Inflation continues to fall

[pubic_assistance]

Once again. The Labor class takes the hit. Wage increases for blue collar workers did not adjust the same way it is doing for white collar jobs. These people already live dollar to dollar. Making everything more expensive by 20% over two years and raising their income by 10% means you're reducing a consumer class in their ability to afford basics. It's little wonder the middle class department stores have vanished and the suburban blue collar landscape is now full of Walfart and Dullard General.

[mike carey]

11 hours ago, pubic_assistance said:

Once again. The Labor class takes the hit. Wage increases for blue collar workers did not adjust the same way it is doing for white collar jobs. These people already live dollar to dollar. Making everything more expensive by 20% over two years and raising their income by 10% means you're reducing a consumer class in their ability to afford basics. It's little wonder the middle class department stores have vanished and the suburban blue collar landscape is now full of Walfart and Dullard General.

We've faced similar pressures here. Inflation is coming down, but not as fast as the Reserve Bank wants, so they raised the cash rate to 4.35% last Tuesday (that's up from 0.1% in May last year). October actually had monthly deflation with CPI of -0.1% (but the year to October was still in the high 4s). Their announcements have centred around spending and demand remaining too high, and concern about rising wages (they are still behind the rate of inflation). The main effect of the rate rises for Joe Average is to increase mortgage rates (which are variable here, not fixed for the life of the mortgage), which flow on to rent rates as most landlords are small investors who also feel the mortgage increases. The RBA studiously avoids attributing any part of inflation to roaring corporate profits (I'm looking at supermarkets among others here) or perceived price gouging. The Bank has also failed to acknowledge that half of home owners don't have mortgages, so rate rises don't affect them, and that many consumers still have savings buffers they built up during Covid. These factors mean that the main lever the Bank has only pressures a minority of the population, and they are the ones who were already worst affected by inflation.

[+ stevenkesslar]

On 11/11/2023 at 5:33 AM, pubic_assistance said:

Once again. The Labor class takes the hit. Wage increases for blue collar workers did not adjust the same way it is doing for white collar jobs.

Do you have any data to back that up?

As a general comment, what I've been reading consistently for the last few years is more like the opposite.  Wages are going up the most, percentage-wise, at the bottom.

A quick Google check immediately produced articles that confirm this.  Although I think we both may have a good argument to make, and it simply depends on the specific circumstances.

Lower-income earners’ wages have grown faster than others

Quote

“This is driven largely by people leaving really bad jobs” for better ones in different industries, Dube added.

Here's a second article that was at the top of the list Google gave me that says the same thing, mostly for the same reasons.  

One consistent fact I've read again and again is that the people who changed jobs during the pandemic got much better wage increases than people who did not.  That may be the case most of the time, anyway.  Since one big reason people change jobs is to make more money.  But it was certainly true during the pandemic.  Without data, I might guess that white collar workers might be the ones who could take the most advantage of this.  But, during the pandemic, apparently not.  And I think both articles suggests why.  When all those lower wage employers needed to hire people back, they had a hard time finding workers. And they had to pay them more.

None of this really says whether any group of people got wage increases that matched or exceeded inflation.  Especially last year, when inflation was spiking.  But my impression from many articles, including these two, is that people who changed jobs probably had much better luck beating inflation with wage increases.  And many of them were lower income workers.

That said, the basic picture I have is that if you have assets, you won during COVID.  If you don't have assets, you lost.  The key statistic is that from 2019 to 2022 average net worth went up 37 % after inflation. That is huge.  Net worth is not cash in your pocket to buy gas with, of course.  But anyone I know who owns homes or stocks, or both, are better off since before COVID.  The people who don't own homes or stocks are the ones who got the joy of inflation without getting the pain of your home value going way up, or the value of your stock portfolio soaring.   🤔 

[EZEtoGRU]

Yet more positive news comes out today regarding slowing inflation. The market is now celebrating!

Stocks rally Tuesday on soft inflation data, Dow jumps 300 points

STOCKS.APPLE.COM

---

Stocks surged Tuesday as investors cheered the latest U.S. consumer price index report.

 

[+ augustus]

7 hours ago, EZEtoGRU said:

Yet more positive news comes out today regarding slowing inflation. The market is now celebrating!

