Joe Biden, who has always been a compulsive liar but at least sounded cognicent, is now babbling and whispering that Bidenomics works. But for who?
Clearly not for first time homebuyers or people looking to move. Bankrate’s 30-year mortgage rate is up to almost 8%, the highest since July 2000 and Willy Slick Clinton. That is a 176% increase in mortgage rates under the most inept “Economic Sheriff” in history.
Deficits? Deficits (which Biden makes outlandish claims) are usually only this big at times of HIGH unemployment and recessions. So, are the staggering deficits under Biden a precursor to a hard landing (recession)? Don’t listen to what Biden or KJP say!!!
Biden’s outlandish claims that he single handedly reduced the deficit by the most in history is, well, typical Biden bloviating. Actually, tax receipts soared after Covid lockdowns ended. Period. Now that stimulus is wearing out, deficits are climbing again.
As Biden sleeps through the Hamas invasion of Israel, that is nothing new. Biden is sleeping through a disastrous downturn in the economy and pretending that Bidenomics is working. It isn’t Joe!
The IBD/TIPP U.S. Economic Optimism Index sank to a 12-year low in October as confidence in the near-term economic outlook crashed to the lowest level in the poll’s history. The survey casts doubt on the Federal Reserve’s justification for turning more hawkish last month: robust consumer spending.
The overall IBD/TIPP U.S. Economic Optimism Index dived 6.9 points to 36.3, the lowest since August 2011. Readings below the neutral 50 level reflect pessimism. The 6-month economic outlook index cratered 9.6 points to 28.7, a record low since the IBD/TIPP Poll began in early 2001.
That means the outlook suddenly appears worse than it was at the depths of the dot-com crash, the great financial crisis and the coronavirus pandemic.
And on the personal savings front, net savings as a percentage of gross national income was negative for the second straight quarter.
Sleepy Joe, wake up! The US economy is slowing down REALLY fast!
Hey Bartender! The leading employment gain under Bidenomics was … low paying leisure and hospitality jobs at 96k jobs added.
The US added a whopping 336K jobs, the highest monthly increase since January. This is surprising given that the ADP report was so weak.
And the BLS decided to UPWARD revised past numbers. The BLS revised not only August but also July higher: the change in total nonfarm payroll employment for July was revised up by 79,000, from +157,000 to +236,000, and the change for August was revised up by 40,000, from +187,000 to +227,000. With these revisions, employment in July and August combined is 119,000 higher than previously reported.
Meanwhile wage growth continued to cool, and in September average hourly earnings increased 0.2%, below the 0.3% expected, and resulted in a 4.2% increase YoY, down from 4.3% in August…
… as a result of a big bump in lower paying jobs.
But perhaps the most remarkable divergence in the report is that with headline payrolls surging 336K (establishment survey), the Household Survey indicated that the pain continues, as the number of people employed not only rose by less than 100K (86K to be precise), but it was all part-time workers, which increased by 151K. Full-time workers? Why, they dropped by 22K, and the lowest since February.
Leisure and hospitality added 96,000 jobs in September, above the average monthly gain of 61,000 over the prior 12 months.
But the jobs report highlights Bidenomics. Lots of government jobs and the private sector getting crushed. +1 million government jobs, -400K non-government.
Hmm. How will The Federal Reserve view this report? Focus on the red-hot headline gain of 336k job added or the fact that it is mostly part-time jobs added? Odds of a rate HIKE rise to 44% after September jobs report and Fed PAUSE expectations have been extended.
After the jobs report, the US Treasury 10Y yield soared.
The 10-year Treasury yield has risen dramatically under Biden’s Reign of (Economic) Error.
The Fed erroneously does not consider rising home prices as inflation. Here’s the result in pictures.
Case-Shiller national and 10-city home prices vs CPI, Rent, and Owners’ Equivalent Rent
Chart Note
Case-Shiller measures repeat sales of the same home over time. This ensures an accurate comparison of room size, yard size, and amenities. The only drawback is the data lags a bit. The most current data is from July representing transactions in May and June.
OER stands for Owners’ Equivalent Rent. It’s the price of rent one would pay to rent one’s own house, unfurnished without utilities.
