Retail Sales Recovering?

 Popular Economics Weekly

“Advance estimates of U.S. retail and food services sales for May 2026, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $763.7 billion, up 0.9 percent (±0.4 percent) from the previous month, and up 6.9 percent (±0.5 percent) from May 2025.” Census Bureau

 

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Retail sales are recovering in 2026 because consumers are still shopping, even though paying more for automobiles and gas because of the higher inflation. But it’s emptying their pocketbooks, to no one’s surprise.

So why do they keep shopping? There’s more than a little irrational exuberance prevailing at the moment in financial markets because of optimism over the SpaceX IPO that is breaking sales records. It’s called herd behavior in economic parlance, because its investors seem to believe SpaceX is the next big thing without too much forethought.

Nobel Laureate Robert Shiller calls it lazy thinking, listening to little more than word of mouth or hearsay, or scanning the headlines but not what is between the lines, instead of researching it.

SpaceX is making a tiny profit, yet Elon Musk’s hyper sales pitch has investors believe the sky’s the limit with future earnings from…what, a trip to the moon or Mars? Its IPO has capitalized it as high as established corporations such as Microsoft that have a track record of real profits.

The stock market indexes are still breaking records in part because the major corporations have record profits. And the job market is finally recovering, after almost no job growth last year. The sudden hiring surge is because manufacturing has rebounded; both from the Biden administration’s $5 trillion raised in legislation to modernize U.S. infrastructure and the $1.5-2 trillion suddenly pouring into the A.I. construction of data centers.

In fact, there’s so much irrational exuberance that this so-called A.I. revolution is now being compared to the Dotcom (in 2000) and housing bubbles (2008).

Too much fiber optic cable was laid in the years leading up to 2000 that is only now turning a profit, and too many homes were built during the bubble that weren’t being absorbed by the housing market, resulting in basically flat home sales and too little construction of new homes for a decade.

This is even though the U.S. population has increased by 60 million since 2000, according to the Census Bureau. The result is the lack of affordable housing and record homelessness, a cure of which would be more profitably invested in, rather than A.I.

But despite the market optimism, most consumers have become more cautious. Irrational exuberance hasn’t convinced ordinary consumers who can barely afford to keep up with rising prices. The Conference Board’s Index of Leading Economic Indicators that attempts to predict business cycles, shows too many headwinds for much improvement.

“Consumers are feeling squeezed because everyday costs—especially gas and energy—are rising faster than their incomes, leaving many households with less money available for things like travel, restaurants, entertainment, and shopping. The good news is that businesses are spending heavily on AI, data centers, and new technology, helping to keep the economy growing, while consumers pull back spending,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators for the Conference Board.

Growing retail sales are a positive sign that the economy is improving for consumers as well as market investors but it can’t last unless inflation declines. Will artificial intelligence be the ticket to greater prosperity for all?

Let’s hope so, otherwise the A.I. bubble will also burst.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Biden vs. Trump Presidency

 Popular Economics Weekly

“The Producer Price Index for final demand increased 1.4 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.7 percent in March and 0.6 percent in February. The April increase is the largest advance since rising 1.7 percent in March 2022.” BLS.gov

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Trump’s economy vs. Biden’s? It’s no contest. Trump made his major reelection campaign about attacking Biden’s inflation problem, yet the latest wholesale and retail inflation data show President Biden has easily won the inflation battle, as well as that for job creation and economic growth.

The retail Consumer Price Index is the highest in three years, and the wholesale Producer Price Index pictured above is now the highest in four years on Trump’s watch.

There’s no contest with job creation and economic growth as well. A total 234,000 payrolls jobs were added in December 2024, Biden’s last month in office; more than the 181,000 jobs that were created in all of Trump’s first year.

That’s because of Trump’s mismanagement of the illegal tariff war on the rest of the world, the 43-day government shutdown over Obama insurance subsidies (longest in history) that temporally laid off millions of workers and the immigrant deportations.