The people aren't celebrating.  Grocery prices are up 30% over the past couple of years.  Car insurance, home insurance, property taxes are sky high.   Obamacare premiums taking a big jump in 2024.  Half the population is delaying medical care because they can't afford the copays and deductibles!  It's all over the news!  And millions of people have been evicted from their homes because of soaring rents.  

[+ augustus]

I don’t need a government report to tell me what I see and what I’m experiencing, and it isn’t rosey. Nothing I see or experience is pointing in very positive direction.  These inflation numbers are a Mark Twain statistic, and the man on the street knows it.  But if you go to college, you can become stupid enough to believe this nonsense.  Go buy a good used car and explain to the seller how low this inflation is.  Then go get it repaired with these fantasy percentages in mind.  The loss of purchasing power has been huge.

[EZEtoGRU]

The man on the street was celebrating today considering the market surged.    Sadly, some posters here desperately want a recession and increasing inflation.  Of course their motivations are sadly obvious.   

Not to worry.  We are on the right track in dealing with the COVID/Ukraine-borne inflation problem felt globally.  BTW, I paid $2.99/gallon for gas in Michigan today.  That's also worth celebrating🙂.

  

[+ Vegas_Millennial]

The Wall Street Journal had an interesting article this week that basically says the last two years has seen a wealth transfer from young to old.  Those under 35 are paying more for rent, their first house, gas for commutes, and groceries.  Their net worth had stagnated, and their prospect of homeownership has diminished.  Those over 65 are sitting pretty on highly valued properties, inflated stocks, and social security checks which keep up with inflation.  It's no wonder most people on this forum feel flush, because most seem to be in the over 60 category and are benefiting from the increasing wealth inequality between young and old.  (That's not necessarily a bad thing.  I hope to be old and wealthy someday.)

[Marc in Calif]

On 11/14/2023 at 3:18 PM, augustus said:

I don’t need a government report to tell me what I see and what I’m experiencing, and it isn’t rosey. 

When was the last time a government report matched what you were seeing and experiencing?

[Pd1_jap]

3 hours ago, Marc in Calif said:

When was the last time a government report matched what you were seeing and experiencing?

That's why every report is proceeded by the term, "long and variable lags".

On 11/10/2023 at 4:23 PM, stevenkesslar said:

There are people who deserve to bitch and moan.  If you are someone who hires escorts, you are almost certainly not one of them.  Average net worth went up 37 % during COVID.  If you own a) a home or b) stocks, you are like the majority of Americans.  And your net worth probably went up a lot.  Granted, inflation-adjusted gas prices in the US are only a little LOWER than they were in 2008.  Making it seem impossible that the US can survive, let alone prosper.  And, yet, we seem to be prospering.  And I get that you can't use big increases in home equity to fill your tank with gas.  But you are still better off.

Careful, one two percent day change does not make a trend. My equities portfolio had been essentially flat for three years, largest investments in VTI, and a target date schwab retirement fund. TBH, we have been in a  recession since 2008. The government prints money and lowers interest rates to stimulate. All that stimulation has led to, ah-hem, rapidly rising inflation. 😂 

The Greek debt crisis, which supposedly triggered the great recession, set off alarm bells because their debt to gdp ratio went above 120%. The current US debt to gdp ratio is 123%. 

Eventually somebody is gonna get left holding the bag. More than likely it will be the American middle class.

[EZEtoGRU]

Walmart CEO predicts food deflation is on the horizon:

New YorkCNN — 

Lower grocery prices may soon be coming for shoppers.

Walmart CEO Doug McMillon said Thursday that the US food industry may be heading into a period of deflation after three years of punishing price hikes that have caused sticker shocker for shoppers at the grocery store. Food prices have increased 25% since the pandemic started.

“We may see dry grocery and consumables start to deflate in the coming weeks and months,” McMillon said. Walmart could enter “a deflationary environment.” Walmart is the largest retailer in the United States, and groceries make up more than half of its sales.

[+ augustus]

1 hour ago, EZEtoGRU said:

Walmart CEO predicts food deflation is on the horizon:

New YorkCNN — 

Lower grocery prices may soon be coming for shoppers.

Walmart CEO Doug McMillon said Thursday that the US food industry may be heading into a period of deflation after three years of punishing price hikes that have caused sticker shocker for shoppers at the grocery store. Food prices have increased 25% since the pandemic started.

