Dallas-Fort Worth, not San Francisco, is in second red-hottest place.
Consumers in Los Angeles are simply not buying the notion that inflation, however benevolently measured by the Consumer Price Index, was “only” 2.8% in May, as we learned today. And they were right, according to the Bureau of Labor Statistics. So here we go.
Earlier today I dissected consumer price inflation for all of the US, with a particular eye on the “hedonic quality adjustments” that are liberally and aggressively applied to used and new cars and trucks.
These hedonic adjustments conjure up a breathlessly miraculous situation where the Consumer Price Index in May for used vehicles is at the same level as it was in 1994 — with no inflation whatsoever over the 24-year period — and where the price index for new vehicles is where it was in 1997, though actual vehicle prices, the amounts car buyers have been paying, have skyrocketed over those years.
Now drilling down by geography: Overall, for urban consumers across the US, CPI rose by 2.8% in May from a year ago, the fastest year-over-year rise since February 2012. But how does this work out for the four regions of the US, and for the largest metros?
The Bureau of Labor Statistics releases a trove of inflation data every month, including data for the 14 largest Metropolitan Statistical Areas (MSAs). Among these MSAs, CPI ranged from lukewarm in the Philadelphia-Camden-Wilmington MSA, at 1.4% year-over-year, to red-hot for the Los Angeles-Long Beach-Anaheim MSA, at 4.1% year-over-year, which is about double the Fed’s target.
Note that the Dallas-Fort Worth-Arlington metro is not far behind the Los Angeles metro.
For some of these MSAs, the BLS releases monthly data. For others it releases data every other month. So some of the inflation rates in the chart above are for May-to-May comparisons, others are for April-to-April comparisons.
By region, CPI averages out some of the extremes. In May, compared to a year ago, CPI was hottest in the West and least hot in the Midwest (here’s a map showing which states are included in these regions):
How individuals experience inflation depends on a lot of factors, including the basket of goods and services they’re buying. If they’re renters in a city where rents are soaring, and if a relatively large portion of their spending goes to tuition and healthcare expenses, their personal inflation rate could be much higher than the national average. And location — as the folks living in Los Angeles, Dallas, and some other places are experiencing painfully on a daily basis — is a big factor in this equation.
“Hedonic quality adjustments” have performed veritable miracles in repressing the appearance of surging new and used vehicle prices. Read… The Dollar’s Purchasing Power Drops 2.9% in May from Year Ago, Fastest Drop since Nov 2011
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Inflation in Baltimore and Camden within a percent or two of LA and San Fran?
Is wealth gap shrinking? Are 2018 model Teslas on sale?
Didn’t you hear? California is a failed state …
https://www.reddit.com/r/politics/comments/8rd8h8/california_sees_9_billion_surplus_passes_budget/
You can have one last latte and don’t let the beaded curtain whisk you on the ass on your way out…
Population increase is helping drive the increase in the DFW area. Rents are increasing dramatically in the area( IIRC, house prices are not factored into inflation statistics).
“The Dallas-Fort Worth-Arlington metropolitan area’s 146,000-resident jump in 2017 was the most of any metro area in the United States. And six of the top 10 fastest-growing counties in the United States were also in Texas, including Tarrant, Dallas, Denton and Collin”
“Population increase is helping drive the increase in the DFW area. Rents are increasing dramatically in the area( IIRC, house prices are not factored into inflation statistics).”
House prices are not, but rents (or a variation of it) are.
Yes the DFW “Metroplex” is being hammered with new companies coming in. Reading my crystal ball, I have a feeling Amazon HQ2 is going to locate in my small city or a neighboring one since we are next to DFW airport. Great schools, Mayberry quality of life and a rail system to the airport. The freeway system here is amazing. It worries me about the future possible expansion.
Oh, I hope not! Amazon’s HQ would be the ruin of the DFW area. Too many of our so-called “civic leaders” fail to see more than one step beyond their faces. Traffic is already bad enough, and house prices are fast becoming as unaffordable as other big metro areas.
If Bezos weren’t simply trying to squeeze as much money as he can out of the HQ #2 city – i.e., if he wasn’t completely infected by greed despite being the richest person on the planet – he would pick a city that really needed the investment and put the HQ there.
The freeway system is ok, but certainly not “amazing”…unless you are fond of toll roads. Anyone clamoring for Amazon HQ2 should be wary of the creative destruction that comes with it, as in massive subsidies to Amazon on the backs of local taxpayers.
Home prices are detached from fundamentals in the DFW area but, low inventory is helping to buffer the obvious shift occurring in the market. High prices and higher rates are starting to take their toll on sales volumes.
On a more interesting note, I discovered today that the Real Estate Center at Texas A&M that produces the monthly sales reports for the DFW area has been overestimating actual sales, at least since the beginning of last year, but I haven’t had the time to check older data. Interesting discovery for sure since the overestimation looks to be about 5% per month.
