Wednesday, December 13, 2017

Fed Raises Rates Too Soon!

Popular Economics Weekly

The Federal Reserve FOMC meeting ended with the predicted 0.25 percent rate hike; but it’s happening at the wrong time.  This is the rate that controls credit card interest and the Prime Lending Rate banks use on short term loans, which will now become more expensive, slowing consumer spending, and hence economic growth, for starters.

That is what the Fed Governors seem to want, even though growth is still weak; too weak to warrant continued tightening.

Few follow the trajectory of the so-called Treasury yield curve which graphs the difference between short and long-term interest rates. The curve is flattening at present—not a good sign for future growth, either. Instead, it’s historically a sign of slowing growth. 



DoubleLine Capital CEO Jeff Gundlach said this morning on CNBC the flattening yield curve is becoming worrisome, even with all signs pointing to no recession on the horizon. It will hurt junk bonds, for starters, especially, as well as investors that are highly leveraged.

Why? The Fed is tightening at the same time as the Repubs’ proposed tax bill will add at least $1.5 trillion to liquidity with the increased budget shortfall. So Republicans are fighting Fed policy, and we know where that will end. Federal Reserve policy always wins!

Short term rates are the cost of money to banks, and longer-term interest rates are what they earn on loans. When the difference narrows, bank profits plunge and they lend less to businesses, which shrinks available credit, even with the additional liquidity.

But CEOs are saying they will return most of the increased profits from any tax cut back to their investors, rather than boosting employees’ incomes. And wages and salaries are two-thirds of product costs, which means no meaningful inflation happens if incomes don’t rise.

Where will the money come from to do some of the $2 trillion in deferred infrastructure maintenance, according to the ASCE, not to speak of modernizing our power grids, airports, and transportation network?  The huge debt increase will make it more expensive to build out the infrastructute that's needed.

Some good news is that factory orders are soaring. Econoday reports factory orders have had a respectable year, moving to roughly $480 billion per month and near a 3-year high. “Year-on-year, orders are up $17 billion or 3.7 percent. Vehicle orders have been showing recent strength and reflect the rush of hurricane-replacement sales, yet the big contributor has been capital goods where annual gains are approaching 10 percent. And investing in capital goods are needed to expand production and even labor productivity."
 

So we have the Fed wanting to slow down what they see as accelerating inflation, which is probably because they anticipate the increased federal budget deficit (and decreased tax revenues) from Republicans single-minded obsession with tax cuts that may or may not help economic growth.

But if corporate CEOs keep their profits in-house, and won’t spend a substantial amount on increasing wages and salaries, there is no inflation increase, and so no acceleration in GDP, ever.

Harlan Green © 2017


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Thursday, December 7, 2017

U.S. Taxes Not Too High!

Financial FAQs

No, our taxes are not too high, and Americans suffer for it. In fact, the non-partisan Tax Policy Center says U.S. taxes at all levels of government represented 26 percent of GDP, compared with an average of 34 percent of GDP for the 34 member countries of the Organisation for Economic Co-operation and Development (OECD) in 2015.


Then why do Americans complain so much about high taxes? It’s because we have to pay for services out-of-pocket that other developed countries’ governments provide—including universal health care, tuition free colleges; services that developed countries consider to be their citizens’ rights.
“In many European countries, taxes exceeded 40 percent of GDP. But those countries generally provide more extensive government services than the United States does,” says the TPC report. “Among OECD countries, only Korea, Chile, Mexico, and Ireland collected less than the United States as a percentage of GDP.”
Actually, the ‘other’ developed countries provide public services as well, including such mass transit conveniences as high-speed trains (in Europe, Japan, and China), and worker-friendly laws—including decent minimum wages, paid maternity leave, and at least 4 weeks paid vacations—the list goes on and on.


The best way to look at this is what typical American households pay. A 2016 PEW Charitable Trust analysis showed how financially stretched we are.
“After declining during and after the Great Recession, expenditures increased between 2013 and 2014 in particular,” said the study. “…In 2014, the typical American household spent $36,800, but median household income continued to contract. By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent.”


In other words, declining American household incomes mean Americans are spending more out of pocket for the essential services, such as education and healthcare than other developed countries. About two-thirds of families’ spending goes to core needs: housing, food, and transportation, said PEW.

Alas, it will take an American electorate that finally wakes up to these facts to call for the benefits others enjoy. Why should we deserve less? One reason that hasn’t happened yet is our huge federal deficit—due to the fact that 60 percent of the federal budget goes to the military and defense spending.

Harlan Green © 2017


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Wednesday, December 6, 2017

Dear Federal Reserve--Please Don't Raise Interest Rates!

Popular Economics Weekly

The Federal Reserve FOMC meeting this week is expected to conclude with another 0.25 percent rate hike; but it’s happening at the wrong time.  This is the rate that controls credit card interest and the Prime Lending Rate that banks use on short term loans.

Few follow the trajectory of the so-called Treasury yield curve which graphs the difference between short and long term interest rates. The curve is flattening at present—not a good sign for future growth. Instead, it’s historically a sign of slowing growth.


Why? Short term rates are the cost of money to banks, and longer term interest rates are what they earn on loans. When the difference narrows, bank profits plunge and they lend less to businesses, which shrinks available credit.

So, Fed Governors, please don’t vote to raise your overnight Fed Funds rate at today’s conclusion of the FOMC meeting.

Now is not the time to be shrinking the credit, when we are in the ninth year of this very long-toothed recovery. Especially when the new Republican tax reform bill would increase taxes for anyone earning less than $70,000 per year by 2027, according to the CBO, non-partisan The Tax Policy Center and Joint Committee on Taxation—and this is most of us; more than 80 percent of consumers earning wages and salaries rather than ‘rents’ (i.e. passive income from investments).


The Fed’s Board of Governors must be focusing on the proposed corporate tax rate cut from 35 to 20 percent, which the Fed predicts will flood the markets with more cheap cash, thus raising the specter of inflation.

But what inflation? The 10-year Treasury is yielding less than 2.4 percent today, as it has been for at least the last three years; still a record low. And that means bond traders see no inflation is even on the horizon, since bond holders look at least 6 months’ ahead for any inflation tendencies.

In fact, Fed  Chair Janet Yellen once said she was more worried about disinflation, because they haven’t been able to goose the inflation rate above 2 percent since the end of the Great Recession, when it has been 3 to 4 percent when growth rates were at historical averages.

The Personal Consumption Expenditure Index (PCI) is the Fed’s preferred inflation indicator and still too low to increase demand. It came in at 1.4 percent in October, which is a sign of insufficient demand, even though corporations already are hoarding more than $4 trillion in excess cash and liquid investments.

The culprit is incomes of the 80 percent that are wage earners. Their average incomes have remained at $37,000 per year for decades with inflation factored in; which means they will continue to shop for bargains. That won’t push prices or inflation any higher.

