Summertime, Econ 101, & Us

Schools are letting out for the summer, new grads are basking in their achievements and hoping to find jobs. Families plan for beach weekends or perhaps are packing for long-awaited trips across the country or elsewhere in the world. Airlines noted record numbers of passengers over the recent Memorial Day holiday, and it is not one considered a big travel weekend. Over 7.7 million travelers took to the air that weekend, according to the news here.

The national employment rate is 60.3%; the unemployment rate for May 2024 was 4.0%. On Friday the Dow Jones Stock average was 38,589, just a bit lower than its highest-ever total of 40,051 reached in May. The Dow Jones average on President Biden’s inauguration Day was 31,188. The US treasury bond yield now sits at 4.65%.

Some other major points to consider are the facts that gas prices have come down to a national average of$3.46 per gallon, although rates in MD are slightly higher at $3.58.

Recently, according to the Washington Post, several major chains, such as Walgreens and Target, reduced hundreds of prices on food and goods. Some fast-food chains such as McDonalds and Burger King are offering $5.00 meals. Ford dropped some of its car prices and Ikea lowered prices on its furniture. Consumers slowed down their post-pandemic buying spree; supply chain issues have eased.

Under pressure, several major pharmaceutical firms dropped prices on some of their most expensive drugs; CMS is working on a list of the 10 priciest to reduce their costs; low costs for insulin and inhalers are underway. The Biden administration has been working diligently on multiple consumer issues such as these. The Consumer Protection Board proposed this week to remove medical debt from credit scoring algorithms. Relief from excessive interest on student loans, although challenged by Republican states and defeated initially, is now being implemented in a revived format.

Each of these items is good news for average Americans. Some of it was delayed in implementation. But all show an administration that gets it and is trying to make economic issues better. Some things a President has the power to change, others may require Congressional action. But neither can control corporate greed; the greed that saw companies drive up prices during the pandemic crisis and worker concerns, but then did not see prices return after the immediacy ended.

Restaurant meals increased (often due to increased food, supply, and labor costs), apartment rents (which had some moratoriums during the pandemic) skyrocketed, and housing (subjected to supply chain issues) costs soared. All of this is understandable to a point, given the unusual circumstances. Inflation came roaring in, interest rates rose, and mortgage seekers were suddenly looking at 7% rates or more.

According to Bankrate.com: ( a publication from the Federal Reserve)

“The annual US inflation rate in April 2024 was 3.4%. Inflation is substantially lower now than at its high point of 9.1 percent in the summer of 2022, but it's still short of the Federal Reserve's stated goal of 2 percent.”

Bankrate also noted:

“Currently, the main contributors to inflation are shelter and motor vehicle insurance.

Taken together, shelter accounted for more than two-thirds of the increase in prices excluding food and energy over the past 12 months, BLS said.

Put another way, if shelter had remained stable, prices would have only risen 1.4% from a year ago.

Over the past 12 months, inflation would have risen just 2.8% had motor vehicle insurance costs remained stable.

Over the past 12 months, energy has contributed to almost 8 percent of the annual increase in prices, while medical care has accounted for roughly 7 percent.”

So let’s take a look at shelter costs, for one.

Landlords can raise rents on their properties. Good ones do so within the economy. But since rate increases were limited during the pandemic, many sought to make up their losses all at once, leaving tenants in the lurch. Tenants could either accept the increases or move. Some cities and counties have housing rates capped, such as the New York City rent controls; most do not. Rentals often require initial deposits and security fees for having a pet, for example. Moving costs require new utility deposits, perhaps new appliances, and movers. Tenants frequently feel trapped and often feel they can demand few repairs from their landlords as complaints might lead to a refusal to renew a lease. One solution might be the Bill of Rights such as that developed by Montgomery County.

This document sets the standards for landlords and tenants such as requiring that a 90-day notice be given to tenants for rent increases and a 60-day notice of intent to not renew. Tenants may organize, distribute literature, and use a meeting room, if available for free, once a month for their meetings. Landlords can charge late fees and review a client's credit history. Landlords must give notice of routine repairs and be allowed access; exceptions are made for emergencies, such as plumbing leaks, for example.