“We may see dry grocery and consumables start to deflate in the coming weeks and months,” McMillon said. Walmart could enter “a deflationary environment.” Walmart is the largest retailer in the United States, and groceries make up more than half of its sales.

That's how you do it! Crank up the prices just long enough for people to forget what it was and then drop it to way more than it was...sit back and watch em happily clear the shelves!

[+ augustus]

1 hour ago, EZEtoGRU said:

Walmart CEO predicts food deflation is on the horizon:

New YorkCNN — 

Lower grocery prices may soon be coming for shoppers.

Walmart CEO Doug McMillon said Thursday that the US food industry may be heading into a period of deflation after three years of punishing price hikes that have caused sticker shocker for shoppers at the grocery store. Food prices have increased 25% since the pandemic started.

“We may see dry grocery and consumables start to deflate in the coming weeks and months,” McMillon said. Walmart could enter “a deflationary environment.” Walmart is the largest retailer in the United States, and groceries make up more than half of its sales.

15 steps backward, 1 step forward. Time to celebrate!  Or said another way, shoppers finally balk at higher prices, forcing stores to lower prices.   Or another way. People have run out of money. The free money too.   Giving me 40 cents off an item that is $2.50 higher than it was just two years ago does give not give me any warm and fuzzy feelings.

[EZEtoGRU]

Gasoline prices falling is good news:

Gas prices are tumbling, just in time for Thanksgiving | CNN Business

WWW.CNN.COM

---

Slug: oil refinery 08282023

 

[+ stevenkesslar]

On 11/14/2023 at 3:18 PM, augustus said:

The loss of purchasing power has been huge.

Damn straight Auggie.  It's all over the news!

Net worth surged 37% in pandemic era for the typical family, Fed finds — the most on record

I feel miserable.  America sucks.  Inflation sucks.  My life is a nightmare.

My house is worth 42 % more than on March 2020, when COVID started, according to Zillow.  I hate this inflation.  How the fuck am I supposed to survive?

And it's even worse.  The S & P 500 is up about 40 % or so since COVID started.  They are fucking killing us with this economy.  And if that wasn't bad enough, my stock portfolio is up 60 % since 2020.  I hate everything I see.  It is all going downhill.  I really can not tolerate this abject misery.

There are a few very small things that I find comfort in.  According to my ice cream inflation calculator, the Haagen Daaz that cost $3 in 2020 has only gone up to $4 today.  So, despite the torment of what has happened to my home and my stocks, which has left me in a deep depression, I am able to scrape together just enough pennies to buy some Dulce De Leche.  At least I have some small reason to live.

Other than that, this economy sucks and everybody knows that their life is miserable.  It is all over the news!

There you have it.  Assholes.  "Households have a lot of money."  And they say it with smiles on their faces, even.  I'm sure these idiots have college degrees.  But they have no human empathy for our misfortune.

Note:  That video is a few years old.  I could not find a recent one from a credible business network like CNBC about this recent 2023 net worth report.  But all the numbers - net worth, home values, the S & P 500 - are even higher than the good news story above.  Since that video, economists have forecasted 3,830 recessions.  Since that video, the actual number of recessions has been zero.

Edited November 18, 2023 by stevenkesslar

[+ stevenkesslar]

On 11/16/2023 at 12:15 PM, Pd1_jap said:

The Greek debt crisis, which supposedly triggered the great recession, set off alarm bells because their debt to gdp ratio went above 120%. The current US debt to gdp ratio is 123%. 

I emphatically agree with you.  My Dad, a Reagan Republican, was a deficit hawk.  I'm a liberal Democrat, and a deficit hawk.  

There is a word for this.  It's not ideology.  Or politics.  It is compromise.  And doing things that create a sound investment environment.

We did it in the 1990's, when we ended up with a surplus.  We can do it again.  Carville commented on this, saying at the time that if he is reincarnated he wants to come back as the bond market.  I respect the bond market, too.  Because they like fiscal sanity. A huge deficit is not good for the bond market, or interest rates.

If I am reincarnated, I want to come back as the 1990's.  People could compromise and get important shit done then.

[+ augustus]

11 hours ago, stevenkesslar said:

Damn straight Auggie.  It's all over the news!

