For over two years, analysts said rent was declining or soon would be. But for the 30th consecutive month, rent was up at least 0.4 percent. Gasoline rose 3.8 percent adding to the misery.
As Hot or Hotter than Expected
- The CPI was hotter than the Fed would like to see in February, up 0.4 percent, but in line with the Bloomberg consensus expectation of 0.4 percent.
- All items excluding food and energy rose a hotter than expected 0.4 percent vs the Bloomberg consensus expectation of 0.3 percent.
- Year-over-year the CPI rose 3.2 percent vs an expected 3.1 percent.
- Year-over-year the CPI excluding food and energy rose 3.8 percent vs an expected 3.7 percent.
Yet Another Groundhog Day for Rent
I repeat my core key theme for over two years now. People keep telling me rents are falling, I keep saying they aren’t.
Rent of primary residence, the cost that best equates to the rent people pay, jumped another 0.4 percent in December. Rent of primary residence has gone up at least 0.4 percent for 30 consecutive months!
The “rents are falling” (or soon will) projections have been based on the price of new leases and cherry picked markets. But existing leases, more important, keep rising.
Only 8 to 9 percent of renters move each year. It’s been a huge mistake thinking new leases and finished construction would drive rent prices.
Moreover, some of the alleged declines failed to take in seasonal adjustments. Most people move between May and September. It’s harder to fill a lease in December pressuring rents in the winter.
Let’s tune into the BLS Report for the more details.
CPI Month-Over-Month Details
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in January on a seasonally adjusted basis, after rising 0.3 percent in January.
- The index for shelter continued to rise in January, increasing 0.4 percent, after rising 0.6 percent in January.
- The energy index rose 2.3 percent over the month. Gasoline rose 3.8 percent.
- Shelter and energy contributed over sixty percent of the monthly increase in the index for all items.
- The food index was unchanged in February otherwise the headline number would have been worse. Food at home was unchanged and the food away from home index rose 0.1 percent over the month.
- The index for all items less food and energy rose 0.4 percent in February, as it did in January.
- Indexes which increased in February include shelter, airline fares, motor vehicle insurance, apparel, and recreation. The index for personal care and the index for household furnishings and operations were among those that decreased over the month.
CPI Year-Over-Year
CPI Year-Over-Year Details
- The CPI is up 3.2 percent from a year ago. That’s negative progress compared to the 3.0 percent registered in June of 2023, 8 months ago. It’s no progress compared to the 3.2 registered in July of 2023, 7 months ago.
- Rent of primary residence and shelter are up 5.8 percent and 5.7 percent respectively, from a year ago.
- Food an beverage is up 2.2 percent from a year ago and perhaps as good as it gets. I expect another jump in food away from home.
- CPI excluding food an energy, a measure the Fed closely follows is up 3.8 percent from a year ago. That’s 1.8 percentage points higher than the Fed’s 2.0 percent target.
- Energy is down 1.9 percent from a year ago. Gasoline is down 3.9 percent from a year ago.
Energy has ceased contributing to the easing of year-over-year prices and I expect food will soon be in that category.
CPI Month-Over-Month Rent and OER
OER stands for Owners’ Equivalent Rent. It is the price people would pay to rent a house unfurnished, without utilities.
People keep repeating the myth that OER is based off the question “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?”
That is false. Rather, that silly question is used to help set CPI weights, not prices. Prices are real measured prices of rent.
Real Measured Prices
Based on minor imputations, some claim OER is not a “real price”.
However, imputations border on trivial. The price is real.
CPI Weights and Other Issues
Rather than bicker over the measured price of OER, the far bigger issue is weight. OER is the single largest component of the CPI with a weight of 26.766 percent as of February 2024. Rent of Primary Residence is 7.655 percent. Shelter comprises 36.222 percent.
Do people pay OER? No they don’t. That’s what’s “unreal”, not the measured price. Roughly 64 percent own their own home with 36 percent renting.
The people who own their own home do not pay rent, they pay a mortgage. Most homeowners refinanced at lower rates, many at or near 3 percent.
Some economists want to strike OER from the CPI on this basis. The problem I have with that idea is “Inflation matters” not just “consumer inflation”. Home prices matter. Asset bubbles matter.
The CPI is totally screwed up as a measure of inflation and ignoring OER and housing bubbles does not address the issue.
