Business

GDP, corporate profits soar as Biden calls out companies for ‘price gouging’ on November 30, 2023 at 11:00 am Business News | The Hill

Published

1 year ago

November 30, 2023

The American economy grew in the third quarter, but there are signs that its growth is beginning to slow.

U.S. gross domestic product (GDP) came in Wednesday at a revised 5.2 percent increase in the third quarter, higher than the 4.9 percent pop of the initial estimate, to hit the fastest quarterly rate of growth in almost two years.

Corporate profits increased by $105.7 billion in the third quarter, compared to $6.9 billion in the second, the Commerce Department reported Wednesday.

What that 5.2 percent GDP number means

The latest GDP number is the highest since the fourth quarter of 2021, when it hit 7 percent and the economy was still seeing explosive quarterly growth in the recovery from pandemic shutdowns.

Despite consecutive quarters of negative growth in the first half of 2022, a strong job market and consumer spending pushed the economy out of recession range.

A major contraction predicted by many following the booming recovery has yet to materialize, adding to the likelihood that the economy could achieve a “soft landing” on a path to more regular growth.

Consumer spending continues to heat up

Personal consumption expenditures increased 3.6 percent in the third quarter, up from 0.8 percent in the second quarter, with advances in both goods and services spending.

Spending was up notably in recreational goods and vehicles and in recreational services, such as concerts and movies.

“The increase in real GDP reflected increases in consumer spending [and] private inventory investment,” the Commerce Department noted.

Corporate profits come in for rough criticism

Earlier this week, President Biden called out the role of private-sector profit-gouging in inflation.

“Let me be clear,” he said Monday. “To any corporation that has not brought their prices back down, even as inflation has come down, even supply chains have been rebuilt — it’s time to stop the price gouging, [give] the American consumer a break.”

Upward revisions to fixed capital investments and state and local government spending drove the higher GDP number, while robust consumer spending was marked down slightly in the third quarter to a 3.6-percent increase.

“Economic growth was even better than expected in the third quarter, with real GDP rising 5.2 percent versus the advance estimate of 4.9 percent. The additional boost came from 2 sources: investments and government spending,” Sonu Varghese, a strategist at Carson Group, said in an analysis.

Gross domestic income (GDI), an inverse measure of economic productivity, came in at a more modest 1.5 percent. The average of real GDP and real GDI advanced 3.3 percent in the third quarter, up from 1.3 percent in the second.

Profits fly high while consumers face prices

While companies rake in massive profits, consumers are being hammered by prices that are as much as 20 percent higher than they were before the pandemic.

“Pandemic-era supply chain disruptions enabled corporations to hike prices and juice profit margins to highs not seen in more than 60 years,” Kitty Richards, director of Groundwork Collaborative, an economic research and advocacy group, wrote in an analysis.

“Now supply chains have returned to normal, but corporations in many sectors are still charging inflated prices and extracting exorbitant profit margins,” Richards said.

Corporate profits are now at the highest share of national income in more than 10 years.

“This means the labor share remains flat or declining, depending on the measure you use, in the third quarter. There’s still room to grow back to more historical ranges during this recovery,” Mike Konczal, director of macroeconomic analysis at the Roosevelt Institute, another research and advocacy organization, wrote.

“[It’s] good reason for the President to be flagging corporate profits alongside high prices,” he added.

Sixty percent of Americans say their income hasn’t kept pace with increases in daily expenses over the past year, according to research released Wednesday by market data company Bankrate. That’s up from 55 percent last year.

“Twenty-nine percent say their pay has kept up, compared to 33 percent last year. Older workers, lower income earners, and hourly workers are more likely to say their pay has not kept up with inflation,” the Bankrate analysis found.

The recession that won’t materialize

The latest GDP numbers come after a deluge of recession predictions from market commentators, economists and even authorities like the Federal Reserve, which forecast a “mild recession” earlier this year before scrapping that call at a later meeting.

“A US recession is effectively certain in the next 12 months,” economists with Bloomberg Economics wrote in October 2022.

The company’s recession probability model “forecast a higher recession probability across all timeframes, with the 12-month estimate of a downturn by October 2023 hitting 100 percent.”