Harlan Green © 2017

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Thursday, November 30, 2017

Q3 Economic Growth Jumps to 3.3%

Popular Economics Weekly

It looks like the U.S. economy is charging ahead for the next few quarters, as Q3 Gross Domestic Product was revised from 3 percent to a 3.3 percent growth rate, due to higher exports and capital expenditures.

Businesses are spending more on equipment such as robots to make up for the labor shortage, and we are exporting more manufactured goods, a sign that the manufacturing sector has finally recovered from the Great Recession.

Good economics says this is an opportunity to pay down our $20 trillion in federal debt. So why are Repubs cutting taxes, which will result in at least $1.5 trillion added to that debt; just when they have to raise the debt ceiling in 9 days, or risk a government shutdown?

Cutting taxes at this time reduces tax revenues, which will also increase the annual budget deficit, and make the debt ceiling negotiations more difficult. Responsible economics should mean finding more ways to pay down that debt, such as closing some of the huge tax loopholes with industries like oil and gas exploration ($6 billion), but one-half of congress that used to be budget hawks now want even more government debt to pay for their tax breaks?

“The increase in real GDP in the third quarter reflected positive contributions from PCE, private inventory investment, nonresidential fixed investment, and exports that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP,” said the BEA.
Sad, there is no fiscal responsibility in DC at the moment. Monthly retail sales are helping to boost GDP due in large part to the hurricanes. An upward revision to September puts the monthly retail sales jump at 1.9 percent and a 2-1/2 year high, as consumers in Texas, Florida, Puerto Rico and the Virgin Islands replace autos and everything else lost in the storms. Sales in October understandably slowed but did remain in the plus column at 0.2 percent, said Econoday.


What should have been done to bring some fiscal responsibility? Raise the national minimum tax from $7.25/hr where it has been since the last raise in 2009, for starters. This would boost consumer spending, which accounts for two-thirds of economic activity at present.

Across the country, 29 states and Washington, D.C., currently have wages above the federal floor, according to the National Conference of State Legislatures. California and New York are set to soon have the highest minimum wages in the nation, after deals were struck by their governors to raise them to $15 an hour by 2022 and 2018, respectively, with slower increases for smaller businesses.

It’s a simple bit of economics that many do not seem to understand, and it’s hurting economic growth. Henry Ford raised his workers’ daily wages to $5 per day in 1914 so they could afford to buy his cars. He could do this because he had reduced the time to build a Model A Ford from 12 hours to less than 1 hour with a better-designed production line.

Corporations are making record profits, with Q3 profits up 10 percent annually. So raising their workers’ incomes today will do the same thing—allow workers to buy more products, which increases company profits, which grows our economy!

Harlan Green © 2017

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Monday, November 27, 2017

New-Home Sales at 10-yr High

The Mortgage Corner

Sales of new single-family houses in October 2017 were at a seasonally adjusted annual rate of 685,000, according to estimates released jointly today by the U.S. Census Bureau and HUD. This is 6.2 percent (±18.0 percent) above the revised September rate of 645,000 and is 18.7 percent (±23.5 percent) above the October 2016 estimate of 577,000.


It is the highest sales rate in 10 years, when it reached its 1.4 million unit peak in 2007 at the height of the housing bubble. Such soaring sales tell us home buyers are hurrying to buy before prices and interest rates rise any higher. But it’s still a meager supply, as there is just a 4.9-month supply of new homes on the market at the current sales rate, which is below the more normal 6-month total.

Graph: Econoday

So there just are not enough homes to satisfy the surging demand for housing in a fully employed economy with wages and household incomes rising substantially for the first time since the Great Recession, as I’ve been saying for weeks. Part of the reason for higher demand—the Gen Y-er, millennial generation want their own living space. They now comprise 42 percent of homebuyers. And first-time buyer total is 32 percent, up from 30 percent last month.

There aren’t enough existing homes to meet demand, either. Total existing-home sales, https://www.nar.realtor/existing-home-sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent to a seasonally adjusted annual rate of 5.48 million in October from a downwardly revised 5.37 million in September. After last month's increase, sales are at their strongest pace since June (5.51 million), but remain 0.9 percent below a year ago.
“There is solid growth in the number of sales contracts signed before construction has begun, a strong indicator that new single-family home production should continue to grow as we look ahead to 2018," said NAHB Chief Economist Robert Dietz.
New home sales increased in all four regions. Sales rose 30.2 percent in the Northeast, 17.9 percent in the Midwest, 6.4 percent in the West and 1.3 percent in the South. Some of it may be replacement homes damaged or lost from the Hurricanes, there is clearly still a housing shortage.

And mortgage rates remain at historical lows. The 30-year fixed conforming rate is 3.50 percent, at one origination point. The Hi-balance conforming 30-year fixed is 3.625 percent for the same one origination point.

Harlan Green © 2017

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Wednesday, November 22, 2017

Housing Shortage Continues

The Mortgage Corner

Existing-home sales increased in October to their strongest pace since earlier this summer, but continual supply shortages led to fewer closings on an annual basis for the second straight month, according to the National Association of Realtors.

There just are not enough homes to satisfy the surging demand for housing in a fully employed economy with wages and household incomes rising substantially for the first time since the Great Recession. Part of the reason for higher demand—the Gen Y-er, millennial generation now wants their own living space.


Total existing-home sales, https://www.nar.realtor/existing-home-sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent to a seasonally adjusted annual rate of 5.48 million in October from a downwardly revised 5.37 million in September. After last month's increase, sales are at their strongest pace since June (5.51 million), but still remain 0.9 percent below a year ago.
Lawrence Yun, NAR chief economist, says sales activity in October picked up for the second straight month, with increases in all four major regions. "Job growth in most of the country continues to carry on at a robust level and is starting to slowly push up wages, which is in turn giving households added assurance that now is a good time to buy a home," he said. "While the housing market gained a little more momentum last month, sales are still below year ago levels because low inventory is limiting choices for prospective buyers and keeping price growth elevated."
Why has it taken so long for the housing market to recover, as I said last week? Fewer new households are being formed that would require a home of their own

A 2016 San Francisco Fed study by economist Fred Furlong on household formation concluded that many young adults chose alternative residential choices such as living with parents, other relatives, or friends, until now, as I noted.
But there are signs that a readjustment is imminent,” said Furlong. “The current population share of young adults is fairly close to the share that existed at the start of the most recent housing boom. Also, while more young people are living with their parents, they are forming their own households, albeit later in life, leading to higher headship rates over time. Mr. Furlong notes that U.S. Census Bureau projections suggest that household formations will average about 1.5 million per year through 2020, which is much better than the 900,000 annual averages of the last 5 years.”
It will be the largest jump in household formation since the Great Recession, which means many more homes will have to be built to satisfy the demand, when there is already a labor shortage in the construction industry.