The illegal tariffs began the inflation surge we are seeing today in import prices. “The 12-month rise in U.S. import prices was the largest over-the-year advance since the index increased 4.2 percent for the year ended October 2022,” per the BLS.

This will also make it even more difficult to lower interest rates in 2026 for the Federal Reserve under new Republican Chairman Kevin Warsh. In fact, the Fed may have to raise their rates if inflation continues to rise and becomes unmanageable as happened during Biden’s term.

That’s because we are not yet accounting for the damage from the Iran war that is elevating prices for all the petroleum byproducts important for jobs and economic growth that are sure to seep into the inflation numbers.

Even if the Iran war is settled soon, predictions are it may take at least one year for a return to normal traffic in the Gulf and Hurmuz Strait that supplies at least 20 percent of the world’s petroleum.

The damage to jobs and economic growth in Trump’s first year shows the extremes to which Republicans will go to ignore basic economic principles (e.g., tariffs are a tax on consumers and producers) to protect their tax cuts.

Even higher inflation is sure to follow. The energy sector is already being hit with higher gas and diesel prices The AI buildout will increase the demand for electricity as the huge AI energy generation centers kick in from the $billions being invested, while Trump continues to cancel more alternative energy solar and wind projects that provide cheaper electricity.

From the start of the Biden presidency through December 2024, the Bureau of Labor Statistics (BLS) recorded an increase of about 16.1 million jobs, the highest total during a presidential term in history, equal to 336,000 per month (my emphasis).

And economic growth averaged more than 3 percent during his four years because of bipartisan plans to modernize the American economy.

What happened on Trump’s watch? Republicans have paid the economic price for refusing to compromise. America’s electorate came to believe that Republicans knew more about economic growth and what it takes to lower everyday prices for Americans.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Stagflation Isn't Going Away

Financial FAQs

“The number of job openings was unchanged at 6.9 million in March, the U.S. Bureau of Labor Statistics reported today. Over the month, hires increased to 5.6 million while total separations changed little at 5.4 million. Within separations, both quits (3.2 million) and layoffs and discharges (1.9 million) were little changed.’ BLS.gov

FREDjolts

The FRED graph of the JOLTS report (U.S. Job Openings and Labor Turnover Survey) shows the sharp decline in the number of job openings from its high of 12 million openings in 2022 at the end of the COVID-19 pandemic. This is another sign of stagnating growth. And though stocks continue to rally to new highs, interest rates are also rising, a sign of higher inflation.

Now combine no new job growth with rising inflation and we have further signs of stagflation, the combination that stopped economic growth for most of the 1970s. It has hovered around 7 million job openings during Trump’s second term because of Donald Trump’s almost single-minded job-killing policies.

It’s not just the illegal on-again, off-again tariffs that disrupt supply chains, but the immigration sweeps taking tens of thousands of workers out of their jobs and off the streets. And most of them pay taxes that would help in reducing our record federal debt.

Cap that with all the DOGE job cuts that have eviscerated the Labor Department responsible for enforcing OSHA worker safety laws and union wage negotiations. Millions have also lost their insurance coverage because Republicans blocked renewal of subsidies that made it affordable to ordinary non-seniors.

Job formation is now at a standstill because of Trump’s anti-labor antics. It’s mostly pure greed that motivates Republicans these days who have cut social services to the bone to pay for their tax cuts.

And there is plenty of time for stagflation to worsen as a semi-permanent feature of Trumponomics, his version of Reagonomics trickle-down economic policies, since Trump has three more years.

Inflation doesn’t disappear when economic growth picks up that is inflating stock prices. All the AI investing will ultimately increase productivity in factories that make cheaper products and need fewer workers. But who will buy its products with fewer employed workers, hence consumers, to buy its products?

Nobel Laureate economist Paul Krugman has pointed out the damage Republican economic policies have done to the health and welfare of Americans and American workers, as well that lessens their productivity because more sick days means time lost from the workplace.