Net worth surged 37% in pandemic era for the typical family, Fed finds — the most on record

I feel miserable.  America sucks.  Inflation sucks.  My life is a nightmare.

My house is worth 42 % more than on March 2020, when COVID started, according to Zillow.  I hate this inflation.  How the fuck am I supposed to survive?

And it's even worse.  The S & P 500 is up about 40 % or so since COVID started.  They are fucking killing us with this economy.  And if that wasn't bad enough, my stock portfolio is up 60 % since 2020.  I hate everything I see.  It is all going downhill.  I really can not tolerate this abject misery.

There are a few very small things that I find comfort in.  According to my ice cream inflation calculator, the Haagen Daaz that cost $3 in 2020 has only gone up to $4 today.  So, despite the torment of what has happened to my home and my stocks, which has left me in a deep depression, I am able to scrape together just enough pennies to buy some Dulce De Leche.  At least I have some small reason to live.

Other than that, this economy sucks and everybody knows that their life is miserable.  It is all over the news!

There you have it.  Assholes.  "Households have a lot of money."  And they say it with smiles on their faces, even.  I'm sure these idiots have college degrees.  But they have no human empathy for our misfortune.

Note:  That video is a few years old.  I could not find a recent one from a credible business network like CNBC about this recent 2023 net worth report.  But all the numbers - net worth, home values, the S & P 500 - are even higher than the good news story above.  Since that video, economists have forecasted 3,830 recessions.  Since that video, the actual number of recessions has been zero.

What????

80% of Americans See Savings Decline Since Pandemic Peak

WWW.PYMNTS.COM

---

80% of American households by income have seen a decline in their liquid assets since the 2021 peak of the pandemic, after adjusting for inflation.

And when the stock and real estate markets tank......................

[+ augustus]

7 minutes ago, augustus said:

My house is worth 42 % more than on March 2020, when COVID started, according to Zillow.  I hate this inflation.  How the fuck am I supposed to survive?

You seem to think this asset bubble in real estate is permanent.  It is not!!  Prices are already crashing in SF, Austin and Phoenix.  

[+ augustus]

11 hours ago, stevenkesslar said:

There you have it.  Assholes.  "Households have a lot of money."

No they DO NOT.  When the next recession comes, these wannabes who think they are "rich" will reap the consequences of these asset bubbles.  Overpriced real estate makes shelter unaffordable for the majority of the population and drastically reduces their standard of living.  Basic economics.  

[+ augustus]

I get a real laugh when people think they are rich because of an overpriced real estate market, caused by low interest rates and real estate speculators.  It's like saying I'm rich because my shoes cost $600 a pair.  And when the market crashes these same wannabes are in shock.  

[+ Vegas_Millennial]

11 hours ago, stevenkesslar said:

Damn straight Auggie.  It's all over the news!

Net worth surged 37% in pandemic era for the typical family, Fed finds — the most on record

I feel miserable.  America sucks.  Inflation sucks.  My life is a nightmare.

My house is worth 42 % more than on March 2020, when COVID started, according to Zillow.  I hate this inflation.  How the fuck am I supposed to survive?

And it's even worse.  The S & P 500 is up about 40 % or so since COVID started.  They are fucking killing us with this economy.  And if that wasn't bad enough, my stock portfolio is up 60 % since 2020.  I hate everything I see.  It is all going downhill.  I really can not tolerate this abject misery.

There are a few very small things that I find comfort in.  According to my ice cream inflation calculator, the Haagen Daaz that cost $3 in 2020 has only gone up to $4 today.  So, despite the torment of what has happened to my home and my stocks, which has left me in a deep depression, I am able to scrape together just enough pennies to buy some Dulce De Leche.  At least I have some small reason to live.

Other than that, this economy sucks and everybody knows that their life is miserable.  It is all over the news!

There you have it.  Assholes.  "Households have a lot of money."  And they say it with smiles on their faces, even.  I'm sure these idiots have college degrees.  But they have no human empathy for our misfortune.

Note:  That video is a few years old.  I could not find a recent one from a credible business network like CNBC about this recent 2023 net worth report.  But all the numbers - net worth, home values, the S & P 500 - are even higher than the good news story above.  Since that video, economists have forecasted 3,830 recessions.  Since that video, the actual number of recessions has been zero.