This is while total housing inventory at the end of October actually decreased 3.2 percent to 1.80 million existing homes available for sale, and is now 10.4 percent lower than a year ago (2.01 million) and has fallen year-over-year for 29 consecutive months, said NAR. Unsold inventory is at a 3.9-month supply at the current sales pace, which is down from 4.4 months a year ago.

Better news is that nationwide housing starts rose 13.7 percent in October to a seasonally adjusted annual rate of 1.29 million units the highest housing production reading since October 2016, when total starts hit a post-recession high of 1.33 million.

So what needs to be done to increase housing inventories? Marketwatch’s Andrea Riquier says we need double the construction workers we now have to boost construction—another 750,000, at least, enough to meet the surging demand from the millennial generation. They are the 18 to 34 year-olds—now the largest buyer group, comprising 42 percent of homebuyers, according to a September study by the Zillow Group.

The housing shortage is also exacerbated by many existing homes being kept off the market—Marketwatch estimates some 300,000—by investors that scooped up bargains from the housing bubble bust, and continue to rent them out.

Harlan Green © 2017


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Tuesday, November 21, 2017

Big Boost In Housing Construction

The Mortgage Corner

Nationwide housing starts rose 13.7 percent in October to a seasonally adjusted annual rate of 1.29 million units after a slight upward revision to the September reading, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. This is the highest housing production reading since October 2016, when total starts hit a post-recession high of 1.33 million.

And today’s huge 1.2 percent rise in the Conference Board’s Index of Leading Economic Indicators for October (that predicts future growth trends) should be a sign that housing construction will continue to ramp up in 2018.  Construction needs to catch up to rising household formation as more of the millennial generation’s 18-38 year-olds—the largest generation in history—are now forming their own living arrangements.
“The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board.


Rising housing starts are because a total of 3 Quantitative Easings by the Fed has kept interest rates at record lows since 2009; where they still are today. For instance, the 30-yr conformed fixed rate is @ 3.50 percent for one origination point, which was unheard of before the various QE bond buying programs begun under Fed Chair Ben Bernanke.

I reported last week that new-home sales shot up 19 percent in September to a consensus crushing annualized rate of 667,000. This is the largest percentage gain in 28 years, folks, which accentuates the rising demand for housing.

The Census Bureau reported ownership increased to 63.9 percent of total households in the third quarter, the highest level since 2014. It is creeping up to the 65 percent historical ownership rate, but remains below the 69 percent clocked at the peak of the housing bubble a decade ago.
“We are seeing solid, steady production growth that is consistent with NAHB’s forecast for continued strengthening of the single-family sector,” said NAHB Chief Economist Robert Dietz. “As the job market and overall economy continue to firm, we should see demand for housing increase as we head into 2018.”
Regionally in October, combined single- and multifamily housing production rose 42.2 percent in the Northeast, 18.4 percent in the Midwest and 17.2 percent in the South. Starts fell 3.7 percent in the West.

Why has it taken so long for the housing market to recover? Fewer new households are being formed that would require a home of their own. A 2016 San Francisco Fed study by economist Fred Furlong on household formation concluded:
“…ownership rates increased during the housing boom of the late 1990s and early 2000s, but fell after 2007. Ownership rates have been driven down by several factors including tougher credit requirements, rising foreclosures, and deteriorating household finances since the Great Recession.”
It is also true that many young adults chose alternative residential choices such as living with parents, other relatives, or friends. There is also a correlation between these living arrangements and both the rise in student debt and the decline in marriage rates.
So we know why the Fed has kept interest rates this low for almost seven years!
“But there are signs that a readjustment is imminent,” said Furlong. “The current population share of young adults is fairly close to the share that existed at the start of the most recent housing boom. Also, while more young people are living with their parents, they are forming their own households, albeit later in life, leading to higher headship rates over time. Mr. Furlong notes that U.S. Census Bureau projections suggest that household formations will average about 1.5 million per year through 2020, which is much better than the 900,000 annual averages of the last 5 years.”
This will continue to boost housing demand, needless to say. Overall permit issuance in October was up 5.9 percent to a seasonally adjusted annual rate of 1.297 million units. Single-family permits rose 1.9 percent to 839,000 units while multifamily permits fell 9.5 percent to 458,000.

An increased supply will also help housing prices, since buying or renting a home has become increasingly expensive for the younger generations.  Continued economic growth will also encourage more millennials—heretofore burdened with student debt and an inadequate housing supply—to strike out on their own.

Harlan Green © 2017


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Thursday, November 16, 2017

The Irrelevance of President Trump

Popular Economics Weekly

It’s sad for America that the President of the United States has become irrelevant to most of the problems facing Americans and the world. But it’s heartening as well, because in choosing to return to a 1950’s that never was—the brief emergence of a white middle class—Trump can’t do much damage to future growth by choosing to isolate himself and his constituency from the real world. Do we need a better definition of President Trump’s irrelevance?

Let’s start with his fiasco of an Asian trip, where he fawned over foreign leaders who gave him massive pageants, but no trade concessions, while abandoning the Trans- Pacific Partnership.

The remaining 11 countries, including Japan, Australia, Mexico and Malaysia, said they had revived the Trans-Pacific Partnership (TPP) deal, a multilateral agreement championed under the Obama administration.

The Guardian reported Ministers meeting in Danang, Vietnam agreed on the “core elements” of what was now called the comprehensive and progressive agreement for Trans-Pacific Partnership, a joint statement read.

And “American leaders from state capitals, city halls and businesses across the country have shown up in force” in Bonn, Germany, to discuss carrying out the 2015 Paris climate agreement,” said California Governor Jerry Brown and Michael Bloomberg in yesterday’s New York Times.

This is when President Trump announced at the beginning of his Presidency that he was abandoning the Paris Accord in favor of supporting a return to coal and oil energy. But that isn’t happening for the rest of America, as some 50 percent of U.S. states and cities are represented in Bonn.

“California just extended its cap-and-trade emission program through 2030 and has adopted incentives that will help put 1.5 million electric vehicles on the road by 2025,’ said Jerry Brown, Governor of the sixth largest economy in the world.

Graph: Marketwatch.com

And the U.S. just released its latest congressionally mandated Climate Science Special Report that says 2017 wreaked the most catastrophic destruction in 90 years with an estimated $175 billion in property damage. Only the San Francisco Earthquake (1906), Chicago Fire (1871), and Great Flood (1927) caused more destruction.

What is Trump afraid of, that he fawns over Chinese and Russian leaders, while extracting no concessions from them? He was seen to spend more time with Vladimir Putin at the Asia-Pacific Economic Cooperation summit in Vietnam than any other leader.

Even his support of Republicans’ so-call tax reform bills is irrelevant, as he wants Republicans once again to attempt to repeal the Obamacare mandate, when more than 50 percent of Americans now support Obamacare, according to the latest Kaiser Family Foundations Health Tracking Poll.
“When asked whether it was good or bad that the Senate GOP had failed to repeal ObamaCare, answers were more direct. Six out of 10 Americans say that Senate Republicans' failure to repeal the law was a "good thing," said the KFF poll, “compared to just 35 percent who disapproved and wanted the law repealed.”
That is irrelevance of the highest order, and as many pundits have noted, it is also the definition of insanity: attempting to repeal Obamacare more than 50 times, and expecting a different result.