If they are making hedonic adjustments for inflation, they should be making hedonic adjustments for wages as well. That would be a real eye opener. The pathetic wage growth published today would be a lot worse. People are working harder for the same money, yet the cost of living keeps increasing.
Employers now require that people constantly check their cell phones after normal work hours. That means extra work for the same wage.
Also, people need more education to qualify for a job than they did in the past. This also increases the cost of qualifying for a given wage.
Further, what about removal of pensions, post-retirement medical, etc.? These items reduce the wage. Also, today’s lack of job security is a big factor that decreases the “quality” of jobs.
You can’t make hedonic adjustments to the CPI basket without doing the same for wages, otherwise the output is nonsense. The current method understates inflation and overstates wage growth.
“The current method understates inflation and overstates wage growth.”
That’s a feature, not a bug. Much like owners equivelent rent understates housing costs
xxxxx…..(I LOOOOVE THIS PLACE!!!!)
Excellent point. People feel poorer for a reason.
It used to be that I felt my words fell on deaf ears when I would proclaim that the numbers are cooked. These days, it’s a chorus of voices. At least now the frogs know they’re being cooked – either that or this website attracts like-minded individuals.
How can CPI be officially 4% for the area when housing rose 8-12% YOY (depending on source of info – I just quickly googled)? Housing would basically account for the entire CPI increase without rising prices in all other categories. So much BS – why even report CPI? I feel like I’m living in the USSR version 2.0.
I’d compare this more to Communist China and the farmers starving to death. The farmers all reported marvelous numbers in the tonnes of rice they were producing, despite they were starving to death. Their tax rate was calculated on the amount they reported so they paid high rice taxes on rice they didn’t have in the first place.
Perhaps in China, the people will do something about…maybe, maybe.
But in the USA, the people will do absolutely NOTHING. History, shows the wineing, wincing, and bitching is just talk. Day after tomorrow, everyone goes right back to the cotton fields for the masters and is please as punch to do so.
Never in my life of 71 years have I ever seen so many shrug their shoulders or roll their eyes, or stare like cows chewing their cud, or slowly blink dead eyes when ANY plain-to-see fact is presented to them.
Never in my 71 years have I seen so many depressed and lonely young, and folks of all ages who feel like the end is near.
That just shows how successful the media propaganda outlets are. I cannot have a reasonable conversation with anyone that gets the “news programming” broadcasts if they have never sought out alternative media. I just repeat what Misha Brzezinski of CNN said one morning “we tell you what to think”.
Between the oligarchy’s control of the mass media and the dumbing down of the population, our financial elites have created the ideal conditions for herding the sheeple onto the globalists’ incorporated neoliberal plantation where they can be fleeced at will. The Wall Street-Federal Reserve Looting Syndicate has already engineered two massive pump-and-dump scams – the tech bubble implosion in 2000 and the housing bubble crash in 2008 – and now their media border collies are herding the last of the muppets into the Mother of All Pump-and-Dump Schemes for the biggest bust of all. Will the sheeple react with their usual pointless bleating, while pulling the lever for the same-old Republicrat duopoly water carriers for the corporations and Wall Street? I don’t know, but the growing wave of nationalism and populism in Europe suggests there’s hope that when the sheeple do finally look up from their grazing and see how badly they’re being shafted by the globalists, more and more of them are starting to fight back. So maybe there’s hope.
What do you mean people are just talk, do nothing. They go to school and shoot. They go out and vote.
Rents are rising in some cities and dropping in others, such as Chicago and New York City. The nationwide average rent reflects that. So you may live in a city where rents are rising, and your inflation is much higher than someone who lives in a city where they can negotiate a lower rent or move and get a lower rent.
Hi Wolf – Your comment is correct, but unrelated to my point. I was pointing out the LA *regional* CPI was listed at 4.1 and housing prices went up 8-12 % YOY in the same region. National CPI averaging out is a separate issue.
“It used to be that I felt my words fell on deaf ears when I would proclaim that the numbers are cooked. These days, it’s a chorus of voices. At least now the frogs know they’re being cooked – either that or this website attracts like-minded individuals.”
It’s the latter. Most people don’t know what the Fed does, what the BLS does, what CPI represents (and what it doesn’t represent), etc.
Truth be told, based on the comments I would say most people here don’t understand those things either.
“How can CPI be officially 4% for the area when housing rose 8-12% YOY (depending on source of info – I just quickly googled)? ”
Because house prices / mortgage payments are not factored into CPI. Instead, a hypothetical “rent equivalent” is used. Basically, if you moved out of your house and rented it out, what could you get on the market with a new tenant, today. It’s less than ideal, especially compared to… I don’t know, the actual rents that new tenants are paying today, instead of theoretical rents. But even rents themselves don’t accurately reflect housing, because rents tend to be stickier than housing for a number of reasons. What this means is that when housing is appreciating, rents understate inflation (e.g. house prices went up 20% over X period, rents went up 10%). When housing is depreciating, rents overstate inflation (in 2008, despite home prices collapsing, housing measured by CPI was staying largely afloat).
One of the problems of using mortgages, for example, is that they are tied to interest rates. If inflation is running hot, central banks will want to raise interest rates… raising interest rates will increase mortgage payments, which if included in inflation figures, would then increase the very inflation they are trying to limit.
Housing is tricky, but the current methodology is definitely lacking.
You’re making my point. That CPI methodology uses OER as defined, which understates price increases that *real* people have to deal with, is just one example of how they cook the numbers! Sure, using their flawed methodology, the numbers are what they state and “that’s how they got 4%”. But the number is no longer meaningful.
no, darling…it is not your proverbial “chorus” just yet, if it will ever be.
the reason i love this site is because as i live in a decimated san francisco, neighbors artists businesses and a way of life just disappearing like an acid bath after a forest fire and all the bad asses and punks are gone evicted suicided or dead of old age–
i love this site because it is the most punk thing on the internet and what can be done with this internet.
and true punk was like only 3 people and they’re dead ugly pathetic wasted deaths for the good story, and vivienne westwood, who DRESSED the punks, went capitalistic in the extreme and even did offshore stuff to not pay taxes to her country.
this site is punk BECAUSE of the inarguable graphs and constant discussion of the NUMBERS.
we’re all awash in how the b.s. is making even and especially the numbers misty watercolored b.s.
i write such a love letter because now i’m reading THE HACKING OF THE AMERICAN MIND by Robert Lustig to understand: WHERE DID ALL THE BAD ASSES GO???
with all the artists and working class folks gone, i’ve never been THIS close to “normal people” since the ’80s (when i was constantly running away from scary normal people) and how they THINK, and this awake with my head out of my own ass, and i’m trying to get how anyone thinks this shxt is a great fxcking idea for ANYONE.
but no. Wolf’s site is not your “chorus” yet. this is punk. it’s gritty stinky scary and could be shut down any moment over something …cute and scary and ridiculous.
I hear you Kitten
Reconcile to the relief
consumed in sacred ground for me…
to the end to the end I’ll journey to the end
Matty came from far away
from New Orleans into the east bay…
The last time SF was an interesting city with come character left was late 80’s early 90’s. The dotcom boom destroyed all the character that city ever had. It’s just a “museum” of its former cool self now. Seattle has also been turned into a boring corporate monoculture.
Same here in San Jose. The city’s official color is beige.
I’ve always believed hedonic adjustments are BS if I can’t buy the non-adjusted product at a lower price. So build a car today exactly as you did in 1995 and price it at $15,000 instead of $30,000. If my only choice is the new $30,000 model, then we have real inflation.
Hedonic adjustments are good academic exercise but shouldn’t be used for policy or anything people depend on.
It’s not just cars. It’s everything. Go buy a faucet, double the money, half the quality.
Of course real price inflation has to be lied about, it is one of the ways the PTB are slowing down the arrival of the inevitable train crash from printing all that fiat.
Same in UK:
https://notayesmanseconomics.wordpress.com/2018/06/13/putting-rents-which-do-not-exist-in-a-consumer-inflation-measure-is-a-disgrace/
Strangely enough, the price of a barrel of crude oil really is the same as it was 40 years ago.
gas prices were similar also, maybe even higher regionally back in 80-81 in todays dollars, Iran-Iraq war. Then the bottom dropped out in 85 and outside of one spike for Iraq war 2 and the huge margin call final bust at $19.00 in 1999 it was pretty stable for 16 years during wars, changes etc….
gas prices goes up into $4 area and today’s SUV sales and production emphasis will hurt automakers…expect demand to wane from here on out..
TX, has some cheap real estate prices which is way less than most cities.
Taxes are a touch higher and so is the hot weather but sure do not seem to matter to most.
The Real World:
Health insurance makes my eyes roll. Shock. This is a crime. $20K for a family for some.
Rents are going up still in Phoenix but not as much.
House prices are going up still in Phoenix.
My daughter’s tuition is going up- they said ONLY 4% this year I kid you not.
My car insurance went up 10% (no accidents, tickets). They said it is an AZ thing. House insurance was down though. Gas prices are up a lot.
Interestingly the cost per barrel is not $100 plus.
The cost of getting things fixed is humongous if you cannot do it yourself.
Water bill up (a lot but it is the desert so they are right to an extent). Can you hedonically adjust this?
My electric provider pushed through a large increase after donating millions to the Corporate Commision election (little reporting in the newspaper).
The charts showing credit card debt and student loan debt are frightening.
I think things are actually very bad and I feel sorry for people on the edge.
