US Workers Made Only 8 Cents More Per Hour, Inflation-Adjusted, Than In January 1973 (While Real Home Prices Soar)

The US Bureau of Labor Statistics released their Real Earnings Report for August yesterday. And is it pretty depressing for US workers.

Real average hourly earnings for all employees increased 0.4 percent from July to August, seasonally adjusted. This result stems from an increase of 0.6 percent in average hourly earnings combined with an increase of 0.3 percent in the Consumer Price Index for All Urban Consumers (CPI-U).
Real average weekly earnings increased 0.3 percent over the month due to the change in real average hourly earnings combined with no change in the average workweek.

If we look at REAL US housing prices versus REAL average hourly earnings for production and nonsupervisory employees, we can see waves of imbalance between the two measures (also known as “bubbles”). Such as today.

But the real horror chart is the following (courtesy of Mish). It shows that real hourly earnings have barely changed since January 1973.

Of course, labor outsourcing to lower labor cost countries is the chief culprit. Karsten Manufacturing, maker of Ping golf clubs, no longer makes their castings in Phoenix AZ thanks, in part, to EPA regulations. Ping clubheads are now made in Asia.

NY Fed Survey Of Consumer Expectations Points To 5.2% Inflation In One Year (Too Bad Hourly Wages Are Growing At 4.3%!)

US inflation is run, runaway.

Americans are expecting a record surge in inflation over the next few years, according to a new report from the Federal Reserve Bank of New York.

In its August Survey of Consumer Expectations, the bank said Monday that respondents see inflation a year from now at 5.2%, up from 4.9% the prior month. Three years from now, it is expected to be at 4%, up from 3.7% in July. Both readings mark record-high readings for data that goes back to 2013.

It is a shame that in that last reading that the CPI YoY exceeded Average Hourly Earnings YoY by a 5.4% to 4.3% margin.

Yes, inflation is hot, hot, hot and consumers are feeling it.

Palm Beach Developer Tries To Flip Island Mansion For $120 Million, 41% More Than It Sold For In July

From ZeroHedge:

The South Florida housing market is sizzling with hot money from the North East, pushing up homes values sky high over the last year. One example of the mania is in Palm Beach, where a private island was bought in July and was relisted months later for a whopping 41% premium, according to WSJ.

One of Miami’s top real estate developers, Todd Michael Glaser, is taking advantage of the bubble, fueled by Wall Street bankers and other elites who have the economic mobility to leave the Northeast for the Sunshine State.

Glaser purchased 10 Tarpon Way, also known as 10 Tarpon Isle, for approximately $85 million in July and has since relisted the tiny 2.5-acre island for $120 million, or $35 million more than he paid a few months ago. The island was created by dredging crews in the 1930s and is only accessible by bridge. Glaser bought the island from private investor William M. Toll and his wife, Eileen, who paid $7.6 million for the property in 1998.

Tarpon Island

The real estate developer said potential buyers have two options: pay the $120 million now or wait ten months for a new renovation for $200 million.

Concept Drawing Of New Renovation

He said with all the hot money flowing into the Palm Beach area, “a $100 million house isn’t that crazy anymore, believe it or not,” adding that in the last 18 months, eight $100 million homes have been sold.

If a potential buyer wants to wait ten months and pay an additional $80 million. The developer will completely redesign the mansion by doubling it to 25,000 sqft, with 14 bedrooms, in addition to a hair salon, gym, and spa. A new pool, octagonal tennis pavilion, and a golf practice area will be installed on the outside.

Some ask how long will this speculation fever last as the Federal Reserve could embark on tapering its extensive bond-buying program later this year or early 2022.

One real estate expert believes the peak of the South Florida housing market could be nearing:

Dr. Ken Johnson, a real estate economist with Florida Atlantic University’s College of Business, told local news WPLG that a peak in the housing cycle could have already arrived, but he believes a crash is not in the mix because demand still outpaces supply.

It remains to be seen if some greater fool will pay the $120 million for the island mansion or $200 million tens months later after renovations.

Time for The Fed to start tapering the punchbowl?