This document lets both sides understand rights and responsibilities, which is as it should be.

Because housing costs should not take over 30% of one’s income, according to experts, these recent increases have not kept up with employees' salaries. In Frederick County, where I live, the average rental cost for a one-bedroom of 933 square feet is $1835; in Montgomery County, a studio apartment of about 500 square feet rents for $1871/month.

In January of this year, several states raised their minimum hourly wages to $15.00 an hour or above. The Federal Minimum wage was last raised in July 2009 to $7.25/hour. That equates to $290.00 as a base, weekly, assuming the worker worked 40 hours. The base rate for tipped workers is $2.13/hour with the employer expected to supply any funds needed to make the minimum if tips do not.

The states that now have raised their minimums above $15.00/hour are California and New York (known as expensive markets), Connecticut, Maryland, Massachusetts, Washington, and the District of Columbia. Several other states have incremental raises in place over the next few years but have not yet reached the $15.00 level. The Economic Policy Institute shows a map of the states and their wage minimums here.

“There are 30 states and D.C. that have a minimum wage higher than the federal minimum wage.

Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, South Dakota, Vermont, Virginia, Washington, Washington D.C., and West Virginia

The minimum wage is indexed for inflation in 19 states and D.C., meaning it is automatically adjusted each year for increases in prices.

Alaska, Arizona, Colorado, Connecticut, Florida, Maine, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New York, Ohio, Oregon, South Dakota, Vermont, Virginia, Washington, and Washington D.C.

There are 7 states that have no minimum wage law or a minimum wage below the federal minimum wage. The federal minimum wage applies in all of these states.

Alabama, Georgia, Louisiana, Mississippi, South Carolina, Tennessee, and Wyoming.”

17.6 million workers earn less than $15.00 an hour; 47% of those workers are paid at the federal minimum; many work in red states.

Therefore it was unbearable to see candidate DJT promise tipped workers recently in Las Vegas that he would remove any taxes from their tipped wages when he was president. He cannot do so, as this would require an Act of Congress.

As quoted in the Nevada Current (link above)

“Tips are not always a predictable form of income,” she said. “And there’s a great deal of variation, the tips that the server gets at the top-notch restaurant are going to be very different than the tips the person in the diner gets.”President Joe Biden’s reelection campaign responded to Trump’s “wild campaign promise” by saying that Biden supports increasing the minimum wage and eliminating the tipped minimum wage, “a much bigger deal” than Trump’s proposal, a campaign spokesman wrote in a Monday email to States Newsroom.Ted Pappageorge, secretary-treasurer for Culinary Workers Union Local 226, which has 60,000 members in Las Vegas and Reno, Nevada, said the organization has for decades “fought for tipped workers’ rights and against unfair taxation.”

“Relief is definitely needed for tip earners,” Pappageorge said in a statement over the weekend. “But Nevada workers are smart enough to know the difference between real solutions and wild campaign promises from a convicted felon.”

The convicted liar continues to lie and apparently fooling few at a Business Roundtable as reported here by CNBC.

“Washington — Former President Donald Trump failed to impress everyone in a room full of top CEOs Thursday at the Business Roundtable’s quarterly meeting, multiple attendees told CNBC.

“Trump doesn’t know what he’s talking about,” said one CEO who was in the room, according to a person who heard the executive speaking. The CEO also said Trump did not explain how he planned to accomplish any of his policy proposals, that person said.

Several CEOs “said that [Trump] was remarkably meandering, could not keep a straight thought [and] was all over the map,” CNBC’s Andrew Ross Sorkin reported Friday on CNBC’s “Squawk Box.”

Among the topics on which Trump offered scant details were how he would reduce taxes and cut back on business regulations, according to two other people in the room who spoke to CNBC.”

Til next week-Peace!