“There is a strong correlation between right-wing politics and increased mortality — stronger than many of the statistical associations that guide public health policy. Deep red states like Alabama and West Virginia have life expectancy comparable to, say, Kazakhstan.”

I’ve written in the past about the dumbing down of the Republican electorate that is causing this; its refusal to rely on scientific knowledge, or support vaccines and publicly funded healthcare.

“We’re seeing the forces that keep U.S. life expectancy far below that in other rich countries, that cause Texans (for instance) to die younger than residents of Massachusetts, go into overdrive at a national level.”

This will cause the death of more Americans, further shrinking our available supply of workers. It’s already happened—just 15,000 new jobs per month were created in 2025. Professor Krugman warns the carnage will continue while inflation is soaring because of his many missteps.

“The consequences will be grim,” he warns.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Trump 2.0?

Popular Economics Weekly

“According to the latest PISA rankings, which assess 15-year-olds in math, science, and reading, the United States ranks around 13th in reading, 18th in science, and 37th in mathematics out of 79 participating countries. Countries like China, Singapore, Finland, and Canada consistently outperform the US, particularly in STEM (Science, Technology, Engineering, and Mathematics) subjects. World Population Review

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Why have Americans twice elected a president who is openly hostile to western, participatory democracy and actively supports dictators or wannabe dictators such as Vladimir Putin and Hungary’s Prime Minister Victor Orban?

It is due to the support of a dumbed-down Republican Party, but also an education system that hasn’t changed with the technological times, such as by educating more scientists and engineers.

Republicans have a history of dumbing down their electorate so much so that a powerful minority no longer believes in scientific facts but prefers conspiracy theories.

The Republican party’s support of ignorance is easily documented; from the denial of evolution and support of creative (intelligent) design in the 1970s, to Donald Trump’s attacks on higher education and scientific research today, including the evisceration of public health services that serve all Americans (including Obamacare) and attempt to eliminate the Department of Education.

The dumbing down of Americans has also been reflected in an educational system that no longer serves all Americans, as I said. We developed a universal K-12 education system that is really the foundation of our democracy. By 1930, 48 states had passed laws making education compulsory.

But according to the National Research Council, only 28 percent of high school science teachers consistently follow the National Research Council guidelines on teaching evolution, and 13 percent of those teachers explicitly advocate creationism or "intelligent design," said Psychology Today in a very damning 2014 article entitled, Anti-Intellectualism and the Dumbing Down of America:

"After leading the world for decades in 25-34 year olds with university degrees, the U.S. is now in 12th place," said Psychology Today. "The World Economic Forum ranked the U.S. at 52nd among 139 nations in the quality of its university math and science instruction in 2010. Nearly 50 percent of all graduate students in the sciences in the U.S. are foreigners, most of whom are returning to their home countries"

The result has been electing a president who makes a virtue of his ignorance and announces decisions with little homework but worldwide repercussions based on what he “feels in his bones.”

Dana Milbank, a longtime political columnist, documented the modern Republican Party’s history in his book, “The Destructionists: The Twenty-Fived-Year Crack-Up of the Republican Party.”

In May of 2021, a poll by the Public Religion Research Institute found that 23% of Republicans agree that, quote, "the government, media and financial worlds in the U.S. are controlled by a group of Satan-worshipping pedophiles who run a global child-sex trafficking operation," said Millbank in an NPR interview.

Milbank asserts Republicans drift towards craziness began in 1994 when more than 300 Republicans under the command of “obstructionist and rabble-rouser” Congressman Newt Gingrich stood outside the U.S. Capitol to sign the Contract with America and put bipartisanship on notice.

And “Twenty-five years later, on January 6, 2021, a bloodthirsty mob incited by President Trump invaded the Capitol,” he said

The American public is getting it. The latest PEW Research poll reports:

· Trump’s approval rating stands at 37%, down from 40% in the fall.