Greater fools?

Broken Transmission: Bank Deposits Have Exceeded Bank Credit Since Covid (C&I Lending Down -13.5% YoY, Residential Lending Down -2.1% YoY)

US banks have the Phed Pneumonia and the Fauci Flu.

Since the Covid outbreak in early 2020, The Federal Reserve lowered their target rate and super-spiked their balance sheet. Helping to lower bank deposit rates to near zero.

But despite near zero bank deposit rates, we seeing bank deposits are larger than bank credit such as commercial and industrial loans, residential mortgages loans, car loans, etc. Normally, bank credit EXCEEDS bank deposits.

The problem? One of them is negative growth in commercial and industrial lending. It declined 13.5% YoY in August. Of course, The Federal government extended emergency business loans that were counted as C&I loans, hence the spike in C&I loan growth in May 2020. But now we are seeing a real slowdown in C&I lending.

Residential lending is down 2.1% YoY as of September 10 (for August).

Commercial real estate lending? At least it is growing at a 2.9% YoY pace for August.

Credit cards and other revolving plans increase steadily since 2014 and then declined after the Fauci Flu struck. But credit cards and revolving credit has started to rise again.

The Fed’s massive overreaction to Covid caused a storm surge in C&I lending that has subsided. But other bank lending has slowed as well.

Lots of bank assets with nowhere to go.

No wonder M2 Money Velocity (GDP/M2 Money) is at historic lows.

Remember, Federal Reserve Chair Jerome Powell is up for reappointment and President Biden must make a decision on his reappointment.

U.S. Producer Prices Increased in August by More Than Forecast (Hot, Hot, Hot!) Fed Pouring Money Into Clogged System

Producer prices are getting hot, hot, hot!

(Bloomberg) — Prices paid to U.S. producers increased in August by more than forecast as persistent supply chain disruptions squeeze production costs higher.

The producer price index for final demand increased 0.7% from the prior month and 8.3% from a year ago, a fresh series high, Labor Department data showed Friday. Excluding the volatile food and energy components, the so-called core PPI advanced 0.6%, and was up 6.7% from August of last year.

PPI Final Demand prices rose 8.3% YoY in August.

Given that there are shortages in the economy, why is The Federal Reserve pumping so much money into the system? It is like repeatedly flushing a clogged toilet hoping it will clear.

The correct way to clear a clogged economic toilet.

Not The Fed way of clearing clogged toilets. Pumping trillions of dollars into a clogged economic system.

The Fed’s comment on their plumbing prowess? “Come on feel the noiz!”

Because inflation is run, runaway.

Citi Inflation Surprise Index Remains Elevated With M2 Money Surge (Did The Fed Overreact??)

Covid struck in early 2020 and The Fed spiked the punchbowl with a massive surge in M2 Money. Like a storm surge.

Today’s unemployment report showed initial jobless claims and continuing jobless claims ALMOST at pre-Covid levels.

So it appears that The Fed’s job is done (under the assumption that The Fed had anything to do with the recovery).

So did The Fed almost violently overreact to the Covid crisis? The Atlanta Fed’s Raphael Bostic says it is too early to withdraw while St Louis Fed’s James “Bully” Bullard says it is time to taper.

Really Raph? 18.8% price growth is not enough for you?

85% Of High Yield Bonds Have A Negative Real Yield (And Real 30Y Mortgages Rates At -2.5% While Real Fed Funds Target Rate Is -5.12%)

We are living in a negative real yield world.

According to Deutsche Bank, 85% of the US High Yield market has a yield below the current rate of inflation.

Its not only high-yield bonds that have negative REAL yields, but even The Fed Funds Target rate is negative at -5.12%. The real 10-year government bond yield is -4.01% and the REAL Freddie Mac 30-year mortgage survey rate is -2.5%.

Yes, its The Fed’s little green bag at work. Is Fed Chair Powell REALLY Mr. Blonde???

Slowdown! U.S. Annual Home Prices Gain a Record 18% in July (But Forecast To Slow Considerably By July 2022)

Slowdown! Forecast home price growth for July 2022, that is.

