Category Archives: Economy

Regional Price Parities by State and Metro Area

Source: Bureau of Economic Analysis, May 17, 2018

Across states, Hawaii had the highest all items RPP (118.4) and Mississippi had the lowest (86.4). Across large metropolitan areas – those with population greater than two million – San Francisco-Oakland-Hayward, CA had the highest all items RPP (124.7) and Cincinnati, OH-KY-IN (89.6) had the lowest.

What are Regional Price Parities (RPPs)?
Allows comparisons of buying power across the 50 states and the District of Columbia, or from one metro area to another, for a given year. Price levels are expressed as a percentage of the overall national level.

America’s Real Economy: It Isn’t Booming

Source: Peter Georgescu, Forbes, August 22, 2018

Ostensibly, for the past ten years, our economy has been recovering from the 2008 collapse. During the past few years, our comeback seems to have gained momentum. All the official indicators say we’re back in boom times, with a bull market, low unemployment and steady job growth. But there is an alternative set of data that depicts a different America, where the overlooked majority struggles from month to month.

The Nation recently published a stunning overview of the working poor and underpaid. One of the most powerful data points in the piece described how empty the decline in unemployment actually is: having a job doesn’t exempt anyone from poverty anymore. About 12% of Americans (43 million) are considered poor, and yet they are employed. They earn an individual income below $12,140 per year, and slightly more than that for a family of two. If you include housing and medical expenses in the calculation, it raises the percentage of Americans living in poverty to 14%. That’s 45 million people…..

Related:
The United States Has a National-Security Problem—and It’s Not What You Think
Source: Rajan Menon, The Nation, July 16, 2018

…..For millions of Americans, however, the greatest threat to their day-to-day security isn’t terrorism or North Korea, Iran, Russia, or China. It’s internal—and economic. That’s particularly true for the 12.7 percent of Americans (43.1 million of them) classified as poor by the government’s criteria: an income below $12,140 for a one-person household, $16,460 for a family of two, and so on… until you get to the princely sum of $42,380 for a family of eight. Savings aren’t much help either: A third of Americans have no savings at all and another third have less than $1,000 in the bank. Little wonder that families struggling to cover the cost of food alone increased from 11 percent (36 million) in 2007 to 14 percent (48 million) in 2014…..

…..As a result, though the United States has a per-capita income of $59,500 and is among the wealthiest countries in the world, 12.7 percent of Americans (that’s 43.1 million people), officially are impoverished. And that’s generally considered a significant undercount. The Census Bureau establishes the poverty rate by figuring out an annual no-frills family food budget, multiplying it by three, adjusting it for household size, and pegging it to the Consumer Price Index. That, many economists believe, is a woefully inadequate way of estimating poverty. Food prices haven’t risen dramatically over the past 20 years, but the cost of other necessities like medical care (especially if you lack insurance) and housing have: 10.5 percent and 11.8 percent respectively between 2013 and 2017 compared to an only 5.5 percent increase for food. Include housing and medical expenses in the equation and you get the Supplementary Poverty Measure (SPM), published by the Census Bureau since 2011. It reveals that a larger number of Americans are poor: 14 percent or 45 million in 2016…..

An Update to the Economic Outlook: 2018 to 2028

Source: Congressional Budget Office, publication no. 54318, August 13, 2018

From the summary:
In CBO’s updated projections, real gross domestic product (GDP) grows by 3.1 percent in 2018 and by 2.4 percent in 2019 before slowing in the following years.

CBO regularly updates its economic forecast to incorporate changes in the agency’s methodology and to ensure that the projections reflect recent economic developments and current law. This report presents the agency’s latest economic forecast, which includes the following key projections of real (inflation-adjusted) gross domestic product (GDP) and other factors:
• In 2018, real GDP is projected to grow by 3.1 percent.
• Growth of actual output is expected to outpace the growth of its maximum sustainable amount through the rest of 2018 and 2019, creating excess demand in the economy.
• Excess demand will put upward pressure on prices, wages, and interest rates over the next few years.
• From 2023 to 2028, real GDP is projected to grow by about 1.7 percent each year.

Trump’s tax cuts have so far failed to deliver on one key promise

Source: Pedro Nicolaci da Costa, Business Insider, August 3, 2018

– The Trump tax cuts were pitched as a boon to US workers, with the administration arguing their benefits would trickle-down into rising wages.
– While the tax cuts have meant some Americans are keeping more of their paychecks, no discernible gains in wages have materialized thus far.
– Real average hourly earnings (adjusted for inflation) for all employees on private nonfarm payrolls were totally unchanged in June from one year earlier.