Another feature of the tax reform bill is that it requires taking away approximately $1.5 trillion in Medicare and Medicaid benefits to give the wealthiest an unnecessary tax cut. Therefore, it won’t help the shrinking middle class, or any income class, except the top one percent.
Harold Myerson voiced recently in The American Prospect, “The United States now has the highest percentage of low-wage workers – that is workers who make less than two-thirds of the median wage- of any developed nation. Fully 25 percent of all American workers make no more than $17, 576 a year.”
The irrelevance of this President is therefore a real danger to our health and standard of living in so many ways.

Harlan Green © 2017


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Tuesday, November 14, 2017

Who Really Needs Tax Reform?

Financial FAQs

Firstly, we know this isn’t real tax reform when the respective Senate and House bills allow an additional $1.5 trillion in debt added to the existing $20 trillion of national debt. Why, when during prosperous times such as these with two consecutive quarters of 3 percent GDP growth, good economics tells us it is time to pay down the debt?

It gets worse. Some spending is cut—up to $1.5 trillion in Medicare and Medicaid benefits for the poorest and elderly. And the House bill proposes cutting out the exemptions for property taxes, state and local taxes, as wellas abolishing the estate tax.  The Senate bill cuts the $1 million mortgage interest deduction in half to make up for the loss in tax revenue.

So, instead of a tax cut, the middle and lower income earners actually have an income cut--both in benefits and loss of homeowners' tax deductions.  Real tax reform would mean higher taxes for the wealthiest and the close out of the tax loopholes that enable them to conceal their wealth overseas; rather than pay down the huge federal debt.

And all this is to be done without any input from Democrats. Why would Republicans even try to ram this through with only Republican votes in the first place? Instead of spending the increased tax revenues on reducing our national debt, they want to give it to their wealthiest donors and corporations—that are already making record profits.


It also happened in 2001, when President GW Bush and VP Dick Cheney blithely erased President Clinton’s preceding four years of actual federal budget surpluses with tax cuts for these same people. What was their rationale?

Their actions were based on the thesis of a then unknown economics graduate student, Arthur Laffer, who drew what came to be known as the Laffer Curve on a napkin in a 1974 meeting with Dick Cheney, then President Gerald Ford’s deputy chief of staff. It was a rationalization never confirmed or evidenced by either history or validated by economic theory.
“The conventional wisdom was: You want more revenue, you raise taxes,” Cheney recalled 30 years later, in a Bloomberg interview reenacting that landmark 1974 meeting. “What Art brought to the table with these curves is that if you wanted more revenue, you were better off if you lowered taxes, to stimulate economic growth and economic activity.”
But that didn’t happen. In 2013 the Center for Budget and Policy Priorities estimated that, when the associated interest costs are taken into account, the Bush tax cuts (including those that policymakers made permanent) would add $5.6 trillion to deficits from 2001 to 2018.  This means that the Bush tax cuts will be responsible for roughly one-third of the federal debt owed by 2018.

In other words, the Clinton surpluses were squandered, instead of bolstering the social security and Medicare funds. Brookings Institution economist William Gale and Dartmouth professor Andrew Samwick, former chief economist on George W. Bush’s Council of Economic Advisers, found that “a cursory look at growth between 2001 and 2007 (before the onset of the Great Recession) suggests that overall growth rate was … mediocre” and that “there is, in short, no first-order evidence in the aggregate data that these tax cuts generated growth.”
When will this foolishness stop, and rational economic thinking return to congress? New York Times’ Paul Krugman says: “..anyone who has paid attention to U.S. politics knows the answer. First, they will lie, unashamedly, about what their bill actually does. Second, they will try to distract working-class voters by stoking racial animosity. That didn’t work too well in Tuesday’s elections, but they’ll keep on trying.”
Harlan Green © 2017

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Thursday, November 9, 2017

New Home Sales-Ownership Rate Rising

The Mortgage Corner

New home sales shot up 19 percent in September to a consensus crushing annualized rate of 667,000. This is the largest percentage gain in 28 years and the highest level of the cycle, since October 2007. In stark contrast, existing home sales, the green line, haven't shown any kind of bounce.


Homeownership is also rising. The Census Bureau last week reported that ownership increased to 63.9 percent in the third quarter, the highest level since 2014. The rate was up from 63.7 percent in the second quarter and 63.5 percent a year earlier. It is creeping up to the 65 percent historical ownership rate, but it remains below the 69 percent clocked at the peak of the housing bubble a decade ago.

What does this mean? Firstly, the housing supply is catching up with demand, and it will take some pressure over rising rents. The rise in homeownership comes as other forces weaken the rental market, including a surge in supply from developers hoping to cash in on rising rents. In September, the seasonally adjusted rate of apartments under construction was 596,000, nearly twice the long-term average of 300,000 units, according to U.S. Census data.

The new housing supply boosted the national vacancy rate to 4.5 percent in the third quarter of this year, compared with 3.5 percent a year earlier, according to John Chang, head of research for real-estate services firm Marcus & Millichap. Nationally, rents were up 3.5 percent between the third quarters of 2016 and ’17, compared with 4.5 percent the previous years, he said.

And it is the millennial generation, children of the baby boomers and the largest generation ever, that are boosting homeownership rates as they begin to marry and raise families. Their marriage rate over the next five years will likely play an important role in demand for apartments and houses, according to Dr. Chang.


The market is not so good for existing-home sales. Econoday reports the red line of pending sales shows the pending index flat at 106.0 and existing homes likely to hold near 5.400 million. Resale prices ($245,100 median) are far lower than new homes ($319,700), but it's not helping sales. It peaked in January and has been trending down ever since.

But if construction and new-home sales continue to pick up, it will move more millennials out of their rentals. They are taking their time to nest, and the oldest of those born from approximately 1980 to 1996 will soon be approaching 40 years of age.

Sales haven’t declined more because mortgage rates are holding @ 3.50 percent for a 30-year fixed conforming loan with 1 origination point, and 3.625 percent for the so-called Hi-balance 30-year conforming rate in high-expense states and regions.

This is actually an incredible number, as interest rates this low in the eighth year of the recovery from the Great Recession attests to the severity of the recession, and fact that household incomes are only beginning to recover.

Harlan Green © 2017

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Monday, November 6, 2017

A Gangbusters Employment Report

Popular Economics Weekly

Payrolls rose 261,000 in October following an 18,000 rise in September, easily weathering the season's hurricane disruptions, the government said Friday. But 765,000 dropped out of the labor force, which is why the unemployment rate fell to 4.1 percent.

The swing factor between the two months is restaurants where payrolls jumped 89,000 after plunging 98,000 during September's storms, said Econoday. Professional business services underscore how urgent demand for labor is, rising 50,000 in October with the temporary help component up 18,000 for the strongest rise of the year.


