MAGAnomics:
Inflation 1.7%, Wage Growth +3.5%,
Real Worker Earnings +1.8%
A series of very strong internal economic evaluations today from the Bureau of Labor Statistics (BLS) and the U.S. Department of Labor (DOL) show the Main Street economy is perfectly positioned with maximum benefit to the U.S. middle-class.
First, despite two years of doomsayer predictions from Wall Street’s professional punditry, saying Trump tariffs on China would create massive inflation…. It Ain’t Happening!
Overall year-over-year inflation is hovering around 1.7 percent [Table-A BLS]; that’s a low inflation rate. Rate has firmed up now with less month-over-month fluctuation, and the rate remains consistent. [See Below]
A couple of important points. First, unleashing the energy sector to drive down overall costs to consumers and industry outputs was a key part of President Trump’s America-First MAGAnomic initiative. Lower energy prices help the worker economy, middle class and average American more than any other sector… Except ‘food at home’.
Which brings us to the second important point. Notice how food prices have very low year-over-year inflation, 0.5 percent. That is a combination of two key issues: low energy costs, and the fracturing of Big Ag hold on the farm production and the export dynamic:
(BLS) […] The index for food at home declined for the third month in a row, falling 0.2 percent. The index for meats, poultry, fish, and eggs decreased 0.7 percent in August as the index for eggs fell 2.6 percent. The index for fruits and vegetables, which rose in July, fell 0.5 percent in August; the index for fresh fruits declined 1.4 percent, but the index for fresh vegetables rose 0.4 percent. The index for cereals and bakery products fell 0.3 percent in August after rising 0.3 percent in July. (link)
For the past twenty years food prices have been increasingly controlled by Big Ag, and not by normal supply and demand. The commodity market became a ‘controlled market’. U.S. food outputs (farm production) was controlled and exported to keep the U.S. consumer paying optimal prices.
President Trump’s trade reset is disrupting this process. As farm products are less exported, the cost of the food in our supermarket becomes reconnected to a ‘more normal’ supply and demand cycle. Food prices drop and our pantry costs are lowered.
Lower gas prices, energy prices and lower food prices again provide greatest benefit to the U.S. middle-class. More MAGAnomics at work. It is critical to understand this dynamic because there are current political candidates like Elizabeth Warren who are openly stating (as a matter of policy) they intend to stop this middle-class price benefit:
Be forewarned, this Warren policy would be devastating to working class Americans.
Back to the good news….
In combination with low inflation on the items that matter, U.S. wage growth is exceeding 3.5 percent. Subtract the inflation of 1.7 percent from the wage growth of 3.5 percent and you get Real Earning Growth of +1.8 percent.
…”From August 2018 to August 2019, real average hourly earnings increased 1.8 percent, seasonally adjusted.”… (BLS Link)
Any time worker earnings grow faster than the rate of inflation the lifestyle of the middle-class improves. People simply have more money to save, spend or upgrade. It’s simply common sense economics.
The last big of extra good news on the internal U.S. economy (not wall street), comes from the number of people who no longer need unemployment benefits. The U.S. Dept. of Labor highlights today that fewer people are claiming unemployment:
As Reuters noted:
…”data on Thursday showed the number of Americans filing applications for unemployment benefits dropped to a five-month low last week suggesting the labor market remains healthy, which should continue to underpin consumer spending”… (link)
What does this all mean?
- Main Street U.S.A. is in excellent economic shape.
- We have low unemployment (3.7%) and more workers coming back into the labor market than in the past 15 years.
- We have low inflation (1.7%) and very low inflation on the sectors that matter most to Main Street.
- We have high wage growth (3.5%) that continues to climb.
- And we have increased disposable income that allows U.S. workers and consumers to purchase goods and services.
The U.S. economy is two-thirds driven by U.S. internal consumer spending. The U.S. consumers are confident and spending…. this means the U.S. economy is strong, and all of the underlying data shows it is only getting stronger.
Because the U.S. economy is self-sustaining and self-fulfilling, all of the negative Wall Street multinational impacts are not generally felt in the day-to-day internal Main Street economy. Jobs strong; wages strong; inflation low; disposable income growing; consumer confidence strong; consumer spending strong; etc. etc.
And, and, and…. keep in mind…. this is all happening BEFORE the super-fuel of the new trade agreements hit the economy. That rocket boost hasn’t even started yet.
As a consequence, this is the bigly and best recession ever.
