Friday’s update on consumer sentiment was an uneventful affair.
Americans’ perceptions of the economy and business conditions were mostly unchanged in early August from July, according to the preliminary read on the University of Michigan survey.
At 71.2, the headline print was in line, both with consensus and with last month’s final reading. The range of guesses, from more than four-dozen professional blindfolded dart slingers, was 67.5 to 75.
The expectations gauge slipped, while current conditions rose slightly. Recall that sentiment rebounded dramatically in June and July.
With the debt ceiling drama out of the way, news about business conditions has improved. Inflation is receding, the labor market is resilient and so on. Some are coming around to the notion that notwithstanding a painful year of what, for the most advanced economy the world has ever seen, counted as runaway inflation, Bidenomics might actually be working in some respects.
My conservative readers would surely scoff at that latter contention, but real wage growth is positive again, and while it’s too early to declare a renaissance for labor as an economic actor, capital is making real concessions for the first time in decades.
Maybe that’s not great news for America’s richest, but I’d say two things. First, you’re not rich. You may think you are, but you’re almost surely not. You’re labor, not capital. You might not be labor in the sense that UPS drivers (let alone Starbucks baristas) are labor, but you’ve got more in common with them than you do with real capital.
Second, the pandemic exposed America’s economy for what it is: An exploitative system built on rent collection by a tiny handful from the many. That isn’t sustainable. Eventually, the many will just take what they need from the few, and there won’t be anything the few can do about it. A cynical take says the system should be a little fairer so that it can continue to sustain itself for the “good” of the people who sit at the top of an increasingly unstable pyramid.
Anyway, the figure below shows the Michigan gauge of “news heard” about business conditions. It’s inflected for the better, and rather sharply at that.
It’s not what you’re experiencing as much as it is what you’re told. You can observe that dynamic clearly in the political sphere, where citizens routinely vote not just against their own economic self-interests, but in fact contrary to their own economic circumstances, based solely on politicians’ narratives about what’s “actually” going on across the country.
“Sentiment is now about 42% above the all-time historic low reached in June of 2022 and is approaching the historical average reading of 86,” Michigan survey director Joanne Hsu said Friday.
Year-ahead inflation expectations ticked lower to 3.3%. That’s still elevated, but not far from the pre-pandemic range of 2.3% to 3%. Longer run expectations moved lower as well to 2.9%. Although that too is above the pre-2020s range, it’s worth noting that despite all the dire predictions about inflation over the past two years, longer-term expectations in the Michigan poll have remained between 2.9% and 3.1% for 24 of the last 25 months.
Walt, entertaining and informative as always. Hoping your new hamster cage is agreeable and less prone to hurricanes, tornadoes, fires and polar vertices. It is unfortunate that people watch news for affirmation versus information, but here we are. Funny about the dart slingers…they are well compensated for something we as a species are not terribly qualified to do.
You are so right ! It is so sad to see so many people accepting the lie they have been told since Reagan that supply-side economics works. Congressional Budget Office data show that taxes and means-tested public assistance narrow the income divide somewhat, but the gaps remain staggering.
Between 1979 and 2019, the richest 0.01 percent of households had a cumulative income growth rate of 507 percent after accounting for taxes and aid transfers.
That’s more than five times the 94 percent growth rate for the bottom 20 percent of households.
Tax cuts for the rich are a key driver of this rising inequality. The top U.S. marginal tax rate in 1979 was 70 percent, compared to just 37 percent today.
I get the 35% bracket for a home + the ever-popular 3.8% tip. It used to be much better but my wife passed away and I flew from 24 to 35. However, such things can be managed so I only paid a total of 9.9% to the IRS for ’22. But like the man said, I am not rich. I can buy about anything I need for comfort but that beautiful Bentley SUV I ogled yesterday, while reachable, wasn’t a great color and at my age and situation, ridiculous. I had two rich mentors in grad school. One was worth about $250 mil in the late 1960’s. He co-founded the CFA institute, owned his own nine-figure REIT, had an NYSE seat for a decade or two, and had a huge bond portfolio. He told me I couldn’t get really rich in the market but that I could do alright in bonds. That was correct. He was the only full prof in the college without a PhD. He didn’t need it. In my way I always figured that he was really rich. I still think that kind of money qualifies as rich, but not three $30 mil houses rich. Only big CEOs, entertainers and founders get there. The main way I lower my taxes is to donate 25% of my income to people who need food, shelter and joy for their lives. That makes all my best friends development directors. The ones I work with are some of the only really nice people I know. H. Enjoy your new homestead. I hope it meets all your expectations.