Harvard University economist Larry Summers said last year that unemployment would need to skyrocket in order to tame inflation before eventually conceding that “transitory factors” contributing to inflation were easing.

Robust consumer spending, a red hot job market, knock-on effects from $1 trillion in pandemic stimulus, as well as longer-term investments spurred by big pieces of legislation have likely all been working in the opposite direction from a downturn, to varying degrees.

Inflation is coming down but pre-pandemic prices are likely gone forever

The pace of price increases in the economy has come down over the past year, and in a few sectors, such as durable goods, price levels have deflated. Annual price increases topped out at 9 percent last June and are now at 3.2 percent, according to the Labor Department’s consumer price index (CPI).

But price levels in absolute terms are still way higher than they were before the pandemic and have little chance of returning to their pre-pandemic norms.

An analysis released this week by Bloomberg Economics found that prices are an average of 20 percent higher across the economy than they were in January 2020.

Rent is up 20 percent, groceries are up 25 percent, electricity is up 25 percent, car insurance is up 33 percent and water is up 16 percent, the analysis found.

Dubbing it a “cost-of-living squeeze,” economists noted that “after accounting for inflation, hourly wages have barely budged since 2020.”

Cost-of-living stresses could be driving poor polling performance

Despite many strong metrics in the national accounting, ranging from consumer spending to the labor market, Americans are disapproving of President Biden’s handling of the economy.

Just 32 percent of respondents said Biden is handling the economy well, according to polling released Tuesday by Gallup.

Slightly stronger marks came in earlier this month from the Harvard CAPS-Harris poll.

That poll found that 44 percent of Americans approved of Biden’s economic stewardship, an increase from 41 percent last month.

White House spokesperson Karine Jean-Pierre echoed Biden’s remarks on the effect of profits and price-gouging on inflation Wednesday.

“Many corporations [have seen] input costs grow more slowly or even fall recently. Some companies are passing those savings on to consumers, but some aren’t,” she said.

“Companies should pass those savings on to consumers by lowering their high markups from the last two years,” Jean-Pierre said. “That’s why taking on price gouging has been part of the President’s economic agenda for more than two years now.”

The market has already priced in rate cuts

Wall Street is already pricing in rate cuts, meaning that the path to more regular growth following the recovery from the pandemic may already be laid out.

This would imply that the soft landing scenario desired by policymakers is already coming to pass.

On Monday, the Wall Street Journal reported that interest-rate futures were at 60-40 odds that “the Fed will lower rates by a quarter-of-a-percentage point by its May 2024 policy meeting.”

That’s up from 29 percent at the end of October, according to CME Group data, the Journal reported.

The U.S. central bank, in its latest summary of economic projections, is still officially predicting one more quarter-point rate hike this year, to max out at a range of 5.5 percent to 5.75 percent.

Administration, Business, News, Policy, corporate profits, GDP, gdp report, inflation, prices, Recession, recession fears The American economy grew in the third quarter, but there are signs that its growth is beginning to slow. U.S. gross domestic product (GDP) came in Wednesday at a revised 5.2 percent increase in the third quarter, higher than the 4.9 percent pop of the initial estimate, to hit the fastest quarterly rate of growth…

Business

The Cities Bracing for Trump’s Immigration Crackdown

Published

3 weeks ago

November 8, 2024

Bolanle Media Staff

In the wake of Donald Trump’s recent election victory and his promise of “the largest deportation operation in American history,” several major U.S. cities are bracing for potentially seismic shifts in their economic and social landscapes. As the nation grapples with the implications of this proposed policy, urban centers that have long been havens for immigrant communities find themselves at the epicenter of a looming storm.

Los Angeles, often dubbed the “City of Angels,” stands to lose more than its celestial nickname suggests. As a primary gateway for immigrants, the city’s vibrant tapestry of cultures and its economic engine could face significant disruption. From the bustling streets of Koreatown to the sun-drenched orchards of the Central Valley, the absence of undocumented workers could leave gaping holes in the city’s workforce and cultural identity.