For 12 years, home prices, OER, Rent, and the overall CPI all rose together. That changed in 2000 with another trendline touch in 2012. Then it was off to the races as the Fed did round after round of QE, suppressing mortgage rates.
Case-Shiller Home Price vs Hourly Earnings, the CPI, and Rent
Case-Shiller national home prices vs CPI, Rent, and Average Hourly Earnings.
As with the previous chart, for 12 years, home prices, rent, the overall CPI and hourly earnings all rose together. That changed in 2000 with another trendline touch in 2012.
How Much Are Homes Overpriced?
If the 12-year trend of home prices rising with average hourly earnings stayed intact, the home price index would be 211, not 308.
From that we can calculate home prices are ((308-211) / 211) percent too high, roughly 46 percent too high. If you prefer, home prices would need to fall ((308-211) / 308), roughly 31 percent.
Alternatively, if home prices stagnate for years, wages may eventually catch up.
Case-Shiller Home Price 1988=$150,000
The same home that cost $150,000 in 1988 now costs $678,366. But wages have gone up too. And mortgage rates have had wild swings.
Mortgage Payment and Wage Adjusted Mortgage Payment
The Least Affordable Mortgages in History
Factoring in wage growth, home prices, and mortgage rates, homes are the most expensive ever.
It’s actually much worse than the chart indicates because property taxes and insurance are not factored into.
Mortgage Rates
Mortgage Rate chart courtesy of Mortgage News Daily.
Through massive and totally unwarranted QE, foolishly hoping to create more inflation, the Fed suppressed interest rates to record lows and mortgage rates followed.
Anyone with an an existing mortgage could and did refinance at 3.00 percent or below.
This increased “affordability” and we now have two classes of people courtesy of the Fed: winners and losers (existing home owners who refinanced low and those who want to buy).
“Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields. Rates for all mortgage products increased, with the 30-year fixed mortgage rate increasing for the fourth consecutive week, up to and above 7.53 percent – the highest rate since 2000,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As a result, mortgage applications ground to a halt, dropping to the lowest level since 1996.The purchase market slowed to the lowest level of activity since 1995, as the rapid rise in rates pushed an increasing number of potential homebuyers out of the market. ARM loan applications picked up over the week and the ARM share increased to 8 percent, as some borrowers searched for ways to lower their payments.”
What About the Winners?
Good question. The winners refinanced at 3.0 percent or below. This put extra money in their pockets every month to spend.
And rising wages further stimulated ability of the winners to buy goods and services.
Thus the Fed is still paying for its asinine push to create inflation.
Meanwhile, the housing market is dead and will remain dead with mortgage rates approaching 8.00 percent.
What About Rent?
CPI data from the BLS, chart by Mish.
That’s another good question. For 24 months or so, economists have been predicting an ease in rent inflations.
The price of gasoline rose 10.6 percent, rent another 0.5 percent, shelter, 0.3 percent, and new cars 0.3 percent leading the way for a 0.6 percent increase in the CPI in August.
The price of rent has gone up at least 0.4 percent for 25 straight months. Not to worry, Paul Krugman says this is lagging.
When Will Record Housing Units Under Construction Ease Rent Inflation?
That’s really a trick question. For a better question, remove the lead “when” from the sentence.
The answer is: I don’t know, nor does anyone else, although people claim to be clairvoyant.
Housing Units Under Construction vs CPI Rent Year-Over-Year
Housing units from Census Department, Rent CPI from BLS, chart By Mish
I saw the theory that rent would collapse as soon as housing units get completed so many times that I almost started believing it myself.
However, the data shows no discernable correlation no matter how you shift the lead or lag times.
The chart looks totally random. So perhaps rent abate. Perhaps not. The data itself provides no reason to believe anything.
Regardless, please note the floor. Year-over-year rent has a floor of about 2 percent except in the Great Recession housing crash.
And these charts are not imputed Owner’s Equivalent Rent prices for which people pay no actual rent. These charts reflect rent of primary residence.
34 Percent are Screwed
Well, don’t worry. Only 34 percent of the nation rents, and besides, rent is lagging.
