<p>The Federal Reserve’s survey of anecdotal evidence for November, <a href="https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20231129.pdf">known
as the Beige Book</a>, said the economy has softened since the previous report
at the end of summer, which covers the period of Oct. 6 to Nov. 17.</p>
<p>This could mean the odds have improved for the Fed to begin to drop interest
rates sooner, maybe in the spring. Wouldn’t consumers like that!</p>
<p align="center">Harlan Green © 2023</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-13929902695096557342024-01-15T16:38:00.000-08:002024-01-15T16:38:30.933-08:00Why the Irrational Pessimism--Part II<p style="text-align: center;"> <a name="_Hlk66092990">Financial
FAQs</a></p><p align="center"><a name="_Hlk92958991"></a></p>
<p>I said a week ago that public polls seem to be saying one thing, economic
facts another. <a href="https://www.realclearpolitics.com/epolls/other/president_biden_job_approval_economy-7321.html">Real
Clear</a> Politics’ compendium of 11 opinion polls on whether participants
approve or disapprove of President Biden’s handling of the economy show a
negative -22.5 percent spread (pro Trump, contra Biden).</p>
<p>But as Paul Krugman pointed out more recently, it’s Republicans driving that
narrative, not U.S. adult citizens or Democrats.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilUHmAsk2SBEMbzjTK__Eg7xdmB6oM3eHcH5i3DBjlB7oiii-8MGKXrZAURyuHH1iD80ZsMLbIVxcvxtcvArwnhjwpzctIM3HSGkceLV8zHVRvBdfPcUXD9pzVcyQNla-sOOAQGHa1QjJgSzKDxfc9pxWCq05L87Uyez3bcJye2j6ktfRAvxaGeeoY/s462/yougov.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="298" data-original-width="462" height="258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilUHmAsk2SBEMbzjTK__Eg7xdmB6oM3eHcH5i3DBjlB7oiii-8MGKXrZAURyuHH1iD80ZsMLbIVxcvxtcvArwnhjwpzctIM3HSGkceLV8zHVRvBdfPcUXD9pzVcyQNla-sOOAQGHa1QjJgSzKDxfc9pxWCq05L87Uyez3bcJye2j6ktfRAvxaGeeoY/w400-h258/yougov.jpg" width="400" /></a></div><p align="center"><a href="https://twitter.com/paulkrugman/status/1746554059035742448/photo/1" style="text-align: left;">Krugman/YouGov</a></p>
<p>Why? The big difference is that Republicans feel much worse for a number of
reasons and that can skew the results.</p>
<p>Krugman cited a YouGov survey showing that overall 33% of U.S. adult citizens
felt great-to-good personally about 2023 while 27 percent felt bad-terrible
about 2023 for the country—pretty balanced. </p>
<p>With Democrats, however, 44% felt great-good while just 16% felt bad-terrible
personally, whereas just 29% of Republicans felt great-good vs. 31% felt
bad-terrible. You can begin to see the trend.</p>
<p>But there’s a big difference over how constituents felt overall about the
country in 2023. Democrats felt much better about 2023—35% to 6% for
Republicans, while a whopping 76 percent of Republicans thought 2023 was a bad
or terrible year for the country, vs. 35 % of Democrats.</p>
<p>What does that tell us? Mainly that the two parties must get their
information from different sources, which speaks to either the fact that the
economic benefits of record low unemployment and economic growth in 2023 haven’t
filtered down to the red states where Republicans dominate, or a willful
ignorance about the facts.</p>
<p>It goes back to Nobel Laureate Robert Shiller’s thesis in his book,
Irrational Exuberance; that most economic decisions are formed not by
researching the facts but hearsay, word-of-mouth stories, or lazy thinking—i.e.,
not thinking through the hard news but following the stories that make them feel
comfortable. </p>
<p>But it also heavily weights surveys such as Real Clear towards the dominant
results—in this case the 76 percent of Republicans who believe 2023 was a
terrible year.</p>
<p>Or, perhaps the negative opinions of Republicans about the economy have
nothing to do with the economy or their personal well-being. </p>
<p>Maybe it has to do with deep-seated prejudices such as an inherent belief
that new immigrants don’t benefit them; or females shouldn’t be allowed to