Related:
GDP Is Growing, but Workers’ Wages Aren’t
Source: Michael Madowitz and Seth Hanlon, Center for American Progress, July 26, 2018

President Donald Trump recently said that the U.S. economy is “stronger than ever before” and points to his tax plan as one of the major reasons why.1 But the fact is that workers are not getting ahead in the Trump economy. Official data released in recent weeks have shown that workers’ wages are flat or even slightly down, in real terms, over the last year.2 These data fly in the face of many tax plan boosters who have claimed that the bill’s passage has already been a boon to middle-class workers….

Prosperity Now Scorecard

Source: Prosperity Now Scorecard, 2018

The Prosperity Now Scorecard is a comprehensive resource featuring data on family financial health and policy recommendations to help put all U.S. households on a path to prosperity. The Scorecard equips advocates, policymakers and practitioners with national, state, and local data to jump-start a conversation about solutions and policies that put households on stronger financial footing across five issue areas: Financial Assets & Income, Businesses & Jobs, Homeownership & Housing, Health Care and Education.

The Scorecard assesses all states on their relative ability to provide opportunities for residents to build and retain financial stability and wealth. The state outcome rankings are a measure of financial prosperity and how that prosperity is shared and safeguarded. The Scorecard ranks the 50 states and the District of Columbia on 62 outcome measures in the five Issue Areas. Data for an additional four measures are published, but states are not ranked on these measures due to insufficient data at the state level. The overall state outcome rank is determined by the rankings each state receives for outcome measures within each issue area. The issue area grades in the Scorecard are distributed on a curve, based on how each state fares compared with all other states.

The Scorecard also separately assesses states on the strength of 53 policies to expand economic opportunity. Taken together, these 53 policies provide a comprehensive view of what states can do to help residents build and protect wealth in the issue areas described above. Unlike the outcome measures, the strength of states’ policies are assessed based on fixed criteria arrived at through consultation with issue experts and Prosperity Now’s own knowledge of policies that are promising, proven or effective in helping families build and protect financial stability and wealth.

In addition to the outcome and policy measures used to assess states, the Scorecard provides additional data to understand financial stability and prosperity in states and communities. For 44 outcome measures, trend data are available for states to track progress over time. The Scorecard also allows you to drill down to the local level—city, county, Congressional district, tribal area and metro area—on up to 26 measures. Additionally, for 21 outcome measures at the state level and 11 at the local level, the Scorecard includes outcome measure estimates disaggregated by race and ethnicity. The Scorecard also disaggregates 14 outcome measures at the state level by disability status, providing for the first time in 2018 a glimpse into the financial challenges facing people with disabilities. While these additional data do not factor into a state’s overall performance in the Scorecard, we provide the data to allow for a more meaningful analysis of financial security and stability in the United States.

Related:
Main findings
Custom reports
Methodology

Credit Conditions: U.S. State And Local Government Credit Conditions Improve As Economic Growth Picks Up

Source: S&P Global Finance, July 26, 2018
(subscription required)

Midway through 2018, accelerating economic growth is providing a favorable near-term backdrop for credit conditions in the state and local government sectors. According to S&P Global Ratings’ updated baseline forecast, U.S. GDP is on a trajectory to expand by 3.0% in real terms in 2018….

Curbing Stock Buybacks: A Crucial Step to Raising Worker Pay and Reducing Inequality — An Analysis of Three Industries — Restaurant, Retail, and Food Manufacturing

Source: Irene Tung and Katy Milani, National Employment Law Project (NELP) and the Roosevelt Institute, July 2018

From the summary:
In a joint publication of the National Employment Law Project (NELP) and the Roosevelt Institute, Irene Tung and Katy Milani expose the extent of stock buyback spending across the U.S. economy from 2015 to 2017—finding that companies spent almost 60 percent of net profits on buybacks. At a time of growing economic inequality, with millions of workers in low-wage industries struggling to make ends meet, that is money that corporations could instead use to improve worker pay.

This report is a crucial addition to any effort to address today’s high-profit, low-wage economy, in which corporate executives and shareholders extract value from corporations rather than creating a cycle of continuous productivity growth, through which workers, consumers, and the economy at large benefit.