The 36 percent of the people who do rent have been royally screwed by Fed policy that inflated assets, especially home prices, in turn causing rents to soar.
Refinancing put extra money in the pockets of homeowners every month. Rising wages with a constant mortgage rate fuels demand for goods and services and that pressures overall inflation.
This is why I expect inflation to be sticker than the Fed believes.
Is the BLS Is Overstating Rent and Exaggerating Inflation?
On December 7, I investigated A Curious Claim that the BLS Is Overstating Rent and Exaggerating Inflation
I provide solid evidence that the BLS has been doing no such thing.
Why Predictions of When the Price of Rent Will Fall Have Been Wrong
For further discussion of rent, please see my January 1, 2024 post Why Predictions of When the Price of Rent Will Fall Have Been Wrong
I address seasonality, five different measures of rent, and how the BLS smooths things out
Factor in Bidenomics
In addition to the mess the Fed made in housing, one needs to factor in the inflationary impacts of Bidenomics.
Our net zero lesson of the day is The True Costs of Net Zero Are Becoming Impossible to Hide
Biden taunted the Supreme Court on Student Debt Cancellation: “The Supreme Court Didn’t Stop Me”
Biden’s regulations, big union wage increases, and student debt cancellation are all inflationary.
Big Explosion of Government and Social Assistance Jobs
President Biden is bragging about job growth. But he doesn’t say where those jobs are.
On March 8, I noted a Huge Percentage of Job Gains are Related to Taking Care of Immigrants
The surge in government jobs and social assistance jobs is soaring to handle the massive influx of immigrants.
Health care jobs are rising for the same reason but also because of demographics. Aging boomers need more assistance.
Everything this president does adds to inflation. Don’t expect that to change.
Wanna see the consequences of stupidity?
link to twitter.com
Effectiveness Questioned: Study Finds That Paxlovid Fails To Reduce Long COVID Risk
University Of California San Francisco Medical Center
FEBRUARY 16, 2024
Researchers at UCSF found that Paxlovid does not reduce the risk of long COVID in vaccinated, non-hospitalized individuals and observed a higher rate of symptom rebound and test positivity than previously reported. The study involved a survey of participants from the UCSF Covid-19 Citizen Science study and revealed similar rates of long COVID symptoms among those treated with Paxlovid and those who were not.
Researchers at UCSF have discovered an unexpectedly high rate of COVID rebound following treatment with Paxlovid.
…
link to scitechdaily.com
They can’t float the boat with more cheap money otherwise >>> hyperinflation.
Meanwhile the current interest rates are gutting the global economy due to the epic amount of debt run up over the past two decades. And as we can see – the rates are not high enough to stop inflation….
Verdict: Civilization is going to collapse.
So why doesn’t anyone setup pickets outside the FED in Washington DC? That sounds like fun!
Short real estate, long homebuilders, it’s inevitable.
Restricting buying power via Fed rates to suppress consumption is obviously not working as intended.
Build more homes to increase supply instead of building a wall to keep construction laborers out at a time we’re short on labor.
Our financial system has become a extremely complex and utterly exploited insane delusion by fckn speculation or wagering that something will go up or something will go down, derivatives they call it, but then even more complex derivatives will hedge the bets just in case, next those hedges have to be hedged too and then the hedges hedging the hedges have to be hedged. Hundreds or, who knows , even thousands of Trillions of $ are moving around in this obscure INSANE financial world , mostly debt driven on top of that ….Is there a way to hedge the crapper where everything WILL go down at one point, not even that long from now ?! Is that maybe the reason’ ‘the Elites’ are desperately looking for a, preferably but not necessarily conventional world war, in order to ‘purify’ the delusional system ?
You correctly identified elites as ‘the Elites’ as in ‘the enemies of the people’.
Actually … what they have been doing is trying to combat the headwinds of the decline in cheap energy (lots left – just very expensive to extract)….
Unfortunately eventually what must stop … stops… and it is close to stopping…
I highly recommend this entire paper:
SEE PAGE 59 – THE PERFECTSTORM : The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy.
But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel
link to ftalphaville-cdn.ft.com
That’s why fusion hopium is full on, except for some cold reality.
link to youtube.com
That’s sarc right?