control their own health, a very skewed belief system that babies lives take
precedence over their mothers’?</p>
<p>It also calls into question what was once our storied educational system. We
were the first country to institute universal K-12 education. But now our K-12
system <a href="https://worldtop20.org/worldbesteducationsystem/">ranks at the
bottom</a> of developed countries in the latest surveys.</p>
<p>Some red states are also banning books from school curriculums and libraries,
even persecuting librarians and K-12 teachers for advocating them. Is our public
K-12 educational system no longer adequate to maintain a Democracy? </p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-51648129121310344602024-01-13T07:42:00.000-08:002024-01-13T07:42:31.155-08:00Signs of Deflation Begin to Appear<p align="center"><a name="_Hlk144895215"></a><a name="_Hlk66092990"></a><a name="_Hlk92958991">The Mortgage Corner</a></p><p>Today’s Producer Price Index for Final Demand, a measure of the cost of
wholesale prices, provides the first concrete evidence that we may be entering a
period of deflation this New Year.</p><p>And, perhaps require the Fed to begin to lower interest rates as soon as in
March. Though ongoing wars may cause future shortages but that isn’t happening
at present.</p><p>Why? Raw material costs are declining into deflation territory, a sign of
overproduction, which means prices that consumers must pay for the finished
product or service will possibly decline into negative territory as well—when
the excess profit margins of distributors and retail sellers that took advantage
of the pandemic shortages also subsides.</p><p>Overproduction last happened in the 2007-09 Great Recession, as I’ve said,
and began a period of Quantitative Easing requiring the Fed to buy massive
amounts of securities to increase liquidity enough to boost the inflation rate
back to the 2 percent range.</p><p>Wholesale prices this round first went into negative territory in July 2022
(-0.28%) per the FRED PPI graph, then fluctuated wildly for several months as
supply chains recovered. But the PPI has been negative for the past 3 months,
which is a sign that most supply chains have more than recovered.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-q1PfXFtGTzosTgMUDVt252pWMHODNaXkoJhQZfQDxFK5uQ2sD15SLEpC_Yxt11gLSrL-AxYCRFAAFwB5X1cnFBb2PMod4sF_wvUrtyIQfCsS6yggq8pv-CoXeEstn93Uzg_AwM89iIyZRj04HY9k93_7z4M8H-fYokko4NiF2SGtG2MHaY_ZtDn2/s489/decppi.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="201" data-original-width="489" height="165" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-q1PfXFtGTzosTgMUDVt252pWMHODNaXkoJhQZfQDxFK5uQ2sD15SLEpC_Yxt11gLSrL-AxYCRFAAFwB5X1cnFBb2PMod4sF_wvUrtyIQfCsS6yggq8pv-CoXeEstn93Uzg_AwM89iIyZRj04HY9k93_7z4M8H-fYokko4NiF2SGtG2MHaY_ZtDn2/w400-h165/decppi.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/PPIFIS/#0" style="text-align: left;">FREDppi</a></p><p>The danger of overproduction has happened many times in the past and been a
major cause of recessions. The Great Recession was caused by the overproduction
of housing, for example; some one million excess units. </p><p>We saw signs of this in yesterday’s Consumer Price Index as well, when the
so-called core index without food and energy prices declined to 3.9 percent for
the first time since May 2021, mainly due to lower energy, healthcare, and used
car prices.</p><p>Energy prices are declining because non-OPEC countries are now outproducing
OPEC oil producing countries, for starters, and the food category was up just
2.7% year-over-year, with food away from home up 5.2% during the month and food
at home up just 1.3%.</p><p>The <a href="https://www.fao.org/newsroom/detail/fao-food-price-index-declines-in-december/en">FAO
Food Price Index</a>, which tracks monthly changes in the international prices
of commonly traded food commodities, was 13.7% lower last year than the 2022