This is the viewpoint of someone who is benefiting from the increase in wealth inequality.  (Nothing wrong with that, I'm in the same boat).  Like my Wall Street Journal reference above, it is only the rich/old who have assets such as a home and stocks that have been enjoying the last three years.  Meanwhile, working class and young adults with no assets have an uphill climb to even enter the housing or stock market as more of their income is going towards rent, vehicles, and groceries than before.

 

[+ augustus]

The definition of a healthy economy is the greatest amount of quality goods and services available to everyone at the lowest possible price.   It's not people who think because their home price has gone up so and so and therefore, they are "rich" and the country is in great shape. Just ridiculous!  If it's unaffordable to the majority of people, then it's nothing but an unsustainable bubble.  The rise in real estate is INFLATION which has hurt the majority of the country with rent increases and the inability to buy a home.  THIS IS NOT PROSPERITY!! 

[+ augustus]

5 minutes ago, Vegas_Millennial said:

This is the viewpoint of someone who is benefiting from the increase in wealth inequality.  (Nothing wrong with that, I'm in the same boat).

1000% correct.  But it's a terribly myopic view!   Real estate will crash as it did in the 1980's and the late 1990's.  It has to, only so at least the majority of people can afford to pay their rent or buy a home.   

[+ augustus]

11 hours ago, stevenkesslar said:

My house is worth 42 % more than on March 2020, when COVID started, according to Zillow.  I hate this inflation.  How the fuck am I supposed to survive?

And that is the primary reason 800,000 Californians have left the state in the past 3 years.  They can't afford to live there and have had to become refugees.  How marvelous for the general welfare! 

[+ stevenkesslar]

I know this is three in a row for me.  But I thought I'd post this as a rebuttal to myself.  I assume people who say we're in a recession and they are worse off financially are not just making it up.

So this is an extremely data geeky post.  And part of the point is that when talking about the "average" American, there really is no average.  The big conclusion the data tells me, as I already said earlier, is that if you own a home and stocks you are probably a lot better off.   Even if prices have gone up.  If you don't own a home and stocks, and especially if you live in a city where rents have soared, you are probably  worse off. 

@Vegas_Millennial, you just said this:

Quote

This is the viewpoint of someone who is benefiting from the increase in wealth inequality.  (Nothing wrong with that, I'm in the same boat).  Like my Wall Street Journal reference above, it is only the rich/old who have assets such as a home and stocks that have been enjoying the last three years.

2 in 3 Americans own homes.  More people own homes since COVID started.  Anyone with basic math skills would put that together and realize that if home values have gone up a lot, the average American's net worth has gone up a lot.

So that chart suggests there is a "there" there.  The article I got it from, which is a right-of-center rant, says that inflation-adjusted wages have dropped 3.7 % since 2020.  What I like about City Journal is that even though they have their own ideology, which I usually disagree with, they do not have their own facts.  So something clearly happened in 2021 and 2022.  And inflation clearly had something to do with it.

That said, once you get beyond that, it's very hard to talk about the "average" American.  As that article notes, part of the reason average wages peaked in 2020 is lots of low-income workers with shitty wages lost their jobs.  So for that part of the pandemic, you can argue @pubic_assistance had a good point above.  Low end workers got screwed.  As in, they got FIRED.  When low wage workers lose their job, the average wage goes up.  Is it good news that lots of people lost their jobs in 2020 during a pandemic that killed over 1 million Americans?  You can decide that for yourself.

As City Journal also notes, in addition to inflation taking its toll on wages, the other thing that happened in 2021 and 2022 is low wage workers were being hired back in droves.  That drove average wages down, of course.  And that in itself is complicated.  Because we also know that people who made the shittiest wages also got the biggest wage increases, because of demand for their labor.  But the math is still pretty basic.  If your wage goes from $8 to $10, that's a big increase.  But if you use $10 in an average with people who make $50, it still pulls the average down.  Is it bad news that lots of low wage workers went back to work, with higher wages, in 2021 and 2022?  Would it have been better if the government had just sent them checks, and run up the deficit?  You can decide that for yourself.

But to the point @Vegas_Millennial just made about wealth inequality, let me repeat what the data says.  Income inequality actually narrowed a little bit, thanks to the fact that wages at the low end went up the most.  I understand that is NOT the same as wealth inequality.  If it were up to me, we'd go back to the 1990's and design sound programs that help working class families buy homes.  Which is how most middle class and working class people build wealth.  But that's a different post.

