U.S. Economy is Doing Great!

America’s employers added a stunning 517,000 jobs in January, a surprisingly strong gain in the face of the Federal Reserve’s higher interest rates. Given that employers added less than 300,000 new jobs in each of the past three months and the Federal Reserve has increased borrowing costs for the past year the January jobs report is astonishing.

After reaching a horrifying rate of 8.5% in March of 2022, the inflation rate was down to 6,5% this past December.

So with jobs plentiful, employers offering higher pay, and inflation declining is this economy in trouble?

The answer is an emphatic NO.

Foreign Buyers are Distorting America’s Housing Market

If you are not a resident of Canada but want to buy a piece of real estate in British Columbia or Ontario you must pay a tax of 20% of the purchase price.  The tax was implemented to discourage foreign buyers who have driven up demand.

That is not the situation in the United States but that kind of tax should be implanted.  Los Angeles area Southern Regional Association of Realtors, Inc. published an article in the Los Angeles Times Advertising Supplement on Saturday August 6, 2022 reporting that sales to foreign buyers is up 8.5%.  International buyers purchased $59 billion worth of U.S. residential properties from April 2021 to March 2022.

In the Los Angeles area San Gabriel Valley is a well known area where Chinese buyers have bought homes where they do not reside.

Forbes magazine reports July 19, 2022. Anyone who bought a home – or tried to – over the past couple of years knows that it was rip-roaringly competitive, with bidding wars and all-cash deals. But it actually could have been worse. One group all but disappeared from the market during the pandemic: foreign buyers with mega millions. But now foreign real estate investments are slowly coming back, according to a new survey from the National Association of Realtors.

Ensuring affordable housing for all Americans is not on the agenda in Congress but it should be.

This is the Wrong Year to Buy a Car

Consumer Reports is now saying that unless you need a new car now is not the time to make a buy. Some models are so hard to come by that consumers are paying well above the sticker price for them. Many do not even have a good rating by CR.

Many of my local dealers have very limited selection of popular brands like Honda and Toyota. Some dealers have no cars of some models. This situation has driven up the price of used cars.

Here is a list of cars being sold at substantial prices over MSRP window stickers according to Consumer Reports.

Kia Rio: 21% Over MSRP

Hyundai Accent: 19% Over MSRP

Chevrolet Spark: 19% Over MSRP

Kia Telluride: 19% Over MSRP

Chevrolet Camaro: 18% Over MSRP

Subaru Crosstrek: 18% Over MSRP

Kia Seltos: 18% Over MSRP

Kia Sorento: 18% Over MSRP

Hyundai Tucson: 18% Over MSRP

Kia Carnival: 17% Over MSRP

Average New-Car Price Tops $47,000, an All-Time High

Consumer Reports now reports that for the first time ever, the average price of a new car has edged past $47,000, according to a new report from Kelley Blue Book and data from TrueCar. Blame it all on the pandemic and the resulting global semiconductor shortage that has hobbled automakers’ ability to crank out new cars, crimping supply, pushing up prices, and limiting availability.

Over several years, a variety of factors has contributed to pushing up the average new-car price. For one thing, consumer tastes have gravitated toward more expensive truck and SUV models. And the recent scarcity of all models has led to more extreme price increases among traditionally more affordable models. The preference for safety features that are on the high end trim lines has also been a factor. Those safety features require computer chips that are in short supply.

Over two years ago I bought a year old car that had all of those safety features. That was before COVID effected car manufacturing and the new car dealer had a parking lot of used cars to choose from. Not anymore.

Business Insider says the best bet for most consumers is to delay buying a car. As the dealers obtain higher stocks prices will fall. 

We Will Buy Your Car

This is a great time to sell your old unwanted car. These are the words posted on the internet ad by my local Toyota dealer. “We will buy your car even if you don’t buy from us.”  Carvana is running a similar ad on their cable television ads.  What’s going on?  Why do they want my old car?