average, but measures of sugar and rice prices growing in that time.</p><p>The pace of inflation for food at home has now been below the Federal
Reserve's overall target rate of 2% for three straight months, although the
overall level of food prices is still elevated compared to two and three years
ago.</p><p>Another reason for the deflation concern is consumers usually cut back their
spending in the spring. The holiday spending spree is over, and tax season is
approaching, which makes personal savings a priority.</p><p>In fact, we are already in the Fed’s 2 percent target range. The Personal
Consumption Expenditure Price (PCE) Index is already at 1.9% and Core CPI Prices
at 2.0% over the past 6 months.</p><p>What Fed officials seldom admit is the 2 percent inflation target isn’t a
reliable target because there is no accurate measure of inflation as economists
such as former Fed Chairman Ben Bernanke have admitted. </p><p>Overproduction can become a serious problem as it was during the Great
Recession, but the possibility of supply disruptions because of the ongoing
Ukraine and Middle East conflicts have made financial analysts leery of even
mentioning the possibility of deflation. </p><p>The possibility of deflation scared the Fed enough under former Chairman Ben
Bernanke to cut the Fed Funds rate to zero percent for a prolonged period—from
December 2008 to February 2016.</p><p>Can that happen again if the Fed doesn’t begin to lower interest rates
sooner?</p><p align="center">Harlan Green © 2024</p><p>
</p><p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-67213997710763666952024-01-11T14:13:00.000-08:002024-01-11T14:13:56.539-08:00Please Get Inflation Right!<p style="text-align: center;"> <a name="_Hlk66092990">Financial
FAQs</a></p><p align="center"><a name="_Hlk92958991"></a></p>
<p>Today’s news that the Consumer Price Index (CPI) was “slightly hotter than
expected”, per the Wall Street Journal, caused financial markets to plunge on
the assumption the Fed will reduce interest rates more slowly than markets would
like to reach its 2 percent inflation target rate.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCDk7Qx18agGOY7fDxrcnryI555Smf6qzVocFwZoq5KjzF1ttXLmmn7W3AvuhUrcCLyJHH3-Ivxha9v8_PQPSGomWi6ouvdrf2jxeHDrv7ATCgFO38PxjjGPvLbgjeQH4qycObhywHYsnM8zY4ibP8i9vMIrH-COWvS4CsmF8cgYTKPlQfwurPMAWq/s488/deccpi.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="118" data-original-width="488" height="96" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCDk7Qx18agGOY7fDxrcnryI555Smf6qzVocFwZoq5KjzF1ttXLmmn7W3AvuhUrcCLyJHH3-Ivxha9v8_PQPSGomWi6ouvdrf2jxeHDrv7ATCgFO38PxjjGPvLbgjeQH4qycObhywHYsnM8zY4ibP8i9vMIrH-COWvS4CsmF8cgYTKPlQfwurPMAWq/w400-h96/deccpi.png" width="400" /></a></div><p style="text-align: center;"><a href="https://fred.stlouisfed.org/graph/?id=CPIAUCSL,CORESTICKM159SFRBATL,#0" style="text-align: left;">FREDcpi</a></p>
<p>Yet if we look at past history in the above FRED cpi graph dating from 1950,
the only time the Fed reached its target rate of 2 percent inflation for any
length of time was right after WWII into the 1960s, and following the Great Recession of
2007-2009 until the COVID pandemic!</p>
<p>So, what does that tell us about monetary policy that is the Feds playing
field? It has taken great recessions or WWII (i.e., widest gray bars in graph)
to bring down inflation to the Fed’s 2 percent target. </p>
<p>Wow, can acceptable inflation levels only be achieved via recessions? That’s
a terrible way to control inflation, in my opinion.</p>
<p>In fact, after 1980 and the Paul Volcker Fed era of sky-high interest rates,
the US economy grew very well while averaging 2.5 to 5 percent inflation, until
December of 2007 and the start of the Great Recession, which was worldwide let
us not forget. </p>
<p>We even had four years of budget surpluses from 1996 to 2000 during the
Clinton administration, and the longest period of prosperity (10 years) without
a recession.</p>
<p>Yet a few Fed Governors are proving reluctant to accept the fact that
inflation is in a prolonged down swing, when today’s ‘slightly hotter’ CPI was