Where are the new workers to come from with so many discouraged workers, if economic growth is to continue? Tax cuts won’t do it, when there aren’t enough workers willing to work. Wages have to rise faster to bring back those workers.

Wages fell a penny to an average of $26.53 an hour. The year-over-year increase in hourly pay slowed to 2.4 percent from 2.8 percent, though wage figures for the past two months were distorted by the storms. But most of the wage increase was in low-paying restaurant work, which means corporations still aren’t boosting wages enough to bring back discouraged workers.


And those actively looking for work fell nearly 300,000 to 6.520 million for an unemployment rate of 4.1 percent, the lowest in 17 years, reports Econoday. When also including those not actively looking but wanting a job, the number moves to only 11.750 million which is a 10-year low.

It will take more generous wages to bring back those workers now sitting on the sidelines. In other words, the return of discouraged workers may have run its course, unless corporations decide to pay more for their workers, rather than continuing to boost the pay of their executives (up more than 4 percent). The labor participation rate fell a steep 4 tenths to 62.7 percent, which is 4 percent below the longer term average, and really a reflection of the fact that wages still aren’t rising faster than inflation.

So why not boost wages, corporate executives? Tax cuts won’t do much to boost the wages of those in the 60 percent middle-income brackets—from $32,000 to $140,000 per year—since they already pay just an average 2.5 percent in income taxes.

Harlan Green © 2017

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

Wednesday, November 1, 2017

Increased Growth Ahead, But Watch for Bubbles!

Financial FAQs

Maybe it’s the natural disasters plaguing U.S. Or the fact businesses haven’t been investing in future growth until now. But the times they are a’changing, as GDP grew 3 percent in Q3 for the second quarter in a row.

It’s mainly due to higher consumer spending and higher inventories as businesses see better times ahead. The higher capital investments have boosted manufacturing, and exports have also increased.

Graph: Econoday

What to make of all this in the eighth year of this recovery, and full employment? More automation, for one thing, as businesses have to depend more on robotics and other aids to productivity with the dearth of new workers entering the labor market. Jobs and income are the keys to October's report, says Econoday.
“ The assessment of October's jobs market is unusually favorable with only 17.5 percent of the sample saying jobs are hard to get, which is very low and down 1/2 percentage point from September.”
Graph: Econoday

Consumer confidence is also soaring, with the Conference Board’s index jumping 5.3 points in the headline index to 125.9 which is a 17-year high. Of course that was just before the dot-com bubble burst in 2000, so is it a sign of irrational exuberance?

Nobel economist Robert Shiller—first to coin the term “irrational exuberance”—has lately been warning of a stock bubble.
“…the US stock market today looks a lot like it did at the peaks before most of the country’s 13 previous bear markets,” said Shiller in a recent Project Syndicate column. “This is not to say that a bear market is guaranteed: such episodes are difficult to anticipate, and the next one may still be a long way off. And even if a bear market does arrive, for anyone who does not buy at the market’s peak and sell at the trough, losses tend to be less than 20 percent.“
The Fed is also expected to raise short term rates another one-quarter percent in their December FOMC meeting, and it looks like President Trump is about to appoint another Fed Governor, Jerome Powell, as the next Fed Chairman to take over February 1, when Janet Yellen’s term is over.

The ‘take’ on Powell is that he is well-qualified and likes fewer regulations, which Trump will like.
He also wants to reduce outstanding Federal Reserve holdings of securities more substantially, and according to former Fed Chair Ben Bernanke did not like so much Quantitative Easing that kept interest rates so low for so long. That puts him in the budget deficit hawk camp.

But what really can be done about reducing the budget deficit with the current one-party tax reform debate? Republicans are attempting once again to get around the Democrats and a bipartisan tax bill, as they did with the attempted repeal of Obamacare.

That didn’t work, so why do they believe it will work this time, especially when some cherished tax breaks would have to be eliminated to cover the approximately $1.5 trillion in tax breaks; that might include reducing 401(k) retirement savings’ accounts and eliminating $1.5 trillion in Medicaid and Medicare spending over the next decade?

Stay tuned, but the U.S. can’t function with a one-party system.

Harlan Green © 2017


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Friday, October 27, 2017

Who Needs Tax Cuts?

Popular Economics Weekly

It turns out very few of us need a tax cut. Marketwatch economist Rex Nutting calculates that those in the 60 percent middle-income brackets—from $32,000 to $140,000 per year—pay just an average 2.5 percent in income taxes. It’s only the richest 0.1 to 1 percent income earners that pay more, and want the huge tax cuts congress and the Trump administration are proposing.
 
Graph: Marketwatch

Their rationale? That it will boost GDP growth to 3 percent from the current 2 percent average since the end of the Great Recession. But guess what? Q2 GDP growth was already 3 percent in Q2 and just revised to 3.1 percent, the highest growth rate in 2 years. Q3 GDP growth was just reported today at 3 percent, due to higher consumer spending and Durable Goods orders on hurricane replacement. 

Businesses are already investing in expansion, in other words—business investment in structures rose a stronger 7 percent instead of 6.2 percent in the revision. So, why not pay down the huge budget deficits accumulated since then, instead of cutting tax revenues?
“A bill that cuts federal income taxes for middle-class families makes absolutely no sense, except as a sad way of camouflaging the real intent of the bill: Giving millions of dollars to the very wealthy, who happen to be the only people who are really benefiting from our uneven economic growth,” said Nutting.
Because the budget deficit cannot be increased more then $1.5 trillion in ten years, due to prior budget agreements, spending has to be cut somewhere, and guess where. The just passed House and Senate budget resolution cuts $1trillion from Medicaid, and $500 billion from Medicare.

Guess who is hurt most by those benefit cuts? Trump's lower-income voters in the red states that depend most heavily on  health benefits. So, once again Repubs are attempting to disguise a tax cut for the wealthiest.

A corporate tax cut also benefit the wealthiest, since the top 10 percent of income earners own 80 percent of stocks, which is where most of the benefits from their increased profits will show up.


Top this off with another record for corporate profits, up 7.4 percent in a year, and there is no reason to be cutting their taxes. They haven’t been using their profits for productive purposes, so what’s needed is for them to pay higher taxes so government can use that money to invest productively in the $2 trillion plus in outmoded infrastructure that badly needs replacement.

As a bonus, any such investments in new airports, power grids, better water treatment facilities (such as Detroit’s), alternative energies, roads, bridges—you name it—will increase labor productivity that has been cut in half since 2000.

And increasing labor productivity is the only real ticket to higher economic growth, and increasing the take-home pay for those middle-income wage earners.

Harlan Green © 2017

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

Wednesday, October 25, 2017

Boom Times for Manufacturing

Popular Economics Weekly

A measure used by economists to track investment, known as core capital orders (minus defense and aircraft), rose 4 percent in the 12 months ended in September. It has risen 1.3 percent for three consecutive months, according to the Commerce Department.

