From the LA Times: L.A. County property values rise 5.9%. Total assessments hit a record $2 trillion. Governments will get $20 billion in taxes. By Andrew J. Campa
Property values for most Los Angeles County owners increased for a 13th straight year with a 5.91% bump to the 2023 assessment roll, bringing the total value to nearly $2 trillion, the county assessor announced Thursday.
The roll includes all taxable property within the more than 4,000-square-mile county and is valued at a record $1.997 trillion.
From that valuation, the county assessor’s office estimates $20 billion in property taxes will fund public services, including schools and medical care.
Property owners will see only a standard 2% tax increase, due to Proposition 13, unless their properties were reassessed because of new construction or other reasons.
Some cities saw jumps significantly higher than the county’s 5.91% rate. Industrial hamlet Irwindale led all cities in gains with a 10% increase in property values, which beat out Burbank and Cudahy, which both finished with a 9.7% boost.
Conversely, La Verne saw the smallest rise, 2.3%, which was a little less than Whittier (3.5%) and Bell Gardens (3.6%).
The county assessor’s office noted that single-family homes “produced a marked increase in property transfer assessments,” which netted the biggest increase — $67.4 billion — to the roll. There were also increases due to inflation ($36.7 billion), personal property and fixtures ($10.4 billion) and new construction ($5.6 billion), along with $2.5 billion in decline-in-value reductions. In total, there were 2,391,198 taxable property parcels, 200,969 business properties, 33,871 boats and 2,952 aircraft assessed.
From the New York Times: U.S. Economy Grew at 2.4% Rate in Second Quarter-The reading on gross domestic product was bolstered by consumer spending, showing that recession forecasts early in the year were premature, at least.
The economic recovery gained momentum in the spring as buoyant consumer spending and resurgent business investment helped, once again, to keep a recession at bay.
Gross domestic product, adjusted for inflation, rose at a 2.4 percent annual rate in the second quarter, the Commerce Department said Thursday. That was up from a 2 percent growth rate in the first three months of the year and far stronger than forecasters expected a few months ago.
Consumers led the way, as they have throughout the recovery from the severe but short-lived pandemic recession in 2020. Spending rose at a 1.6 percent rate, slower than in the first quarter but still solid. Much of that growth came from spending on services, as consumers shelled out for vacation travel, restaurant meals and Taylor Swift tickets.
Consumers didn’t carry all the weight, however. Business investment rebounded in the second quarter after slumping in the first three months of the year, and increased spending by state and local governments contributed to growth.
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From Peter Coy at the New York Times: A look at history shows that the burden of proof is on the optimists:
More and more economists are dropping their recession calls for the U.S. economy. They are forecasting instead a “soft landing” in which the economy continues to grow, but more slowly. A headline in The Times on Wednesday asked, “Could the Recession in the Distance Be Just a Mirage?” My Opinion colleague Paul Krugman wrote on July 13 that “a happy outcome that not long ago seemed like wishful thinking now looks more likely than not.”
I understand the case for optimism. Unemployment is still low. Inflation has come down, lessening the need for the Federal Reserve to cool the economy off with higher interest rates. Consumer confidence has strengthened. And the stock market is up, which makes people feel wealthier and in the mood to spend. Plus, stock investors try to be alert to danger, so it means something when they keep buying.
The economist Mark Zandi, in a CNN op-ed last month, gave five additional reasons he thinks the economy will escape a recession: Consumers still have some unspent savings from the pandemic stimulus; businesses will be slow to lay off workers even if conditions worsen, because talent is hard to find; household and business debt loads are light; inflation expectations are low and well-anchored, so the Fed can relax; and oil prices have receded.
All that said, I’m sticking with my prediction of a recession. If the economy doesn’t crack this year, I still think a downturn is highly likely next year (which would be bad timing for President Biden and better for whichever Republican opposes him in the 2024 election).
Right or wrong, I’ve been hammering on recession for a long time. In December, I wrote, “A Strong Signal That Recession Is Looming.” In March, I wrote, “Will the Fed Cause a Recession?” In April, I wrote, “Why We’re Probably Headed for a Recession.”
As readers of this newsletter know, I’m not an economist of any kind, let alone a forecaster of the macroeconomy. But that’s OK, because it’s not me I’m asking you to heed. All I want you to look at is what I’m looking at, which are data points that have been highly reliable indicators of recession for many years. Sure, they could be wrong. But “this time is different” is generally not a good way to bet.
One persuasive data point is the steady decline in the Conference Board’s Leading Economic Index. The index tends to rise and fall ahead of the overall economy. In June, it fell for the 15th straight month, which was the longest streak of consecutive decreases since 2007-08, when the economy was tumbling into a deep recession.