The other thing I said above that I will repeat is that the people who moved jobs during the pandemic tended to get the best wage increases.  The reason the pandemic helped a lot of workers who makes the lowest wages, and actually reduced income inequality a little bit, is that the jobs they went back to tended to pay more.  That statistic is a very well documented fact. Workers at the bottom, not the top, had the biggest percentage wage increases.  Is that bad?

One more fact, which is also a repeat.  Just about 2 in 3 Americans own their homes.  Many, probably most, of them locked in low fixed interest rates in 30 year mortgages.  So I agree with City Journal that it particularly sucks for the minority of Americans who want to buy homes right now, and can't.  Both because home prices are too high, and mortgage rates are too high.  But tell my Republican niece who lives in a nice home in Kentucky, and who just bought a second vacation home for cash,  that her homes are worth "too much".  And that's why my nephew who lives in a Chicago suburb can't afford to buy a home, even though he and his wife work hard.  Anyone want to try a conversation like that at Thanksgiving dinner?  I won't be talking about it.  

How many of you who own homes think your home is worth "too much"?  Don't all raise your hands at once.  😉

And since I'm being particularly data geeky, no one should feel sorry for my data geek nephew.  We exchange extremely verbose and chart-laden emails constantly.  So I'll say this in a Geek-O-Rama paragraph.  The guy we're both following closely now is Glenn Neely. His claim to fame as a sort of voodoo stock prognosticator with his own proprietary system is that when smart rich guys like Stanley Druckenmiller said in 1987 that we were headed into a depression, Neely said we are headed into the biggest bull market ever.  He was right.  In 2000 he predicted we're headed into a long secular bear market.  He was right.  In early 2008, when the S & P had already started to fall apart, his voodoo wave theory told him there were two versions of a crash imminent. Fast crash meant 1500 to about 650 soon.  Slow crash meant it would take longer, and not go quite as low.  His "fast crash" prediction was pretty much exactly on target.  So maybe it's voodoo.  But like Allan Lichtman, who has predicted every POTUS race in advance since 1984, he is a guy who use relatively objective pattern recognition techniques.  And he ends up being right about the big things.  Neely has been wrong about many of the details.  But the big picture movements, he tends to be right.

Why is this relevant?  Neely predicted in mid-June 2023 that the 2022 bear market/correction was over, and we were headed into a one year bull market that would take the indexes to new highs.  That looked right on the money for months.  And then it looked kind of dicey a few weeks ago.  Thanks in part to Hamas, Neely says.  So last week he came out and said the next phase of the bull market is on, and we're headed to new highs.

Is this voodoo?  Is it science?  Decide for yourself.  But the guy's been right about most of the big things in the stock market for decades.  If he is right again, it means average American net worth - already at an all time high - is about to go higher.  Boo hoo!  Doesn't it just suck???!!!  Ain't life awful!

Again, there is no average, I think.  On a personal level, my intelligence is below average, and my nephew's is above average, perhaps.  I did sell a lot of stock last Fall, when I should have been buying.  Why?  Because I had a conservative reaction to all these Wall Street guys like Mike Wilson (they are almost all men) screaming "Recession!  Recession!  Recession!"  I have beat the S & P by a lot since 2020.  But I would have beat it more had I ignored the fat cat whiners and pessimists.  Sensing a bottom, my nephew instead loaded up on SOXL- a leveraged tech index fund -  last Fall, starting at about $7 a share, which went to $28 by this Summer.  It tanked to $14 last month, lower than either of us thought it would go.  It's now recovered to $23.  If Neely is right, my nephew is going to have a massive capital gain and increase in net worth.  Happily, all this took over a year, meaning long term capital gains tax rates.  If he were really a genius, he would have sold it at $28 and bought it back at $14 and paid short term gains taxes.  But that is exactly what real geniuses like Warren Buffet advise us NOT to do.

So somebody tell my nephew (or niece) how much things suck.  And how people can't afford to buy homes.  He's sitting on a big down payment, at least.  And probably being able to buy a house for cash, if he wants.  Boo hoo!  Life sucks!  The market sucks!  Capitalism sucks!  😉

 

Edited November 18, 2023 by stevenkesslar