Core orders are spent domestically for the most part, so this is happening just when it’s needed—to rebuild the hurricane and wildfire damaged states of Florida, Texas, California, as well as U.S. Territories of Puerto Rico and the Virgin Islands.

Graph: FRED

It will also boost economic growth, since it boosts labor productivity, one of the two components that determine GDP growth. The other component is population growth, but the U.S. population is barely growing, as is immigration that supplies the majority of new workers.

The main beneficiary of higher capex spending will be manufacturing, which is already showing improvement with a cheaper dollar exchange rate that has boosted exports.


And today we have durable-goods orders that rose 2.2 percent in September, beating forecasts. Durable goods are all goods that last three or more years—including auto vehicles, defense and aircraft. These orders have climbed 7.8 percent in the past year, the fastest pace since early 2012.
“Strength in the manufacturing sample is centered in new orders and employment,” says Econoday. “Of special note are unusual delivery delays, which help lift the composite indexes and are the result of lingering disruptions and stretched workloads following Hurricanes Harvey and Irma.”
So we are seeing effects of the hurricanes in boosting economic activity. The role of capital expenditures is especially important, as it means the replacement of much of our aging infrastructure as well.

And don’t forget at least 1 million motor vehicles were destroyed by the hurricanes that will need to be replaced. But buyers shopping for used replacement vehicles should be aware of the pitfalls of those storm-damaged cars that are put back on the market.

Consumers should take precautions like getting a history of repairs and checking the VIN number in the National Insurance Crime Bureau and National Motor Vehicle Title Information System databases, reports Fortune Magazine. Even without a database, strange stains and smells can be a red flag that a car has weathered a flood. Consumers buy a used car should check for signs of water damage — mineral deposits, mildew and the smell of mold or overpowering scents of cleaning supplies that may be trying to mask it.

Harlan Green © 2017


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Friday, October 20, 2017

Rising Existing-Home Sales Not Enough

WASHINGTON (October 20, 2017) — After three straight monthly declines, existing-home sales slightly reversed course in September, but ongoing supply shortages and recent hurricanes muted overall activity and caused sales to fall back on an annual basis, reports the National Association of Realtors.

There aren’t enough homes for sale, in other words, at a time when many more homes are needed.  The inventory for sale is down to 4.2 months’ supply at the current sales rate. How will all the homes lost in the hurricanes and California wild fires be replaced with such low inventories?

It will take massive help from governments and disaster relief agencies, for starters. The U.S. House has voted $51.8 billion in relief aid to date that the Senate will also have to approve; much of it for replacement housing. But that means mobile homes providing immediate shelter from the approaching winter, as happened in New Orleans with Hurricane Katrina.

It will take much longer to replace those homes destroyed. The ongoing California wildfires have destroyed more than 6,000 homes in Northern California, which is more than half the average total of new homes built in California during ordinary years. And 185,149 homes are estimated to be damaged or destroyed just by Harvey, according to recent data from the Texas Division of Emergency Management.

This will certainly boost the construction industry. But construction also is suffering from a shortage of workers. And affordability is now a problem slowing sales, as housing prices have risen faster than incomes due to the current housing shortage.

Graph: Econoday

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 0.7 percent to a seasonally adjusted annual rate of 5.39 million in September from 5.35 million in August. Last month's sales pace is 1.5 percent below a year ago but is the second slowest over the past year (behind August).
Lawrence Yun, NAR chief economist, says closings mustered a meager gain in September, but declined on an annual basis for the first time in over a year (July 2016; 2.2 percent). “Home sales in recent months remain at their lowest level of the year and are unable to break through, despite considerable buyer interest in most parts of the country,” he said. “Realtors® this fall continue to say the primary impediments stifling sales growth are the same as they have been all year: not enough listings – especially at the lower end of the market – and fast-rising prices that are straining the budgets of prospective buyers.”
Bottom line is that U.S. and state economies will be given a massive boost by the recent disasters. We can really call it a new, New Deal, since governments will have to approve massive spending bills to rebuild as if it were wartime. Much of that spending has to be for modernizing our infrastructure—which includes all the roads, bridges, water systems, and electrical grids destroyed.

And don’t forget the replacement housing needed. We see such spending can and will prolong this recovery another one or two years. Since such massive spending will require bipartisan support, maybe politics can be thrown out the window this time.

Harlan Green © 2017

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

Tuesday, October 17, 2017

Republicans Are Killing Housing

The Mortgage Corner

The Trump administration and Republicans’ anti-immigration policies will kill the housing market. Why? Trump wants to cut immigration quotas by 50 percent when there aren’t enough qualified workers to fill current job openings. And congress can’t agree on anything that gives easier access to citizenship for the foreign-born; which is why there is a housing shortage.

The housing market can’t provide enough housing even for current population growth. Both new and existing-home sales have declined this year because of the lack of housing. Builders and real-estate agents have complained for years about more red tape, tighter lending standards and a scarcity of inexpensive lots to build on.

And builders are now facing an extreme labor shortage. They can’t find enough carpenters, bricklayers and other workers with the needed skills. “Labor and material shortages are holding construction back, and will continue to do so for some time yet,” says Marketwatch, citing economists at Capital Economics.

Graph: FRED

The number of existing-homes listed for sale in 2017 to date is the lowest since 1999, according to the NAR. That’s in part because distressed sales volumes have fallen from more than 100,000 a month at the peak of the post crisis period, 2009-2012, to about 25,000 today, which means there aren’t many cheaply-priced homes left over from the housing crash. 

I said last week the Labor Department reported there were 6.1 million job openings in August in its JOLTS report, or Job Openings and Labor Turnover Survey, which was “little changed” from July, while hirings remained far behind at 5.430 million. The very large gap has been little changed for more than a few months. At 652,000, the current spread between openings and hirings is one of the very widest on record, and two months ago it was even higher—the spread was 1 million.

Why? There aren’t enough workers to fill current job openings; as I said—and the Trump administration wants to restrict the supply even further in its single-minded pursuit of minority white-nationalist voters?


Economists know that to advance economic growth to say, 3 percent for any length of time, 2.8 million new workers are needed each year, when our domestic population is capable of just 600,000 new adult workers, according to the U.S. Census Bureau. So where are the additional workers to come from if Trump and the Republican congress continue to block a more enlightened immigration policy?

Housing affordability will suffer the most, when household incomes are rising at half the rate of both housing prices and rental rates. It’s a sad fact that the average production and non-supervisory worker earned $37,600 annually in 2016. “When adjusted for inflation, the average wage has remained stagnant for 50 years,” said Executive Pay Watch, in a report conducted by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO).

So we are at a crossroads, if we want to provide the necessary housing for our growing population. A more enlightened immigration policy is the first step. And then Republicans should drop their obsession with unnecessary tax cuts and instead focus on that $1 trillion infrastructure bill they’ve talked so much about.  It’s even more necessary because of the horrific hurricanes.

