Today’s release of personal consumption expenditure (PCE) inflation numbers by our friends at the federal government was a spin on the philosophical chestnut: If a tree falls in the forest and no one is around to hear it, does it make a noise?
In the case of this inflation release, stocks, bonds and precious metals markets were closed in celebration of Good Friday and Easter, so there was no way for investors to display their typical knee-jerk reaction to such government statistical updates. We must wait until Monday for that.
What is amusing about the lack of immediate (over?)reaction is that billions, even trillions of dollars of capital market valuations customarily change on these announcements, based on numbers that are little more than guesswork.
Don’t take my word for it. Just examine the track record of the people giving you those guesstimates, then revising them in succeeding months.
Today’s PCE print was “in line” with expectations, coming in at a 3-tenths of a percent increase from last month, and up 2.8 percent over the past 12 months.
The Federal Reserve Board of Governors, who are supposed to use such numbers to set their interest rate policy, are reported to favor PCE because it is less volatile. PCE also excludes food and energy costs, so you tell me how relevant a number is that arbitrarily excludes what arguably are the two top priorities of individual spending.
And, as to the accuracy of these inflation numbers, this report was used to slip in that the January core inflation number had been revised to a 5-tenths of a percent increase. This 3-tenths current number might be 5-tenths, higher, or lower by the time the next month’s figures are divulged.
It’s not only the inflation numbers being dispensed by bureaucrats and treated as gospel by policymakers and investors that are suspect. Those glowing job reports the Biden regime is so fond of referencing don’t ring true, either.
The good folks at zerohedge.com, citing the Philadelphia Fed, headlined that payroll numbers are overstated by as much as 800,000 for 2023 and 1.1 million for 2022.
The zerohedge post goes on to delve into how one person working several jobs to make ends meet in an inflationary environment, largely is treated as multiple workers. Similarly, no distinction is made between part-time (ordinarily low paying and zero benefits jobs) and full-time work (customarily with higher pay and benefits).
You are forgiven for wondering why, in view of the blatant shortcomings of these data dumps, are they taken so seriously?
Because they are all we have to prop up the house of cards that is the U.S. stock, bond and real estate (particularly commercial) markets.
We’re creating national debt at the rate of $1 trillion every 100 days and inflating the job numbers gives the appearance of better return on that debt.
But, providing accurate inflation reports harms the case if those numbers are high, so best to tamp down those figures.
What follows are some parting thoughts for those who dismiss inflation’s negative effects by noting people make more money these days to account for it.
When I was young, say 12-years of age in 1967, a full-sized Three Musketeers bar, a Milky Way or a Snickers cost 5 cents at the corner store. Almond Joy or Mounds were the high-priced spread at 10 cents, so we only bought those occasionally.
Routinely, these candy treats now cost more than $1 each, a 20-fold or more increase for the 5-cent bars. This does not factor in their shrinking size.
I attended Cochran Junior High in those days, hard by the former Hallman Chevrolet lot. I recall new Corvettes going for the low $4,000s and confirmed that with some quick internet research. In 1967, the base MSRP for a Corvette coupe was $4,385; $4,240.75 for a convertible. Fast-forward to 2024 and the base Corvette MSRP is $69,994, an increase of roughly 16 times.
Energy, housing, health care, prescription drugs, all those costs have skyrocketed.
But I promised to reference increased pay. Social Security lists average annual wages for indexing eventual benefits to be paid out.
The 1967 average wage figure was listed as $5,213.44. For 2022, the last year available, the number was $63,795.13, an increase of about 12.2 times. If you’re buying a candy bar, a Corvette, or almost anything, your wages have not kept up with their increasing prices.
And that doesn’t factor in that the federal income tax is a progressive one – the more you earn the higher the rate you pay on marginal income. Comparing net take-home pay would show an even larger decline in purchasing power.
The average worker is much worse off now, than in 1967, due to rising costs and taxes and compensation that has not kept pace.
Now, if you’re an illegal bumbling across the border and being handed pre-loaded debit cards and other benefits such as free food, housing and health care, it’s a different story.
But we can’t all be illegals, can we?
Sam Ross Jr's site 