It’s simple.  Car dealers lack inventory.  After going to the Los Angeles Auto Show and sitting in their new cars I looked at my local dealer web sites to see what models they had in stock. Some had none.  Some had a handful of 2021 cars and the trim choice was one.  Take it or leave it.  2022 cars are even rarer. To keep their business alive those new car dealers want your old car so they will have any inventory to sell.

What’s going on here? It’s a year of shortages.   The auto industry’s turmoil may be unrivaled.  It’s all about the computer chips in short supply.  Every car needs them and so do appliances.  The chip makers are overwhelmed by the unexpected demand.  Most of the chips are made overseas in China and Taiwan. Most the cargo ships are waiting to be unloaded in the ports of Long Beach and Los Angeles.  Those computer chips are somewhere among the cargo containers on the ships.

2022 will be an expensive year to buy a car.  This is definitely a supply demand situation.  Some car dealers are actually asking for more than the sticker price. Unless you really need another car it has been advised by many to wait until 2023.

Auto Shows are Fun to Visit

I visited the Los Angeles Auto show the other day.  It’s always fun to see what is new.  The big push was on all electric vehicles that are referred to as EVs.

The most significant  thing for me was the number of companies offering cars that I never new existed. Lucid Motors, Fisker, Bremach, Cobera, EdisonFuture, Electra Meccanica, Imperium Motor Co., Mullen, Sondors, VinFast.  Is there any chance that any of these companies will survive?  Fisker has a very large display as you enter the South Hall of the Los Angeles Convention Center. Henrick Fisker claims to have raised $1.6 billion in a public offering last year, he said, and there were 19,000 reservation holders waiting for his cars.  His display includes his first offering called Ocean, an EV SUV.    

Fisker Ocean

These vehicles are great in a city where there are charging stations but there is a big downside to having an EV if you plan to travel.  First there is finding a charging station. Second is the time to charge the cars.  “Coming to Yosemite with your Tesla or other electric vehicle? Stop in at Tenaya Lodge for a charge! … Things you can do while you charge your car: Dine in one of our five restaurants.” That is on Highway 41 outside the park.

There are two charging stations in Yosemite Valley.  Today the one by the Ahwahnee Hotel is closed.  Using I5 going from Los Angeles to Oregon you will need a map to locate charging station locations and a lot of patience.

Despite these two glaring issues Nissan is introducing a new EV SUV that is beautifully designed.  In my view the vehicle was the outstanding car.

Nissan 2022 Ariya CUV

But there is a problem. A shortage of computer chips has slowed the manufacturing of all vehicles. 

So while going to the auto show is fun. Dealers have little or no 2021 and 2022 cars in stock.

Weekly Jobless Claims Plunge to 199,000

Jobless claims reached the lowest level in more than 50 years. This is the lowest level for initial claims since November 15, 1969 when it was 197,000. The 71,000 slide marks the eighth straight week of declines, a reflection of a tight labor market that has companies scrambling to retain and expand their workforces.

Unemployment is still higher than it was before the pandemic, resignations are soaring, and employers are struggling to keep their workers. Workers are demanding higher pay and walking away from jobs that don’t provide a living wage or are just plain boring and don’t offer an opportunity for more satisfying work.

Inflation may be up but the economy is growing. Most businesses are seeing higher profits.

Thanks Joe, You Had Your Turn!

President Joe Biden is in serious trouble despite the fact that his infrastructure bill has been passed.  His social infrastructure bill of $3 Trillion has been striped down to a mere $1.75 Trillion and is looking to be stripped to an even smaller size. Inflation reports by the Bureau of Labor Statistics (BLS) just reported that inflation rose 6.2% in the past year. Add to that the supply chain issues that are causing shortages in the things we want, the sloppy withdrawal from Afghanistan, the unconquered COVID-19 pandemic, the likely control of Congress passing to the Republicans next November and you have the formula for a one term president.

The infrastructure bill that will be signed on Monday November 15 will deliver $550 billion of new federal investments in America’s infrastructure over five years, including money for roads, bridges, mass transit, rail, airports, ports and waterways. The package includes a $65 billion investment in improving the nation’s broadband infrastructure, and invests tens of billions of dollars in improving the electric grid and water systems. Another $7.5 billion would go to building a nationwide network of plug-in electric vehicle chargers, according to the bill text. The public is not impressed.