Harlan Green © 2017

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Thursday, October 12, 2017

JOLTS Report And Too Many Job Openings!

Financial FAQs

The Labor Department reported today there were 6.1 million job openings in August in its JOLTS report, or Job Openings and Labor Turnover Survey, which was “little changed” from July, while hirings remained far behind at 5.430 million.  Corporations are flush with cash from record profits, so they need to put that cash to work by filling more of those job openings instead of asking for tax cuts they don’t need.

Graph: BLS.gov

In fact, the very large gap has been little changed for more than a few months. At 652,000, the current spread between openings and hirings is one of the very widest on record, and two months ago it was even higher—the spread was 1 million.

Yes, the gap between openings and hiring first opened up about 2-1/2 years ago signaling that employers are either not willing to offer high enough pay to fill empty positions and/or are having a hard time finding people with the right skills.

It’s worse than that. I maintain companies (corporations in particular) are using their record profits (up 7.4 percent in one year) to buy back their stock, instead; which enhances CEO pay.

I reported two weeks ago that Executive Pay Watch, in a report conducted by the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), said last year CEOs were paid 335 times the average worker. The average production and non-supervisory worker earned $37,600 annually in 2016. “When adjusted for inflation, the average wage has remained stagnant for 50 years,” said the report. 

This brake on economic growth is mainly because corporations have been able to successfully resist their employees’ demands for higher wages due to corporations’ monopoly positions in many industries, and massive lobbies. Instead they’ve used most of those profits to buy back their stock, and so enhance their earnings. CEO pay spiked 19.6 percent last year, before inflation.

And next year may not be better for their employees. I also reported recently that “Pay raises for U.S. employees are not expected to improve next year, according to a survey released recently by global professional services company Aon, based on a survey of over 1,000 companies. Base pay is expected to rise 3 percent in 2018, up slightly from 2.9 percent in 2017. Spending on variable pay — incentives or bonuses — will be 12.5 percent of payroll, low levels not seen since 2013. This suggests a “pessimistic view of corporate performance in the coming year,” Ken Abosch, a strategy and development analyst at Aon, said in a statement.


How can corporations be pessimistic about their prospects with their record profits? They now have the largest profits as a percentage of Gross Domestic Income (a measure of total national income) in history.

So, it should be obvious corporations want more tax breaks, rather than pay their employees more, so the Aon survey is suspect. Corporations are really not interested in expanding their markets—at least in the U.S. of A. They are more interested in expanding the pocketbooks of their executives and stockholders, which is why GDP growth has been below the long term average.
As Nobel economist Joseph Stiglitz has been saying for years, “…it is not as if America’s large corporations were starved for cash; they are sitting on a couple of trillion dollars. And the lack of investment is not because profits, either before or after tax, are too low; after-tax corporate profits as a share of GDP have almost tripled in the last 30 years.”
Consumers power two-thirds of economic activity, so economic growth can’t improve unless the incomes of consumers grow, and that won’t happen as long as corporations hoard their profits rather than invest in their own employees future growth.

Harlan Green © 2017

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Tuesday, October 10, 2017

A Poor Employment Report?

Popular Economics Weekly

What does it mean when 33,000 nonfarm payroll jobs were lost in September? Not much, when many of the losses came from the hurricanes that threw 1.5 million out of work, according to Marketwatch’s Jeff Bartash, and the rest of our economy is doing very well.

Wages jumped, also good news, but it was mainly because many of those lost jobs were in retail and restaurants which tend to pay the lowest incomes, hence the upward trend may be temporary.


The number of employed jumped by a huge 906,000 in the smaller household survey that determines the unemployment rate—in spite of the storms—while the number of job losses was smaller; at 331,000, hence the lower unemployment rate. So the rest of the U.S. is doing well.

And we now have a fast growing manufacturing sector that will grow even faster with the cleanup and rebuild from those disasters. Its growth is also helped by the cheaper dollar, which is boosting exports.

Econoday reports ISM's manufacturing index, already running well beyond strength in factory data out of Washington, is accelerating even further, to an index of 60.8 in September which is a 13-year best. Part of the gain in the index is tied to hurricanes and specifically deliveries times where slowing is translated as strength, as we said.

But it's more than that—maybe those higher exports are boosting GDP growth as well? Factory new orders rose 4.3 points in the month to 64.6 which is a 4-year high. And the hurricanes didn't slow down production which is at a very strong 62.2. Employment is a big standout in today's report, posting the first 60 score at 60.3 in 6-1/2 years.


The ‘other’ non-manufacturing service sector part of the economy is also growing robustly. The headline ISM non-manufacturing survey index jumped to 59.8 for the highest score in more than 3 years. New orders, that include strength for exports, jumped nearly 5 points to a robust 61.3 level that was last exceeded in April this year. Backlog orders jumped 2.5 points to 56.0 which helped employment rise 6 tenths to 56.8 with both these readings the strongest since May this year.

So the U.S. economy is firing on all cylinders, which is why the Fed is making louder noises re a December rate hike, in spite of nonexistent inflation. Why do so? Because it wants to gradually sell off its $4.5 billion hoard of government securities, which reverses the various QE programs that injected that much cash to boost growth.

So with less cash in circulation, money is no longer so cheap and market interest rates tend to rise. The Fed wants to be able to anticipate this trend.

But shouldn’t we be seeing more indications of higher growth than just one quarter of 3.1 percent GDP growth? That may happen if more federal funding than a measly $14.6 billion is available for Hurricane Harvey alone, when cleanup may cost $200 billion

Government-is-the-problem Texas Gov. Greg Abbott has changed his tune now that Texas is in need of federal funding. He said he thinks the state will need "far in excess" of $125 billion in federal relief dollars. Houston Rep. Sheila Jackson Lee called for a record-breaking $150 billion aid package on CNN recently.

Really, and who knows what Florida and Puerto Rico’s cleanup will cost? In fact, it will take such large amounts of federal spending to even sustain last quarter’s 3.1 percent growth rate, in my opinion.

Harlan Green © 2017

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Thursday, October 5, 2017

It's Time to Build More Housing!

The Mortgage Corner

The National Association of Home Builders (NAHB) analysis of Census Construction Spending data shows that total private residential construction spending is soaring, as it rose to a seasonally adjusted annual rate (SAAR) of $520.9 billion in August, 0.5 percent up from downwardly revised July estimates.

But that’s not enough housing to satisfy current demand. There will be plenty of housing to replace, however, after this hurricane season has devastated so many U.S. states and territories.

Graph: NAHB.org

It was the fourth consecutive monthly increase after a dip in April, said the NAHB, Hurricane Harvey that made landfall late in August did not have significant impacts on construction spending in the same month, but will have a huge impact in months to come, as I said. The total private residential construction spending was 11.7 percent higher than a year ago. However, the blue line in the graph that represents residential construction spending still lags far behind commercial (red) and home improvement construction (gray lines).

