Elliot Eisenberg Economic & Policy Blog

Profit Performance While corporate profit growth has , of late , been strong , only one-third of the growth has come from rising revenues . Corporate profits are being primarily driven by intense cost-cutting . We know this because unit labor cost growth has been zero Y-o-Y , and real personal disposable income growth has been rising by less than 1 % Y-o-Y since 2 / 24 , just 40 % of its 2014 through 2019 growth rate .

Fantastic Fed In a move largely unexpected just days ago , the Fed cut the Fed funds rate by 50bps ! This is an overt acknowledgement that the inflation battle is over , and that rising unemployment is now public enemy # 1 . While the Fed should have cut earlier , that doesn ’ t detract from this gutsy call . Fed policymakers expect

rates to bottom at 2.875 % in 2026 . That ’ s probably too high . Pre-Covid the rate was 1.5 %.

Uncomfortably Unaffordable What is both amazing and absolutely terrifying about the current housing market is how unaffordable it is . The combination of ever rising prices and stubbornly high rates has reduced first-time housing affordability to its worst level since the mid-1980s . But back then rates were almost 13 %, double what they are now , which tells you all you need to know how insanely high house prices are .

Economic Education While economists struggle to agree on many policies , there are some they coalesce around . When asked if giving the President more direct influence over monetary policy would lead to substantially worse monetary policy decisions , 94 % agreed . Similarly , 95 % agreed that imposing tariffs results in significant price increases in tariffed goods , borne by consumers of the imposing country . Lastly , 83 % don ’ t believe price gouging is the cause of high food prices .

Income Increase For the first time since 2019 , median

inflation-adjusted household income rose , to $ 80,610 in 2023 , up from 2022 ’ s $ 77,540 . This brings median income almost back to the 2019 peak of $ 81,210 . The rise was the result of a tight labor market and easing inflation . However , the female-to-male earnings ratio declined from 84 % to 82.7 %, the first meaningful decrease in two decades . Men saw wages rise 3 %, vs . 1.5 % for women .

Productivity Performance Productivity Performance Markets were somewhat perturbed by August M-o-M wage growth of 0.4 %. They needn ’ t be . The main driver was a huge 0.9 % increase in technology , the fastest pace since 8 / 22 . Moreover , with productivity rising at a stellar 2.5 % Y-o-Y , wage growth could be as high as 4.5 %, it ’ s currently 4 %, without causing inflation to exceed 2 %. Lastly , unemployment has risen from 3.8 % to 4.2 % Y-o-Y , putting downward pressure on wage growth .

Labor Limps Employers added a decent 142,000 net jobs in August , but July was revised down from 114,000 to 89,000 and June from 179,000 to 118,000 . Four of the five weakest

monthly readings since 12 / 20 have come during the past five months . The August number will also likely be revised down . Weakening is obvious . The Fed should cut 50bps on 9 / 18 / 24 but will do 25bps because they remain oblivious to the obvious .

Bubbling Beer The Friday File : While the federal government collects excise tax on fermented malt beverages at rates ranging from $ 0.11 / gallon to $ 0.58 / gallon , based on production , location , and quantity , state excise taxes show bigger variation . Rates are lowest in Wyoming at $ 0.02 / gallon . Missouri and Wisconsin follow at $ 0.06 / gallon . At the other end , Tennessee is tops at $ 1.29 / gallon , followed by Kentucky and Hawaii at $ 0.93 / gallon . Virginia is the median state at $ 0.26 / gallon . Cheers !

Elliot Eisenberg , Ph . D . is an internationally acclaimed economist and public speaker specializing in making economics fun , relevant and educational . Dr . Eisenberg earned a B . A . in economics with first class honors from McGill University in Montreal , as well as a Master and Ph . D . in public administration from Syracuse University . Eisenberg is the Chief Economist for GraphsandLaughs , LLC , a Miamibased economic consultancy that serves a variety of clients across the United States . He writes a syndicated column and authors a daily 70-word commentary on the economy that is available at www . econ70 . com .

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