My favourite flavour of hopium is this link to bbc.com
The growth of government employment is the inevitable result of the trade imbalance. Clearly tarrifs couple with other incentives can move manufacturing back to the US. Sure it will raise prices but that was the inevitable long term outcome of offshoring. All these replacement, government make work jobs also raise prices. The difference is, manufacturing produces something useful while government jobs produce toxic government over reach.
The biggest concern of firms with manufacturing operations in China is the possibility of war over Taiwan. It will be impossible to get product out of China if war breks out.. Manufacturing might not make it all of the way back to the USA, but it will definitely leave China, possibly bound for Thailand, Vietnam, India, etc…
It’s “kinda” looking like Chinese relations are cooling off, as long as the leader of the free world isn’t blindly raging about racial ignorance, making angry statements about “Gina” I wager it continues to cool.
“The growth of government employment is the inevitable result of the trade imbalance. Clearly tarrifs couple with other incentives can move manufacturing back to the US.”
The growth of government jobs & social entitlements is the result of failed job creating tax cuts that have resulted in foreign jobs created, a completely counterproductive loss of revenues that has only served to make the wealthy wealthier, the rest poorer.
There’s no possible way a tariff could offset a Chinese laborer at $5 a day, we’d only have more expensive Chinese goods, and nothing but a tax hike on consumers.
That cheap Chinese labor savings benefit has gone to foreign workers and increased C-suite bonuses, to the loss of American wages and U.S. tax revenues.
It’s the Peter Principle. Powell rose to his level of incompetence.
Asset price inflation was deliberately created. And the FED’s current money stock numbers are wrong.
ISDA is recommending a permanent exemption of Treasuries from Basel III leverage calculations.
Dr. Daniel L. Thornton, May 12, 2022:
“However, on March 26, 2020, the Board of Governors reduced the reserve requirement on checkable deposits to zero. This action ended the Fed’s ability to control M1.”
Time for a new Compound Inflation Report/Compound Currency Devaluation Report
If February 2024 CPI were calculated Biennially it would be 9.4%, stating that prices are 9.4% higher than in February, 2022. If February 2024 CPI were calculated triennially, it would be 18.04%, stating that prices are 18.04% higher than in February 2021. This Triennial CPI is very sticky and seems to have consistently hovered around 18%.
Once again inflation is not simple inflation but is compound inflation. Triennial Compound CPI is approximately 12.00% greater than FED targeted 2% CPI goals for this same 3 year time period.
Moving Forward it would take just shy of 6 years of ZERO PERCENT CPI to arrive at what the FED’s targeted 2% CPI would have produced with February 2021 as the base month. I call this important number the “ZERO PERCENT CPI NEUTRAL AFFECT ADJUSTMENT INDICATOR” or ZPCpiNAAI for short,
4 year compound inflation now stands at 20.05%.
5 year compound inflation now stands at 22.80%
6 year compound inflation now stands at 25.13%
Just the Facts.
Compounding is an amazing process. Be sure that you are on the right end of the compounding…assets, not liabilities. Reference current national debt for an example of the devastating effects of compounding in the wrong direction.
Liabilities are systemic, so even though you may perceive yourself on the right side of the equation, your position may not be equitable. Your position may not be that much fun if society is breaking down. You may escape for a while, maybe not. Your children or grandchildren might not escape. Money in circulation is a liability to the central bank, and like a casino, the house always wins some sort of margin; until one day when the system no longer works. History has never had a perpetually successful currency.
Think for a minute what your cosmic fortune might be if your actions or investments were precipitates for societal collapse. World Wars, Genocides, Pandemics, and Holocausts don’t happen in a vacuum, but spawn in a social environment,
and germinate in the petri dish of economics, greed, and politics. Ones 401k, retirement fund, investments, or even occupation may be a sepsis flowing through the blood of the community you live in.
Assets and liabilities can be quickly convoluted, when the love of money is the goal.
There’s a shortage of housing in Mass. and Connecticut and they build very little new housing or apartments in these states compared to the west or south. House prices and rents are going bonkers.
Both of these states are magnets for migrants and they are the root cause of the housing shortage in these two states. 18% foreign born in Mass. 16% foreign born in Connecticut.
It’s great for real estate investors, but bad news for people who have to compete for housing with immigrants.