· By more than two-to-one, Americans say the administration’s actions have been worse than they expected (50%) rather than better (21%).

· Only about a quarter of Americans today (27%) say they support all or most of Trump’s policies and plans, down from 35% when he returned to office last year. That change has come entirely among Republicans.

Pundits give other reasons for such a dumbing down of a segment of the electorate--such as social media and television replacing literacy, or education that no longer teaches math and science or even history. Maybe that has enabled the Donald Trumps of the world to shout louder. The danger is that it may drown out any intelligent discourse about the most important issues of our day. It's driving at least one of our political parties into insanely dangerous positions today.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

 

This Inflation Isn't Temporary--Part II

 Popular Economics Weekly

From the same month one year ago, the PCE price index for July increased 2.6 percent. Excluding food and energy, the PCE price index increased 2.9 percent from one year ago. BLS.gov

BLS.gov

The PCE price index is one of several inflation measures that the Fed will use to determine whether to cut the Fed Funds rate at their September FOMC meeting. The other measures include the unemployment report and Consumer Price Index that will be out before their next meeting.

Fed Chair Powell has recently implied at the Jackson Hole Conference that if the employment picture is as bad as that of the past three months, they might even cut it -0.50%.

That would help borrowers because the Prime Rate would drop to 7.0% (from 7.5%) that lenders use for credit card and car loan rates. Consumer spending would then most likely pick up and elevate prices on top of the higher prices already appearing from the tariff taxes that Trump has levied.

This highlights the incredible stupidity of Republicans that may come to haunt them, who have passed massive tax cuts while allowing Trump to create havoc with his tariff war. They are counting on an increase in economic growth next year from higher capital investment in such as AI to pay for it and keep stagflation from happening.

But the inflation part of stagflation is already happening, in spite of the Q2 jump in GDP to 3.1% that was mostly due to the drop in imports, as the tariff taxes have begun to kick in.

Consumers are already seeing rising inflation. The Personal Consumption Expenditures price index (PCE), the Federal Reserve’s preferred inflation gauge, rose 2.9% annually without volatile food and energy price changes. That’s too high for the Fed’s target rate of 2% inflation that prevailed until the COVID-19 pandemic threw a monkey wrench in supply lines that are still recovering for most of the world.

It is a huge miscalculation for Republicans to believe that allowing Trump’s massive tariffs without their consent has anything more to do than increasing his wealth, and that of the Oligarchs that support him.

How much of the investments promised by Japan and the EU in their new tariff agreements will materialize, and how will it be spent? How much manufacturing can return to the US that must still compete with cheaper foreign products?

We know how con men operate from experience. Prices weren’t reduced or a Ukraine peace deal negotiated on ‘Day 1” as Trump had promised.

It will mostly be more smoke and mirrors that the White House propaganda machine will attempt to make Americans believe there is very little inflation and the job market won’t further worsen. Trump already fired the Bureau of Labor Statistics (BLS) head that reported job growth slowed precipitously over the past three months because he didn’t like the numbers.

The above graph pictures how consumers have been behaving this year during the chaos. Their disposable incomes (blue bars) and savings (black line) had been rising faster than spending (outlays) until April when tax returns are due (and Trump’s retaliatory tariffs were first announced). Then it reversed. The spending rate has been increasing (brown bars) faster than savings since then as consumers are depleting their savings accounts once again.

Consumers spent more on cars, car parts and financial services (59%) of their Personal Consumption Expenditures, while gas and energy spending fell 12.1%. Their personal savings rate has hovered around 4% all year.

It’s an important indicator because personal savings rise sharply when consumers pocket their incomes if they fear something bad is about to happen, like higher unemployment. If the Fed also sees danger, then they will cut their interest rates.

And if President Trump succeeds in politicizing the Fed by firing Governor Lisa Cook and hiring another BLS head who will cook the job numbers for him, so that he can hide what is really happening in the job market, then all bets are off on just how bad the stagflation that results will be.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Happens Next?