Looking at every recession since December 1969, the economist David Rosenberg has calculated that, on average, the Leading Economic Index starts to decline 13 months before a recession begins and falls 4.6 percent before the recession begins. By that metric, we’re even deeper into the danger zone than we were ahead of past recessions: June marked 18 months since the index’s peak, and the decline from the peak has been 9.9 percent.
This leading index is called “leading” for a reason. “Fifteen Strikes in a Row on the L.E.I. and the Economy is Out (Every Time)!” read a chart headline in a client note from Rosenberg, the founder and president of Rosenberg Research in Toronto, on Friday.
One of the components that’s dragging down the leading index is worth examining separately. It’s the shape of the yield curve. On a chart, the yield curve slopes upward from bottom left to top right when short-term interest rates are lower than long-term interest rates. That’s usually a sign of a healthy economy. When the yield curve “inverts” — sloping downward from top left to bottom right — it’s a strong recession indicator. One possible explanation is that an inversion reflects an aggressive Fed (the high short-term rates) coupled with gloomy expectations that the economy will slow and the Fed will need to change course (the low long-term rates).
And boy, has the curve inverted! When I wrote in December that the yield curve was flashing red, 10-year Treasury-note yields were about 0.8 percentage points lower than 3-month Treasury bill yields. Now, after several more Fed rate hikes, the gap has nearly doubled to almost 1.6 percentage points. According to data from FactSet, the inversion this year is the biggest in its records, which go back to 1982.
The Fed’s rate-hiking campaign has lifted the federal funds rate target range by 5 percentage points since March 2022. In the past, smaller increases than that, spread out over longer periods, have been enough to send the economy into recession.
I realize some smart economists and strategists are saying that these indicators have lost their predictive value. “The situation we are in is very different from normal,” Bryce Doty, a senior portfolio manager at Sit Investment Associates, told The Times this month. He said he doesn’t think the yield curve’s inversion signals recession. Rather, he said, “It’s relief that inflation is coming down.”
But it seems to me that the onus is on the this-time-is-different crowd to prove its point. Lots of economists seem to agree. This month, in a Bloomberg survey of 73 forecasters, the median forecast for the likelihood of a recession in the next 12 months was still 60 percent.
There are solid reasons for their pessimism. The Fed’s rate increases work with a lag; their full force will hit the economy over the coming months. Rising interest rates have already dug into home sales volume and prices and put pressure on smaller banks. Retail sales adjusted for inflation have fallen. In addition, there are special factors that are dangerous for the economy. Russia’s attempted embargo of Ukraine’s Black Sea ports has caused wheat prices to spike. The resumption of student loan payments will force many consumers to cut back on spending.
When the sun is out and the birdies are tweeting, it seems churlish to predict bad times ahead. But I’m sticking with my recession forecast.
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Beaten as they might be by the stock market’s rally, worriers on Wall Street still question how long it can last. Their numbers are shrinking, though.
After starting the year with dour warnings about the economy, many investors and analysts have changed their minds. This newfound bullishness is grounded in signs that inflation is slowing and the economy is still standing strong, as well as a belief that corporate profits are set to grow now that interest rates have reached their peak, or are at least very close to it.
The past week gave them little reason to revert to more gloomy opinions.
Marquee earnings from some large tech companies, like Meta and Alphabet, helped drive stock prices higher. Consumer-facing companies like Coca-Cola and Unilever that are dependent on households continuing to spend also posted bumper financial results. Even the Federal Reserve chair, Jerome H. Powell, said on Wednesday that the central bank’s own researchers no longer expected a recession this year.
With that upbeat backdrop, the S&P 500 has climbed more than 19 percent since the start of the year. The benchmark sits less than 5 percent from the record it reached in January 2022.
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Europe’s economy is looking even more vulnerable. As expected, the European Central Bank raised interest rates yesterday by a quarter percentage point, as the eurozone grapples with inflation rates well above the United States’s.
Christine Lagarde, the E.C.B.’s president, suggested that the central bank could pause on raising rates in September, as data showed high prices sapping consumers of their buying power, putting the bloc’s economy at risk. Data this morning from Germany showing that Europe’s biggest economy is stagnating underscored this concern.
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Meanwhile, in Japan … The Bank of Japan surprised global markets this morning by loosening its cap on 10-year government bond yields, the equivalent of an interest-rate increase.
Japanese stocks and bonds fell sharply, catching up with a drop in U.S. stock indexes yesterday that was driven by forecasts that Japan’s central bank would signal an end to its yearslong policy of maintaining rock-bottom interest rates.