One of the primary strategies used to extract profits up and out of companies is the stock buyback—a practice in which corporations repurchase their own stocks from the open market to artificially drive up share prices. Stock buybacks greatly benefit corporate executives, but they leave companies with fewer resources available to invest in workers, business expansion, and long-term economic growth.

By highlighting three core industries—restaurant, retail, and food manufacturing, in which millions of our nation’s workers struggle to make ends meet in low-wage, economically insecure jobs—Tung and Milani demonstrate how workers, and thus the economy at large, could benefit if CEOs chose to redirect money spent on stock buybacks toward worker compensation.

Key findings from the report include:
– The restaurant industry spent more on stock buybacks than it made in profits, funding buybacks through debt and cash reserves. Buybacks totaled 136.5 percent of net profits.
– Companies in the retail and food manufacturing industries spent 79.2 percent and 58.2 percent, respectively, of their net profits on share buybacks.
– McDonald’s could pay all of its 1.9 million workers almost $4,000 more a year if the company redirected the money it spends on buybacks to workers’ paychecks instead.
– If Starbucks reallocated money from share repurchases to compensation, every worker could get a $7,000 raise.
– With the money currently spent on buybacks, Lowes, CVS, and Home Depot could give each of their workers raises of at least $18,000 a year.

Relate:Are Stock Buybacks Starving the Economy?
Source: Annie Lowrey, The Atlantic, July 31, 2018

A new report finds that big companies could have given their workers thousands of dollars’ worth of raises with the money they spent on their own shares.

Connecticut in Crisis: How inequality is paralyzing ‘America’s country club’

Source: Jared Bennett, Center for Public Integrity, July 25, 2018

The state is caught in an economic straitjacket and there’s no easy way out…..

…. Blue chip companies like General Electric have either left or are threatening to leave. A yawning budget deficit continues to loom over the state, amplified by some of the nation’s most glaring economic inequality. Greenwich, home to hedge funders and Manhattan corporate titans, and the Norman Rockwell suburbs of Westport, New Canaan and Darien share few priorities with Hartford, New Haven and Bridgeport, gritty cities struggling with searing poverty and fiscal disaster. Connecticut’s political leaders must choose between what seem like equally rotten options: cut services, and push more burden onto the urban poor, or hike taxes, and risk repelling both the suburban rich who pay much of the freight and new businesses that might consider moving here. Put simply, Connecticut is in a bind with precious little room to maneuver.

Connecticut’s troubles are extreme but hardly unique. The recovery that has entrenched Connecticut into the haves and have-nots has been unequal in other regions as well – from Florida to California and down to Texas. As the stock market climbs but wages remain relatively flat, the Constitution State serves as a troubling bellwether of national priorities that seem to favor wealth creation for the few before investments in the broader economy. ….

When Wall Street Showed Up, Fortunes Sank in This Small American Town

Source: Thomas Black and Christopher Cannon, Bloomberg, July 24, 2018

….True enough, the mill in Wickliffe, the county seat, would have been staring down the barrel with or without the involvement of first Cerberus Capital Management and then Apollo Global Management. They came in, as private-equity firms often do, as business was on the skids, aiming for a turnaround.

Opened in 1970 by Westvaco Corp., the mill produced coated paper for magazines and glossy marketing inserts—a profitable enterprise in the pre-internet age. Times changed. Former employees said worries about the future began when Westvaco merged with Mead Corp. in 2001 and ratcheted up when Cerberus acquired the coated-paper unit in a $2.3 billion leveraged buyout in 2005…..

….To be sure, the mill’s idling can’t be held solely responsible for the county’s credit and debt woes. Other employers have disappeared in recent years. Within a 50-mile radius of Wickliffe, two tire plants and a Honeywell International Inc. factory that converted uranium ore into fuel for nuclear plants shuttered, and a government-run uranium enrichment facility is winding down.

The death of the paper mill hurt the most, with about 350 jobs with generous benefits lost. Locals blame Wall Street investors for accelerating what might haven been the inevitable (there’s still debate about that in Wickliffe), echoing detractors of the private-equity model that has a bumpy turnaround track record but that has been attracting record amounts from investors because they promise juicy returns in a world of ultra-low interest rates. The $3 trillion industry pulled in a record $453 billion last year.

Officials at Apollo and Cerberus declined to comment for this story….