almost solely due to sticky used car prices and rental rates.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxv8SBfKAINZK3gKr3ipSxWPX9IsgzdR134xs7kz7M_13eEWkNdXK5-T4UGWavZqw8WsLNYrE51Wgoz4coVRGcYbAVw6hy3N75sJTC5GP1e1NLcIC_OyVYpQGhpWoCTHIawsSjfmfq6fHQpiZGo5Y8UW0zV3e7HCQJgoNCGWJp9ZC66O0kHGLLJj8R/s459/blscpi.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="138" data-original-width="459" height="120" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxv8SBfKAINZK3gKr3ipSxWPX9IsgzdR134xs7kz7M_13eEWkNdXK5-T4UGWavZqw8WsLNYrE51Wgoz4coVRGcYbAVw6hy3N75sJTC5GP1e1NLcIC_OyVYpQGhpWoCTHIawsSjfmfq6fHQpiZGo5Y8UW0zV3e7HCQJgoNCGWJp9ZC66O0kHGLLJj8R/w400-h120/blscpi.jpg" width="400" /></a></div><br /><p align="center"><span style="text-align: left;">The above </span><a href="https://www.bls.gov/cpi/" style="text-align: left;">official BLS graph</a><span style="text-align: left;"> explains
the ingredients of CPI inflation best. The biggest inflation drop was energy
(black bar), along with food (blue bar), though its Core index (green bar) was
above the All Items index.</span></p>
<blockquote>
<p>“In December, the Consumer Price Index for All Urban Consumers increased 0.3
percent, seasonally adjusted, and rose 3.4 percent over the last 12 months, not
seasonally adjusted.”</p></blockquote>
<p>What is the real cause of the inflationary surge? Most economists now say it
was suddenly interrupted supply-chains caused by the pandemic that returned to
normal, thus increasing the supply of things and services, not excessive demand
because of suddenly wealthy consumer spending too much due to all the pandemic
recovery aid.</p>
<blockquote>
<p>Economics Professor James Galbraith, son of New Deal Economist John Kenneth
Galbraith said, “There is a wave of reporting to the effect that the Fed
deserves credit [for the drop in inflation]. But the fact is that the peak in
rising prices occurred in June 2022, and that was only three months after the
Fed started raising interest rates.”</p></blockquote>
<p>Average hourly private sector wages are the main driver of demand-side
inflation (via consumer spending) and they peaked in March 2022 at 5.9 percent.
Average earnings had already dropped to 5.4 percent in June 2022, continuing
their decline to 4.1 percent in December 2023.</p>
<p>So why do Fed Governors keep saying that the unemployment rate must rise to
lower inflation? New York Federal Reserve President John Williams, one of the
most influential Governors, was cited recently at a White Plains, NY <a href="https://www.marketwatch.com/story/feds-williams-says-interest-rates-need-to-stay-high-for-some-time-to-ensure-inflation-is-tamed-c03faba2?mod=article_inline">speech
per MarketWatch</a> saying U.S. interest rates will likely need to stay high
“for some time” until senior central bank officials are confident the rate of
inflation is returning to 2 percent. He said the labor market would need to
soften a bit more, potentially bumping up the unemployment rate to 4 percent
from the current level of 3.7 percent.</p>
<p>We have had the unemployment rate below 4 percent for two years, current
6-month inflation is hovering at 2.5 percent and still declining, and consumers
continue in record numbers to travel and enjoy leisure activities, I said
recently.</p>
<p>Why spoil the party unnecessarily with another recession?</p>
<p align="center">Harlan Green © 2024</p>
<p>Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-42937863092804928102024-01-09T09:30:00.000-08:002024-01-09T09:30:21.485-08:00When Has Inflation Declined This Steeply?<p style="text-align: center;"> <a name="_Hlk92958991">The Mortgage Corner</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>When was the last time inflation rates declined this steeply? You guessed
right if you said the Great Recession.</p>
<p>Calculated Risk’s colorful graph of various inflation indicators (gray bars
are recessions) shows the history of Core CPI (red line) and Core PCE (green