The Midwest region is currently hurting the most from a housing shortage. Marketwatch’s Andrea Riquier reports the Home Affordability Index from real estate data provider Attom Data Solutions edged down to 100 in the third quarter, the lowest level since the third quarter of 2008, which was just as the financial crisis was taking hold.

Affordability is a problem because incomes haven’t risen as much as housing prices (especially in the Midwest). Attom notes that median home prices have risen 73 percent since bottoming out in 2012, while average weekly wages have increased only 13 percent in that time.

Why such a housing shortage so late in this recovery? For starters, the number of existing-homes listed for sale in 2017 to date is the lowest since 1999, according to the NAR. That’s in part because distressed sales volumes have fallen from more than 100,000 a month at the peak of the post crisis period, 2009-2012, to about 25,000 today, which means there aren’t many cheaply-priced homes left over from the housing crash.

And the construction industry because of a labor shortage has yet to catch up to soaring demand from a fully employed economy. More than half of the 3.5 million construction workers were laid off during the recession, and replacements are hard to find in this now fully employed economy.

Harlan Green © 2017

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

Wednesday, October 4, 2017

It's Time For 2018

Financial FAQs

We will need the 2018 elections now more than ever to vote out the greed and cowardice of those members of our national legislature who oppose all forms of gun control in the wake of the Las Vegas massacre of innocents.  It is those who have supported gun-rights groups that need to be replaced to protect Americans from such random acts of violence.

Gun-rights groups have allowed the killing of thousands of Americans in mass shootings over the past decade, including 521 mass shootings in just the last 477 days, according to New York Times columnist Frank Bruni.

That’s also because we have to vote out supporters of the largest terrorist organization in the U.S., the National Rifle Association, that opposes any controls on military-style weapons of mass destruction.

Yes, that’s right. Military weapons, such as the AK-47 developed by the Soviets because it was cheap to manufacture and easy to use, are responsible for more American deaths than ISIS; or any other terrorist organization that has killed maybe 15-20 Americans in all, yet we spend $billions trying to eliminate them, but nothing on eliminating American terrorism.

Instead those monies are donated to the candidates that support American anti-gun control organizations, such as the NRA. Ted Cruz and Marco Rubio were the top recipients of monies from organizations that oppose any form of gun control in 2016, reports Marketwatch — no surprise, since they both ran for president.

Cruz raked in $360,727 to lead the way, according to OpenSecrets.org. Just two years earlier, Cruz had collected $18,300 when he was the junior senator from Texas and lacked any significant influence in the Senate.

Third on the list of recipients of their largesse is House Speaker Paul Ryan, who said of the Las Vegas massacre, “this is not who we are”. Do we really believe him when he was the recipient of $171,977 from such organizations?

Who are we when President Trump, our elected President said, “You came through big for me, so I will come through big for you,” at the NRA’s latest convention?



That is in fact “who we are” at the moment, but not who we can become if we will take on such American terrorist organizations as the NRA that are responsible for the indiscriminate killing of so many women and children.

The big lie broadcast by gun-rights groups is that banning military-style weapons is banning the Second Amendment right to bear arms. No, that right is protected by the Second Amendment, but not the right to bear arms that slaughter so many innocents.

Harlan Green © 2017

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Tuesday, October 3, 2017

Guns Kill People

Popular Economics Weekly

“Guns don’t kill people, people kill people” has been the credo of the NRA, gun lobby and most Republicans since the 1980s when gun manufacturers came up with automatic pistols, so that guns could kill more people.
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But Las Vegas shooter Stephen Paddock had no discernable mental illness, criminal record—or anger problems, according to his brothers. The NRA will try in vain to find a reason this inhuman act was committed when there is no reason, other than the fact that semi-automatic military-style weapons are legal in much of America and easily obtainable.

Only guns can kill that many people—including women and children. His brothers didn’t even know he was a gun nut who owned more than 30 weapons, and was able to smuggle in 10 suitcases containing 23 of those weapons without any Mandalay Bay staff even noticing such an oddity. Who needs that many suitcases in a hotel room?

The odds are that nothing will be done about this massacre, as long as President Trump and Republicans are in power. President Trump called it an act of evil, yet he won’t look at the evil in his own soul; the countless times he has lied and cheated to build his real estate empire that have been documented in many of the 3,500 lawsuits he has been involved in.

Australia had a similar gun problem until 36 people were killed in Port Arthur, and Prime Minister John Howard was able to pass strict gun control laws in 1996, the same year of the Port Arthur massacre. There hasn’t been a mass killing since then in Australia.

Australians apparently don’t believe owning an assault rifle is the ticket to manhood. Their gun control laws are maintained by weapon buyback programs and the requirement that gun owners must belong to a certified gun club.

How did our gun laws become so lax that military-style weapons are easy to obtain? It was a little known Supreme Court decision authored by its most extreme ideologue, Justice Antonin Scalia in the 1980s, which said that gun owners no longer must heed the constitutional Second Amendment stricture that gun owners are members of a well-regulated militia in order to bear arms.

Our founding fathers must have thought it would help to curb the random gun violence we have today.

Harlan Green © 2017

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

Friday, September 29, 2017

Who Needs a Tax Cut?


It turns out very few of us need a tax cut.  Marketwatch economist Rex Nutting calculates that those in the 60 percent middle-income brackets—from $32,000 to $140,000 per year—pay just an average 2.5 percent in income taxes.  It’s only the richest 0.1 to 1 percent income earners that pay more, and so want the huge tax cuts congress and the Trump administration are proposing.
 
Graph: Marketwatch

Their rationale? That it will boost GDP growth to 3 percent from the current 2 percent average since the end of the Great Recession. But guess what? Q2 GDP growth was already 3 percent in Q2 and just revised to 3.1 percent, the highest growth rate in 2 years. Businesses are already investing in expansion—business investment in structures rose a stronger 7 percent instead of 6.2 percent in the revision. So, why not pay down the huge budget deficits accumulated since then, instead of cutting tax revenues?
“A bill that cuts federal income taxes for middle-class families makes absolutely no sense, except as a sad way of camouflaging the real intent of the bill: Giving millions of dollars to the very wealthy, who happen to be the only people who are really benefiting from our uneven economic growth,” said Nutting.

Top this off with another record for corporate profits, up 7.4 percent in a year, and there is no reason to be cutting corporate taxes. They haven’t been using their profits for productive purposes, so what’s needed is for them to pay higher taxes so government can use that money to invest productively in the $2 trillion plus in outmoded infrastructure that badly needs replacement.

As a bonus, any such investments in new airports, power grids, better water treatment facilities (such as Detroit’s), alternative energies, roads, bridges—you name it—will increase labor productivity that has been cut in half since 2000.

And increasing labor productivity is the only real ticket to higher economic growth, and increasing the take-home pay for those middle-income wage earners.

Harlan Green © 2017


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