I just read “Fed Up” and was not surprised to find the Fed was 100% clueless about the financial crisis, the shadow banking system, and how people live in the real world. Nor did they seem to care.
I do not understand the levels of optimism in the polls as the actuality is so bad and so many are on the edge and have no savings.
I hate to be so negative but my optimism has been hedonically adjusted to down only 5%.
“I do not understand the levels of optimism in the polls as the actuality is so bad and so many are on the edge and have no savings.”
It’s virtually all politically motivated. The current historically high optimism– not reflected almost anywhere in the real economy, by the way– is divided by partisan lines more than any other time in the history of the various surveys. The ‘hard’ data (actual economic results) and ‘soft’ data (consumer/business surveys) have never been this far apart, and they began separating right after DJT was elected. Groupthink and the herd mentality are driving sentiment surveys more than ever before.
Google search trends for consumer activity in apparel, cars, furniture, etc. are plummeting at the fastest rate since 2009. Google searches for credit/financing are also dropping, as well as searches related to small business creation.
The Fed still considers the survey data very important and reflective of the real economy, though.
And to be clear, I’m not chicken little… the economy is doing OK… mediocre, maybe, but it’s not terrible. However, it’s nowhere near as good as many economic surveys would have you believe, nor is any of this good data being reflected in wages, for example.
i used to not like you at all and even wince when i saw your name but now i actually look for you and get happy enough when you post that i read and re-read you a few times so i can take it in. especially now that Petunia’s off in her rhinestone flip flops enjoying the sun and reality somewhere.
i don’t think you care what ANYONE thinks and that’s why i never wrote anything nice to you, but i realize i like that you don’t care what anyone thinks and that’s why i used to wince.
but now you’re Brother. only a man would write like that. women we are programmed to be liked at least a LITTLE bit. it’s biological. i fight this every day. it’s why i love men who teach me how to handle contempt. it IS the only way to be truly free.
but i also know that you’re human and dig a compliment even if you keep your face straight and stoic and take it in later like how i do. later i usually forget what they said as i try to recall it.
but in writing it’s here so you don’t have to say, “did she really say THAT?”
yep.
and RD Blakeslee… oh, man, when YOU write it’s poetry. you ARE love letter, even in your rage. it’s papi rage. the best protective kind.
father’s day is coming. i said love letters in my head to all the guy DJs i love on KPOO and kept ’em to myself. youse guys get the leaky mess instead.
(smile)
x
The economy is kind of running hot per my view but slowing in certain finance areas like subprime ABS, MBS and applications, travel, auto, digital.
I think everything digital is now becoming crowded trade, especially for marketing and business. A slow down in SAAS and other sectors along with housing, could lead to interesting things for Fall…
the fed has to cool down the housing market, its overbought….a .50 rate hike this year would not be a surprise
That inflation is in service, and LA has a high number of hispanic service workers, (left leaning marxists!) who don’t belong to any labor unions, but they sure know how to raise their prices!! A lot of that work is in construction and landscaping. Then you make a policy of doing an immigration bust on every pizza delivery boy what the hell do you expect??? In the local news Cheesecake Factory got busted for not paying its janitorial help.
“That inflation is in service, and LA has a high number of hispanic service workers, (left leaning marxists!) who don’t belong to any labor unions,”
About 1/3 of Latinos (who voted) voted for Trump (more or less in line with previous elections), and considerably more Latinos are conservative but do not like voting Republican. So probably not… also, service workers generally don’t set prices… yawn
Then you haven’t had to hire somebody to do some work for you. The myth of the Trump border wall is that most of the quasi-legal hispanics don’t want more people coming in and taking their jobs! Whatever their political stripe, these people are independent contractors and they are raising their prices!! Then of course you bust the lowest tier and what’s that do to prices??? In food service the state is subsidizing minimum wage, that puts pressure on wages of mostly legal restaurant level workers (skilled)???? That’s why LA has more inflation.
Oh don’t worry, Unions are coming back.
With both the dollar losing value inside the us and winning value outside of it when compared to other currencies, sounds like a good time for americans to take holidays in one of those countries were the dollar is expensive.
That said, of course there is inflation, the cost of all that “zero interest” debt and tax cuts had to go somewhere.
The FED slow actions are enough to cause economic crisis outside the US but inside the US things are going way slower. Unless you are a junk debt zombie, a junkie looking for their next junk debt fix. Then you are doomed.
The CPI is not trust worthy.
I came across this independent researcher gathering and producing real cost data for most US cites. His method is not completely scientific but is likely better than the stuff pushed out of the Mininstry of Truth.
http://www.chapwoodindex.com
According to this index, cost of living in San Francisco is supposed to have skyrocketed 83% over the past 5 years. We live here, and I guarantee you this is total unadulterated BS. They’re just making up numbers, the higher the better.