line) inflation from January 1990, among others. Core prices are without more
volatile food and energy prices. </p>
<p>What does that tell us about the current drop in inflation? Maybe there’s a
danger of it falling too far, too fast, fulfilling the prophecies of some that
still see a looming recession. This inflation surge was worse than during the
Great Recession (thickest blue bar) because of the COVID pandemic, per the
graphic picture.</p>
<p align="center"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhzbpuH3t4ndwW3y1nY6Ytsi9dem-FPAbc59SwddQ4MS0MZRTfeIbu_j66HPh1qLMQ6NzbU1r-mEuEDjZHnnraXcFhK-dgkNQq2d-s1KcJ_tDEltLUGFBPJcWHxZ0ZOQrQYOEvnex7Jl7j4Ad_8hATX6G9Rc5Bgj4aaLQWY7Imd4M9SPY4M27qNZlPd/s465/calcrisk.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="206" data-original-width="465" height="142" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhzbpuH3t4ndwW3y1nY6Ytsi9dem-FPAbc59SwddQ4MS0MZRTfeIbu_j66HPh1qLMQ6NzbU1r-mEuEDjZHnnraXcFhK-dgkNQq2d-s1KcJ_tDEltLUGFBPJcWHxZ0ZOQrQYOEvnex7Jl7j4Ad_8hATX6G9Rc5Bgj4aaLQWY7Imd4M9SPY4M27qNZlPd/s320/calcrisk.png" width="320" /></a></div><a href="https://www.calculatedriskblog.com/2024/01/question-5-for-2024-what-will-yoy-core.html" style="text-align: left;">Calculated
Risk Blog</a><p></p>
<p>Only the 1980-81 recessions caused a <a href="https://fred.stlouisfed.org/series/CPIAUCSL">sharper inflation
decline</a>. But that was because then Fed Chair Paul Volcker raised interest
rates into the double digits to combat double-digit inflation caused by the
1970’s oil crisis-fed stagflationary spiral.</p>
<p>In fact, we are already in the Fed’s 2 percent target range. The Personal
Consumption Expenditure Price (PCE) Index is already at 1.9% and Core CPI Prices
at 2.0% over the past 6 months.</p>
<p>And what Fed officials seldom admit is the 2 percent inflation target isn’t a
dependable target. Why? Because no one really knows what the true inflation rate
is! Yes, there is no measure among the vari-colored measures above that is an
accurate indicator of inflation as economists such as former Fed Chairman Ben
Bernanke have admitted. It could have already hit zero percent in some sectors
of our economy. Hence economists consult many different indexes to arrive at a
mean value.</p>
<p>And consumers may already believe this, since the most recent inflation
assessment coming from the New York Fed says their expectations are declining
fast as well. </p>
<p>Consumers expect the inflation rate to fall to 3 percent, according to the
Federal Reserve Bank of New York. That’s the lowest anticipated one-year ahead
inflation rate since January 2021, in the NY Fed’s ongoing survey of <a href="https://www.newyorkfed.org/newsevents/news/research/2024/20240108">consumer
expectations</a>. </p>
<p>Median inflation expectations declined at all horizons, falling to 3.0
percent from 3.4 percent at the one-year ahead horizon, to 2.6 percent from 3.0
percent at the three-year ahead horizon, and to 2.5 percent from 2.7 percent at
the five-year ahead horizon. </p>
<p>Maybe some Fed Governors, such as <a href="https://www.marketwatch.com/story/feds-bowman-says-inflation-could-drop-without-further-rate-hikes-d7ec5a93?mod=economy-politics">Michele
Bowman</a> are beginning to believe this as well who have studied the history of
inflation.</p>
<p>Energy and food prices are falling, for starters. The U.S. is even
outproducing the OPEC countries and Russia, which may not be the best way to win
the inflation war. But it could convince the Fed to begin to lower short term
rates sooner and preserve this recovery.</p>
<p>No one really wants to cause another recession, right?.</p>
<p style="text-align: center;">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-49618768849359877152024-01-05T14:39:00.000-08:002024-01-05T14:39:37.095-08:00Still Fully Employed!<p style="text-align: center;"> <a name="_Hlk92958991">Popular Economics Weekly</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>Ho hum, The U.S. economy was still fully employed in December. How boring!