Sarcasm aside, the Fed blew huge asset bubbles and did not see that as inflation. Nor did the Fed see that three massive rounds of fiscal stimulus would cause inflation.
Real Income and Spending Billions of Chained Dollars
Note the three rounds of massive fiscal stimulus in the Covid pandemic. This triggered the most inflation since the 1970s. Economists debate how much “excess savings” still remains.
The Fed never saw this coming, never saw a housing bubble in 2007, and has never once predicted a recession.
Heck, former Fed chair Ben Bernanke denied a housing bubble and denied a severe recession that had already started.
Expect More Inflation Everywhere
Unfortunately, Biden is doing everything humanly possible to stoke inflation with EV mandates, natural gas mandates, union pandering, student debt forgiveness, and regulations, some of which is blatantly unconstitutional.
If you are looking to buy your first home and need to finance, good luck.
The longer the Fed holds rates high, the longer the housing transaction crash lasts. But cutting rates will further expand the housing bubble, asset bubbles in general. And bubbles are destabilizing.
That is the Fed’s tightrope dilemma, of its own making.
If you are one of the winners, congrats. But that extra money the Fed put in your pocket every month may stoke inflation for a long time.
The Market Composite Index, a measure of mortgage loan application volume, decreased 6.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6 percent compared with the previous week. The Refinance Index decreased 7 percent from the previous week and was 11 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 22 percent lower than the same week one year ago.
The purchase market slowed to the lowest level of activity since 1995, as the rapid rise in rates pushed an increasing number of potential homebuyers out of the market. ARM loan applications picked up over the week and the ARM share increased to 8 percent, as some borrowers searched for ways to lower their payments.
The US 30-Year Mortgage Rate Tops 7.5% for First Time Since 2000.
On the energy front, where we are represented by former Michigan governnor Jennifer Granholm and former South Bend Indiana mayor Pete Buttigieg, we see that the Strategic Petroleum Reserve is down to only 17 days left.
Fear the talking Fed! Various Fed Presidents are talking this week and when they do. WATCH OUT!
The latest fear mongering will be … inflation is persistent and they might have to keeep raising rates.
The two-year Treasury remains above 5% and the 10Y-2Y T-Curve remains inverted.
Treasury 30-year yield rose to 4.856%, HIGHEST SINCE 2007.
The likelhood of another Fed rate hike is growing.
While inflation is cooling (but still elevated), The Fed could choose to rate hikes again.
Treaury yields have decoupled from US manufacturing data.
Best picture of Lael Brainard, Director of the National Economic Council of the United States and former Federal Reserve member and talking head. Or screaming head.
We know that the horribly-flawed Bidenomics doesn’t work, unless you are a large corporate donor in green energy. For the rest, particulary small companies, Bidenomics is a total bust.
Under Bidenomics (the Soviet-style command economy), small companies are paying reconrd interest expense WITHOUT a major boost from interest income. Well, ain’t that a kick in the head … to most companies.
Pension funds that invested in “safe” MBS are finding that MBS isn’t so safe under inflation.
Look at the 10Y-2Y yield curve since Covid. I had a slight surge by March 2021, then has flattened then inverted as The Fed’s balance sheet still remains above $8 trillion.
Face it. The Biden Administration and Congress are owned by BIG corporate interests. BIG defense, BIG tech. BIG Pharma, BIG banking, BIG auto, BIG Union, BIG anything.
No wonder the Obamas were seen snorkeling in The Med with Tom Hanks and Steven Spielberg. BIG Hollywood!
That has certainly been the case with US labor data, where as we first reported last month, every single monthly payrolls print in 2023 has been revised lower (see chart below), a 12-sigma probability and virtually impossible unless there was political pressure to massage the data higher initially and then revise it lower when nobody is looking.
But the BLS is not done: as we reported last week, besides the now traditional one-month lookback revisions the ridiculously high monthly payrolls prints accumulated over the past year will also be slowly but surely revised gradually lower at annual benchmark revisions for years to come. As Morgan Stanley chief US economist Ellen Zentner explained (full note available to pro subscribers)…
Payrolls get revised too, and we expect a downward revision. Payrolls have an annual benchmark revision that is published in February each year. The revision adjusts the level of payrolls through March of the prior year. For example, a new revision will be published in Feb-24, adjusting payroll levels from April-22 to Mar-23. And a preliminary estimation of the upcoming revision points to a decrease in payroll YoY% growth rates of -0.2pp.
