Up, Up, and Away

The unemployment rate is a mere 3.6 percent. There are 11.4 million job openings, almost two for every person looking for work. We have added over one million jobs in the past 90 days. Jobs are so readily available that 20-25 percent of candidates don’t show up for interviews, even if offered cash to appear. There are some 275 million registered vehicles in the United States and 271 million people over the age of 15. Those who own homes have seen the median value rise almost 40 percent since China exported its virus. Investors who did not dump shares at the bottom of the pandemic market have seen them increase in value by 75 percent despite recent setbacks. Six out of ten Americans are planning to take at least one summer trip. More and more Americans are getting to see the faces of their friends, neighbors and relations as masks are increasingly so yesterday.

Up, Up, And Away In A Not-So-Beautiful-Balloon

Nevertheless, these are not the best of times in America. The government reported on Friday that the Consumer Price Index (CPI) in May jumped 8.6 percent over last year, the biggest price rise in 40 years. Prices of food at home (bureaucrat speak for groceries) are a stunning 11.9 percent higher than last year, with meats, poultry and fish +14.2 percent, and eggs, +32 percent leading the parade. The Bureau of Labor Statistics also reports gas +48.7 percent and fuel at +106.7 percent.

And that doesn’t count shrinkflation: five fewer chips in each Dorito bag, five fewer tissues in a Kleenex box, 10 fewer grams in a Nescafe tin, eight fewer sheets in Cottonelle paper roll, Chobani Flips yogurts have shrunk from 5.3 ounces to 4.5 ounces. Gatorade has redesigned its bottle to include an indentation to make it easier to grip, and to reduce the contents from 32 ounces to 28 ounces, just in time to reduce its famed dehydration antidote for summer athletes. Gas stations have not figured out how to shrink the size of a gallon.

Blame Putin

In what will probably prove to have been a vain effort to soothe voters’ feelings that America is headed towards heck in a basket, Treasury secretary Janet Yellen told a television audience, “We have a very strong economy.” But her words do not carry the weight they did before she traded in her independence as Fed chair for the Treasury slot, where she must toe the administration line and, anyhow, according to Politico, has “often taken a back seat to the National Economic Council…”.

President Biden’s assurance that “our economy has gone from being on the mend to being on the move” is met with a mixture of incredulity and derision, with the kinder attributing his problems to his advanced years. A strong job market is good news in ordinary times, but the Fed chairman calls it “unhealthy” because it is too tight.

Besides, the President remains unwilling to attack $5-and-rising gas prices by recognizing oil as a transition fuel to a greener America, but wants to get rid of it here and now – or at least soon – by denying usable permits for drilling and pipeline infrastructure. And, in a rambling talk with the port of Los Angeles as a background, he claimed to be working hard to reduce supply-chain costs without mentioning that the principal impediment to such efficiency is the refusal of the unions to accept automation. Robots don’t vote.

And the SSPutin, on which Biden attempted to load the blame, was sunk by reality. Between Biden’s inauguration and before Putin’s invasion, gas prices had already risen 37 percent. Yes, Putin’s outrage accelerated the increase, but Biden’s policies already had the increase under way. And the CPI year-over-year increase, which shocked at 8.6 percent for May, hit 7.5 percent in January, before Putin moved on Ukraine. It had been 2.5 percent when Biden was inaugurated.

Wrong Direction

No surprise that Gallup pollsters report:

• Only 16 per cent of Americans are satisfied with the direction of the country, a six point drop from April and a 20 point drop since last May.

• Only 24 per cent of Democrats and 18 per cent of independent voters (the ones that can tip elections), respectively, are satisfied with the way the country is headed.

• Only 18 per cent approve of the way congress is doing its job.

• Pew Research pollsters find that 65 per cent believe most politicians are in office “to serve their own personal interests.”

The Numbers That Count

The country is in the grip of, dare I say it, a malaise. Most Americans couldn’t care less about the 150 macroeconomic variables some investment advisers say they look at. Or numbers produced by Federal Reserve policy makers who measure inflation using a “core” that excludes the prices of food and energy. Most people eat and drive, if they can afford both.

Other than those who spend their hours following the course of share prices, most Americans have their eyes focused on inflation, which 93 percent regard as a very big or moderately big problem. And on two manifestations of inflation as they experience it regularly– the rising prices of food and gasoline.

The CPI, of course, includes gasoline prices, so it may be double counting to watch gas prices separately, but that’s a statistician’s quibble. Most households make separate weekly visits to their supermarkets and their gas stations, enduring two separate exposures to the ravages of inflation. Various experts reckon that Americans are now spending between $1,200 and $2,200 more annually on gasoline than they were last year.  

Some hit the limits of their credit cards if they try to fill up the tank, and so return to the gas pump when the next paycheck arrives. Some choose a staycation over a vacation. Some price electric vehicles. Some, hit by an almost 12 percent rise in the price of groceries this year try to screw down even more on the cost of what goes into the supermarket trolley so they can afford enough gas to get to work.

Gloom In The C-Suites

Consumers have company as they nervously face the future. A recent survey of Fortune 500 CEOs found that 75 percent expect the economy to be in recession next year, with 32 percent believing it would begin this year. Since it is highly unlikely the Fed will have talked the inflation genie back into its bottle by then, 2023 would be the year stagflation returns.

Joy In The IRS

One group complains about insufficient revenue to take on needed staff, overwork and a dissatisfied customer base as cover for its unbounded joy. The taxman cameth, and for reasons still being determined, in the fiscal year ending in September, harvested the largest portion of GDP on record, 10 percent. That topped 1944, a war year, and 2000, the year of the dot-com boom. Chortling not permitted lest it interfere with the success of the next request for a tax increase.

The good news in this worst of times: the Fed’s policy stupor has proved transient.