November PCE, 12-23-2021

 

The Commerce Department released the latest CPE information. This concludes the inflation information that I track... for the month of November. 5.7% PCE; PCE EX-F&E at 4.7% and trimmed mean PCE at 3.5%. All numbers are above October data.

There is really no surprise, and the latest numbers simply affirm what is already widely known, so has been rather mildly reported. Especially the relationship between PCE and the Federal Reserve's reliance on that information.

The FED has already mentioned what they might do, but haven't done anything, other than reducing bond buying... which is the key point. 

As for me, the MPI is my gauge and I suspect it will go up for the December report to about 5.1% annual and 0.4% on the month.

Forecasts for CPI-U range from -0.3% to +0.4% for December and year to year between 6.7% and 7.1%. I suspect we are nearing the end of peak y/y numbers and should look closer at month to month in the upcoming reports.

OMICRON

Omicron is spreading very fast, according to news and data sites. While it appears to be much less severe than previous covid variants, the current CDC protocols for medical staff is quarantining for 7 days from testing positive from covid... any covid, mild or not. Considering how pervasive the omicron variant is, and the apparent weakness of vaccines and prior covid immunity are to the omicron variant, the likelihood of much higher infection rates exists. This would include the medical community.

As with any virus, certain portions of the population are more susceptible to serious illness and death and would require medical attention. Medical attention that might be restricted by its own members infections and requirement to quarantine.

The timing for getting sick and seeking medical attention might not be as good as current. Then think about all the various companies, schools, etc. that require testing and adhering to various protocols. Think about the grocery stores that look warily on employees sniffling and sneezing. 

Just sayin..

Saving Social Security and Changing C.O.L.A.

 

via GIPHY

I have been reading about attempts to save Social Security of which I partake. Does Social Security need saving?

The short answer is no, as social security will not come to an end in 2033/34. Think of the S.S. trust as a bank account. You put money into the bank and the bank uses it to make loans, which is how the bank can afford to pay interest into your account. That is the basic foundation of S.S. from the beginning in 1935.

The issue is... your expenses are now exceeding the amount you are putting into that bank account as well as the interest being paid to that account by the bank.

At some point in 2033/34, the amount being withdrawn cannot exceed the deposits, which results in something like 80% of withdrawals compared to previous.

The ideas being put forth, while ignoring the likelihood of congress doing anything...

A. Raise the eligibility ages. Considering the longevity of the average American is now older... probably an good idea, but not a complete resolution. 

B. Remove the cap on taxable earnings or raise it substantially. Probably the best solution across the board and can take various forms to alleviate the issue going forward. Whether deducting only from the worker and continuing cap on employers, etc.

C. Change the method for calculating increases. This runs into changing from current Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to either Consumer Price Index for All Urban Consumers (CPI-U, which is current headline used) or Chained Consumer Price Index for All Urban Consumers (C-CPI-U) or Research CPI Experimental for Americans age 62 years of age and older (R-CPI-E). 

As an elder, I can narrow down the choice fairly quickly, based on which would have benefited me. The current method of CPI-W had fairly consistently moved with CPI-U and outpaced C-CPI-U on a historical basis. It does strike me as odd that the current CPI-W year over year is outpacing those two by a large margin. 

Historically, the following is based on typical rank of inflation (from highest inflation to lowest, based on August BLS release)...

• R-CPI-E (100=1982; current 297.114 (217.8=2007, 36.42% increase since 2007)
• CPI-W (100=1982; current 268.387)(205.777=2007, 30.42% increase since 2007)
• CPI-U (100=1982; current 273.567 (210.236=2007, 30.12% increase since 2007)
• C-CPI-U (121.295=2007: current 153.715) (26.73% increase since 2007)

Based on data from August BLS release...

• CPI-W (5.8%)
• CPI-U (5.3%)
• C-CPI-U (5.1%)
• R-CPI-E (4.8%)

So obviously for the long haul, I would have preferred the R-CPI-E, based on the above, but... since December 2016 until July 2021, the changes have been this by rank... (did not update to August numbers.)

• CPI-W: 13.8%
• CPI-U: 13.1%
• R-CPI-E: 12.86%
• C-CPI-U: 11.68%

Clearly something has changed since 2016 and the near term data favors the CPI-W. 

Until something better comes along, the CPI-W remains the best option as the E in R-CPI-E stands for experimental. Not sure why so many on the left are pushing the R-CPI-E. I understand the right's fascination with C-CPI-U.

The answer to the Social Security dilemma is a combination of A and B. While it is a fun task for me to opinionize about the matter, it still falls to a future congress to actually do something.

Congress does not move on major projects unless pushed into a corner. My guess would be about 10 years from now... that corner will come into view. Truly, I do hope to be around to see that take place.