But while downward payroll revisions under Bidenomics are as certain as death and taxes, what we wanted to discuss here are the just as striking downward revisions to US consumption which hit this morning alongside the comprehensive once every-five-years historical revisions to GDP. As a reminder:
Today’s release presents results from the comprehensive update of the National Economic Accounts (NEAs), which include the National Income and Product Accounts (NIPAs) and the Industry Economic Accounts (IEAs). The update includes revised statistics for GDP, GDP by industry, GDI, and their major components. Current-dollar measures of GDP and related components are revised from the first quarter of 2013 through the first quarter of 2023. GDI and selected income components are revised from the first quarter of 1979 through the first quarter of 2023.
Earlier today we already noted the disaster that was Q2 Personal Consumption: instead of the 1.7% unchanged print from the second estimate of Q2 GDP, the final number was a dire 0.8%, a 9-sigma miss to estimates…
… and the worst quarterly increase since the Covid collapse in Q2 2020.
But what about other historical data? After all today’s revision impacted all data from Q1 2013? Therein, as the bard says, lies the rub.
Let’s start with personal consumption, and compare the latest post-revision current data (link) with the most comprehensive pre-revision data as of last month (link). It should come as no surprise to anyone that with the (slight) exception of just Q4 2022, personal consumption in every single quarter since the start of 2022 – when the Fed aggressively started tightening and hiked rates by the most since Volcker – has been revised lower, and in some cases dramatically so.
Bloomberg also picks up on the GDP revision and looking at revisions to the historical data, writes that “the pandemic contraction is seen as being a bit less severe than previously thought: GDP is now reckoned to have dropped at a 28% annual clip in the second quarter of 2020, instead by 29.9%, as the government shut down swathes of the economy to fight the spread of the virus. But the recovery since then has been somewhat slower, according to the update. Growth last year was revised to 1.9% from 2.1%.” And of all GDP components, consumption was the weakest.
So not only was the Fed hiking at a time when personal consumption would grow much less period to period than previously expected, but the US economy was generally weaker than previously expected (as discussed here).
There’s more.
When looking at the composition of the US household’s income statement – the summary of economic accounts – we find just what we had expected: US savings were in fact far lower than previously expected.
… and indeed as the BEA chart below shows, Americans stashed away an average 8.3% of their disposable income annually from 2017 through 2022, down from a previously estimated 9.4%.
The reduction stems from an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts. Additionally, as Bloomberg notes, much of the reduction in personal savings seen in the revised data occurred prior to the pandemic, so its implications for how much extra cash Americans may feel they still have now is not clear cut.
Whatever the reason for the statistical adjustment, however, one can say goodbye to even the faintest speculation that US households have any excess savings left… why they don’t, of course, because even when using the previous methodology which artificially inflated total savings, JPM calculated that excess savings had already run out…
… which means that if Q3 GDP was bad and consumption was “revised” sharply lower (odd how economic data is never revised higher under Joe BIden), Q4 – when savings are virtually non-existant – and where we also get the i) return of student loan payments; ii) the UAW strike; iii) the government shutdown and iv) oil at almost $100 and gasoline at one year highs, is about to fall off a cliff.
Yes, Bidenomics is a form of Brawdo, the economic mutilator!
Donald Trump was famous for his “Make America Great Again!” campaign. Joe Biden seems to want to make America LAST again (MALA).
A newly aired “60 Minutes” segment entitled The unexpected way American tax dollars are being used in Ukraine has uncovered that the US government is paying the salaries of some 57,000 Ukrainian civic services personnel.
The report details the various ways non-military aid is being spent at a moment GOP Congressional leaders are intensely debating whether to move forward with a proposed defense budget that includes Biden’s push for $24 billion more in military assistance for Kiev.