While this is an interesting number … please note 2 things:
This is likely from rental turnovers, not from renewals which tend to be far lower … so it does not represent industry wide
This means that even this slightly inflated number means that rent has not been keeping up with inflation.
If you look at insurance costs for landlords … they have gone up far more. Supply and labor costs have gone up far more (now that you can generally get most of the supplies).
Labor has definitely soared, and any site you pass, most workers are Latino or Brazilian.
We need more and we don’t have enough Americans as is, meanwhile we have an immigrant crisis, I see a solution there, somewhere.
Choo Choo Biden’s 2 million rental units. Biden ==> LBJ. Choo Choo the disinflation going downhill without brakes.
Food and beverages plunged the most. Rent of primary resident is up. [OER east + OER midwest + OER south and OER west], the x4 OER are down, though still rising.
All items ex food & energy are flat, rising at the same pace.
The positively biased CPI Y/Y rate of change is BEARISH. Every parameter is down for 2 years since mid 2022 !!
link to youtube.com
I recommend this video to anyone investing in the next 20 years. Gen Z is broadly mentally ill or incapable of running our society. This agrees with Pentagon findings that 77% are unfit for service. This will lead to shortages and stagflation for years to come. Add to that the GINI index as it applies to big cities – in which rich people can move out. Robots and illegal immigrants can’t cover it all.
Nearly everyone is sick and or mentally ill in America.
If you are a married boomer the chances your wife is on antidepressants is very high. statistically 1 in 4 – likely underreported, more likely it’s 1 in 3 or 33%.
Mentally ill people partner up with other mental ill people. Why? Obviously an insane person is avoided by a normal person
The odds that children have a mentally ill parent, is at a minimum 1 in 4. Factor in the male you have 2 in 4 or 50%.
Add in alcoholism, alcohol abuse, abusive behaviors, parental neglect, general dysfunction, welfare and other psychological disturbances. 75% of homes are likely very toxic to children.
Children are being raised by mental reprobate psych cases who believe they are good parents.
Maybe 20% – 30% had relatively sane parents
Gen Z does not believe the lies that the Boomers tried to feed them, Boomers turned the US from heaven into hell by their “me generation” selfishness. Boomers hate the Gen Z because they see Boomers for what they are. Gen Z hates boomers “OK BOOMER” They will never die for boomers and MIC. NEVER!
Old impotent Viagra men send the youth to die to boost their deflated egos and protect their 401K and equities.
Are you one of those “Viagra men”?
Gen Z have pledged to kill the draft recruitment officers rather than die for boomers.
Unless robots get a lot more sophisticated WAR may be finished for good and that’s a good thing.
“…Boomers turned the US from heaven into hell by their “me generation” selfishness…”
Yes, because Gen Z somehow got lucky and, as a cohort, didn’t inherit the selfish gene. Tell me, did Gen Z pass through some super altruistic membrane from a super selfless other worldly dimension? Give me a break.
There are two kinds of Gen Zers. The smart GenZers bought homes as soon as they could, and now on their 2nd home with up to 1M in equity.
Then their are the other GenZers who rented while waiting for house prices to crash. They are upset because the boomers will not sell them a house for pennies on the dollar.
This is just good old survival of the fittest.
my 5-year tips from 2019 is up < 20%. my spend from 2019 is up > 50%.
S&P is up 95% (reinvesting dividends) since Feb 2019. Too bad for you.
Bitcoin is up 80% in the past 3 weeks. Too bad for you.
Shiba coin up 245% in 1 month. Too bad for you. uff
Yeah, that’s the spirit. Keep thinking like that. People like you always get their comeuppance. Always.
I have indeed gotten my comeuppance, it sucks going skiing everyday. Too bad I left all my investments alone every time in the last decade Mish called for a recession!
Last I looked 3.8% is a fuc.k ton over 2%. The idea they are considering cutting rates is crazy
When 7 million people illegally enter the country, food and shelter costs necessarily have to rise. Powell understands this and will keep interest rates at present levels.
Millions have been entering illegally since 1492, it’s been 532 years of illegal entry. The US will export $170 billion worth of food in Feb 2024 and there are record apartments and housing being built in 2024. Something else is causing inflation but I’ll let you figure that out.
link to ers.usda.gov
Yeah sorry no. We have a way to legally immigrate. All countries have borders. Otherwise why have a country?