 Financial FAQs

“In an interview with Fox News on Sunday, Trump refused to rule out a recession for the U.S. this year, implying his tariff strategy and attempts to cut government spending were part of a necessary transition that in the short term could cause problems for the world’s biggest economy.” MarketWatch

AtlantaFedGDPNow

I find it laughable that President Trump is now saying the ‘R’ word on a Sunday talk show, when one of his most famous campaign promises was that “Starting on day one, we will end inflation and make America affordable again, to bring down the prices of all goods.”

So the question to ask is, what happens next when and if he succeeds in enacting his agenda? We should know by now it isn’t words but his administration’s actions that will determine (or hinder) how much the economy and prices will grow (or shrink) this year.

In fact, Trump has inherited a fully employed and still growing economy. Prices and inflation can’t come down in such a situation because there is more demand (i.e., money in circulation) than goods available. It’s good old Economics 101 that is taught in business classes.

But economists do agree on what would bring prices down, a recession. Many economists and pundits have been looking at the Atlanta Fed’s estimates of first quarter GDP growth, and been seeing the possibility of the ‘R’ word.

Why? It’s mainly because consumers have been spending less since the holidays, in part because they are losing confidence that they may even have a job, or the ability to change jobs in the future. Why wouldn’t they lose confidence when “chainsaw Musk” cuts federal jobs with abandon and the newly jobless federal workers competing in the private sector?

That why first quarter growth estimates, such as the Atlanta Fed’s GDPNow estimate have fallen.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.4 percent on March 6, up from -2.8 percent on March 3,” is their latest

That’s also why the stubbornly high inflation and interest rates are making creation of a new fiscal budget so difficult. Republicans want the tax cuts they promised to spark more spending, which is inflationary, but need Democrats to agree. Yet Democrats don’t want the cuts to social security, Medicare, and Medicaid that Trump said would never happen, but must happen for any preservation of the tax cuts enacted during Trump’s first term.

Hence there will probably be a so-called continuing resolution to keep the existing budget until end of the fiscal year in September. This will avoid a possible government shutdown, but what then?

This week’s news will be mostly about inflation, since February’s Consumer Price Index and wholesale Producer Price Index will come out that may paint a clearer inflation picture, and whether the Fed might resume cutting interest rates.

And we need not only to be talking about the prospects for higher prices from tariffs, but also the trade disruptions that tariff wars cause, because President Trump will antagonize both friend and foe in his flailing (and counterproductive) attempts to decree rather than negotiate a new foreign trade policy.

There is something seductive to many voters about a new foreign trade policy that promises to bring more jobs home. But firstly, it’s more expensive to make things in the U.S., which is why we import more than we export. And with Trump making enemies of our friends and closest allies, they will be sure to reciprocate with higher tariffs.

Trump has to know that is no way to do business from his history of bankruptcies and lawsuits. He has always chosen confrontation over cooperation to get what he wants, and the financial markets as well as consumers will soon figure this out. The only question is when, and what happens next.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Higher Economic Growth Ahead--Part II

 Financial FAQs

AtlantaGDPNow

US economic growth could be accelerating—with manufacturing as well as consumers. It was consumers that provided most of the 2.4 percent increase in Gross Domestic Product (GDP) in the ‘advance’ (first of three) estimates of second quarter economic growth, but the manufacturing and construction industries may be taking over in the next phase of this economic recovery.

The Atlanta Federal Reserve’s advance estimate of third quarter economic growth just jumped to 5.8 percent, thought to be an almost unbelievable growth rate just weeks ago. This will confound pundits and economists alike as all those capital infrastructure projects shift into high gear.

GDP growth is soaring because private capital spending has also picked up, proving that governments must kick start many of those projects that don’t promise enough profits to bring in private investment, i.e., long term projects like roads, bridges that pay for future growth. This is the truth that Wall Street doesn’t want to hear, until it meets a worldwide catastrophe like the COVID pandemic.