Across the country, New York City, with its iconic skyline and melting pot reputation, faces its own reckoning. The Big Apple’s 5.9 million immigrants, many of whom are undocumented, form the backbone of industries ranging from construction to healthcare. The potential exodus could transform neighborhoods like Jackson Heights and Flushing, altering the very essence of what makes New York a global city.In the Sunshine State, Miami’s tropical allure belies the turbulent times ahead. Home to 2.5 million immigrants, the city’s economy relies heavily on sectors like tourism and hospitality – industries where undocumented workers often fill crucial roles. The potential deportation of these workers could send shockwaves through Miami’s economic ecosystem, from South Beach’s glitzy hotels to the agricultural heartlands of South Florida.

Chicago, the “City of Big Shoulders,” may find those shoulders significantly weakened. With 1.7 million immigrants in its metropolitan area, the Windy City’s diverse neighborhoods and industries face an uncertain future. From the meatpacking plants to the tech startups, Chicago’s economic resilience could be tested like never before.

In the Lone Star State, Houston and Dallas stand as twin testaments to the complexities of immigration policy. These Texas titans, each home to large immigrant populations, could see their booming economies stumble. The construction sites that dot their ever-expanding skylines and the service industries that keep these cities humming could face unprecedented labor shortages.

Out West, the San Francisco Bay Area’s reputation as a bastion of innovation and progress could be challenged. The region’s tech industry, often reliant on immigrant talent, might find itself grappling with a new reality. From Silicon Valley’s coding campuses to the agricultural expanses of the Central Valley, California’s economic powerhouse could face a reckoning. Phoenix, rising from the Sonoran Desert, could see its growth trajectory altered. As Arizona’s urban center, it stands at the forefront of the immigration debate, potentially facing not just economic impacts but social and political upheaval as well.

These cities, along with others like San Diego and Las Vegas, are not just facing potential economic disruptions. They are staring down the barrel of profound social change. Family separations, community fragmentation, and the erosion of cultural enclaves built over generations are all possible consequences of mass deportations. Moreover, the fiscal implications are staggering. Undocumented immigrants contribute billions in taxes annually, often without receiving the full benefits of their contributions. Their sudden absence could leave gaping holes in city budgets, potentially affecting public services and infrastructure projects.

As these urban centers brace for impact, the debate rages on. Supporters of stricter immigration policies argue for the need to enforce laws and protect American jobs. Critics warn of economic devastation and the unraveling of America’s urban fabric. What’s clear is that America’s cities stand at a crossroads. The coming months and years will likely reshape urban landscapes in ways both visible and invisible. From the foods we eat to the services we rely on, from the neighborhoods we call home to the very character of our cities, the impacts of this proposed immigration crackdown could be far-reaching and long-lasting. As the nation watches and waits, these cities – vibrant, diverse, and economically vital – find themselves on the front lines of a policy that could redefine what it means to be an American city in the 21st century.

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Business

How Trump’s Deportation Plans Could Reshape Major Cities

Published

3 weeks ago

November 8, 2024

Bolanle Media Staff

In the wake of Donald Trump’s recent election victory, his ambitious plans for mass deportations have thrust America’s urban centers into the spotlight. As the nation grapples with the potential implications of what Trump calls “the largest deportation operation in American history,” cities across the country are bracing for significant changes that could reshape their economic, social, and cultural landscapes.

The stakes are particularly high for metropolitan areas like New York, Los Angeles, Houston, Dallas, and Miami, which host the largest populations of unauthorized immigrants. These cities, along with other major urban hubs such as Chicago, Washington D.C., and San Francisco, stand at the forefront of a looming transformation that could reverberate throughout the nation.

Economic Tremors

Economists warn that the proposed deportations could send shockwaves through urban economies. Mark Zandi, chief economist at Moody’s, cautions that businesses would face “significant challenges” if a substantial number of immigrants were removed. Industries such as construction, hospitality, and healthcare—pillars of urban economies—could face severe labor shortages.

Joe Brusuelas, chief economist at RSM, emphasizes the potential ripple effects: “The native-born workforce cannot meet current labor demands.” This labor gap could lead to increased wages, potentially rekindling inflation—a concern that looms large over city planners and policymakers alike.