The St. Louis Fed (FRED) graph below shows the American economy has been at full
employment since December 2021 when the unemployment rate first sank below 4
percent (to 3.9 percent). </p>
<p>And much of the hiring has been at state and local government levels because
local governments are finally recovering from the COVID pandemic. That is the
surest indicator of the beginning of a new uptick in the business cycle.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiX9uPF9g8jSGM5Fpk7BF5r7kM0zgUeTF7wakskomBSK4kJuEE2dLwFqMrl5yRY-Jfkz76vD61ALsoF0v7vkW0nDgMEtpkw_2KlgM4Ce36U8_nJl-GwFp8U0L5JBMcPmmTn0Yb2JKEj8DkVHLW-Y4LRdYw0rMawWWZEoEUYqoNXo5ozJCxNMVOBtHql/s471/decjobs.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="134" data-original-width="471" height="114" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiX9uPF9g8jSGM5Fpk7BF5r7kM0zgUeTF7wakskomBSK4kJuEE2dLwFqMrl5yRY-Jfkz76vD61ALsoF0v7vkW0nDgMEtpkw_2KlgM4Ce36U8_nJl-GwFp8U0L5JBMcPmmTn0Yb2JKEj8DkVHLW-Y4LRdYw0rMawWWZEoEUYqoNXo5ozJCxNMVOBtHql/w400-h114/decjobs.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/UNRATE/#0" style="text-align: left;">FREDunemployment</a></p>
<blockquote>
<p>“Total nonfarm payroll employment increased by 216,000 in December, and the
unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor
Statistics <a href="https://www.bls.gov/news.release/empsit.nr0.htm">reported
today</a>. Employment continued to trend up in government, health care, social
assistance, and construction, while transportation and warehousing lost
jobs.”</p></blockquote>
<p>Average hourly wages of nonfarm private employees rose from 4.0 to 4.1
percent annually.</p>
<p>More good news is that factory orders have picked up, according to the
Commerce Department, with new orders for U.S.-made goods increasing more than
expected in November amid a surge in demand for civilian aircraft, government
data showed on Friday.</p>
<p>Factory orders rose 2.6 percent after declining by 3.4 percent in October,
the Commerce Department's <a href="https://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf">Census
Bureau</a> said. Orders climbed 0.7 percent on a year-on-year basis in November.
And manufacturing, which accounts for 10.3 percent of the economy, is still
being constrained by high interest rates. It should therefore pick up even more
this year as interest rates decline further.</p>
<p>This is what is called a ‘soft landing’, I said when the unemployment rate
dropped back to 3.7 percent in November. Government agencies at all levels added
52,000 new jobs in December - the biggest of any industry - to cap off a record
year of hiring (i.e., total of 2.7 million new jobs in 2023), says MarketWatch’s
Jeffry Bartash. “Altogether, government employment rose by 672,000 in 2023 and
accounted for one-quarter of all new U.S. jobs created.”</p>
<p>So, what’s not to like about this jobs report? Maybe the Fed may now change
its mind and not bring down interest rates so quickly, which could happen
beginning this March? The evidence is becoming overwhelming that inflation is
continuing to rapidly fall. Maybe Powell, et. al., may begin to worry that
prices could plunge even more, which isn’t a good sign, since profits then begin
to decline, a precursor to a recession.</p>
<p>I believe all the government hiring shows something else—a full blown
recovery leading to a new business cycle and maybe what I’ve been calling a
‘Roaring Twenty-Twenties’. Such a ‘roaring’ recovery happened once before, a
century ago at the end of the last pandemic that was caused by the Spanish
Flu.</p>
<p>Then again, maybe a more boring economic recovery is in the works, with
steady employment, wages continuing to rise more than inflation, and a majority
of consumers admitting they are happy. Maybe a boring economy is good! </p>
<p align="center">Harlan Green © 2023</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0tag:blogger.com,1999:blog-1269896055364219535.post-15602484609633812252024-01-04T10:38:00.000-08:002024-01-04T10:38:27.641-08:00Q4 Growth Prospects Improve<p style="text-align: center;"> <a name="_Hlk92958991">The Mortgage Corner</a></p><p align="center"><a name="_Hlk144895215"></a></p>
<p>Prospects for better fourth quarter economic growth are improving. Why?