(Bloomberg) — U.S. home prices increased 18% in July compared to a year earlier, according to a CoreLogic Inc. report released Tuesday.

The jump is the largest 12-month gain in the index since the series began 45 years ago. On a month-over-month basis, home prices increased by 1.8% in July from June.

“Home price appreciation continues to escalate as millennials entering their prime home buying years, renters looking to escape skyrocketing rents and deep pocketed investors drive demand,” said Frank Martell, president and CEO of CoreLogic, a global property-information firm.

The rush of home buyers — amid extremely low mortgage rates — has caused a lack of supply, which is unlikely to be resolved over the next five to 10 years “without more aggressive incentives for builders to add new units,” he said in a statement.

But it is the forecast for July 2022 that is interesting. A slowdown in home price growth across the board.

Lets see what happens to wage growth are three out of four Americans lose their Covid benefits as of today.

Ironman! Commodities Point To Slowing Economy And Inflation (Atlanta Fed GDPNow Forecast For Q3 Drops To 3.7%)

What if inflation is actually transitory like The Federal Reserve has been saying? Or is The Fed really telling us about an impending economic slowdown after the Fed’s and Federal government stimulypto wears off?

Iron ore prices have slowed noticeably after peaking earlier this year. Lumber futures (random length) have crashed to pre-Covid levels.

On the other hand, food stuffs and raw industrials remain elevated, but the growth in price has stalled (see pink box).

The Atlanta Fed’s GDPNow model of GDP growth shows a slowing of Q3 GDP to 3.7%. A slowdown from above 7% for the blue chip consensus.

President Biden, aka The Kabul Klutz, is now recommending tax increases as a result of the terrible jobs report from Friday. Rather than focus on The Fed’s monetary stimulus not working for the labor market.

The problem with fiscal stimulus is that the debt lasts forever but the GDP effects are short-lived. And The Fed is a crazy train.

Taper Vapor! Only 235,000 Jobs Added Versus Expectations Of 733,000 (Hopes Of Fed Taper Go Up In Smoke) Silver, Bitcoin, Ethereum Rise

Well, after the dismal ADP print we knew that the August jobs numbers would be worse than imaginable. And they were!

A big miss on the topline job creation number — the establishment survey suggested only 235,000 jobs were created in August, versus expectations for 733,000 — has undercut what little chance there was left of a Fed announcement on tapering later this month. It should make for a very interesting debate among policy makers about forward momentum in the labor market.

The shocker was in the leisure and hospitality sector, which created zero new jobs on net in August after figures of around 400,000 in each of the previous two months. There was a dip in hiring in other service sectors too, but nowhere near as significant. That could perhaps be due to some early impact from the spread of the delta variant in recent weeks.

On the household survey, the numbers looked better. According to those figures, the unemployment rate fell to 5.2%, in line with estimates, thanks to a 509,000 increase in reported employment. That also propelled the prime working-age employment to population ratio to 78%, from 77.8% in July.

Disparities narrowed in August as well, according to prime working-age EPOP ratios by race and ethnicity. Prime working-age Black EPOP, in particular, jumped to 73% from 72.2% the month before — outpacing the rest.

Equity futures pared a modest gain after the release, with contracts on the S&P 500 Index flat as of 9:09 a.m. in New York. With wages climbing, Treasury yields rose, with those on 10-year notes rising 4 basis points to 1.33%. The Bloomberg Dollar Index was down 0.3%.

The unemployment rate dropped which a misleading headline. That simply means that more people dropped out of the labor force than were unemployed. Not a good way to lower the unemployment rate.

Alternative investments silver, Bitcoin and Ethereum rose on the lousy jobs report as the US Dollar dropped.

The good news? US Average Hourly Earnings All Employees Total Private YoY rose to 4.28%! The bad news? US home prices are rising at a 18.61% pace.

The bad news? Black unemployment rose to 8.8% in August while white unemployment fell to 4.5%. This represents a widening of the employment gap that is higher in August than pre-Covid.