In a new WaPo-ABC poll In a new WaPo-ABC poll

  • 63% of respondents said Biden has accomplished “not very much” or “little or nothing” so far in his presidency. A full 45% said he’s done “little or nothing” — that’s worse than the numbers for then-Presidents DONALD TRUMP, BARACK OBAMA or BILL CLINTON at comparable points in their presidencies.
  • Just 31% said he’s kept most of his major campaign promises — also a worse figure than Trump, Obama or Clinton received.
  • 70% rated the economy as “not so good” or “poor.”

    While the 2024 presidential election is three years away likely candidates are laying their plans now. The winner will not be President Joe Biden nor past president Donald Trump. We want a unifier but politics will be getting in the way.

I Refuse Your Lousy Pay

The latest jobs report from the federal government provided some shocking information.  The total number of new jobs rose by only 194,000.  The economic experts had predicted about 500,000.  What happened?

Many people are not willing to return to their old jobs.  It’s not just one reason.  The obvious reason is fear of contracting COVID-19.  The less obvious is many people thinking they never did like their old job because the pay was lousy, the hours were too long, and the chances for advancement were limited.  Even the poorly educated are thinking they want a more rewarding occupation so maybe I can find something else to do.

That feeling that “I’ve had enough” according to the BLS report resulted in 4.3 million workers, or 2.9% of the labor force, quitting their jobs in August. That’s the highest rate since the BLS began tracking the data in December 2000.

After all who wants to drive a truck and who wants to deal with difficult patrons? Who in the hell wants these jobs?

To lure those workers back to those mind numbing jobs it is going to take higher pay and that will mean higher prices for everything.  After all businesses still want the same profits they have had in the past.

Now it appears certain that many of these strains, both economic and viral, will continue well into 2022, and perhaps beyond. “There’s just no road map to opening a global economy in a pandemic, and people keep forgetting we’re still in a pandemic,” said Diane Swonk, chief economist at Grant Thornton. Now the recovery not only has to fix what was lost, but also the “scars and wounds have to heal” after hard-hit workers and industries reevaluated their futures,” Swonk said.

The Impact of COVID-19

The world has been dislocated by the COVID-19 pandemic in ways most of us cannot comprehend. Shortages, higher prices, and few of us are willing to work in low paying jobs with no future are outcomes of this world wide catastrophe.

When fewer items are available, consumers are willing to pay more to obtain the item—as outlined in the economic principle of supply and demand. The result is higher prices due to demand-pull inflation.

Employers have faced a number of challenges throughout the COVID-19 pandemic — most recently, a labor shortage. In order to protect profitability, companies will have to pass on the additional costs to the consumer, adding to inflationary pressures. 

cargo ships awaiting a birth at Los Angeles harbor

There is a cargo ship bottleneck trying to get into ports along the California coast. The supply chain is backed up and affecting businesses all the way down to the consumer. Another in inflationary pressure.

Add social behavior caused by the COVID-19 pandemic and the world is confronted with an inflationary period with no ending in sight.

Government solution of aid in the form of unemployment benefits, regulations protecting tenants against evictions, and other programs to protect the unemployed causes many to believe the United States is becoming a socialist society.

Those “experts” writing their opinion pieces and appearing on news media outlets don’t really know where this situation is going.  Your opinion an my opinion is just as valid.

‘It takes just “one extra snowflake to start an avalanche — and boom!” Indeed, according to Harry S. Dent Jr., aka The Contrarian’s Contrarian, flurries could come in July: The ever-building market bubble is likely to “blow at the end of this month, if not September,” predicts Dent in an interview with ThinkAdvisor.’

The Conference Board opinion: Looking further ahead, we forecast that the US economy will grow by 3.8 percent (year-over-year) in 2022 and 3.0 percent (year-over-year) in 2023.

My opinion: The sky is not falling. Despite politics we will muddle through despite our lack of a strong leader.  Ignore the noise.