Interest rates are declining along with inflation rates. </p>
<p>In fact, I mentioned last week that the rate of U.S. inflation based on the
Federal Reserve’s preferred <a href="https://www.bea.gov/news/2023/personal-income-and-outlays-november-2023">PCE
index</a> became negative in November for the first time since 2020 indicating
that price pressures continue to subside. The PCE index actually dipped – 0.1
percent last month, the government said Friday, a<b>nd was unchanged in
October.</b></p>
<p>The Atlanta Fed’s GDPNow Q4 estimate of economic growth that I like just
picked up steam after several downward revisions.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEih9lLZYLhUQczRDd90dJSBsTGFmos5EZIar_kqIo_IyVFg_VAF2cdkrTAoToMyqeJXG2-dXgvyEmXXx0dgFwjL7o9FJwFqI7Ry2lHisxIMDt2lAmZwtfcO1gdE9NS1pBAYbXw6g6hR4uqG7gFb88xGquNHeWpZvrnNCsvagPJnTG14AwMcsf2n0e17/s480/decgdpnow.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="167" data-original-width="480" height="139" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEih9lLZYLhUQczRDd90dJSBsTGFmos5EZIar_kqIo_IyVFg_VAF2cdkrTAoToMyqeJXG2-dXgvyEmXXx0dgFwjL7o9FJwFqI7Ry2lHisxIMDt2lAmZwtfcO1gdE9NS1pBAYbXw6g6hR4uqG7gFb88xGquNHeWpZvrnNCsvagPJnTG14AwMcsf2n0e17/w400-h139/decgdpnow.gif" width="400" /></a></div><p align="center"><a href="https://www.atlantafed.org/cqer/research/gdpnow.aspx?utm_medium=email&utm_source=mailchimp&utm_campaign=cqer-research" style="text-align: left;">AtlantaFed</a></p>
<blockquote>
<p>“The GDPNow model estimate for real GDP growth (seasonally adjusted annual
rate) in the fourth quarter of 2023 is <b>2.5 percent</b> on January 3, up from
2.0 percent on January 2. After this morning’s release of the ISM Manufacturing
Index from the Institute for Supply Management, the nowcasts of fourth-quarter
gross personal consumption expenditures growth and fourth-quarter gross private
domestic investment growth increased from 2.4 percent and -0.4 percent,
respectively, to 2.9 percent and 0.5 percent,” said its
report.”</p></blockquote>
<p>Boosting growth is consumer spending holding up with robust
holiday shopping, and soaring construction spending, up 11.3 percent
annually.</p>
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiulr_X02GO3L5by-1IyNhG29IA27dmysVjOwAsmd7fQ7fwsAk8FCc9LPguufoC0ztdrslBZK7xEf1pFWfa2em9gOowfDnu6oA2WjmV9SzOFo7H0vPqh9GmxJ-ElE4i9OhWbSdPIK1geSJ9QNU9AZ2h1F1ml0JDDnfNJ8WJCFppLM5gH4vCZoE3nkRn/s477/decconst.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="164" data-original-width="477" height="138" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiulr_X02GO3L5by-1IyNhG29IA27dmysVjOwAsmd7fQ7fwsAk8FCc9LPguufoC0ztdrslBZK7xEf1pFWfa2em9gOowfDnu6oA2WjmV9SzOFo7H0vPqh9GmxJ-ElE4i9OhWbSdPIK1geSJ9QNU9AZ2h1F1ml0JDDnfNJ8WJCFppLM5gH4vCZoE3nkRn/w400-h138/decconst.png" width="400" /></a></div><p align="center"><a href="https://fred.stlouisfed.org/series/TTLCONS#0" style="text-align: left;">FREDconstruction</a></p>
<p>Why? It’s mostly the Infrastructure and Inflation Reduction Acts pairing with
private industry in modernizing the American economy that is creating
high-paying jobs and producing more things, which also brings down
inflation.</p>
<p>There’s more spending on highways and bridges, while private residential
construction rose 1.1 percent in November, with single-family construction up
2.9 percent and multi-family construction rising 0.1 percent. These are longer
term investments which should mean longer term growth prospects.</p>
<p>On the inflation front stocks and bonds have been rallying because Chairman
Powell sounded dovish for the first time at his December press conference
following their last FOMC meeting of the year.</p>
<blockquote>
<p>“The question of when it will be appropriate to begin dialing back the policy
restraint” was clearly “a discussion for us at our meeting today,” Powell said.
The Fed is “likely at or near the peak rate for this cycle.”</p></blockquote>
<p>Plunging interest rates are best illustrated by the 10-year benchmark fixed
rate Treasury note yield that sets mortgage rates. It had dropped below 4
percent for the first time since the pandemic.</p>
<p>And the 30-year fixed-rate mortgage fell for the seventh week in a row,
averaging 6.61 percent as of Dec. 28, according to<a href="https://www.freddiemac.com/pmms?mod=article_inline"> data</a> released by
Freddie Mac on Thursday. A year ago, the 30-year fixed-rate mortgage was
averaging at 6.31 percent.</p>
<p>What’s not to like about prospects for growth in the New Year? Would congress
be so foolish as to close down government because so much is on the line? I
don’t think so.</p>
<p align="center">Harlan Green © 2024</p>
<p>Follow Harlan Green on Twitter: <a href="https://twitter.com/HarlanGreen">https://twitter.com/HarlanGreen</a></p>Popular Economics Weeklyhttp://www.blogger.com/profile/10561620874779044599noreply@blogger.com0