“Otherwise why have a country?”
Why indeed?
To fight against rape and pillage.
Right because there has been zero rape and pillage from 1492 thru 2024.
My point is there hasn’t been a single period from 1492 thru 2024 that there hasn’t been some type of ‘illegal’ entry into the United States, it’s a feature not a bug. But if you think it will magically stop I think you’re going to be disappointed.
Mr. Market seems to think more stubborn/sideways inflation = rate cuts in June.
Personally, I’ll be surprised if Powell cuts rates in ’24 at all. I never seem to be on the same page with Mr. Market.
Yeah, I’m also a little surprised that the stock market didn’t take this news a little more negatively. On the other hand, I think Powell is obligated to cut later this year regardless of the rate of inflation. Regional banks are going to start breaking and the government can’t continue paying such high interest rates on debt. Plus, I think Powell wants to give Biden a boost and doesn’t really care if it’s viewed as a political move. Hell, Janet Yellen is out stumping for Biden.
disagree RE: Powell’s “obligation”
seems to me that Fed/Powell have been very candid about the coming failure/consolidation among banks & esp. regionals, and they are prepared to facilitate this consolidation/turmoil, not prevent it.
i also disagree RE: Powell wanting to “help” Biden
everything i’ve read&heard regarding the Fed vs. Admin./Treasury relationship points to Powell’s disgust for the fiscal/spending explosion. if Powell were inclined to “help” Biden, he would NOT have forced Biden to finance Ukraine/policy at 5% !!! Powell has consistently ignored&contradicted Yellen/Treasury. I don’t see any evidence of Powell’s preference for this administration, at all.
I think Powell intends to defend the $USD (relative to fiat/western currencies). I think Powell wants to re-domesticate monetary policy by (eventually) breaking the global eurodollar system.
last fall we had our 1st vacancy in smaller(sub 10 unit) apartment
owner said remodel – new windows, etc.
now that it’s rented at higher rate
time to raise rents on others – but we’re still below market by $200 – I like keeping apt full – cash flows better
Housing and food are overrated.
I know that why when meat goes up in price the economic politubro substitutes it with cat food which is cheaper, a win win. For housing costs they already ommitted home prices because it doesn’t comply with their lies to under represent the fact we are losing our standards of living. They will soon be able to substitue housing rent etc and instead subtitue that with a mobile home or tent. Another win/win . This despicable lying will keep on until the people rise up. Our forefathers would be planning another revolutionary war.
yeah, and fasting in a cave in the mountains is underrated.
Things may get worse before they get better on the housing front. Real estate taxes, insurance and other costs (labor, services and materials) all continue to increase by ridiculous amounts, so don’t expect rents to come down AT ALL.
As a rental property owner, I have not and will not be reducing my rents at the same time that my costs have ALL gone up and continue to go up.
Story from friend in FL with rental units. Insurance doubled. HOAs insurance doubled. So HOA passed that expense on to all owners. Double whammy apart from more expensive vendors and contractors. She will be passing those cost increases along in rent increases over the next 18 months as leases expire. Pain is just getting started.
For renters. Once their credit limit is hit and shelter becomes top priority. Then All other goods besides food become elastic. Big decrease in economic activity from them. Slow moving train wreck. Immigrants will work 3 jobs to make ends meet. They are happy that they can even work at all. Entitled lower income will be very upset as they are displaced.
Well said. I have a rental and the property tax increased from 950 to 1900 the past 3 years. Insurance went up from $750 to $950. Rent is slower to follow these increases.
Car and home insurance were both up about 15% for me.
Direct result of government trying to prop up the economy by pumping printed money in the form of handouts, bailouts, fake NGO/govt jobs, student loan cancellations, it has worked only because of the USD reserve status so far, it is chipping away and there is no turning back from here.Politicians want to give even more handouts – latest $10K handout towards down payment for first time home buyers and they want to punish the people who actually does something productive by raising taxes. It’s all messed up.
Rents no longer count. FOMO. Buy “cheep stochs.”
Disinflation is transitory. My tenants renewed their lease but rent was kept the same as last year. Property keeps appreciating in value though so money to be made many ways….Choo! Choo!
“It’s turtles all the way down and inflation all the way up!”
Who thinks the Fed will cut this year?