This has been the case since the Great Depression but never in the scale that has been spurred by the post-pandemic recovery.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 5.8 percent on August 16, up from 5.0 percent on August 15. After this morning's housing starts report from the US Census Bureau and industrial production report from the Federal Reserve Board of Governors, the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic investment growth increased from 4.4 percent and 8.8 percent, respectively, to 4.8 percent and 11.4 percent,” said the Atlanta Fed.

The jump in housing starts was surprising in the face of higher mortgage rates as bond traders expect that more robust growth will push up longer term interest rates, like the benchmark 10-year Treasury yield now edging above 7 percent.

“With many homeowners choosing to stay in their existing home to preserve their low mortgage rate, demand for new home construction pushed up single-family starts in July even as builders continue to struggle with increased uncertainty stemming from rising rates,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB).”

And manufacturing companies have added 100,000 clean energy jobs in wind and solar energy, EV manufacturing and other clean energy sectors across the country since the Inflation Reduction Act became law,, according to a report by the nonprofit Climate Power.

As of January 31, 2023, there are over 90 new clean energy projects in small towns and bigger cities nationwide totaling $89.5 billion in new investments, said their study.

This is what it means to pay for the future—our future health as well as creating better-paying jobs.

Harlan Green © 2023

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

No More Inflation?

 Financial FAQs

FREDppifinaldemand

The Federal Reserve has announced its first rate pause since it began to raise short term rates last year. But it threatened to raise rates twice more this year after a six week pause to study the impact of its policies to date.

Inflation may have all but disappeared by then, at least for wholesale goods and services that took a sudden plunge in May.

The Producer Price Index (PPI), the Federal Government’s wholesale inflation indicator, shows the Federal Reserve has already overreacted to the inflation surge. Its index for final demand plunged from 2.3 percent to 1.2 percent YoY in just one month, April to May 2023.

“In May, the decline in the final demand index can be traced to prices for final demand goods, which fell 1.6 percent. The index for final demand services increased 0.2 percent,” said the BLS. “Prices for final demand less foods, energy, and trade services were unchanged in May after inching up 0.1 percent in April.”

These changes will also be reflected in the retail Consumer Price Index in coming months, and we could begin to experience a close to zero overall inflation rate if it continues its downward trend very soon.

Another inflation indicator is moving quickly downward, U.S. import prices, which fell 4.6 percent from March 2022 to March 2023. This was their largest over-the-year drop since import prices declined 6.3 percent from May 2019 to May 2020.

All signs are now pointing to lessening demand from consumers and businesses. So, do consumers and businesses want to live in a zero-inflation rate environment if the Fed keeps raising interest rates?

No, is the short answer because when prices stop rising they quickly begin to fall in such a consumer-oriented economy as ours. That's good, isn’t it? But not too much because it’s a sign of falling demand for products, and less demand means businesses see shrinking markets and soon begin to cut jobs.

This hasn’t happened yet but we have a good example in the last decade as it recovered from the Great Recession. PPI for Final Demand was at zero inflation from January 2015 to August 2016 YoY, and quarterly GDP growth was less than 1 percent during the period, per the St. Louis FRED.

It looks like Ian Shepherdson’s remarks are coming true that I quoted recently.

“The forces that drove up inflation since the onset of the Covid pandemic are reversing rapidly,” said Ian Shepherdson, chief economist at Pantheon Economics, in a recent Barron’s article. “Over the next year, both the headline and core rates—the latter excludes food and energy prices—will drop sharply. By the end of 2024, inflation is likely to be below the Federal Reserve’s 2% target, and policy makers will be trying to stop it falling too far.”

The irony is that Fed Chair Powell has said they may have to continue to raise rates even if it causes job losses, if they are to meet their 2 percent inflation target.

He just said inflation has not moved down as much as they would like at his latest press conference. What would it take to convince him and the Fed Governors otherwise, another recession?

Harlan Green © 2023

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen