by Mish

Bright Outlook for Consumers?

Following today’s job’s report, Econoday commented on wages and tight labor conditions.

Tight conditions haven’t yet sparked much pressure in average hourly earnings which did rise a respectable 0.3 percent in the month though the year-on-year rate fell 1 tenth to a very soft 2.5 percent. How long wages can stay quiet given the lack of available labor is an open question.

In February, Jim Glassman, head economist for JPMorgan, forecast a Bright Outlook for Consumers.

Stronger household finances are laying the foundation for a sustained boom in consumer spending. The improving job market has lifted incomes across the board, while shrinking debt burdens and falling energy prices are freeing up disposable income. The stock market’s rally and real estate’s recovery have helped households more than regain the wealth erased by the recession, placing American consumers in a stronger position than ever before. And since consumer spending accounts for nearly 70 percent of American GDP, a sunny outlook for the nation’s consumers could boost overall economic output in 2017.


Today’s job report shows average hourly earnings of production and nonsupervisory workers are $21.96 vs $21.46 a year ago.

For my take please see April Payrolls Bounce, Revisions Take March Lower: Hiring Increasingly Volatile.

Think you are you getting ahead?

Less Than 0% Real Wage Growth

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Pack of Liars at the Fed


The pack of liars at the Fed and the pack of charlatans in mainstream media all want you to believe there is a benefit to inflation. There is no benefit except to the banks, the bondholders, the already wealthy, and those who feed off the system like public unions and politicians.

The above graph is far worse than it appears because the BLS does not include home prices in the CPI. The BLS also does product substitution. Price inflation is way understated.

To achieve that price inflation, the Fed went rampant with monetary inflation including QE.

Fed chair Janet Yellen rails against income inequality but she needs to look in the mirror. The Fed is the primary sponsor of income inequality was well as a primary reason for price inflation.

Inflation Challenge

In central banks’ seriously misguided attempts to fight routine consumer price deflation, central bankers create very destructive asset bubbles that eventually collapse.

When bubbles burst, they trigger debt deflation, which is what central banks ought to fear.

The BIS did a study and found routine deflation was not any problem at all.

Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive*,” stated the BIS study.*

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

My Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered.

Keynesians and Monetarists have no answer because history and logic prove that concerns over consumer price deflation are seriously misplaced.

Mike “Mish” Shedlock

Congratulations Workers! You Make One Penny More Than a Year Ago

Real wages for production and nonsupervisory workers are up precisely one penny per hour from January of 2017.

Congratulations Workers! You Make a Penny More Per Hour Than Last Month

The average worker makes a penny more per hour than last month in real terms. The year-over-year gain is precisely zero.

Congratulations Workers, You Now Make 0.5% More Than a Year Ago

In real (inflation-adjusted) terms workers make 0.5% more than a year ago, assuming one believes the CPI.

Congratulations Workers: You Make 0.3% More Per Hour Than One Year Ago

In real terms, workers make 0.3% more per hour than a year ago, assuming one believes the BLS CPI Statistics.

Central Banks Wage War on Markets: Bill Bonner Says They Will Lose; Fed Up Yet?

Daily Reckoning founder Bill Bonner thinks central banks are waging war on the markets. He also believes they will lose.

Consumer Spending Expectations Down Again: Dear Fed, Why Don’t You Believe Your Own Survey?

Fed Chair Janet Yellen keeps citing consumer confidence and jobs as reasons consumer spending and inflation will pick up.

Does Technology Destroy Jobs? If Not What Does?

In light of my posts on robots, driverless vehicles, and automation, readers keep asking: where will the jobs come from?

BLS Reports Net Negative Inflation for 5 Months: Anyone Believe That?

Today the BLS reported the CPI was flat. The Econoday consensus was for a 0.1% rise.

Car Dealers Make More Profit On Loans Than Selling Cars

A third of auto loans in 2019 had a term period over six years. People cannot afford the cars they are buying.