Community Fabric Under Strain

Beyond economic considerations, the social fabric of cities hangs in the balance. Elena, a Nicaraguan immigrant in Houston, voices a fear echoed in immigrant communities across the nation: “I’m scared… This is my home.” The threat of family separations, particularly in mixed-status households, casts a long shadow over urban neighborhoods.

Immigrant advocacy groups like FIEL are mobilizing, advising clients to prepare for “anything that can happen.” This atmosphere of uncertainty could lead to decreased community engagement and cooperation with local authorities, potentially impacting public safety and community cohesion.

Cities at a Crossroads

As the debate intensifies, cities find themselves at a crossroads. Some, like New York and Los Angeles, have historically positioned themselves as “sanctuary cities,” often at odds with federal immigration enforcement. The impending clash between federal policy and local governance promises to be a defining feature of this new political landscape.

Meanwhile, the logistical challenges of implementing such a massive deportation operation remain daunting. Questions abound regarding detention facilities, transportation networks, and the sheer manpower required to carry out Trump’s vision.

Looking Ahead

As America’s urban centers brace for potential change, the full impact of Trump’s deportation plans remains to be seen. Legal challenges are all but certain, and the resilience of America’s cities will be put to the test.

What is clear is that the coming months and years will be pivotal for urban America. As Jason Miller, a senior Trump adviser, puts it, the plan is to “immediately reinstate” immigration policies from Trump’s first term. For America’s cities, this could mean a period of unprecedented change, challenge, and, potentially, transformation.

As the nation watches and waits, the story of America’s cities in the face of this ambitious deportation plan is just beginning to unfold. The outcome will undoubtedly shape the future of urban life in America for years to come.

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Business

Donald Trump Wins 2024 USA Election

Published

3 weeks ago

November 6, 2024

Bolanle Media Staff

Based on the election results, Donald Trump has indeed won the 2024 U.S. presidential election, defeating Vice President Kamala Harris. Here’s an analysis of the key statistics and implications:

Electoral College Victory

Donald Trump has secured the presidency by winning crucial battleground states and flipping some key states that were previously held by Democrats. The final Electoral College tally is still being determined, but Trump has surpassed the 270 electoral votes needed to win.

Battleground State Performance

Trump’s victory was largely secured by winning several critical swing states:

Wisconsin: Trump’s win here was pivotal in securing his path to victory.
Pennsylvania: This state flipped back to Republican control.
Georgia: Another key state that Trump managed to win back.
Michigan: Trump successfully flipped this traditionally Democratic stronghold.

Popular Vote and Voter Priorities

While the final popular vote tally is still being calculated, exit polls provide insight into voter priorities:

Economy and democracy were top concerns for voters.
Abortion and immigration also played significant roles in voter decision-making.

Congressional Control

The election results extend beyond the presidency:

Republicans are set to take back the Senate majority, securing at least 51 seats.
Control of the House of Representatives remains undetermined.

Media Implications

The outcome of this election could be seen as a challenge to mainstream media narratives for several reasons:

Polling Discrepancies: Many pre-election polls suggested a tight race or even a slight Harris advantage in key states. Trump’s victory, particularly in battleground states, may indicate that polls underestimated his support.
Narrative Shifts: Throughout the campaign, much of the mainstream media focused on Trump’s legal challenges and controversies. His victory suggests that these issues may not have resonated with voters as much as economic and policy concerns.
Voter Priorities: The emphasis on issues like the economy and immigration in voter decision-making may indicate a disconnect between media focus and voter concerns.
Electoral Predictions: Many mainstream outlets were cautious about predicting a Trump victory, even as results began to favor him. This hesitancy could be seen as a reflection of broader media skepticism about Trump’s chances.
Underestimation of Trump’s Base: The results suggest that Trump’s core support remained strong and potentially grew, despite negative coverage in much of the mainstream media.

It’s important to note that while the election outcome may challenge some media narratives, it doesn’t necessarily invalidate all mainstream reporting. The complex factors influencing voter behavior and the challenges of accurate political forecasting remain subjects of ongoing analysis and debate.

As the dust settles on this historic election, both the media and political analysts will likely engage in extensive reflection on the factors that led to Trump’s victory and the implications for future political coverage and analysis.