“The U.S. has spent just over $43 billion on military aid to Ukraine since Russia invaded. That’s equivalent to about 5% of the American defense budget. European countries combined have contributed around $30 billion,” the 60 Minutes report narrates.
American taxpayers are financing more than just weapons. We discovered the U.S. government’s buying seeds and fertilizer for Ukrainian farmers… and covering the salaries of Ukraine’s first responders – all 57,000 of them.
That includes the team that trains this rescue dog – named Joy – to comb through the wreckage of Russian strikes looking for survivors.
Political commentator Collin Rugg has noted in relation to the potential government shutdown looming for Oct. 1st: “Yes, your tax dollars will be used to fund Ukrainian salaries while American citizens are forced to wait for their pay while the government remains closed,” he said on X.
Rugg is referencing the fact that the Biden administration and Pentagon have declared that Ukraine aid will remain exempt from any potential government shutdown. This means Ukrainian salaries will still be paid, even while federal employees aren’t, in the event of a shutdown.
Here’s more from the 60 Minutes video, featuring a Ukrainian woman “thanking” US taxpayers for footing the bill for Ukrainian employees, thanks to USAID funding:
Tatiana Abramova: Especially in the condition of war, we have to work. We have to pay taxes, we have to pay wage– salary to our employees. We have to work, don’t stop.
Holly Williams: Why does that help Ukraine win the war?
Tatiana Abramova: Because economy is the foundation of everything.
American officials from USAID – the agency in charge of international development – helped Abramova find new customers overseas. In the midst of war, her company is supporting over 70 families.
Meanwhile, a fresh Newsweek headline: US Will Pay Salaries to Thousands of Ukrainians During Government Shutdown…
“US taxpayers will pay the salaries of thousands of Ukrainians, even as the country faces a government shutdown at the end of September.”
But as noted above, this is more like tens of thousands of Ukrainian salaries.
“A federal government shut down will effectively begin on October 1 if Congress isn’t able to pass a funding plan that Biden signs into law,” Newsweek underscores. “If that happens, federal agencies have to stop all nonessential work and will not send paychecks for as long as the shutdown lasts.”
Appropriately, the 60 Minutes episode invoked memory of the late John McCain…
In total, America’s pumped nearly $25 billion of non-military aid into Ukraine’s economy since the invasion began – and you can see it working at the bustling farmers market on John McCain Street in central Kyiv.
The late senator is revered in Ukraine because he pushed the U.S. government to start sending arms to the country… back in 2014.
Here’s how 60 Minutes presents bipartisan support for Biden’s blank check for Ukraine:
While in Kyiv, we learned that three of McCain’s former colleagues were also in town: Democratic Sens. Elizabeth Warren and Richard Blumenthal and Republican Sen. Lindsey Graham. They don’t normally agree on much – together, though, they’re some of the staunchest supporters of U.S. funding for Ukraine’s resistance.
Indeed Zelensky himself while meeting with US Senators in Washington last week said something similar – that without continuing American funds, the war effort is doomed. He urged Congress to keep the billions in aid flowing, and sought to present that Moscow will one day expand aggression beyond just Ukraine.
* * *
Meanwhile, the “aid from the heart of every ordinary American person” will continue (whether those ordinary Americans like or not)…
Alarm! US 10-year Treasury yields are soaring along with mortgage rates.
The US Treasury market is witnessing another significant selloff, pushing the 10y UST yield close to the 4.50% mark. The surge in real rates is remarkable, reaching 2.12% for the 10y, a level not seen since 08’. While this might appear attractive in real terms compared to historical benchmarks, could we be on the brink of a third consecutive year of negative performance for US Treasuries? To put this into perspective, such a scenario has never occurred in history.
The conforming mortgage rate is at 7.3%, up 156% under since Biden’s coronation as El Presidente of the United Banana Republics of America. Where political opponents are indicted prior to elections.
In Biden’s Banana Republic economy, the US Treasury 10y-2y yield curve remains inverted.
And then we have Mish’s chart on debt as a percentage of GDP from CBO. Remember, we used to worry about the US breaking the 80% debt to GDP level. It is now projected to be 181%. Wow.
Confounded Interest - Anthony B. Sanders 
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